Download Impact of Climate Change on Transportation Funding Paper

THE IMPACT OF CLIMATE CHANGE
ON TRANSPORTATION FUNDING
Climate Change in Today’s World
The issue of climate change is a complex one, but leading scientists and
governments around the world widely agree on three main points: 1) The global climate
is becoming warmer as average temperatures around the world have shown measurable
increases; 2) global warming, if kept unchecked, will cause severe and lasting impacts -impacts already evident in the rising sea levels, shrinking polar ice, warmer winters, and
retreating glaciers, and which will become more severe as global warming continues with
variations by region, but affecting every part of the world; and 3) global warming is
caused largely by human activities, as human activities release greenhouse gases, which
then accumulate in the atmosphere and trap the earth’s heat. Human activities also
reduce the earth’s ability to absorb greenhouse gas (GHG) emissions by changing the
uses of forested lands.
Greenhouse gases exist naturally in the environment and are necessary for the
world to be warm enough to support life, but the GHG concentrations have reached a
level above their natural one, which causes warming temperatures. According to an
Environmental Protection Agency (EPA) report, the total GHG emissions in the United
States rose 14.1 percent from 1990 to 2006, when levels reached about 7.2 billion metric
tons. The 2006 level is actually a slight decrease in emissions from the 2005 level of 7.3
billion metric tons.1
A study by McKinsey & Company based on official United States government
forecasts says that GHG emissions will continue to rise, unless there are major policy
changes, at an approximate rate of 1.2 percent annually through 2030, which would total
a 35 percent rate increase by 2030. With this scenario, GHG emissions would rise from
7.2 billion metric tons in 2005 to 9.7 billion metric tons by 2030.2
Forests and grasslands are referred to as “carbon sinks” because they naturally
absorb large quantities of CO2 through photosynthesis. When these lands are changed to
serve agricultural or development uses, it reduces the absorption of CO2. Carbon sinks
offset 12.3 percent of total GHG emissions in the U.S. in 2006 according to the EPA’s
latest inventory.3 The McKinsey report also says that there will be a nearly 7 percent
drop in carbon absorption between 2005 and 2030.4
Some ways to increase carbon absorption include managing both publicly and
privately-owned lands in ways that restore former forested areas (reforestation) along
with creating more forests (afforestation). Other possibilities include providing
incentives for agricultural practices that promote carbon absorption such as planting trees
or grasses along streams and croplands; practicing “conservation tillage,” which leaves at
least 30 percent of crop residue on the soil after planting; and rotational grazing, which
divides the available pasture into smaller sections and rotating the cattle. While there are
positives to using biofuels like ethanol, mainly that they emit less carbon when burned
than petroleum-based fuels such as gasoline, using them widely causes the need for more
land to be cleared for agriculture, and thus less carbon absorption will occur. A study by
T. Searchinger and others in Science predicts that “corn-based ethanol, instead of
EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks, 1990-2006 – Public Review Draft (Feb.
2008), p. ES-16.
2
McKinsey & Co., Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost (Dec. 2007), p. 6.
3
EPA, GHG Inventory 1990-2006, p. ES-7.
4
McKinsey & Co., Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost (Dec. 2007), p. 8.
1
2
producing a 20 percent savings, nearly doubles greenhouse emissions over 30 years and
increases greenhouse gases for 167 years. Biofuels from switchgrass, if grown on U.S.
