I now get why Europeans are disgusted with the European Parliament

The European Parliament last week rejected a fix to their cap-and-trade system that would have set a bottom floor to the price of carbon, a floor that likely helped keep California's system functioning through a tentative start to a better shape (so far).

Among other things that are annoying is that European fossil fuel-dependent industries say that a floor will put them at a competitive disadvantage to Americans, an ironic repetition of what the same American industries say about Indian and Chinese competitors. In Europe's case it also happens to be a lie as far as California's concerned, and dubious in the case of New England (has an existing-if-low price for carbon, and plans to restrict allocations further).

So you've got a system that can work if you make it work. Demanding that the sausage making of government work as well as one's ideal proposal (like a carbon tax that would supposedly emerge unscathed from a political process) is unrealistic, but then the failure to improve the solution is just stupid. The only good aspect is that it's not over - the Parliament left open the door to reconsider their action.

Another way to look at it: China and India committed to permanent greehouse gas advantage for the US (and Marco Rubio is lying)

News recently announced that China plans to enact a carbon tax, along with its longstanding commitment to never match US per-capita emission rates, and India's greater commitment to never match OECD rates, all suggest a need to look at emissions a different way.

What matters is total emissions over the modern time period from the recent past until several generations (at least) into the future.  There has to be a limit, that limit has to be divided among nations, and that division has to take population into account at some level.  The US can't be expected to produce the same total emissions as Mexico, and China can't be expected to produce the same as the US.

So if we set a per-capita limit, with China and India agreeing that for all of the 20th Century and for much of the 21st Century that the US can produce more per-capita, then the total per-capita emissions over the two centuries (or even just the 21st Century) will be far greater for the US.  China and India are saying they're willing to accept that outcome.

China and India could easily have taken a different stance, and said that because the US produces more emissions per-capita in the first 50 years of the 21st Century (let alone the previous century), then they should be allowed to produce more per-capita in the second half.  Instead they are planning to do more than we are doing.

For Republicans like Marco Rubio to say the rest of the world is doing nothing and therefore we shouldn't either, when China and India have actually committed to do more than the US by having total lower emissions, is outrageous.  And no matter how you slice it, Rubio is lying about India repeatedly - even with three times the US population it is not "polluting in the atmosphere much greater than we are" - their total emissions are one-third of ours.  Rubio is lying, and the rest of them are deceptive.

California cap-trade passes second test better than first

California's cap-and-trade passed, barely, its first test last fall with an auction price that just barely exceeded the $10/ton minimum price.  The second auction of carbon allowances last week went better, with all carbon allowances selling at $13.62/ton, right in the middle of the expected range of $11-15/ton.  The amount of carbon allowances released for auction isn't so big that regulated buyers figured they only needed to pay the minimal amount because it would only take minimal effort to comply with or buy allowances later, nor was it so little that buyers were forced to pay top dollar and would then come screaming that the political system is demanding more change than is economically feasible.

Coming in at another $3/ton also means more money available to fund the other important parts of California's climate mitigation plan.  Finally, half the 2016 allowances were sold, which is fine - the market has another way to satisfy the same demand by selling them as futures.

So far, the California system seems to be doing a lot better than Europe's.  Probably not a huge surprise - we got to see what didn't work.

Incremental progress - we just need more of it and faster.

The California Cap passes its first test, barely

News coverage of the California cap-and-trade auction results diverged fairly sharply into whether it went well or had problems. Put me in the half-full category that it went well enough, but just barely.

The Air Board announced a sale price of $10.09 a ton, just barely above the reserve price of $10 and lower than the expected $11-15. Digging around a little doesn’t make the auction mechanics very clear – many bids were far higher than this. The reports imply that everyone paid $10.09, which would mean some type of Dutch auction setup.  (UPDATE:  confirmed it's a Dutch auction arrangement where everyone pays the same price.  Good explainer of the whole auction by Reed Smith is here.  The reserve price is a minimum that keeps the market from collapsing - if there's not enough demand for all the allowances to keep the price above that minimum, the effect of the reserve price is to reduce the supply of allowances being sold.)

