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Sunday, February 13, 2022

Treatment of slaves in the United States

Scars of Gordon, a whipped Louisiana slave, photographed in April 1863 and later distributed by abolitionists.
Bill of sale for the auction of the "Negro Boy Jacob" for "Eighty Dollars and a half" (equivalent to $1,423 in 2020) to satisfy a money judgment against the "property" of his owner, Prettyman Boyce. October 10, 1807.

The treatment of slaves in the United States often included sexual abuse and rape, the denial of education, and punishments like whippings. Families were often split up by the sale of one or more members, usually never to see or hear of each other again.

The debate over slave treatment

In the decades before the American Civil War, defenders of slavery often argued that slavery was a positive good, both for the enslavers and the enslaved people. They defended the legal enslavement of people for their labor as a benevolent, paternalistic institution with social and economic benefits, an important bulwark of civilization, and a divine institution similar or superior to the free labor in the North.

Some slavery advocates asserted that many slaves were content with their situation. African-American abolitionist J. Sella Martin countered that apparent "contentment" was in fact a psychological defense to dehumanizing brutality of having to bear witness to their spouses being sold at auction and daughters raped.

After Civil War and emancipation, White Southerners developed the pseudohistorical Lost Cause mythology in order to justify White supremacy and segregation. This mythology deeply influenced the mindset of White Southerners, influencing textbooks well into the 1970s. One of its tenets was the myth of the faithful slave. In reality, the enslaved people "desperately sought freedom". While 180,000 African-American soldiers fought in the United States Army during the Civil War, no slave fought as a soldier for the Confederacy.

Legal regulations

Legal regulations of slavery were called slave codes. In the territories and states established after the United States became independent, these slave codes were designed by the politically dominant planter class in order to make "the region safe for slavery".

In North Carolina, slaves were entitled to be clothed and fed, and murder of a slave was punishable. But slaves could not give testimony against whites nor could they initiate legal actions. There was no protection against rape. "The entire system worked against protection of slave women from sexual assault and violence".

Living conditions

Compiling a variety of historical sources, historian Kenneth M. Stampp identified in his classic work The Peculiar Institution reoccurring themes in slavemasters’ efforts to produce the "ideal slave":

  1. Maintain strict discipline and unconditional submission.
  2. Create a sense of personal inferiority, so that slaves "know their place."
  3. Instill fear.
  4. Teach servants to take interest in their master's enterprise.
  5. Prevent access to education and recreation, to ensure that slaves remain uneducated, helpless, and dependent.

Punishment and abuse

Abolitionist drawing showing enslaved people being tortured

Slaves were punished by whipping, shackling, hanging, beating, burning, mutilation, branding, rape, and imprisonment. Punishment was often meted out in response to disobedience or perceived infractions, but sometimes abuse was performed to re-assert the dominance of the master (or overseer) over the slave.

Pregnancy was not a barrier to punishment; methods were devised to administer lashings without harming the baby. Slave masters would dig a hole big enough for the woman's stomach to lie in and proceed with the lashings.

Slave overseers were authorized to whip and punish slaves. One overseer told a visitor, "Some Negroes are determined never to let a white man whip them and will resist you, when you attempt it; of course you must kill them in that case." A former slave describes witnessing females being whipped: "They usually screamed and prayed, though a few never made a sound."

In his autobiography, Frederick Douglass describes the cowskin whip:

The cowskin ... is made entirely of untanned, but dried, ox hide, and is about as hard as a piece of well-seasoned live oak. It is made of various sizes, but the usual length is about three feet. The part held in the hand is nearly an inch in thickness; and, from the extreme end of the butt or handle, the cowskin tapers its whole length to a point. This makes it quite elastic and springy. A blow with it, on the hardest back, will gash the flesh, and make the blood start. Cowskins are painted red, blue and green, and are the favorite slave whip. I think this whip worse than the "cat-o'nine-tails." It condenses the whole strength of the arm to a single point, and comes with a spring that makes the air whistle. It is a terrible instrument, and is so handy, that the overseer can always have it on his person, and ready for use. The temptation to use it is ever strong; and an overseer can, if disposed, always have cause for using it.

The results of harsh punishments are sometimes mentioned in newspaper ads describing runaway slaves. One ad describes a woman of about 18 years, named Patty: “Her back appears to have been used to the whip."

Illustration from the American Anti-Slavery Almanac for 1840

A metal collar could be put on a slave. Such collars were thick and heavy; they often had protruding spikes which impeded work as well as rest. Louis Cain, a survivor of slavery, described the punishment of a fellow slave: "One nigger run to the woods to be a jungle nigger, but massa cotched him with the dog and took a hot iron and brands him. Then he put a bell on him, in a wooden frame what slip over the shoulders and under the arms. He made that nigger wear the bell a year and took it off on Christmas for a present to him. It sho' did make a good nigger out of him."

The branding of slaves for identification was common during the colonial era; however, by the nineteenth century it was used primarily as punishment. Mutilation of slaves, such as castration of males, removing a front tooth or teeth, and amputation of ears was a relatively common punishment during the colonial era, still used in 1830: it facilitated their identification if they ran away. Any punishment was permitted for runaway slaves, and many bore wounds from shotgun blasts or dog bites inflicted by their captors.

Slaves were punished for a number of reasons: working too slowly, breaking a law (for example, running away), leaving the plantation without permission, insubordination, impudence as defined by the owner or overseer, or for no reason, to underscore a threat or to assert the owner's dominance and masculinity. Myers and Massy describe the practices: "The punishment of deviant slaves was decentralized, based on plantations, and crafted so as not to impede their value as laborers." Whites punished slaves publicly to set an example. A man named Harding describes an incident in which a woman assisted several men in a minor rebellion: "The women he hoisted up by the thumbs, whipp'd and slashed her [sic] with knives before the other slaves till she died." Men and women were sometimes punished differently; according to the 1789 report of the Virginia Committee of the Privy Council, males were often shackled but women and girls were left free.

Wilma Dunaway notes that slaves were often punished for their failure to demonstrate due deference and submission to whites. Demonstrating politeness and humility showed the slave was submitting to the established racial and social order, while failure to follow them demonstrated insolence and a threat to the social hierarchy. Dunway observes that slaves were punished almost as often for symbolic violations of the social order as they were for physical failures; in Appalachia, two-thirds of whippings were done for social offences versus one-third for physical offences such as low productivity or property losses.

Education and access to information

Slave owners greatly feared slave rebellions. Most of them sought to minimize slaves' exposure to the outside world to reduce the risk. The desired result was to eliminate slaves' dreams and aspirations, restrict access to information about escaped slaves and rebellions, and stifle their mental faculties.

Teaching slaves to read was discouraged or (depending upon the state) prohibited, so as to hinder aspirations for escape or rebellion. Slaveowners believed slaves with knowledge would become morose, if not insolent and "uppity". They might learn of the Underground Railroad: that escape was possible, that many would help, and that there were sizeable communities of formerly enslaved Blacks in Northern cities. In response to slave rebellions such as the Haitian Revolution, the 1811 German Coast Uprising, a failed uprising in 1822 organized by Denmark Vesey, and Nat Turner's slave rebellion in 1831, some states prohibited slaves from holding religious gatherings, or any other kind of gathering, without a white person present, for fear that such meetings could facilitate communication and lead to rebellion and escapes.

