A ‘Cap and Trade’ system means the industries specifically the coal-fired power plants that account the most for polluting our environment will have to pay certain amount for the emissions they make. This amount can be $50/tonne in 2020 for carbon dioxide emissions.
This mission can be related to the ‘Pay-as-you-drive‘ scheme where drivers will have to pay hefty amounts for driving their ‘Chelsea Tractors’. The question that still needs an answer is – Will such taxes and schemes do some good to the environment or will people come up with their own unique excuses and answers.
Car owners need to devise some silly excuses to avoid the tax, but Coal-Fired power plants have some great alternatives. These alternatives include retrofitting these plants with new devices to control emissions or replace the plant completely with high-performance supercritical plant.
The cost power plant owners will have to pay also depends on the type of emissions they make. Currently the IGCC models the evolution prices of SO2, NOx, Hg and CO2 using geometric Brownian motion with drift, volatility, and jumps, and use an options-based analysis to find the value of the alternatives. Plants are expected to install SO2 and NOx controllers and continue polluting with CO2 while paying for the same at the mentioned rate.
Retrofitting and installing new plants means an expenditure of billions of dollars, I think power plant owners will be quite happy to pay $50 per tonne of CO2 they emit. Similar to the ‘Pay-as-you-drive’ scheme the green ambassadors of the government will benefit more from this than the environment for which this all is actually being done.
Monetary fines can do well if they are imposed according to the annual turnover of the industry responsible for the fines; else big giants will not find it hard to pay for all their deeds and still continue doing the same.
Via: Tree Hugger
