How Not To Do Emissions Trading

I was reading a paper about emissions trading in Thailand recently, and noted that the preferred option for an Emissions Trading Scheme is based on equivalent tonnage of oil energy output rather than equivalent emission of Green House Gasses. In all honesty, this decision has some benefits and some flaws in my mind.

The problem as I see it is that this moves the Emissions Trading Scheme from a system that looks at the Green House Gas emissions to one that looks at fuel security. This can be an issue because it permits fuels, processes or technologies that are high emitters of CO2 to operate to the detriment of those that are lower emitters. It places a price on the inherent energy within the fuel rather than the damage that fuel will do to the environment.

To be fair, from a shorter term national perspective, this is probably not a bad thing, and actually promotes fuel security. It promotes technologies that are thermally efficient rather than those that simply have lower CO2 emissions for the equivalent energy output. An example of this is the comparison between Coal and Natural Gas for electricity generation. In that case, coal is more efficient on an energy input for energy output basis, but generates more CO2 emissions than a Gas Turbine.

What is worse, basing trading on energy content has holes. Methane emissions are 20-30 times worse than CO2, meaning that any methane in exhaust should be removed if at all possible, converting it into CO2. This can be as simple as ensuring proper combustion. But there are some legitimate reasons for not having proper combustion within an engine, leading to increased methane emissions, which could then be removed through secondary processes. However, with an Emissions Trading Scheme that is based on energy, and not Equivalent CO2, there is no incentive to implement any secondary processes.

If I were to design a system myself, I would design one where some of the price was based on included energy and some of the price was based on emissions. With the two, you would get a decent system