Utilizing Momentum from COP21

to Call for US Cap-and-Trade Program

by Diana Tarrazo

 

Paris, France—On December 7th and 8th, over 190 countries joined forces to address the largest environmental issue facing our global community: climate change. This Conference of Parties, (COP21), built on work by the UN Environment Programme to foster global climate change cooperation.[1]

 

The results of COP21 were formidable—countries established and agreed upon a goal to keep global warming below 2 degrees Celsius. What is more, many of the agreements established within COP21 are legally binding.[2] While achieving completely legally binding agreements was the preferred course of action, doing so would have meant that the United States would have had to get additional approval from a Republican-dominated House and Senate—a tall order President Obama prudently avoided by working within already ratified treaties.[3]

 

Global momentum from COP21 is palpable, and represents enormous leaps in climate change policy. However, countries have a long, treacherous road ahead as they look toward mitigating climate change. While COP21 was successful in many ways, it will likely not be enough to prevent catastrophic consequences to our global climate system. Combating climate change will require drastic action from one of the most resource-intensive, most greenhouse gas polluting, and among the most developed economies in the world: the United States.

 

The United States is a top contributor to climate change inducing greenhouse gasses, particularly with respect to carbon dioxide.[4] Despite containing about 5% of the global population, it accounts for roughly 18% of the total carbon dioxide emissions from fossil fuel combustion[5].

 

United States climate change policy is incredibly important for two reasons: 1) The United States has one of the largest greenhouse gas emissions per capita, and 2) The United States is politically very powerful. The former reason speaks for itself—if the United States were able to successfully and substantially reduce its greenhouse gas emissions, it would reduce global GHG emissions significantly.

 

The latter reason is a little more complex, but rests on the notion that what the United States decides to do environmentally reverberates globally. That is to say, an initiative or policy that the United States refrains from participating in is unlikely to succeed at significant environmental protection. This is, in part, because without serious action by the United States to decrease emissions, other countries see their actions to reduce their impact on the climate system as futile.[6] And in many ways, they are right.

 

With the exception of COP21, the United States has recently and largely baked away from international environmental leadership,[7] which poses enormous threats to mitigating climate change. The Bush administration obstructed progress on a number of international environmental initiatives.[8] The hallmark of US obstructionism, however, came with the “unsigning” of the Kyoto Protocol on climate change in 2001.[9] And for reasons that are multifaceted and well beyond the scope of a blog post, US environmental issues have increasingly become partisan.[10]

 

However, in the past two decades, there has also been a remarkable embrace market-based approaches to tackle climate change. Emissions trading, also know as cap and trade, was first proposed by Dales (1968), and offers enormous potential as a method for the new regulation of pollution in the United States.[11] Now is the optimal time for the United States to look toward adopting this trading system, as the country likely has a Democratic president on the horizon, and would be able to utilize COP21 momentum, thereby tapping into an international and national consciousness.

 

The primary roadblock for the Obama Administration’s environmental measures has been the Republican majority in both the House and Senate. However, the upcoming election may very well turn the congressional tides in favor of the Democrats.

 

Tradable emissions permits were first used as part of the US Acid Rain Program under Title IV of the 1990 Clean Air Act Amendments.[12] This landmark program instituted a system of tradable emissions permits to cut sulfur dioxide emissions from electrical power plants, which were contributing to acid rain. The program was widely hailed as an overwhelming success, and cut sulfur dioxide emissions by 40% at a very low cost.[13]

 

Cap and trade is a simple concept: a “cap”, or limit, is set on the total amount of certain pollutants or greenhouse gasses that can be emitted by factories, power plants, and other installations in the system. Overtime, this cap is reduced to lower total emissions. Within this cap, companies receive or buy emission allowances, which they can trade with other countries as needed. Each year, a company must surrender enough allowances to cover all of its emissions, otherwise the company incurs heavy fines.[14]

 

This success of the Acid Rain Program paved the way for the European Union’s Emission Trading Scheme (EUETS) for carbon dioxide, the world’s largest emissions market. The EUETS operates in 28 EU countries and covers around 45% of the EU’s greenhouse gas emissions. The EU is currently on target to reach 2020 emissions that are 21% lower than 2005 emissions.[15]

 

There is general consensus among economists and policy analysts that a market-based policy instrument targeting CO2 emissions should be a central element of any domestic climate policy.[16] Cap-and–trade works by creating a price signal for emissions.[17] This provides firms with an incentive to reduce their emissions, influencing not only production decisions but also investment decisions. The cap is placed only on aggregate emissions, and thus allows market forces to act largely uninterrupted to produce the most efficient outcome.

