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3 signs we're entering a golden age for carbon markets

This is an adaptation of an essay by Fred Krupp and Nat Keohane for the International Emissions Trading Association’s Greenhouse Gas Market 2015/2016 report. This adaptation was originally posted on EDF Voices.

There was a time when market-based approaches seemed to fall off the radar in discussions of climate policy, but carbon markets are back.

Well-designed emission trading systems offer the combination of flexibility, incentives and guaranteed results that help polluters meet their targets – while leaving it up to the market to figure out the best way to meet them, driving costs down.

This is why so many companies are staunch supporters of emissions trading, and why national and international efforts are taking off.

Here are three indications  we may be entering a golden age for carbon markets and what it means for COP21, the international climate talks that begin in Paris later this month.

1. Carbon markets are going global

Climate progress in the United States and China is changing the global dynamic.

Gone are the days when the two largest emitters blame each other for inaction, and their bilateral progress is inspiring commitments around the world. All told, cap-and-trade programs are in place in more than 50 jurisdictions worldwide that are home to nearly a billion people.

Quebec and California have linked their carbon markets, creating North America’s largest cap-and-trade system, becoming the first example of subnational jurisdictions in different countries launching a joint market. And more programs are in the works.

Ontario, Canada’s most populous province and home to a significant manufacturing base, is developing a cap-and-trade program to launch by 2017 and link to California and Quebec’s market by 2018. Having the largest U.S. state and Canadian province in a formal, linked carbon market will help lay the foundation for further carbon market collaboration in North America and beyond.

China, meanwhile, is set to open a national carbon market in 2017, the world’s largest.

2. Next: International aviation and tropical forests

One of the most exciting opportunities is in international aviation.

The International Civil Aviation Organization (ICAO) is developing a market-based mechanism for consideration at its next Triennial Assembly in 2016 to help the sector meet its stated commitments to carbon-neutral growth from 2020 and a 50-percent cut by 2050.

That would cap emissions from a global sector that accounts for roughly 2 percent of carbon emissions, and growing fast, and would set a powerful precedent for international cooperation on climate change.

Another opening is in the forest sector.

Tropical forests are not only crucial to stabilizing the climate – they are critical to sustainable economic development for the communities and nations that rely on them. Carbon markets can play a key role in driving a new model of green growth in the tropics.

By allowing jurisdictional REDD+ credits (short for Reducing Emissions from Deforestation and forest Degradation) into their compliance markets, California – and, perhaps soon, the ICAO – have the opportunity to create positive economic incentives for forest protection at a landscape scale.

3. Existing markets are thriving

Since 2006, when California’s climate change program was signed into law, the state has received more clean tech venture capital investment than all other states combined. Bloomberg News recently ranked the Golden State the best place in the U.S. to do business, citing the state’s visionary leadership on climate change as one of the markers of its success.

A good illustration of how market-based policies can promote greater ambition is the landmark U.S. cap-and-trade program for sulphur dioxide. This program reduced national average concentrations of the pollutant by 76 percent since 1990 – taking an enormous step toward solving the problem of acid rain ahead of schedule and well below the estimated cost while creating hundreds of billions of dollars in annual benefits.

And despite well-publicized ups and downs – attributable in large part to the worst recession since the 1930s – the European Union’s emissions trading system is now performing well. It has over-achieved its goals, leading to more reductions at lower cost than expected.

To COP21 in Paris…and beyond

How can we capitalize on this political moment and build on the momentum we are seeing, to keep carbon markets growing around the globe?

A durable climate regime established by the Paris agreement will be one that harnesses market forces in the hunt for solutions, mobilizes private sector energies, enhances national self-interest and, through rigorous and transparent reporting, allows countries to demonstrate to each other that they are meeting their commitment.

A United Nations agreement is only one of many tools available to address climate change. It will take continuing strong action by leading emitters and leading carbon market jurisdictions to spur the technological, political and institutional transformations that will support more ambitious action in the years to come.

