A new report from RFF points out that despite the absence of cap-and-trade legislation, the United States is on course to reach the same emissions reduction goal – 17 percent fewer emissions from 2005 levels by 2020 – that would have been mandated under the Waxman–Markey cap-and-trade proposal [H.R. 2454], if it had become law in 2010.
The report identified three factors contributing to the emissions reductions projections: Regulations under the Clean Air Act that were set to take effect without cap-and-trade legislation, particularly expected operating performance standards for new and existing stationary sources and vehicle efficiency standards; trends in fuel prices and energy efficiency; and subnational efforts, such as the Regional Greenhouse Gas Initiative and renewable portfolio standards in 29 states.
The model assumes that some EPA rules, such as the additional fuel economy standards proposed in 2011, would have been preempted by Waxman-Markey. That policy argument – to let the purchase of emissions credits substitute for other regulatory efforts – would have resulted in fewer emission reductions, according to RFF.
In light of this assessment should the US pursue cap-and-trade or other carbon emissions-related legislation?
Further reading:
Linking Climate Policy to Fiscal and Environmental Reform
Design and implementation of carbon cap and dividend policies
Cap and trade is deeply flawed and has consistently failed when tried. In a slumpling economy, policies that increase energy costs and undermine economic recovery will continue to be politically unacceptable.
Breakthrough innovation is needed to create economically competitive, alternative energy solutions that can serve multiple constituencies’ objectives. A modest fuel tax to provide additional resources to support energy R&D and innovation might be acceptable, but still will be a hard sell.
Reforming the strategy, organization, and processes for supporting energy R&D and innovation could accelerate technical advances without necessarily making increased demands on the public treasury.
See: http://www.energyinnovation.perelman.net
.. “has consistently failed when tried.” Hmm, I believe it’s generally considered to have worked quite well for abatement of emissions from power plants in the early days of the EPA. But you may know more about it.
In any case, I think the efficacy of cap and trade, per se, is irrelevant to the real thrust of the question posed. I take “cap and trade”, in this context, to mean “policy measures that incentivise low fossil carbon energy resources (or fossil carbon resources with CCS) at the expense of fossil carbon resources without CCS. My answer to the question posed is emphatically, “Yes, there is still a need for such legislation”.
The drop in US CO2 emissions, as I see it, is almost entirely due to the combination of two factors. One is the unrealistically low prices for natural gas in the past few years, causing a switch from coal to natural gas for power generation. The other is the dismal state of the economy. Disposable income among the lower and middle classes is sharply down, driving mileage and air travel are down, and manufacturing is down. So of course CO2 emissions are down.
The thing to remember is that the emission reduction goals that were set were only to help reduce the rate at which global CO2 levels are rising. They were an initial target, to get us moving in the right direction and perhaps buy a few years before levels regarded as dangerously high would be reached. But practically speaking, there is no rate at which fossil carbon can be dumped into the atmosphere without causing CO2 levels to rise. There are only two natural processes for long term disposal of CO2. One is weathering of silicate rocks, which increases the ocean’s holding CO2. The other is the same process by which fossil carbon stores were created in the first place: burial of biomass at the bottom of lakes, bogs, and seas under anaerobic conditions. We’re currently extracting and burning fossil carbon thousands of times faster than those two processes can lock it back up.
Ultimately, we must reduce our consumption of fossil carbon to the rate at which we can artificially sequester it. That will never happen as long as we allow ourselves to use the atmosphere as a free dump for CO2 emissions.
Cap and trade has in general proved to be bogus. Typically, far too many credits are distributed to the end that no one’s ox is gored (isn’t that the intent?). Add to that inflation from system gaming and the market inevitably notices there are lots of spare credits seeking buyers, even in the context of the massive amount of emissions out there. The price of credits in that particular C&T market falls precipitously, traders make money, get bored and move on. A corpse is left behind, only to have yet another Dr. Frankenstein come around saying it can be reanimated once again.
A carbon tax is far simpler, a much more predictable cost – a nice thing in business – and would actually generate revenue to offset the national deficit. If we DO wish to insure no one pays much extra for their energy (????), we can peg the base tax to the cleanest, carbon-creating fuel around (natural gas), hit motor fuels moderately, coal quite hard and give renewables a free ride (although there are costs other than CO2 emissions, something sun & wind fanatics refuse to recognize). Then folks like us can just sit back and let the market place regulate our carbon foot print.
And if you think a carbon tax is going to be passed any time soon by the U.S. Congress, I’ve got some waterfront property I’d like to show you. At low tide.
Excellent, Joel.
The report generally sounds reasonable, but your questions are still a bit tricky.
“Should we still pursue cap and trade or other carbon regulation measures?’
