Tag: Kyoto Protocol

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California’s new targets on greenhouse gas emission

The Governor of California, Jerry Brown, has issued an executive order to cut greenhouse gas emissions 40% from 1990 levels by 2030 (a 44% cut on 2012 levels). This matches the target set by the EU. It is tougher than that of the US administration, which has set a target of reducing emissions in the range of 26 to 28 percent below 2005 levels by 2025.

The former Governor of California, Arnold Schwarzenegger, had previously set a target of reducing emissions 80% below 1990 levels by 2050. Brown’s new target can be seen as an interim step toward meeting that longer-term goal.

There are several means by which it is planned to meet the Californian targets. These include:

a focus on zero- and near-zero technologies for moving freight, continued investment in renewables including solar roofs and distributed generation, greater use of low-carbon fuels including electricity and hydrogen, stronger efforts to reduce emissions of short-lived climate pollutants (methane, black carbon and fluorinated gases), and further efforts to create liveable, walkable communities and expansion of mass transit and other alternatives to travelling by car.

Some of these will be achieved through legislation, after consultations with various stakeholders. But a crucial element in driving down emissions is the California’s carbon trading scheme. This is a cap-and-trade system, similar to the EU’s Emissions Trading Scheme.

The cap-and-trade rules came into effect on January 1, 2013 and apply to large electric power plants and large industrial plants. In 2015, they will extend to fuel distributors (including distributors of heating and transportation fuels). At that stage, the program will encompass around 360 businesses throughout California and nearly 85 percent of the state’s total greenhouse gas emissions.

Under a cap-and-trade system, companies must hold enough emission allowances to cover their emissions, and are free to buy and sell allowances on the open market. California held its first auction of greenhouse gas allowances on November 14, 2012. This marked the beginning of the first greenhouse gas cap-and-trade program in the United States since the group of nine Northeastern states in the Regional Greenhouse Gas Initiative (RGGI), a greenhouse gas cap-and-trade program for power plants, held its first auction in 2008.

Since January 2014, the Californian cap-and-trade scheme has been linked to that of Quebec in Canada and discussions are under way to link it with Ontario too. Also California is working with other west-coast states/provinces, Oregon, Washington and British Columbia, to develop a co-ordinated approach to greenhouse gas reductions

To achieve sufficient reductions in emissions, it is not enough merely to have a cap-and-trade system which, through trading, encourages an efficient reduction in emissions. It is important to set the cap tight enough to achieve the targeted reductions and to ensure that the cap is enforced.

In California, emissions allowances are distributed by a mix of free allocation and quarterly auctions. Free allocations account for around 90% of the allocations, but this percentage will decrease over time. The total allowances will decline (i.e. the cap will be tightened) by 3% per year from 2015 to 2020.

At present the system applies to electric power plants, industrial plants and fuel distributors that emit, or are responsible for emissions of, 25,000 metric tons of carbon dioxide equivalent (CO2e) per year or more. The greenhouse gases covered are the six covered by the Kyoto Protocol ((CO2, CH4, N2O, HFCs, PFCs, SF6), plus NF3 and other fluoridated greenhouse gases.

Articles

California governor orders aggressive greenhouse gas cuts by 2030 Reuters. Rory Carroll (29/4/15)
California’s greenhouse gas emission targets are getting tougher Los Angeles Times, Chris Megerian and Michael Finnegan (29/4/15)
Jerry Brown sets aggressive California climate goal The Desert Sun, Sammy Roth (29/4/15)
California’s Brown Seeks Nation-Leading Greenhouse Gas Cuts Bloomberg, Michael B Marois (29/4/15)
California sets tough new targets to cut emissions BBC News, (29/4/15)
California’s New Greenhouse Gas Emissions Target Puts Obama’s To Shame New Republic, Rebecca Leber (29/4/15)
Governor Brown Announces New Statewide Climate Pollution Limit in 2030 Switchboard, Alex Jackson (29/4/15)
Cap-and-trade comes to Orego Watchdog, Chana Cox (29/4/15)
Cap and trade explained: What Ontario’s shift on emissions will mean The Globe and Mail, Adrian Morrow (13/4/15)
California’s Forests Have Become Climate Polluters Climate Central, John Upton (29/4/15)
States Can Learn from Each Other On Carbon Pricing The Energy Collective, Kyle Aarons (28/4/15)

