In Search of Effective and Viable Policies to Reduce GHG Emissions

Article by

Nicolas Burger, Liisa Ecola, Thomas Light & Michael Toman

Environmental Pollution Policy: A US Approach

Lead Discussion

Jenkins Macedo, MA

February 14, 2013

SOME STATISTICS AND BACKGROUND INFORMATION

What did he say?

Are we on track to fulfill our commitment in

reducing GHG emissions by 17% to 2005 levels by

2020?

Source: WRI 2013

U.S. GHG Emissions Mitigation Target

KEY FINDINGS FROM THE WRI 2013 REPORT

v  “Without new action by the U.S. Administration, greenhouse gas (GHG) emissions will increase over time. The United States will fail to make the deep emissions reductions needed in coming decades, and will not meet its international commitment to reduce GHG emissions by 17 percent below 2005 levels by 2020.”

v  “The U.S. EPA should immediately pursue “go-getter” emissions reductions from power plants

and natural gas systems using its authority under the Clean Air Act. These two sectors represent two of the top opportunities for substantial GHG reductions between now and 2035.”

v  “The U.S. Administration should pursue hydrofluorocarbon (HFC) reductions through both the

Montreal Protocol process and under its independent Clean Air Act authority. Eliminating HFCs represents the biggest opportunity for GHG emissions reductions behind power plants.”

v  “U.S. states should complement federal actions to reduce emissions through state energy

efficiency, renewables, transportation, and other actions. States can augment federal reductions.” v  “New federal legislation will eventually be needed, because even go-getter action by federal and

state governments will probably fail to achieve the more than 80 percent GHG emissions reductions necessary to fend off the most deleterious impacts of climate change.”

Source: WRI, 2013

World Resources Institute’s Recommended Approaches to GHG Mitigation

v  “Lackluster” scenario that aggregates reductions at the lower end of what is technically feasible, therefore representing “low regulatory ambition.”

v  a “Middle of the Road” scenario

that combines reductions “generally in the middle of the range considered technically feasible and corresponding to moderate regulatory ambitions.”

v  a “Go-Getter” scenario that

combines higher-feasibility reductions with “higher regulatory ambition.”

Global Carbon Cycle (Billion Metric Tons Carbon)

U.S. Anthropogenic Greenhouse Gas Emissions by Gas, 2001 (Million Metric Tons of Carbon Equivalent)

U.S. Primary Energy Consumption and Carbon Dioxide Emissions, 2001

Trends in Atmospheric Concentrations and Anthropogenic Emissions of Carbon Dioxide

Carbon Intensity by Region, 2001-2025 (Metric Tons of Carbon Equivalent per Million $1997)

OBJECTIVE OF THE PAPER

To develop effective and viable pollution policies that would harness economic incentives while

reducing greenhouse gas emissions.

WHY REGULATE GREENHOUSE GAS

EMISSIONS?

POLICIES LESSONS FROM THE PAST

v  Clinton’s Administration Partnership for New Generation of Vehicles o  private-public partnership focused on technology improvements

v  Clinton’s British Thermal Unit Energy Tax

o  It includes tax rates based on the carbon content of the fuel.

v  Corporate Average Fuel Economy (CAFÉ) standards

o  It requires automobiles manufacturers to meet minimum fuel efficiency standards (cars and light trucks).

The Obama Administration

v  American Clean Energy and Security Act (2009) o  Cut CO2 emissions by 17% to 2005 levels by 2020

v  American Power Act (failed to pass 60% Congress) v  2010 Obama Administration proposed the Carbon Pollution

Standard for new power plants only half the emission compared to uncontrolled plant.

o  Pollution limits on existing plants needs to also be considered.

v  National Renewable Electricity Program (2011) o  Requires Utility companies to generate 80% of their electricity from no-

or low-carbon pollution sources by 2035.

GHG Mitigation Policies: “Should Anticipate the Unexpected.”

v  Coverage changes

v  Changes in approaches

v  Stringency of GHG controls (Why are these aspects important?)

v  Incentives for innovation

RESTRUCTURING GHG MITIGATION POLICIES

v  Obama Administration GHG Cap and Trade Program

o  GHG Emissions limitation o  Allowances to quantify emissions o  Less emitter can trade their allowance to others o  Market systems that promote economic development

Downstream Vs. Upstream Approach to Cap and Trade

v  Measures and restricts actual emissions (DS)

v  Emitters have sufficient allowances to match their emissions (DS).

v  Linked to the production of fossil fuels rather than emissions itself (US).

v  Allowances are based on the Carbon content of fuel and its implied emissions per unit of fuel use (US).

v  Congressional proposals (a combination of these approaches)

Other Regulatory Approaches to Reduce CO2 Emissions

v  Carbon Tax

o  Taxing fossil fuels based on their Carbon content and the associated amount of CO2 that is emitted per unit of fuel used.

o  Expended to include the other GHGs potential to global warming relative to

CO2 emissions. v  Hybrid system of cap-and-trade

o  allocates free allowances to large fossil energy users (industrial and power plants).

v  Tighter Fuel-economy and other energy-efficiency standards o  buildings, appliances, and other end users.

