Fighting Climate Change with Economics

Cap and Trade Programs Provide Mechanism for Reducing Carbon Emissions

The expansion of carbon trading markets offers great promise for reducing the impacts of global warming from human-produced greenhouse gas emissions, according to Andrea Cook, CCSE’s climate change program manager.

Cook spoke about the current status of carbon markets in the United States and California at a CCSE workshop in July, stating repeatedly as she progressed through her slides, “this is where it gets complicated.”

The basic idea of a carbon market is simple, however, the government sets limits, or caps, on pollution emissions, and if you can’t achieve your cap, you trade with someone who has earned carbon credits by polluting less than their cap. Thus, “cap and trade” becomes an economic market-based pollution solution rather than the usual government approach of regulation, taxation and penalization.

This blend of capitalism and government regulation to reduce pollution has worked before. Remember acid rain? Around 25 years ago, the U.S. and Canada were at odds over sulfur dioxide and nitrogen oxides spewing from American smokestacks, drifting north, mixing into rain particles and acidifying Canadian lakes and forests. Ultimately, amendments to the 1990 Clean Air Act established a SO₂ emissions trading system that helped curtail acid rain.

Cook points out that curbing greenhouse gas ( GHG) emissions involves more complex factors than acid rain, but that carbon markets have the potential to deliver substantial reductions. Europe’s Emissions Trading Scheme (ETS), established in 2005, is the world’s first mandatory cap and trade program for GHG emissions, setting caps for some 10,000 power generators and factories in 27 countries. ETS officials reported a 3% reduction in GHG emissions for 2008.

In the U.S., carbon markets are voluntary and while much smaller than the ETS, growing rapidly. Companies join for reasons such as social responsibility and environmental branding, but in fact they are forward-thinking because, Cooks says, “there’s pressure to make U.S. compliance markets in response to public perceptions about climate change and state legislative activities.”

California has decided to regulate emissions within the state ahead of the federal government. Assembly Bill 32, the California Global Warming Solutions Act of 2006, makes reductions mandatory for the largest emitters in 2012. One way to look at AB 32 requirements is the average tons of GHG emitted by each person in California per year. Currently at 14 tons, it is set at 10 tons by 2020 and 1.5 tons by 2050. Note that GHGs are not only CO₂, but also methane, sulfur hexafluoride and other gases that may not be as large in quantity, but their impacts on the climate per ton are far greater than CO₂.

“Ideas for U.S. carbon markets are developing and changing daily,” Cook said. “Clearly, it’s time to get involved, and what we do in California will set the stage for defining how the nation responds.”

What is Your Carbon Footprint?
Calculate your impact on the environment in terms of the total amount of greenhouse gases you produce at the following recommended websites.

Carbon Footprint
UC Berkeley: Carbon Calculator
EPA: Personal Emissions Calculator
An Inconvenient Truth: Carbon Calculator

Quick Tips for Acting Now!

Turn off your engine while you wait – Idling for 30 seconds wastes more gas than restarting your engine.
Purchase local goods – The average meal travels 1,500 miles to get to you. Frozen food takes 10 times more energy to produce than locally grown food.
Always recycle – A single aluminum can recycled equates to 6 oz. of gas or 3 hours of TV.

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