Responsible Carbon Resource Management through Input-Oriented Cap and Trade (IOCT)

Abstract

Fossil fuels store primary carbon. When they are combusted, CO2 is released into the atmosphere. The accumulation of CO2 in the atmosphere causes the anthropogenic greenhouse gas effect, which has led to the existing climate crisis. Academic literature, international climate deliberations and most domestic climate mitigation plans have so far focused primarily on reducing emissions (output orientation) and have paid little attention to supply-side climate policies. Thus, this study shows that output-oriented literature is heavily overweighted with over 7000 publications compared to input-oriented literature with just 107 publications (equivalent to 1.5% percent). The overall scope of this review article was therefore to identify the gaps of output-oriented mechanisms such as the European Union Emissions Trading Scheme (EU ETS), and to point out how an Input-Oriented Cap and Trade (IOCT) system might overcome those gaps. IOCT refers to limits to the carbon input into the global fossil fuel trading system instead of limiting only the emissions caused by already burned fuel. For this purpose, a global cap on the extraction of coal, gas and oil must firstly be defined. Accordingly, IOCT provides for the allocation of allowances for the extraction, processing and trading of carbon-based products. IOCT is a source-oriented approach that refers to a joint allocation of the resource consumption responsibility to the fossil fuel producer and consumer as well. This review represents a unique, comprehensive and current collection of supply-side literature that can be used as a starting point for further applied research on this topic.