Climate Policy and Regulation

What role does policy play in mitigating climate change?
What has happened in terms of international policy?
What policies and programs currently exist in the nation, individual states, and municipalities?
What programs are available at the organizational level?
What are the policy options for addressing climate change? What is cap-and-trade and how does it differ from command and control policies? What about a carbon tax?

What role does policy play in mitigating climate change?

Climate change is truly a global issue that requires clear policy set forth at all levels of governance around the world. Policy related to climate change mitigation would also clearly lay out the rules and regulations for all stakeholders. These policies would also help communicate decisive reduction targets and provide a universal action plan to which all stakeholders could abide and adhere.

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What has happened in terms of international policy?

In 1997, the United Nations Framework Convention on Climate Change (UNFCCC) initiated the Kyoto Protocol in an effort to stabilize greenhouse gas concentrations worldwide. As of January 14, 2009, 183 countries have signed the protocol, with 182 having ratified the protocol. The United States is the only country that has signed the protocol but has announced their intention to not proceed with the ratification process. Countries that ratify the Kyoto Protocol agree to submit annual greenhouse gas inventories and meet their respective greenhouse gas reduction targets during the commitment period (2008 through 2012). The reduction target varies by country. For example, if the United States had ratified the protocol, they would commit to reduce emissions by 7% from 1990 emissions. In comparison, Russia must not emit more than their 1990 emissions level, and Iceland would be allowed to increase greenhouse gas emissions by 10% from 1990 emission levels. Each country is given flexibility on how they reach their target; however, those countries that do not meet their target would be required to purchase carbon credits from countries that are below their greenhouse gas emission targets. This trading has occurred through carbon markets around the world.

Since the Kyoto commitment period ends in 2012, negotiations for a post-Kyoto treaty are already underway. In June 2007, the group of eight leaders, collectively known as the G8, (Canada, France, Italy, Germany, Japan, Russia, United States, and the United Kingdom), plus five emerging countries (India, China, Brazil, South Africa, and Mexico) declared they would negotiate a post-Kyoto treaty. On December 3, 2007, over 180 countries convened in Bali to begin this negotiation process. The result was the “Bali Road Map” which documented a consensus of nations that have declared that global warming is “unequivocal” and that to avoid severe climate change impacts nations would need to make significant cuts in greenhouse gas emissions.

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What policies and programs currently exist in the nation, states, and municipalities?

United States Climate Change Policies and Programs

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Climate change policy was initiated in 2002 under the Bush administration. Under the President’s policy, a greenhouse gas intensity reduction target was set that consisted of an 18% reduction from the 2002 level by 2012. Greenhouse gas intensity is defined as amount of greenhouse gas emissions per capita of gross domestic product (GDP). According to the United States Fourth Climate Action Report, the country is on track to meet this goal. This means that we are generating less greenhouse gases for every dollar measured in the GDP. However, this metric does not capture absolute emissions, which have increased 14.7% from 1990 to 2006.

Aside from setting greenhouse gas intensity reduction targets, President Bush’s climate policy includes a number of incentive and voluntary programs, including Climate VISION, Climate Leaders, Green Power Partnership, SmartWay Transport Partnership, and the Energy Policy Act of 2005. In addition, the United States has committed to continued support and funding towards the Climate Change Technology Program, Climate Change Science Program, and International Cooperation Programs that include continued funding to the UNFCCC and the IPCC. Climate change policy is expected to dramatically shift with the Obama administration.

State Policies and Programs

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In the absence of federal total greenhouse gas reduction emission targets, many states have taken the initiative to enact policy to reduce emissions. As of August 2008, 32 states have adopted a climate action plan.

However, the reduction targets vary from state to state. For example, Florida’s target is to reduce greenhouse gas emissions by 50% of the 1990 level by 2020 and 80% by 2050, and Utah’s target is to reduce emissions to the 1990 level by 2020 and 60% by 2050. California is the most advanced, with not only an aggressive reduction target and climate action plan, but also a cap and trade program.

Some states have joined forces to address climate change on a regional scale. There are currently three regional programs:

Regional Greenhouse Gas Initiative (RGGI) – RGGI (referred to as “Reggie”) is a regional cap and trade program that includes 10 northeast and Mid–Atlantic States. RGGI’s reduction target is to ultimately reduce power sector emissions by 10% by 2018. The RGGI program sets a “cap” and then phases in gradually increased reductions to the cap over time. The first commitment period has already begun (2009–2014) and carbon dioxide allowances have already begun trading.

Western Climate Initiative (WCI) – The WCI is a regional cap and trade program comprised of seven western states and four Canadian provinces. The WCI is designing its cap and trade policy; however, they have announced that they intend to design an economy-wide system (as opposed to just the power sector).

Midwestern Greenhouse Gas Reduction Accord – Governors from nine Midwestern states and premiers from two Canadian provinces have signed the accord agreeing to take action to reduce greenhouse gas emissions through market mechanisms.

