Cap, Trade and Skeletons

Did Waxman-Markey’s ancestors really deliver on their promises? 10

“EU ETS” ... The continental cousin: After George W. Bush bailed on the Kyoto Protocol in early 2001), the European Union member nations moved forward without the United States, piecing together the Emissions Trading Scheme, or System, that eventually will require them to reduce the six worst greenhouse gases by an average 8 percent from 1990 levels. The program has been dogged by problems and controversy, but regulators insist it is beginning to pay off in actual reductions. But evidence of those reductions is hard to come by.

The Emissions Trading System is split into phases. From 2005 to 2007, just as AQMD had done in California, ETS staff say nations were way too generous in handing out emissions allowances. That meant there was no need for the polluters to buy credits or make actual reductions. That in turn led to windfall profits of $1.7 billion for utilities in Britain, according to one report, along with steep increases in customers’ electric bills. There were even increases rather than reductions in emissions in some places.

For the second phase, running from 2008 to 2012, Environment Commissioner Stavros Dimas cracked down on member nations, forcing them to sharply reduce pollution allowances handed out to polluters. In May, he announced that the tough new rules were paying off, with a 3.06 percent reduction in emissions of six greenhouse gases in 2008, by more than 11,000 businesses in 27 nations participating in the Emission Trading System

“It confirms that the EU has a well functioning trading system, with a robust cap, a clear price signal and a liquid market, which is helping us to cut emissions cost-effectively,” said Stavros in a rosy press release on May 15.

But there is little to no concrete evidence that the Emissions Trading System is what achieved those greenhouse gas reductions. While emissions did fall in 2008, Environment Commission staff concede that is at least partly due to other factors. Unseasonably warm weather reduced demand for heat from polluting utilities, and the global recession, which slowed production of many polluting industries.

“We had reductions, but is not clear whether the reductions were clearly due to trading,” said Barbara Helfferich, spokeswoman for the ETS office, based in Brussels, who stressed that it was important not to confuse greenhouse gas emissions reporting with the cap-and-trade system. Helfferich added, “We are sure that a good part of the reduction is from the ETS.”

But when she was asked in a follow-up interview if there was any verified data showing greenhouse gases dropping as a result of emissions trading, she said “no.”

Data released at the end of May by a second agency, the European Environmental Agency in Copenhagen, showed an encouraging 9.3 percent drop from 1990 levels in greenhouse gas emissions by 27 countries in 2007. But there was no direct link in the inventory between the overall drop and the Emissions Trading System.

To the contrary, the main reasons cited were unseasonable weather and higher prices for fuel outside the trading cap. Most nations did for the first time report how much of their greenhouse gas emissions were covered under the trading system, showing increasing participation at widely differing levels. For instance, in Finland, two thirds of all CO2 emissions were covered under the cap and trade system in 2007, while in France, one third were covered.

The ETS program is the first multinational attempt to drastically reduce greenhouse gases. Emissions from a wide range of sources, including everything from power plants to mules and asses, are now covered and measured annually. European polluters are now also allowed to buy a small part of their credits from “clean development mechanism” projects in developing countries, which has produced a small amount of verified emission reductions, but also sparked controversy. One 2007 review in Nature magazine found that 30 percent of all CDM offsets were coming from credits from China that could have been reduced far more cheaply or even voluntarily, freeing up money for other more costly greenhouse gas reductions, but were instead translated into hefty profits on the international carbon market. Other reports found irregularities in emissions reporting from international projects elsewhere.

The cap on greenhouse gases is scheduled to drop sharply in coming years, meaning large reductions from trading could be seen. But as nations prepare to gather in Copenhagen this fall to draft a new international climate accord, it’s still an open question whether the EU program, by far the world’s largest, is reducing greenhouse gases.

Janet Wilson is a senior fellow at USC Annenberg’s Institute for Justice and Journalism, and a veteran environmental reporter based in California.

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  1. Clifford Wells's avatar

    Clifford Wells Posted 3:17 pm
    28 Jun 2009

    How to fix the cap 'n' trade of the old SO2 program, and similar ozone programs such as for NOx?  To me that issue can be resolved to some extent by imposing a "green tax" on the credits.  Often these are expressed as a percentaage such as 15%.  So if you document 100 tons of reductions, you actually get a credit for 85 tons.  One could increase the green tax higher.I didn't get all the way through your article, but another problem was on the issue of "allowances."  Back in the day, air pollution permits had a "maximum emission rate" expressed in watts, BTU, resulting pollution, etc.  These allowances were set very high, assuming dirty fuels such as coal or Bunker-C fuel oil.  All the company had to do was to convert to natural gas or import some Wyoming coal and the problem disappeared overnight - instant credits of thousands of tons.  I am not sure if the Waxman bill allows such gaming of the system.You can bet the lawyers will have a field day with this hot potato though, since they get to comment and sue over any agency regulations in addition to the Congressional votes.  Things should be interesting this fall when the Senate debates the bill, and then EPA and other agencies have to draft regulations such as an "advanced notice of proposed rulemaking" (ANPR).  Hah, they'll be fighting over the clear meaning of words buried in the thousand-page missive as opposed to "unclear legislative intent."  Oops, did I infer the rule is too dang long and is too darn laden with pork?  Me?? Should be interesting viewing!

