Climate Compass Blog
What if you held a sale and customers bought hardly any of your product? You might conclude that your product wasn’t very popular. If your product happened to be carbon allowances, essentially permission slips to emit carbon pollution, that lack of popularity sounds like a good thing for the climate.
This is essentially what happened last week when California and Quebec, who have joined their carbon markets, announced the results of their most recent auction of allowances. Companies who must buy allowances decided they didn’t need the full amount being offered, presumably because their emissions are declining.
California and Québec began their carbon markets in 2013, and the partners have held joint auctions of allowances every three months since November 2014. Each jurisdiction sets a limit on nearly all fossil fuel combustion at an amount that declines each year (the cap). Businesses responsible for that fossil fuel combustion have to buy allowances at auction to cover their emissions.
Historically, businesses have bought more than 90 percent of the allowances offered. But at the most recent auction, only about 10 percent of the allowances were sold.
This is great news. It means that carbon emissions are going down, and at a faster rate than the policy requires. If emissions were going up, prices at auction would be high. If emissions were going down at the same rate as the cap, then prices might be low but the auction would still sell out.
Market forces, like declining costs of renewable power, are part of the reason why emissions are declining. Businesses can use cost-effective alternatives to fossil fuels in their operations.
Also factoring into the results are the numerous other policies California and Québec have in place to drive down emissions, including ones aimed at increasing energy efficiency. That means businesses use less energy overall.
Is there any reason this might be considered bad news? Well, if you were counting on the money from the sale, it’s a problem.
California has anticipated generating billions in revenue through 2020 from the allowance auctions. But with few allowances sold, that state revenue source drops dramatically. California’s auction revenue is directed to various clean energy programs across the state, which means those programs could be in jeopardy if auction sales remain low.
So, is this an example of cap-and-trade working or not working? I would argue this is how cap-and-trade is supposed to work. The government sets a cap based upon its climate goals, the cap creates a price in the market, and companies incorporate the carbon price into their business decisions. If emissions are low (more accurately, if they are lower than the cap), then businesses don’t buy carbon allowances, pure and simple. Both California and Québec agreed upon rules for handling unsold allowances before their programs started, so businesses know what to expect.
A larger and more difficult question is whether this is an example of carbon pricing working. In both jurisdictions, the cap-and-trade program is only one of many policies aimed at reducing emissions. It’s unclear at the moment to what extent the carbon price is driving down emissions (and allowance demand) versus other policies. A sophisticated statistical analysis is required to answer that question, and as the cap-and-trade program continues there will be observations to enable just such an analysis.
There is often a heated debate around implementing new policies, and it is not unusual to hear predictions that regulating carbon emissions will cause economic doom. But time and again, experience has shown that businesses adapt quickly to new conditions and keep doing what they’re good at – giving us the products and services we want to buy. That they’re doing this while keeping their carbon emissions below a set level is something to celebrate.
|The Bonn Conference Center, site of May 2016 UNFCCC discussions.|
Climate change negotiators gathering for the first time since hammering out the Paris Agreement faced an unexpected quandary – preparing for the agreement to formally take effect so quickly.
The agreement is intended to guide climate efforts starting in 2020, and originally it was expected it would take a few years for governments to complete their ratification processes and formally bring the treaty “into force.”
But when it was ceremonially “opened for signature” last month in New York, an astounding 175 countries signed. And with the United States and China declaring they will go the next step and formally join the agreement later this year, it’s looking very likely the threshold for entry into force will be cleared next year if not sooner (55 countries representing at least 55 percent of global emissions must formally consent).
This is great news. It shows that the tremendous political momentum that produced the agreement in December is still going strong – even if it is complicating life a bit for the teams of negotiators who now must flesh out the broad Paris architecture with a set of more detailed implementing decisions.
The unanticipated issue is how to ensure that countries that aren’t able to formally join as quickly can still have a hand in shaping the implementing decisions once the agreement enters into force. The lawyers have identified potential fixes and the issue should be ironed out at COP 22 this November in Marrakech, Morocco.
Beyond that, the negotiators are just beginning to grapple with a host of technically and politically challenging design issues – for instance, the specifics of the transparency system that will keep countries accountable, and of the every-five-years cycles for assessing collective progress and updating countries’ national contributions.
The two-week meeting just wrapping up Bonn, Germany, where the United Nations climate secretariat is headquartered, was largely about getting the post-Paris process organized.
Following the frenzied rounds of talks leading up to and culminating in Paris, there were signs of negotiating fatigue. But the “Paris spirit” by and large prevailed, with parties working through their differences about the process going forward.
The more substantive discussions during the second week foreshadowed some of the challenges ahead in fleshing out the Paris framework. One of the trickiest will be sorting out exactly how to apply Paris’ more nuanced approach to differentiating responsibilities among countries, which replaces the Kyoto Protocol’s stark divide between developed and developing countries.
