Binary option CHL: Cap and trade system in the us

Cap and Trade.

News about Cap and Trade, including commentary and archival articles published in The New York Times. More.

News about carbon caps and emissions trading programs, including commentary and archival articles published in The New York Times.

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CLIMATE FWD:

Temperatures in Alaska Were So High That Computers Said ‘No Way’

Welcome to the Climate Fwd: newsletter. The New York Times climate team s readers once a week with stories and insights about climate change. Sign up here to get it in your inbox.

Op-Ed Contributors.

A Landmark California Climate Program Is in Jeopardy.

An oversupply of pollution permits threatens the state’s efforts to reduce greenhouse gas emissions.

By JUSTIN GILLIS and CHRIS BUSCH.

What Happened (and Didn’t) at the Bonn Climate Talks.

The 23rd United Nations climate talks ended early Saturday, kicking most big issues down the road until 2018.

By LISA FRIEDMAN and BRAD PLUMER.

Op-Ed Contributors.

The U. S. Is Tackling Global Warming, Even if Trump Isn’t.

Leaders from state capitols, city halls and businesses have come to a climate meeting in Bonn to say America remains committed to the Paris accord.

By MICHAEL R. BLOOMBERG and JERRY BROWN.

Here’s How Far the World Is From Meeting Its Climate Goals.

Two years after countries signed a landmark climate agreement in Paris, the world remains far off course from preventing drastic global warming in the decades ahead.

By BRAD PLUMER and NADJA POPOVICH.

Economic View.

How to Improve the Trump Tax Plan.

The business tax plan promoted by President Trump, and its cousin released by the House, start with a good idea but descend into a mess. It can be fixed.

By N. GREGORY MANKIW.

Op-Ed Contributor.

Australia Has a Climate Change Lesson for the World.

You can ignore it if you wish, but you cannot outrun it.

States Dare to Think Big on Climate Change.

Washington is in denial, but California and nine Northeastern states are forging ahead.

By THE EDITORIAL BOARD.

Some Democrats See Tax Overhaul as a Path to Taxing Carbon.

Two Senate Democrats are advocating a carbon tax plan that would cut the corporate tax rate as well as greenhouse gas emissions.

By LISA FRIEDMAN.

Op-Ed Contributor.

Climate Lessons from California.

The state faces big challenges but has also been particularly ambitious in its efforts to reduce greenhouse gas emissions.

By NOAH S. DIFFENBAUGH.

Extending Cap and Trade in California.

Readers are critical of the new California law.

Just How Far Can California Possibly Go on Climate?

California wants to cut greenhouse gas emissions more than even President Barack Obama had proposed. But can the state pull it off, or will it falter?

California Shows How States Can Lead on Climate Change.

The state is making a bold global statement with its cap-and-trade program.

By THE EDITORIAL BOARD.

California Extends Climate Bill, Handing Gov. Jerry Brown a Victory.

The state legislature approved a measure extending the state’s pioneering cap-and-trade program until 2030. Governor Brown lobbied intensively for the bill.

By ADAM NAGOURNEY.

Xi Jinping Is Set for a Big Gamble With China’s Carbon Trading Market.

A carbon trading program is shaping up as a big policy retort to President Trump’s decision to quit the Paris accord. But getting local industries on board will be a challenge.

By CHRIS BUCKLEY.

Exxon Mobil Lends Its Support to a Carbon Tax Proposal.

The company is joining other oil companies and corporate giants to endorse a plan from the Climate Leadership Council to tax fossil fuels and pay the dividends to taxpayers.

By JOHN SCHWARTZ.

Both Climate Leader and Oil Giant? A Norwegian Paradox.

While Norway wants to wean its own citizens off fossil fuels, it remains one of the world’s biggest petroleum producers and is revving up exports.

By SOMINI SENGUPTA.

Canada’s Strategy on Climate Change: Work With American States.

After President Trump said that he would pull out of the Paris climate accord, Canada is increasing its efforts to court American governors and mayors.

States and Cities Compensate for Mr. Trump’s Climate Stupidity.

The president is abdicating responsibility, but progress is possible despite him.

By THE EDITORIAL BOARD.

As Trump Steps Back, Jerry Brown Talks Climate Change in China.

