European regulators and businesses are making an attempt to revive carbon trading through the use of a supplemental “green bond” system that would function alongside the current cap-and-trade scheme, according to a report in the New York Times.
But cap-and-trade controversy remains an issue. Companies have been able to game the system by selling off permits they never needed. Traders have been arrested for fraud and some critics argue that the system is doing little to reduce greenhouse gas emissions.
This week, the International Emissions Trading Association (I.E.T.A.), which represents banks and businesses, and the E.U. commissioner on climate change are promoting two proposals that would significantly alter the cap-and-trade landscape. The I.E.T.A. has suggested a “green bond.” The bond, which would function alongside the existing cap-and-trade system, would be backed by international lenders, possibly including the World Bank. Developing economies would pay the interest on the bond by selling carbon credits on global markets. International lenders could then punish countries that failed to back up their carbon credits with reductions by raising the interest rate on the bond, according to the Times report.
Meanwhile, E.U. commissioner Connie Hedegaard as proposed increasing the cost of carbon emissions by withholding the issuance of permits in order to drive up demand. According to the report, Hedegaard has said reductions in greenhouse gas emissions by up to 30 percent from their 1990 baseline are possible. The European Commission will vote on the proposal today, according to the Times.
The developments come as the U.S. is looking at implementing its own cap-and-trade system under the Kerry-Lieberman bill now making its way through the U.S. Senate.