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Last Updated: Thursday, 14 July, 2005, 17:15 GMT 18:15 UK
Climate changes on carbon trading
By Kevin Anderson
BBC News website

Wind farm, Eyewire
Carbon trading could help raise cash for wind farms
Until five or six years ago, every time environmental adviser James Cameron spoke in public about creating a market to trade carbon credits to reverse climate change a protester would disrupt his talk.

The protester said it amounted to paying for pollution.

But now Europe has embraced carbon trading as a way to meet the goals laid out in the Kyoto Protocol.

Mr Cameron told the Technology, Entertainment, Design (TED) conference how the market could help solve the problem of global warming.

A market for carbon

Conventional wisdom often pits business and growth against care for the environment, but Mr Cameron argued that market models could help to address climate change.

Environmentalists have long argued that the impact of resource depletion and pollution should be subtracted from calculations of a country's gross domestic product.

In essence, this is what carbon trading does. It puts price tags on the release of greenhouse gases so that they can be included in economic decisions.

The US came up with the idea of applying market models to pollution control to help curb the release of sulphur dioxide and nitrous oxides that contributed to acid rain.

The suggestion that the same model be adapted to curb greenhouse gases was initially rejected by Europeans, said Mr Cameron of Climate Change Capital.

James Cameron, BBC
Cameron: Europeans have embraced carbon trading
However, roles reversed with a shift in politics on both sides of the Atlantic.

The American government under President George W Bush rejected the Kyoto Protocol, while the EU embraced the market model.

Advocates say that the model allows flexibility but also increases efficiency in the reduction of carbon emissions.

Instead of government regulations dictating how the private sector meets these goals, the market helps rationalise the process.

Sean Park, of Dresdner Kleinwort Wasserstein, helped negotiate one of the first carbon swaps last year and provided insights into how the mechanism worked.

He said a company that developed a wind farm could receive carbon credits because the technology has a zero carbon output.

The company could then sell these carbon credits on the market to help raise capital to set up the wind farm.

Advocates also see this as a way to encourage traditional utilities to take up less polluting technologies.

The market is very new, and companies and market managers are still finding their way and making sense of the pricing mechanisms.

"But big utilities in Europe are already working hard to embed it into their strategic thinking," said Mr Park.


But not all of the news is good. Without the participation of the US, Mr Cameron said that efforts to slow climate change had been set back 10 years.

Drought in Spain, AP
Climate change affects all nations
However, he remained hopeful. There was nothing preventing individual states in the US trading carbon.

He believes that California, which is considering adding greenhouse gases to its already strict system of limits, might want to join the EU or global carbon trading scheme.

Some American opponents of the Kyoto Protocol argue that the agreement is flawed because India and China enjoy lighter carbon limits.

However, Mr Cameron points out that China is a part of the regime.

The country does have an ever increasing thirst for oil with its rapidly expanding economy.

The navies of both India and China are scouring the oceans nearby looking for potential energy sources.

Mr Cameron believes China has a great opportunity to leapfrog old technologies and create a massive market for solar and wind power generation.

"Prices go down with economies of scale, and with China you definitely have a big enough scale," he said.

And with carbon trading, Mr Cameron and other advocates believe it will create the economic incentives for development of new and emerging technologies like fuel cells and clean coal processes like gasification.

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