Editor's Note: With this post we welcome Shayle onto the writing team. Shayle writes out of San Francisco, and will be focusing on carbon trading and carbon markets, business and sustainability-innovations, new technologies and interesting policies and developments in utilities and energy generation. Welcome Shayle!
The United States has been trading emissions for over 15 years. The 1990 U.S. Clean Air Act created the Environmental Protection Agency’s Acid Rain Program, under which industries have been trading allowances to emit Sulfur Dioxide (SO2) and Nitrogen Oxides (NOx), two leading causes of acid rain. The successful emissions trading market that emerged from the Acid Rain Program formed the basis for emissions trading as a solution to our next global environmental problem, climate change. However, when the Kyoto Protocol came along, the U.S., which had been the main proponent of international acid rain legislation, shied away from action.
The Kyoto Protocol, which was ratified in 2005, introduced the first major greenhouse gas cap-and-trade program. With 172 signatories, Kyoto has already seen 1600 projects with 201 different methodologies to reduce GHG emissions. Though it has been in place since 2005, the Kyoto Protocol really starts on January 1, 2008, when “hard caps,” or more stringent, enforceable standards, take effect. The U.S. had, until recently, awaited the effects of Kyoto strictly from the sidelines.
However, it looks as though legislators throughout the U.S. are beginning to embrace greenhouse gas (GHG) emissions trading, or carbon trading for short (although multiple greenhouse gases will be traded, they will be expressed in metric tonnes of carbon dioxide equivalent, or Tonnes CO2e). In the past two years, cap-and-trade legislation has emerged from various sectors of the government, gaining more and more notoriety as global warming becomes recognized as fact, not theory.
As it so frequently happens, states are leading the way. Governor Schwarzenegger of California passed AB 32 in 2006, requiring the California Air Resources Board to implement a statewide cap-and-trade scheme to be put in place by 2012. With a target of reducing statewide GHG emissions to 25% below 1990 levels by 2020, California has immediately stepped to the forefront of emissions trading.
On the East Coast, nine states have so far signed on to the Regional Greenhouse Gas Initiative, or RGGI, with three more states considering action. Originally proposed by New York Governor George E. Pataki, RGGI will introduce a cap-and-trade system among states starting in 2009, with a target of 10% reduction in GHG emissions by 2020.
Slowly but surely, the Federal Government is also taking heed. A number of cap-and-trade bills have been introduced in the senate, none of which have gained much steam so far. The one possible exception is Bingaman/Specter which was introduced just over two weeks ago. This bill has gained support from both sides of the aisle, but has come under fire from environmentalists because it contains a clause for a “safety valve,” or a price for emissions credits above which participants are exempted from their requirements.
Depending on how you look at it, the U.S. is either bravely pushing cap-and-trade from the bottom up, hoping to force the President into action, or it is slowly realizing its mistake in avoiding carbon trading early and attempting to save face. Either way, it seems inevitable that regulated carbon trading is on its way to the U.S. The only question remaining is: When?
