Green Options » cap and trade

Forget Cap and Trade; Cap and Dividend is the Way Forward

Amiel Blajchman — Fri, 22 Aug 2008 20:01:24 +0000

Well how’s this for getting your ideas out: In the July 10th issue of Rolling Stone, Barrack Obama was questioned on how he plans on achieving an 80% reduction in greenhouse gas emissions by 2050. According to Obama:

Whenever you transition to a new technology or a new way of thinking about structuring our economy, the old is going to resist the new. The key is to make the new profitable, job-generating and appealing enough that more and more people embrace the new and let go of the old. That’s where government can play a role. If we institute a cap-and-trade system for carbon emissions, that’s going to generate billions of dollars. Now, that’s also going to mean higher electricity prices for consumers, so a huge chunk of that has to go back to consumers in the form of rebates, so they don’t feel the pinch as badly. [author's highlight]
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Wisconsin Looks to Reduce Greenhouse Gas Emissions

Amiel Blajchman — Fri, 22 Aug 2008 18:15:20 +0000

Wisconsin’s Governor’s Task Force on Global Warming has recommended that the state achieve 2005 levels by 2014; reduce emissions by 22% from 2005 levels by 2022 (someone one day will have to explain to me the fascination with number alliteration); and finally, it calls for 75% reductions from 2005 levels by 2050.

The task force has also recommended a two-pronged approach, adopting state level support for either a federal or state-level cap and trade program, as well as a series of policy recommendations for several important state industry sectors:

Energy Sector
Transportation Sector
Agriculture and Forestry Sectors
Industry Sector
Waste Sector
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Is McCain Serious About Cap-and-Trade? Economic Advisor Steve Forbes Doesn’t Think So

Timothy B. Hurst — Fri, 01 Aug 2008 09:24:56 +0000

Speaking on CNN last week, former GOP presidential candidate and current McCain economic adviser Steve Forbes belittled the likelihood of McCain’s plan to combat climate change actually coming to fruition.When asked about the economic impact of McCain’s proposed cap and trade, Forbes almost scoffed at the idea of such a policy ever actually being taken up. Forbes said:

“I think cap and trade is going to go the way of some other things. As you may remember, when he came into office, Bill Clinton had a proposal of tax carbons and stuff like that. I don’t think those things are going to get very far as people start to examine the details of them.”

This story contains additional media. Click here to view the media.

Throughout the Republican primaries John McCain continually pointed to his support for a carbon cap and trading program and the legislation he co-sponsored with Joe Lieberman as one of the critical differences between himself and the other Republicans - as well as between himself and President Bush.

So, is McCain saying one thing on the stump and then planning something completely different with his economic advisors? The McCain camp has issued no statement on the Forbes remarks - but I’m sure they’ve seen the video.

If Mr. Forbes was speaking out of turn then why doesn’t the McCain camp distance themselves from Forbes by reiterating their support of cap and trade? Without any such action, one can only assume that Forbes’ remarks were not too wide of the mark in terms of Mcain’s priorities.

Wonk Room

Largest Cleantech Industry is…Carbon Credits at $63 Billion

Sarah Lozanova — Wed, 30 Jul 2008 18:52:32 +0000

Emerging out of thin air, it has already surpassed solar and wind as the largest cleantech industry. Carbon credits were worth a staggering $63 billion in 2007 and $59 billion in the first half of 2008 alone.

Europe has dominating the carbon market since its creation less than five years ago. EU’s Emissions Trading Scheme (EU ETS) was responsible for 70% of the trading in the first half of this year, totaling $47 billion. This dollar amount is likely to increase as the cost of carbon credits soars and with the inclusion of aviation emissions in 2012.

Obviously an industry of this amount of rapid growth opens many business opportunities. Companies are needed to provide verified emissions offsets, energy efficiency audits, greenhouse gas emission audits, and to design carbon software. This industry has gained considerable interest from venture capitalists.

Carbonetworks of Victoria, British Columbia provides software to evaluate carbon footprints and reduction options for businesses, governments, project developers, and consultants. They are located in one of the few areas in North America with a carbon tax. They recently announced the first close of a $5 million Series A round from NGEN Partners.

