The logic of carbon taxes, I Point: sources differ. It may be cheaper to reduce emissions from synthetics & coal than from oil & gas.
The logic of carbon taxes, II Point: source matters. Marginal abatement costs differ across countries. Cleanup where it is cheapest!
Example Canadian power utility is purchasing CO 2 offsets from Guatemalan government Idea: cheaper to buy land and reforest it in central America, than to reduce emissions Cost of CO 2 permits? Expected price $67-$218/ton Guatemala selling for $15-$25
Kyoto Accord Protocol signed December 1997, in Kyoto, Japan Plan to reduce 6 greenhouse gasses (GG) Binding emissions targets and timetables set Reflects proposals advanced by the United States Specific limits vary from country to country 8% below 1990 emissions levels for the EU, 7% for the U.S., 6% for Japan Five-year commitment period: 2008-2012 Developing countries do not have binding targets
Problems 1. Uncertainty regarding impacts of GW 2. Focus on industry (only 1/3 of problem) 3. Poor vs. rich countries 4. Role of “sinks” not well specified 5. Feasibility of trading uncertain 6. Will carbon taxes in some counties lead companies to relocate? 7. How will policies affect economic growth?
Kyoto – current status Ratified by 169 countries as of Feb 2007 US not a signatory (36% of 1990 emissions) Takes effect if nations accounting for 55% of all industrial countries’ 1990 emissions ratify it. Critical country: Russia (17% of 1990 emissions) Russia endorsed treaty on Sept 30, 2004 Now more than 55% of emissions is covered Emissions trading is permitted under the treaty, and Russia is likely to have “credits” since current emissions are less than 1990 levels. This means there may not be much additional reduction in GGs.
Local government response Regional Greenhouse Gas Initiative (RGGI) –January 2007 –8 northeastern US states –State-level cap and trade program California –12 th largest emitter –Attempt to reduce GHG emissions by 25% by 2020 369 US Cities in all 50 states support protocol
Washington Declaration Non-binding agreement US, Canada + 10 countries Support for cap and trade program –Industrialized countries –Developing countries