How Cap and Trade Will Fuel the Global Economy

• Date: 01 July 2010

40 ELR 10696 ENVIRONMENTAL LAW REPORTER 7-2010

How Cap and

Trade Will Fuel

the Global

Economy

by Aaron Ezroj

Aaron Ezroj is a Law Fellow, Adams Broadwell Joseph & Cardozo.

Editors’ Summary

Many commentators have expressed concerns that cap

and trade will increase the costs faced by businesses and

perhaps stall economic growth. While these concerns

are understandable, as cap a nd trade will increase costs

for at least some businesses, these commentators often

fail to recognize the multitude of business opportu-

nities that cap and trade will create. In fact, cap and

trade programs and related measures will create new

and exciting opportunities for the nancial sector, low-

carbon technologies, carbon capture-and-storage proj-

ects, plug-in and other advanced technology vehicles,

and legal and nonlegal consulting. Cap and trade is not

just an environmental eort that will curb the eects of

global warming. It also presents a wide range of busi-

ness opportunities that will fuel the global economy.

Cap-and-trade programs and related measures will

spark a wide range of business opportunities. e

nancial sector will grow to facilitate hundreds of

billions of dollars worth of climate change-related exchanges.

By 2050, ma rkets for low-carbon technologies are likely to

be worth at least $500 billion annually, and possibly much

more.1 Numerous carbon capture-and-storage projects will

emerge. Plug-in and other advanced technology vehicles will

become the norm. Moreover, a plethora of legal and nonle-

gal consulting agencies will be advising government agencies

and companies on climate change. Countries and companies

should position themselves now in order to take full advan-

tage of these opportunities.

e European Union (EU) has done the most to position

itself and companies within it. A lthough it initially disfa-

vored cap and trade, the EU has implemented the world’s

most expansive cap-and-trade program: the EU Emission

Trading System (EU ETS).2 Following the implementation

of the EU ETS, nancial markets in London are overseeing

the trading of billions of dollars in carbon allowances. Diplo-

mats in Brussels are negotiating guidelines for oset projects

in China. Moreover, Copenhagen is becoming the global

center for the development of wind turbine technology.

ese eorts have provided the EU and companies within it

with a signicant head start in positioning themselves for the

transition to a low-emissions global economy.

Eying the success of cap and trade in Europe, New Zealand

is moving forward with the New Zealand Emissions Trad-

ing Scheme (NZ ETS), Australia is moving forward with the

Australian Carbon Pollution Reduction Scheme (CPRS), and

individual states and provinces within the United States and

1. N S, T S R: E  C C 270

(Cambridge Univ. Press 2007) (Lord Nicholas Stern led the development of

the Stern Review while he served as the Head of the Government Economic

Service for the United Kingdom (U.K.). e Stern Review is one of the most

comprehensive studies of the economics of climate change.).

2. J L, T EU G G E A T-

 S 108 (Climate Change Policy 2005) (Jurgen Lefevere worked on

the design of the EU ETS while at the Field School in London and currently

oversees the program’s operation as an Environment Director General.).

Author’s Note: As a Fulbright Scholar, the author studied market-based

environmental mechanisms under one of Europe’s leading energy and

environmental law academics. He then was a law clerk at the California Air

Resources Board where he advised on the drafting of California’s landmark cap-

and-trade regulation. e author would like to thank everyone that he worked

with at the California Air Resources Board, the California Environmental

Protection Agency, the California Attorney General’s Oce, and the Center

for Law, Energy, and the Environment, and within the Western Climate

Initiative legal team. He would especially like to thank Stephen Adams who

has been working as the senior sta counsel on California’s cap-and-trade

regulation and who, in addition to being a wonderful legal mentor, is without

question a rst-rate human being. e views expressed in this article are the

author’s views and not those of Adams Broadwell Joseph & Cardozo.

Copyright © 2010 Environmental Law Institute®, Washington, DC. reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.