Gov. Jerry Brown, 18 months from leaving office, is finishing his term as the nation’s de facto envoy on climate change.

Obama Just Created a Carbon Cap-and-Trade Program.

As the Obama Administration honed its historic new climate rules affecting power plants, it began thinking about electricity more broadly. It was a shift in perspective that in the end may produce the nation’s newest system for trading pollution.

Instead of looking solely at how each state could reduce pollution from its electricity sector, the U. S. Environmental Protection Agency’s new carbon dioxide limits emphasize interstate cooperation.

That cooperation will be possible, the EPA realized as it reviewed millions of public comments on the plan’s draft, partly through the regional nature of the nation’s electrical grids. The EPA’s Clean Power Plan, finalized Monday, envisions a nation in which interstate electrical grids serve as backbones for renewable energy and pollution trading and a carbon cap-and-trade program.

States where more clean energy is being produced than is required by the Clean Power Plan could, in the coming years, sell their surplus achievements to more laggardly states. The new rules create a system in which those trades can be made without any need for special interstate agreements.

“That's great news, to put it mildly,” Environmental Defense Fund economist Gernot Wagner said. “Putting a price on carbon emissions via cap and trade is among the best possible ways to get emissions down quickly and cheaply."

Europe uses a cap-and-trade program to keep its carbon dioxide pollution within levels required by international agreements. Two cap-and trade programs also operate in the U. S., and states are considering creating more. Obama was elected to his first term vowing to introduce a cap-and-trade program to fight climate change, but he couldn’t get enough support for it from Congress.

The draft of the new rules, published a year ago, listed interstate collaboration as a possible tool for achieving compliance — an option that has interested most states. The final version promotes it. It encourages states to join an existing cap-and-trade program, or develop their own trading-based approach to pollution reductions.

“The most striking change, from what I’ve seen, is the degree to which state-level and multi-state cap-and-trade systems are now explicitly encouraged,” Harvard University environmental economics professor Robert Stavins said.

The Clean Power Plan effectively creates a new national cap-and-trade program, allowing states to trade pollution credits with each other — without setting up special interstate agreements beforehand.

States that fail to produce their own plans to comply with the Clean Power Plan may be forced by the federal government into such a program.

Under a proposal accompanying Monday’s rule, the federal government would push states “that do not submit an approvable plan” to comply with the new rules into a trading program.

“Whereas the proposed rule was virtually silent on trading, the final rule explicitly encourages it — and makes provisions for it,” Stavins said.

In last year’s draft, the EPA controversially announced that some states would be required to make much larger cuts than others. That was based on opaque calculations of states’ potentials to make such cuts. Those differences were reduced in the final rule, published Monday.

The changes will force for some states, like Wyoming and Kentucky, to be more ambitious than they previously realized. "The final rule released today is twice as bad for Kansas as the proposed rule released last summer," Kansas Gov. Sam Brownback (R) told the AP.

Dave Johnson coal-fired power plant in central Wyoming.

But it also eased demands on some states, such as California, which serves as a clean energy hub for the region. California’s own state rules to reduce greenhouse gas pollution are more stringent and far-reaching than the new federal rule.

Some of the biggest polluters, including Texas and Ohio, will be required to make the biggest reductions in pollution rates under the new rule. New Jersey, California and six smaller states will be allowed to increase the amount of pollution they produce in 2030, compared with 2012, as their populations increase.

“We have opened it up so that we can look at capacity for renewables and natural gas across the regions — a much broader area,” the EPA’s top air quality official, Janet McCabe, told reporters Monday during a phone call. “That means there’s more opportunity to shift to cleaner natural gas and renewables broadly across the sector.”

With three exceptions, all U. S. states are expected to decrease the amount of pollution they release for every megawatt-hour of electricity generated by 2030.

The flip side to the EPA’s new approach is that the two states that lack grid connections with any others — Hawaii and Alaska — were placed into the EPA’s ‘too hard’ basket. They have been excluded from the final rule altogether.

“Alaska will be exempt,” Alaska Sen. Lisa Murkowski (R) told the Alaska Dispatch News on Monday, after speaking with the EPA. “This is by far the best possible outcome for our state and therefore a significant victory.”