In 1841, Virginia punished violations of this law by 20 lashes to the slave and a $100 fine to the teacher, and North Carolina by 39 lashes to the slave and a $250 fine to the teacher. In Kentucky, education of slaves was legal but almost nonexistent. Some Missouri slaveholders educated their slaves or permitted them to do so themselves.

Medical treatment

The quality of medical care to slaves is uncertain; some historians conclude that because slaveholders wished to preserve the value of their slaves, they received the same care as whites did. Others conclude that medical care was poor. A majority of plantation owners and doctors balanced a plantation need to coerce as much labor as possible from a slave without causing death, infertility, or a reduction in productivity; the effort by planters and doctors to provide sufficient living resources that enabled their slaves to remain productive and bear many children; the impact of diseases and injury on the social stability of slave communities; the extent to which illness and mortality of sub-populations in slave society reflected their different environmental exposures and living circumstances rather than their alleged racial characteristics. Slaves may have also provided adequate medical care to each other.

According to Michael W. Byrd, a dual system of medical care provided poorer care for slaves throughout the South, and slaves were excluded from proper, formal medical training. This meant that slaves were mainly responsible for their own care, a "health subsystem" that persisted long after slavery was abolished.

Medical care was usually provided by fellow slaves or by slaveholders and their families, and only rarely by physicians. Care for sick household members was mostly provided by women. Some slaves possessed medical skills, such as knowledge of herbal remedies and midwifery and often treated both slaves and non-slaves. Covey suggests that because slaveholders offered poor treatment, slaves relied on African remedies and adapted them to North American plants. Other examples of improvised health care methods included folk healers, grandmother midwives, and social networks such as churches, and, for pregnant slaves, female networks. Slave-owners would sometimes also seek healing from such methods in times of ill health.

Researchers performed medical experiments on slaves, who could not refuse, if their owners permitted it. They frequently displayed slaves to illustrate medical conditions. Southern medical schools advertised the ready supply of corpses of the enslaved, for dissection in anatomy classes, as an incentive to enroll.

Separation of families

Old black-and-white photo of wooden shacks
Plantation slave cabins, South Carolina Low Country
 
Black-and-white photo of large gazebo
Slave Market, Public Square, Louisville, Georgia

In the introduction to the oral history project, Remembering Slavery: African Americans Talk About Their Personal Experiences of Slavery and Emancipation, the editors wrote:

As masters applied their stamp to the domestic life of the slave quarter, slaves struggled to maintain the integrity of their families. Slaveholders had no legal obligation to respect the sanctity of the slave's marriage bed, and slave women— married or single – had no formal protection against their owners' sexual advances. ...Without legal protection and subject to the master's whim, the slave family was always at risk.

Elizabeth Keckley, who grew up enslaved in Virginia and later became Mary Todd Lincoln's personal modiste, gave an account of how she had witnessed Little Joe, the son of the cook, being sold to pay his enslaver's bad debt:

Joe’s mother was ordered to dress him in his best Sunday clothes and send him to the house, where he was sold, like the hogs, at so much per pound. When her son started for Petersburgh, ... she pleaded piteously that her boy not be taken from her; but master quieted her by telling that he was going to town with the wagon, and would be back in the morning. Morning came, but little Joe did not return to his mother. Morning after morning passed, and the mother went down to the grave without ever seeing her child again. One day she was whipped for grieving for her lost boy.... Burwell never liked to see his slaves wear a sorrowful face, and those who offended in this way were always punished. Alas! the sunny face of the slave is not always an indication of sunshine in the heart.

Between 1790 and 1860, about one million enslaved people were forcefully moved from the states on the Atlantic seabord to the interior in a Second Middle Passage. This normally involved the separation of children from their parents and of husbands from their wives.

Rape and sexual abuse

Owners of enslaved people could legally use them as sexual objects. Therefore, slavery in the United States encompassed wide-ranging rape and sexual abuse, including many forced pregnancies, in order to produce children for sale. Many slaves fought back against sexual attacks, and some died resisting them; others were left with psychological and physical scars. Historian Nell Irvin Painter describes the effects of this abuse as "soul murder".

Rape laws in the South embodied a race-based double standard. Black men accused of rape during the colonial period were often punished with castration, and the penalty was increased to death during the Antebellum Period; however, white men could legally rape their female slaves. Men and boys were also sexually abused by slaveholders. Thomas Foster says that although historians have begun to cover sexual abuse during slavery, few focus on sexual abuse of men and boys because of the assumption that only enslaved women were victimized. Foster suggests that men and boys may have also been forced into unwanted sexual activity; one problem in documenting such abuse is that they, of course, did not bear mixed-race children. Both masters and mistresses were thought to have abused male slaves.

The mistreatment of slaves frequently included rape and the sexual abuse of women. The sexual abuse of slaves was partially rooted in historical Southern culture and its view of the enslaved as property. Although Southern mores regarded white women as dependent and submissive, black women were often consigned to a life of sexual exploitation. Racial purity was the driving force behind the Southern culture's prohibition of sexual relations between white women and black men; however, the same culture protected sexual relations between white men and black women. The result was a number of mixed-race offspring. Many women were raped, and had little control over their families. Children, free women, indentured servants, and men were not immune from abuse by masters and owners(See Children of the plantation.) Children, especially young girls, were often subjected to sexual abuse by their masters, their masters' children, and relatives. Similarly, indentured servants and slave women were often abused. Since these women had no control over where they went or what they did, their masters could manipulate them into situations of high risk, i.e. forcing them into a dark field or making them sleep in their master's bedroom to be available for service. Free or white women could charge their perpetrators with rape, but slave women had no legal recourse; their bodies legally belonged to their owners.

After 1662, when Virginia adopted the legal doctrine partus sequitur ventrem, sexual relations between white men and black women were regulated by classifying children of slave mothers as slaves regardless of their father's race or status. Particularly in the Upper South, a population developed of mixed-race offspring of such unions (see children of the plantation), although white Southern society claimed to abhor miscegenation and punished sexual relations between white women and black men as damaging to racial purity.

Slave breeding

Slave breeding was the attempt by a slave-owner to influence the reproduction of his slaves for profit. It included forced sexual relations between male and female slaves, encouraging slave pregnancies, sexual relations between master and slave to produce slave children and favoring female slaves who had many children.

For instance, Frederick Douglass (who grew up as a slave in Maryland) reported the systematic separation of slave families and widespread rape of slave women to boost slave numbers. With the development of cotton plantations in the Deep South, planters in the Upper South frequently broke up families to sell "surplus" male slaves to other markets. In addition, court cases such as those of Margaret Garner in Ohio or Celia, a slave in 19th-century Missouri, dealt with women slaves who had been sexually abused by their masters.

Handwritten receipt for slave
Receipt for $500 payment ($10,300, adjusted for inflation as of 2007) for slave, 1840: "Recd of Judge S. Williams his notes for five hundred Dollars in full payment for a negro man named Ned which negro I warrant to be sound and well and I do bind myself by these presents to forever warrant and defend the right and Title of the said negro to the said Williams his heirs or assigns against the legal claims of all persons whatsoever. Witness my hand and seal this day and year above written. Eliza Wallace [seal]"

Concubines and sexual slaves

The evidence of white men raping slave women was obvious in the many mixed-race children who were born into slavery and part of many households. In some areas, such mixed-race families became the core of domestic and household servants, as at Thomas Jefferson's Monticello. Both his father-in-law and he took mixed-race enslaved women as concubines after being widowed; each man had six children by those enslaved women. Jefferson's young concubine, Sally Hemings, was 3/4 white, the daughter of his father-in-law John Wayles, making her the half-sister of his late wife.

