GREENHOUSE GAS 101

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GREENHOUSE GAS 101

• Policy Matters Ohio
• All materials taken from Dr. Hummels Climate
  Policy Design website

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Explaining the Greenhouse Effect
Figure www.myclimatechange.net
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(No Transcript)
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Warming is unequivocalclear and unambiguous.
Source IPCC, AR4, WG1, Chap 6, Fig. 10
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Global Greenhouse Gas Emissions
2004 data in the 2007 IPCC, AR4, SPM, Fig 3
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Rise in CO2 Concentration is Accelerating.
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One fifth of our CO2 emissions today will remain
in the air in 3009
Atmos. Chem. Phys. 7, 2287-2312, 2007
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Stabilization of CO2 concentration, temperature,
and sea level takes centuries after emissions
are reduced
IPCC TAR SYN SPM Fig 5-2
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Water supply in Himalayan watersheds is a major
humanitarian concern.
Rongbuk glacier in 1968 (top) and 2007. The
largest glacier on Mount Everests northern
slopes feeds Rongbuk River.
Slide from Dr. James Hansens Congressional
briefing June 23, 2008.
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Cap-and-Trade Systems Under Development
EU Emissions Trading System (EU ETS)
Western Climate Initiative (WCI)
Regional Greenhouse Gas Initiative (RGGI,
Reggie)
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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
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Musical Chairs A Helpful Analogy for Managed
Scarcity

• Each chair represents the permission to
  pollute
• one metric ton of carbon dioxide (1 mtCO2)
• or an equivalent amount of any other
  greenhouse gas

If you have an allowance, you can have a chair.
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Players Polluters at Points of Regulation
Chemical companies
Power Plants
Oil Refineries
Natural Gas companies
Aluminum smelters
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Cap-and-Trade
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Polluters Compete for Scarce Permits
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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.
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Carbon Price Established by Market Activity
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Would anyone accept 40 for your permit?
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Carbon Costs Passed to Consumers
Sending a price signal is the point of the policy!
40
40
40
40
40
35 per gallon
2.5 per kWh
0.6 per therm
People Respond?
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Moving to Clean Energy
2050
2040
2030
2020
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
Wind power
Solar power
Green buildings
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h
Price On Carbon
Demand
50
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Quantity of Permitted Emissions
50 MtCO2
100 MtCO2
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Price On Carbon
Supply
50
20
Quantity of Permitted Emissions
50 MtCO2
100 MtCO2
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Carbon Cap vs. Carbon Tax
Price On Carbon
Supply
Demand
P
Quantity of Permitted Emissions
Q
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Carbon Cap vs. Carbon Tax
Price On Carbon
Cap
Demand
P
Quantity of Permitted Emissions
Q
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Carbon Cap vs. Carbon Tax
Price On Carbon
Demand
P
Tax
Quantity of Permitted Emissions
Q
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Carbon Cap vs. Carbon Tax
Carbon Cap
Price On Carbon
Demand
Demand
Carbon Tax
P
P
Q
Quantity of Emissions
Q
Should we set the quantity and let markets
determine the price for a scarce resource?
Should we set the price and let markets
determine the quantity of pollution?
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• JOBS
• New Green Jobs ?
• LEAKAGE ?

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Competitiveness Concern
2050
At higher carbon prices, Ill need to close my
cement plant or move it to another country...
SELL PRICE
90
90
90
90
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Competitiveness Concern Leaking Emissions
Leakage occurs when polluters move outside a
carbon cap territory to avoid regulation which
may drive jobs away and still not reduce global
emissions.
SELL PRICE
90
90
90
90
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Competitiveness Concern Leaking Emissions
A tight international agreement or global carbon
price would diminish any reward for industrial
migration due to climate policy. but it could
be a long time before either of those feats of
diplomacy are accomplished.
SELL PRICE
90
90
90
90
90
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Competitiveness Concern
In the meantime, Output-Based Rebates can relax
any competitive disadvantage for energy-intensive
manufacturers of global commodities (e.g. iron,
cement, steel, paper, glass) by returning carbon
costs based on the best performance standard in
each industry, motivating all to improve not
move.
SELL PRICE
90
90
90
90
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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.