corn lands, increase emissions by 50 percent.” The same study, however, also states the
good value that biofuels produced from waste products such as municipal waste, crop
waste and fall grass harvests from reserve lands have. This is because these biofuels can
avoid land-use change and its associated GHG emission.5
Reduced absorption is not a critical issue of climate change, however, according
to a report by Resources for the Future, a non-partisan think-tank, Forest and Biological
Carbon Sinks After Kyoto, which says that “the primary cause of the build-up in
atmospheric carbon is not attributable to land use changes, but is due largely to fossil fuel
burning and its associated emissions.”6
In 1988, the Intergovernmental Panel on Climate Change (IPCC), which includes
leading scientists from around the world, was established to organize the latest scientific
research on climate change. Some of the IPCC’s findings from their latest report, the
Fourth Assessment Report, released in November 2007, include the following: 1) eleven
of the twelve years from 1995 to 2006 ranked among the twelve warmest years for global
surface temperature since 1850, when recordkeeping began, and this temperature increase
is widespread around the world, with greater increases at higher northern latitudes; 2)
global sea level has risen at an average rate of 1.8 millimeters per year since 1961, with
the rate increasing to 3.1 millimeters a year since 1993; and 3) the annual average extent
of the Arctic Sea has shrunk by 2.7 percent per decade since 1978, with the shrinkage rate
during the summer being 7.4 percent per decade, with glaciers and snow cover shrinking
as well.7 These conclusions of the report have been widely accepted as representing the
consensus of opinion in the scientific community. Although the U.S government has
been hesitant to have specific goals for reducing GHG emissions, the Environmental
Protection Agency has accepted the conclusions in this report, and the Transportation
Research Board and Federal Highway Administration have referred to these conclusions
as authoritative in recent reports.8 These conclusions are also being accepted by
businesses, including many of the largest corporations in the United States9 (AASHTO,
2008).
Impact of Climate Change on Transportation
Definition of Terms:
Cap-and-Trade: A flexible mechanism that puts a cap on the emission of a certain
pollutant and distributes allowances based on that cap, but permits
companies that can easily reduce emissions to sell allowances to other
companies that would have a difficult time reducing emissions. This
ensures emissions will not exceed a desired amount.
T. Searchinger et al., “Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through
Emissions from Land-Use Change” Science, Vol. 319 no. 5687 (Feb. 29, 2008), pp. 1238-1240.
6
Resources for the Future, “Forest and Biological Carbon Sinks After Kyoto” (March 2006) p. 6.
7
IPCC, Fourth Assessment Report, “Summary for Policymakers”.
8
TRB, Special Report 290: Potential Impacts of Climate Change on U.S. Transportation (2008); Federal
Highway Administration, Information on Climate Change and Transportation (March 2008).
9
McKinsey & Co., Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost (Dec. 2007).
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Background
The Transportation Research Board’s Special Report 290: Potential Impacts of
Climate Change on U.S. Transportation, 2008, has reported that climate change will pose
serious impacts on transportation. Some of these problems include the increasing
frequency of wildfires, the compromising of pavement integrity, and deformed rail lines
as the result of the increase in very hot days; inundated roads, bridges, and rail lines
because of increased flooding of coastal areas; the increasing of Arctic temperatures
causing the lowering of permafrost, disrupting roads, rail lines, and airports; the
requirement to redesign and replace drainage structures as a result of heavier rainfall in
many parts of the country; and more frequent and more severe hurricanes disrupting
service in affected areas and requiring the devotion of more resources to evacuations.10
To try to stop this continuing rise in temperatures, the goal is to reduce GHG
emissions and stabilize GHG concentrations in the atmosphere. As of yet, the U.S.
government has not adopted a specific GHG reduction goal. A coalition of industry and
environmental groups, the U.S. Climate Action Partnership (U.S. CAP), aims to reduce
U.S. GHG emissions to 60 to 80 percent below 2005 levels by the year 2050. Many
states have even more aggressive goals.
Many economists agree that the most cost-effective way to lower GHG emissions
is by establishing a carbon price, which would give businesses and individuals an
incentive to lower their carbon usage. Two ways a carbon price could be set are by
establishing a cap-and-trade program or instituting a carbon tax.
Under a cap-and-trade program, allowances are given to emitting facilities for
free, based on their current emissions, or can be auctioned off. With auctions, the
potential for great revenues exists. How great these revenues would be would depend on
the cost of the allowances, which would be set at the auction, but a reasonable
expectation is that a national cap-and-trade program could raise $100 billion or more
each year in revenue. If such a program were enacted, an important decision would be to
decide how this revenue would be distributed -- whether to reduce existing taxes, support
funding for existing or new programs, reimburse individuals or businesses that are
disproportionately affected by higher energy prices, or a combination of these.
