Ian Parry and Roberton C. Williams III
- Published in print:
- 2012
- Published Online:
- May 2012
- ISBN:
- 9780199692873
- eISBN:
- 9780191738371
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199692873.003.0010
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter estimates the welfare costs of the main medium‐term options for significantly reducing US energy‐related carbon dioxide (CO2) emissions, including carbon taxes and cap‐and‐trade systems ...
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This chapter estimates the welfare costs of the main medium‐term options for significantly reducing US energy‐related carbon dioxide (CO2) emissions, including carbon taxes and cap‐and‐trade systems applied economy‐wide and to the power sector only, and an emissions rate standard for power generation. The key theme is that welfare costs depend importantly on how policies interact with distortions in the economy created by the broader fiscal system. Economy‐wide cap‐and‐trade systems, or carbon taxes, where allowance rent or tax revenue is not used to increase economic efficiency, perform the worst on cost‐effectiveness grounds. In contrast, the costs of economy‐wide carbon taxes or auctioned allowance systems may be (slightly) negative, if revenues are used to substitute for distortionary income taxes (either directly, or indirectly through deficit reduction). The bottom line is that revenue/rents created under economy‐wide, market‐based carbon policies must be used to increase economic efficiency to ensure that these instruments are more cost‐effective than regulatory or sectoral approaches.Less
This chapter estimates the welfare costs of the main medium‐term options for significantly reducing US energy‐related carbon dioxide (CO2) emissions, including carbon taxes and cap‐and‐trade systems applied economy‐wide and to the power sector only, and an emissions rate standard for power generation. The key theme is that welfare costs depend importantly on how policies interact with distortions in the economy created by the broader fiscal system. Economy‐wide cap‐and‐trade systems, or carbon taxes, where allowance rent or tax revenue is not used to increase economic efficiency, perform the worst on cost‐effectiveness grounds. In contrast, the costs of economy‐wide carbon taxes or auctioned allowance systems may be (slightly) negative, if revenues are used to substitute for distortionary income taxes (either directly, or indirectly through deficit reduction). The bottom line is that revenue/rents created under economy‐wide, market‐based carbon policies must be used to increase economic efficiency to ensure that these instruments are more cost‐effective than regulatory or sectoral approaches.
Geoffrey Heal
- Published in print:
- 2016
- Published Online:
- January 2019
- ISBN:
- 9780231180849
- eISBN:
- 9780231543286
- Item type:
- book
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231180849.001.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
In the decades since Geoffrey Heal began his field-defining work in environmental economics, one central question has animated his research: "Can we save our environment and grow our economy?" This ...
More
In the decades since Geoffrey Heal began his field-defining work in environmental economics, one central question has animated his research: "Can we save our environment and grow our economy?" This issue has become only more urgent in recent years with the threat of climate change, the accelerating loss of ecosystems, and the rapid industrialization of the developing world. Reflecting on a lifetime of experience not only as a leading voice in the field, but as a green entrepreneur, activist, and advisor to governments and global organizations, Heal clearly and passionately demonstrates that the only way to achieve long-term economic growth is to protect our environment. Writing both to those conversant in economics and to those encountering these ideas for the first time, Heal begins with familiar concepts, like the tragedy of the commons and unregulated pollution, to demonstrate the underlying tensions that have compromised our planet, damaging and in many cases devastating our natural world. Such destruction has dire consequences not only for us and the environment but also for businesses, which often vastly underestimate their reliance on unpriced natural benefits like pollination, the water cycle, marine and forest ecosystems, and more. After painting a stark and unsettling picture of our current quandary, Heal outlines simple solutions that have already proven effective in conserving nature and boosting economic growth. In order to ensure a prosperous future for humanity, we must understand how environment and economy interact and how they can work in harmony—lest we permanently harm both.Less
In the decades since Geoffrey Heal began his field-defining work in environmental economics, one central question has animated his research: "Can we save our environment and grow our economy?" This issue has become only more urgent in recent years with the threat of climate change, the accelerating loss of ecosystems, and the rapid industrialization of the developing world. Reflecting on a lifetime of experience not only as a leading voice in the field, but as a green entrepreneur, activist, and advisor to governments and global organizations, Heal clearly and passionately demonstrates that the only way to achieve long-term economic growth is to protect our environment. Writing both to those conversant in economics and to those encountering these ideas for the first time, Heal begins with familiar concepts, like the tragedy of the commons and unregulated pollution, to demonstrate the underlying tensions that have compromised our planet, damaging and in many cases devastating our natural world. Such destruction has dire consequences not only for us and the environment but also for businesses, which often vastly underestimate their reliance on unpriced natural benefits like pollination, the water cycle, marine and forest ecosystems, and more. After painting a stark and unsettling picture of our current quandary, Heal outlines simple solutions that have already proven effective in conserving nature and boosting economic growth. In order to ensure a prosperous future for humanity, we must understand how environment and economy interact and how they can work in harmony—lest we permanently harm both.