Also posted in Economics| Comments are closed

We Need the Mercury and Air Toxics Standards in Place to Continue to Provide Their Life-Saving Protections

power-plant-815799_1280Last week, EDF went to court to help make sure that the Mercury and Air Toxics Standards can continue protecting American families and communities.

EDF joined a broad group of state and local governments, public health and medical associations including the American Lung Association and the American Academy of Pediatrics, and environmental groups – who all jointly filed a motion asking the D.C. Circuit Court to leave the life-saving protections in place while the U.S. Environmental Protection Agency (EPA) responds to a recent Supreme Court decision.

The Mercury and Air Toxics Standards set the first-ever national limits on hazardous air pollution from their largest source – fossil fuel-fired power plants. The protections cover pollutants including mercury, arsenic, chromium, and hydrochloric acid gas. These pollutants are dangerous to human health even in small doses — mercury causes brain damage in children, metal toxics like chromium and nickel cause cancer, and acid gases cause respiratory problems.

But in June, the Supreme Court held that EPA should have considered costs in its threshold assessment whether it is “necessary and appropriate” to move forward with the regulation of these toxics – EPA had considered costs in establishing the resulting emissions standards. The Supreme Court did not overturn the Mercury and Air Toxics Standards, it provided for EPA to take corrective action.

Right now, the Mercury and Air Toxics Standards — which would save an estimated 11,000 lives each year — remain in effect and continue to deliver clean air protections for our nation.

However, opponents of the Mercury and Air Toxics Standards are asking the D.C. Circuit Court to halt the implementation of these safeguards while EPA responds to the High Court’s decision. EDF and our allies will be fighting in court to prevent that from happening.

The current battle in the D.C. Circuit is critically important because halting the Mercury and Air Toxics Standards would result in the release of the most hazardous air pollutants from power plant smokestacks.

Some of the nation’s preeminent public health scientists are on our side in this battle. They also filed statements with the D.C. Circuit Court supporting the continued implementation of the Mercury and Air Toxics Standards and highlighting what’s at stake for our communities and families including protecting infants from neurotoxic exposures to methylmercury:

Methylmercury can pass the placenta, and the developing brain is particularly vulnerable to such effects. If methylmercury toxicity occurs during fetal or early postnatal development, the damage is much more severe and more widespread than in adults, and the effects are likely to be permanent. . . . some portion of the increased mercury levels resulting from vacatur would persist in environmental reservoirs, available for uptake by fish and eventual consumption by people, for decades.”  (Philipe Grandjean, pages 6 and 14)

Vacating the Mercury and Air Toxics Standards would lead to more hazardous air pollution with serious public health consequences and is utterly unwarranted given the fact that EPA previously found that the public health benefits of the standards were valued at up to $90 billion annually and far exceeded the compliance costs.

Furthermore, due to technological improvements and other factors, power companies have been able to comply with the Mercury and Air Toxics Standards at less than one-quarter of the cost originally estimated by EPA. Indeed, a group of power companies submitted their own motion to keep the Mercury and Air Toxics Standards in place. See the declaration of James E. Staudt on page 5.

In other words, once EPA goes back and considers costs as the Supreme Court directed (which it plans to do by April 2016), the record before the Agency will be manifest that the public health benefits of the Mercury and Air Toxics Standards exceed the costs by an even greater margin.

More briefs are expected to be filed with the D.C. Circuit over the next two months on whether to vacate the Air Toxics Rule or keep it in place. EDF and our allies will continue to urge the court to keep these life-saving protections, for the health and safety of all Americans.

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Saving Thousands of Lives, Preventing Millions of Asthma Attacks – And Rising Above the Hair Salon Rhetoric

Go Fly a Kite!

If you had the chance to save 7,900 lives every year and prevent 1.8 million annual asthma attacks in children, would you take it?

That is the very question before the U.S Environmental Protection Agency (EPA) and the White House now as we are nearing the final deadline for updated national health-based smog air quality standards.

Smog is a deadly pollutant that contributes to asthma attacks, early deaths, missed school days for kids and more harmful impacts to human health.