 

There are already state-level cap and trade initiatives underway. In 1994, California’s South Coast Air Quality Management District launched such a program to reduce the state’s GHG emissions of nitrogen oxide and sulfur dioxide.[18] This program has successful reduced these pollutants by 60% and 50%, respectively.

 

The United States has the decisive ability to impact the entire global climate system, and by adopting a cap-and-trade policy on greenhouse gasses, it can make this impact positive. Doing so would not only reduce global greenhouse gas emissions substantially, it would prove economically beneficial for the United States and would have reverberating effects across the globe.

 

In 2009, the House of Representatives approved the American Clean Energy and Security Act (also known as the Waxman-Markey Bill).[19] The Bill would have established an emissions trading scheme similar to that of Europe. This bill was never brought to the floor of the Senate for discussion or vote.[20] However, with national momentum from COP21, now is the ideal time to reintroduce a carbon cap and trade.

 

The time to act is now, while climate change is already on the national and domestic agenda.

Comments

 

Jessica

Although ideally a carbon cap and trade would make a lot of sense for the US, I am not sure if it is the most feasible way to curb US emissions. Programs such as California’s program to limit nitrogen oxide and sulfur dioxide may be more effective, because industry is the bigger emitters of such pollutants. Additionally, curbing these pollutants is akin to picking low hanging fruit because technologies such as scrubbers can serve as an easy mechanism for limiting emissions. The same goes for the US Acid Rain Program.

When we think about the biggest emitters of carbon dioxide as well as other greenhouse gasses, it is hard to narrow those groups down. It is the vehicle drivers, the homes, the factories, the utility companies. Something like a carbon cap and trade policy would be very hard to pass because it is a partisan issue but also because of the feasibility issues involved. As you mention about the EU program, it only covers 45% of their greenhouse gas emissions! That is not to say that their program shouldn’t be valued, because it has made a difference. I just think that there must be some other solution out there to discourage carbon usage. Perhaps that solution will involve technological solutions or maybe a carbon tax that will raise the price of “carbon-intensive” goods.

However, I do agree that the time to act is now, in the wake of COP21. As a leader of the world, the United States needs to figure out some way to set a good example of what a sustainable economy looks like.

 

Quinn

I think if we could figure a way to make reducing carbon emissions (or emissions of any GG, because I’m sure this program could be applied to a variety of emissions issues) economically positive, then it would definitely be a program worth pursuing. However, I don’t quite understand what would make this program economically positive and not just economically neutral, but reduce emissions. Would the economic increase come from the strict taxes imposed on the major carbon producers create the economic boost? Or would it come from selling the allocations of carbon allowed?

I can see how this program would impact global emissions because unlike pollutants from point sources, pollutants to the air spread globally. As a result of their ability to spread, reducing emissions anywhere globally would affect the total percentage of pollutants in the air. I also agree that major polluters like energy production companies and factories should be targeted first. While the average consumer may add to emissions, power producers and industry are still the leading emitters of GG. I might even go one step further with the cap-and-trade system and have the cap that limits the amount of emissions any company could produce include the items they produce. By doing so and having the companies rather than the consumers absorb the cost of making emission inefficient products, it incentivizes them to produce lower-emission products. If companies aren’t incentivized otherwise, they may continue to produce carbon/other emission inefficient products, leaving consumers little to no choice with regard to picking carbon/other emission efficient products. I don’t think that consumers should be penalized with taxes or fines (due to failing to meet a cap-and-trade system’s demand) if the technology isn’t there and the consumers don’t have the option to choose more efficient tech.

In short, I totally support the idea of a cap-and-trade system on major carbon emitting organizations. One thing I wouldn’t rely on is that we will likely have a Democratic president. We can all hope for a greener, Democratic president, but Trump is still a very real threat. Maybe, if he does become president, we can institute a cap on the hot air Trump is allowed to spout and if he exceeds that, then we fine him to bankruptcy, again.

 

Hannah

While I agree that reducing global carbon emissions is an extremely important issue and that action is required from industrialized countries and developed economies, I think it’s also important to remember the role that developing countries play. Deforestation contributes to carbon emissions as well, so I think having developed countries agree to not only decrease their own emissions but to participate in programs with developing countries will also be important. The problem is so complex and far-reaching that a global carbon market is important to facilitate. I know forest protection credits in the form of carbon credits given to developing countries for decreasing rates of deforestation have been proposed, so I think it’s also important for the United States to agree to this form of carbon trading as well.