Denny Ellerman
- Published in print:
- 2012
- Published Online:
- September 2012
- ISBN:
- 9780199656202
- eISBN:
- 9780191742149
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199656202.003.0008
- Subject:
- Economics and Finance, Development, Growth, and Environmental
The European Union’s CO2 Emissions Trading Scheme (EU ETS) has shown that cap-and-trade systems can work in a highly decentralized multinational setting, but that experience has also revealed some ...
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The European Union’s CO2 Emissions Trading Scheme (EU ETS) has shown that cap-and-trade systems can work in a highly decentralized multinational setting, but that experience has also revealed some issues in governance that threaten the feasibility of cap-and-trade in an international setting. These issues are captured in the conflicting demands for differentiation and harmonization. This chapter examines the experience of the EU ETS and of cap-and-trade systems in the USA in resolving this conflict with particular attention to the governance institutions and their potential applicability on a broader global scale.Less
The European Union’s CO2 Emissions Trading Scheme (EU ETS) has shown that cap-and-trade systems can work in a highly decentralized multinational setting, but that experience has also revealed some issues in governance that threaten the feasibility of cap-and-trade in an international setting. These issues are captured in the conflicting demands for differentiation and harmonization. This chapter examines the experience of the EU ETS and of cap-and-trade systems in the USA in resolving this conflict with particular attention to the governance institutions and their potential applicability on a broader global scale.
K Russell LaMotte, David M (Max) Williamson, and Lauren A Hopkins
- Published in print:
- 2009
- Published Online:
- February 2010
- ISBN:
- 9780199565931
- eISBN:
- 9780191722028
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199565931.003.0018
- Subject:
- Law, Environmental and Energy Law, Private International Law
This chapter offers a guide to the key legal issues presented by national and sub-national greenhouse gas (GHG) regulatory initiatives in the United States. Section 2 provides an overview of ...
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This chapter offers a guide to the key legal issues presented by national and sub-national greenhouse gas (GHG) regulatory initiatives in the United States. Section 2 provides an overview of sub-national trading schemes at the regional and state level, where mandatory regulations creating carbon trading regimes are most advanced in the United States. Section 3 surveys a number of legal issues that will play an essential role in the design and implementation of any cap-and-trade scheme in the United States, whether at the national or sub-national level. Section 4 addresses a series of constitutional challenges specific to state or regional programs that may limit the scope and perhaps the viability of these non-federal programs. Section 5 highlights a number of prospective legal issues that are likely to arise in designing a new federal climate change statute, such as the relationship between an emissions trading market and existing US environmental laws and trade policy. It also identifies the legal issues that may arise in the event that there is no new climate change-specific federal statute adopted, in which case the US Environmental Protection Agency (US EPA) may instead seek to generate a market for emissions trading through regulations adopted under the existing Clean Air Act.Less
This chapter offers a guide to the key legal issues presented by national and sub-national greenhouse gas (GHG) regulatory initiatives in the United States. Section 2 provides an overview of sub-national trading schemes at the regional and state level, where mandatory regulations creating carbon trading regimes are most advanced in the United States. Section 3 surveys a number of legal issues that will play an essential role in the design and implementation of any cap-and-trade scheme in the United States, whether at the national or sub-national level. Section 4 addresses a series of constitutional challenges specific to state or regional programs that may limit the scope and perhaps the viability of these non-federal programs. Section 5 highlights a number of prospective legal issues that are likely to arise in designing a new federal climate change statute, such as the relationship between an emissions trading market and existing US environmental laws and trade policy. It also identifies the legal issues that may arise in the event that there is no new climate change-specific federal statute adopted, in which case the US Environmental Protection Agency (US EPA) may instead seek to generate a market for emissions trading through regulations adopted under the existing Clean Air Act.
Kyle W Danish
- Published in print:
- 2009
- Published Online:
- February 2010
- ISBN:
- 9780199565931
- eISBN:
- 9780191722028
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199565931.003.0019
- Subject:
- Law, Environmental and Energy Law, Private International Law
As the United States moves forward from voluntary efforts to the establishment of mandatory cap-and-trade programmes for greenhouse gas (GHG) emissions, offsets have become a central issue of policy. ...
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As the United States moves forward from voluntary efforts to the establishment of mandatory cap-and-trade programmes for greenhouse gas (GHG) emissions, offsets have become a central issue of policy. Offsets can help minimize the total costs associated with GHG regulation; offsets can also provide other benefits, such as economic development and reduced pollution. However, incorporation of offsets into a cap-and-trade programme requires careful attention to policy design. This chapter begins with a brief background on offsets, including a discussion of their value within a cap-and-trade programme, the use of offsets in various policy contexts, and different types of offset projects. It then discusses the most important design issues for an offset project programme: additionality of GHG emission reductions made, quantitative limits on offsets, addressing the risk of reversal of sequestered emissions, providing credit for early action offset projects, incorporating international offset projects, and projects aiming to reduce emissions from deforestation and forest degradation. Each section highlights how leading proposals for US federal cap-and-trade legislation have addressed these issues. The final section discusses the use of offsets in state and regional cap-and-trade programmes.Less
As the United States moves forward from voluntary efforts to the establishment of mandatory cap-and-trade programmes for greenhouse gas (GHG) emissions, offsets have become a central issue of policy. Offsets can help minimize the total costs associated with GHG regulation; offsets can also provide other benefits, such as economic development and reduced pollution. However, incorporation of offsets into a cap-and-trade programme requires careful attention to policy design. This chapter begins with a brief background on offsets, including a discussion of their value within a cap-and-trade programme, the use of offsets in various policy contexts, and different types of offset projects. It then discusses the most important design issues for an offset project programme: additionality of GHG emission reductions made, quantitative limits on offsets, addressing the risk of reversal of sequestered emissions, providing credit for early action offset projects, incorporating international offset projects, and projects aiming to reduce emissions from deforestation and forest degradation. Each section highlights how leading proposals for US federal cap-and-trade legislation have addressed these issues. The final section discusses the use of offsets in state and regional cap-and-trade programmes.
