. . . the Nebraska Carbon Sequestration Advisory Committee  

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Private Interests in Carbon Emissions, Storage and Marketing

Emissions Markets (click here for actual cases). These markets evolve after caps on emissions of carbon dioxide are set by governments, as reflected in  third way policy approaches.   In this policy approach, a legitimate role is recognized for both market and government.   The setting of a cap on emissions creates the environment in which market can operate.   A governmental unit in consultation with citizen groups (for example, with various non-governmental organizations) sets the "cap."    A commodity is then created, generally referred to as an allowance, e.g., a 1-ton allowance would allow emitting 1-ton of carbon per year. The "trade" is then commenced in the 1-ton allowances.  The result of applying third way environmental policy  is a "cap-and-trade" process (see Ellerman, 2000, for an example, demonstrated in the workings of the sulfur emissions market).  The best of both worlds is achieved:  Overall limits on how much pollution the atmosphere can hold (and what we can tolerate) are maintained while the cost efficiencies and profit potentials of the market are also realized.

Sequestration, Storage Markets (click here for actual cases). These markets may evolve separately from, or in consort with, emissions markets.   If an emissions market is operating, such a storage market will provide an alternative way for an entity to cover emissions.  That is, one can cover the emission of 1-ton of carbon either by purchasing a 1-ton emissions allowance, or the emission can be covered by purchasing the sequestration (and subsequent longer term storage) of 1-ton in land. One would also expect, then, that prices in one market will affect prices in the other.

If no emissions market is in place, then entities needing to cover emissions would operate only in the sequestration (storage) market.   Every ton of carbon emitted in any given year would have to be associated with a ton sequestered that year, and held in storage in land.  Intriguingly, eventually the carbon sink (the capacity of the land) will be full. At that point, payments and market prices will reflect the value of maintaining the carbon in the land.

Government Payments for Storing Carbon (click here for legislation  proposed for such payments).  Rather than using cap and trade, with marketing,  another possibility is that the general public will choose to make direct payments for sequestering and storing carbon in land.  As an example, the U.S.D.A. Conservation Reserve Program which pays for changing cropland back to grassland, in effect, pays for storing carbon (among other outcomes, e.g., more wildlife habitat; less soil erosion).

Last update:  September 16, 2004