A carbon tax would have a similar effect as the cap-and-trade program, but would
have the government set the price charged for every ton of carbon dioxide emitted rather
than pricing by the current condition of the market. Some carbon tax plans have the
government reducing other taxes to redistribute the revenue gained from the carbon tax.
Although many economists view the carbon tax as more efficient and avoiding possible
windfalls to polluting industries, the cap-and-trade program appears to have the best
chance for near-term enactment in U.S. Congress. Another possibility is a combination
of the two methods, with a cap-and-trade program that also has a “safety valve,” or a
ceiling on the price of carbon, which would add some of the pricing certainty of a carbon
tax without having an actual tax.
Transportation has a big role in GHG emissions, as about 27 percent of total
emissions in the U.S. come from transportation. 72 percent of the transportation sector’s
emissions are generated by road use.11 The factors that affect GHG emissions from road
use include: 1) fuel economy, 2) the type of fuel used, 3) the number of vehicle miles
10
11
TRB, Special Report 290: Potential Impacts of Climate Change on U.S. Transportation (2008).
EPA, GHG Inventory 1990-2006
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traveled (VMT), and 4) traffic operations, which includes traffic-flow management by
transportation agencies and individual driving behavior.
Fuel Economy and the Type of Fuel Used
In 2007, Congress enacted fuel economy standards that will require the average of
all new vehicles in the light-duty automotive fleet (cars, light trucks, and SUVs) to meet a
standard of 35 miles per gallon by 2020.12 Today’s average is about 20 mpg for both new
and existing vehicles, so the new standards will drastically change the vehicles produced
and sold by the auto industry. The hope is that alternative fuels, such as ethanol and
biodiesel, will help reduce GHG emissions because they emit less CO2 for each unit of
energy produced – although that reduction would be offset somewhat by a reduction in
CO2 absorption as discussed above. Other changes that are being made that should
reduce transportation’s contribution to GHG emissions include hybrids, plug-in electric
and hydrogen-fueled vehicles. Alternative fuels represented less than two percent of the
fuel supply in 2006 and are projected to only rise to eight percent by 2030 by the
Department of Energy (DOE).
The Toyota Prius is one example of a gas-electric hybrid. The Prius’ average fuel
efficiency is 46 mpg, while a standard Toyota vehicle, the Corolla, averages 27 mpg in
the city and 35 mpg on the highway. Hybrids, however, remain a small percentage of the
vehicles on the road today even with sales increasing in recent years. Factors that could
increase the number of hybrids in the market include changes in federal policy,
technological innovations, and rising fuel prices.
Many plug-in electric hybrids are expected to achieve fuel efficiency rates of 100
mpg. They are expected to operate mainly as limited range electric vehicles, and include
a small gasoline engine to extend the range and recharge the batteries, if needed. The
current battery system for plug-in hybrids is extremely expensive, so the hope is that
more advanced technology will be available by 2015, and the future battery systems
would be able to run without failure for 15 years. Their effectiveness in reducing
emissions would depend on the power source, with little or no net reduction or even a
gain in emissions if powered by a power plant that produces a high level of emissions, or
a net reduction if powered by a source with low emissions such as wind, solar, or natural
gas among others. The report by McKinsey & Co. states that many experts believe that
plug-in hybrids “would likely be commercially available by 2030.”13
Another technology that is currently under development is hydrogen fuel-cell
powered vehicles, which produce no GHG emissions from the vehicle itself. (Energy is
required to produce the hydrogen fuel supply for the vehicles; if fossil fuels are used to
produce the hydrogen, then there will be some GHG emissions associated with the use of
hydrogen-powered vehicles.) Hydrogen-powered vehicles are projected to become
widely used between 2030 and 2050. Main issues that still need to be resolved include
reducing the size and weight of the fuel cells to the point where they can survive longterm road use and reducing the cost of producing the fuel cells. Another issue to
overcome is widespread sources of hydrogen, with such sources needing to be available
just as gas stations are today.
DOE, Annual Energy Outlook 2008, Revised Early Release, Tab 7, “Transportation Sector Key
Indicators and Delivered Energy Consumption.”
