Using "carbon credits" as a tool and an incentive to slow down global warming by rewarding those that release less carbon dioxide to the atmosphere is a solution that must be implemented with utmost care for the correct policy measures to go along with it.
If implemented within a framework of incorrect politics, it can backfire and either handicap the economy with unnecessary restriction and land use patterns or create serious political fractions within a country, or both.
A case in point is the "deforestation tax" controversy raging in New Zealand (as of early 2007).
It all started when the forest owners in New Zealand felt compelled by market forces to shift their land use from forestry to dairy farming.
This would have required cutting down forests to make way for the dairy farms.
By 2012, a total of 44,000 hectares of forest are expected to give way to pastures and other uses.
However, there is a problem.
When live tress are cut, they eventually release all the carbon dioxide that they have stored inside.
Thus deforestation by definition increases the "carbon footprint" and contributes to the greenhouse effect.
The overall cost of "deforestation liability" is estimated to hit $650 million by 2012 in New Zealand.
As an incentive to stop or slow down the conversion of forests to pastures, the government announced a deforestation tax for trees that were planted before 1990.
But since the tax would be applied only after a certain future date, the decision actually helped accelerate deforestation instead of slowing it down since everybody wanted to beat the deadline and shift to dairy farming without incurring any taxes.
How much should such permits cost? What should be the size limits on forest plots that would be exempted from such a tax? Which year should be declared as the cut-off date for the taxes? These are all questions with different sets of "winners" and "losers.
" Unless the political balance between such groups are addressed well, not only social justice but even a country's economic development might be effected adversely while trying to curb greenhouse gases and global warming.
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