Energy Policy 30 (2002) 263–265

Viewpoint

CO2 credit or energy credit in emission trading?

Eric Hu*

School of Engineering and Technology, Deakin University, Geelong, Victoria 3217 Australia

Abstract

Emission trading is a good concept and approach to tackle global warming. However, what ‘‘currency’’ or ‘‘credit’’ should be usedin the trading has remained a debatable topic. This paper proposed an ‘‘Energy Credit’’ concept as an alternative to the ‘‘CO2

credit’’ that is currently in place. From the thermodynamic point of view, the global warming problem is an ‘‘energy balance’’problem. The energy credit concept is thought to be more thermodynamically correct and tackles the core of the global warmingproblem more directly. The Energy credit concept proposed can be defined as: the credit to offset the extra energy trapped/absorbedin the earth (and its atmosphere) due to the extra anthropogenic emission (or other activities) by a country or company. A couple

of examples are given in the paper to demonstrate the concept of the Energy credit and its advantages over the CO2 credit concept.r 2002 Published by Elsevier Science Ltd.

Keywords: Energy credit; CO2 credit; Emission trading

1. Introduction

A key feature of the Kyoto Protocol is the free marketapproach to the greenhouse gas issue: the endorsementof international emissions trading, i.e., countries areallowed to obtain credits toward their (CO2 reduction)targets through project-based emission reductions/off-sets in other countries. The CO2 is proposed to be useddirectly as the ‘‘currency’’ in the trading, although itspolitical (and technical) acceptance is still in doubt(Boom, 2001). Generally speaking, the so-called CO2

credit is that if a company or a country wants to emitextra CO2, it needs to take some measures (e.g. plantingtrees or buying credit forest somewhere in the world) toreduce or offset/absorb CO2 emission somewhere. Fromthe thermodynamic point of view, the cause of globalwarming is the heat (energy) accumulation in the earthand its atmosphere. This accumulation is mainly due tothe imbalance of (solar) energy reaching the earth andthe energy leaving the earth, which is caused by ‘‘greenhouse effect’’ in which the CO2 and other green housegases play a critical role. In another words, the globalwarming problem is an ‘‘energy balance’’ problem. So,an ‘‘energy credit’’ concept is proposed in this paper,which is basically to use ‘‘energy’’ rather than CO2 as ameasure in the emission trading between parties. The

energy credit proposed in lay language is defined as: toemit extra CO2 or conduct any other activities con-tributing to global warming, you need to send the energyout of the earth’s atmosphere, which equals the energytrapped due to the extra CO2 you emitted.

2. Energy credit or CO2 credit

The main argument related to the CO2 credit idea isthat the CO2 credits obtained especially by carbon sinksi.e. planting trees are temporary (i.e. it is not a realcredit) and any benefit may be countered by reducingsurface albedo (Betts, 2000). The carbon sink (forest)may become a CO2 generator when the forest is maturedor in case of bushfire. There is an even argument that theCO2 level/concentration increasing in the atmospherehas a positive effect on the life on the earth as CO2 is thefood for plants.The global warming ultimately is an energy (balance)

problem. The green house gases or CO2 just play animportant role in it. So using ‘‘energy’’ as the‘‘currency’’ directly in the emission trading sounds morereasonable. The concept of ‘‘energy credits’’ proposedby the author can be defined as: the credit to offset theextra energy trapped/absorbed in the earth (and itsatmosphere) due to the extra man-made (anthropo-genic) emission (or other activities) by a country orcompany. The energy credit can only be obtained

*Tel.: +61-3-5227-2828; fax: +61-3-5227-2167.

E-mail address: erichu@deakin.edu.au (E. Hu).

0301-4215/02/$ - see front matter r 2002 Published by Elsevier Science Ltd.