13
McKinsey & Co., Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost (Dec. 2007), p. 3
12
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In regard to biofuels, federal and state laws have promoted increased use of
ethanol and other biofuels as an energy source for transportation vehicles. An example of
this is Congress’ enacting energy legislation mandating the production of 36 billion
gallons of biofuels by 2022 with the Energy Independence and Security Act of 2007.
While most biofuels come from corn currently, there is much interest in developing
cellulosic biofuels, which are made from cellulosic (woody) plants. Cellulosic biofuels
are expected to produce a more clear-cut reduction in GHG emissions. They are not yet
commercially available because enzymes are needed to break down the woody material
into fuel, and these enzymes are not yet available on a commercially viable scale.
Reducing Growth in VMT
There is much interest in lessening highway use by changing trips to other modes
of transportation, as statistics from the Federal Highway Administration (FHWA) show
that VMT increased from about 2.1 trillion in 1990 to almost 3 trillion in 2005, an annual
rate of 2.2 percent. At the same time, the annual population growth rate in the same
period has only been about 0.8 percent.14 The American Association of State Highway
and Transportation Officials (AASHTO), for example, supports a policy to double transit
ridership by 2030. To significantly reduce emissions by increasing use of transit however
“would require momentous efforts as transit accounts for only one percent of passengermiles traveled in the United States today,” according to a report by researchers for the
Pew Center for Global Climate Change.15 A recent report, published by several smart
growth advocacy groups concluded that the combination of aggressive land-use strategies
and increased transit usage could bring about a 7 to 10 percent reduction in
transportation-related CO2 emissions.16 Other options that could help reduce GHG
emissions include making more trips by biking, walking or telecommuting.
A VMT-related trend is that the growth in the vehicle miles traveled rate has
slowed to 0.5 percent per year in the 2005 to 2007 period.17 Whether this is a temporary
trend because of high oil prices or a more permanent one is unknown at this point,
although if oil prices continue to stay at a high level along with the increase in number of
people ages 65 and over as the baby boomer generation ages and the related trend that
people over the age of 65 tend to drive less than others, we possibly could be ushering in
a new era of low VMT rate increases. The predictions of VMT growth rates in the next
twenty years by the U.S. DOT and DOE are well above the 0.5 percent rate however,
although lower than the 2.2 percent rate from 1990 to 2005. The U.S. DOT predicts that
VMT will grow at an annual rate of 1.92 percent the next twenty years, while the DOE
predicts a 1.6 percent annual rate. The 1.6 percent annual rate would equal
approximately 4.5 trillion VMT in the year 2030, up from 3 trillion in 2006. With the
1.92 percent annual rate, VMT would rise to about 4.9 trillion by 2030.
See FHWA, Office of Highway Policy Information, “Highway Statistics”, available at:
http://www.fhwa.dot.gov/policy/ohpi/index.htm.
15
Greene, D. and A. Schafer, “Reducing Greenhouse Gas Emissions from U.S. Transportation” (May
2003), pp. 38-39.
16
R. Ewing, et al., Growing Cooler: The Evidence on Urban Development and Climate Change, Urban
Land Institute (Oct. 2007).
17
See FHWA, Office of Highway Policy Information, “Highway Statistics”, available at:
http://www.fhwa.dot.gov/policy/ohpi/index.htm.
14
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Improving Technology and Operations
It is the belief of many transportation agencies that lowering traffic congestion
can bring about a large change in GHG emissions. They say that if congestion were
reduced, the billions of gallons of fuel burned by vehicles stuck in traffic would decline
drastically. Others do not have the belief that congestion reduction is a good strategy,
because of the fear that it could encourage more driving and thus increase VMT. The
DOE predicts that efficiency will be gained in the coming years by improvements in fuel
efficiency and by renewable fuels gaining market share, but at the same time VMT will
continue to greatly rise, which would result in a net gradual increase in GHG emissions
between now and 2030. These predictions, however, do not take into account major
technological breakthroughs, such as significantly more fuel-efficient vehicles or
hydrogen-fueled cars, and/or policy changes, such as the government limiting GHG
emissions (AASHTO, 2008).