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    1. ClaudeB Posted 6:25 pm
      28 Jun 2009

      Clifford, that's the point. The idea was to reduce SO2 and NOx levels. If, by substituting their fuel source, they reduced overall emissions at the lowest cost possible for them, that's exactly the point. The economy is all about incentives and profit is the biggest of all.

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      1. Clifford Wells's avatar

        Clifford Wells Posted 7:16 pm
        28 Jun 2009

        Hard to explain this, but Bunker C and high-sulfur coal was rarely if ever used, and only for "emergency" uses.  These were not normal emissions in the least.  What happened was that during the fuel crisis of the 70s and early 80s, facilities were allowed to amend their permits to use high sulfur fuels in case of a national emergency.  So a unit might go from 20,000 TPY to 35,000 TPY and the upper number became the "allowable" under which you could trade.  Hey, nice to be able to trade off 15,000 tons of SO2 credits at 70 dollars per ton, and not do a darn thing! I don't have a lot of good to say about the concept, no matter how good it sounds.  If it works so well, why are CO2 emissions not being significantly reduced in Europe?  Were folks trading phoney date plam tree and airline miles for credits that were used for extra in Eastern Europe?  From a practical standpoint, such Ponzi schemes never really worked as well as they were advertised. The alternative seems to be a carbon tax.  Excuse me, since when did a tax every help anybody?  I believe in helping the needy and stuff, but with a carbon tax?  You must be crazy.  The way to limit CO2 is by restricting CO2 and other greenhouse gas emissions in terms of grams per mile, pounds per million BTU, pounds per therm or million cubic feet of natural gas, grams per kilowatt-hour, kilograms per tonne of fuel, or whatever rate-based measure you can find.  Plain and simple. that's how you do it. 

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  2. Tr2828 Posted 6:20 am
    29 Jun 2009

    Look at the picture is being güvenlik kabini used gasoline in the  United States.

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  3. OrganicCat Posted 8:06 am
    29 Jun 2009

    I think it's clearly evident that event slow changes get pushed back by the party of No.  Hard pushes are necessary for many reasons, one of which is because we can't sustain ourselves at our current level of consumption of resources and another (more obvious one) is that things get watered down so much that if we tried to implement "little" changes they'd be watered down into non-existence.  Larger pushes get changed into what we have here, not what we want, but better than nothing.  Could they try a more bi-partisan effect, maybe reducing the changes a LITTLE bit?  Probably, but in my (admittedly bias) opinion, we don't have the time to squabble over the pork and beans of it, we need to do it in a rational, efficient manner taking the vast majority of scientific evidence into account.As for the electrical comment, I kindly ask that you show evidence that electrical technology is somehow not up to standard for being able to replace current technology at the drop of a hat.  The only thing holding those technologies back are the money grubbing companies making billions off their old technology.  Fat lot of good that did them (like GE).

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  4. bmengr Posted 5:32 am
    08 Jul 2009

    We don't have to perfectly account for carbon emissions at the beginning.  Why not start with the easiest measure, which would require permits to sell fuel, give credit for carbon capture, and include the effects of large-scale agricultural activities?  Fine tuning the system could give bonuses for actions that will reduce carbon emissions in the future or take into account smaller actions (and the prospect of a cap being implemented could encourage people to use current, uncapped energy to make more solar, wind, etc devices).From the consumer's perspective, the costs are just built in, so there's no paperwork to be done.  When you pump your gas, the seller will have arranged for permits to cover its use.I'm certainly worried about the potential giveaway of billions of dollars worth of carbon permits to the energy industry, given corruption trends. If we imagine that it is politically possible to have a 100% auction system, however, there would be no reason for companies to pretend to be worse than they are, and thus there wouldn't be a "bunker coal" situation.  Two problems solved at once!  If money from the auction were distributed equally to all American citizens and maybe permanent residents, those consuming the least would come out ahead and there would be better incentives to reduce all around. It will be important to have the infrastructure in place for taking more dramatic action if it does turn out to be needed, or increase the cap if the earth is doing 'ok' and the models start looking more livable.  There's no reason auctions couldn't be held quarterly or even more often, and this would allow a rapid response to actual results.Cap and trade will increase costs or some people, but it will also reduce the extent to which the costs of consumption are externalized and produce a system that is more fair to those who use less.  The tradeoffs between different consumer choices will shift, so that a decision that is best for the environment is more likely to also be better for the purchaser's bottom line.  Hopefully water usage and trash production will also factor in somehow, so that these metrics don't worsen.Remember, we're not just talking about climate change.  Ocean acidification will probably cause the elimination of shellfish, reduce fish production, and kill off reefs - all within the lifetimes of most people here.   Personally, I like being able to eat fish.

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