{"id":1031,"date":"2017-11-20T15:14:24","date_gmt":"2017-11-20T20:14:24","guid":{"rendered":"http:\/\/blogs.edf.org\/markets\/?p=1031"},"modified":"2017-11-20T15:14:24","modified_gmt":"2017-11-20T20:14:24","slug":"california-bucks-global-trend-with-another-year-of-ghg-reductions","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/markets\/2017\/11\/20\/california-bucks-global-trend-with-another-year-of-ghg-reductions\/","title":{"rendered":"California Bucks Global Trend with another Year of GHG Reductions"},"content":{"rendered":"

This post was co-authored by Maureen Lackner<\/a> and originally appeared on the EDF Talks Global Climate blog<\/a>.<\/em><\/p>\n

The California Air Resources Board\u2019s November 6\u00a0release<\/a>\u00a0of 2016 greenhouse gas (GHG) emissions data from the state\u2019s largest electricity generators and importers, fuel suppliers, and industrial facilities shows that emissions have decreased even more than anticipated. California\u2019s emissions trends are showing what is possible with strong climate policies in place and provide hope even as\u00a0new analysis<\/a>\u00a0projects that global emissions will increase by 2% in 2017 after a three-year plateau.<\/p>\n

California\u2019s emissions kept falling in 2016<\/em><\/strong><\/p>\n

The 2016 emissions report, an annual requirement under California\u2019s regulation for the\u00a0Mandatory Reporting of Greenhouse Gas Emissions (MRR)<\/a>, shows that emissions covered by the state\u2019s cap-and-trade program are shrinking, and doing so at a faster pace than in prior years. Covered emissions have dropped each year that cap and trade has been in place, amounting to 31 million metric tons of carbon dioxide-equivalent (MMt CO2<\/sub>e) over the whole period, or 8.8% reduction relative to 2012. The drop between 2015 and 2016 accounts for over half of these cumulative reductions (16 MMt CO2<\/sub>e; 4.8% reduction relative to 2015). The electricity sector is responsible for the bulk of this drop: electricity importers reduced emissions about 10 MMt CO2<\/sub>e while in-state electricity generation facilities reduced emissions by about 7 MMt CO2<\/sub>e.<\/p>\n

Some sectors\u2019 emissions grew in 2016. Just as with global transportation emissions,\u00a0California\u2019s transportation emissions<\/a>\u00a0have steadily crept up in recent years, and the MRR report suggests this trend is continuing. Transportation fuel suppliers, which account for the largest share of total emissions, reported a 1.8 MMt CO2<\/sub>e increase in emissions covered by cap and trade since 2015. Cement plants and hydrogen plants also experienced small increases in covered emissions. One of the benefits of cap and trade, however, is that if the clean transition is occurring more slowly in one sector, other sectors will be required to reduce further to keep emissions below the cap while the whole economy catches up.<\/p>\n

Emissions that are not covered by the cap-and-trade program dropped, from 92 MMt CO2<\/sub>e in 2015 to 87 MMt CO2<\/sub>e in 2016. While small, this represents the largest reduction in non-covered emissions since 2012 and is mostly driven by suppliers of natural gas\/NGL\/LPG and electricity importers. Net non-covered and covered emissions reductions resulted in a 20.5 MMt CO2<\/sub>e drop in total emissions from these sectors.<\/p>\n

\n

These results are a welcome reminder that the cap-and-trade program is working in concert with other policies to accomplish the primary objective of reducing emissions.<\/p>\n<\/div>\n

The California climate policies are accomplishing their emissions reductions goals<\/em><\/strong><\/p>\n

The 2016 MRR data indicate impactful reductions in GHG emissions and progress toward reaching the state\u2019s target emissions reductions by 2020. The 2016 emissions drop is a consequence of several factors:\u00a0a CARB analysis<\/a>\u00a0of the year\u2019s electricity generation points to increased renewable capacity, decreased imports of electricity from coal-fired power plants, and increased in-state hydroelectric power production. To put it in perspective, the 20.5 MMt CO2e emissions reductions is\u00a0equivalent to offsetting the energy use of about 2.2 million homes<\/a>, or 16% of California\u2019s households.<\/p>\n

Emissions below the cap are a climate win, not a concern<\/em><\/strong><\/p>\n

Total covered emissions in 2016 were about 324 MMt CO2<\/sub>e, well below California\u2019s 2016 cap of roughly\u00a0382 MMt<\/a>. Some observers of the cap-and-trade program worry that an \u201coversupply\u201d of credits will result in reduced revenue for the state and lesser profits for traders on the secondary market. This concern was especially pronounced when\u00a0secondary market prices<\/a>\u00a0dipped below the price floor in 2016 and 2017.<\/p>\n

Importantly, oversupply of allowances is not a bad thing for the climate. As Frank Wolak, an energy economist at Stanford,\u00a0points out<\/a>, oversupply may be a sign of an innovative economy in which pollution reductions are easier to achieve than anticipated. Furthermore, having emissions below the cap represents earlier than anticipated reductions which is a win for the atmosphere. Warming is caused by the cumulative emissions that are present in the atmosphere so earlier reductions mean gases are not present in the atmosphere for at least the period over which emissions are delayed.<\/p>\n

While market stability is a valid concern, the design of the program has built-in features to prevent market disruptions. Furthermore, the California legislature\u2019s recent\u00a0two-thirds majority vote<\/a>\u00a0to extend the cap-and-trade program through 2030 provides long-term regulatory certainty. Both the May and August auctions were completely sold out suggesting that the extension has succeeded in stabilizing demand.<\/p>\n

These results are a welcome reminder that the cap-and-trade program is working in concert with other policies to accomplish the primary objective of reducing emissions, and that we\u2019re doing it cheaply is an added bonus. Early reductions at a low cost can lead to sustained or even improved ambition as California implements its world-leading climate targets.<\/p>\n

As California closes its fifth year of cap and trade, it should be with a sense of accomplishment and optimism for the future of the state\u2019s emissions.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post was co-authored by Maureen Lackner and originally appeared on the EDF Talks Global Climate blog. The California Air Resources Board\u2019s November 6\u00a0release\u00a0of 2016 greenhouse gas (GHG) emissions data from the state\u2019s largest electricity generators and importers, fuel suppliers, and industrial facilities shows that emissions have decreased even more than anticipated. California\u2019s emissions trends …<\/p>\n","protected":false},"author":8819,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[200,325,9031,43],"tags":[],"coauthors":[],"class_list":["post-1031","post","type-post","status-publish","format-standard","hentry","category-california","category-cap-and-trade","category-cap-and-trade-watch","category-economics"],"acf":[],"yoast_head":"\nCalifornia Bucks Global Trend with another Year of GHG Reductions - Market Forces<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/blogs.edf.org\/markets\/2017\/11\/20\/california-bucks-global-trend-with-another-year-of-ghg-reductions\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"California Bucks Global Trend with another Year of GHG Reductions - Market Forces\" \/>\n<meta property=\"og:description\" content=\"This post was co-authored by Maureen Lackner and originally appeared on the EDF Talks Global Climate blog. 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