European Union’s Emissions Trading Scheme
Background
The European Union Greenhouse Gas Emission Trading Scheme (EU ETS) began
in January 2005 as the largest multi-country, multi-sector greenhouse gas emission
trading scheme worldwide. It is also the first international trading system for CO2
emissions in the world. It covers over 11,500 energy-intensive installations across the
EU, which include combustion plants, oil refineries, coke ovens, iron and steel plants,
and factories making cement, glass, lime, brick, ceramics, pulp and paper.
Its goal is to help the Member States of the EU achieve compliance with their
commitments under the Kyoto Protocol. Without the ETS, more costly measures would
have had to be implemented (European Commission, 2008). The World Wildlife Fund
commissioned the Center for European Economic Research (ZEW) to study the impacts
the ETS would have. ZEW found that, since a “do nothing” alternative is impossible
with the EU having a legal obligation under the Kyoto Protocol, emissions trading is the
most cost-effective method over other options such as an eco-tax. If countries had to
meet the Kyoto targets without the freedom to participate in emissions trading, the cost
would be much higher (WWF, 2006).
Allowances
Companies with commitments can trade allowances directly with each other, or
buy or sell through a third party, e.g., a broker or bank. Allowances traded in the EU
ETS will not be printed but held in accounts in electronic registries set up by Member
States, with one allowance representing the right to emit one ton of CO2. This registry
system keeps track of the ownership of emission allowances as they change hands.
Through the Community independent transaction log, these transactions will be checked
for irregularities by a Central Administrator at EU level. This allows the system to keep
track of the ownership of allowances in the same way as a banking system keeps track of
the ownership of money. The price of the allowances is a function of supply and demand
as in any other free market.
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National Allocation Plans
National Allocation Plans (NAPs) exist to determine the total amount of CO2
emissions that Member States grant to their companies, which can then either be bought
or sold by the companies themselves. This plan means that each of the Member States
must decide beforehand how many allowances to allocate in total for a trading period and
how many each plant covered by the Emissions Trading Scheme will receive. The first
trading period runs from 2005-2007, the second from 2008-2012, and the third one will
start in 2013. The goal is that Member States limit CO2 emissions from the energy and
industrial sectors through the allocation of allowances, thereby creating scarcity, so that
later a functioning market can develop and overall emissions are reduced. New NAPs
have to be created for each trading period. The number of allowances that a Member
State can issue is governed by EU-established criteria, which do not list an exact given
number of allowances, but each Member State must respect the criteria.
Some countries’ plans were required to be changed by the European Commission.
There were three triggers for these required changes:
1. If the allocation plan chosen by a Member State for the 2005-2007 trading
period jeopardizes the achievement of its Kyoto target (excessive
allocation)
2. If the volume of allowances for the 2005-2007 trading period is
inconsistent with assessment of progress towards the Kyoto target, i.e. the
allocation exceeds projected emissions
3. If a Member State intends to make so-called “ex-post adjustments” to
allocations, which means that the Member States plan to intervene in the
market after the allocation is done, and redistribute the issued allowances
among the participating companies during the 2005-2007 trading period.
There are several cases in which a country can excessively allocate. The first is
when a Member State does not reason how the Kyoto target in 2008-2012 would be
respected, but left a gap to be closed with measures to be defined later. Second case is
when a Member State states the intention to purchase Kyoto credits, but does not
demonstrate credible and reliable steps to realize these purchases. Lastly, it can occur
when a Member State bases its plan on projections (including economic and emission
growth rates) that are inconsistent and exaggerated compared to official growth forecasts
by the Member State itself or other impartial sources.
Ex-post adjustments are disallowed because they are incompatible with the legal
framework and represent interventions that disrupt the market and create uncertainty for
companies. For example, if a company faces the possibility that the government may
take away allowances after it has reduced its emissions, it will hesitate to do so. Also, if
companies believe they can receive additional allowances for free from their
governments, they will pursue this route instead of turning to the market and buying
allowances. In total, the Commission has approved the allocation of about 6.57 billion
allowances to over 11,500 installations for the 2005-2007 trading period. It has required
cuts in the number of allowances to be allocated in 14 of the 25 plans. These cuts total
over 290 million allowances, which equals about 4% of the notified number of
allowances. In addition, the Commission has disallowed intended ex-post adjustments in
13 plans.