The EPA’s McCabe, though, disagreed with that characterization. “I wouldn’t use the world exempt — I would use the word ‘defer,’ ” she told reporters.

“The Clean Power Plan, as it applies to the contiguous states, is very dependent on the interconnectedness of the grid,” McCabe said. “What we found was that we don’t feel we have the kind of data and information we need to estimate final goals for Alaska, Hawaii, Guam and Puerto Rico at this time.”

That means Alaska and Hawaii may eventually be required to comply with the rule — though McCabe said there are no timelines for that. Vermont, meanwhile, has no coal power plants, and it’s the only state in the Lower 48 that won’t be directly affected by the Clean Power Plan.

Climate Central's Alyson Kenward and Sarthak Gupta provided data analysis for this story.

Cap And Trade.

What is 'Cap And Trade'

Cap and trade, or emissions trading, is a common term for a government regulatory program designed to limit, or cap, the total level of specific chemical by-products resulting from private business activity. Cap and trade's purpose is to create a market price for emissions or pollutants that did not previously exist and address possible negative externalities.

BREAKING DOWN 'Cap And Trade'

How Cap and Trade Works.

There are different versions of emission trading programs around the world. The program proposed by President Barack Obama and the Environmental Protection Agency in 2009 relies on the government to set a total limit on annual emissions of greenhouse gases. This is the “cap.” The cap is designed to shrink each year.

After the cap has been determined, allowances for portions of the total limit are allocated. Such allocations, or permits, are either handed out to businesses that have relationships with the federal government, or else auctioned off to the highest bidder. Companies are taxed if they produce a higher level of total emissions than their permits allow, but they can also sell off any unused allowance to other producers. This is the “trade.”

Market System.

The cap-and-trade system is sometimes described as a market system. This is because it ostensibly creates an exchange value for emissions and uses many of the same methodologies as neoclassical economics. For example, produced emissions may represent a market failure in the perfect competition model, leaving room for a government-based solution.

The perfect competition model says markets are only efficient when firms internalize all their production costs. If costs are imposed on third parties, rather than being borne by the business, it creates a negative externality. This leads to an overproduction of pollutants relative to the theoretical social optimal level.

To help incorporate the external costs for producing emissions or pollution, the cap-and-trade program creates a higher cost of production. By extension, it is relatively more expensive to produce those emissions compared to other production processes. In theory, this also imposes costs on those who create emissions rather than on taxpayers or other third parties.

Challenges.

This proposal runs into many of the problems inherent in the perfect competition model. Most notably, it is not at all clear that government will impose the correct cap on the producers of emissions. Imposing an incorrect cap, whether too high or too low, will inevitably lead to either an over - or under-production of the social optimal amount of pollution or emissions.

Whether emissions are taxed or imposed to a shrinking cap, economists and policymakers must come up with the appropriate discount rate to apply to the forecasted benefits and costs. In other words, any cap and trade scheme requires a correct estimation of future deadweight loss. This is extremely challenging, if not impossible.

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Existing Cap-and-Trade Programs to Cut Global Warming Emissions.

Existing cap-and-trade programs provide important lessons about the need for robust design features. A brief review of real-world experience will illustrate two of these lessons. First, a cap must be tight enough to achieve significant cuts in emissions. Second, the method regulators select for distributing emission allowances to firms is critical, and auctioning is gaining favor as the preferred approach.

Cap and Trade in Practice: The European Union's Trading Scheme.

The European Union’s Emission Trading Scheme (EU ETS) is the first cap-and-trade program for reducing heat-trapping emissions, and is designed to help European nations meet their commitments to the Kyoto Protocol. This program includes 27 countries and all large industrial facilities, including those that generate electricity, refine petroleum, and produce iron, steel, cement, glass, and paper.

The first phase of the EU ETS—from 2005 to 2007—drew criticism for not achieving substantial cuts in emissions, and for giving firms windfall profits by distributing carbon allowances for free. These criticisms are valid. However, the EU viewed Phase 1 as a trial learning period. The extent to which Phase 2—which runs from 2008 to 2012—helps Europe fulfill its Kyoto commitments will be a better test of the program.

