Carbon emissions in Europe are governed by a cap-and-trade system. Certificates to pollute are give out to companies that need to pollute based on the previous polluting of the company. If the company pollutes less than the number of certificates it owns, then it can sell the left over certificates to other companies that need more than their quota. This is meant to create system in which society reduces its emissions in the cheapest way possible, because the companies that can reduce their emissions easily do so and then sell their unused certificates to other companies for which it is cheaper to buy more certificates rather than cut their emissions.
Phase I of the European Union Emission Trading Scheme (or EU ETS), which ran from 2005 to 2007, received great criticism because there was an oversupply of allowances and the allowances were distributed freely to companies based on their previous polluting (a practice known as grandfathering). Critics argue that permits should be auctioned and the proceeds from the auctions should be used for scientific research into green technologies.
So, what does this mean to average Joe? If you are very good about reducing your foot print by cutting back on your electricity consumption, for example by using low energy light bulbs instead of regular ones, then you are not necessarily reducing the amount of carbon dioxide being emitted. This is because your electricity provider will now have more polluting permits than it needs, and it will sell these permits into the market to another company that needs more permits. Because there are more permits in the market, the price of a permit will be lower and, consequently, high polluting companies will be more likely to buy extra permits instead of making their operations greener.
What can you do about this? That is were Sandbag comes in. Sandbag is a not for profit organization the lobbies polluting companies to cancel their unused permits, and also buys permits from the market and cancels them. Sandbag are also active in trying persuade governments to release less permits so that there is less polluting.
The result of canceling the permits that Sandbag can get hold of is to prevent polluting companies from using them. Also, it creates a greater demand in the market, pushing the price up. This increase in price means that the polluting companies are more likely to spend money on the research into greener technologies.
If you’re interested, there is a ton of information on the Sandbag website – you could also pay for a permit to be cancelled on your behalf.
Thanks to Jaffari Amir for pointing me in their direction.