Not only is the planet heating up, but, as we've seen here, so is the intensity and the seriousness of the debate on how to get GHG's down. One persistent theme is the necessity of "setting a price on carbon." We've heard this from the Stern Review, the IPCC, Lehman Brothers in their reports on the Business of Climate Change, and numerous economists. The US Senate will shortly begin debate , as early as next week , on a vehicle for a comprehensive federal approach, with a cap-and-trade system at its core. (See A Summary of the Boxer Substitute Amendment To the Lieberman-Warner Climate Security Act and this look at the state of legislation in Congress from the Pew Center on Global Climate Change.) Realistically, nobody expects a bill to be passed by this Congress and signed into law by this President. However, the lessons we will learn as legislation progresses this year in Congress will serve as the foundation for the law that will emerge from the next Congress and that will be signed by the next President. Beyond an American cap-and-trade regime, of course, there is the international agreement that will be finalized in December of 2009 in Copenhagen.
So, as the pace quickens over the next few months and into next year, there will be more and more analysis emerging from various worthy think tanks and other keepers of the policy flames. Here, for instance, is a paper on "Economic Incentives in a New Climate Agreement" from Harvard's Belfer Center for Science and International Affairs. The paper looks at the " potential use of market-based or economic-incentive instruments to ensure that polluters face direct cost incentives to mitigate emissions at the lowest possible cost. The first section describes various economic-incentive policy instruments and the second section discusses their potential application in the design of an international climate policy agreement." This is the language that the international negotiators on the post-Kyoto agreement are speaking. (For more on their activities, the UN Framework Convention on Climate Change has comprehensive coverage.) The Belfer Center paper is a good, digestible look at some of the basics of where we're going.
Another approach to curbing GHG, particularly from newly and rapidly industrializing economies such as China's and India's, is to use trade instruments. How do you do that? One way was detailed by Yale professor Judith Chevalier in an op-ed from the "NY Times" in December: a tax on carbon consumption. I wrote about this here and described it thus: "So, if you can't get China or some other recalcitrant to restrain GHG emissions through some international protocol (to which the Bali meetings were supposed to point the way), then take it out of their exchequer by creating barriers to products created in high-GHG economies."
"Policy Innovations," a Carnegie Council online magazine, has this recent take: Can Green Trade Tariffs Combat Climate Change? The federal legislation under consideration "would also levy punitive tariffs on greenhouse-gas-intensive products imported from countries that lack comparable action' to that of the United States, starting in 2020. Industrial lobbies and labor unions are pushing hard for these sanctions to take effect more quickly." So, this is not just some wonks pushing ideas around in space any longer. This could become one of the keystones of an American approach to the global crisis. And not just American. The Carnegie Council article reports that "European Commission President José Manuel Barroso, French President Nicolas Sarkozy, and industrial chambers of commerce strongly advocate a similar tariff system, leading many analysts to predict that the EU will also adopt some sort of green tariff system in the next few years."
I'll give you one more tactic to consider: feed-in tariffs. What are FIT laws? "They place a legal obligation on utilities to purchase electricity from renewable energy installations. The tariff rate is guaranteed, and in the best examples, for a long period — say 20 years. The tariff rate is scientifically determined for each technology, to ensure profitable operation of the installation." (This is from an excellent paper by an analyst from The World Future Council, courtesy of RenewableEnergyWorld.com.) A new report from the Heinrich Boell Foundation North America, Feed-in Tariffs and Renewable Energy in the USA – a Policy Update, looks at how FIT's have driven growth in Europe, what the experience has been in the six US states where they're on the books, and the proposal in Congress for a federal law.
Break out your old economics textbooks. There's going to be plenty to look at and analyze.
