1 / 13

Cap-and-Trade Legislation Overview: Advantages, Structure, and Operation

Understand the key components of cap-and-trade legislation, including the federal role in reducing greenhouse gas emissions, the advantages of this approach, and the basic structure of cap-and-trade systems. Explore the covered sectors of the economy, operation details, comparison of emissions targets, allocation mechanisms, and offsets. Learn about critical issues and considerations in implementing cap-and-trade, such as regional challenges, technology availability, and cost containment approaches.

penney
Download Presentation

Cap-and-Trade Legislation Overview: Advantages, Structure, and Operation

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Overview of Cap-and-Trade LegislationPresentation by Matt WardClimate Communities July 30, 2008

  2. Federal Role in GHG Reductions • Setting overall national target for GHG reductions in set time period • Setting uniform national approach (that accounts for regional issues) • Reducing costs and inefficiencies of regulation • Fostering transition to a green economy

  3. Advantages of Cap-and-Trade Approach • Command-and-control (set emission rates and control technologies) is inflexible, costly & stifles market and technological innovation • Carbon tax is politically challenging, with no certainty on cap & emissions reductions • Successful precedents with Acid Rain and NOx trading programs • Market-based system results in overall economic efficiency through price on carbon control • System fosters technology development & innovation

  4. Basic Cap-and-Trade Structure • Overall national annual cap on carbon-equivalent GHG emissions, declining over time to desired total reductions • Under this cap, “allowances” (rights-to-emit) would be distributed and/or sold to covered emitters and/or to other targeted sectors • 1 ton of carbon equivalent = 1 allowance • Covered emitters must hold sufficient number of allowances to cover annual GHG emissions • Emitters who reduce GHG efficiently have extra allowances to sell on open market, emitters who cannot reduce efficiently must buy allowances on market

  5. Comparison of Economy-wide Cap-and-Trade Emissions TargetsIncludes Legislation Introduced in the 110th Congress as of May 30, 2008 Source: Pew Center on Global Climate Change

  6. Covered Sectors of Economy • Lieberman-Warner approach: • Coal-fired and gas-fired electric utilities, fossil-fired manufacturers, petroleum refiners, natural gas processors, possibly others under EPA rule • 2,100 sources • 87% of U.S. economy • Upstream cap-and-auction • Sectors not typically covered: • Farming, local governments, individual vehicle tailpipes, small sources

  7. Cap-and-Trade Operation • EPA establishes system for issuing, recording, transferring & tracking allowances • Other federal boards to oversee and support markets and technology incentives • Target date for starting 2012 with key targets in 10-20 years and by mid-century • Measurement, monitoring and reporting of emissions & allowances critical to successful system • Cost containment approaches – offsets, borrowing, banking, compliance period flexibility, cost safety valves • Enforcement (pay 3x market value or $200)

  8. Auctions vs. Free Allocations • Free allocation of allowances to covered emitters based on historic emissions baseline • Advantage – easy to determine recipients; recipients do not need resources to obtain; institutional precedents • Disadvantage – some industries will pass compliance costs onto customers anyway, reaping “windfall” profits; no proceeds for investment in transition and green economy • Auctions require sources to bid and buy allowances • Hybrid or shifting allocations

  9. Targeted Distribution of Allowances & Auction Proceeds • Transition assistance – carbon intensive states, carbon intensive industries, utility customers, carbon workers, CCS technologies • Green activities – local governments, green buildings, transit, renewables, efficient manufacturing, advanced vehicles & fuels, low carbon technologies • Adaptation – vulnerable states & localities, wildlife • Public benefits – farmers, foresters, international • Consumer dividends

  10. Allocation of Cap-and-Trade Resources under Lieberman-Warner Source: Office of Senator Joseph Lieberman

  11. Lieberman-Warner Allocations (cont.) Source: Office of Senator Joseph Lieberman

  12. Offsets • Regulated entities could comply by purchasing GHG emissions reductions elsewhere: • Activities outside the cap (e.g., landfill gas recovery) • Terrestrial carbon sinks (forestry, no-till farming, international reductions) • Different views on offset levels • Offsets must be real, measurable, verifiable, additional & enforceable • Proposal for new offset approaches by localities

  13. Issues to Resolve • Stringency of national carbon cap • Regional issues • Technology availability for GHG control, sequestration, transformation • Energy price impacts (gas, utility bills) • Utility issues – nuclear, coal, auctions • Federal preemption of state & regional trading • Worker transition • Cost safety valves • Involvement of developing countries • Complicated system

More Related