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Is Free Trade the Solution to Climate Change?

Jennifer Lance — Wed, 23 Jul 2008 18:01:59 +0000

Globalization is a fact of modern times, and supporters of “free trade” tout it is good for the US economy and supports world peace. Given that it will take a global effort to solve the climate crisis, free trade has a new spin: The solution to global warming. In fact, Republican presidential candidate John McCain thinks that a free-market provides solutions to climate change, such as capping carbon emissions, which contradicts the very notion of free trade’s elimination of government imposed regulations. Even Rush Limbaugh’s not buying free trade is the solution (mostly because he doesn’t believe in global warming).

Free trade puts corporations and profits first, ahead of environmental and social concerns. McCain thinks this is not a problem, “As never before, the market would reward any person or company that seeks to invent, improve, or acquire alternatives to carbon-based energy…” Will the market reward alternative energy companies with profit? The US and EU are already calling on the elimination of tariffs for goods and services that protect the environment and fight climate change to help these companies profit.

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McCain’s Plan to Combat Climate Change

Sarah Lozanova — Thu, 12 Jun 2008 15:01:41 +0000

Editor’s Note: This is a follow up post to Obama’s Plan to Reduce Foreign Oil Dependence.

Regardless of who is elected next November, both candidates agree that climate change is a fact and not a theory. “I know that climate change is real,” said John McCain. “We can have a debate about how serious it is, but the debate about climate change is over.”

McCain and Obama however vary widely in their response to this issue, leaving the American people with a choice of approaches when choosing the next president. McCain’s primary weapons in this battle includes implementing a cap and trade system for emissions and utilizing greater amounts of nuclear power.

Cap and Trade

“Cap and trade is being implemented in Europe and they have stumbled and they’ve had problems but it is still the right thing to do,” said John McCain. “It is what we did in relation to acid rain.”

One of the reasons McCain supports this approach is because it encourages the market to respond with the lowest cost approach. He believes the market will correct itself with the use of cleaner technologies without the need for intervention, such as a tax credit or major investment from the government.

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Business Can Address Global Warming… With a Level Playing Field

Jeff McIntire-Strasburg — Wed, 04 Jun 2008 14:19:13 +0000

Can a cap and trade system for greenhouse gas emissions harness market forces to address climate change? As I noted on Monday, that’s the thesis of Fred Krupp and Miriam Horn’s new book Earth: The Sequel. To support this claim, Krupp and Horn focus on the innovative ecopreneurial efforts happening around the world in the broad field of clean technology. From thin-film solar to algae biodiesel to an Alaskan ice palace powered (and kept frozen) by geothermal energy, Earth: The Sequel tells the stories of scientists, business people, and outright dreamers experimenting with both current incarnations, and the next generation, of renewable energy technologies. A few of these companies include:

Australian solar thermal company Ausra
Solar thin-film company First Solar
Greenfuel Technologies, a pioneer in algae biofuels
AquaEnergy Group, the creator of technology for harnessing wave power

Of course, the technologies under development by the companies profiled in Earth: The Sequel aren’t cheap; in almost every case, major investors, such as Vinod Khosla and John Doerr, have backed these start-ups with significant funding. At one level, some might argue that the market is already working: capital is flowing to promising ideas.

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The Economics of Global Warming: Fred Krupp and Miriam Horn’s “Earth: The Sequel”

Jeff McIntire-Strasburg — Mon, 02 Jun 2008 15:22:42 +0000

I’m a bit behind the curve in getting to Fred Krupp (the president of Environmental Defense Fund) and Miriam Horn’s new book Earth: The Sequel– my reading time ain’t what it used to be! While other green bloggers have beat me to the punch on this one, I still wanted to weigh in on this book, especially since the US Senate begins its debate of the Lieberman-Warner-Boxer Climate Stewardship Act today. While this timing was a matter of luck, as opposed to planning, Krupp and Horn’s book provides some valuable insight into the debate that will occur on the Senate floor this week… let’s hope a few of our esteemed representatives have read it.