I doubt it’s coincidental that the price is just above the reserve – that suggests the ‘market’ expectation is that it won’t be too hard to for California emitters to meet the cap, something that’s uncomfortably close to the problem of the European market that has too high a cap and a collapsed market. OTOH, emitters didn’t have to buy any allowances if they thought they could meet the cap on their own, so their expectation is that the Air Board will keep the California market from collapsing. I put the word ‘market’ in scare quotes because a sealed-bid auction barely qualifies – we’ll get a better idea of market price when trades start happening on a regular basis.

So it worked. A somewhat higher price would suggest a better-functioning market and more incentive for carbon reductions, although a much higher price would provide ammunition to critics’ ridiculous claim that the cap harms California’s economy.

Critics of the system include the state-level California Chamber of Commerce, treading a perilous line against California green energy businesses. The state Chamber filed a lawsuit against the auction on the day before it started. I expect they’ll take some flak for waiting so long to file, but I’ll have to save a look at their legal interests for another day.

The economic interest here is that free carbon allowances actually benefit emitters – the allowances have economic value that can be resold, and California is issuing 90% of the first emissions for free (that percent will decline over time). A 90% benefit isn’t good enough for the Chamber though – they want it all for free, forever. At least they claim they’re not trying to destroy the cap market – they just want free allowances – and that distinguishes them from the evil that is the US Chamber.  This isn't a trivial distinction from the US Chamber, by the way, and shows some-if-inadequate level of responsiveness to in-state business politics.

Even a 100% auction in my opinion would benefit California green businesses and help cement the leadership this state has on the green economy. The state Chamber is being short-sighted on a number of levels, especially if their effort to change the cap market ends up destroying it. This might be a good place for the state legislature to step in and backstop the Air Board’s decision, something that could be possible now that the Democrats have two-thirds majority in both houses, a requirement under the tax-revenue stupidity of California's Proposition 13.

An aside - there is a dividend component to the cap.  In a somewhat complicated procedure, utilities get all their allowances for free but are required to sell some and split the proceeds so 15% goes to reducing greenhouse emissions and the remainder as a credit applied to utility bills.  Seeing that credit will help counter the inevitable claim that the money is just going to solar power fat cats.

Happy California Cap-And-Trade Eve

Nice radio program on California's cap-and-trade allocation auction that starts taking bids tomorrow, and on Monday we'll find out the price per ton, with a minimum price set by regulation at $10/ton.  Second biggest cap-and-trade market in the world after Europe.  Hopefully we've learned from other's mistakes (and I think we have).

One critique deserving a response is whether including a minimum and maximum price on allocations somehow proves a failure of the cap system.  The idea is if a cap's appeal over a carbon tax is that it determines the total amount of emissions, then the floor and ceiling prove the lack of commitment to determine the right amount of emissions.

Three responses:

1. Doesn't matter anyway unless the price hits the floor or ceiling.

2. It's a little simplistic to say a tax focuses on specific price for carbon while a cap focuses on specific quantity of carbon emissions.  The floor and ceiling for a cap just lets society choose a tradeoff between price and quantity.  You could do something similar with a tax by letting the tax price change if total emissions fall through a floor or above a ceiling.

3. If greenhouse gases were as easy to eliminate as ozone-destroying chemicals then we'd have a similar schedule for phaseout.  It's not that easy, so we're doing things less quickly under either a carbon tax in Australia, or cap in Europe and in parts of the US.  Putting a floor is an indication that we overestimated the difficulty in achieving a reduction and therefore will require a larger reduction.  It's actually good news, that we can achieve reductions more quickly than anticipated.

We've got enough problems without shooting ourselves in the foot

A somewhat depressing article in the NY Times about wasted money being spent on the waste gas HFC-23, so much so that it's been produced in order to be destroyed.  It looks like the problem is finally being brought under control, with the UN tightening down what qualifies and the Europeans finally rejecting outright doing any more future payments for this.  Still, the problem has been obvious for years.  Offsets can work, but only if they're done right.

Skinny people dieting to reduce human biomass

So concludes David Appell about Mexico's new climate change law (my paraphrase).  Kinda hard to find detailed info about the law - David has useful stuff, a little more at Nature, and then way too much to sort through at the official legal gazette in Spanish.

The 50% below 2000 levels by 2050 will attract attention, but short term is what counts most to me.  They want 30% below business as usual by 2020, which sounds impressive but vulnerable to weird accounting.