Jos Cozijnsen and Michael J Coren
- Published in print:
- 2009
- Published Online:
- February 2010
- ISBN:
- 9780199565931
- eISBN:
- 9780191722028
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199565931.003.0025
- Subject:
- Law, Environmental and Energy Law, Private International Law
This chapter addresses the following question: ‘Can offset mechanisms help promote a low-carbon economy at a reasonable cost?’ The answer to this question is, yes. They are not the entirety of the ...
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This chapter addresses the following question: ‘Can offset mechanisms help promote a low-carbon economy at a reasonable cost?’ The answer to this question is, yes. They are not the entirety of the solution — regulation and economy-wide incentives are needed — but as an addition to cap-and-trade, an essential component. Reforms will go a long way toward making offset mechanisms an integral and effective part of the global climate architecture. The first section of this chapter covers existing cap-and-trade systems and progress toward a global system. The second section identifies the building blocks needed to design an effective globally linked emissions trading system. Finally, a vision for a post-2012 climate treaty incorporating project mechanisms is outlined and the policies needed to increase global emission reductions and achieve the target of limiting temperature increase to 2°C are discussed.Less
This chapter addresses the following question: ‘Can offset mechanisms help promote a low-carbon economy at a reasonable cost?’ The answer to this question is, yes. They are not the entirety of the solution — regulation and economy-wide incentives are needed — but as an addition to cap-and-trade, an essential component. Reforms will go a long way toward making offset mechanisms an integral and effective part of the global climate architecture. The first section of this chapter covers existing cap-and-trade systems and progress toward a global system. The second section identifies the building blocks needed to design an effective globally linked emissions trading system. Finally, a vision for a post-2012 climate treaty incorporating project mechanisms is outlined and the policies needed to increase global emission reductions and achieve the target of limiting temperature increase to 2°C are discussed.
Allan Cook
- Published in print:
- 2009
- Published Online:
- February 2010
- ISBN:
- 9780199565931
- eISBN:
- 9780191722028
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199565931.003.0003
- Subject:
- Law, Environmental and Energy Law, Private International Law
This chapter examines, in the context of the European Union's new Emissions Trading Scheme under the Kyoto Protocol, the issues surrounding the aborted attempt by the International Accounting ...
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This chapter examines, in the context of the European Union's new Emissions Trading Scheme under the Kyoto Protocol, the issues surrounding the aborted attempt by the International Accounting Standards Board (IASB) in early 2005 to regulate the accounting for ‘cap-and-trade’ schemes. It argues that the features that made this model attractive to governments were precisely the ones that accountants found difficult to capture under existing standards. After showing why the challenge has to be faced, the chapter suggests a possible way forward that the IASB might consider when it revisits the subject, as it is now doing.Less
This chapter examines, in the context of the European Union's new Emissions Trading Scheme under the Kyoto Protocol, the issues surrounding the aborted attempt by the International Accounting Standards Board (IASB) in early 2005 to regulate the accounting for ‘cap-and-trade’ schemes. It argues that the features that made this model attractive to governments were precisely the ones that accountants found difficult to capture under existing standards. After showing why the challenge has to be faced, the chapter suggests a possible way forward that the IASB might consider when it revisits the subject, as it is now doing.
Christian de Perthuis and Pierre-André Jouvet
- Published in print:
- 2015
- Published Online:
- May 2016
- ISBN:
- 9780231171403
- eISBN:
- 9780231540360
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231171403.003.0013
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter presents the assessment methods available for moving from the previously constructed growth model to an understanding of the concrete conditions for the transition to a green economy. ...
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This chapter presents the assessment methods available for moving from the previously constructed growth model to an understanding of the concrete conditions for the transition to a green economy. This transition is still only in its infancy, with the first moves to introduce the value of natural capital into the economy now being taken. With regard to the climate system, the value collectively attributed to its preservation is measured by the costs associated with greenhouse gas emissions, more commonly termed the “carbon price.” The methods for introducing this price into the economic system are now well known, but both nationally and internationally.Less
This chapter presents the assessment methods available for moving from the previously constructed growth model to an understanding of the concrete conditions for the transition to a green economy. This transition is still only in its infancy, with the first moves to introduce the value of natural capital into the economy now being taken. With regard to the climate system, the value collectively attributed to its preservation is measured by the costs associated with greenhouse gas emissions, more commonly termed the “carbon price.” The methods for introducing this price into the economic system are now well known, but both nationally and internationally.
