GREENHOUSE GAS 101 Policy Matters Ohio All materials

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, AR 4, WG 1, Chap 6, Fig. 10

Rise in CO 2 Concentration is Accelerating. Scripps Institution of Oceanography NOAA Earth System Research Laboratory

One fifth of our CO 2 emissions today will remain in the air in 3009 Atmos. Chem. Phys. 7, 2287 -2312, 2007

Stabilization of CO 2 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 mt. CO 2) 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 2. 5 ¢ per k. Wh $40 0. 6 ¢ 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 Mt. CO 2 100 Mt. CO 2 Quantity of Permitted Emissions

Price On Carbon Supply $50 $20 50 Mt. CO 2 100 Mt. CO 2 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 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.