I like how you outline the importance of the United States in taking action because of their GHG emission contribution and their political clout in international relations. You mention how the United States has refrained form participating in global agreements and even “unsigned” the Kyoto Protocol. There are a large number of international treaties that the United States hasn’t signed at all, like the Law of the Sea and the Comprehensive Nuclear-Test-Ban Treaty. However, the United States not signing these treaties hasn’t always meant that they refrained from the actions outlined in them, so I think there is hope for United States cooperation with COP21.
[1] Author Unknown. “Find out More about COP21.” UNFCCC COP 21 Paris France. Accessed March 20, 2016. http://www.cop21paris.org/about/cop21/.

[2] Author Unknown. “Find out More about COP21.” UNFCCC COP 21 Paris France. Accessed March 20, 2016. http://www.cop21paris.org/about/cop21/.

[3] Page, Samatha. “No, The Paris Climate Agreement Isn’t Binding. Here’s Why That Doesn’t Matter.” ThinkProgress RSS. December 14, 2015. Accessed March 20, 2016. http://thinkprogress.org/climate/2015/12/14/3731715/paris-agreement-is-an-actual-agreement/.

[4] US EPA. “Global Greenhouse Gas Emissions Data.” United States Environmental Protection Agency. February 23, 2016. Accessed March 20, 2016. https://www3.epa.gov/climatechange/ghgemissions/global.html.

[5] Union of Concerned Scientists. “Each Country’s Share of CO2 Emissions.” Union of Concerned Scientists. November 18, 2014. Accessed March 20, 2016. http://www.ucsusa.org/global_warming/science_and_impacts/science/each-countrys-share-of-co2.html#.Vu7Qs5MrI_U.

[6] DeSombre, Elizabeth R. 2015. “Domestic Sources of U.S. Unilateralism” in The Global Environment: Institutions, Law and Policy, 4th Edition, Eds. Regina S. Axelrod, and Stacy D. VanDeveer. Washington DC: CQ Press, pp. 133-156.

[7] DeSombre, Elizabeth R. 2015. “Domestic Sources of U.S. Unilateralism” in The Global Environment: Institutions, Law and Policy, 4th Edition, Eds. Regina S. Axelrod, and Stacy D. VanDeveer. Washington DC: CQ Press, pp. 133-156.

[8] Ivanova, Maria, and Daniel C. Esty. “Reclaiming U.S. Leadership in Global Environmental Governance.” SAIS Review 28, no. 2 (2008): 57-75. Accessed March 28, 2016.

[9] Ibid.

[10] Ibid.

[11] Keohane, N. O. “Cap and Trade, Rehabilitated: Using Tradable Permits to Control U.S. Greenhouse Gases.” Review of Environmental Economics and Policy 3, no. 1 (January 24, 2008): 42-62. Accessed March 20, 2016.

[12] CA EPA. “Cap-and-Trade Program.” California Environmental Protection Agency, Air Resources Board. Accessed March 20, 2016. http://www.arb.ca.gov/cc/capandtrade/capandtrade.htm.

[13] CA EPA. “Cap-and-Trade Program.” California Environmental Protection Agency, Air Resources Board. Accessed March 20, 2016. http://www.arb.ca.gov/cc/capandtrade/capandtrade.htm.

[14] Stavins, Robert N. “A Meaningful U.S. Cap-and-Trade System to Address Climate Change.” SSRN Electronic Journal SSRN Journal, October 2008, 1-91. Accessed March 20, 2016.

[15] Climate Action. “The EU Emissions Trading System (EU ETS).” – European Commission. March 09, 2016. Accessed March 20, 2016. http://ec.europa.eu/clima/policies/ets/index_en.htm.

[16] Stavins, Robert N. “A Meaningful U.S. Cap-and-Trade System to Address Climate Change.” SSRN Electronic Journal SSRN Journal, October 2008, 1-91. Accessed March 20, 2016.

[17] Stavins, Robert N. “A Meaningful U.S. Cap-and-Trade System to Address Climate Change.” SSRN Electronic Journal SSRN Journal, October 2008, 1-91. Accessed March 20, 2016.

[18] CA EPA. “Cap-and-Trade Program.” California Environmental Protection Agency, Air Resources Board. Accessed March 20, 2016. http://www.arb.ca.gov/cc/capandtrade/capandtrade.htm.

[19] Walsh, Bryan. “Why the Climate Bill Died.” Time Magazine. July 26, 2010. Accessed March 29, 2016. http://science.time.com/2010/07/26/why-the-climate-bill-died/.

[20] Ibid.

 

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