Barry G. Rabe
- Published in print:
- 2018
- Published Online:
- September 2019
- ISBN:
- 9780262037952
- eISBN:
- 9780262346580
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262037952.001.0001
- Subject:
- Political Science, Public Policy
Economists have argued for decades that the best way to address climate change is by placing a price on the carbon content of fossil fuels. But governments in North America and beyond have struggled ...
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Economists have argued for decades that the best way to address climate change is by placing a price on the carbon content of fossil fuels. But governments in North America and beyond have struggled mightily in trying to surmount political hurdles and translate this compelling idea into policy that can be adopted and operated efficiently. This book examines the past two decades of political experience in trying to launch carbon taxes or cap-and-trade systems, placing primary focus on the United States and Canada but also considering efforts from Europe and Asia. It considers the many political and management obstacles that have undermined carbon pricing adoption and implementation to date but also examines exceptional cases that demonstrate political feasibility and durability. The book also examines other forms of carbon pricing that place some price on carbon but do so with broader and more enduring bases of political support.Less
Economists have argued for decades that the best way to address climate change is by placing a price on the carbon content of fossil fuels. But governments in North America and beyond have struggled mightily in trying to surmount political hurdles and translate this compelling idea into policy that can be adopted and operated efficiently. This book examines the past two decades of political experience in trying to launch carbon taxes or cap-and-trade systems, placing primary focus on the United States and Canada but also considering efforts from Europe and Asia. It considers the many political and management obstacles that have undermined carbon pricing adoption and implementation to date but also examines exceptional cases that demonstrate political feasibility and durability. The book also examines other forms of carbon pricing that place some price on carbon but do so with broader and more enduring bases of political support.
Barry G. Rabe
- Published in print:
- 2018
- Published Online:
- September 2019
- ISBN:
- 9780262037952
- eISBN:
- 9780262346580
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262037952.003.0001
- Subject:
- Political Science, Public Policy
The use of taxes to elevate the price of popular commodities in order to reduce consumption and risks related to use did not originate with carbon taxes. Excise taxes on tobacco have been used ...
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The use of taxes to elevate the price of popular commodities in order to reduce consumption and risks related to use did not originate with carbon taxes. Excise taxes on tobacco have been used aggressively by governments in the United States and beyond in recent decades to achieve significant reductions in smoking. Fossil fuel use has long been deemed by diverse economists as a viable target for a sequel, leading to innumerable reports and scholarly arguments making the case for a carbon price. This can take the form of either a direct tax on the carbon content of fossil fuels or a cap-and-trade system that allows for purchase of rights to release emissions at a price. Both are thought to offer effective paths to reduce emissions in a cost-effective manner.Less
The use of taxes to elevate the price of popular commodities in order to reduce consumption and risks related to use did not originate with carbon taxes. Excise taxes on tobacco have been used aggressively by governments in the United States and beyond in recent decades to achieve significant reductions in smoking. Fossil fuel use has long been deemed by diverse economists as a viable target for a sequel, leading to innumerable reports and scholarly arguments making the case for a carbon price. This can take the form of either a direct tax on the carbon content of fossil fuels or a cap-and-trade system that allows for purchase of rights to release emissions at a price. Both are thought to offer effective paths to reduce emissions in a cost-effective manner.
Geoffrey Heal
- Published in print:
- 2016
- Published Online:
- January 2019
- ISBN:
- 9780231180849
- eISBN:
- 9780231543286
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231180849.003.0004
- Subject:
- Economics and Finance, Development, Growth, and Environmental
The classical approach to external costs is to levy corrective taxes. An alternative, the cap and trade system, builds on the idea that external effects arise from inadequately-defined property ...
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The classical approach to external costs is to levy corrective taxes. An alternative, the cap and trade system, builds on the idea that external effects arise from inadequately-defined property rights. Historically most societies have regulated external effects, passing laws limiting externality-generating actions: this practice dates back at least to the Middle Ages. The US practices a legal approach to externality-management, giving damaged parties the right to sue for damages. Finally we are now seeing the emergence of an approach based on activism by civil society and consumers and by the investor community. Some of these approaches seem better than others – taxes and cap and trade, for example, are capable of correcting external effects at minimum cost.Less
The classical approach to external costs is to levy corrective taxes. An alternative, the cap and trade system, builds on the idea that external effects arise from inadequately-defined property rights. Historically most societies have regulated external effects, passing laws limiting externality-generating actions: this practice dates back at least to the Middle Ages. The US practices a legal approach to externality-management, giving damaged parties the right to sue for damages. Finally we are now seeing the emergence of an approach based on activism by civil society and consumers and by the investor community. Some of these approaches seem better than others – taxes and cap and trade, for example, are capable of correcting external effects at minimum cost.
Geoffrey Heal
- Published in print:
- 2016
- Published Online:
- January 2019
- ISBN:
- 9780231180849
- eISBN:
- 9780231543286
- Item type:
- chapter
- Publisher:
- Columbia University Press
- DOI:
- 10.7312/columbia/9780231180849.003.0005
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Ozone depletion and acid rain are problems that have some similarity to climate change – both are caused by the emission of gases that circulate widely, though neither has the scope and scale of the ...
