Cap and Trade - By Peter Judge

Views and Opinions on Green IT (Feb 1 2010) Carbon Reduction Commitment

1. 

   There is a law of unintended consequences. Pompously, it says "any intervention in a complex system may or may not have the intended result, but will inevitably create unanticipated and often undesirable outcomes". More simply, it just says: things don't always turn out the way you want.

   Governments who set up regulations mandating green behaviour are going to have to deal with a lot of unintended consequences this year, as they build complex new systems designed to change behaviour. As I said last week, cap and trade schemes are an attempt to build a system with a financial incentive to cut emissions where, otherwise no incentive would exist. That's not a criticism -  just a statement of how things are. And the intervention has produced consequences such as the potential cancellation of renewable energy projects such as a wind farm project by telecom provider BT. 

   This week I heard another unintended consequence from a data center service provider who is very angry about the UK's CRC (carbon reduction commitment) rules, due to come into force in a couple of months. "CRC is taxing the cloud, and that is a tax on efficiency," says Dan Lowe, managing director of UKsolutions, a British company providing datacentre space. 

   The CRC is designed to only affect a few thousand of the largest companies in the UK - those who consume more than 6000MWh of electricity. As Lowe explains, that definitely includes his company, as a datacenter can use as much energy as a small town. But it doesn't just affect large companies, as it will also affect his customers, and have the effect of making green decisions less economic for them, because it doesn't deal fairly with the large players, he says. 

   "The CRC does not look at efficiency, it looks at consumption," says Lowe. This means that if his company grows by 35 percent, he will have to pay for the extra emissions he produces, even if that growth represents a net improvement in the world's efficiency. 

   Suppose a medium-sized company has an inefficient in-house data center, he argues. They might consider canning it, and moving to cloud services running in a big data center. Overall, that should produce a net cash saving, as well as a reduction in emissions, because big data centers are generally more efficient. But the medium-sized company doesn't qualify for the CRC regulations, so it pays no carbon credits on its in-house data centre. And the data center will have to pay carbon credits on the new emissions produced by the extra power used when the extra business is added to its center. 

   So the cap and trade scheme actually adds to the cost, and reduces the savings, in moving to a more efficient system, says Lowe. 

   Proponents of the scheme would argue that any new business should be - in some way - taxed for the energy it uses and the emissions it creates, and it is not possible to judge whether those emissions replace less efficient production elsewhere. And also, the sums charged under the CRC are likely to be a small proportion of any business turnover. 

   But it's an unintended consequence, and I expect we will hear of more. 

    

    

   Bookmark or Share this article

Login to comment.

Related Articles