Navigant Research Blog

Emissions Reduction Efforts Gather Steam

Madeline Bergner — July 2, 2014

Over the past month, worldwide efforts to reduce global carbon emissions have intensified.  On June 2, the U.S. Environmental Protection Agency (EPA) released a proposal to cut emissions using state-by-state targets (read more on the proposed rule and its implications in previous blogs by my colleagues Brett Feldman and Ryan Citron).  As states begin to explore different compliance options, regional cap-and-trade programs, such as the Northeast’s Regional Greenhouse Gas Initiative (RGGI), have gained traction.  Outside of the United States, The World Bank recently reported that more than 60 carbon pricing systems are either operational or in development worldwide.

Cap-and-Trade Considerations

Despite opposition to the EPA’s proposed rule, some states have already begun to embrace the change by exploring a variety of compliance options.   Washington state and Pennsylvania, among others, see cap-and-trade as a possibility to achieve their state’s target for emissions cuts.  John Podesta, a senior adviser to President Obama, told the Financial Times that a market-based solution to achieve emissions cuts would be “the most cost-effective way that states might come together to get the reductions that will be required.”  Many Democratic governors have already indicated that they will draw on the success of the RGGI and California’s statewide market to achieve compliance with the new targets.

Not to be outdone, the National Development and Reform Commission (NDRC) of China laid out plans to establish a national carbon market starting in 2018.  If it comes to fruition, the national model will take into account outcomes from seven regional pilot programs that launched in 2014 (the last of which was scheduled to launch in June).  The pilot schemes, scheduled for evaluation in 2016, cover around one-third of China’s gross domestic product and one-fifth of its energy use.  If successful, these programs will not only shape the development of a national carbon market, but also help meet the national goal to reduce carbon intensity by 40% to 45% by 2020 from 2005 levels.

Is a U.S. Carbon Market Realistic?

Realistically, such legislation would be extremely unlikely in the immediate future.  National cap-and-trade legislation has failed on several occasions since President Obama took office, with opponents citing economic harm as the primary concern.  However, if China implements a national carbon market that achieves economical emissions cuts, it could provide the impetus to spur federal legislation in the United States.  Additionally, with the United Nations Climate Summit approaching in September, progress from United States and China may help further global efforts to curb emissions.

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