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Ozone depletion and acid rain are problems that have some similarity to climate change – both are caused by the emission of gases that circulate widely, though neither has the scope and scale of the climate problem. But it is encouraging that both problems are well en route to solution. Our main institutions for addressing climate change are the IPCC (Intergovernmental Panel on Climate Change) and the UFCCC (United Nations Framework Convention on Climate Change), with the latter producing the Kyoto Protocol in 1997 and the 2015 Paris Agreement. Cap and Trade and regulatory policies have been used more widely than any others for tackling the climate problem so far. Replacement of fossil fuels by low-carbon energy technologies offers the greatest hope for a complete solution, and is within sight: policies need to be focused on making this a reality.Less
Ozone depletion and acid rain are problems that have some similarity to climate change – both are caused by the emission of gases that circulate widely, though neither has the scope and scale of the climate problem. But it is encouraging that both problems are well en route to solution. Our main institutions for addressing climate change are the IPCC (Intergovernmental Panel on Climate Change) and the UFCCC (United Nations Framework Convention on Climate Change), with the latter producing the Kyoto Protocol in 1997 and the 2015 Paris Agreement. Cap and Trade and regulatory policies have been used more widely than any others for tackling the climate problem so far. Replacement of fossil fuels by low-carbon energy technologies offers the greatest hope for a complete solution, and is within sight: policies need to be focused on making this a reality.
Jeremiah D. Lambert
- Published in print:
- 2015
- Published Online:
- May 2016
- ISBN:
- 9780262029506
- eISBN:
- 9780262330985
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262029506.003.0007
- Subject:
- Business and Management, Business History
While Lovins addressed fossil fuels, renewables, and a carbon tax as a consultant and public intellectual, Jim Rogers, until recently the chief executive officer of Duke Energy, the nation’s largest ...
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While Lovins addressed fossil fuels, renewables, and a carbon tax as a consultant and public intellectual, Jim Rogers, until recently the chief executive officer of Duke Energy, the nation’s largest electric utility, did so as a shrewd pragmatist and soldier in the trenches of legislative conflict. A facile lawyer who served as a FERC litigator, Rogers once ran the gas pipeline business of Houston Natural Gas, an Enron predecessor. Later he took the helm at PSI Energy, a coal-fired utility, where he reached an accommodation with environmental opponents on cleaning up his company’s SO2 emissions, then the subject of cap-and-trade amendments to the Clean Air Act. Rogers defied industry logic and supported the new program just as other utility executives lobbied against it. Rogers saw the SO2 cap-and-trade program as a smart and creative compromise that allocated generous allowances to utilities in coal-dependent states and enabled them to modernize their plants to meet emissions targets without price spikes. In the conservative utility industry, Rogers was an outlier whose environmental credentials generated favorable publicity but at the same time drew skepticism. In 2006, after a series of acquisitions, Rogers headed Duke Energy, just in time to participate as a key player in shaping forthcoming climate change legislation that proposed CO2 cap-and-trade methodology modeled on the successful SO2 program of almost twenty years before. Rogers wanted Duke Energy to receive enough free allowances to make the transition to clean energy affordable and avoid rate shock for its customers. Environmentalists saw free allowances as a giveaway to polluters and demanded they be auctioned, but Rogers objected to according the government free rein to spend revenues raised from selling allowances. In his first State of the Union message President Obama proposed legislation that placed a market cap on carbon pollution. Coal-fired utilities, with Duke Energy in the forefront, saw a looming threat. Eager to shape the debate, Rogers urged that the power sector receive 40 per cent of all allowances for free as a bridge to a decarbonized economy and got most of what he wanted in the Waxman-Markey bill that narrowly passed the House in 2009 but later failed in the Senate, the victim of polarized politics. In negotiations with Congress, Rogers had used his pivotal position to extract the accommodation he required only to see cap and trade blown away by hard economic times, extreme partisan division, and effective right-wing opposition. Given the threat of legislation, he tried to mitigate the risks to his company. “When you see a parade form on an issue in Washington,” he said, “you have two choices: you can throw your body in front of it and let Washington walk over you, or you can jump in front of the parade and pretend it’s yours.”Less
While Lovins addressed fossil fuels, renewables, and a carbon tax as a consultant and public intellectual, Jim Rogers, until recently the chief executive officer of Duke Energy, the nation’s largest electric utility, did so as a shrewd pragmatist and soldier in the trenches of legislative conflict. A facile lawyer who served as a FERC litigator, Rogers once ran the gas pipeline business of Houston Natural Gas, an Enron predecessor. Later he took the helm at PSI Energy, a coal-fired utility, where he reached an accommodation with environmental opponents on cleaning up his company’s SO2 emissions, then the subject of cap-and-trade amendments to the Clean Air Act. Rogers defied industry logic and supported the new program just as other utility executives lobbied against it. Rogers saw the SO2 cap-and-trade program as a smart and creative compromise that allocated generous allowances to utilities in coal-dependent states and enabled them to modernize their plants to meet emissions targets without price spikes. In the conservative utility industry, Rogers was an outlier whose environmental credentials generated favorable publicity but at the same time drew skepticism. In 2006, after a series of acquisitions, Rogers headed Duke Energy, just in time to participate as a key player in shaping forthcoming climate change legislation that proposed CO2 cap-and-trade methodology modeled on the successful SO2 program of almost twenty years before. Rogers wanted Duke Energy to receive enough free allowances to make the transition to clean energy affordable and avoid rate shock for its customers. Environmentalists saw free allowances as a giveaway to polluters and demanded they be auctioned, but Rogers objected to according the government free rein to spend revenues raised from selling allowances. In his first State of the Union message President Obama proposed legislation that placed a market cap on carbon pollution. Coal-fired utilities, with Duke Energy in the forefront, saw a looming threat. Eager to shape the debate, Rogers urged that the power sector receive 40 per cent of all allowances for free as a bridge to a decarbonized economy and got most of what he wanted in the Waxman-Markey bill that narrowly passed the House in 2009 but later failed in the Senate, the victim of polarized politics. In negotiations with Congress, Rogers had used his pivotal position to extract the accommodation he required only to see cap and trade blown away by hard economic times, extreme partisan division, and effective right-wing opposition. Given the threat of legislation, he tried to mitigate the risks to his company. “When you see a parade form on an issue in Washington,” he said, “you have two choices: you can throw your body in front of it and let Washington walk over you, or you can jump in front of the parade and pretend it’s yours.”