I’d say yes, BUT ONLY if we give much higher priority to other measures (such as a comprehensive bill to make us independent of the need to use fossil fuel as soon as possible and minimizing cost of transition), and ONLY if we take a very different approach from what we saw in the Waxman Bill. Since the Waxman bill did very little to transform
transportation, and manufacturing is more of a problem to politics than benefit to GHG reduction, the rational approach would be to aim for something much simpler just for the electric power sector. There is a wide spectrum of possibilities much better than either Waxman bill or the status quo, ranging from something like the Cantwell bill to something more like a flat user fee for GHG emission (maybe phasing in quickly to about $30 per ton of CO2); people who really care should be open to anything in this space. Whichever is chosen, it should be well-designed to give effective credit to carbon capture and reuse (CCR, as in making fuel or construction materials from flue gas) and to sequestration of carbon by farmers based on a system of measurement of soil carbon implemented mainly through USDA. And it should supplant all EPA regulation of CO2 emissions under the Clean Air Act. This would be a worthwhile step up, since there is real hope for CCR technologies and hope that farmers can help a lot more than most environmentalists understand as yet, and it’s only fair to offer them a rational market incentive to prove what they can do; if the social cost of carbon is, say, $30 per ton, it’s irrational and unfair not to PAY people who pull it out of flue gas or the atmosphere, so long as the accounting is done right.
For your amusement — I saw presentations by a guy named Allen Savory of Africa,
a serious if controversial player in the sustainable development world, who claims that free ranging cattle could solve all our CO2 problems by themselves, if UN and such would reverse their opposition to cattle ranching and such. I was VERY skeptical at first, but when I looked it up, I found just one serious modeling study which assessed the carbon sequestration value of the carbon in the defecations of livestock. It’s already a pretty big number, but changes in practices might well make it bigger. (e.g. stop just burning the stuff.) Apparently this important part of empirical reality has been neglected in lots
of purist studies, because of the fastidiousness and correctness of certain folks. In any case, though RFF is right that Clean Air Act is already having a big impact, having more rationality and clarity could reduce the cost of having such an impact and mobilize new resources.
In 2009, Senator Specter gave me a mandate to analyze just what a maximal comprehensive bill would be to reduce dependence on fossil oil. A long story
(www.werbos.com/oil.htm), but a bill much more effective and comprehensive than Waxman for transportation ran to 18 pages total, out of Senate General Counsel.
It would need a little updating today (to get better numbers for the LCFS part and add the comment that the new LCFS would replace RFS), but I’d see that as much more important and urgent than the electric power side of this.
All of these changes would also make it much easier to get a deal with China as well, in my view — and that is essential to make real progress here.
Paul, Savory’s assertion about free-ranging cattle runs counter to what I’ve heard for years about the negative impact of cows on green house effects. Ruminants create and emit significant amount of methane, which we all know is about 20 times more an inducer of green house heating than CO2. Does the study you cite include the impact of methane, or does it just concern CO2?
Hi, Joel! I think the lone paper is open access..
http://rd.springer.com/article/10.1007/s10668-008-9157-0
Savory himself, and his colleague Heather Lovins, have also written tomes on the subject.
It’s my impression that BOTH the positive and negative GHG effects of livestock are highly dependent on the specific agricultural practices, and both large. That’s why, in general terms, I’d like to see the good incentivized and the bad discouraged, if that is feasible to do. Ideally, by incentives strictly the same as what we use in discouraging emissions, like the Social Cost of Carbon. USDA says they could handle the technical requirements of carbon payments to farmers (and ranchers) for sequestration of carbon into the soil.
A lot of the literature does seem confused by all kinds of ad hoc biases, like folks not wanting to talk directly about feces, or folks having religious commitment to vegetarianism, or age-old tensions between ranchers and crop growers. It would
be nice to have quantitative metrics and incentives which bypass such biases –
IF it doesn’t become so much trouble than it keeps us from addressing larger and more urgent issues like transportation fuel and avoiding World Great Depression II.
“A lot of the literature does seem confused by all kinds of ad hoc biases, … It would be nice to have quantitative metrics and incentives which bypass such biases …” Truer commentary has never been posted! This truth is the darkness at the heart of the difficulty in conducting reasonable energy policy discourse. Thanks, Paul, I’ll follow your link.
