Every year, Gustavus Adolphus College in tiny St. Peter, MN holds a Nobel Conference, authorized by the Nobel Foundation of Stolkhom, Sweden. The conference brings together renowned experts to discuss timely issues, like aging or globalization. This year, it was “Heating Up: The Energy Debate.”

I attended the two-day event, which delivered in its round-up of impressive energy and global warming experts: Nobel Laureate in Physics Dr. Stephen Chu, biofuels expert Dr. Lee Rybeck Lynd, peak oil expert Ken Deffeyes, economist Paul L. Joskow, polar explorer Will Steger, hydrogen expert Joan M. Ogden, and James Hansen, Director of NASA’s Goddard Institute for Space Studies.

While at times the science got a bit thick, the message from all of the lecturers was clear: Global warming is urgent, we need to do something NOW, and many different solutions will get us there.

I was most interested to hear from Paul L. Joskow, an MIT economist who discussed the best methods for regulating carbon dioxide (CO2), a major contributor to global warming. Many politicians favor a cap-and-trade policy, in which a limit on CO2 is determined and then tradable/sellable permits to pollute are issued to utilities and industry. Economists, on the other hand, generally prefer a carbon tax that simply taxes CO2 at a certain rate.

Although an economist himself, Joskow argued that a cap-and-trade policy is the best way to create a market for CO2 and drive down emissions. First of all, a cap-and-trade policy is politically feasible, and making sure it actually has a chance of passing Congress in our lifetime is the most important thing to slowing global warming. Secondly, a cap-and-trade plan links the U.S. with other nations (and other states) that have already started down this path, thus creating a global solution to a global problem.

While economists favor a carbon tax that the feds could ideally use to cut taxes in another area, like income, Joskow said “perfect the enemy of good.” Sure, in a perfect world we would tax bad stuff and never tax good stuff (like working). But the urgency of global warming calls for a good system that is feasible now and gets us in sync with the rest of the planet. And the best system for that is a cap-and-trade policy.

Joan M. Ogden lectured on a hydrogen economy, although her fellow panel discussion presenters were skeptical of using hydrogen as a fuel source, at least in terms of it being ready fast enough to fight global warming. Although no option should be taken off the table, hydrogen could play a more important role in bettering existing technologies (like ethanol production) rather than creating an entirely new infrastructure.

Dr. James Hansen – you may remember him from his accusations that NASA officials edited his global warming reports – said that if someone is seriously concerned about climate change, any elected official they vote for should agree on three principals:

1) A moratorium on traditional coal-fired power plants (until we can sequester the CO2, building more plants moves us backwards)

2) Policies that encourage more renewable energy

3) Incentives for energy efficiency.

With the clean technology here but the leadership lacking, the issue of urgency was paramount throughout the lectures. In fact, I thought the statistics and scenarios put forth more dire than those I normally read in the media. More than one expert prefaced a recommendation with something like, ‘A year ago I would’ve been laughed out of the room for saying this, but now I can say that what we need to do is…’ The extensive media attention on global warming, along with some serious dialogue and action by the business sector and politicians, have made it “safer” to talk about the true consequences and costs of global warming without immediately being labeled a nutcase.

For example, MIT economist Paul L. Joskow said that any sort of carbon regulation is going to raise our utility bills “and anyone who tells you otherwise is lying.” With a cap-and-trade policy that sets CO2 at $50 per ton (a price he thinks is likely), it could drive up utility bills 40-50%. But this would not happen over night: Any measure passed by Congress would give utilities several years to implement efficiency programs to soften the landing. But the message was still clear: This isn’t going to be easy, but we can do it.

Polar explorer Will Steger, who has been traveling and studying the arctic and Antarctic regions for 40 years, gave an eyewitness account of global warming’s effects at the poles (in May I interviewed him about his most recent trip). I’d heard his talk several times, but there was a big difference this time: He showed a slide of polar bear and then said in his quiet-but no-BS –sort-of-way, “This is our friend the polar bear. I’m afraid there’s nothing we can do for them – they will go extinct. I couldn’t say that 18 months ago to people, but now I am.”

Despite the wake up calls – no use in sugarcoating at this point – it was still uplifting to know that some of the planet’s smartest people are working on this and elected leaders are slowly getting the message.

