Oh, patents! Emissions trading

Copyright © Françoise Herrmann

Here’s an interesting commodities market in the domain of green technology, supported by green patents, in the quest for reducing greenhouse gasses to curb global warming,

Carbon emissions trading, also called the carbon emission allowances and credit market is a system arising out of the Kyoto Protocol in 1997 designed to incorporate “flex-mex” (flexible mechanisms) in the binding targets for reducing emissions of greenhouse gasses.

The idea, which remains seen as a very controversial compromise among various civil society groups and advisory committees to the UN, is to offer firms the possibility of selling their unused carbon emission allowances at a carbon emissions marketplace in the form of credits. This becomes possible as governments seek to regulate and cap the emissions of greenhouse gasses with emission permits for a particular pollutant. Thus, the government sets a limit to the amount of pollutant that can be emitted and sells this amount as a permit. If a firm falls below the permitted amount of pollutants they may sell their unused carbon emission allowances on the market as a credit to a company which is producing in excess of their permitted allowances for emissions.  Alternatively, a company may also be engaged in a project elsewhere that “sinks” carbon, providing allowances to offset excess emissions.

At the end of the day, the proponents of this market commodity approach to greenhouse emissions believe they are offering a panacea for meeting regulatory targets, all the while providing incentives to reduce emissions, and penalizing excess production of emissions.

The carbon emission units are quantifiable (1 unit is equal to 1 metric ton of CO2). And within the framework of the UN Convention on Climate change, carbon emission units may take various credit commodity forms such as the following: 

-          CRU - Carbon Removal Unit for land use, land use change or forestry such as reforestation
-          ERU – Emission Reduction Unit in a joint implementation project
-          CER Certified Emission Reduction generated in a clean emission development project

The largest greenhouse market is the European Union Emission Scheme.

The US has a national market for reducing acid rain and several local markets for trading nitrogen oxides, which were founded in 1970 by the former US Environmental Protection Agency, as an incentive for pollution abatement.

A search for “emissions trading” patents at the EPO yielded 75 hits. Below you will find a selection of these patents, supporting the technology of greenhouse gas emission markets:

• JP2013061897 CO2 emissions trading system
• WO2013010160 Process for tracking greenhouse gas emission/carbon reductions and other environmental credit in open and closed trading systems
• US2011144921   Greenhouse gas emission trading system, greenhouse gas emission apparatus, greenhouse gas emission trading method and program
• WO2012176949 System for converting greenhouse gas emission to carbon credit and method for same
• US2012117003 Geo-engineering method of business using Carbon counterbalance Credits.
• WO2011002710 System, method and media for trading energy efficiency (Chicago climate Exchange Inc.)

 UN advisory critics of these flex-mex mechanisms point out that the ultimate goal of climate change policy is for the industrialized North to convert economies to clean ones rather than to find ways to pursue unclean activity using paid credits or developing other activities that will offset the carbon that is produced. They argue that emissions trading, in fact, promotes and supports the trading of allowances rather than curbing emissions (ETC Group, 2011).

Indeed, according to the carbon trading think tank Sandbag, an oversupply of emissions permits due to recession and dubious sink projects worldwide will cancel out carbon emission savings gained with renewable energy and energy efficiency efforts.  A situation in which Sandbag actually calls for the destruction of surplus permits rather than backloading for later use. (Carrington, 2013)

 Bored of tracking NASDAQ?  Try Sandbag…!

References
ETC Group (2011)– EARTH GRAB: Geopiracy, the New BioMassters and Capturing Climate Gene
Carrington, D. (July 25 ,2013) EU emissions trading scheme to cancel out renewable energy gain  http://www.theguardian.com/environment/2013/jun/25/eu-emissions-trading-scheme-energ
Sandbag – www.sandbag.org.uk/