Carbon Cap & Trade in (Parts of) the US

I didn’t give people greenhouse gas credits as holiday gifts, as in, “Happy Chanukah, I’ve offset your carbon footprint for this week!” or “Merry Christmas, I bought you some methane!” or “A fine Festivus to you and yours; I’m fighting global climate change in your name!”

In theory, this would be a reasonable extension of donating to charities as a non-materialistic holiday gift. In practice, I feel like it would end up sounding more like, “Could we celebrate this year by my ramming my beliefs down your throat?”

It’s a precarious balance.

If you shout at people, you alienate them and they ignore your message; if you whisper, most people can’t hear you.

“We’re doomed!” is excessive (Who knew?).

“Pssst, environmental apocalypse coming soon, pass it on,” seems a tad inadequate.

The Happy New Year news is that ReGGIe is now up and running.

Under the Regional Greenhouse Gas Initiative (RGGI, but Reggie to its friends), as of January 1st, ten mid-Atlantic and northeastern states have implemented the first mandatory greenhouse gas emissions cap-and-trade program in the US.

Straight up the coast, from Maryland to Maine—with Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont in between and with Pennsylvania and the Canadian provinces of New Brunswick, Ontario, and Quebec currently enjoying “observer status,” power companies will have to either reduce their greenhouse gas emissions (for which they will earn salable credits) or pay a fee for every ton of CO2 they emit ($3.38 at the last auction).

The goal is to reduce CO2 emissions from the power sector by 10% by 2018. The money the states collect from the auctions is to be used for energy efficiency projects, renewable energy, and other clean energy technologies.

This is a welcome step from the states, given that the Bush administration (Bye now, don’t forget to write!) has worked to pillage, rather than to preserve, the environment. Hopefully this will serve as a model for the incoming Obama administration, something that can be rolled out nationwide if it works well.

I’m not convinced that The Market Will Save Us! But it’s clear that sending the right economic signals, and setting up incentive systems that push both companies and people to Do the Right Thing is a crucial part of addressing our environmental problems.

And a Happy Festivus to all!

High Fuel Prices Are. . . good

Doh! Originally Published: Sunday, May 4, 2008

Accidentally deleted (the dog did it!); restored here for posterity.

Gasoline is bumping $4/gallon on the west coast and you can feel the country scream. John McCain and Hilary Clinton have joined hands to propose a Gas Tax Pander Moratorium. Truckers have dieseled into DC to protest the high cost of fuel, which is also blamed for the inexorable rise of prices in general and food prices in particular.

And this is. . . I’ll whisper it from under my bed, where people are less likely to find me: a good thing.

I’m not a disciple of Adam Smith and The Market Triumphant; I don’t believe that free markets solve all problems; but you might as well deny gravity as argue against the way in which prices send signals. We change course—put a greater emphasis on conservation, invest more in alternative means of energy production, shift what we buy and where it comes from—when it becomes too expensive to maintain our present course.

The intersection between environmental policy and energy policy is arguably the greatest market failure of our (or perhaps all) time. It’s been a collision of “fast” signals and “slow” signals: We get sticker shock at the pump and want lower fuel prices NOW; the environmental impact of our (mis)use of energy is TOMORROW. We don’t seem to be wired to deal effectively with slow threats: when a car is coming you jump out of the way; when an iceberg is coming you tend to stand and gawk.

TOMORROW is the hydrocarbonaholic’s friend, as it is the friend of any addict.

Just one more tank, man! Just need it to get going today. Gonna cut back starting tomorrow. Really—c’mon man, I’m hurtin’ here!

I will squeal like a stuck pig at $5/gallon gasoline. It’s going to make me do even more things that will be difficult and expensive. I know it’s going to be worse for people with fewer options: driving older, bigger cars that they can’t afford to trade in; stuck with even longer commutes; mass transit not an option.

We ought to do what we can to buffer the people who will be hit hardest, to give them breathing space, perhaps a five year energy rebate that declines over time, going down fifteen percent a year until it’s phased out, to encourage people to adjust.

Meanwhile, we need to raise the efficiency of our cars (as we become less reliant on them); we need to live in smaller footprint communities that put more of what we need in walking, biking, or busing distance; we need to (re)build mass transit; we need to reconnect to more local products.

And we need a CARBON TAX. . . I’ll stay under my bed while people digest that.