At it’s core, Earth: The Sequel is an argument for cap-and-trade as a viable, market-based mechanism for addressing climate change. While long-time sustainablog readers are likely up on the concept of cap-and-trade, it’s worth a quick explanation. Krupp and Horn define the concept in the book’s first chapter:

The U.S. Congress must set a legal and steadily declining limit on global warming pollution. The allowances will be divvied up among emitters, or auctioned by the government to raise revenues — or some combination of the two. Polluters who emit more will need to pay for the extra pollution reduction achieved by others; those who can reduce global warming pollution further will profit by selling those reductions in an open market. We can, in short, use the power of the market system to climb out of the hole created by flawed markets.

One might worry that what follows such an introductory chapter might be a long, boring treatise on market-based economics and the environment; rather, the bulk of the book focuses on the companies (mostly start-ups) involved in innovative research and development of next-generation clean energy technologies. I’ll be discussing some of those stories in subsequent posts at CleanTechnica and Ecopreneurist. Today, I want to stay focused on this main argument: cap-and-trade is the mostly viable method of achieving significant reductions in greenhouse gas emissions.

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The Week in Cleantech News (5/12- 5/16)

Timothy B. Hurst — Fri, 16 May 2008 19:55:18 +0000

For those of you who are bettin’ folks, traders on the Chicago Climate Exchange view the Democrats as more bullish on cap-and-trade systems. So if you’re betting on a Democratic victory, you’ll want to buy those contracts now, in anticipation of a price spike on Nov. 5 (Politico).

Toyota Prius sales have topped 1 million and dealers in most markets simply can’t keep them on the shelves. Toyota says domestic inventory is limited by production capacity in Japan, which is shared by the Asian and European markets. The U.S. supply is at its lowest level in two years (Wired).

Imagine a high-speed train that could get you from San Francisco to Los Angeles in two hours forty minutes. Well, that dream is now one step closer to reality as the California High Speed Rail Authority has cleared environmental impact assessments and is beginning construction of what will be the most substantial high-speed rail network in the U.S. But don’t make travel arrangements just yet. The project is not scheduled to be completed until 2030 (gas 2.0).

A joint biofuel effort was announced Thursday involving Air Bus, JetBlue, Honeywell, and Aero Engines that plans to study ways to make commercial aviation fuels out of second-generation feedstocks such as algae (Green Tech Blog).

A new wave of nuclear power plants in the U.S. is likely to cost $5 billion to $12 billion a plant, two to four times previous estimates, driving up electricity bills for consumers and inevitably reigniting public concerns about the costs and benefits of nuclear power (The Wall St. Journal).

Photo credits:

Karl Gunnarrsson via flickr Creative Commons License

compicpie via flickr Creative Commons License

Bistrosavage via flickr Creative Comons License

McCain Begins Environmental PR Push Across West [w/video]

Timothy B. Hurst — Mon, 12 May 2008 18:54:44 +0000

Tries to woo Western Dems by touting climate change as key

It might be argued, that the only way for John McCain to win in November’s general election would be by setting himself apart from President Bush enough to attract support from the middle - and one way he is doing that is by emphasizing his stance on environmental issues. Last week, the Straight Talk Express began a PR campaign aimed at courting independent-minded environmentalists, especially in the swing states.

In remarks he prepared to give at a wind technology firm in Portland, Oregon, on Monday, the Arizona senator said he would seek international accords to reduce greenhouse gas emissions, and would offer an incentive system to make businesses in the United States cleaner. McCain said:

“We stand warned by serious and credible scientists across the world that time is short and the dangers are great. The most relevant question now is whether our own government is equal to the challenge.”

The presumptive Republican presidential candidate is using his stance on energy and the environment to draw distinctions between himself and President Bush, whose approval rating has sunk to a near-record low of 28% (Pew , Gallup, USA Today).

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Laws and Money: Ending the Free Ride for Carbon Emissions

Carol Gulyas — Wed, 27 Feb 2008 21:29:43 +0000

“Personal choices, no matter how virtuous, cannot do enough. It will also take laws and money.”