Phase 1 allowed countries to auction up to only 5 percent of allowances—and only Denmark chose to auction that amount. The result was billions of dollars in windfall profits for electricity producers. Phase 2 allows slightly more auctioning, which is expected to occur.

The rules for Phase 3—which extends from 2012 to 2020—were published in December 2008, and unfortunately they are not as ambitious as expected, given the EU’s stated commitment to tackling global warming. This phase targets a 20 percent reduction in emissions from 1990 levels by 2020; climate experts had hoped for 30 percent. Even this target is considerably watered down because of the large amount of offsets allowed from outside the capped region. Auctioning of allowances is still not likely to play a major role. This experience reinforces the fact that the United States would be much more likely to win stronger commitments from the EU and elsewhere if it fulfilled its responsibility to lead on climate policy.

The Northeast Regional Greenhouse Gas Initiative.

The Regional Greenhouse Gas Initiative (RGGI) is a cap-and-trade program that covers a single sector—electricity generation—in 10 northeastern and mid-Atlantic states. The program aims to achieve a 10 percent reduction in emissions from power plants by 2018.

The program’s most notable aspect is that states unanimously chose auctioning to distribute the vast majority of emission allowances. Six of the ten states will auction nearly 100 percent of their allowances. The auctions of the other four states include fairly small portions of fixed-price sales or direct allocations.

The program's initial three-year compliance period begins in 2009, but the first multistate auctions occurred on September 25 and December 17, 2008. The first auction, which included allowances from only six states, raised $38.5 million, while the second raised $106.5 million. States and electric utilities will invest the vast majority of those funds in energy efficiency and renewable technologies, with an emphasis on reducing demand for fossil fuel–based electricity and saving consumers money.

The RGGI auction includes a reserve price, to ensure that CO2 emissions will always carry a minimum cost, and that the auctions will yield a minimum amount of revenue for these important programs. Some analysts fear that the states may have set the cap too high, because emissions have not grown at the rate expected when the cap was set in 2005. However, there is a possibility that the states could revisit the cap.

The Western Climate Initiative.

The Western Climate Initiative (WCI)—which includes seven western states and four Canadian provinces—has established a regional target for reducing heat-trapping emissions of 15 percent below 2005 levels by 2020. WCI’s main focus is developing a regional cap-and-trade program. The WCI also requires participants to implement California’s Clean Car Standard, and recommends other policies and best practices that states and provinces can adopt to achieve regional goals for cutting emissions.

The first phase of WCI development culminated on September 23, 2008, with the release of its Design Recommendations. These sketch out a very broad cap-and-trade program that would cover 85–90 percent of all heat-trapping emissions from participating states and provinces. The only parts of the economy that would remain uncapped are agriculture, forestry, and waste management. However, some sectors, such as transportation fuels, would be brought in at the start of the second compliance period, in 2015.

California is the largest single entity in the WCI, and it has the most detailed action plan of any state in the nation. In 2006 the legislature passed, and Governor Schwarzenegger signed, a law to reduce emissions economywide. The California Air Resources Board has created a blueprint for achieving the required reductions. The plan includes a strong set of sector-specific policies forecast to provide about 80 percent of the needed reductions, as well as a broad cap-and-trade program linking to the WCI. The California and WCI cap-and-trade programs are scheduled to go into effect in 2012.

Midwestern Regional Greenhouse Gas Reduction Accord.

Another nascent regional effort is occurring in the Midwest. On November 15, 2007, the governors of Illinois, Iowa, Kansas, Michigan, Minnesota, and Wisconsin, as well as the premier of the Canadian province of Manitoba, signed the Midwestern Regional Greenhouse Gas Reduction Accord. Participants agreed to establish regional targets for reducing global warming emissions, including a long-term target of 60–80 percent below today’s levels, and to develop a multisector cap-and-trade system to help meet the targets.

Participants will also establish a system for tracking global warming emissions, and implement other policies to help reduce them. The governors of Indiana, Ohio, and South Dakota joined the agreement as observers. The regional accord for reducing such emissions is the first in the Midwest.

The governors and premier assembled an Advisory Group of more than 40 stakeholders to advise them, and their final recommendations are due in May 2009. As now conceived, the cap would take effect January 1, 2012.

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Cap and trade system in the us

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