Emissions Trading Scheme and Direct Action Plans

emissions trading scheme

What’s an Emissions Trading Scheme ?

In reducing greenhouse gases countries have put into place various schemes such as the “Emissions Trading Scheme” and the “Direct Action Plan“. But how does an emissions trading scheme (ETS) or a direct action plan work and how do they affect you? Do they both relate to carbon emission trading?

Each country applying an emissions trading scheme tinkers with it’s implementation but in essence it is supposed to penalize the heavy polluters and reward those companies that reduce their emissions. But does it work? Read about my opinion later in this article.

With an emissions trading scheme a country sets a cap on the total emissions allowed to reduce the level down to a set amount in a certain time. For example, Australia has set it at a 5% reduction from 2005 levels by 2020. Each segment of industry, services etc are then given an individual cap. This is because some are heavy producers of carbon gases and others less so. For each segment that reduces their emissions below the cap they are given a carbon credit. For those that that do not reduce their emissions down to the cap or increase them then they are penalized. This is where the trading comes in.

Those companies that have carbon credits can sell their credits to the polluters which they can use to offset their penalties. But! The overall country cap has still to be maintained. This means if a company reduces their carbon emissions below the cap by 10 tons of greenhouse gases they can trade to another company who may still be polluting at 10 tons above the cap. This cancels out the penalty or reduces if the amounts of greenhouse gases are still above the cap minus the credit. This means that they will be still penalized for the remainder unless they can trade credits from somewhere else. But they are still being penalized somewhat as they have to pay for the credits. The amount paid per ton of greenhouse gases is initially set by the government but can rise or fall depending on demand for credits.

So what does this mean for you? Well where I think this falls down is that these companies who are being penalized simply pass the costs of the emissions trading scheme onto you and me. This happened with the “Carbon Tax” introduced in Australia. The energy companies in particular simply passed the cost on to the consumer. So what’s the point.

Personally I think the emissions trading scheme penalties should be levied against profits with no allowance to pass it on to consumers.

One other type of scheme is the “Direct Action Plan” Unlike the emissions trading scheme, this type of plan is where the companies are paid to reduce carbon emissions.

With the direct action plan companies put forward what they want to implement to reduce their greenhouse gas emissions. The government pays them to do this. Where I think this falls down is that there is no way in which heavy polluters who have to undertake very costly upgrades will do so. It is unlikely that the cost to you and I can sustain that cost after all we are the taxpayers who have to pay for it. (again). Having to pay anything for a direct action plan means it is taking money away from other deserving things.

Below is shown where greenhouse gases are produced by the various segments of industry in Australia. These obviously vary country by country. It shows that Australia produces most from electricity production due to the fact that they are heavily dependant on coal fired power stations.

emissions trading scheme

“Fugitive emissions” are those greenhouse gases emitted from pressurized equipment due to leaks. They also those released due to mining especially coal mining. You can find how other countries compare by clicking on “Greenhouse Gases

If you would like to read in more details about ETS click on “Emissions Trading Detail”

Do you think the emissions trading scheme or a direct action plan is taking money away from plans such as renewable low emission energy projects where it would be better spent, after all there is nothing better than competition for cleaning up acts.

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