Emissions Trading – A Brief Overview

Economist Philip H. Brown focuses the majority of his work in the areas of health, education, poverty, inequality, and the environment. As a developmental economist interested in the environment, Philip H. Brown examines the effects of various environmental policy instruments, including emissions trading.

Emissions trading, a market-based tool for managing greenhouse gas emissions, puts a price on air pollution and provides economic incentives for companies that work to reduce it. Under the most common type of emissions trading plan, a government agency or other organization sets a cap on allowable emissions and then allocates emissions permits that total the cap.

Participating companies that lack sufficient permits to cover their emissions must either work to reduce them or purchase additional permits from a company that has more credits than it needs. This type of system rewards efficiency and creates an incentive for companies to reduce their emissions, with the bonus of cutting operations costs and profiting from selling surplus permits to other participating entities.

Policy Approaches to Climate Change

Economist Philip H. Brown studies developing economies, identifying sources of poverty and ways to reduce it. A Ph.D. recipient from the University of Michigan, Philip H. Brown’s professional interests cover a broad range of topics, including global food prices, wind power, cost-benefit analysis, emissions trading plans, and dealing with climate change.

While advocates on both sides of the issue continue to argue passionately about the impact of human activity on climate change, policymakers must consider what steps to take, if any, with respect to the phenomenon. Significant areas of policy response to climate change include mitigation strategies, adaptation policies, and bioengineering.

Mitigation policies are designed to reduce or eliminate the discharge of greenhouse gases into the atmosphere. In addition to regulating factory, automobile, and other emissions, mitigation activities include the development of renewable energy sources, increasing energy efficiency, and developing low-emission urban systems, among other approaches. Mitigation also includes changing consumer behavior as well as the way resources are managed.

Adaptation policy objectives are to help the population deal with consequences of climate change such as rising sea levels, extreme weather patterns, and ocean acidification. Example strategies include building flood defenses, employing environmentally responsible forestry practices, and developing crops that can tolerate the greater ranges of weather extremes.

A third approach under consideration is geoengineering, which involves direct intervention in the planetary energy balance. This is a relatively new strategy, and involves massive manipulation of the global environment. Examples of geoengineering include such techniques as dispersing particles into the atmosphere to “whiten” clouds and thus make them more reflective of the sun’s rays, increasing the iron content of seawater to encourage the development of plankton, seeding clouds to force rainfall, and genetically engineering crops to make them better reflect sunlight.