Environmental property rights
In 1920, Arthur-Cecil PIGOU (1877 - 1959), a British economist, highlighted the issue of externalities. This term includes the positive and negative effects that an economic activity can have on other sectors without them being reflected in the final price.
Pigou took as example cinders, pieces of glowing coal that were thrown out of the funnels of the steam engines of the time and which caused fires near the railway lines. This is a typical case of a negative externality: the activity of the railway created economic and environmental damage for which the railway company did not pay.
Pigou suggested that the State impose a tax on the railway companies for the risk of damage caused by the cinders. This tax would encourage the railway companies to equip their locomotives with anti-soot systems and would also help to compensate the victims. The first ecotax was born.
The birth of rights to pollute
40 years later, another economist, Ronald Coase, criticized this fiscal solution, which is mainly based on state intervention and is harmful to the economic efficiency of the system. In fact, it leads to an increase in the price of train tickets. So Coase suggested allocating property rights to the environment. To clarify, either we consider that the farmer or the owner of the forest has the right not to be the victim of fire, or we consider the contrary, that the railway company has the right to cause them. It follows that the rights are exchangeable in a market through private transactions between the different agencies concerned.
The Clean Air Act and its Acid Rain program
At the beginning of the 1960s, the US launched a plan to fight persistent atmospheric pollution: the Clean Air Act. In 1990, a clause was added to include the problem of acid rain, caused primarily by the burning of coal in thermo electric power plants, which emit large quantities of sulphur dioxide (SO2): The Acid Rain Program.
It provides for a real market in pollution rights, following the recommendations of Coase.
According to a reduction target fixed in advance, the government allocates to manufacturers something like SO2 ration coupons, called "emissions permits".
At the end of the year, the manufacturer must present to the authorities as many permits as the tons of SO2 actually emitted. In between there is the market, which authorizes an exchange of quotas between agencies, without control from the authorities.
This technique of exchangeable quotas, called cap and trade (fixing of a ceiling for emissions – cap – and market exchange – trade) will constitute the basis of the mechanisms of the Kyoto Protocol. So it is the US, on the basis of the positive results of their Acid Rain Program, which shaped the Kyoto Protocol...., which it has never ratified.
The Kyoto Protocol
The first international recognition of the impact of greenhouse gas emissions on the climate and the first political will to limit them, the Kyoto Protocol was adopted in 1997 through the United Nations Framework Convention on Climate Change (UNFCCC)
Among the 172 countries that ratified it, 38 countries (Annex 1) committed themselves to limit and reduce their greenhouse gas emissions overall by 5.2 % (8% for Europe) compared with1990, over the period 2008-2012. The effectiveness of the Protocol was dependent on the support of these 38 countries, which represented at least 55% of the greenhouse gas emissions in1990.
COP 13 - Conference of the Parties - Bali December 2007
To go one step further
> Téléchargez notre PDF sur les marchés du carbone
> Rendez-vous sur le site de Coordination SUD (dont le GERES est membre) et découvrez l'analyse faisant suite à la conférence de Cancun : "Climat : les négociations en mal d'ambition"
> Lire le livre " Le prix du carbone", Ellerman, Convery, de Perthuis, Editions Pearson, 2010.
> Lire le livre "Le climat otage de la finance", Aurélien Bernier, Editions Mille et une nuits, 2008.
