Carbon dioxide emissions cap and trade

Can the Paris Agreement targets be met?

Keeping global warming within the limits set by the Agreement can only be accomplished if there is an unprecedented shift from fossil fuels to renewable energy.  This transition is already underway—but is being constantly hampered, interrupted, and thwarted at every turn by the oil and coal companies who aren’t going to concede their dominant position in the fossil fuel powered energy sector—a position which is hugely profitable and which enables them to strongly skew government policy and regulatory procedures in their favor—particularly in the US but also in Canada.

The most powerful forces influencing the mix of fuels used for power generation in the industrial economies are those of the market.  But at the moment, it is a market seriously distorted by massive subsidies and incentives in favor of the fossil fuel companies.

Internal affairs

The external costs associated with the generation of electricity from coal—if they were to be fully accounted for in the price of electricity– would double the cost of electricity generated from this fuel.[1]  Coal would simply be priced out of the market.

The external costs associated with natural gas are also substantial—smaller than coal but substantial.  If these costs were to be fully internalized, solar and wind, already cost competitive, would be significantly cheaper than all the fossil fuels.  The power companies would gradually shift electricity generation towards the least-cost technologies—and in an undistorted market where external costs are fully internalized those technologies are wind power and photovoltaics.

The simplest way to internalize at least a part of the external costs of power production from fossil fuels is to tax their emissions of carbon—because it’s carbon in all its forms: carbon dioxide, methane, particulate matter, soot, and aromatic hydrocarbons (benzene and the other carcinogens) that do all the damage to human health.  The physicians have been shouting this out for years: fossil fuels, and particularly coal, are a global health hazard much more than a global environmental hazard.[2]

In this context, the carbon cap-and-trade market operated by California, Ontario and Quebec is a forceful move in the right direction. There are different ways of taxing carbon emissions.  Some of the  fossil fuel companies claim to be in favor of a carbon tax—in an attempt to burnish their image a bit.  By so doing they buttress their claim to be environmentally responsible—but in reality it’s a scam.  Once again they are attempting to dupe the politicians and the public.

A tax on carbon without a cap doesn’t ensure that emissions are curtailed or reduced. Far from it. A simple carbon tax is in fact a license to pollute. The payment of the tax is simply passed on to the consumers by the coal, oil and gas companies. Pollution may actually increase. The companies don’t care.  They pay the tax, circulate press releases about how good a corporate citizen they now have become, and pass the cost on to the consumer.

Does the polluter pay?

Of course not.  It’s the pollutee who pays.

So together with a tax, there has to be a cap on emissions.  A legal limit which cannot be exceeded.

So kudos to Ontario’s government for showing foresight, vision and leadership. The politicians who are against Ontario’s carbon tax present it as damaging the economy, throwing people out of work, and resulting in the transfer of huge amounts of money to California.  This is nonsense of course, but many voters will listen. So it will be extremely important coming up to the Ontario provincial election this year that government spokespeople explain how the carbon tax works.

After California established its cap-and-trade carbon market, its GPD grew by nearly $5,000 per capita while over the same period, emissions fell by 12 percent. The State’s growth was twice the national average, and job growth in California outpaced the US as a whole.[3]  This pace of economic development has been replicated in Ontario over the last few years. There is absolutely no evidence to support the assertion that a tax on carbon emissions impedes economic growth.

California is a major player on the world’s energy stage. Ontario should be taking note at what else Governor Jerry Brown is working on—as there are lots of good ideas down on the west coast of the US that could be adopted and replicated up here in Canada.

California is strongly promoting electric vehicles with a program of subsidies and rebates to buyers.  Ontario should follow suit, and particularly the city of Toronto.  Canada has enormous potential as a renewable energy leader—and the biggest stage on which to demonstrate that action is Ontario, where the leading actor should be Toronto.

The ESSential missing link

California is also promoting energy storage systems (technically known as ESS or more generally as batteries). The Self-Generation Incentive Program (SGIP) provides incentives to homeowners who install batteries linked with photovoltaic panels [4].

ESS is the key to the sustainable management of renewable energy technologies which, for wind and solar, are intermittent.  But the solution is conceptually simple.

It’s been hiding in plain sight for several years now but once again the power companies and the companies owning the transmission lines have flooded the media with fake science and forecasts of power failures, blackouts, and higher electricity prices.

ESS systems are the  key. If the power produced by wind turbines is stored in megawatt-scale ESS installations and released when needed, it is no longer intermittent.  It is dispatchable.  Photovoltaic ESS installations need more capacity because there’s no power for a longer period–when the sun goes down.  But when wind is combined with PV power and all that power is made dispatchable by employing utility-scale ESS, you have both baseload power and daytime peak loads covered.

And what about the built environment?  Put ESS and smart controllers behind the meter, and all the pesky domestic and commercial peak loads disappear. This is what California’s SGIP aims to achieve. We may not have the internet of everything, but we already have the internet of power conditioning, energy storage, and smart metering.

We know how to do this stuff.  We know how to make it work.  We have the money to do it.

What we lack is the leadership and the vision to make it happen.


Check out the data:

[1] See:  Subsidies and costs of EU energy. Final report. European Commission. November 2014.  Also:  The external  costs of fossil fuels: Environmental and health value of solar, Energy and Policy Institute.

[2] See: Coal’s assault on human health, Physicians for Social Responsibility.

[3] See: California governor pushes for 5 million zero-emission cars. and : California’s car culture is slowing the State’s emission cuts. At

[4] See: California home battery rebate: Self-Generation Incentive Program (SGIP) explained. At


2 thoughts on “Carbon dioxide emissions cap and trade

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