The New Yorker has published an illuminating article on carbon emissions and carbon “cap and trade” systems, which shares the example of the successful reduction in sulfur emissions to illustrate how carbon emissions could be reduced. The passage of the Clean Air Act in 1990 mandated massive acid-rain reductions, and created a market for sulfur-dioxide emissions that forced companies to “pay to pollute”. Once a cost was associated with sulfur-dioxide emissions, companies could save money by installing scrubbers. Emissions were reduced from eighteen million tons to nine million, and acid rain evaporated as an environmental problem. Cap and trade is already happening, at the Chicago Climate Exchange (CCX), where carbon futures are traded like pork bellies.

“…CCX members buy and sell the right to pollute. Each makes a voluntary (but legally binding) commitment to reduce emissions of greenhouse gases—including carbon dioxide, methane, and nitrous oxide—and hydrofluorocarbons. Four hundred corporations now belong to the exchange, including a growing percentage of America’s largest manufacturers. The members agree to reduce their emissions by a certain amount every year, a system commonly known as cap and trade. A baseline target, or cap, is established, and companies whose emissions fall below that cap receive allowances, which they can sell (or save to use later). Companies whose emissions exceed the limit are essentially fined and forced to buy credits to compensate for their excess.” — Michael Specter, The New Yorker

This isn’t just a method for punishment and reward. Establishing a carbon market allows money to flow toward developing the new energy technologies that will help companies save money. And if Silicon Valley is ever going to become “Solar Valley”, as some have predicted, the money needs to flow. Obama, Clinton and McCain are all advocating a cap and trade system.

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Florida Considers Carbon Control

Maria Surma Manka — Tue, 22 Jan 2008 12:34:06 +0000

Florida Governor Charlie Crist (R) signed an executive order last summer to develop a carbon market in the state, and has been making other good strides in the renewable energy department. Now, the governor, lawmakers, and Florida-based companies are debating the two main methods of carbon control: A carbon tax or a cap-and-trade system.

A cap-and-trade policy to limit carbon dioxide (CO2) - a major contributor to global warming - is a market-based system that creates a financial incentive by assigning a cost to polluting. First, a “cap” is established that limits how much CO2 can be released into the atmosphere (limits are often determined by industry, like power plants). That amount is divided up into permits that represent the right to emit that amount. Companies buy and sell permits based on how much pollution they have to emit. Those companies that cut emissions or make their operations more efficient are able to sell their extra permits and make money. The ones who don’t cut emissions have to buy more permits.

Former British Prime Minister Tony Blair was in the Sunshine State last week to discuss the intricacies of a cap-and-trade policy with Crist and others. Emissions trading has been happening in Europe for some time, but Florida officials - like the rest of America - are just becoming acquainted with the idea. Florida’s State Chief Financial Officer, Alex Sink, told 100 business leaders at a recent conference on carbon markets:

If we make Florida a hub for developing international carbon trade, we’ll be able to energize Florida’s economy. We have to change the way we do business and explore what opportunities clean energy offers to Floridians.

On the other hand, Florida Power & Light, - one of the largest renewable energy providers in the nation - favors a carbon tax. Rather than relying on the market to set the price of carbon, the utility favors a price set by the government. Specifically, $10 per ton of carbon and with an eventual increase of $2 each year. Politicians, though, have found a carbon tax to an unpopular idea and an FP&L representative noted “We also are political realists and realize that it’s much more likely that this country will have some sort of cap and trade.” It never hurts to ask, I guess.

Palm Beach Post
South Florida Business Journal
Union of Concerned Scientists

Dispatches from Paros: The Green Economy

Jeff McIntire-Strasburg — Fri, 20 Jul 2007 10:27:13 +0000

Thursday morning’s session at the Papandreou Foundation’s Symi Symposium focused on the "green economy": how to craft economic policy that both internalizes the costs of a carbon-based economy, and creates incentives to move away from carbon-intensive energy sources. The presenters in this session were Joseph Stiglitz, professor of economics at Columbia University and former member of the Clinton administration, and Angelo Consoli, Director, Codeco s.s., European Affairs and Progressive Communication.