  1. Strong, health-based smog standards would save the lives of 7,900 Americans each year.
  2. Strong, health-based smog standards would prevent 1.8 million annual asthma attacks in children.
  3. Strong, health-based standards are essential to ensure that all Americans know whether the air in their neighborhoods and communities is safe to breathe – through the “truth in labeling” that links our nation’s air pollution monitoring system with air quality standards anchored in medical science.

It is well established that our nation’s health-based standards are the very bedrock of our nation’s clean air laws – saving lives and empowering communities with critical air quality information.

What is standing in the way of saving lives and ensuring healthier air for our families and children? A well-funded “sky is falling” campaign by polluters and other naysayers. These big emitters claim that our nation cannot afford protective smog standards. These opponents also attack the science that shows the need for a stronger smog standard, in direct opposition to the more than one thousand peer-reviewed studies that EPA considered while working on updating the health-based standard.

Unfortunately, these “sky is falling” claims are all too familiar. Claims questioning science and fear mongering over economic impacts have been made almost every time we talk about the need for stronger clean air protections – and they have never borne out. Clean air benefits outweigh costs of implementation by about 30 to one, according to a landmark study assessing the Clean Air Act.

It’s worth recalling the outlandish claims made by opponents of the 1997 smog standard. A key Senator from Michigan warned that health-protective smog standards would cause hair salons to go out of business. You’ve probably noticed that we still have a lot of hair salons in America. We also have a lot less smog – and that has saved a lot of lives.

But we could do much better. That’s why I hope that EPA and White House will take this opportunity to lead on clean air — and to ensure longer, healthier lives for millions of Americans in this generation and the next. Let’s save lives. Let’s protect our children and our communities. Let’s rise above the “sky is falling” rhetoric and work together to ensure the sky is clearing — putting medical science, healthy families and health communities first.

Also posted in Clean Air Act, Health, Policy| Comments are closed

Statistics 101: Climate policy = risk management

Bjørn Lomborg reviewed my book, Climate Shock (Princeton University Press, 2015), joint with Harvard's Martin L. Weitzman, for Barron's over the weekend. He started it by stating that "global warming is real."

So far, so good.

But the book is not about whether the climate is changing. It is.

The book is about whether we are getting the order of magnitude of its effects right. Weitzman and I argue forcefully — in prose in the text, supported by a significant amount of research going into the 100-page end notes — that it's what we don't know that really puts the "shock" into Climate Shock. Lomborg asks how we can know that, if apparently we don't.

The answer is simple, and it's a statistical point that can't possibly be lost on Lomborg, a former lecturer on statistics. The set of distributions that most directly represent climate uncertainty — the link between concentrations of carbon dioxide and eventual temperature outcomes — is inherently skewed. We know, and Lomborg agrees, that adding carbon dioxide increases temperatures. (Back to 19th century science.)

So we can very clearly cut off the distribution linking a doubling of pre-industrial concentrations to temperatures at zero. In fact, we can cut it off at least at around 1 degree Celsius (almost 2 degrees Fahrenheit). The world, after all, has already warmed by over 0.8 degrees Celsius (around 1.5 degrees Fahrenheit), and we haven't yet increased pre-industrial concentrations by even 50 percent.

Reprinted from Climate Shock, with permission from Princeton University Press

Reprinted from Climate Shock, with permission from Princeton University Press

That skewedness of the underlying distribution is real. It's important. The correct response, then, to those who are too sure about where the climate system will go isn't to say, "cool it." It's to take the uncertainties seriously. Those, sadly, are skewed in one direction.

Climate risk is not our friend. It ought to prompt us to rethink not just how we talk about climate change. It should also inform our response. The burden of proof clearly rests on those who argue against these statistical facts.

Also posted in Greenhouse Gas Emissions| Read 4 Responses

Legal Experts Affirm the Strong Legal Basis for the Clean Power Plan

rp_Gavel_iStock000003633182Medium1-300x199.jpgLike other major Clean Air Act standards protecting our climate and public health, the Clean Power Plan will likely be subject to numerous legal attacks.

