Spurring Early Greenhouse Gas Reductions in the U.S.
By Dr. Daniel J. Dudek and Joseph Goffman
Now what? That question has been on the minds of environmentalists, business leaders, politicians, and many ordinary citizens around the world as they ponder the outcome of December's climate summit in Kyoto, Japan.
The results from Kyoto actually are quite remarkable. For industrial countries to meet their commitment to cut greenhouse gas emissions at least 5% below 1990 levels, starting in 2008, will be both a formidable and a promising task. Formidable, because if the U.S. were to continue with "business as usual," our greenhouse gas (GHG) emissions in 2008 could be 30% above 1990 levels! But also promising, because the strategies and technologies to accomplish the needed reductions are sure to promote a host of beneficial innovations.
The daunting nature of the challenge can be seen in the graph at right. If the U.S. remains on its current course and follows the upward curve of GHG emissions, it will have to make abrupt changes later to get its emissions back down to the levels required by the Kyoto treaty in 2008-2012. Such abrupt changes will be expensive, and will increase the political resistance to comply with the treaty and limit the choices we can make in response to the climate challenge.
Greenhouse Gases Persist for Decades
The upward curve poses a serious environmental risk. Greenhouse gases do their damage by staying in the atmosphere for long periods of time, typically a century or more. That is why preventing their release in the first place is so important. Because the climate treaty's limits do not begin to take effect until 2008, however, there could be ten more years of increased, unchecked GHG emissions, as shown by the upward curve. Those increased emissions represent more warming of the atmosphere.
For all these reasons, the best answer to "Now what?" may be this: Start cutting GHG emissions as quickly as possible, well before treaty obligations begin in 2008. A market-based approach long advocated by EDF -(Environmental Defense Fund) and built into the treaty itself - provides the tools needed to stimulate early reductions.
The climate treaty will create a worldwide market for GHG emission reductions. After 2008, companies and countries that can reduce GHG emissions more than required will be able to earn money by selling the excess reductions to those that face greater difficulty in making their own cuts. This creates a positive economic incentive for making extra reductions.
An identical economic incentive system can be put into place - and quickly - to stimulate businesses to make early reductions voluntarily before 2008. Under such a system, companies that find ways to make early reductions would earn GHG reduction credits that they could save and use later to meet their mandatory GHG reduction requirements. They could also sell the credits to other companies who might need them for the same purpose. Either way, such a program would offer financial value to companies who make GHG reductions today or any time before 2008. This would benefit the environment by providing the atmosphere years of relief from the gasses' effects.
How it Worked for Acid Rain
The 1990 Clean Air Act's acid rain program shows how powerful such incentives can be in producing the early emissions reductions so critical to the battle against global warming. That program operates through a similar trading market to reduce emissions of sulfur dioxide (SO2), a major cause of acid rain. Electric power plants that reduce their emissions below the mandatory level during the program's first phase, between 1995 and 2000, can save those extra reductions to use or sell after the year 2000, when additional reduction requirements are fully implemented.
As shown in EDF's recent study, More Clean Air for the Buck: Lessons from the Acid Rain Program, the incentives created by this opportunity to profit from early reductions have led utilities to cut SO2 emissions by about 35% more than required in 1995 and 1996. The incentives have also created competition among pollution-reduction methods, driving down the cost of the reductions to less than one-tenth of the predicted cost.
The President and Congress can and should move quickly to create a voluntary program for early GHG reductions that would mimic the first phase of the acid rain program. Participants who chose to join the program would agree to keep their GHG emissions at a certain level.
For example, a company could agree to offset any increase above present levels of emissions. For any GHG reductions they made below present levels, they would receive GHG reduction credits, which they could use to meet any future (post-2008) obligations. Under such a program, early GHG reductions would have tangible financial value - as do SO2 reductions made between 1995 and 2000. Thus, companies who could make GHG reductions before 2008 would have a compelling financial reason for doing so.
An effective early reduction program would slow, and possibly even reverse, the upward climb of the curve shown in the graph. As a result, the U.S. economy's transition to the Kyoto treaty's limits on GHG emissions would afford a "soft landing."
Reducing greenhouse gas emissions in the next ten years not only benefits the environment, but also promotes the early discovery and use of technological innovations that ultimately benefit the economy. A voluntary program that delivers both economic and environmental benefits should command the support of the business community and of both political parties.
Dr. Daniel J. Dudek is an economist and Joseph Goffman is an attorney. Both are on EDF's Global and Regional Air Program staff.
from The EDF Letter