Professor Stiglitz’s presentation picked up on a theme that has run throughout the conference: the question of the best economic mechanisms to address climate change. Stiglitz argued (as have others) that a carbon tax is preferable to a cap and trade system (the model embraced by the Kyoto treaty, and much of the business world). Because changes in the market away from fossil fuels will inevitably make those energy sources less expensive, carbon taxes keep their prices high, reflecting the costs imposed on society by carbon emissions. Stiglitz also argued that such taxation responds to another reality: market-based approaches won’t work by itself, and government investments in infrastructure, research, and preparedness will be needed to round out a comprehensive approach to fighting climate change.

Other costs that the developed world likely will face stems from advancing the concepts of energy security and independence. If countries like China and India act in accordance with these concepts, that inevitably means that they’ll be burning more coal — China is already building coal-fired power plants at the rate of one/week. This could be disastrous in terms of climate change, but it points to the need for developing countries to build their energy infrastructure. If countries like China and India have to impede their own development to play a part in a global response to the climate crisis, Stiglitz argued that they should probably be compensated.

All of these question are important for the next round of climate negotiations. Stiglitz noted that in order to bring the developing world into this process, measuring carbon emissions on a per capita basis will be critical, as will a strict enforcement system. His last point: trade sanctions will likely be the most effective means of enforcing adherence to carbon mitigation strategies adopted by the international community.

Consoli’s presentation dealt with a completely different issue: the necessity (his argument) of developing the hydrogen economy in order to address global warming. He argued that one of the major impediments facing the growth of renewable generation technologies is storage, and that by using renewables such as wind and solar power to electrolyze water and create hydrogen, we can overcome that impediment. Consoli noted that the development of such systems, which would be decentralized, also has the benefit of empowering (in every sense of the word) people around the globe without access to electricity, or the capital to create it with current centralized generation technologies. The economic effect of such a transition involves a move from carbon-intensive energy sources, which require high amounts capital, to renewable sources that require high amounts of labor, so renewable production of hydrogen as an energy storage mechanism ends up boosting employment and economic growth.

Consoli presented the EU Parliament’s Written Declaration on energy, and it’s five pillars:

Efficiency
Renewables
CO2 Reduction
Hydrogen
Smart Grids

As you might imagine, the questions and responses came quickly and furiously to these presentations, and included thoughts about the political reality of carbon taxation, the idea that such taxes create a right to pollute, the problem of hydrogen generation from "dirty" sources, and the methods by which governments can encourage their citizens to accept changes that could be painful in the short term. As usual, I’m giving a quick and dirty overview here — feel free to ask questions or offer your own responses.

California Eyes CO2 Partnership with Europe

Maria Surma Manka — Tue, 03 Apr 2007 13:20:48 +0000

As California implements a cap-and-trade system for carbon dioxide (CO2), a major contributor to global warming, it’s eyeing the European CO2 market as a model. Creating similar market-based mechanisms to fight global warming could create a more thorough, comprehensive solution to the problem.

California officials met with EU lawmakers last week to discuss cap-and-trade, a system in which industries are given a limit as to how much CO2 they can emit. For companies that cut emissions more than what is regulated, they receive credits. That company can then turn around and sell those credits to other companies that cannot or will not cut their CO2 pollution, thus allowing them to meet their requirements, too. So the further a company can reduce its CO2, the more money it can make from selling or trading its extra credits.

The California Global Warming Solutions Act signed into law last fall by Governor Schwarzenegger requires a CO2 market, but the state has learned that creating its own unique market could be very costly and complicated. Linda Adams, secretary of the California Environmental Protection Agency, told Reuters: “Our governor has asked us to design a market that could be compatible with the ETS, the European trading system.”

California is the 12th largest CO2 polluter on the planet, so their entry into the European market could mark the beginning of a global CO2 trading system. Adams hopes that other nations will join:

"California and the European Union can't solve this problem alone. We think working together and working with China and India and other countries will lead to a solution."

Reuters, via Planet Ark