PII: S 0 3 0 1 - 4 2 1 5 ( 0 1 ) 0 0 1 0 1 - X

through the anthropogenic process or activities. In otherwords, any country or company that wants to emit moregreen house gas or to conduct any other activities whichwould trap an extra amount of energy in the earth, needsto get the same amount of energy which would beotherwise trapped in the earth naturally, out of the earthby some means.At the conceptional level, the ‘‘energy credit’’ concept

has the following advantages:

(1) It will not limit nor retard the development in allcountries. Namely, all countries are allowed todevelop their carbon based industry as long as theyget sufficient energy credits. In most of the cases,direct reduction/limiting of CO2 emission wouldretard the development so that it is not easily to beaccepted politically. The USA’s pull out of KyotoTreaty was an evidence of this fact. The energycredit concept avoids the reduction or limitation ofCO2 emission directly, but instead provides acompensating way, i.e. reject ‘‘extra energy’’ thatis the core of the problem, out of earth. It should bemore easier to obtain the political acceptance, atleast theoretically.

(2) It is thermodynamically correct. From a thermo-dynamic point of view, CO2 is not the core of theproblem but energy is. Only energy focusedmeasures (e.g. energy credit) are capable of ulti-mately limiting (or even solving) the problem. Aslong as we keep consuming (at the current rate if notmore) the fossil energy, the CO2 focused measure isnot a real solution to the global warming problem.How can you compensate the CO2 released from thefossils that are the result of ‘‘carbon sink’’ overmillion years, with any CO2 mitigation/sink mea-sures in our life time?

(3) The energy credit concept can be extended tomeasure and guide other human activities whichcontribute to increasing radiative forcing (and soglobal warming). All human activities related torelease energy from fossil and nuclear (and otheractivities like decrease in the surface albedo byconstruction etc.) should be treated same as theemissions. These activities may not be a concernnow, but may be a problem in future.

The technologies and measures to gain energy creditsmay include anthropogenic change/increase of thealbedo of local earth surface, shading the earth fromouter-space and cloud control etc. The feasibilityespecially the large scale feasibility of these ideas isbeyond the scope of this paper. The following hypothe-tical examples do not promote any particular measurei.e. ‘‘change local albedo’’ nor endorse its feasibility, butdemonstrate the practical application of the principle of‘‘Energy Credit’’ and compare it with the ‘‘CO2 credit’’.

Example 1. Question: if Australia wants to increase itsannual CO2 emission by 5%, how much energy creditdoes it need? To gain these energy credits by installingman-made reflector in its central desert areas, how muchland area is required as compared to the land require-ment for forestation to absorb (sink) the 5% of CO2?

Solution:Australia’s annual CO2 emission in mid-90s is about

0.5Gt=114 Million of Metric Tons Carbon Equivalent(MMTCE). 5% of this is 0.025Gt CO2, i.e. Australiawants to emit 0.025Gt more of CO2.The correlation between the CO2 concentration in the

atmosphere and the energy absorbed can be calculatedby the radiative force (at the tropospheric level) (Lupis,1999)

F ¼ 5:35 ln ðC=C0Þ ¼ 5:35 ln ð1þ DC=C0ÞW=m2;

where C0 is the base concentration of CO2 in atmo-sphere=363.9 ppmv (in 1997) which is equivalent to2815.4Gt CO2 in the atmosphere.If CO2 concentration doubled (i.e. DC ¼ C0),

F ¼ 3:7W/m2 on the earth surface. This rough estima-tion agrees with the calculation in Myhre et al. (1998).Assume earth is a round ball, its surface area is about

5.2� 1014m2. This means double CO2 (i.e. another2815.4Gt CO2 in the atmosphere) will be equivalent toextra heating at the rate of 3.7� 5.2� 1014=19.24� 1014W. This gives that per Gt CO2 in atmo-sphere would equivalently gain earth 6.83� 1011W heat/Gt CO2. This is the energy credits needed to emit anextra Gt of CO2. So, in this example, Australia needs tohave 1.7� 1010W energy credits to emit an additional5% (=0.025Gt) CO2.To gain the energy credits by installation of reflector:

Assuming that the 1m2 reflector (in central Australia)can reflect 300W/m2 solar energy back to space and thatthe reflector works effectively 8 h every 24 h, that givesthat the 1m2 reflector has 100W energy credits (dailyaverage). For Australia to emit 5% more CO2, it needsto install 1.7� 108m2 reflector working in the aboveassumed conditions.If trying to absorb the 5% CO2 by forestation: The

production of a hectare (100� 100m�m) pine planta-tion is about 22m3 wood (carbon) per year at a densityof 0.6 T/m3. This gives that per m2 plantation would beable to absorb 4.84� 10�3 T/CO2 per year. Namely, toabsorb 0.025Gt CO2, one needs to plant 5.16� 109m2

pine trees.The land use figures seem big in both cases, but

plantation needs 30 times more land than installation ofthe reflector. If Australia wants to emit 5% more of CO2

every year, it needs to install these areas of reflectorevery year.This example shows that there are other (than

plantation) measures that exist when a party has to

E. Hu / Energy Policy 30 (2002) 263–265264

emit more CO2 due to the need of the development, ifthe energy credit concept is accepted.

Example 2. Question: A company proposes to constructa road network across Australia. The total length of theroad is 14,000 km and width of the road is about 12m.Assume that the road surface will be black colour withan absorptivity of 0.9 to solar radiation while thenatural land surface has the absorptivity of 0.6. Whenthe road network was built, how much extra solarenergy would be absorbed by the road network andthe amount of energy trapped would be equivalent tohow much CO2 emitted into the atmosphere? If thecompany changed the road surface colour to a lighterone with the absorptivity of 0.3, how much energycredits could the company gain when the road networkwas in place?

Solution:To simplify the question, we assume that the total

(global) solar radiation on the road network is 1000W/m2 for 8 h a day. A road with black surface would thenabsorb (turn to infrared energy) X amount of more solarradiation than natural land surface

X ¼ 14; 000�103�12�1000ð0:9-0:6Þ=3

¼ 168�108 Wðdaily averageÞ:

This would be equivalent to 168� 108/(6.83� 1011Wheat/Gt CO2)=0.0246 Gt CO2 in the atmosphere interms of the energy/heat absorption effect. It means thatif the network was in place, it was equivalent for thecompany to emit extra 0.0246Gt CO2 into the atmo-sphere every year.If the road surface was changed to a lighter colour, it

would gain the company the same amount of energycredits i.e. 168� 108W or 0.0246Gt CO2. It means thelight colour road network would gain the company anextra 0.0246Gt CO2 emission quota that is about 5% ofAustralia’s annual total CO2 emission, which thecompany might want to ‘‘sell’’ to other parties in theemission trading market. In this example, CO2 credit isnot applicable.The above two examples were highly hypothetical and

had no consideration of any real and side effects. Theaccuracy of the figures used in the above examples maybe arguable and need to be further explored. The

examples simply tried to show that the ‘‘energy credit’’concept can be used as an alternative measure to ‘‘CO2

credit’’ in emission trading. The cost to gain the energycredit relies on the progress of R&D in detailedtechnologies and new ideas.

3. Conclusion

The ‘‘energy credit’’ concept proposed is superior tothe ‘‘CO2 credit’’ and more likely to result in successfulratification and implementation of the emission tradingto tackle the global warming problem. Although nointensive study on the energy credit concept has yetbeen done regarding its fairness and its possibilityto succeed, the author believes that the concept isable to play a role in the emission trading mechanismbecause of its wider application potential (than CO2

credit).The author is a traditional supporter of the reduction

of green house gas emissions by all means. The ‘‘EnergyCredit’’ concept proposed in the paper is not anobjection to the CO2 focused measure, but provide analternative angle to look at the global warming problem.The ‘‘energy credit’’ concept/idea proposed is fordiscussion/debate.

Acknowledgements

The author wants to thank Mr. Martin Dix at CSIROAtmospheric Research, Aspendale, Victoria, Australia,for his comment and contribution to the paper.

References

Betts, R., 2000. Offset of potential carbon sink from boreal forestation

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Boom, J.T., 2001. International emission trading under the kyoto

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Lupis, C., 1999. Greenhouse gases and the metallurgical process

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Myhre, G., Highwood, E.J., Shine, K.P., Stordal, F., 1998. New

estimates of radiative forcing due to well mixed greenhouse gases.

Geophysical Research Letters 25, 2715–2718.

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