Sometimes problems get so big, that the rest of the world can't wait for the the U.S. "to lead."
This apparently is one of those times ... China is adopting "Cap and Trade" to curb their CO2 emissions, without the help or leadership, of the USA at all.
With cap and trade plan, China adopts emissions policy that couldn’t get through U.S. Congress
by Steven Mufson, washingtonpost.com -- Sept 28, 2015
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The cap and trade scheme for controlling pollution was pioneered in the United States to reduce power plant emissions of sulfur dioxide and nitrogen oxides, which cause acid rain. Under the Clean Air Act of 1990, the government established a mandatory cap on emissions and allowed companies the flexibility to figure out how to comply. The power companies ended up cutting emissions sharply and at much lower cost than anticipated. By 2013, sulfur dioxide emissions plunged 80 percent to a level well below the statutory requirement.
But Europe’s cap and trade program for greenhouse gas pollution has failed in many respects. Launched in 2005, it covered 13,200 facilities, responsible for about half the European Union’s emissions. But the cap was set too high and was easily reached, especially after the 2009 recession and with lingering economic weakness in Europe. Carbon emission permit prices collapsed from around $40 per metric ton of carbon to single digits. Recently prices have crawled back up to about $10, still providing companies little incentive for cutting greenhouse gas output. The system currently has a glut of more than two billion emissions permits.
In 2006, California adopted legislation setting up a carbon trading scheme, but it took a few years before the details could be ironed out. It aims to reduce emissions to 1990 levels by 2020, an 18 percent reduction from projected business as usual levels. It is still early going for the plan, but permit prices have been fluctuating between $15 and $20 a metric ton of carbon in the power sector.
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How have those theories worked out in practice ...
What’s the difference between a carbon tax and “cap-and-trade” system for reducing greenhouse gas emissions?
augustafreepress.com, Oct 3, 2015
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Not everyone thinks cap-and-trade is the way to go to reduce emissions. Carbon tax proponents argue that cap-and-trade scenarios can cause unnecessary price volatility to energy prices, are overly complicated, and are easily manipulated by those that learn to game such systems to their advantage without reducing greenhouse gas output. “Carbon taxes will lend predictability to energy prices, whereas cap-and-trade systems will aggravate the price volatility that historically has discouraged investments in less carbon-intensive electricity generation, carbon-reducing energy efficiency and carbon-replacing renewable energy,” reports the Carbon Tax Center.
Critics counter, however, that it’s easier for companies to pass the costs of a carbon tax onto consumers by raising prices -- and that lower income households bear a disproportionate amount of those economic costs. Perhaps the world’s biggest experiment in carbon taxation ended last year when Australians voted to repeal their carbon tax due to rising costs of living, saving the average household more than $500 a year. Meanwhile, a recent analysis of Norway’s carbon tax -- the highest in the world on a percentage basis -- found that emissions reductions there were negligible over the first decade of implementation.
While both systems have their pros and cons, either can be effective in reducing emissions if there is enough political will behind it. A key component to the upcoming COP21 Paris climate talks is flexibility in allowing participating nations to choose how they want to reduce emissions. Environmental leaders are keeping their fingers crossed that whether through cap-and-trade or taxation, the nations of the world will finally agree on enough greenhouse gas cuts to finally stem the still surging tide of global warming.
Sometimes debating all the "pros and cons" can lead to Inaction -- since 'perfect systems' are so hard to find.
Inaction however, is the exact opposite of "Leading" ... heck it's not even following.
As Donald Trump might say, "China is about to eat our Carbon-reduction Lunch."
(That's assuming of course, the Donald actually believed Carbon-reduction was a worthwhile Environmental goal.)
When in Econ Class, or in the inevitable Econ Debates, that such classes lead to,
-- it really helps to know the "jargon" ... and since this CO2 Debate may be coming back around, here's a quick economic refresher ...
How cap and trade works
by Environmental Defense Fund -- edf.org
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The “cap” sets a limit on emissions, which is lowered over time to reduce the amount of pollutants released into the atmosphere.