Many female slaves (known as "fancy maids") were sold at auction into concubinage or prostitution, which was called the "fancy trade". Concubine slaves were the only female slaves who commanded a higher price than skilled male slaves.

Mixed-race children

By the turn of the 19th century many mixed-race families in Virginia dated to Colonial times; white women (generally indentured servants) had unions with slave and free African-descended men. Because of the mother's status, those children were born free and often married other free people of color.

Given the generations of interaction, an increasing number of slaves in the United States during the 19th century were of mixed race. With each generation, the number of mixed-race slaves increased. The 1850, census identified 245,000 slaves as mixed-race (called "mulatto" at the time); by 1860, there were 411,000 slaves classified as mixed-race out of a total slave population of 3,900,000.

Notable examples of mostly-white children born into slavery were the children of Sally Hemings, who it has been speculated are the children of Thomas Jefferson. Since 2000 historians have widely accepted Jefferson's paternity, the change in scholarship has been reflected in exhibits at Monticello and in recent books about Jefferson and his era. Some historians, however, continue to disagree with this conclusion.

Speculation exists on the reasons George Washington freed his slaves in his will. One theory posits that the slaves included two half-sisters of his wife, Martha Custis. Those mixed-race slaves were born to slave women owned by Martha's father, and were regarded within the family as having been sired by him. Washington became the owner of Martha Custis's slaves under Virginia law when he married her and faced the ethical conundrum of owning his wife's sisters.

Planters with mixed-race children sometimes arranged for their education (occasionally in northern schools) or apprenticeship in skilled trades and crafts. Others settled property on them, or otherwise passed on social capital by freeing the children and their mothers. While fewer in number than in the Upper South, free blacks in the Deep South were often mixed-race children of wealthy planters and sometimes benefited from transfers of property and social capital. Wilberforce University, founded by Methodist and African Methodist Episcopal (AME) representatives in Ohio in 1856, for the education of African-American youth, was during its early history largely supported by wealthy southern planters who paid for the education of their mixed-race children. When the American Civil War broke out, the majority of the school's 200 students were of mixed race and from such wealthy Southern families. The college closed for several years before the AME Church bought and operated it.

Summaries by survivors of slavery

Historian Ty Seidule uses a quote from Frederick Douglass's autobiography My Bondage and My Freedom to describe the experience of the average male slave as being "robbed of wife, of children, of his hard earnings, of home, of friends, of society, of knowledge, and of all that makes his life desirable."

A quote from a letter by Isabella Gibbons, who had been enslaved by professors at the University of Virginia, is now engraved on the university's Memorial to Enslaved Laborers:

Can we forget the crack of the whip, the cowhide, whipping-post, the auction-block, the spaniels, the iron collar, the negro-trader tearing the young child from its mother’s breast as a whelp from the lioness? Have we forgotten that by those horrible cruelties, hundreds of our race have been killed? No, we have not, nor ever will.

Saturday, February 12, 2022

Fear, uncertainty, and doubt

From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Fear,_uncertainty,_and_doubt

Fear, uncertainty, and doubt (often shortened to FUD) is a propaganda tactic used in sales, marketing, public relations, politics, polling and cults. FUD is generally a strategy to influence perception by disseminating negative and dubious or false information and a manifestation of the appeal to fear.

Definition

The term "fear, uncertainty, and doubt" appeared as far back as the 1920s, whereas the similar formulation "doubts, fears, and uncertainties" reaches back to 1693. By 1975, the term was appearing abbreviated as FUD in marketing and sales contexts as well as in public relations:

One of the messages dealt with is FUD—the fear, uncertainty, and doubt on the part of customer and sales person alike that stifles the approach and greeting.

The abbreviation FUD is also alternatively rendered as "fear, uncertainty, and disinformation".

FUD was first used with its common current technology-related meaning by Gene Amdahl in 1975, after he left IBM to found his own company, Amdahl Corp.:

FUD is the fear, uncertainty, and doubt that IBM sales people instill in the minds of potential customers who might be considering Amdahl products.

This usage of FUD to describe disinformation in the computer hardware industry is said to have led to subsequent popularization of the term.

As Eric Steven Raymond wrote:

The idea, of course, was to persuade buyers to go with safe IBM gear rather than with competitors' equipment. This implicit coercion was traditionally accomplished by promising that Good Things would happen to people who stuck with IBM, but Dark Shadows loomed over the future of competitors' equipment or software. After 1991, the term has become generalized to refer to any kind of disinformation used as a competitive weapon.

By spreading questionable information about the drawbacks of less well-known products, an established company can discourage decision-makers from choosing those products over its own, regardless of the relative technical merits. This is a recognized phenomenon, epitomized by the traditional axiom of purchasing agents that "nobody ever got fired for buying IBM equipment". The aim is to have IT departments buy software they know to be technically inferior because upper management is more likely to recognize the brand.

Examples

Software producers

Microsoft

From the 1990s onward, the term became most often associated with Microsoft. Roger Irwin said:

Microsoft soon picked up the art of FUD from IBM, and throughout the '80s used FUD as a primary marketing tool, much as IBM had in the previous decade. They ended up out FUD-ing IBM themselves during the OS/2 vs Win3.1 years.

In 1996, Caldera, Inc. accused Microsoft of several anti-competitive practices, including issuing vaporware announcements, creating FUD, and excluding competitors from participating in beta-test programs in order to destroy competition in the DOS market. One of the claims was related to having modified Windows 3.1 so that it would not run on DR DOS 6.0 although there were no technical reasons for it not to work. This was caused by the so-called AARD code, some encrypted piece of code, which had been found in a number of Microsoft programs. The code would fake nonsensical error messages if run on DR DOS, like:

Non-Fatal error detected: error #2726
Please contact Windows 3.1 beta support
Press ENTER to exit or C to continue

If the user chose to press C, Windows would continue to run on DR DOS without problems. While it had been already speculated in the industry that the purpose of this code was to create doubts about DR DOS's compatibility and thereby destroy the product's reputation, internal Microsoft memos published as part of the United States v. Microsoft antitrust case later revealed that the specific focus of these error messages was DR DOS. At one point, Microsoft CEO Bill Gates sent a memo to a number of employees, reading

You never sent me a response on the question of what things an app would do that would make it run with MS-DOS and not run with DR-DOS. Is there [a] feature they have that might get in our way?

Microsoft Senior Vice President Brad Silverberg later sent another memo, stating

What the [user] is supposed to do is feel uncomfortable, and when he has bugs, suspect that the problem is DR-DOS and then go out to buy MS-DOS.

In 2000, Microsoft settled the lawsuit out-of-court for an undisclosed sum, which in 2009 was revealed to be $280 million.