Now, it’s time for the rest of us to get to work. For starters, check out Will Steger’s “Template for Action,” Lighter Footstep’s “10 First Steps,” or the Union of Concerned Scientist’s “How You Can be Involved.”

While voters, businesses, and politicians are calling for carbon regulation, exactly what that regulation would look like is far from decided.

Carbon taxes and cap-and-trade systems are the two most-cited proposals for cutting carbon dioxide (CO2), a major contributor to global warming. Supporters argue over which plan would be the most efficient method of cutting emissions while allowing for flexibility in the economy.

A carbon tax is a tax levied on CO2 emissions. Those who favor a carbon tax say it will drive innovations and technologies that allow for the same amount of work to be done with less pollution, and decrease the demand for products that are dirtier and thus more expensive. Critics point out that a tax would have a harsher impact on the poor, while others argue that carbon tax revenues could be used to lower other taxes, like income taxes or payroll taxes.

A carbon tax also makes many elected officials nervous: New taxes, fees, or whatever you want to call them, are rarely popular with voters. One notable supporter of carbon taxes — although he’s not running for office anymore — is Al Gore. He has promoted a carbon tax in addition to implementing a cap-and-trade program.

A cap-and-trade system requires an overall cut in emissions. Companies that cut emissions further than required are issued permits that they can then sell to companies that can’t or won’t cut emissions far enough.

Promoters of cap-and-trade say that the system provides an incentive — rather than a heavy-handed tax approach — to cut emissions because companies can sell the excess permits. It also requires a definitive limit on emissions, while some are afraid that a carbon tax would simply drive companies to pay the fines, pass the increase along to consumers, and keep on polluting. Companies like GE, DuPont, Duke Energy, and Toyota back a cap-and-trade policy, as do many environmental groups and labor unions. Presidential candidates like Hillary Clinton, John McCain, and Barack Obama also prefer it.

This fall, Congress could see a slew of measures to cut CO2. Senators Joe Lieberman (I-CT) and John Warner (R-VA) are planning to propose a cap-and-trade bill. Representative John Dingell (D-MI) is expected to introduce a carbon tax proposal — not in the hopes of actually passing it, but rather just to show how unpopular such a tax would be.

San Francisco Chronicle
Wall Street Journal, via Environmental Economics

Finance ministers from the Asia-Pacific Economic Cooperation forum (APEC) met last week in Australia to discuss how to meet the region’s energy needs and combat global warming. Key to this effort, they concluded, is to establish a framework to take the place of the Kyoto Protocol when it expires in 2012.

Market-based strategies, like a cap-and-trade policy used in Europe, were discussed. A cap-and-trade policy sets an overall limit on emissions, and then grants entities (factories, for example) permits that allow them to emit a particular amount of pollution. If they emit less than what is allowed, they can sell the surplus permits to a business that can not or will not meet their emissions requirements. This puts a price on emissions and creates an incentive to lower them. The value of global emissions-permit trading was over $30 billion in 2006, with 81 percent of that in the European Union.

APEC economies represent half of the world’s trade and include the world’s largest emitters, the U.S. and China. Neither country is bound by the Kyoto Protocol: China because it is a developing nation, and the U.S. because it didn’t ratify it. Another APEC member and large emitter, Australia, also didn’t ratify Kyoto but seems to making some progress with the announcement last week that it will start a national CO2 emissions trading system by 2012 and set a global warming emissions reduction target by next year.

China plans to cut energy consumption by 20 percent over the next five years. However, Finance Minister Jin Renqing told APEC members that developed countries have the responsibility to help developing ones with the technology to achieve this. China is the world’s largest user and producer of coal, and just passed the U.S. as the world’s largest emitter of CO2.

Australian Treasurer Peter Costello was encouraged by China’s talk of using market mechanisms to cut pollution. He foresees his country playing a larger role as energy demand increases in the region but traditional supplies dwindle or are unusable because of their global warming impact. He assured China that its development will not be interrupted by energy scarcity and that Australia has “a lot to offer” it in terms of energy security.

Bloomberg News

Last week, Bill Chameides, chief scientist at Environmental Defense, talked with Ira Flatow on National Public Radio’s Talk of the Nation: Science Friday about market-based policies to cut carbon dioxide (CO2) emissions, a big contributor to the global warming problem.