The “trade” creates a market for carbon allowances, helping companies innovate in order to meet, or come in under, their allocated limit. The less they emit, the less they pay, so it is in their economic incentive to pollute less.
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Trading: Leads to investment and innovation
Some companies will find it easy to reduce their pollution to match their number of permits; others may find it more difficult. Trading lets companies buy and sell allowances, leading to more cost-effective pollution cuts, and incentive to invest in cleaner technology.
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How Carbon Tax Works
by Sarah Dowdey, science.howstuffworks.com
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Carbon tax is a form of pollution tax. It levies a fee on the production, distribution or use of fossil fuels based on how much carbon their combustion emits. The government sets a price per ton on carbon, then translates it into a tax on electricity, natural gas or oil. Because the tax makes using dirty fuels more expensive, it encourages utilities, businesses and individuals to reduce consumption and increase energy efficiency. Carbon tax also makes alternative energy more cost-competitive with cheaper, polluting fuels like coal, natural gas and oil.
Carbon tax is based on the economic principle of negative externalities. Externalities are costs or benefits generated by the production of goods and services. Negative externalities are costs that are not paid for. When utilities, businesses or homeowners consume fossil fuels, they create pollution that has a societal cost; everyone suffers from the effects of pollution. Proponents of a carbon tax believe that the price of fossil fuels should account for these societal costs. More simply put -- if you're polluting to everyone else's detriment, you should have to pay for it.
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How Carbon Trading Works
by Sarah Dowdey, science.howstuffworks.com
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Carbon trading, sometimes called emissions trading, is a market-based tool to limit GHG. The carbon market trades emissions under cap-and-trade schemes or with credits that pay for or offset GHG reductions.
Cap-and-trade schemes are the most popular way to regulate carbon dioxide (CO2) and other emissions. The scheme's governing body begins by setting a cap on allowable emissions. It then distributes or auctions off emissions allowances that total the cap. Member firms that do not have enough allowances to cover their emissions must either make reductions or buy another firm's spare credits. Members with extra allowances can sell them or bank them for future use. Cap-and-trade schemes can be either mandatory or voluntary.
A successful cap-and-trade scheme relies on a strict but feasible cap that decreases emissions over time. If the cap is set too high, an excess of emissions will enter the atmosphere and the scheme will have no effect on the environment. A high cap can also drive down the value of allowances, causing losses in firms that have reduced their emissions and banked credits. If the cap is set too low, allowances are scarce and overpriced. Some cap and trade schemes have safety valves to keep the value of allowances within a certain range. If the price of allowances gets too high, the scheme's governing body will release additional credits to stabilize the price. The price of allowances is usually a function of supply and demand.
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Fun, huh? No wonder Economics is affectionately called the "Dismal Science".
When was the last time you thought about the damage caused by Acid Rain?
We have a Cap and Trade system on "dirty coal" to thank for that. It worked.
In the U.K. they have the functional equivalent to a Carbon Tax -- but it's a Tax on their consumption of Gasoline.
Their sizable Gas Tax arguably "works" too -- it has reduced the UK national consumption level of petrol, while some argue that it has prolonged their recession too.
When was the last time you worried about the damage being done to Ozone Layer, as it was being eroded away by Chlorofluorocarbons (CFCs), as planet-sized holes?
Well, we have The Montreal Treaty to thank for that. In that case, the Nations of the world simply agreed -- because the global threat was so great -- that they would voluntarily phase out our individual use of CFCs over time.
When was the last time you seen a hair spray canister fouling up the air? Simply getting countries "to agree" can work. It did once before. It can once again.
Finding common cause -- that is what Leadership should be all about. Finding the mutual benefits for ALL the parties involves.
Because the "external costs" of not doing so -- will far, far exceed our ability to fix and payfor, after the fact (think of multiple Cleanup Tabs for events like Hurricane Sandy). That is, if the nations of the world insist on our individual competitive advantages -- at the (yet-to-be recognized) costs of our mutually destructive impacts, being "freely" imposed on the world's climate systems, without a care.
SOOOO, what CO2 solution will the U.S. ultimately choose?
What CO2 solution -- would YOU choose, if only given the chance?