Peter Heindl, Peter J. Wood, and Frank Jotzo
- Published in print:
- 2015
- Published Online:
- January 2016
- ISBN:
- 9780262029285
- eISBN:
- 9780262330435
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262029285.003.0006
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter examines the effects of combining an international cap-and-trade scheme with national carbon taxes. We consider a two-country stochastic partial equilibrium model with log-normally ...
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This chapter examines the effects of combining an international cap-and-trade scheme with national carbon taxes. We consider a two-country stochastic partial equilibrium model with log-normally distributed uncertainty. The situation is analogous to the situation where European countries impose national carbon taxes in addition to the EU emissions trading. The allowance price in the joint cap-and-trade scheme depends on the tax rate, the relative size of countries and abatement options, the magnitude of uncertainty, and correlation of abatement costs. In most cases, the additional tax will not lead to additional production of the public good beyond the fixed targets. The additional tax results in higher costs of abatement to the country introducing the additional tax, and higher costs overall.Less
This chapter examines the effects of combining an international cap-and-trade scheme with national carbon taxes. We consider a two-country stochastic partial equilibrium model with log-normally distributed uncertainty. The situation is analogous to the situation where European countries impose national carbon taxes in addition to the EU emissions trading. The allowance price in the joint cap-and-trade scheme depends on the tax rate, the relative size of countries and abatement options, the magnitude of uncertainty, and correlation of abatement costs. In most cases, the additional tax will not lead to additional production of the public good beyond the fixed targets. The additional tax results in higher costs of abatement to the country introducing the additional tax, and higher costs overall.
Leigh Raymond
- Published in print:
- 2016
- Published Online:
- May 2017
- ISBN:
- 9780262034746
- eISBN:
- 9780262336161
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262034746.003.0003
- Subject:
- Political Science, Environmental Politics
This chapter describes the “old” model of cap-and-trade policy design that largely controlled emissions trading policy from its origins in the 1970s through the 1990s, under which emissions trading ...
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This chapter describes the “old” model of cap-and-trade policy design that largely controlled emissions trading policy from its origins in the 1970s through the 1990s, under which emissions trading programs were adopted reluctantly, and “grandfathered” emissions allowances to current emitters at no cost. It also describes some important events starting in the 1990s that helped lay the groundwork for the sudden switch to auctions in RGGI, including: greater attention to allocation rules by political actors, new precedents such as spectrum rights auctions and severance taxes on some nature resources, new political and economic pressures from electricity deregulation, and the emergence of “public benefit” charges and programs to improve energy efficiency for consumers. In addition, this period saw the emergence of new polluter pays and public ownership normative frames in the context of emissions allowances. At the same time, the chapter documents how these initial changes were insufficient to successfully promote allowance auctions in the development of two prominent cap and trade programs: the initial phase of the EU ETS from 1998-2005, and the NOx Budget emissions trading program from 1994-2005.Less
This chapter describes the “old” model of cap-and-trade policy design that largely controlled emissions trading policy from its origins in the 1970s through the 1990s, under which emissions trading programs were adopted reluctantly, and “grandfathered” emissions allowances to current emitters at no cost. It also describes some important events starting in the 1990s that helped lay the groundwork for the sudden switch to auctions in RGGI, including: greater attention to allocation rules by political actors, new precedents such as spectrum rights auctions and severance taxes on some nature resources, new political and economic pressures from electricity deregulation, and the emergence of “public benefit” charges and programs to improve energy efficiency for consumers. In addition, this period saw the emergence of new polluter pays and public ownership normative frames in the context of emissions allowances. At the same time, the chapter documents how these initial changes were insufficient to successfully promote allowance auctions in the development of two prominent cap and trade programs: the initial phase of the EU ETS from 1998-2005, and the NOx Budget emissions trading program from 1994-2005.
