Name: How do carbon markets work? | The Economist
Uploaded: 2021-10-01T17:05:28.000Z
Duration: 9 min 27 s
Description: VoiceTubeの動画で発音を聞きながら英語表現を覚えよう！学べる英語：

基礎受動態

So putting a price on carbon emissions...

...should encourage businesses to stop polluting, right?

That's exactly what carbon markets were designed to do...

...reduce emissions by charging polluters...

...but so far they haven't achieved that aim

Towards the end of the 1980s America had a problem

...had been emitting large amounts of sulphur dioxide...

...which was falling back to Earth as acid rain...

...causing harm to plants, aquatic animals and infrastructure

But there was no incentive for the power plants...

Weather warnings, an acid-rain alert is in effect

So in 1990 the American government launched an experiment…

...to pay for their emissions, by establishing a new kind of market...

...governed by a system called “cap-and-trade”

Eight years later, acid-rain levels over large regions...

And a new way of cutting emissions was born

In 1997 the international climate-change treaty...

...suggested applying the concept of cap-and-trade to carbon

In the years that followed different countries and regions...

A government sets a cap on the amount of CO2...

...and either gives or sells these permits to firms

If a company doesn't use up all of its allowance...

If it needs more permits, it can buy them from those with spares

...and the shrinking pool of permits gets more expensive

The genius of cap-and-trade systems when they're done properly...

...is that they both use a stick and a carrot

That gives them an incentive to innovate, to get cleaner and cleaner...

...it provides that carrot for innovation...

The magic of the market unleashes those animal spirits...

While regulation can introduce a new industry standard...

...it doesn't give firms an incentive to cut emissions below a certain level

But a carbon market creates a race in which companies...

...are motivated to cut emissions as fast as they can

The more they cut emissions, the fewer permits they have to buy...

So in theory in a cap-and-trade market...

...carbon-dioxide emissions should fall...

...but in reality, they've continued to rise

Because incentives work only if they're big enough

Carbon markets are great in theory, but in practice...

Carbon prices have been far too low to motivate change...

...that's needed to decarbonise the world economy

According to Joseph Stiglitz and Nicholas Stern, two economists...

...in order to meet the Paris Agreement goal of limiting global warming...

...to two degrees above pre-industrial levels...

...needs to be between $50-100 per tonne by 2030

However, the majority of carbon prices still remain far below that figure

What's more, even if carbon is priced appropriately...

...the fines for exceeding permitted levels...

In the EU, a fine can be as low as €100 per excess tonne

Considering that's not that much more than the price of a permit...

Now in theory, regulators enforce carbon prices and permits...

...but in practice, it can be very challenging

...direct emissions versus indirect emissions

There's questions of cheating, for example...

...you find in most markets around the world...

...enforcement is lax and punishment is not great

And even if some markets adopt effective deterrents...

...you have a mind-boggling variety of rules, systems...

And so if you're a company that's based in multiple countries...

...divisions of your company making the same product in the same way...

...will face a mind-boggling patchwork of rules, regulations that differ

Worse than that, you have leakage, among these markets as well

The direct result of this patchwork of systems...

A business or an industry relocates from an area...

...with high environmental regulations...

...to somewhere where the rules are more relaxed

Which means it can avoid having to pay for its carbon emissions

The role of regulation is important because absent regulation...

...nobody would pay for carbon emissions or pay a penalty for emitting carbon

So almost by definition, government has to create the market...

...set the rules, enforce penalties, set a carbon cap...

...for example, the maximum amount a company or industry can emit