Because this week’s focus on greenhouse gases (GHG) is related to my personal project (http://v515brian.blogspot.com/2011/09/personal-project.html), I thought that I would use this opportunity to blog about my findings regarding the evolution of market-based GHG regulations in the U.S.
Prior to 1970, the federal government conducted research on air pollution but had no formal authority to issue regulations prohibiting GHG emissions. The Clean Air Act of 1970 changed this by authorizing the development of National Ambient Air Quality Standards (NAAQS) for air pollutants. The act provided a crucial incentive for compliance by allowing citizens the right to take legal action against any organization that violated the new standards. The Environmental Protection Agency (EPA) was established in 1971 in order to implement the requirements included in the Clean Air Act (http://epa.gov/oar/caa/caa_history.html).
After a long period of limited amendment, the Clean Air Act was significantly revamped in 1990 due to growing environmental concerns. Two of the driving forces behind the 1990 amendments were the desires to eliminate both acid rain and ground-level ozone which were being generated by high emission levels of Sulphur Dioxide (SO2) and Nitrogen Oxide (NOx). Amendments within the 1990 act were the first attempt by Congress to control pollution through market forces. Under the program, emissions of SO2 land NOx were capped far below 1990 emission levels. Regional organizations were established under the act in order to achieve mutual emission reduction goals (http://www.nrel.gov/docs/fy01osti/29448.pdf).
Several trading platforms have since gained traction in order to reach these emissions targets. The Northeast States for Coordinated Air Use Management, an association of northeast and mid-Atlantic states, has initiated a trading program for NOx (http://www.otcair.org/). From 2003 to 2010, the Chicago Climate Exchange (CCX) operated a Carbon Exchange. This exchange has since been dissolved and is operated as an over-the-counter (OTC) market. Most recently, the California government, in conjunction with the government of British Columbia, is working to establish a carbon market that would go into effect on January 1, 2012. In the beginning, British Columbia is expected to be a net seller of carbon credits, while California will be a net buyer. (http://www.nytimes.com/2011/05/02/business/energy-environment/02iht-green02.html).
Interesting! I like how you focused on some trading platforms withing the US. Very cool. I would also check out international agreements the US has been involved in. For example, the Kyoto Protocol and COP15 in Copenhagen, Denmark. While we aren't the best at international participation, they could be an interesting element to examine.
ReplyDeleteAlso, the Massachusetts vs. EPA Supreme Court case enforced the Clean Air Act and gave the EPA some teeth in its ruling that stated the EPA has regulatory to control GHG emissions from vehicles
Good luck with your personal project!
I find this interesting that in 2012 British Columbia is selected to be a net seller of carbon credits and CHICAGO is supposed to be a net buyer. Chicago has taken many steps to make their city more green and environmentally friendly. I would hope that as time progresses Chicago also begins to become a net seller. Likewise, hopefully other US cities join the list of net sellers!
ReplyDeleteGoodluck on your project!
I'm not sure I can see the long-term efficacy of a carbon trading market. In order to have a thriving market, there needs to be a continued intrinsic value to what is being traded. But in the best case scenario everyone everywhere would get better at managing their own carbon output and, as a result, everyone would want to sell, with no one left to buy. This sounds ideal, except that the whole point of a market to motivate people with the promise of money and if they know that what they are creating will eventually be unsellable, they may choose not to participate in the first place.
ReplyDeleteThe only way around this would be to require carbon credits as a statutory edict, but that has its own political issues and barriers as well.
Localsustainability - Thanks for your response, I was under the impression that, despite much hype, nothing much came out of Denmark's COP15. Did that conference achieve any new emissions caps?
ReplyDeleteNikki - The carbon exchange is in California, not Chicago. But thanks for your support!
Scott - I like your long-term thinking and I think that in the long-run, if the exchange went out of business due to the absence of a need for carbon credits, then the exchange would have served its purpose sucessfully.
But I'm not sure I agree that, in the end, everyone would become net sellers of carbon. If sellers began to outnumber buyers, the price of carbon credits would decrease. If that occured, it would become cheaper and cheaper to pollute, thereby bringing back the buyers and driving the price back up.
Unfortunately, I think that there are always going to be people that are willing to pollute if they can get away with it at low costs.
The goal of a carbon trading scheme is generally accepted as getting rid of carbon as a fuel and thus put the trading scheme itself out of business. That's the "cap" part of "cap-and-trade," which generally goes hand-in-hand with trading. We did it in the 70s and 80s with lead in gasoline as well (in addition to nitrous oxides and sulfur dioxide): establish an initial cap and a trading market, allow allowances to be traded, but lower the cap gradually until we completely eliminated lead from gas.
ReplyDeleteCalifornia is both instituting its own cap and trade through state bill AB-32, and part of the Western Climate Initiative (of British Columbia and a bunch of other U.S. states and Canadian provinces as members). Also there's the Regional Greenhouse Gas Initiative, which includes ten...check that, nine U.S. states (thank you, Chris Christie). They already have a market going; an auction held about six weeks ago priced carbon at $1.89/ton. http://www.rggi.org/market/co2_auctions/results/auction_13
Nice post with good structure and links. Note that you get points for adding interesting images, such as graphs, charts and photos. Think multimedia.
ReplyDeleteI am intrigued by the new carbon tax in Australia. http://www.smh.com.au/money/investing/investors-predict-carbon-tax-benefits-20111020-1m8wk.html
Closer to home: In the battle of the EPA vs. the Republicans, who will win?
http://cleantechnica.com/2011/10/19/epa-defies-republicans-announces-better-data-gathering-on-air-pollution-harm-anyway/
Oh Brian, I do so like your posts. The idea of ghg trading markets is one of my fave-rave topics. I think that the idea is incredibly savvy and is well-oriented toward economic incentives. That being said, I also think that they're more for PR than efficacy in restricting atmospheric change. Even if some pollutants are heavy enough to defy natural weather & climatological circulation, the effect of these localized, regional, or even national trading markets are minimal at best. From a global perspective, I think that they act as a good constraint on industrial tendency to make bad matters worse, but without binding international treaties, their existence is more of a political bargaining chip to demonstrate "environmental leadership" or to get other countries to buy-in to the model, sign treaties, or otherwise comply with what is, essentially, domestic European & US political-constituency demands. Developing countries are more worried about surviving the day than about what's coming a few years down the road, so if there's money being placed on the odds of self-enforcing climate treaties being placed, global financiers stand to make a big buck facilitating this gamble (which I'm sure they'd love to, given their track-record with things like people's homes).
ReplyDeleteOr, if you're of the persuasion that microclimates are to be treated with equal concern, then the problem quickly reduces to a mix between complex-systems modelling and the now-trite "prisoner's dilemma." I'm sure Californian's will feel good patting themselves on the back for "doing their part," yet that self-gratification will mean little when folks in other parts of the country -- and, certainly, other parts of the world -- are busy wreaking havoc on their microclimates, which, in the end, still always aggregate to a global climate system.
To counterbalance my apparent troll-ism, I will say that I fully support such markets and truly wish that most of the rest of the country and the world would take the good-faith effort to adopt such systems themselves...then a linked market structure would truly be viable and, possibly, sustainable. Too many years of studying environmental treaties has left me somewhat upset, however...as is readily apparent. I do hope for the best, nonetheless; and, in truth, I find it deeply admirable that some segment of humanity is taking the risk -- on principle, on hope, on good will, on faith -- to do what they know is right and attempt to build and strengthen a system that, if widely adopted, would go a long way toward alleviating our atmospheric problems.
Oh, social psychology, what have you done to me.