Executive Order
Governor Brown Establishes Most Ambitious Greenhouse Gas Reduction Target in North America Office of Edmund G. Brown Jr. (29/4/15)
Frequently Asked Questions about Executive Order B-30-15: 2030 Carbon Target and Adaptation California Environmental Protection Agency: Air Resources Board (29/4/15)

Californian cap-and-trade scheme
Cap-and-Trade Program California Environmental Protection Agency: Air Resources Board (29/4/15)
California Cap and Trade Center for Climate and Energy Solutions (January 2014)

Questions

  1. Explain how a system of cap-and-trade, such as the Californian system and the ETS in the EU, works.
  2. Why does a cap-and-trade system lead to an efficient level of emissions reduction?
  3. How can a joint system, such as that between California and Quebec, work? Is it important to achieve the same percentage pollution reduction in both countries?
  4. What are countries coming to the United Nations Climate Change conference in Paris in November 2015 required to have communicated in advance?
  5. How might game theory be relevant to the negotiations in Paris? Are the pre-requirements on countries a good idea to tackle some of the ‘gaming’ problems that could occur?
  6. Why is a cap-and-trade system insufficient to tackle climate change? What other measures are required?
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Clean Energy Bill

The environment has been a growing part of government policy for many years. With the Kyoto Protocol and Europe’s carbon trading system, effort has been made to reduce carbon emissions. Part of UK policy to meet its emission’s target requires substantial investment in infrastructure to provide efficient energy.

Details of the government’s Energy Bill sets out plans that will potentially increase average household energy bills by about £100 per annum, although estimates of this vary from about £90 to £170. This money will be used to finance much needed investment in infrastructure that will allow the UK to meet its carbon emissions target. With this extra cost on bills, energy companies will increase bring in something like £7.6bn. The benefit of this higher cost is that investment today will lead to lower energy bills tomorrow. Essentially, we’re looking at a short-term cost for a long-term gain.

The Energy Bill also delayed setting a carbon emission target until 2016. Crucially, this will come after the next election. Environmentalists have naturally criticised this omission. John Sauven of Greenpeace said:

’By failing to agree to any carbon target for the power sector until after the next election, David Cameron has allowed a militant tendency within his own ranks to derail the Energy Bill … It’s a blatant assault on the greening of the UK economy that leaves consumers vulnerable to rising gas prices, and sends billions of pounds of clean-tech investment to our economic rivals.’

One further problem that this lack of a target creates is uncertainty. The energy sector requires significant investment and in order to be encouraged to invest, firms need assurances. Without knowing the target and hence facing a degree of uncertainty, firms may be less likely to invest in building new power plants. And this investment is crucial. The Government has committed to replacing most coal-fired power stations across Britain with low carbon technology at a cost of hundreds of billions of pounds. However, the Chancellor has said “he would not allow saving the planet to come at the cost of ‘putting our country out of business.’”

When this Energy Bill is published, it is claimed that £110bn of spending on different aspects of the National Grid will occur. The suggestion is that this will generate a further 250,000 jobs by 2030 and will be a big step in the right direction towards creating an economy that is more reliant on clean energy.

The following articles consider the wide range of issues surrounding the Energy Bill.

’It’s reasonable to hike energy bills to build wind farms’ says Tim Yeo The Telegraph, Rowena Mason (23/11/12)
Energy Bill to increase prices to fund cleaner fuel BBC News (23/11/12)
Energy deal means bills will rise to pay for green power The Guardian, Juliette Jowit and Fiona Harvey (23/11/12)
Energy Bill Q&A BBC News (23/11/12)
Energy bills to rise by £170 a year to fund wind farms Independent, Andrew Woodcock and Emily Beament (23/11/12)
Energy deal – but no target to cut Britain’s carbon emissions Independent, Nigel Morris (22/11/12)
Davey defends contentious energy agreement Financial Times, Jim Pickard, Pilita Clark and Hannah Kuchler (23/11/12)
Energy bill lacks emissions target Channel 4 News (23/11/12)

Questions

  1. Why does the environment require so much government intervention? Think about the different ways in which the environment as a market fails.
  2. If household bills rise, is there likely to be an income and substitution effect between consumption of ‘energy’ and other goods? Which direction will each effect move in and which do you think would be the largest?
  3. Why is uncertainty such a deterrent for investment? Why does a lack of a carbon emissions target represent uncertainty?
  4. The higher cost of bills today may enable future bills to fall. Why is this? For a household, explain why discount factors could be important here.
  5. Why do some argue that the extra cost to households set out by the government are likely to under-estimate the actual increase households will face?
  6. Is the Chancellor right to say that he will not put our country out of business to save the planet?