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If the Commission rejects a plan, for which it must give reasons, the Member
State cannot proceed to implement the plan as it stands, i.e. may not allocate the proposed
number of allowances. If a plan is partially rejected, and that Member State incorporates
the proposed changes, the Member State does not have to submit their plans to the
Commission a second time, and instead, they automatically qualify for emissions trading.
After Commission approval, Member States have to make a final allocation
decision at national level. Before this step, the Member States can make changes to the
number of allowances for individual plants as a resulted of improved data, although they
cannot, under any circumstance, increase the total number of allowances to be put into
circulation. Once the decision is made at the national level and the final plan is
published, no more changes can be made to the number of allowances in total or per
plant. This step concludes the allocation process, and opens the market for trading
allowances in the Member State.
The Commission has sole responsibility to assess the plans, although a Climate
Change Committee exists consisting of Member State representatives that considers each
plan and serves as a forum to debate each plan. The Commission serves as the chair of
the Committee and follows these debates and takes the findings into account in its
assessments.
Role of Involved Parties
Participating companies have had to keep track of their emissions since January 1,
2005. At the end of each year, they are required to produce a report on their annual
emissions, which is then verified by a third party. The companies also have to make sure
they have a sufficient number of allowances to surrender year by year so they are not
subject to financial sanctions.
Member States have to issue allowances by the end of February each year
according to the final allocation decisions, operate the national registry, compile verified
emissions data and verify that enough allowances are surrendered by each company.
Each Member State also has to produce an annual report to the Commission.
The Commission operates the European hub of the registry system, and prepares
an annual report based on Member State reports, which closely follows the performance
of, and reviews the experience with, the EU ETS.
Costs For Reaching Kyoto Targets and Whether European Competitiveness Will Be
Jeopardized
Recent studies by the Commission estimate the targets of the EU ETS can be
achieved at an annual cost of €2.9 to €3.7 billion, which is less than 0.1% of GDP for the
EU. One study found that without the Emissions Trading Scheme, costs could be as high
as €6.8 billion, thus emissions trading achieves lower costs than other options as
discussed earlier.
The implementation of Kyoto does bring costs, in addition to the positive, new
economic opportunities. This is unavoidable because there cannot be Kyoto compliance
for nothing. Europe gets the best value for its money with the ETS. There exists a
‘linking directive,’ which allows companies that carry out emissions reduction projects
with the Flexible Mechanisms of the Kyoto Protocol – Joint Implementation and the
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Clean Development Mechanism – to convert the credits earned from those projects into
allowances for the ETS.
How Emissions Trading Works and How Companies Benefit
As example let us suppose companies A and B both emit 100,000 tons of CO2
annually and that the government gives them 95,000 emissions allowances each. Each
allowance allows 1 ton of CO2 to be emitted, thus neither company is fully covered. At
the end of each year, each company has to surrender a number of allowances according to
their emissions during the year. If they fail to do this, they face a €40 fine for each
missing allowance during the 2005-2007 trading period, and €100 during the 2008-2012
period. The companies do not want to pay the fine, so they have two ways of covering
5,000 tons of CO2. They can either reduce their emissions by 5,000 tons, or purchase
5,000 allowances in the market. They will make this decision on an individual basis
based on comparing the cost of reducing their emissions with the market price for
allowances.
For this example, €10 per ton of CO2 will serve as the allowance market price.
The reduction costs for 1 ton of CO2 for Company A are €5, which is lower than the
market price, thus this company will reduce its emissions because it is cheaper than
buying allowances. It can even reduce its emissions by more than 5,000 tons, say 10,000
tons. Company B’s reduction costs are €15, thus it is in the opposite case as Company A,
with costs higher than the market price, and it will buy allowances rather than reducing
emissions.
Company A spends €50,000 on reducing 10,000 tons at €5 per ton, and receives
€50,000 from selling 5,000 tons at €10 each. So Company A fully offsets its emission
reduction costs by selling allowances, whereas without the ETS, it would have had a net
cost of €25,000. Company B spends €50,000 on buying 5,000 tons at a price of €10.