They set overall limits and allow emission trading, so this is cap-n-trade for those who don't like that kind of thing.  I think it can be done well or done poorly.  Hopefully the American and European experiments will help Mexico figure out a good system.

Mexico's drought may have spurred political support for the law.  Too bad we've seen less action here in the States, although climate weirding has seemed to pick up some popular notice.

Progress, a bit at a time.

UPDATE:  what I really wanted to find out is if the law has a counterpart to what's been in American proposals - a tariff on imports from foreign nations that don't control carbon emissions.  That would be interesting, and entirely appropriate.  I skimmed the long Spanish web page but ran out of steam before I could find out.

Whaling cap and trade has the politics of carbon taxes

The politics is that I don't see it happening, or at least not as the primary tool for managing the problem, regardless of the merits.

Unfortunately the paywall means I can't RTFA in Nature, but here's the Washpost and an interesting take by Holly Doremus.  A pure cap/trade, which they're not proposing, would require whaling nations to buy whaling allocations they now steal from the world's common heritage for free, so politics rules that out.  The authors apparently propose allocating parts of the harvest for free to whaling nations, which raises the question of why anyone else would support it.

The other biological aspect of this issue that I haven't seen discussed stems from my understanding that the current harvest is likely significantly less than what some common whale species can handle.  Of course whalers currently ignore species restrictions and kill whatever whales they can find, but that gets arm-waved (and more could be done if the political will existed).  This proposal could result  in an increased allocation, making it more expensive for whaling opponents to buy out quotas.

I agree with Holly that there are non-economic problems with this proposal, although I disagree with her implication that an economic approach is incapable of addressing non-economic problems.  Just this one.

Holly also picked up on the same parallel I saw to attempts to buy slaves as a way to end slavery.  I wouldn't be as dismissive as she is though.  I suspect buying slaves their freedom was an important method to reduce the number of slaves in states where it was a marginal activity, making it easier for those states to move to abolition. Pennsylvania then moved to a gradual abolition of slavery in 1780, diminishing the economic impact to slaveowners by putting it off into the future.  Economic approaches have their value.

Glenn Greenwald is primarily responsible for the failure of progressive legislation since 2008.

The reasoning's simple:  Greenwald's part of the left, just like Obama and the Democrats who controlled the House and had a filibuster-proof majority in the Senate for a while.  Greenwald's side failed to pass enough progressive legislation, therefore Greenwald's primarily responsible.

If you don't like this reasoning, complain to Greenwald:  he used the same reasoning to say voters will determine that Republicans are not primarily responsible for the failure to pass progressive legislation, laying responsibility instead at Obama's feet, especially with repeated reference to the 60-person Senate majority.  Greenwald does some really good work on civil liberties but mixes it in with this terrible reasoning.  Fault lies primarily with the Republicans, secondarily with the Democratic Senators (and some Representatives) who refuse to vote in defense of the middle class and for scientific reality.  Obama is not a Prime Minister.  Maybe somewhere Greenwald has laid out how he thinks Obama could've pushed legislation through, but he certainly didn't make that point when I listened to him.

That's not to say Obama is blameless - Greenwald rightly points to the HAMP mortgage modification failure as a self-inflicted wound.  On legislation though, he and we have to deal in reality.

Speaking of reality and legislation, we might want to look ahead.  A best-case scenario in 2012 elections will bring Obama back along with marginal control of the Senate and House.  I'm guessing more likely that Obama returns and we only get one of the two congressional houses, and even worse scenarios are very plausible.  The  best case scenario, in other words, still has us in worse position than 2009-2010.  Things generally get worse in mid-term elections for the majority party, and the majority party starts getting tired and often corrupt after many years in office.  

I think the best chance to pass climate legislation for another four years was the one that we had before the 2010 elections.  It really is a shame that many enviros failed to push for cap-and-trade, because as marginally, politically viable as it was, it was the best shot for years to come.  A national carbon tax was not politically meaningful and will take a lot more changes of political fundamentals before it will be.  Some enviros missed the boat last time.  We can still work together though do things on a piecemeal basis and at the state and local level instead, and gradually enforce carbon regulation through the Clean Air Act and other laws.