ANALYTICAL FRAMEWORKS

RESTRUCTURING POLLUTION POLICIES: “The Normative Criteria.”

GHG Emissions Mitigation

Cost-effectiveness

Fairness

Incentives for

Innovation

Adaptability to Change

Cost-effectiveness (Utilitarianism)

v Achievement of goals at least cost society (i.e., the cap-and-trade approach)-cost-benefit analysis.

o  The extent and means of mitigating pollution is individualized to sources, which tend to make viable economic choices.

o  Involves broad, consistent coverage of emissions sources, a relatively low cost of implementing regulation, and reasonable predictable rules and procedure to reduce uncertainties associated with operation.

Fairness (Environmental Justice)

v  GHG mitigation measures may disproportionately impact the livelihoods of certain households and Workers.

o  Designing policy that reflects a broader spectrum of societal

judgment of “fair burden sharing of compliance cost” for different groups (i.e., gasoline tax along with lump-sum rebates scale against households income). Any idea?

o  Alleviating economic adjustment cost associated with GHG

mitigation policy through temporary compensations (returning portion of the revenue generated to workers or communities whose economies are adversely affected by the reduce of coal use or high cost of electricity.

o  Instituting a system that target the burden of the cost of

compliance to those who produce the most GHG emissions and obtain the greatest economic benefit by doing so (i.e., designing allowance allocation in the cap-and-trade).

Incentives for innovation (Sustainable Development)

v  Necessary to expand affordable long-term GHG mitigation option.

v  Economic rewards for technological innovation that reduce GHG emissions.

v  Incentives-based policies such as cap-and-trade, carbon-based fossil fuel

tax, help drive demand for lower-emissions technologies that will adversely reduce the cost of compliance.

v  The government can finance and carry out research and development (i.e.

include research laboratories).

Adaptability to change overtime (Flexibility of the Policy)

v Policy framework that can be changed over time to meet the attitudinal, behavioral and institutional change toward GHG emissions.

DISCUSSION QUESTIONS

Q1. The development of GHG mitigation policies requires identifying and quantifying pollutants that need to be reduced. Should the cap-and-trade system or carbon tax only include stationary sources and exclude mobile sources? Or can the two merge in regulatory approaches in regulating GHG emissions?

Q2. How do we distribute the direct and indirect costs of regulating GHG mitigation among those being regulated and across various parts of the larger economy?

Q3. Why is it relevant when formulating GHG mitigation measures or regulations to rethink the adverse impacts on the livelihoods and workers in some communities?

Q4. Which analytical framework (discussed by Salzman & Thompson, Jr.) would you ascribed to the authors’ approach in framing environmental pollution policy?

Q5. In what ways can incentives for innovation have a negative or positive cost-effectiveness?

SOURCES

U.S. Energy Information Administration (2004). GHG. URL: http://www.eia.gov/oiaf/1605/ggccebro/chapter1.html. Accessed: 02/10/2013. World Resources Institute (WRI 2013). “Can the U.S. Get There from Here? Using Existing Federal Laws and State Action to Reduce Greenhouse Gas Emissions.” URL: http://www.wri.org/publication/can-us-get-there-from-here. Accessed: 02/12/2013. Lisa Friedman (2013). “U.S. May Not Meet Greenhouse Gas Emissions Pledge without More Action.” URL: http://www.scientificamerican.com/article.cfm?id=us-may-not-meet-greenhouse-gas-emissions-pledge-without-more-action. Accessed: 02/08/2013 International Food Policy Research Institute (2012). “Carbon Dioxide Emissions in Developed and Developing Countries.” URL: http://www.ifpri.org/sites/default/files/bk_2012_gfpr_ch04_fig01.png. Accessed: 02/08/2013 U.S. Environmental Protection Agency (2012). URL: http://www.epa.gov/climatechange/science/indicators/ghg/global-ghg-emissions.html. Accessed: 02/07/2013 World Resources Institute (2008). “US GHG Emissions Flow Chart.” URL: http://www.wri.org/chart/us-greenhouse-gas-emissions-flow-chart. Accessed: 02/09/2013. Institute for Energy Research (2012). “U.S. Energy-Related Carbon Dioxide Emissions Declining.” URL: http://www.instituteforenergyresearch.org/2012/07/20/u-s-energy-related-carbon-dioxide-emissions-are-declining/. Accessed: 02/08/2013. Todd Stern (2012). “Special Envoy to the Climate Change Meeting in Durbai, UAE.” URL: http://unfccc.int/resource/docs/cop18_cmp8_hl_statements/Statement%20by%20USA.pdf