GREENHOUSE GAS 101

Policy Matters Ohio All materials taken from Dr. Hummel’s Climate Policy Design website

Explaining the Greenhouse Effect

Figure: www.myclimatechange.net

Warming is unequivocal: clear and unambiguous.

Source: IPCC, AR4, WG1, Chap 6, Fig. 10

Rise in CO

2

Concentration is Accelerating.

One fifth of our CO 2 emissions today will remain in the air in 3009 Atmos. Chem. Phys. 7, 2287-2312, 2007

Stabilization of CO 2 concentration, temperature, and sea level takes centuries after emissions are reduced IPCC TAR SYN SPM Fig 5-2

Water supply in Himalayan watersheds is a major humanitarian concern.

Rongbuk glacier in 1968 (top) and 2007. The largest glacier on Mount Everest’s northern slopes feeds Rongbuk River.

Slide from Dr. James Hansen’s Congressional briefing June 23, 2008.

Cap-and-Trade Systems Under Development Western Climate Initiative (WCI) EU Emissions Trading System (EU ETS) Participant Observer Regional Greenhouse Gas Initiative (RGGI, “Reggie”)

Cap-and-Trade Climate Policy

• • “Cap-and-trade” means a government authority establishes a cap limits the total amount of pollution allowed, that and then distributes allowances for “permission to pollute” the global atmosphere, which can be traded as private property. The amount of greenhouse gas emissions permitted declines each year, creating demand for a new commodity: carbon permits .

• When offered enough money (or faced with high enough costs), polluters who own permits (or need permits) will reduce their emissions.

• These trades establish a market price for greenhouse gas pollution.

Got it?

A familiar game can help illustrate the concepts…

Musical Chairs A Helpful Analogy for Managed Scarcity Each chair represents the “permission to pollute”: one metric ton of carbon dioxide (1 mtCO 2 )

or an equivalent amount of any other greenhouse gas

If you have an “allowance”, you can have a chair.

Players: Polluters at Points of Regulation

Power Plants Oil Refineries Aluminum smelters Natural Gas companies Chemical companies

Cap-and-Trade

Declining Cap Covered Entities

Polluters Compete for Scarce Permits

Carbon Price Established by Market Activity So, is it more profitable to:

buy a permit, OR reduce my own

emissions?

Profit opportunities are a main driver for innovation and investment , and the climate challenge needs both.

Carbon Price Established by Market Activity

$40

Would anyone accept $40 for your permit?

Carbon Costs Passed to Consumers

Sending a price signal is the point of the policy!

$40 $40 $40 $40 $40 35¢ per gallon 2.5 ¢ per kWh 0.6 ¢ per therm People Respond…?

Moving to Clean Energy

Players seek better options as costs rise .

Cap-and-trade lets players choose at what price they leave the game – and how they want to make that change.

Green buildings Hybrid vehicle Solar power Nuclear power Rail Transport Wind power $100 $50 $200 $20 $150 $30

h Price On Carbon Demand $50 $20 50 MtCO 2 100 MtCO 2 Quantity of Permitted Emissions

Price On Carbon $50 $20 Supply 50 MtCO 2 100 MtCO 2 Quantity of Permitted Emissions

Carbon Cap vs. Carbon Tax Price On Carbon Demand Supply

P Q

Quantity of Permitted Emissions

Carbon Cap vs. Carbon Tax Price On Carbon Demand

Cap P Q

Quantity of Permitted Emissions

Carbon Cap vs. Carbon Tax Price On Carbon Demand

P Tax Q

Quantity of Permitted Emissions

Carbon Cap vs. Carbon Tax Price On Carbon

Carbon

Demand

Cap

Demand

P P Carbon Tax Q

Should we set the quantity and let markets determine the price for a scarce resource?

Q

Quantity of Emissions Should we set the price and let markets determine the quantity of pollution?

JOBS: 1) New Green Jobs

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2) LEAKAGE

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Climate Policy Design

• • • All credits to Dr. Holmes Hummel of the University of California Google ‘Climate Policy Design for complete curriculum These slides were taken from her site, which is available for your use as well – a great resource of explaining climate policy to your colleagues and members.