Leigh Raymond
- Published in print:
- 2016
- Published Online:
- May 2017
- ISBN:
- 9780262034746
- eISBN:
- 9780262336161
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262034746.003.0004
- Subject:
- Political Science, Environmental Politics
This chapter provides a detailed analysis of the multi-year design process leading to the implementation of the Regional Greenhouse Gas Initiative (RGGI) in 2008. It considers the question: How did ...
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This chapter provides a detailed analysis of the multi-year design process leading to the implementation of the Regional Greenhouse Gas Initiative (RGGI) in 2008. It considers the question: How did RGGI’s policy designers succeed in auctioning virtually all of the program’s emissions allowances, wheresimilar efforts to promote auctions failed? After reviewing the limits of existing explanations of RGGI’s decision to auction allowances that are grounded in the interest group politics model, the chapter offers a detailed analysis of the RGGI design process to demonstrate the central role of the new public benefit model in making auctions politically viable. Public and private accounts confirm the prominence of this new normative framing for auctions from the very beginning of the process, and its influence over the political choice to make this policy change.Less
This chapter provides a detailed analysis of the multi-year design process leading to the implementation of the Regional Greenhouse Gas Initiative (RGGI) in 2008. It considers the question: How did RGGI’s policy designers succeed in auctioning virtually all of the program’s emissions allowances, wheresimilar efforts to promote auctions failed? After reviewing the limits of existing explanations of RGGI’s decision to auction allowances that are grounded in the interest group politics model, the chapter offers a detailed analysis of the RGGI design process to demonstrate the central role of the new public benefit model in making auctions politically viable. Public and private accounts confirm the prominence of this new normative framing for auctions from the very beginning of the process, and its influence over the political choice to make this policy change.
Leigh Raymond
- Published in print:
- 2016
- Published Online:
- May 2017
- ISBN:
- 9780262034746
- eISBN:
- 9780262336161
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262034746.003.0005
- Subject:
- Political Science, Environmental Politics
After RGGI’s implementation in 2008, a series of political set backs led some to declare cap and trade “dead.” This chapter rejects the asserted demise of cap and trade, arguing that the public ...
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After RGGI’s implementation in 2008, a series of political set backs led some to declare cap and trade “dead.” This chapter rejects the asserted demise of cap and trade, arguing that the public benefit model for climate policies offers the best hope for political progress. The chapter reviews post-2008 climate policies, noting thatdespite a few prominent failures,cap and trade with auction has become the most common approach to addressing climate change. In addition, the chapter documents how three policies—the EU ETS, California’s cap and trade program, and RGGI—used the public benefit frame to resist political challenges and strengthen their emissions goals. The chapter then describes additional potential applications for the public benefit model, including carbon tax policies and the new Clean Power Plan regulations promulgated by the U.S. EPA in 2015. As uses of the public benefit frame expand, the chapter notes, a key question for the future will be what types of policy designs will be perceived as “fitting” with the norms that constitute the frame. Finally, the chapter discusses how normative framing could improve the ability to understand and predict other sudden policy changes beyond the topic of climate change.Less
After RGGI’s implementation in 2008, a series of political set backs led some to declare cap and trade “dead.” This chapter rejects the asserted demise of cap and trade, arguing that the public benefit model for climate policies offers the best hope for political progress. The chapter reviews post-2008 climate policies, noting thatdespite a few prominent failures,cap and trade with auction has become the most common approach to addressing climate change. In addition, the chapter documents how three policies—the EU ETS, California’s cap and trade program, and RGGI—used the public benefit frame to resist political challenges and strengthen their emissions goals. The chapter then describes additional potential applications for the public benefit model, including carbon tax policies and the new Clean Power Plan regulations promulgated by the U.S. EPA in 2015. As uses of the public benefit frame expand, the chapter notes, a key question for the future will be what types of policy designs will be perceived as “fitting” with the norms that constitute the frame. Finally, the chapter discusses how normative framing could improve the ability to understand and predict other sudden policy changes beyond the topic of climate change.
Leigh Raymond
- Published in print:
- 2016
- Published Online:
- May 2017
- ISBN:
- 9780262034746
- eISBN:
- 9780262336161
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262034746.003.0006
- Subject:
- Political Science, Environmental Politics
This chapter reviews the theory of normative reframing that is at the heart of the book’s explanation for sudden policy change, and the evidence of normative reframing’s role in the unprecedented ...
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This chapter reviews the theory of normative reframing that is at the heart of the book’s explanation for sudden policy change, and the evidence of normative reframing’s role in the unprecedented policy shift toward auctioning emissions allowances from 2008-2015. It then offers some concluding thoughts on the wider implications of the expansion of auctions since RGGI, and the theory of normative reframing for climate and environmental policymaking, as well as for understanding sudden policy change in general. In particular, the chapter concludes that the choice of how to distribute benefits from future climate policies will be the most important factor determining the political success of those policies, and that policies such as cap and trade with auction using public benefit framing remain the most promising policy option going forward.Less
This chapter reviews the theory of normative reframing that is at the heart of the book’s explanation for sudden policy change, and the evidence of normative reframing’s role in the unprecedented policy shift toward auctioning emissions allowances from 2008-2015. It then offers some concluding thoughts on the wider implications of the expansion of auctions since RGGI, and the theory of normative reframing for climate and environmental policymaking, as well as for understanding sudden policy change in general. In particular, the chapter concludes that the choice of how to distribute benefits from future climate policies will be the most important factor determining the political success of those policies, and that policies such as cap and trade with auction using public benefit framing remain the most promising policy option going forward.
