How Trump Inspired America’s Carbon Markets
Jamie Horgan
The American Interest
September 22, 2017
When a 2009 bill that would have established a carbon trading system in the United States failed to get Senate approval, the market-based approach to curbing greenhouse gas emissions seemed dead in the water here in America. But while cap and trade failed at the national level, it’s seeing patchwork regional success.
And now, motivated by President Trump’s decision to pull out of the Paris climate accord, interest from state officials in the Northeast U.S. is growing to join the Regional Greenhouse Gas Initiative (RGGI, or “reggie”). So far, RGGI includes Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. And now Bloomberg is reporting that New Jersey, Pennsylvania, and Virginia are considering joining the program.
It’s interesting that, in spite of his intentions, Trump may have done more to help the climate cause here in America by playing the eco-villain than he would have if he had upheld the status quo.
Let me explain: falling emissions in the United States are the result of cheap, abundant natural gas (thank you fracking) that’s displacing coal as our country’s single biggest source of power. Natural gas emits half as much carbon as coal, which means that the shale boom has been an extremely powerful climate mitigation tool. And, for all his talk about wanting to revive the coal sector, Trump isn’t about to regulate fracking into oblivion, which means American emissions—especially in the power sector—are going to continue to drop.
But by pulling out of Paris, Trump galvanized the environmental movement, and shook them out of Obama-induced contentment to start agitating for even greater controls of carbon. Since Trump’s announcement, cities and states have started to take a closer look at what they’re capable of doing to reduce emissions, since it’s clear that those mandates won’t be coming from the federal level—hence this surging interest in RGGI.
This bottom-up approach to combatting climate change has advantages over the top-down strategy embodied by the UN and the Paris deal. For one, cities and states have a better handle on what they’re capable of, and that matters when it comes to reducing emissions. Energy resources vary widely across countries, regions, and states, so it makes sense to allow for local control of climate policies that can account for, say, plenty of wind power potential—or a lack thereof. Local policies afford more accountability than nebulous, “comprehensive” international agreements. People can use their votes to speak their minds on these issues in ways that they can’t with the UN approach.
That said, there are drawbacks to a regional approach to capping or putting a price on carbon. California’s carbon market has been a resounding failure thus far: The state has struggled to fix a price for carbon allowances that’s high enough to induce heavy emitters to change behavior, but not so high that those same emitters pick up and move someplace that doesn’t entail those costs. Carbon leakage, as that last issue is called, is the central problem with a patchwork network of carbon markets, and it’s why the EU’s Emissions Trading System (EU ETS) has floundered, too.
The Golden State has also run into issues with how to spend the proceeds from sales of carbon permits. A number of Californian politicians signed on to the program because they saw it as a way to finance pet projects. This system, as currently envisioned, is fertile ground for pork barrel politics, which is as much a problem in Sacramento as it is in Washington.
Next year, California wants to link its market with Ontario and Quebec, and there’s talk of a link with RGGI as well. Scaling up will help reduce the threat of carbon leakage, but it won’t fix the pork problem, and neither will it create a Goldilocks price for carbon. Still, it’s interesting that cap-and-trade in the United States has gained momentum in 2017, despite (or because of) Trump’s intervention. Funny how things work out, sometimes.
the-american-interest.com |