Without the ETS, Company B would have had to spend €75,000.
Since only a company that has low reduction costs and thus chooses to reduce its
emissions, like Company A, is able to sell, the allowances that Company B buys
represent a reduction of emissions, even with Company B not reducing emissions itself.
This ensures that the cheapest reductions are made first. Since the ETS is EU-wide,
companies will find the cheapest reductions for the entire EU and ensure they are made
first. The flexibility in this system makes emissions trading the most cost-effective
manner of achieving a given environmental target. If Company B had had to reduce
emissions at its own plant at a higher cost, the overall cost to industry would have been
greater (European Commission, 2008).
The Lieberman-Warner Climate Security Act
Background
The Lieberman-Warner Climate Security Act (S. 2191) was defeated in the U.S.
Senate in June 2008, but its plan was establishing the core of a federal program to
substantially reduce U.S. greenhouse gas emissions to avoid catastrophic global warming.
The greenhouse-gas emissions cap in the Act covered U.S. electric power, transportation,
manufacturing, and natural gas sources that together account for 87% for U.S.
greenhouse-gas emissions.
10
The cap over those sources was to start in 2012 at 4% below the 2005 emission
level, and lower year after year, so that it was to reach 19% below the 2005 level in 2020,
and 71% below the 2005 level in 2050. The cap along with the other provisions in the act
were projected to reduce total U.S. greenhouse-gas emissions by as much as 25% below
the 2005 level in 2020 and 66% below the 2005 level by 2050. An EPA study in July
2007 found that if those emission reductions were reached, while making conservative
assumptions about the emissions reduction rate for the rest of the world, the concentration
of greenhouse gases in the atmosphere would remain under 500 parts per million (ppm) at
the end of this century. According to the Intergovernmental Panel on Climate Change,
keeping the concentration below 500 ppm will avoid a great risk of global warming that
would cause severe impacts.
The Act was to control compliance costs by allowing companies to trade, save,
and borrow emission allowances, and by allowing them to receive allowances when they
got non-covered businesses, farms, and other entities to reduce their greenhouse gas
emissions or to capture and store greenhouse gases.
The Climate Security Act would have invested set-aside emission allowances and
revenue gained by the auction of these allowances in advancing several important public
policies including the following: 1) deploying advanced technologies and practices for
reducing emissions, 2) protecting low- and middle-income Americans from higher energy
costs, 3) keeping good jobs in the U.S., 4) reducing the negative impacts of any
unavoidable global warming on low- and middle-income Americans and wildlife, and 5)
reducing or preventing political instability and international conflict that can threaten the
national security of the U.S., through acts designed to address negative global warming
impacts on populations in other countries that have little resources (S. 2191, 2008).
Transportation-Related Elements of Act
Under a “manager’s substitute” introduced by Barbara Boxer (D-CA), Chair of
the Senate Environment and Public Works Committee, which became the primary text of
the Lieberman-Warner legislation when the Act was considered on the Senate floor, the
Climate Security Act was to dedicate roughly 2.5% of the total revenues generated by the
legislation’s “cap-and-trade” system to public transportation investment and other
activities that can reduce growth in vehicle travel. The Administrator of the
Environmental Protection Agency (EPA) was to be directed to deposit part of the revenue
from the auction of emissions allowances into a new Transportation Sector Emission
Reduction Fund. The Fund was to receive 1% of “cap-and-trade” auction revenues in the
first five years of the bill, increasing to 2% starting in the sixth year, and 2.75% from the
tenth year on. From EPA estimates, the Fund would have received about $171 billion
between 2012 and 2050.
Annual Percentage and Estimated Average Annual Value of Allowance Auction
Revenue Dedicated to the Transportation Sector Emission Reduction Fund
Years
Percentage
Avg. Annual Value
2012 through 2017
1.00 %
$1,163,791,666.67
2018 through 2021
2.00 %
$2,733,832,000.00
2022 through 2050
2.75 %
$5,297,024,206.90
Note: assumes emission allowance price under Scenario 10, EPA Analysis of Lieberman-Warner
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When the money went into the Transportation Sector Emission Reduction Fund, it
would have been broken up as follows: 65% into urbanized area formula grants, 30% for
the Capital Investments Grants program (New Starts/Small Starts) which is for the
design, engineering and construction of new fixed guideway transit projects or extensions
to existing fixed guideway transit programs, and the final 5% for grants for transportation
alternatives and travel demand reduction projects. Grant applications would have been
evaluated based on the total greenhouse gas emissions reductions that were projected to
result from proposed projects.
