cap-and-trade

As California writes the details of a statewide cap-and-trade plan for greenhouse gas emissions, it is considering a different approach for divvying up the proceeds, one that would put state residents — rather than polluters — first in line for payouts.

Billions of dollars will be at stake once the state's carbon trading system gets going in 2012.

As federal cap-and-trade legislation stalls in the U.S. Senate and comes under international scrutiny in Copenhagen, California policymakers are moving forward with their own design for a carbon-capping strategy.

California’s Global Warming Solutions Act of 2006 (AB 32) mandated that the state cut its emissions back to 1990 levels by 2020, and then decrease emissions to 80 percent below 1990 levels by 2050.

To reach those targets, policymakers plan to launch California's own state-based carbon-trading scheme in 2012, but some important details are still being worked out.

The first question is one that has also tied up policymakers in Washington: What is the most effective way to distribute the emission allowances that will eventually make up the state carbon trading market?

The answer recommended by a committee studying the allocations issue is very different than Washington’s. Rather than give away the majority of permits to polluters for free — the path Congress is using to win over votes from fossil fuel-heavy states — the committee recommends the permits be auctioned.

Grassroots — adjective of, pertaining to, or involving the common people, esp. as contrasted with or separable from an elite.

Astroturf — trademark used for an artificial grass-like ground covering.

In the lead up to next month's climate negotiations in Copenhagen and the possibility of the U.S. Congress voting a climate bill, many groups are claiming to “represent Americans” and their views on energy and climate legislation.

The International Energy Agency states in its 2008 World Energy Outlook that global energy demand will likely increase 45% by 2030. Developing countries led by China and India will account for 97% of the related rise in carbon dioxide emissions, and by 2030, they will supply 67% of the energy-related CO2 that enters the atmosphere.

Using 450 atmospheric parts per million (ppm) of CO2 as the ceiling for effective climate change mitigation, the Energy Outlook concludes: 

[Developed] countries alone cannot put the world onto a 450-ppm trajectory, even if they were to reduce their emissions to zero.

In post-Kyoto negotiations, developed and developing countries have generally split on what the world should do about this fact. While there is a consensus that the CO2 footprint of economic growth must be greatly reduced, the sides differ on how the costs of this makeover should be divided.

Congressman Ed Markey hinted today at how CO2 emissions allowances might be divvied up under a national cap-and-trade program. He also spelled out a strong incentive for detractors in Congress to change their tune – three letters: EPA.

Markey, the chairman of the House Energy and Environment Subcommittee and one of the architects of the comprehensive climate bill headed for Congress, was speaking at a symposium on climate legislation at MIT along with President Obama’s chief advisor on energy and climate change, Carol Browner, and presidential science advisor John Holdren.

An audience member asked how quickly the proposed cap-and-trade program would reach 100 percent auction of the emissions allowances.

Markey's answer made it clear that cap-and-trade won't start with a 100 percent auction and that the Obama administration is concerned about the impact on competitive trade, particularly when it comes to China:

“Initially, at least, we have to set aside a certain amount of the carbon credits to ensure that the steel, the paper and other trade-sensitive, energy-intensive industries are not exploited in the near term by the Chinese and others in terms of them taking advantage of this increased cost.

"Right off the top, we cannot auction off all those credits.”

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• Stacy Morford's blog
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American-style capitalism, sans regulation, has earned its present bad rap. Even so, some market mechanisms do work quite well.

Markets discover commodities pricing and keep costs low, and they are very efficient at making sure that metals, oil, food, etc. are moved to where the demand is highest from where the supply is greatest. A market in traded sulfur emissions imposed by the Clean Air Act has enabled fossil fuel plants to reduce sulfur dioxide emissions (the main source of acid rain) dramatically since that market’s inception.

And soon, President Obama and the Congress will catch up to New England and the European Union with a new vision for capitalism – carbon capitalism.

Carbon capitalism involves a cap-and-trade market for carbon dioxide, and it makes a lot of sense. Just like sulfur dioxide, CO2 emissions from different sources mix with each other in the atmosphere, and for this reason trading emission credits between one source and another is physically viable. Add in the ability to bank emissions credits, and you’ve got the makings of a complete carbon market and financial system.

So if cap-and-trade is really carbon capitalism, why do so many supposed capitalists hate the idea of a market in CO2?

Senate Environment and Public Works Chairwoman Barbara Boxer gave opponents of climate change legislation, including some in her own party, a “reality check on global warming” this morning.

Look at the Federal Register – the EPA and other federal agencies are already moving to reduce greenhouse gas emissions, Boxer told a news conference. California will soon have a waiver so it and 17 other states can increase their auto emissions standards. A declaration that greenhouse gases endanger human health and welfare is coming.

“The days of inaction on climate change have ended,” Boxer said. “Action has begun.”

“My message to my colleagues is, we could sit here and let EPA do it, with the president’s support, we could allow the states and cities and the world to do it, or we can move forward. I believe the thing to do is to move forward.”

The target of her message was clear, and it wasn’t the press.

In his first address to a joint session of Congress, President Obama called on lawmakers tonight to create a market-based cap for carbon emissions and to commit to a future built on renewable energy.

The president's own commitment to clean energy as an economic driver for the nation was clear in the structure of his speech. He focused on three areas that he called “absolutely critical to our economic future.” Number one on the list: energy. Healthcare and education followed, but the president emphasized:

The country that harnesses the power of clean, renewable energy will lead the 21st century.

That's a major shift from calls to open up more land to oil exploration and chants of "drill, baby, drill."

Obama's first budget, being released on Thursday, already factors in revenue from a future cap-and-trade system starting as early as 2012. The White House hasn’t publicly detailed the contours of a carbon cap program, but The New York Times reported over the weekend that the president's plan could raise up to $300 billion a year by 2020 and that the president wants most of the revenues to go to families to offset higher utility bills and related expenses, with the rest going to support the development of alternative energy.

Here's what Obama said to Congress about cap-and-trade this evening:

The 2008 Democratic National Convention kicked off yesterday with throngs of delegates descending on Denver and a firm party commitment to embrace Barack Obama’s election plank -- energy and climate policies included.

ENS parses the green details here, while the Wall Street Journal clears the air on Obama and cap-and-trade legislation: if elected, expect it to be President Obama's #1 economic priority.

As predicted, aspiring First Lady Michelle Obama and ailing Senator Ted Kennedy stole the Day 1 show with electrifying, homerun speeches, earning near-unanimous media praise. (Read the transcript of Obama's speech here and Kennedy's here. Videos of both follow the post.)

Among the other first impressions to emerge, here's one of the most prevalent: ExxonMobil, the American Coalition for Clean Coal Electricity and the whole clean coal lie are "everywhere."