EarthTalk: If “cap and trade”
has worked so well in Europe for reducing greenhouse gas
emissions there, why haven’t we tried something similar
here in the U.S.?
– Sandra M., Bern, NC
European Union reports that by the year 2020 emissions
from sectors covered by the Emissions Trading System
(ETS) there will be 21 percent lower than they were
in 2005 and 43 percent lower by 2030. Pictured:
A coal-fired power plant in Germany.
credit: Arnold Paul
whereby big polluters must pay to emit greenhouse gases
against a capped total amount that is reduced over time—has
been in effect across the European Union (EU) since 2005.
This so-called Emissions Trading System (ETS) requires 11,000
of the largest electric and industrial facilities in 28
European countries to participate. Some 45 percent of Europe’s
total greenhouse gas emissions are regulated under the system.
Proponents say the ETS has succeeded in keeping greenhouse
gas emissions in check and making Europe a global leader
on climate. The EU reports that, by 2020, emissions from
sectors covered by ETS will be 21 percent lower than they
were in 2005 and 43 percent lower by 2030.
critics argue that Europe’s reduced emissions may
be more due to the global recession than the ETS, and that
the cheap availability of allowances has made it easier
for companies to pay to burn coal than to switch to cleaner
natural gas or invest more in carbon mitigation technologies.
Early in 2014 the EU tightened up its system by cutting
the number of new allowances it plans to issue over the
next three years by a third while simultaneously creating
a “market reserve” to absorb extra allowances
Switzerland, New Zealand, Australia, Kazakhstan and South
Korea have each set up their own national cap-and-trade
programs to varying degrees of success, while regional versions
have popped up within Japan, Canada and the U.S.
to the U.S., whether or not to establish a nationwide cap-and-trade
system here has been a hot topic of discussion in Congress.
It last came up for a vote in 2010, but never found enough
bi-partisan support to become the law of the land. But in
lieu of any federal system, two U.S. regions have undertaken
their own attempts at ratcheting down greenhouse gas emissions
through market mechanisms:
2009, 10 Northeastern states came together to create the
Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade
system with the goal of reducing regional carbon emissions
from the power sector 10 percent from 2009 levels by 2018.
Lower emissions than expected over the first five years
of the program—thanks to many utilities switching
over to cleaner burning and increasingly cheaper natural
gas as well as less overall economic output due to the recession—led
RGGI to lower its overall annual cap from 165 million to
91 million tons in 2014, with a 2.5 percent reduction every
year thereafter until 2020. Analysts expect this rejiggering
will drive the price of polluting five times higher than
it has been and thus force utilities across the region to
seek cleaner, greener alternatives to coal as an electricity
other major U.S. cap-and-trade player is California, which
launched its own ETS in 2013 with a cap set initially at
two percent below 2012 emission levels. The cap will then
be reduced three percent a year from 2015-2020. Some 600
facilities are big enough polluters to qualify for participation
in the system, which will cover around 85 percent of the
state’s total greenhouse gas emissions. Given that
California in and of itself is the 12th largest economy
in the world, its forward-thinking commitment to cap-and-trade
gives hope everywhere to fans of marshalling market forces
to bring about environmental change.
EU Emissions Trading System, ec.europa.eu/clima/policies/ets/index_en.htm;
California Cap-and-Trade Program, www.arb.ca.gov/cc/capandtrade/capandtrade.htm.
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