While low cost natural gas has knocked out 20% of US coal generation falling from 50% to 40% of total national electric generation — other drivers are going to needed to significantly lower and stabilize carbon and other greenhouse gas emissions — and do so in a way that is both economic and improves the long term energy economy on a sustainable path. First, federal and state tax, bond, and procurement incentives need to be ratcheted up – so that industrial and commercial businesses dedicate resources to significantly reduce water and energy input costs. This will make US products far more globally competitive and increase US exports. For about 40 percent of the US, on-site electric and thermal generation that offsets increasing electric power outages and higher seasonal energy rates must also be incentivized so that our industrial and commercial sector stays viable with increasing harsh weather patterns and aged electric grid outages. Along with the federal government, if State and local governments continue these policies and also address the residential sector, renters and homeowners will have more disposable income (rather than being siphoned into increasing energy costs) which then will push more consumer dollars into the US economy – increasing jobs. If our Congressional leaders could bring themselves to lop off a large portion of the $70 billion per year of conventional energy subsidies, even with accelerating the efficiency, renewable, and on-site utilization mentioned about, it would mean a net revenue savings $55 billion per year – or a trillion dollar savings over a decade.
Please identify which renewable sources, especially locally based, of electricity are less expensive than the electricity that is grid based? If this is only true during peak electricity demand? Please clarify this. Since ,except for large hydropower systems, are all renewables are intermittent sources, how is this to be overcome in a maner that is less expensive than what we have today? How many megawatt-hours of this ;lower cost electricity are you thinking about and how does that compare to the national annual number of megawatt-hpours now produced?
Thank you,
Herschel Specter
The RFF analysis of the Waxman/Markey bill (H.R. 2454) might reach some very different conclusions if it went out to year 2050. This dormant HR bill, based on climate change analyses done by the International Panel on Climate Change (IPPC), called for about an 83% reduction in the emission of greenhouse gases (GHG) by 2050, relative to the emissions measured in 2005. Greenhouse gases are composed of carbon dioxide and a host of other gases such as methane, nitrous oxide, and florinated gases. The non-carbon dioxide contribution to greenhouse gases contributes about 17% of the total GHG effect. Therefore, unless there are reductions in these non-carbon dioxide gases, the full implementation of H.R. 2454 would require the complete removal of all fossil fuels from our energy mix by 2050. The RFF report seems to miss this point.
While the substitution of natural gas for coal in our electricity sector has been very helpful in the near term, natural gas would also have to be phased out if the goals of H.R. 2454 are to be achieved. However, we are building many new natural gas power plants whose expected lifetime should reach beyond 2050. Is this a bad investment? The nation could build many more nuclear power plants which are expected to last between 80 to 100 years because these plants do not give off GHG. However, today such plants are very capital intensive, although their lifetime cost of electricity is attractive. We haven’t learned to build low cost, but safe, nuclear power plants like the South Koreans and Chinese have. Their low costs are as much a matter of intelligent financing rather than technological or manufacturing breakthroughs.
RFF did not seem to recognize that the burning of petroleum is a larger source of GHG than burning coal in our power plants. According to the Energy Information Administration, in 2012 burning petroleum released 2345 million metric tons of carbon dioxide equivalent while coal released 1,855. Burning natural gas released 1358 million metric tons of carbon dioxide equivalent in 2012. These data show that burning petroleum is the largest source of GHG in this country and this is principally due to our transportation system, which is so highly dependent on petroleum. To help put this into some perspective, the GHG emissions limit in H.R. 2454 would be exceeded by around year 2030 even if all (100%) the GHG from coal and shale gas emissions were eliminated if petroleum use does not decline. If, somewhat more realistically, we were able to eliminate 80% of the GHG emissions from coal and gas, the time when H.R. 2454 would be exceeded would come five years sooner, in 2025[1]. Since petroleum represents a national security threat , a huge balance of payment issue, as well as being the largest contributor to GHG emissions, the RFF report and its carbon tax analysis seems to address an issue of lesser importance than investing in a low carbon intensive transportation future. It has been suggested that methanol from shale gas be used to replace imported petroleum. This certainly has national security and economic benefits. However, methanol is another carbon based fuel and produces carbon dioxide when burned. Unless a method is found to have low GHG liquid fuels, the goals of H.R. 2454 will never be met regardless of any cap and trade scheme or a carbon tax.
Every year the Energy Information Administration (EIA) makes its annual energy outlook (AEO). Using the 2012 AEO, it is interesting to compare this year’s GHG gases, in millions of metric tons, with the projected ones for 2030, as shown in the table below:
Source; 2012; 2030:
Petroleum; 2345.0; 2271.0
Natural gas; 1358.0; 1405.0
Coal; 1855.0; 1959.0
Other; 12.0; 12.0
Total; 5570.0; 5647.0
It is obvious that if the EIA projections are borne out it would not be possible to meet the goals of H.R. 2454. The EIA prediction shows virtually no change in the use of fossil fuels, including the use of petroleum. In my opinion the EIA projection is as unrealistic as H.R.2454.
The fundamental problem is that there is no national energy plan that would simultaneously remove the threat of anthropologically induced climate change and the national security threat of importing foreign oil.
[1] See “A Call to Action”. Contact H. Specter at mhspecter@verizon.net for a copy.