Under Section 621 of the bill, to verify that grants from the Fund achieved
significant reductions in greenhouse gas emissions from the transportation sector, Sec.
621-funded projects and activities would have needed to be part of new statewide
transportation plans that included the following elements: 1) include all modes of surface
transportation; 2) integrate transportation data collection, monitoring, planning, and
modeling; 3) report on estimated greenhouse gas emissions; 4) be designed to reduce
greenhouse gas emissions from the transportation sector; and 5) be certified by the EPA
Administrator as consistent with the purposes of the Lieberman-Warner legislation.
Other sections of the legislation where potential transit funding existed were
Section 613 and 614. Section 613 was titled Energy Efficiency and Conservation Block
Grant Program. This program was authorized by the Energy Independence and Security
Act of 2007, and provides funding for a wide range of activities related to energy
conservation to state and local governments, and transit systems and their facilities would
be eligible for potential grants. Section 614 was titled State Leaders in Reducing
Emissions, and was to provide states with a significant new source of funding to reduce
greenhouse gas emissions and to lessen the effects of climate change legislation on their
citizens. From EPA estimates, this program was to be provided $566 billion through
2050, which was one of the highest totals out of any program in the Lieberman-Warner
legislation, increasing to up to 10% of annual auction revenue by the year 2032. One of
the 22 purposes the states could have used the funds for was “to improve public
transportation and passenger rail service and otherwise promote reductions in vehicle
miles traveled.”
The “manager’s substitute” changed the Climate Security Act by increasing
public transportation funding from 1% of emissions allowance revenue to around 2 ½%,
but more is needed to address transportation-related emissions (APTA, 2008). The bill
was effectively killed in early June 2008, by a vote of 48-36, when 60 “yes” votes were
needed to move it forward (Baltimore Sun, 2008).
Final Thoughts
If GHG emissions are reduced, or even completely eliminated in the U.S., it will
not solve the problem of climate change if emissions continue to greatly rise in
developing countries. It will be difficult to reduce GHG emissions in these developing
countries such as China, as their large economic growth and rising incomes will likely
raise emissions. Technological innovations are needed for developing countries, along
with developed countries, to enjoy economic growth and also greatly reduce GHG
emissions. Some of these technologies are already in place to reduce emissions, and new
innovations can bring even larger reductions. Other factors that can cut emissions
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include policy changes, transit and land-use changes, and operational strategies and
driver education to help promote more efficient vehicle operations (AASHTO, 2008).
Much work is needed, but it is very possible for greenhouse gas emissions to be greatly
reduced.
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American Association of State Highway and Transportation Officials (AASHTO) (2008).
Primer on Transportation and Climate Change.
American Public Transportation Association (APTA) (2008). Public Transportation
Provisions in the Lieberman-Warner Climate Security Act (S. 3036). Retrieved from
http://www.apta.com/government_affairs/policy/transportation_provisions.cfm
Baltimore Sun (2008). Bay and Environment: Climate Change Bill Stymied. Retrieved from
http://weblogs.baltimoresun.com/news/local/bay_environment/blog/2008/06/climate_change_bill
_stymied.html
European Commission (2008). Emission Trading Scheme. Retrieved from
http://ec.europa.eu/environment/climat/emission.htm
S. 2191 (2008). The Lieberman-Warner Climate Security Act (S. 2191). Retrieved from
http://lieberman.senate.gov/documents/lwcsaonepage.pdf
World Wildlife Foundation (WWF) (2006). Emissions trading best choice for EU economy and to
ensure Kyoto compliance. Retrieved from
http://www.panda.org/about_wwf/what_we_do/climate_change/news/index.cfm?uNewsID=7096
0
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