05/12/2020 - Environment | GS III | Mainstorming

IAS Parliament 3 years

KEY POINTS

· A cap-and-trade market for carbon permits looks like an idea whose time may finally have come. At the core of it is the power of economic incentives. This gives it a certain conceptual elegance.

· Under such a scheme, the government must fix a target, back-calculate a schedule of gradual carbon reduction, and then either sell or award a preset number of annual licences for emissions.

· These could be rationed across various industries and other polluters, or auctioned openly for anybody to acquire, with the permissible total programmed to go down every year. Companies that exceed their emission limit would need to buy unused permits in an open market, supplied by those that perform better on that score.

· Keeping operational costs low would then depend on going as eco-friendly as possible. The pressure to do the planet justice would increase as the years roll by and permits turn increasingly scarce, pushing their price up.

· A pilot project based on the concept has been launched in Surat’s textile sector to cut air pollution of the particulate matter sort. A carbon scheme for all of India, however, would entail far greater complexity.

· Meanwhile, the dream of a global carbon market seems unrealistic, given that we would need significantly lower prices. Our industrial base needs to be cost-competitive.

· Also, we must retain autonomy over how we help save a world put at threat mostly by industrialized economies. Cynicism over outcomes may also need to be overcome, after our adherence to the Kyoto Protocol left us with carbon credits that could not easily be monetized. The potential expiry of past credits and the US flip-flop over climatic risks have hurt the cause.