Pollution Trading Credits And Corporate Pollution

Pollution trading credits are widely used throughout the world by industrialized, developed nations. Many economists have recently recommended them, and the United States has actively promoted this method of curbing pollution. Pollution trading was discussed as one way to implement the global climate treaty, which was signed in Kyoto in 1997. At this meeting, the United States introduced a program that rewards countries who are willing to reduce greenhouse emissions further than required by the treaty. The countries can sell credits for their excess reductions to other nations, who then can count then count them to their own goals. Pollution trading credits are a vital, but controversial approach to controlling the world's pollution problems. This report examines the pros and cons of pollution trading credits and gives examples of various programs currently implemented.

The United States assists Mexico in reducing their current vehicle emissions. Mexico spends little or no money for this, and the United States takes credit for curbing pollution in Mexico. This is a very basic scenario, but generally it is that simple. Government backed pollution trading programs have been around since the 1970's, but only recently has pollution trading become a huge commodity. Sulfur dioxide, nitrogen oxide, particle matter, volatile organic compounds, and even hog manure are just a few of the commodities that are traded on a daily basis (Murphy). Firms, such as Natsource (http://www.natsource.com), in downtown Manhattan, take care of much of the dirty work. This company alone has brokered over $5,000,000,000 (five billion) dollars in greenhouse gas emissions, sulfur dioxide, oxides of nitrogen, and renewable energy certificates (Natsource). Natsource and other firms, such as Evolution Markets, allow various techniques to trade such as swaps, forwards, puts, calls, and options. Sulfur Dioxide allowances can be used as collateral, loaned, or swapped for other pollutants. The United States trades wetlands, water pollution, and fishing rights (Murphy). Even though pollution trading sounds like a huge market, it really has not even begun to show it's full potential. Jack Cogen, president of Natsouce, says "It's small compared with almost any other commodity... but this is going to grow and grow. I think it will be the dominant thing we do in five years."

According to William Nordhaus, a professor currently with Yale University, developed countries could cut the cost of meeting the treaty obligations by 85% by reducing emissions in other, less developed countries (Clifford). In general, it costs substantially less for a developed, industrialized country to fight pollution in a developing country. Also, controlling pollution becomes more expensive as industry becomes cleaner and cleaner. Even though poor and developing countries allow for the least expensive pollution reduction, most have rejected the idea of pollution trading. These countries are not ignorant to the fact that pollution trading will help them because they are working in their self-interest. If they refuse help, they believe that they can gain leverage in the negotiations to set emission limits. They also believe that this would allow the wealthier nations to pay their way out of the obligations in their own countries.

Even though there are obvious benefits to the pollution trading plan, many industrialized and developing countries do not believe the plan makes political or moral sense. According to Michael Sandel, a professor at Harvard, the plan "turns pollution into a commodity to be bought and sold." He believes that people will be paying a fine to pollute. He further states that "a fee, unlike a fine, makes pollution just another cost of doing business, like wages, benefits, and rent." Sandel also argues that pollution, as a whole needs