Transcript GREENHOUSE GAS 101 - Policy Matters Ohio

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 CO2 Concentration is Accelerating.
Scripps Institution of Oceanography
NOAA Earth System Research Laboratory
One fifth of our CO2 emissions today
will remain in the air in 3009
Atmos. Chem. Phys. 7, 2287-2312, 2007
Stabilization of CO2 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 that
limits the total amount of pollution allowed,
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 mtCO2)
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
35¢
per gallon
$40
$40
$40
2.5 ¢
0.6 ¢
per kWh
per therm
$40
People
Respond…?
Moving to Clean Energy
2020
2030
2040
2050
2010
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.
Rail Transport
Hybrid vehicle
Nuclear power
Solar power
Green buildings
Wind power
$100
$50
$20
$150
$200
$30
h
Price
On Carbon
Demand
$50
$20
50 MtCO2
100 MtCO2
Quantity
of Permitted
Emissions
Price
On Carbon
Supply
$50
$20
50 MtCO2
100 MtCO2
Quantity
of Permitted
Emissions
Carbon Cap vs. Carbon Tax
Price
On Carbon
Supply
Demand
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
Cap
Demand
P
Demand
Carbon
Tax
P
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 
2) LEAKAGE 
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.