Re: US policy Was Re: [asa] Subglacial Water System Moving

On 2/22/07, David Opderbeck <dopderbeck@gmail.com> wrote:
>
> The price crash is one problem, but that doesn't bother me, since I
> generally think markets correct that sort of thing over time. The bigger
> problem with the EU system is that the supply side is decentralized, which
> allows individual member states and their constituent industries to game the
> system. In the EU system, a central authority designates the industrial
> sectors that will be subject to the trading scheme, but each member state is
> free to allocate allowances from a national allowance budget to affected
> industries within their borders. As a result (a) supply doesn't respond
> efficiently to demand; and (b) strong local industries can capture the
> national allocation process. (For a good summary of the EU experience, see
> here: http://www.rff.org/Documents/RFF-DP-07-02.pdf)
>
> This centralized demand / decentralized supply aspect of the EU system
> makes it very different than most of the cap and trade programs tried in the
> U.S. The U.S. experiments have been ones in which the same central
> authority identifies target industries and allocates the tradeable credits,
> establishing a more unified and efficient market. My understanding is that,
> while some of the U.S. experiments have succeeded in reducing target
> emissions, Phase I of the EU program under Kyoto has seen no net reductions
> in CO2 emissions.
>

The countries were less than their allowances. The problem was the
allowances were too lax. Everybody hit their targets. It's time to turn the
screws. The same held true with the U.S. program in its early days, BTW. As
this shows, it's too early to determine if the decentralized system works or
not because of the sandbagging. The sandbagging appears to be ending,
though.
http://environment.newscientist.com/article/dn11219-eu-agrees-to-cut-greenhouse-emissions-by-20.html
<http://environment.newscientist.com/channel/earth/dn11184-china-to-promise-cuts-in-greenhouse-gases.html>

Country Cap 2005 Verified Emissions
Belgium 62.08 55.58
Germany 499 474
Greece 74.4 71.3
Ireland 22.3 22.4
Latvia 4.6 2.9
Lithuania 12.3 6.6
Luxembourg 3.4 2.6
Malta 2.9 1.98
Netherlands 95.3 80.35
Slovakia 30.5 25.2
Sweden 22.9 19.3
UK 245.3 242.4

> A full-on implementation of Kyoto would make the EU decentralization
> problem look like child's play -- unless there were a central authority of
> sufficient strength to regulate both demand and supply of credits. I think
> the prospect of ceding national sovereignty to such a central authority is
> the heart of the issue concerning Kyoto or a Kyoto-like regime. If you want
> to propose a global cap and trade program, you have to be able to answer
> this question of sovereignty. IMHO, it's awfully difficult to argue that
> the precautionary principle as applied to the current science on global
> warming justifies devolving sovereignty to an unelected international body
> comprised of countries like China, Russia, and France.
>

You gave up too quickly on decentralization in order to bring out the
sovereignty bogeyman. I have seen nothing that would indicate that national
allocation wouldn't work. Nor is it the precautionary principle. The
post-Kyoto target is 450-550 ppm. (We are currently at 385 ppm). If you go
back to Hansen's slides that Randy posted, 450 is extremely expensive to do
while 550 ppm is the divide for a "different planet" where all sorts of
positive feedbacks kill us. The difference between 450 and 550 is not great
in terms of negative effects thus this is the sweet spot to hit.

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Received on Thu Feb 22 19:01:53 2007