At around the same time, the leaked internal Microsoft "Halloween documents" stated "OSS [Open Source Software] is long-term credible… [therefore] FUD tactics cannot be used to combat it." Open source software, and the Linux community in particular, are widely perceived as frequent targets of Microsoft's FUD:

SCO v. IBM

The SCO Group's 2003 lawsuit against IBM, funded by Microsoft, claiming $5 billion in intellectual property infringements by the free software community, is an example of FUD, according to IBM, which argued in its counterclaim that SCO was spreading "fear, uncertainty, and doubt".

Magistrate Judge Brooke C. Wells wrote (and Judge Dale Albert Kimball concurred) in her order limiting SCO's claims: "The court finds SCO's arguments unpersuasive. SCO's arguments are akin to SCO telling IBM, 'sorry, we are not going to tell you what you did wrong because you already know...' SCO was required to disclose in detail what it feels IBM misappropriated... the court finds it inexcusable that SCO is... not placing all the details on the table. Certainly if an individual were stopped and accused of shoplifting after walking out of Neiman Marcus they would expect to be eventually told what they allegedly stole. It would be absurd for an officer to tell the accused that 'you know what you stole, I'm not telling.' Or, to simply hand the accused individual a catalog of Neiman Marcus' entire inventory and say 'it's in there somewhere, you figure it out.'"

Regarding the matter, Darl Charles McBride, President and CEO of SCO, made the following statements:

  1. "IBM has taken our valuable trade secrets and given them away to Linux,"
  2. "We're finding... cases where there is line-by-line code in the Linux kernel that is matching up to our UnixWare code"
  3. "...unless more companies start licensing SCO's property... [SCO] may also sue Linus Torvalds... for patent infringement."
  4. "Both companies [IBM and Red Hat] have shifted liability to the customer and then taunted us to sue them."
  5. "We have the ability to go to users with lawsuits and we will if we have to, 'It would be within SCO Group's rights to order every copy of AIX [IBM's proprietary UNIX] destroyed'"
  6. "As of Friday, [13] June [2003], we will be done trying to talk to IBM, and we will be talking directly to its customers and going in and auditing them. IBM no longer has the authority to sell or distribute IBM AIX and customers no longer have the right to use AIX software"
  7. "If you just drag this out in a typical litigation path, where it takes years and years to settle anything, and in the meantime you have all this uncertainty clouding over the market..."
  8. "Users are running systems that have basically pirated software inside, or stolen software inside of their systems, they have liability."

SCO stock skyrocketed from under US$3 a share to over US$20 in a matter of weeks in 2003. It later dropped to around US$1.2—then crashed to under 50 cents on 13 August 2007, in the aftermath of a ruling that Novell owns the UNIX copyrights.

Apple

Apple's claim that iPhone jailbreaking could potentially allow hackers to crash cell phone towers was described by Fred von Lohmann, a representative of the Electronic Frontier Foundation (EFF), as a "kind of theoretical threat...more FUD than truth".

Security industry

FUD is widely recognized as a tactic to promote the sale or implementation of security products and measures. It is possible to find pages describing purely artificial problems. Such pages frequently contain links to the demonstrating source code that does not point to any valid location and sometimes even links that "will execute malicious code on your machine regardless of current security software", leading to pages without any executable code.

The drawback to the FUD tactic in this context is that, when the stated or implied threats fail to materialize over time, the customer or decision-maker frequently reacts by withdrawing budgeting or support from future security initiatives.

FUD has also been utilized in technical support scams, which may use fake error messages to scare unwitting computer users, especially the elderly or computer-illiterate, into paying for a supposed fix for a non-existent problem, to avoid being framed for criminal charges such as unpaid taxes, or in extreme cases, false accusations of illegal acts such as child pornography.

Caltex

The FUD tactic was used by Caltex Australia in 2003. According to an internal memo, which was subsequently leaked, they wished to use FUD to destabilize franchisee confidence, and thus get a better deal for Caltex. This memo was used as an example of unconscionable behaviour in a Senate inquiry. Senior management claimed that it was contrary to and did not reflect company principles.

Clorox

In 2008, Clorox was the subject of both consumer and industry criticism for advertising its Green Works line of allegedly environmentally friendly cleaning products using the slogan, "Finally, Green Works." The slogan implied both that "green" products manufactured by other companies which had been available to consumers prior to the introduction of Clorox's GreenWorks line had all been ineffective, and also that the new GreenWorks line was at least as effective as Clorox's existing product lines. The intention of this slogan and the associated advertising campaign has been interpreted as appealing to consumers' fears that products from companies with less brand recognition are less trustworthy or effective. Critics also pointed out that, despite its representation of GreenWorks products as "green" in the sense of being less harmful to the environment and/or consumers using them, the products contain a number of ingredients advocates of natural products have long campaigned against the use of in household products due to toxicity to humans or their environment. All three implicit claims have been disputed, and some of their elements disproven, by environmental groups, consumer-protection groups, and the industry self-regulatory Better Business Bureau.

Carbon emission trading

From Wikipedia, the free encyclopedia

Carbon emission trade - allowance prices from 2008

Emission trading (ETS) for carbon dioxide (CO2) and other greenhouse gases (GHG) is a form of carbon pricing; also known as cap and trade (CAT) or carbon pricing. It is an approach to limit climate change by creating a market with limited allowances for emissions. This can lower competitiveness of fossil fuels and accelerate investments into low carbon sources of energy such as wind power and photovoltaics. Fossil fuels are the main driver for climate change. They account for 89% of all CO2 emissions and 68% of all GHG emissions.

Emissions trading works by setting a quantitative total limit on the emissions produced by all participating emitters. As a result, the price automatically adjusts to this target. This is the main advantage compared to a fixed carbon tax. Under emission trading, a polluter having more emissions than their quota has to purchase the right to emit more. The entity having fewer emissions sells the right to emit carbon to other entities. As a result, the most cost-effective carbon reduction methods would be exploited first. ETS and carbon taxes are a common method for countries in their attempts to meet their pledges under the Paris Agreement.

Carbon ETS are in operation in China, the European Union and other countries. However, they are usually not harmonized with any defined carbon budgets, which are required to maintain global warming below the critical thresholds of 1.5 °C or "well below" 2 °C. The existing schemes only cover a limited scope of emissions. The EU-ETS focuses on industry and large power generation, leaving the introduction of additional schemes for transport and private consumption to the member states. Though units are counted in tonnes of carbon dioxide equivalent, other potent GHGs such as methane (CH4) or nitrous oxide (N2O) from agriculture are usually not part these schemes yet. Apart from that, an oversupply leads to low prices of allowances with almost no effect on fossil fuel combustion. In September 2021, emission trade allowances (ETAs) covered a wide price range from €7/tCO2 in China's new national carbon market to €63/tCO2 in the EU-ETS. Latest models of the social cost of carbon calculate a damage of more than $3000 per ton CO2 as a result of economy feedbacks and falling global GDP growth rates, while policy recommendations range from about $50 to $200.

History

The international community began the long process towards building effective international and domestic measures to tackle GHG emissions (carbon dioxide, methane, nitrous oxide, hydroflurocarbons, perfluorocarbons, sulphur hexafluoride) in response to the increasing assertions that global warming is happening due to man-made emissions and the uncertainty over its likely consequences. That process began in Rio de Janeiro in 1992, when 160 countries agreed the UN Framework Convention on Climate Change (UNFCCC). The necessary detail was left to be settled by the UN Conference of Parties (COP).