EPA has a long history of successfully defending its rules against such attacks – and the Clean Power Plan is on similarly strong legal footing.

Leading law enforcement officials, former EPA officials, and prominent legal scholars have concluded that the Clean Power Plan is firmly within EPA’s long-standing authority under the Clean Air Act:

Statements on the Final Clean Power Plan

We are in the process of reviewing the rules but fully anticipate standing with EPA to defend these necessary emission standards if they are challenged in court…The rules are also firmly grounded in the law. The Clean Air Act requires EPA to regulate emissions of climate change pollution from new and existing power plants. Furthermore, the rules set reasonable limits on these sources as a result of a multi-year stakeholder process that drew heavily on strategies states have used to successfully cut power plant emissions while growing our economies. — Attorneys General of New York, California, Connecticut, Maine, Massachusetts, New Mexico, Oregon, Vermont, Washington, the District of Columbia, and the Corporation Counsel of the City of New York, Letter to EPA Administrator Gina McCarthy, August 3, 2015

The new rules set reasonable limits on emissions of climate change pollution from new and existing power plants and are firmly grounded in law. My office stands ready to support and assist the EPA throughout the implementation of the plan, including in any legal challenges that may be filed in the courts. — George Jepsen, Attorney General of Connecticut, August 3, 2015

North Carolina's Clean Smokestacks Act, our renewable energy standard and other forward-thinking efforts were forged by collaboration among interested parties such as utilities, environmentalists, businesses and consumer advocates. Our state is in a great position to bring these and other stakeholders together once again to work with the EPA to devise our own plan to protect North Carolina's air and promote economic growth… I encourage the [North Carolina General Assembly] to avoid the path of litigation and instead work on a cooperative effort we can all be proud of. – Roy Cooper, Attorney General of North Carolina,letter to leaders of the North Carolina General Assembly, Aug. 7, 2015

[T]he government is on solid legal footing to defend the Clean Power Plan. — Profs. Jody Freeman and Richard J. Lazarus, Harvard Law School, The Biggest Risk to Obama's Climate Plan May Be Politics, Not the Courts, The Guardian, August 5, 2015

[T]here is no question that in the final plan, the government has shored up its legal vulnerabilities and put itself in a far better position to defend its ambitious rule. — Prof. Jody Freeman, Harvard Law School,How Obama Plans to Beat His Climate Critics, Politico, August 3, 2015

Every president since [the late 1980s], whether a Democrat or Republican, has taken meaningful steps to slash pollution from existing plants, in most cases relying not on new legislation but on previously neglected provisions of the Clean Air Act itself… The Clean Power Plan follows in this bipartisan tradition… [T]he rule is the latest chapter in a decades-long effort to clean up our oldest, dirtiest power plants and at last fulfill the pledge that Congress made to the American people back in 1970: that the air we all breathe will be safe. — Prof. Richard Revesz and Jack Lienke, New York University School of Law, Obama Takes a Crucial Step on Climate Change, The New York Times, August 3, 2015

Statements on the Proposed Clean Power Plan

The EPA has authority under the 1990 Clean Air Act, an authority affirmed by the U.S. Supreme Court, to set these public health protections against carbon pollution. — Carol M. Browner, former EPA Administrator under President Bill Clinton, and Alex Laskey, With New Power Plant Rules, Energy Efficiency Checks All the Boxes, The Hill, June 2, 2014

Critics of the [Clean Power Plan] say that President Obama is making an end run around Congress, stretching the law to achieve by executive action what he could not accomplish through the legislative branch. This is flat wrong. More than four decades ago, Congress expressed its clear desire to regulate pollution from power plants, in the form of the Clean Air Act. I know, because I worked on the legislation, including the key part of the act—Section 111—that the Obama administration is using to justify its move. — Leon Billings, former Chief of Staff to Sen. Edmund Muskie and staff director of the Senate Environment Subcommittee during the drafting of the Clean Air Act, The Obscure 1970 Compromise That Made Obama’s Climate Rules Possible, Politico, June 2, 2014

