Creating a Market for Emissions Trading On Monday, a coalition of U.S. corporations and several environmental groups will announce a plan to limit greenhouse gas emissions and create a market to trade the right to emit carbon dioxide. How will it work?
NPR logo

Creating a Market for Emissions Trading

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Creating a Market for Emissions Trading

Creating a Market for Emissions Trading

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


From NPR News, this is WEEKEND EDITION. I'm John Ydstie. Congress, the president and business leaders will be laying down their markers on global warming this week. House Speaker Nancy Pelosi is setting up a special committee to produce legislation on the issue by next summer. President Bush is expected to announce new initiatives on climate change in his State of the Union address on Tuesday. He is not expected to drop his opposition to mandatory caps on greenhouse gas emissions. That puts the president at odds with a proposal expected to be announced tomorrow by a coalition of major U.S. corporations. The group, including such giants as General Electric, DuPont and Duke Energy, is calling for limits on carbon dioxide emissions and the creation of a so-called carbon market to trade emissions credits. Here to talk about these proposals is Eileen Claussen. She is president of the Pew Center on Global Climate Change. Thanks for joining us.

Ms. EILEEN CLAUSSEN (Pew Center on Global Climate Change): My pleasure.

YDSTIE: This group of businesses is in favor of capping carbon dioxide emissions. Several pieces of legislation already proposed in Congress also would cap carbon emissions and create markets for trading emissions. So just how would a carbon cap and this market work?

Ms. CLAUSSEN: Well, I think once you have a limit on emissions, the real question is who has to reduce them. And the way a carbon market would work - those who can reduce them most cheaply would do that. And if they were able to reduce more than they were required to reduce, they could sell those extra emission credits to those who would find it more expensive to reduce. So the net result would be the limit that you want, but you would get it in as cheap a way as you could get it.

YDSTIE: Now is there an emissions market already in the world?

Ms. CLAUSSEN: There is. The Europeans already have a trading system. It's been operational since 2005. In the United States, we have a voluntary market. There is something called the Chicago Climate Exchange. There are a lot of companies who are members of that. There is even a stay in some cities who are members of that who are reducing emissions and trading them. We've got a set of states in the Northeast and the mid-Atlantic who are going to be creating a market for emissions. And California now has a set of requirements passed into law. And so I actually think, even before we get national legislation, we really will be creating a market here in the U.S. as well.

YDSTIE: What kind of impact would these caps on carbon emissions have on consumers?

Ms. CLAUSSEN: Well, it really depends on what kind of limits they have and also what opportunities they have to reduce their emissions. So for example, if a company who is regulated can just become more efficient and meet its limits that way, and I think you wouldn't have an effect on consumers. But there also are going to be companies who will need new technologies. Some of those may be more expensive. The price may go up. Particularly in the stages where you're starting off with new technology, it's probably more expensive than it would be over the long term. So I think we will see some increases in price in some areas.

YDSTIE: Well, what about the impact of these caps on the economy in general and specific regions of the country?

Ms. CLAUSSEN: I mean it really depends on how much time you give companies to adjust. If you impose stringent requirements immediately, you could cause real hardship. But I think we've learned, over time, that for many, many sources of carbon dioxide, there are inexpensive reductions, mostly through efficiency, and those would not result in that. So I think the challenge is to find the right formula for starting slowly and ramping up as you have more technology available and more options for reductions.

YDSTIE: Would a carbon cap system really do enough to reduce the buildup of carbon dioxide in the atmosphere and halt, or reverse, global warming?

Ms. CLAUSSEN: That is very important, to establish a price on carbon and to make sure you get reductions as cost-effectively as possible. But I think there are other things that are also required. And we have to deal with transportation. It doesn't fit easily into a carbon cap and trade system. But that's a third of the problem and you can't ignore it. I think we have to do something slightly different for coal. We have a lot of coal. It's very cheap to burn. The rest of the world has a lot of coal, particularly in China and India. They're going to burn it, because they need the electricity. We have to find a way to capture the carbon from those coal-burning power plants and sequester it in some way so that it doesn't go into the atmosphere. So with coal and transportation, maybe some things on efficiency for buildings and a cap and trade, I think we'd be on our way.

YDSTIE: President Bush is expected to announce some proposals in his State of the Union address on Tuesday night. His spokesman says that reports that he's going to drop his opposition to carbon are inaccurate. What do you expect from the president on this issue?

Ms. CLAUSSEN: Not that much. It looks like he's going to be doing something on bio-fuels. We don't anticipate anything in terms of a cap and trade system. So a little bit maybe, not what we need, what we believe is important, what the companies that we work think is important, or what a large portion of the Congress thinks is important.

YDSTIE: Eileen Claussen, president of the Pew Center on Global Climate Change. Thanks very much.

Ms. CLAUSSEN: Thank you.

Copyright © 2007 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.