Daily Archives: August 23, 2009

If the US Implements Cap and Trade Instead Of Carbon Tariffs, Are You Ready?

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As my long-time readers will recall, green and sustainability were major foci of this blog before they became popular topics among other bloggers. As a result, I’ve been following, and occasionally blogging about, carbon tariffs for years, which I expected to see more of in the (near) future as some states and provinces have already implemented a carbon tax (like California and British Columbia) and a bill was introduced into US Congress.

But recently I’ve been seeing references to cap and trade, which disturbed me for reasons I couldn’t quite pinpoint, mainly because I never saw a good definition of what it was, how it might be implemented, or what impacts it will have on your (global) supply chain. Needless to say, I was glad to see this recent article on the supply chain and cap and trade by Supply Chain Digest Editor-in-Chief Dan Gilmore and find out that I’m not alone. Seems Dan was in the same boat too.

So he did some research, and a few calculations, and arrived at some conclusions which are even more disturbing than you might expect. Not only will cap and trade, which would dole out carbon permits for so many tons of CO2 to your company, cost you and be more complicated than a carbon policy needs to be, but it will add volatility and risk into your supply chain … and that’s not good. You see, if cap and trade comes into play, we have the following unknowns to deal with:

  • the details
    depending on the implementation of cap and trade, the impact on your supply chain could be anywhere on the scale from minor nuisance through major burden
  • the complexity
    any scheme will necessarily be more complex than a straight carbon tariff (per ton) and will take years to implement
  • the global impact
    how will offshore carbon production be addressed, will it result in a move back to near-shore or home production, and will it result in more telecommuting to reduce office space?
  • the cost
    if your emissions are capped, you either have to reduce them or buy permits from your competitors, who will be auctioning them to the highest bidder … so you have no way to plan for the potential cost in advance

Policies should reduce the risk and volatility of your supply chain, not add to them … which is precisely what a cap and trade approach will do. So be sure to support your local trade association in lobbying for a straight carbon tariff. At least you can plan for that.