Limiting Greenhouse Gas emissions from existing power plants is the next logical step after the Supreme Court and other courts have upheld EPA’s authority and obligation to address this issue. A system-wide approach provides needed flexibility and reduces costs, as well as encouraging investment in lower-emitting generation. EPA has wisely left the states a lot of discretion rather than mandating specific measures as some had wanted. — E. Donald Elliott, EPA General Counsel under President George H.W. Bush, Obama’s Section 111d Plan Has Support From George H.W. Bush’s EPA General Counsel, Utility Executives, Legal Planet, June 1, 2014

[I]t is important to be clear here: the President is required to issue the rules, required by law and by the interpretation of the law by the highest Court in the land. — Prof. Ann Carlson, UCLA School of Law, Obama Has To Issue Climate Change Rules — The Law Says So,Talking Points Memo, May 30, 2014

Also posted in Clean Power Plan, EPA litgation| Comments are closed

An Early Look at the Clean Power Plan in Six Charts

(This post was written by EDF’s Nicholas Bianco and Tomás Carbonell)

On August 3rd, 2015, President Obama announced the Clean Power Plan – a historic set of Clean Air Act standards that will finally put an end to the era of unlimited carbon pollution from America’s fossil fuel-fired power plants.

Fossil fuel-fired power plants are the nation’s single largest source of climate-destabilizing pollution, accounting for nearly 40 percent of our emissions of carbon dioxide. Unlike other major air pollutants from the power sector that have been subject to protective standards under the Clean Air Act, carbon pollution from power plants has been subject to no national limits –until now.

In our new white paper, An Early Look at the Clean Power Plan in Six Charts, we summarize the Clean Power Plan, and provide an overview of the major features of these vital standards and explain the broader market and industry trends that will shape the implementation of the Clean Power Plan, including:

  • an examination of the nationwide emission reduction targets
  • the process by which state targets were developed
  • state flexibility in the development of implementation plans
  • early action crediting
  • reliability mechanisms
  • environmental and public health benefits of the standards

As we explain in the white paper, reducing carbon pollution from the power sector will yield a safer and more stable climate for ourselves and for our children.

It will also result in near-term public health benefits in the form of thousands of avoided deaths, hundreds of thousands of avoided childhood asthma attacks, and fewer strokes and heart attacks.

By creating incentives for energy efficiency, the Clean Power Plan also has the potential to reduce energy bills for households by an average of approximately $80 per year when fully implemented – yielding significant economic benefits.

Click to enlarge. Source: EDF white paper

The Clean Power Plan is an important step for America, but it should be seen as setting the floor for ambition, not the ceiling. It is abundantly clear that the power sector is fully capable of achieving – and greatly exceeding — the standards laid out in the Clean Power Plan, and doing so in a highly cost-effective way that maintains a reliable and affordable electric system.

Experience has shown that states that move early and in a rigorous way to reduce emissions will reap the greatest health and economic benefits. States will have tremendous flexibility under the Clean Power Plan to determine how best to win this race, and how to take advantage of their own unique opportunities.

Deploying that flexibility to surpass the carbon pollution limits established in the Clean Power Plan will maximize benefits to ratepayers and power companies, while improving health in local communities.

With the finalization of the Clean Power Plan, states and power companies will now begin the important work of developing state-based solutions. The Clean Air Act requires that this process include extensive public outreach and involvement. It’s important that citizens engage in this process, and tell their state officials, regulators, and power companies that they want to win the race to a low-carbon economy — and that officials should therefore act early and boldly to make progress in reducing carbon pollution.

By leveraging all of the opportunities and tools that the Clean Power Plan offers, we can secure healthier air, a safer climate, and a more resilient and affordable electricity grid. That’s something all Americans can celebrate.

You can read more in our white paper.

Also posted in Clean Power Plan| Read 1 Response
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