In 1997, the Kyoto Protocol was the first major agreement to reduce greenhouse gases. 38 developed countries (Annex 1 countries) committed themselves to targets and timetables.

The resulting inflexible limitations on GHG growth could entail substantial costs if countries have to solely rely on their own domestic measures.

Economics

The economic problem with climate change is that the emitters of greenhouse gases (GHGs) do not face the full cost implications of their actions. These other costs are called external costs. External costs may affect the welfare of others. In the case of climate change, GHG emissions affect the welfare of people now and in the future, as well as affecting the natural environment. The social cost of carbon depends on the future development of emissions. This can be addressed with the dynamic price model of emissions trading.

Distribution of allowances

Emission allowances may be given away for free or auctioned. In the first case, the government receives no carbon revenue and in the second it receives (on average) the full value of the permits. In either case, permits will be equally scarce and just as valuable to market participants. Since the private market (for trading permits) determines the final price of permits (at the time they must be used to cover emissions), the price will be the same in either case (free or auctioned). This is generally understood.

A second point about free permits (usually “grandfathered,” i.e. given out in proportion to past emissions) has often been misunderstood. Companies that receive free permits, treat them as if they had paid full price for them. This is because using carbon in production has the same cost under both arrangements. With auctioned permits, the cost is obvious. With free permits, the cost is the cost of not selling the permit at full value — this is termed an “opportunity cost.” Since the cost of emissions is generally a marginal cost (increasing with output), the cost is passed on by raising the cost of output (e.g. raising the cost of gasoline or electricity).

Windfall profits

A company that receives permits for free will pass on its opportunity cost in the form of higher product prices. Hence, if it sells the same amount of output as before that cap, with no change in production technology, the full value (at the market price) of permits received for free becomes windfall profits. However, since the cap reduces output and often causes the company to incur costs to increase efficiency, windfall profits will be less than the full value of its free permits.

Generally speaking, if permits are allocated to emitters for free, they will profit from them. But if they must pay full price, or if carbon is taxed, their profits will be reduced. If the carbon price exactly equals the true social cost of carbon, then long-run profit reduction will simply reflect the consequences of paying this new cost. If having to pay this cost is unexpected, then there will likely be a one-time loss that is due to the change in regulations and not simply due to paying the real cost of carbon. However, if there is advanced notice of this change, or if the carbon price is introduced gradually, this one-time regulatory cost will be minimized. There has now been enough advance notice of carbon pricing that this effect should be negligible on average.

Carbon emission trading systems and markets

For emissions trading where greenhouse gases are regulated, one emissions permit is considered equivalent to one tonne of carbon dioxide (CO2) emissions. Other emissions permits are carbon credits, Kyoto units, assigned amount units, and Certified Emission Reduction units (CER). These permits can be sold privately or in the international market at the prevailing market price. These trade and settle internationally, and hence allow permits to be transferred between countries. Each international transfer is validated by the United Nations Framework Convention on Climate Change (UNFCCC). Each transfer of ownership within the European Union is additionally validated by the European Commission.

Emissions trading programmes such as the European Union Emissions Trading System (EU ETS) complement the country-to-country trading stipulated in the Kyoto Protocol by allowing private trading of permits. Under such programmes – which are generally co-ordinated with the national emissions targets provided within the framework of the Kyoto Protocol – a national or international authority allocates permits to individual companies based on established criteria, with a view to meeting national and/or regional Kyoto targets at the lowest overall economic cost.

Other greenhouse gases can also be traded, but are quoted as standard multiples of carbon dioxide with respect to their global warming potential. These features reduce the quota's financial impact on business, while ensuring that the quotas are met at a national and international level.

Exchanges trading in UNFCCC related carbon credits include the European Climate Exchange, NASDAQ OMX Commodities Europe, PowerNext, Commodity Exchange Bratislava and the European Energy Exchange. The Chicago Climate Exchange participated until 2010. NASDAQ OMX Commodities Europe listed a contract to trade offsets generated by a CDM carbon project called Certified Emission Reductions. Many companies now engage in emissions abatement, offsetting, and sequestration programs to generate credits that can be sold on one of the exchanges. At least one private electronic market has been established in 2008: CantorCO2e. Carbon credits at Commodity Exchange Bratislava are traded at special platform called Carbon place. Various proposals for linking international systems across markets are being investigated. This is being coordinated by the International Carbon Action Partnership (ICAP).

China

The Chinese national carbon trading scheme is the largest in the world. It is an intensity-based trading system for carbon dioxide emissions by China, which started operating in 2021. The initial design of the system targets a scope of 3.5 billion tons of carbon dioxide emissions that come from 1700 installations. It has made a voluntary pledge under the UNFCCC to lower CO2 per unit of GDP by 40 to 45% in 2020 when comparing to the 2005 levels.

In November 2011, China approved pilot tests of carbon trading in seven provinces and cities – Beijing, Chongqing, Shanghai, Shenzhen, Tianjin as well as Guangdong Province and Hubei Province, with different prices in each region. The pilot is intended to test the waters and provide valuable lessons for the design of a national system in the near future. Their successes or failures will, therefore, have far-reaching implications for carbon market development in China in terms of trust in a national carbon trading market. Some of the pilot regions can start trading as early as 2013/2014. National trading is expected to start in 2017, latest in 2020.

The effort to start a national trading system has faced some problems that took longer than expected to solve, mainly in the complicated process of initial data collection to determine the base level of pollution emission. According to the initial design, there will be eight sectors that are first included in the trading system: chemicals, petrochemicals, iron and steel, non-ferrous metals, building materials, paper, power and aviation, but many of the companies involved lacked consistent data. Therefore, by the end of 2017, the allocation of emission quotas have started but it has been limited to only the power sector and will gradually expand, although the operation of the market is yet to begin. In this system, Companies that are involved will be asked to meet target level of reduction and the level will contract gradually.

European Union

European Allowance prices from 2009

The European Union Emission Trading Scheme (or EU-ETS) is the largest multi-national, greenhouse gas emissions trading scheme in the world. After voluntary trials in the UK and Denmark, Phase I began operation in January 2005 with all 15 member states of the European Union participating. The program caps the amount of carbon dioxide that can be emitted from large installations with a net heat supply in excess of 20 MW, such as power plants and carbon intensive factories, and covers almost half (46%) of the EU's Carbon Dioxide emissions. Phase I permits participants to trade among themselves and in validated credits from the developing world through Kyoto's Clean Development Mechanism. Credits are gained by investing in clean technologies and low-carbon solutions, and by certain types of emission-saving projects around the world to cover a proportion of their emissions.

During Phases I and II, allowances for emissions have typically been given free to firms, which has resulted in them getting windfall profits. Ellerman and Buchner (2008) suggested that during its first two years in operation, the EU-ETS turned an expected increase in emissions of 1%–2% per year into a small absolute decline. Grubb et al. (2009) suggested that a reasonable estimate for the emissions cut achieved during its first two years of operation was 50–100 MtCO2 per year, or 2.5%–5%.

A number of design flaws have limited the effectiveness of the scheme. In the initial 2005–07 period, emission caps were not tight enough to drive a significant reduction in emissions. The total allocation of allowances turned out to exceed actual emissions. This drove the carbon price down to zero in 2007. This oversupply was caused because the allocation of allowances by the EU was based on emissions data from the European Environmental Agency in Copenhagen, which uses a horizontal activity-based emissions definition similar to the United Nations, the EU-ETS Transaction log in Brussels, but a vertical installation-based emissions measurement system. This caused an oversupply of 200 million tonnes (10% of market) in the EU-ETS in the first phase and collapsing prices.