Nathan Braun, Timothy Fitzgerald, and Jason Pearcy
- Published in print:
- 2015
- Published Online:
- January 2016
- ISBN:
- 9780262029285
- eISBN:
- 9780262330435
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262029285.003.0010
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter extends the existing theory of tradable emissions permit markets to allow for tradable permits and offsets. Offsets are currently incorporated into the EU ETS, and in the future similar ...
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This chapter extends the existing theory of tradable emissions permit markets to allow for tradable permits and offsets. Offsets are currently incorporated into the EU ETS, and in the future similar assets will likely become a feature of many pollution control systems. A model is developed with multiple compliance assets, offset quotas, and different transaction costs across compliance assets. Either offset usage quotas or additional transaction costs associated with surrendering offsets can lead to an equilibrium price difference between permits and offsets, as experienced in the EU ETS. Another result of the chapter shows that offset usage quotas alone cannot explain observed offset behavior in the EU ETS, but combining offset usage quotas with firm-level heterogeneity in transaction costs can be consistent with observed EU ETS behavior. Annual compliance data from Phase I and II of the EU ETS are used to support the consistency of the theory.Less
This chapter extends the existing theory of tradable emissions permit markets to allow for tradable permits and offsets. Offsets are currently incorporated into the EU ETS, and in the future similar assets will likely become a feature of many pollution control systems. A model is developed with multiple compliance assets, offset quotas, and different transaction costs across compliance assets. Either offset usage quotas or additional transaction costs associated with surrendering offsets can lead to an equilibrium price difference between permits and offsets, as experienced in the EU ETS. Another result of the chapter shows that offset usage quotas alone cannot explain observed offset behavior in the EU ETS, but combining offset usage quotas with firm-level heterogeneity in transaction costs can be consistent with observed EU ETS behavior. Annual compliance data from Phase I and II of the EU ETS are used to support the consistency of the theory.
Michael J. Trebilcock
- Published in print:
- 2014
- Published Online:
- April 2014
- ISBN:
- 9780199370658
- eISBN:
- 9780199370672
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199370658.003.0008
- Subject:
- Law, Constitutional and Administrative Law
One of the most intractable contemporary policy challenges facing the world is mitigating anthropogenic (i.e., human-caused) climate change, which has the potential to cause disastrous consequences ...
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One of the most intractable contemporary policy challenges facing the world is mitigating anthropogenic (i.e., human-caused) climate change, which has the potential to cause disastrous consequences for large swaths of humanity. However, climate change by definition is a global problem, so that unilateral action to reduce, e.g., CO2 emissions is unlikely to be effective without other major emitting-source countries making similar commitments. Indeed, unilateral action may simply induce expansion of CO2 emitting activities in unconstrained countries or the relocation of firms from countries adopting such measures to countries with no such constraints. The transition costs within given countries in moving to a lower carbon future are severe and the transition costs across countries, especially developed and developing, are equally intractable, as evident from the relative lack of progress in achieving binding commitments in international fora over the past 20 years. Normative arguments for how to allocate the burden of reducing CO2 emissions are a major source of conflict, with developed countries pointing out that major developing countries like China and India are now major sources of CO2, while developing countries argue that developed countries have been historically responsible for creating most of the problems we confront today and are in any event better placed to bear a larger burden of abatement measures than poorer developing countries. This chapter explores a range of transition cost mitigation strategies, both within countries and across countries, that might facilitate progress on this issue.Less
One of the most intractable contemporary policy challenges facing the world is mitigating anthropogenic (i.e., human-caused) climate change, which has the potential to cause disastrous consequences for large swaths of humanity. However, climate change by definition is a global problem, so that unilateral action to reduce, e.g., CO2 emissions is unlikely to be effective without other major emitting-source countries making similar commitments. Indeed, unilateral action may simply induce expansion of CO2 emitting activities in unconstrained countries or the relocation of firms from countries adopting such measures to countries with no such constraints. The transition costs within given countries in moving to a lower carbon future are severe and the transition costs across countries, especially developed and developing, are equally intractable, as evident from the relative lack of progress in achieving binding commitments in international fora over the past 20 years. Normative arguments for how to allocate the burden of reducing CO2 emissions are a major source of conflict, with developed countries pointing out that major developing countries like China and India are now major sources of CO2, while developing countries argue that developed countries have been historically responsible for creating most of the problems we confront today and are in any event better placed to bear a larger burden of abatement measures than poorer developing countries. This chapter explores a range of transition cost mitigation strategies, both within countries and across countries, that might facilitate progress on this issue.
