Download Laurie Williams & Allan Zabel

CLIMATE CHANGE SOLUTIONS
Cap-and-Trade with Offsets
vs.
Carbon Fees with Rebates
By Laurie Williams and Allan Zabel
Speaking Out as Parents,
Citizens and a Married Couple
Education and Work
Experience
• Laurie - B.A. Yale University, J.D.
UC Berkeley
• Allan – B.A. UC Santa Cruz, J.D.
UC Berkeley
• Environmental Enforcement
Attorneys for 20+ years at US EPA
Region IX, San Francisco
• Allan has worked extensively on
Cap-and-Trade and Offset issues.
Disclaimer –
Our presentation is based on our
personal opinions only and does
not reflect U.S. EPA or U.S.
government position
Our personal opinions are
also presented on our
website:
www.carbonfees.org
What is Cap-And-Trade?
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Cap on Emissions from Covered Sources
Set Number of Emissions Credits
Declines Annually
Until Reaching Environmental Goal
• Trade – Credits Can be Bought and Sold
What Is the Acid Rain Program?
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“Poster Child” for Cap-and-Trade
Existing Coal-Fired Power Plants
Burning Coal with SO2 = Acid Rain
Acid Rain killed fish and forests
Highly Accurate Emission Measurements
Needed Reductions in SO2 Emissions
What the Acid Rain Program
Accomplished
• 43% Reduction in SO2 Emission in 12 Years
• Fuel Switch: Low-Sulfur Western Coal
substituted for High-Sulfur Eastern Coal
• Little New Infrastructure or Innovation
– A Few New Rail Lines,
– Minor Burner Modifications
– Slightly more efficient scrubbers (90 vs 99%)
• Declining Cap Worked – “Proof of Concept”
How is Climate Change Different from
Acid Rain?
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Need for New Clean Energy Revolution
Massive New Infrastructure
Extensive Innovation
Complexity (not a simple fuel switch)
Not Tweaks to Existing Facilities
Too Many Credits Given Out
Inaccurate Measurement
Outside Offsets
Outside Offsets –
An Interactive Set of Problems
• Additionality
– Not Beyond Business-As-Usual
– Activity Shifting Leakage
– Perverse Incentive to keep polluting activity legal
– Complexity
• Inaccurate Measurement
• No enforceable standards
• Fraud
What is Additionality?
• Reductions beyond what is legally
required, and
• Reduction beyond what “would have
happened anyway”
Carbon Offsets: Forestry Preservation Example
Bonus for What You Would Have Done Anyway
A Different Forest is Cut
Refrigerant By-Product Offset Example
Carbon Offset is Twice as Profitable
As Refrigerant
Two Perverse Incentives in
Refrigerant Example
1. Incentive to keep the damaging activity legal
– so that it will be additional.
2. Incentive to create additional greenhouse
gases, unneeded refrigerant to make money
on the by-product offsets.
Summary of
Cap-and-Trade With Offsets Weaknesses
• Deception – Shows progress while allowing
degradation
• Unproductive Costs – Huge Bureaucracy,
Offset Profiteers and Market Manipulation
• Delay in Clean Energy Investments
• Demonstrated by European Experience with
Kyoto – Price Volatility, Few Greenhouse Gas
Reductions, Billions in Windfall Profits for
Utilities
Two Critical Elements of the Real
Solution
• Clean Energy must become cost
competitive with fossil fuel energy
within a known time frame
• The energy people need remains
affordable
Alternative to Cap-and-Trade with Offsets
What are Carbon Fees with Rebates?
1. Market Mechanism – Raise price of Fossil
Fuels above Clean Energy.
2. Gradually phased in
3. Insure Clean Energy becomes competitive
with Fossil Fuel Energy within 10 years
4. Point of extraction or importation - already
measured for sale and taxation
5. Carbon Fees Trust Fund – Rebate
Have We Used Fees To Cut
Emissions Before?
• Yes - a U.S. Tax on Ozone-Depleting
Substances, “CFCs”
• Required Substitutes Not Modification of
Existing Facilities
• Substitutes were More Expensive but
Available
• 37% Reduction in First Year of the Tax
What are Other Critical Measures?
• Ban on New Coal-Fired Power Plants
• Efficient Energy Superhighway
• Carbon-Fee-Equivalent Tariffs and
Rebates – also called “border
adjustments’
• Energy Efficiency Standards
• Green Job Training