Efforts to control emissions of carbon dioxide in Britain are in a muddle. Until we sort this out, it will be needlessly difficult to meet our national goal of a 60 per cent cut in emissions by 2050.
Almost everybody accepts that a financial penalty must be attached to CO2 emissions, because mere exhortation is not proving to be enough. There are two main ways of attaching that penalty: the direct way, through taxation, where the emitter pays a tax for each tonne of CO2 emitted, and the indirect way—the so-called “cap and trade” approach.
Under a cap and trade system, the government (in our case Brussels because it’s an EU-wide scheme) sets the cap—the maximum overall tonnage of CO2 (and other greenhouse gases) that can be emitted in any given period. The cap is then divided into permits, each allowing the bearer to emit one tonne of CO2. The permits are then distributed to each country in the EU, and the countries then allocate them to their main emitting companies. Any company not needing all of its allocation is free to sell its surplus to a company that needs more. The emissions trading scheme (ETS) provides the marketplace for the trade of these permits.
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