The Water District reducing GHG emissions and California cap-and-trade

Today's Water District meeting featured an energy usage work study session.  We use a lot of energy moving water across much of the state and then treating it, about 5% of all our costs.  While we also have a policy saying we that want to reduce greenhouse gas emissions, our policy isn't very clear.  I pressed staff on this issue and another director, Linda Lezotte, also followed up:

(Arrgh, something won't let me post more than one video excerpt.  It's here for the December 5 2011 meeting at the 01:11:00 mark, for about 4 minutes.  Two of us seven directors say we need to do more than merely "cost-effective" efforts to reduce GHG emissions, the other five don't say anything.)

We're pretty good overall in our energy usage.  Maybe we can partner with Sonoma County to be better.
We're part of a joint powers authority for buying our power at a rate that's both cheaper and with lower carbon emissions than our local utility provides.  Our CO2 emissions are 435lbs/MWh, one-third the national average (see the first link, Attachment 4, p 17). Not the one-tenth that we need, but pretty good.

While California cap-and-trade doesn't apply directly to us, it does apply to the joint powers authority called PWRPA that we helped establish to get our power, and we may have a chance to sell carbon allowances from environmental improvements that we make:



(UPDATE:  okay, more linkrot, but it's towards the end of the discussion of Item 4.1 at the link above.)

In addition to what you can see on the video is the 3 hours that we spent in closed (confidential) session to discuss internally the negotiations with labor unions for new contracts.  Obviously I can't talk about what happened then, but the financial issues highlight how important the economics of all this is. If doing the right thing environmentally can help us out financially, we're going to do more of the right thing, especially right now when finances are so tight.

California creates second-largest cap and trade market, to start next year

Still looking around for the best writeup, but this seems pretty good:

The California Air Resources Board yesterday [Oct. 21] gave its final approval to the state’s cap-and-trade system, which sets limits on carbon emissions starting next year.

CARB unanimously approved details of the regulations over the objections of industry groups, the San Francisco Chroniclereported, with the board’s major actions focusing on the allocation of carbon allowances.

Under the plan approved yesterday, the state will limit carbon emissions from its 350 or so biggest emitters starting in 2012, with enforcement starting in 2013. The carbon cap will drop every year until 2020. Over this time, CARB expects the program to prevent 273 million metric tons of carbon emissions.

The regulations will cover electric utilities and large industrial plants first, later expanding to cover fuel distributors. Each company covered by the program will need to hold allowances for carbon that they emit over the cap, and companies will be able to trade these allowances in the marketplace. This will create the world’s second-largest carbon market behind that of the EU, with about $10 billion in allowances traded by 2016, according to the Los Angeles Times.

Initially 90 percent of allowances will be free, with companies needing to buy the other 10 percent. From there some industries will see the percentage of free allowances drop to about 30 percent. Emitters will also be able to meet up to eight percent of their required emissions reductions through carbon offsets.

In a letter to the board, industry groups and the California Chamber of Commerce called the 10 percent purchase requirement an “unjustified, job-killing tax,” and they said California would lose business to other states and countries. Water agencies are also covered by the regulation, and they told the board that the program would increase water rates.

....

Environmental justice groups had argued that cap-and-trade would increase pollution in low-income neighborhoods near high-emitting facilities, because polluters could simply buy the right to increase pollution.

The board yesterday responded to these concerns by approving an adaptive management plan, which would monitor the air quality of neighborhoods near regulated facilities, the APreported. If pollution does increase, the CARB said it would respond.

Last week Bank of America Merrill Lynch announced it is entering the nascent California carbon trading market with an agreed option to buy several million tons of offsets from TerraPass, through 2020.

Just to add a few comments: limits in 2012 with no enforcement until 2013 sounds to me like the program really starts in 2013. OTOH, the market is already getting moving (see the last sentence from the article), so that's good.

I believe the free allowances are grandfathered from past emissions. That would also be anti-competitive, because new entrants would have to buy allowances. No wonder the Chamber wants them to be all free.

The part about water agencies complaining is news to me. Guess I should look that up.

The enviro justice groups' lawsuit is a huge mistake. This response is cutting it close to the law though - I hope it works out.

Together with Australia's carbon tax and the European Union's cap system finally getting beyond its intentionally-easy stage, we're seeing some incremental progress. We need far far more than incremental progress, but we shouldn't forget that it's happening, either.

Good writeup of the original California program here, by an offset critic who thinks California's system isn't too bad. I believe the finalized program is only marginally different.