However quickly the Paris Agreement formally enters into force, it will likely take until 2018 to complete the implementing decisions. Continued high-level political attention can help ensure that the negotiations stay on track – and, perhaps more importantly, that countries push forward with the domestic policies needed to deliver on their commitments.
|In Philadelphia, officials collect energy use data from schools, hospitals, labs and office buildings, using the information to identify energy and cost savings.|
Cities can be the leaders and heroes in our climate crisis if we can build the right relationships to empower them.
Whether it’s because their governments can be more responsive, or because they are becoming so interconnected, cities are playing a prominent role on the international stage in galvanizing climate action.
Starting with the groundbreaking Mayors Climate Protection Agreement in 2005, city initiatives like the Compact of Mayors and the Carbon Neutral Cities Alliance are evolving to connect cities with each other to exchange knowledge and achieve economies of scale for new technologies. This month, mayors around the world announced plans to push for investments in climate-friendly urban infrastructure, particularly in developing nations.
But the transformation we need requires more than connecting cities to one another. Cities also need to be connected to other levels of government and to the business community.
Barriers to Action
Two new reports from C40 Cities (Power Behind Paris) (Unlocking Climate Action In Megacities) highlight obstacles stopping cities from enacting transformative climate solutions. First, cities operate within a larger system of governments that affect their ability to act. Second, they rely on businesses to implement solutions to achieve a low-carbon, resilient local economy.
You could look at these as barriers or simple truths, but either way, the fact that cities rely on external entities is important to keep in mind. To combat global climate change, we cannot expect any institution to do it alone.
The C40 reports point to the need for better vertical integration with governments, and stronger collaborative relationships and practices with the private sector.
Examples of Leadership
Putting this into practice is difficult but achievable.
For example, to achieve its goal to reduce the city’s carbon footprint, Philadelphia had to address energy use in buildings, the city’s largest source of emissions. To establish its energy benchmarking policy, which collects and publicizes energy use for non-residential buildings over 50,000 square feet, the city had to work with local school officials, universities, and commercial real estate companies. The city collects energy use data from schools, hospitals, labs, office buildings and more that can be used to find energy and cost savings.
The city of Phoenix has set a goal to get 15 percent of its electricity from renewable resources by 2025. To reach that goal, it has partnered with the private sector, investors, and the state to finance and develop solar power installations on public and private lands, including the airport, a landfill, and a water treatment plant.
Steps like these can help states implement the Clean Power Plan, and help the U.S. close the gap to reach its emissions-cutting goals under the Paris Agreement. Despite this, cities have been largely outside-looking-in when it comes to serious conversations on designing and implementing state, federal and international climate policy.
An Integrated Approach
How much faster could we tackle our climate and energy challenges if we took a more integrated approach? The potential is great; for every Philadelphia or Phoenix there are a dozen more cities that aspire to achieve similar success.
For these reasons, C2ES is promoting collaborative approaches that result in integrated 'ecosystems' of policies and programs. Our Solutions Forum fosters new relationships among cities, businesses, and states on key issues. We are also helping cities work with local businesses to establish climate resilience plans that leverage both public and private resources.
City-city initiatives are critical to galvanize support for and increase understanding of transformative climate and energy solutions. But putting these solutions into practice will take on-the-ground collaboration with other levels of government and businesses.
The state of New York has passed a budget that includes a new EV purchase incentive that will provide up to $2,000 for eligible buyers of an all-electric vehicle, a plug-in hybrid EV, or a hydrogen fuel cell vehicle. Meanwhile in Minnesota, legislators have been considering an EV purchase incentive.
The CEO of the Freedom Foundation of Minnesota criticized EV purchase incentives as “a reverse Robin Hood scheme,” without the green tights, that takes money from the many (taxpayers) and subsidizes the purchases of the few (elites who buy EVs). How accurate is the assertion that the wealthy benefit the most from purchase incentives?
A free EV data tool from the New York State Energy Research and Development Authority can provide some insight. Developed with support from C2ES, EValuateNY gives users access to wide-ranging data sources from New York State’s EV market and allows easy comparisons of the factors that affect EV sales. You can find more about the tool in a previous blog post.
Our initial assessment, examining the period before the purchase incentive program has been implemented, shows that the EV market extends well beyond New York’s wealthiest counties.
Using the U.S. Census Bureau’s data on median household income by county, we established three income brackets to compare wealth between counties. Next, we broke down EV registrations by county and income bracket from the beginning of the EV market (2010) to the most recent data in EValuateNY (2014). The results show that counties with high median incomes account for slightly less than half the state’s total EV registrations.
Figure 1: Distribution of EVs by Income Bracket and County (2010-2014)
Therefore, EVs are not solely purchased in high-income counties, though households with high incomes are found in each county. However, EV registrations in three high-income counties (Suffolk, Nassau, and Westchester) account for more than 43 percent of the state’s total registrations, but only about 22 percent of the population. Clearly, these high-income counties have a higher rate of EV registrations. To dive deeper, we used EValuateNY to plot the rate of EV purchases per 1,000 vehicle registrations by county and income level, shown in Figure 2. Using a rate of EV purchases helps eliminate other factors that may affect the data, such as population or the rate of vehicle ownership. We also added the total number of EV registrations as the size of the bubble representing each county.
