GREENHOUSE GAS 101

Policy Matters Ohio

All materials taken from Dr. Hummel’s Climate Policy Design website

Figure: www.myclimatechange.net

Explaining the Greenhouse Effect

Warming is unequivocal:clear and unambiguous.

Source: IPCC, AR4, WG1, Chap 6, Fig. 10

Scripps Institution of OceanographyNOAA Earth System Research LaboratoryScripps Institution of OceanographyNOAA Earth System Research Laboratory

Rise in CO2 Concentration is Accelerating.

One fifth of our CO2 emissions today will remain in the air in 3009

Atmos. Chem. Phys. 7, 2287-2312, 2007

IPCC TAR SYN SPM Fig 5-2

Stabilization of CO2 concentration, temperature, and sea level takes centuries after emissions are reduced

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.

Water supply in Himalayan watersheds is a major humanitarian concern.

Western Climate Initiative (WCI)

Regional Greenhouse Gas Initiative(RGGI, “Reggie”)

EU Emissions Trading System(EU ETS)

Cap-and-Trade Systems Under Development

Participant

Observer

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.

A familiar game can help illustrate the concepts…

Got it?

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.

Players: Polluters at Points of Regulation

Oil Refineries Natural Gas

companies

Chemicalcompanies

Aluminumsmelters

PowerPlants

Cap-and-TradeDeclining 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

Would anyone accept $40 for your permit?

$40

Carbon Costs Passed to Consumers

$40$40 $40 $40 $40

35¢per gallon

2.5 ¢per kWh

0.6 ¢per therm People

Respond…?

Sending a price signal is the point of the policy!

Moving to Clean Energy

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.

$30$150$20

$100

$200$50

2050204020302020

Wind power

Rail Transport

Green buildings

Nuclear power

2010

Solar power

Hybrid vehicle

h

PriceOn Carbon

$20

50 MtCO2

$50

Quantityof PermittedEmissions

100 MtCO2

Demand

Quantityof PermittedEmissions

PriceOn Carbon

$20

50 MtCO2

$50

100 MtCO2

Supply

Quantityof PermittedEmissions

PriceOn Carbon

Q

P

SupplyDemand

Carbon Cap vs. Carbon Tax

Quantityof PermittedEmissions

PriceOn Carbon

Q

P

CapDemand

Carbon Cap vs. Carbon Tax

Quantityof PermittedEmissions

PriceOn Carbon

Q

P Tax

Demand

Carbon Cap vs. Carbon Tax

Carbon Cap vs. Carbon Tax

PriceOn Carbon

Q

P

CarbonCap

Demand

Quantityof Emissions

Q

P

Demand

CarbonTax

Should we set the price and let markets determinethe quantity of pollution?

Should we set the quantity and let markets determinethe price for a scarce resource?

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.