Phase II saw some tightening, but the use of JI and CDM offsets was allowed, with the result that no reductions in the EU will be required to meet the Phase II cap. For Phase II, the cap is expected to result in an emissions reduction in 2010 of about 2.4% compared to expected emissions without the cap (business-as-usual emissions). For Phase III (2013–20), the European Commission proposed a number of changes, including:

  • Setting an overall EU cap, with allowances then allocated;
  • Tighter limits on the use of offsets;
  • Unlimited banking of allowances between Phases II and III;
  • A move from allowances to auction.

In January 2008, Norway, Iceland, and Liechtenstein joined the European Union Emissions Trading System (EU-ETS), according to a publication from the European Commission. The Norwegian Ministry of the Environment has also released its draft National Allocation Plan which provides a carbon cap-and-trade of 15 million tonnes of CO2, 8 million of which are set to be auctioned. According to the OECD Economic Survey of Norway 2010, the nation "has announced a target for 2008–12 10% below its commitment under the Kyoto Protocol and a 30% cut compared with 1990 by 2020." In 2012, EU-15 emissions was 15.1% below their base year level. Based on figures for 2012 by the European Environment Agency, EU-15 emissions averaged 11.8% below base-year levels during the 2008–2012 period. This means the EU-15 over-achieved its first Kyoto target by a wide margin.

A 2020 study found that the European Union Emissions Trading System successfully reduced CO2 emissions even though the prices for carbon were set at low prices.

India

Trading is set to begin in 2014 after a three-year rollout period. It is a mandatory energy efficiency trading scheme covering eight sectors responsible for 54 per cent of India's industrial energy consumption. India has pledged a 20 to 25 per cent reduction in emission intensity from 2005 levels by 2020. Under the scheme, annual efficiency targets will be allocated to firms. Tradable energy-saving permits will be issued depending on the amount of energy saved during a target year.

USA

As of 2017, there is no national emissions trading scheme in the United States. Failing to get Congressional approval for such a scheme, President Barack Obama instead acted through the United States Environmental Protection Agency to attempt to adopt through rulemaking the Clean Power Plan, which does not feature emissions trading. The plan was subsequently challenged by the administration of President Donald Trump.

Concerned at the lack of federal action, several states on the east and west coasts have created sub-national cap-and-trade programs.

President Barack Obama in his proposed 2010 United States federal budget wanted to support clean energy development with a 10-year investment of US$15 billion per year, generated from the sale of greenhouse gas (GHG) emissions credits. Under the proposed cap-and-trade program, all GHG emissions credits would have been auctioned off, generating an estimated $78.7 billion in additional revenue in FY 2012, steadily increasing to $83 billion by FY 2019. The proposal was never made law.

The American Clean Energy and Security Act (H.R. 2454), a greenhouse gas cap-and-trade bill, was passed on 26 June 2009, in the House of Representatives by a vote of 219–212. The bill originated in the House Energy and Commerce Committee and was introduced by Representatives Henry A. Waxman and Edward J. Markey. The political advocacy organizations FreedomWorks and Americans for Prosperity, funded by brothers David and Charles Koch of Koch Industries, encouraged the Tea Party movement to focus on defeating the legislation. Although cap and trade also gained a significant foothold in the Senate via the efforts of Republican Lindsey Graham, Independent and former Democrat Joe Lieberman, and Democrat John Kerry, the legislation died in the Senate.

State and regional programs

In 2003, New York State proposed and attained commitments from nine Northeast states to form a cap-and-trade carbon dioxide emissions program for power generators, called the Regional Greenhouse Gas Initiative (RGGI). This program launched on January 1, 2009, with the aim to reduce the carbon "budget" of each state's electricity generation sector to 10% below their 2009 allowances by 2018.

Also in 2003, U.S. corporations were able to trade CO2 emission allowances on the Chicago Climate Exchange under a voluntary scheme. In August 2007, the Exchange announced a mechanism to create emission offsets for projects within the United States that cleanly destroy ozone-depleting substances.

In 2006, the California Legislature passed the California Global Warming Solutions Act, AB-32. Thus far, flexible mechanisms in the form of project based offsets have been suggested for three main project types. The project types include: manure management, forestry, and destruction of ozone-depleted substances. However, a ruling from Judge Ernest H. Goldsmith of San Francisco's Superior Court stated that the rules governing California's cap-and-trade system were adopted without a proper analysis of alternative methods to reduce greenhouse gas emissions. The tentative ruling, issued on January 24, 2011, argued that the California Air Resources Board violated state environmental law by failing to consider such alternatives. If the decision is made final, the state would not be allowed to implement its proposed cap-and-trade system until the California Air Resources Board fully complies with the California Environmental Quality Act. However, on June 24, 2011, the Superior Court's ruling was overturned by the Court of Appeals. By 2012, some of the emitters obtained allowances for free, which is for the electric utilities, industrial facilities and natural gas distributors, whereas some of the others have to go to the auction. The California cap-and-trade program came into effect in 2013.

In 2014, the Texas legislature approved a 10% reduction for the Highly Reactive Volatile Organic Compound (HRVOC) emission limit. This was followed by a 5% reduction for each subsequent year until a total of 25% percent reduction was achieved in 2017.

In February 2007, five U.S. states and four Canadian provinces joined to create the Western Climate Initiative (WCI), a regional greenhouse gas emissions trading system. In July 2010, a meeting took place to further outline the cap-and-trade system. In November 2011, Arizona, Montana, New Mexico, Oregon, Utah and Washington withdrew from the WCI. As of 2021, only the U.S. state of California and the Canadian province of Quebec participate in the WCI.

In 1997, the State of Illinois adopted a trading program for volatile organic compounds in most of the Chicago area, called the Emissions Reduction Market System. Beginning in 2000, over 100 major sources of pollution in eight Illinois counties began trading pollution credits.

Australia

In 2003 the New South Wales (NSW) state government unilaterally established the New South Wales Greenhouse Gas Abatement Scheme to reduce emissions by requiring electricity generators and large consumers to purchase NSW Greenhouse Abatement Certificates (NGACs). This has prompted the rollout of free energy-efficient compact fluorescent lightbulbs and other energy-efficiency measures, funded by the credits. This scheme has been criticised by the Centre for Energy and Environmental Markets (CEEM) of the UNSW because of its lack of effectiveness in reducing emissions, its lack of transparency and its lack of verification of the additionality of emission reductions.

Both the incumbent Howard Coalition government and the Rudd Labor opposition promised to implement an emissions trading scheme (ETS) before the 2007 federal election. Labor won the election, with the new government proceeding to implement an ETS. The government introduced the Carbon Pollution Reduction Scheme, which the Liberals supported with Malcolm Turnbull as leader. Tony Abbott questioned an ETS, saying the best way to reduce emissions is with a "simple tax". Shortly before the carbon vote, Abbott defeated Turnbull in a leadership challenge, and from there on the Liberals opposed the ETS. This left the government unable to secure passage of the bill and it was subsequently withdrawn.

