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Summary
In the long run Cap & Trade will create more problems and risks for investors than a policy of carbon reduction. As the mandated reduction percentage increase the opportunity for individuals to originate strategic maneuvers to take advantage of the regulations rises tenfold. And, without complete transparency in the market along with the cost associated with continuous measurement of carbon emissions, there will be plenty of opportunity for creativity in cap & trade transgressions.
Analysis
Cap and trade on the surface looks like a viable solution for encouraging large polluters to reduce their process emissions. One of problems with the plan is the flaws in the standards used to determine the actual amount of carbon emission a plant is capable emitting on any given day. The current methodology in testing stack emission is sound. But, any plant can be set operate to control and/or reduce the amount its emitting to set their base parameters which in turn establishes its ability to trade carbon emissions. Also, after the tests are completed, there is no assurance that the emissions will not increase defeating the purpose of carbon reduction. Without continuous testing the plants limits can be exceeded defeating the intent of cap and trade.
The second flaw is allowing owners of closed plants to sell their carbon emission allotment. The amount of pollutants allocated to that plant should be banked for that site and restricted from being used or traded. We will continue with increasing our carbon emissions if this practice is allowed.
Carbon emission is a problem not a commodity that should not be traded in the open market. Cap & trade will propagate the matter as it allows polluters to continue at the expense of the general public, stock holders and investors.
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
Analysis by: GLG Expert Contributor
http://www.glgroup.com/Council-Member-News/GLG-Expert-Contributor-206861-News-1.html
Analysis of: U.S. carbon market: many projects, many clouds
http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE5756WI20090806?pageNumber=2&virtualBrandChannel=0&sp=true
Published at: www.reuters.com
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