Warming is unequivocal: clear and unambiguous. Source: IPCC, AR4, WG1, Chap 6, Fig. 10
2004 data in the 2007 IPCC, AR4, SPM, Fig 3 Global Greenhouse Gas Emissions
Scripps Institution of Oceanography NOAA Earth System Research Laboratory Scripps Institution of Oceanography NOAA Earth System Research Laboratory Rise in CO 2 Concentration is Accelerating.
One fifth of our CO 2 emissions today will remain in the air in 3009 Atmos. Chem. Phys. 7, 2287-2312, 2007
IPCC TAR SYN SPM Fig 5-2 Stabilization of CO 2 concentration, temperature, and sea level takes centuries after emissions are reduced
Rongbuk glacier in 1968 (top) and 2007. The largest glacier on Mount Everests northern slopes feeds Rongbuk River. Slide from Dr. James Hansens Congressional briefing June 23, 2008. Water supply in Himalayan watersheds is a major humanitarian concern.
Western Climate Initiative (WCI) Regional Greenhouse Gas Initiative (RGGI, Reggie) EU Emissions Trading System (EU ETS) Cap-and-Trade Systems Under Development Participant Observer
Cap-and-Trade Climate Policy Cap-and-trade means a government authority establishes a cap that limits the total amount of pollution allowed, and then distributes allowances for permission to pollute the global atmosphere, which can be traded as private property. The amount of greenhouse gas emissions permitted declines each year, creating demand for a new commodity: carbon permits. When offered enough money (or faced with high enough costs), polluters who own permits (or need permits) will reduce their emissions. These trades establish a market price for greenhouse gas pollution. A familiar game can help illustrate the concepts… Got it?
Musical Chairs A Helpful Analogy for Managed Scarcity Each chair represents the permission to pollute: one metric ton of carbon dioxide (1 mtCO 2 ) or an equivalent amount of any other greenhouse gas If you have an allowance, you can have a chair.
Players: Polluters at Points of Regulation Oil Refineries Natural Gas companies Chemical companies Aluminum smelters Power Plants
Carbon Price Established by Market Activity So, is it more profitable to: buy a permit, OR reduce my own emissions? Profit opportunities are a main driver for innovation and investment, and the climate challenge needs both.
Carbon Price Established by Market Activity Would anyone accept $40 for your permit? $40
Carbon Costs Passed to Consumers $40 35¢ per gallon 2.5 ¢ per kWh 0.6 ¢ per therm People Respond…? Sending a price signal is the point of the policy!
Moving to Clean Energy Players seek better options as costs rise. Cap-and-trade lets players choose at what price they leave the game – and how they want to make that change. $30 $150 $20 $100 $200 $50 2050204020302020 Wind power Rail Transport Green buildings Nuclear power 2010 Solar power Hybrid vehicle
h Price On Carbon $20 50 MtCO 2 $50 Quantity of Permitted Emissions 100 MtCO 2 Demand
Quantity of Permitted Emissions Price On Carbon $20 50 MtCO 2 $50 100 MtCO 2 Supply
Quantity of Permitted Emissions Price On Carbon Q P Supply Demand Carbon Cap vs. Carbon Tax
Quantity of Permitted Emissions Price On Carbon Q P Cap Demand Carbon Cap vs. Carbon Tax
Quantity of Permitted Emissions Price On Carbon Q P Tax Demand Carbon Cap vs. Carbon Tax
Price On Carbon Q P Cap Demand Quantity of Emissions Q P Demand Carbon Tax Should we set the price and let markets determine the quantity of pollution? Should we set the quantity and let markets determine the price for a scarce resource?
At higher carbon prices, Ill need to close my cement plant – or move it to another country... $90 2050 SELL PRICE: Competitiveness Concern: $90
Leakage occurs when polluters move outside a carbon cap territory to avoid regulation – which may drive jobs away and still not reduce global emissions. $90 SELL PRICE: Competitiveness Concern: Leaking Emissions $90
A tight international agreement or global carbon price would diminish any reward for industrial migration due to climate policy. … but it could be a long time before either of those feats of diplomacy are accomplished. SELL PRICE: Competitiveness Concern: Leaking Emissions $90
In the meantime, Output-Based Rebates can relax any competitive disadvantage for energy-intensive manufacturers of global commodities (e.g. iron, cement, steel, paper, glass)… by returning carbon costs based on the best performance standard in each industry, motivating all to improve – not move. $90 SELL PRICE: Competitiveness Concern: $90
Climate Policy Design All credits to Dr. Holmes Hummel of the University of California Google Climate Policy Design for complete curriculum These slides were taken from her site, which is available for your use as well – a great resource of explaining climate policy to your colleagues and members.