carbon pricing

EPA's Clean Power Plan puts states in the driver's seat

The finalization today of EPA’s Clean Power Plan offers Americans a clear, realistic roadmap for addressing planet-warming emissions that threaten the environment and the U.S. economy.

Most importantly, it puts states in the driver’s seat to devise innovative strategies to reduce emissions efficiently and cost-effectively. Now it's time for states to work together with businesses and cities to craft the approaches that work best for them.

Climate change is a critical challenge, and the impacts will only grow more costly if we fail to act. Last year was the warmest on Earth since we started keeping records over a century ago. During the first half of this year, it got even hotter. Climate change impacts include more extreme heat, which can exacerbate drought and wildfires, more frequent and intense downpours that can lead to destructive floods, and rising sea levels that threaten coastal cities.

Many cities, states, and companies recognize climate risks. And many are taking steps to reduce greenhouse gas emissions.

New federal standards are already reducing heat-trapping emissions from the second-biggest source, transportation, by increasing the fuel economy of cars and trucks. The Clean Power Plan takes the next logical step by addressing the largest source: the electric power sector, responsible for nearly 40 percent of U.S. carbon dioxide emissions.

The plan will accelerate the trajectory toward cleaner power that is already well underway. This spring, for the first time ever, more U.S. electricity came from natural gas than from coal, which emits about twice as much carbon dioxide when combusted. In the first six months of this year, wind and solar made up 65 percent of new utility-scale electric capacity. Leading energy companies have been working to reduce their emissions and some have already pledged to make further cuts.

We’re on the right track. Now we need states to seize this opportunity to build a clean energy future.

The most exciting part of the plan is that it puts state leadership front and center. The plan offers states the flexibility to determine the best way to meet their own targets. Most states will answer the call and do what states do best: innovate.

The most cost-effective way to cut emissions is through market-based approaches, and the Clean Power Plan encourages these innovative strategies.

Ten states, home to a quarter of the U.S. population, already use market-based approaches.

The nine-state Regional Greenhouse Gas Initiative, a cap-and-trade program, has cut emissions from power plants nearly 40 percent since 2005, lowered consumer electric bills by $460 over the past three years, and generated $1.3 billion in economic benefits for member states. California’s cap-and-trade program, launched in 2013, saw companies covered under the cap cut emissions nearly 4 percent in the first year while the state had one of the highest job growth rates in the nation.

To further move more states to consider market-based approaches, the final rule also includes a new incentive program based on early action credits that will boost renewable power and energy efficiency in the near term, helping the U.S. meet its international carbon-cutting pledges, and laying the foundation for deeper emission cuts in the long term. Giving states the time they need to develop their plans– something C2ES and others recommended – will enable states to look at long-term solutions, such as market approaches, renewables and energy efficiency.

The next step is for states, cities, and businesses to come together to craft commonsense plans.

Key Insights from a Solutions Forum on Carbon Pricing and Clean Power

Key Insights from a Solutions Forum
on Carbon Pricing and Clean Power

April 2015

By Jason Ye

Download the Key Insights (PDF)

 

States will have tremendous flexibility to choose how to reduce carbon emissions under the Clean Power Plan. One idea states are exploring is putting a price on carbon. The first C2ES Solutions Forum — held on April 15, 2015 — brought together legal and economic experts, state environmental directors, and business leaders to explore the potential use of market mechanisms to reduce these damaging emissions efficiently and cost-effectively.

For more information about the C2ES Solutions Forum, see: http://www.c2es.org/initiatives/solutions-forum

Key insights and highlights from the event on carbon pricing and clean power include:

  • Most economists agree that the most efficient way to address climate change is to put a price on carbon.
  • The U.S. Environmental Protection Agency (EPA) has given states tremendous flexibility to determine the best way to achieve emission targets.
  • Virtually every state is already engaged in some activity that reduces emissions.
  • Market-based options available under the proposed Clean Power Plan go beyond creating or joining a cap-and-trade program or instituting a carbon tax.
  • States and businesses generally agree that market mechanisms are a proven, least-cost way to reduce emissions.
  • States believe support from the business community will be essential to adopting market-based options.
  • State and business leaders recognize the need to talk to one another about the best way to reduce emissions.
  • States are concerned about having enough time to develop market-based policies.
  • State and company representatives see a role for EPA to help states after the Clean Power Plan is finalized. 

C2ES will continue the conversation with states and businesses to share insights and innovative ideas that will help us get to a clean energy future. Our second Solutions Forum on May 18 will explore improving energy efficiency, which reduces emissions, through information and communication technologies. Our third event on June 25 will examine how to finance clean energy technology and infrastructure.

States will have tremendous flexibility to choose how to reduce carbon emissions under the Clean Power Plan. One idea states are exploring is putting a price on carbon. The first C2ES Solutions Forum — held on April 15, 2015 — brought together legal and economic experts, state environmental directors, and business leaders to explore the potential use of market mechanisms to reduce these damaging emissions efficiently and cost-effectively. This document summarizes key insights and highlights from the event.
Jason Ye
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Taking action on climate change is good business strategy

A new C2ES report highlights lessons useful for companies and policymakers as more states and countries consider carbon pricing to spur innovative technologies and cut emissions at the lowest possible cost.

The report, written for the World Bank’s Partnership for Market Readiness (PMR), examines how three companies — Pacific Gas and Electric (PG&E), Rio Tinto, and Royal Dutch Shell -- prepared for carbon pricing programs.

The PMR shares this type of information with developing countries to help them create their own market-based policies. We were pleased to partner with the PMR to explore how a few of the companies in our Business Environmental Leadership Council prepared for carbon pricing and we thank the companies for sharing their expertise.

The lessons they shared fall into two categories – what business can learn from other companies operating in carbon markets and what governments considering market-based climate policy can learn from business.

Pricing carbon - What are the options?

Judging from the climate policy debate in Washington, one might conclude that carbon pricing is only a concept, or something being tried in Europe.

But in fact, 10 U.S. states (California and the Northeast states in the Regional Greenhouse Gas Initiative) have carbon trading programs. That means more than a quarter of the U.S. population lives in a state with a price on carbon. And a growing number of nations and provinces around the globe are turning to carbon pricing to cost-effectively reduce greenhouse gas emissions and encourage energy innovation.

Over the years, C2ES has closely examined the many ways available to price carbon, including a cap-and-trade system, an emissions tax, and a clean energy standard with tradable credits.

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