Julia Gillard defeated Rudd in a leadership challenge and promised not to introduce a carbon tax, but would look to legislate a price on carbon when taking the government to the 2010 election. In the first hung parliament result in 70 years, the government required the support of crossbenchers including the Greens. One requirement for Greens support was a carbon price, which Gillard proceeded with in forming a minority government. A fixed carbon price would proceed to a floating-price ETS within a few years under the plan. The fixed price lent itself to characterisation as a carbon tax and when the government proposed the Clean Energy Bill in February 2011, the opposition claimed it to be a broken election promise.

The bill was passed by the Lower House in October 2011 and the Upper House in November 2011. The Liberal Party vowed to overturn the bill if elected. The bill thus resulted in passage of the Clean Energy Act, which possessed a great deal of flexibility in its design and uncertainty over its future.

The Liberal/National coalition government elected in September 2013 has promised to reverse the climate legislation of the previous government. In July 2014, the carbon tax was repealed as well as the Emissions Trading Scheme (ETS) that was to start in 2015.

Canada

The Canadian provinces of Quebec and Nova Scotia operate an emissions trading scheme. Quebec links its program with the US state of California through the Western Climate Initiative.

Japan

The Japanese city of Tokyo is like a country in its own right in terms of its energy consumption and GDP. Tokyo consumes as much energy as "entire countries in Northern Europe, and its production matches the GNP of the world's 16th largest country". A scheme to limit carbon emissions launched in April 2010 covers the top 1,400 emitters in Tokyo, and is enforced and overseen by the Tokyo Metropolitan Government. Phase 1, which is similar to Japan's scheme, ran until 2015. (Japan had an ineffective voluntary emissions reductions system for years, but no nationwide cap-and-trade program.) Emitters must cut their emissions by 6% or 8% depending on the type of organization; from 2011, those who exceed their limits must buy matching allowances or invest in renewable-energy certificates or offset credits issued by smaller businesses or branch offices. Polluters that fail to comply will be fined up to 500,000 yen plus credits for 1.3 times excess emissions. In its fourth year, emissions were reduced by 23% compared to base-year emissions. In phase 2, (FY2015-FY2019), the target is expected to increase to 15%–17%. The aim is to cut Tokyo's carbon emissions by 25% from 2000 levels by 2020. These emission limits can be met by using technologies such as solar panels and advanced fuel-saving devices.

New Zealand

New Zealand Unit Prices

The New Zealand Emissions Trading Scheme (NZ ETS) is a partial-coverage all-free allocation uncapped highly internationally linked emissions trading scheme. The NZ ETS was first legislated in the Climate Change Response (Emissions Trading) Amendment Act 2008 in September 2008 under the Fifth Labour Government of New Zealand and then amended in November 2009 and in November 2012 by the Fifth National Government of New Zealand.

The NZ ETS covers forestry (a net sink), energy (43.4% of total 2010 emissions), industry (6.7% of total 2010 emissions) and waste (2.8% of total 2010 emissions) but not pastoral agriculture (47% of 2010 total emissions). Participants in the NZ ETS must surrender two emissions units (either an international 'Kyoto' unit or a New Zealand-issued unit) for every three tonnes of carbon dioxide equivalent emissions reported or they may choose to buy NZ units from the government at a fixed price of NZ$25.

Individual sectors of the economy have different entry dates when their obligations to report emissions and surrender emission units take effect. Forestry, which contributed net removals of 17.5 Mts of CO2e in 2010 (19% of NZ's 2008 emissions,) entered the NZ ETS on 1 January 2008. The stationary energy, industrial processes and liquid fossil fuel sectors entered the NZ ETS on 1 July 2010. The waste sector (landfill operators) entered on 1 January 2013. Methane and nitrous oxide emissions from pastoral agriculture are not included in the NZ ETS. (From November 2009, agriculture was to enter the NZ ETS on 1 January 2015)

The NZ ETS is highly linked to international carbon markets as it allows the importing of most of the Kyoto Protocol emission units. However, as of June 2015, the scheme will effectively transition into a domestic scheme, with restricted access to international Kyoto units (CERs, ERUs and RMUs). The NZ ETS has a domestic unit; the 'New Zealand Unit' (NZU), which is issued by free allocation to emitters, with no auctions intended in the short term. Free allocation of NZUs varies between sectors. The commercial fishery sector (who are not participants) have a free allocation of units on a historic basis. Owners of pre-1990 forests have received a fixed free allocation of units. Free allocation to emissions-intensive industry, is provided on an output-intensity basis. For this sector, there is no set limit on the number of units that may be allocated. The number of units allocated to eligible emitters is based on the average emissions per unit of output within a defined 'activity'. Bertram and Terry (2010, p 16) state that as the NZ ETS does not 'cap' emissions, the NZ ETS is not a cap and trade scheme as understood in the economics literature.

Some stakeholders have criticized the New Zealand Emissions Trading Scheme for its generous free allocations of emission units and the lack of a carbon price signal (the Parliamentary Commissioner for the Environment), and for being ineffective in reducing emissions (Greenpeace Aotearoa New Zealand).

The NZ ETS was reviewed in late 2011 by an independent panel, which reported to the Government and public in September 2011.

South Korea

South Korea's national emissions trading scheme officially launched on 1 January 2015, covering 525 entities from 23 sectors. With a three-year cap of 1.8687 billion tCO2e, it now forms the second largest carbon market in the world following the EU ETS. This amounts to roughly two-thirds of the country's emissions. The Korean emissions trading scheme is part of the Republic of Korea's efforts to reduce greenhouse gas emissions by 30% compared to the business-as-usual scenario by 2020.

United Kingdom

Business in the UK have come out strongly in support of emissions trading as a key tool to mitigate climate change, supported by NGOs. However, not all businesses favor a trading approach. On December 11, 2008, Rex Tillerson, the CEO of ExxonMobil, said a carbon tax is "a more direct, more transparent and more effective approach" than a cap-and-trade program, which he said, "inevitably introduces unnecessary cost and complexity". He also said that he hoped that the revenues from a carbon tax would be used to lower other taxes so as to be revenue neutral.

Market trend

Carbon taxes and emission trading worldwide
Emissions trading and carbon taxes around the world (2021)
  Carbon tax implemented or scheduled
  Carbon emission trading implemented or scheduled
  Carbon emission trading or carbon tax under consideration

Carbon emissions trading increased rapidly in 2021 with the start of the Chinese national carbon trading scheme. The increasing costs of permits on the EU ETS have had the effect of increasing costs of coal power.

A 2019 study by the American Council for an Energy Efficient Economy (ACEEE) finds that efforts to put a price on greenhouse gas emissions are growing in North America. "In addition to carbon taxes in effect in Alberta, British Columbia and Boulder, Colorado, cap and trade programs are in effect in California, Quebec, Nova Scotia and the nine northeastern states that form the Regional Greenhouse gas Initiative (RGGI). Several other states and provinces are currently considering putting a price on emissions."

Business reaction

23 multinational corporations came together in the G8 Climate Change Roundtable, a business group formed at the January 2005 World Economic Forum. The group included Ford, Toyota, British Airways, BP and Unilever. On June 9, 2005, the Group published a statement stating the need to act on climate change and stressing the importance of market-based solutions. It called on governments to establish "clear, transparent, and consistent price signals" through "creation of a long-term policy framework" that would include all major producers of greenhouse gases. By December 2007, this had grown to encompass 150 global businesses.