Figure 2: Household Income with Rate of EV Purchases and EV Registrations by Income Bracket and County (2010-2014)
This chart indicates that income may have a positive effect on the rate of EV registrations. High-income counties’ rate of EV purchases per 1,000 vehicles is higher than the range of low-income counties. With some notable exceptions, it’s also higher than the range of medium-income counties.
EValuateNY helped establish two findings[i] about the effect of income in New York State’s EV market:
1. Counties with low and medium median incomes make up more than half of the market; and
2. Residents of high-income counties may be more likely to purchase an EV than residents of low- and medium-income counties.
So, would New York’s forthcoming purchase incentive rob from the poor and give to the rich? This could not be entirely true, since more than half of all registered EVs are in low- and middle-income counties, and residents in these counties would arguably benefit more from $2,000 than residents from high-income communities. However, there may be some validity to the argument that on an individual basis, residents of high-income counties would benefit more from the purchase incentive because they may be more likely to buy an EV.
From a policy perspective, the purchase incentive is designed to promote EV deployment, reduce greenhouse gas emissions, and invest in the state’s economy. The program is not designed with any specific social equity goals, but New York legislators could address any potential wealth disparity by instituting an income cap, as California recently did.
The value of purchase incentives in spurring the EV market should not be lost in the discussion of income, though. A recent report by the Stockholm Environment Institute highlights the need to reduce EV price premiums as a means of encouraging consumer adoption. The effect of purchase incentives on state EV markets has been demonstrated over the past year after Georgia eliminated its $5,000 all-electric vehicle tax credit, and EV sales fell sharply.
New York State’s purchase incentive is a helpful tool for putting more electric vehicles on the roads. All New Yorkers, not only the wealthy, benefit from the reduced greenhouse gas emissions from having EVs using some of the least carbon-intensive electricity in the nation.
[i] The strength of any correlation is difficult to establish, as EValuateNY’s user interfaces are designed to provide high-level insights. A regression analysis that provides confidence intervals may be required to better understand the significance of income on counties’ rate of EV uptake. Users may conduct advanced analyses by directly accessing EValuateNY’s databases.
It’s strawberry season!
The first fruits of our family’s membership in a community-supported agriculture (CSA) program are starting to come in. This weekend, our kids will get back to the Earth (and get some of it on them) by picking a quart of berries at a farm just up the road from our house. And that will be just the start of a weekly harvest of fresh produce that’s locally and organically grown.
CSA is one model for locally-based agriculture and food distribution. It’s essentially a cooperative arrangement between a farmer and the local community. Members of a CSA program buy shares of the eventual harvest from the farmer at the beginning of the growing season and receive a portion of what the farmer produces in return.
The farmer gets help with the upfront costs of running a business that has a lot of uncertainty, like the weather, insects, or blight. The consumer gets a regular supply of produce fresh from the farm, sometimes at a discount over what they might pay at the grocery store.
Of course, with the shared benefits comes shared risk. If the growing season is bad for a certain crop, or an unexpected storm hits, that will affect the harvest. It can be disappointing. But the fact that the community is helping the farmer with costs could mean that the farmer can stay in business despite a bad harvest or devastating storm.
It made sense for my family, which includes two vegan teenagers, to give it a try this year. Each week, we’ll get up to eight items from the farm, such as a head of lettuce, a bag of spinach, a bundle of carrots, or a pound of green beans. We hope the experience will diversify the whole family’s food choices.
Being a CSA shareholder feels good because not only are we supporting our own community, but we are teaching our children where their food comes from and the work it takes to produce it.
You can find a CSA farm or other sources of locally grown food here.
CSA could be right for you if:
- Eating locally grown food is important to you.
- You cook the majority of your own meals.
- You like a variety of different and fresh vegetables.
- You can commit to picking up your produce share on the same day and at the same location each week. (Although some CSAs now offer door-to-door delivery).
- You can tolerate some risk of not getting crops or crops not coming in as planned.
- You want to support the local economy and small farm/agriculture industry.
Not all CSA farms are certified organic, although many do have a USDA certified organic seal. If this is a priority for you, ask about the farm’s growing practices before committing. Another important consideration is to find out what a CSA will provide. Some grow fruit, and others even include meat, eggs and honey.
If you want to eat fresh from the farm but can’t commit to CSA, you have other easy options:
- Farmers’ markets: Many communities set aside places for farmers to sell their produce directly to the public.
- Recovered food: Businesses like Hungry Harvest in the Washington, D.C., area take food that is perfectly edible but might be discarded by a restaurant or a grocery store because of a cosmetic imperfection. Some is sold to customers and some is donated to food banks or farmer’s markets.
- Grow your own: It doesn’t take much space in your backyard or balcony to plant a few tomatoes, bell peppers or squashes—especially if you grow them vertically. If you pull the weeds and water the plants, you’ll have tasty produce you can call your own.