Chameides argued that the fastest, most cost-effective way to reduce CO2 emissions is with a policy called cap-and-trade. This system tells big emitters – like powerplants, automobile manufacturers, etc – that they have to cut their CO2 emissions by a certain amount by a certain date. For companies that make deeper cuts than what is required, a credit is issued and can be traded (sold) to other emitters that don’t meet the targets. With this system, explained Chameides, government plays “a fairly light role” by ensuring that technologies are valid and are reducing emissions, while carbon dioxide becomes a commodity and sold on the open market. Companies are rewarded for innovations that take them beyond targets set by lawmakers.

Cap-and-trade isn’t a new concept: A cap-and-trade policy was enacted with the 1990 Clean Air Act amendments to cut emissions that cause acid rain. According to the current Bush Administration, the cap-and-trade system has been a “resounding success,” cutting annual sulfur dioxide emissions ahead of target dates and at one-third of the expected cost.

When a caller pointed out the lack of action from the federal government on CO2, Chameides noted that states have taken the initiative. For example, the Regional Greenhouse Gas Initiative (RGGI) is an effort by Northeastern and Mid-Atlantic states to reduce CO2 emissions. RGGI employs a multi-state cap-and-trade program and requires electric power generators to make the cuts. California is also implementing a cap-and-trade system (one that targets all big emitters, not just the electricity sector, and which covers all six major global warming gases, not just CO2), and Europe’s cap-and-trade came into effect over two years ago. As important as it is for states to forge ahead, Chameides is concerned that without leadership from the federal government, we won’t get the cuts we need and we’ll fall behind in renewable energy innovation:

“Europe is way ahead of us in renewable energy technology and that’s where we’re really going to have to play catch up…If we wait long enough, we’ll have to be an importer of these technologies instead of an exporter.”

There are several bills in Congress that have cap-and-trade policies, and many see a “clear preference” for this approach among utilities, compared to a carbon tax. In fact, 91 percent of California businesses in one survey responded that a cap-and-trade policy was the best way to meet CO2 reduction goals. Chameides argued that a carbon tax – besides being “a political nonstarter” – doesn’t allow for measurable reductions, and the government sets the price on CO2 rather than the marketplace. The best way to slow global warming, spur technological innovation, boost our economy, and clean up our environment is with a measurable, market-based system like cap-and-trade.

UPDATE: See Maria Energia for another point of view: Fareed Zakaria of Newsweek argues that a global carbon tax is the most efficient, market-friendly way to cut emissions that cause global warming.

Business Wire, via Find Articles
Climate Action Network Europe
MarketWatch
National Public Radio
Regional Greenhouse Gas Initiative
Terra Daily
WhiteHouse.gov

The Global Warming Solutions Act in the Maryland legislature mimics the policy California lawmakers passed late last summer. The MD bill requires carbon dioxide (CO2) emissions to be reduced to their 1990 levels by the year 2020. According the Chesapeake Climate Action Network, the bill also requires energy efficiency measures, cleaner cars, and directs state agencies to draft global warming solutions plans. To hit the emissions targets, the Global Warming Solutions Act uses a “cap-and-trade” system.

A cap-and-trade system is a market-based solution to cutting CO2 emissions efficiently and with flexibility, resulting in real reductions. First, lawmakers establish a limit or “cap” to the emissions (in this case lowering them to 1990 levels by 2020). Often the caps are aimed at particular sources, like power plants. Next, the amount of emissions that are allowed under the new law are divided up into individual permits. Each utility is allowed to emit a particular amount of pollution according to their number of permits (normally a permit is equal to one ton of pollution).

The permits create a financial incentive for emission cuts by designating a cost to the pollution. A company that has cut emissions sufficiently can sell their extra permits to companies not able or willing to cut emissions enough to meet the requirements. This helps to ensure that companies cut emissions while remaining profitable.

Maryland already has a renewable energy standard that requires 7.5 percent of its energy to come from renewable sources by 2019. It’s also passed the Healthy Air Act, a strong power plant clean-up bill that will cut mercury and CO2 emissions. These laws and the Global Warming Solutions Act are just more examples of the states taking meaningful action on global warming and energy. The federal government will have to work even harder to catch up.

Hugg.com: Global Warming Solutions Act
Chesapeake Climate Action Network
Maryland Sierra Club
Union of Concerned Scientists