The International Air Transport Association, whose 230 member airlines comprise 93% of all international traffic, position is that trading should be based on "benchmarking", setting emissions levels based on industry averages, rather than "grandfathering", which would use individual companies' previous emissions levels to set their future permit allowances. They argue grandfathering "would penalise airlines that took early action to modernise their fleets, while a benchmarking approach, if designed properly, would reward more efficient operations".

In 2021 shipowners said they are against being included in the EU ETS.

Voluntary surrender of units

There are examples of individuals and organisations purchasing tradable emission permits and 'retiring' (cancelling) them so they cannot be used by emitters to authorise their emissions. This makes the emissions 'cap' lower and therefore further reduces emissions. It is argued that this removes the credits from the carbon market so they cannot be used to allow the emission of carbon and that this reduces the 'cap' on emissions by reducing the number of credits available to emitters.

Criticisms

Critics of carbon trading, such as Carbon Trade Watch, argue that it places disproportionate emphasis on individual lifestyles and carbon footprints, distracting attention from the wider, systemic changes and collective political action that needs to be taken to tackle climate change. Groups such as the Corner House have argued that the market will choose the easiest means to save a given quantity of carbon in the short term, which may be different from the pathway required to obtain sustained and sizable reductions over a longer period, and so a market-led approach is likely to reinforce technological lock-in. For instance, small cuts may often be achieved cheaply through investment in making a technology more efficient, where larger cuts would require scrapping the technology and using a different one. They also argue that emissions trading is undermining alternative approaches to pollution control with which it does not combine well, and so the overall effect it is having is to actually stall significant change to less polluting technologies. In September 2010, campaigning group FERN released "Trading Carbon: How it works and why it is controversial" which compiles many of the arguments against carbon trading.

The Financial Times published an article about cap-and-trade systems which argued that "Carbon markets create a muddle" and "...leave much room for unverifiable manipulation". Lohmann (2009) pointed out that emissions trading schemes create new uncertainties and risks, which can be commodified by means of derivatives, thereby creating a new speculative market.

In China some companies started artificial production of greenhouse gases with sole purpose of their recycling and gaining carbon credits. Similar practices happened in India. Earned credit were then sold to companies in US and Europe.

Proposals for alternative schemes to avoid the problems of cap-and-trade schemes include Cap and Share, which was considered by the Irish Parliament in 2008, and the Sky Trust schemes. These schemes stated that cap-and-trade schemes inherently impact the poor and those in rural areas, who have less choice in energy consumption options.

Carbon trading has been criticised as a form of colonialism, in which rich countries maintain their levels of consumption while getting credit for carbon savings in inefficient industrial projects. Nations that have fewer financial resources may find that they cannot afford the permits necessary for developing an industrial infrastructure, thus inhibiting these countries economic development.

The Kyoto Protocol's Clean Development Mechanism has been criticised for not promoting enough sustainable development.

Another criticism is the claimed possibility of non-existent emission reductions being recorded under the Kyoto Protocol due to the surplus of allowances that some countries possess. For example, Russia had a surplus of allowances due to its economic collapse following the end of the Soviet Union. Other countries could have bought these allowances from Russia, but this would not have reduced emissions. Rather, it would have been simply be a redistribution of emissions allowances. In practice, Kyoto Parties have as yet chosen not to buy these surplus allowances.

Flexibility, and thus complexity, inherent in cap and trade schemes has resulted in a great deal of policy uncertainty surrounding these schemes. Such uncertainty has beset such schemes in Australia, Canada, China, the EU, India, Japan, New Zealand, and the US. As a result of this uncertainty, organizations have little incentive to innovate and comply, resulting in an ongoing battle of stakeholder contestation for the past two decades.

Lohmann (2006b) supported conventional regulation, green taxes, and energy policies that are "justice-based" and "community-driven." According to Carbon Trade Watch (2009), carbon trading has had a "disastrous track record." The effectiveness of the EU ETS was criticized, and it was argued that the CDM had routinely favoured "environmentally ineffective and socially unjust projects."

Annie Leonard's 2009 documentary The Story of Cap and Trade criticized carbon emissions trading for the free permits to major polluters giving them unjust advantages, cheating in connection with carbon offsets, and as a distraction from the search for other solutions.

Offsets

Forest campaigner Jutta Kill (2006) of European environmental group FERN argued that offsets for emission reductions were not substitute for actual cuts in emissions. Kill stated that "[carbon] in trees is temporary: Trees can easily release carbon into the atmosphere through fire, disease, climatic changes, natural decay and timber harvesting."

Permit supply level

Regulatory agencies run the risk of issuing too many emission credits, which can result in a very low price on emission permits. This reduces the incentive that permit-liable firms have to cut back their emissions. On the other hand, issuing too few permits can result in an excessively high permit price. This is an argument for a hybrid instrument having a price-floor, i.e., a minimum permit price, and a price-ceiling, i.e., a limit on the permit price. However, a price-ceiling (safety value) removes the certainty of a particular quantity limit of emissions.

Permit allocation versus auctioning

If polluters receive emission permits for free ("grandfathering"), this may be a reason for them not to cut their emissions because if they do they will receive fewer permits in the future.

This perverse incentive can be alleviated if permits are auctioned, i.e., sold to polluters, rather than giving them the permits for free. Auctioning is a method for distributing emission allowances in a cap-and-trade system whereby allowances are sold to the highest bidder. Revenues from auctioning go to the government and can be used for development of sustainable technology or to cut distortionary taxes, thus improving the efficiency of the overall cap policy.

On the other hand, allocating permits can be used as a measure to protect domestic firms who are internationally exposed to competition. This happens when domestic firms compete against other firms that are not subject to the same regulation. This argument in favor of allocation of permits has been used in the EU ETS, where industries that have been judged to be internationally exposed, e.g., cement and steel production, have been given permits for free).

Structuring issues

Corporate and governmental carbon emission trading schemes have been modified in ways that have been attributed to permitting money laundering to take place. The principal point here is that financial system innovations (outside banking) open up the possibility for unregulated (non-banking) transactions to take place in relativity unsupervised markets.

Public opinion

In the United States, most polling shows large support for emissions trading (often referred to as cap-and-trade). This majority support can be seen in polls conducted by The Washington Post/ABC News, Zogby International and Yale University. A new Washington Post-ABC poll reveals that majorities of the American people believe in climate change, are concerned about it, are willing to change their lifestyles and pay more to address it, and want the federal government to regulate greenhouse gases. They are, however, ambivalent on cap-and-trade.

More than three-quarters of respondents, 77.0%, reported they "strongly support" (51.0%) or "somewhat support" (26.0%) the EPA's decision to regulate carbon emissions. While 68.6% of respondents reported being "very willing" (23.0%) or "somewhat willing" (45.6%), another 26.8% reported being "somewhat unwilling" (8.8%) or "not at all willing" (18.0%) to pay higher prices for "Green" energy sources to support funding for programs that reduce the effect of global warming.

According to PolitiFact, it is a misconception that emissions trading is unpopular in the United States because of earlier polls from Zogby International and Rasmussen which misleadingly include "new taxes" in the questions (taxes aren't part of emissions trading) or high energy cost estimates.

Introduction to entropy

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