Policies and Programs in Municipalities
Local governments from across the country have also responded to the scientific consensus that global climate change is linked to greenhouse gas emissions from human activities. Many representatives from these local governments had expressed their frustration with the lack of national leadership on global climate change and have taken action through a variety of policies and programs.

The following is a list of actions that municipalities have taken to address climate change:

Signed onto U.S. Conference of Mayors Climate Protection Agreement – The U.S. Conference of Mayors Climate Protection Agreement (CPA) was officially launched in 2007 by mayors across the country that recognized the urgent need to provide cities with guidance and assistance to address climate change. Mayors who sign onto the CPA strive to achieve three major goals: urge federal and state government to enact policy to meet or beat Kyoto Protocol reduction targets (7% below 1990 levels by 2012); urge Congress to pass bipartisan greenhouse gas reduction legislation; and strive to meet or exceed Kyoto Protocol targets by taking action in government operations and within community, by taking specific actions that include conducting greenhouse gas inventories, promoting transportation and energy efficiency programs. As of the end of December 2008, 910 mayors from across the United States have signed onto the United States Conference of Mayors Climate Protection Agreement (CPA).

Joined ICLEI’s Climate Protection Program – The International Council for Local Environmental Initiatives (ICLEI) is a non-profit organization dedicated to helping local governments (both county and city) address climate change. ICLEI’s flagship program is the Climate Protection Program (CCP) which provides technical assistance and software tools to assist local governments in conducting baseline greenhouse gas inventories, adopting emissions reduction targets, and developing, implementing, and monitoring local action on climate change.

Joined Climate Communities – Climate Communities was formed by a national coalition of local governments, including both county and city governments with the goal of educating federal policymakers on climate change. To join Climate Communities, local governments adopt a resolution stating that climate change is a challenge that requires solutions that meet other national objectives (e.g., energy independence); local governments are critical in crafting solutions; and that America cannot meet the challenge without federal support. As of December 2008, 35 county and city governments have joined Climate Communities from across the United States.

Joined Cool Cities or Cool Counties Initiatives – The “Cool Cities” and “Cool Counties” Initiatives were developed through a partnership with the Sierra Club, specifically to assist local governments. Membership with both initiatives is free and simply requires registering on their respective websites; however, by registering, the city or county must agree to take action on climate change. The “Cool City” Campaign has over 1,100 “Cool Cities” and “Cool Counties” has 35 counties from across the country that has signed onto the “Cool Counties Initiative.”

Joined National Association of Counties (NACo)’s County Climate Protection Program – Launched in March 2008, NACo’s program requires that county governments adopt a resolution committing to take action to mitigate climate change by committing to reduce greenhouse gas emissions, conducting a county–wide inventory of greenhouse gas emissions, and developing a county–wide plan.

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What programs are available at the organizational level?

United States Environmental Protection Agency (EPA) Climate Leaders Program – The EPA Climate Leader Program is a voluntary reporting and reduction program that provides companies with technical guidance in quantifying emissions as well as mitigating climate change. As of January 7, 2009, 250 members from various industrial sectors have joined Climate Leaders. With free membership, organizations receive 80 hours of technical guidance from EPA staff as well as a platform to highlight actions taken on climate change. Members must agree to conduct annual inventories and commit to a self-identified reduction target. Third-party verification is recommended, but is not required.

United States Department of Energy (DOE’s) Voluntary Reporting of Greenhouse Gases (1605(b)) Program – The DOE’s 1605b Program is a voluntary greenhouse gas-reporting program that was initiated in 2002. Based on the last published report summarizing participation (2005), 223 organizations reported their emissions to this program, with most of the participants from the utility and industrial sectors. Participation is free and members may report emissions as well as reductions; however, no reduction target is required. Third-party verification is also not required for participation.

The Climate Registry – The Climate Registry is technically not a program but a voluntary greenhouse gas reporting registry (not greenhouse gas reduction program). As of December 2008, 299 reporters have registered their emissions with The Climate Registry.

Chicago Climate Exchange (CCX) – The CCX is a voluntary reduction program as well as a platform to trade carbon credits (both allowance and carbon offset credits). Even though this is a voluntary program, members who participate are contractually obligated to reduce emissions by 6% below their 2002 baseline. Entities that are unable to meet their reduction target may purchase offsets from sellers who post their projects on the platform. An organization can participate as a member and/or a carbon offset provider. CCX has hundreds of members that include electricity providers, municipalities, states, manufacturers, and food, agricultural, and forest product providers.

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What are the policy options for addressing climate change?

What is cap-and-trade and how does it differ from command and control or a carbon tax?

Climate change can be addressed through various policy mechanisms that include command and control and market-based regulation. They are briefly described below:

Command and control – In command and control policies, government typically regulates a company by “commanding” specific action to be taken to mitigate the problem (e.g., using a scrubber on your smokestack). They “control” the problem by strictly monitoring compliance with regulation and impose strict penalties for non-compliance. This type of regulation was used in the early days of environmental regulation (e.g., point source water pollution). These policies tend to have little flexibility in meeting the overall goal, which is to reduce pollution, and hold all polluters to the same standard and stifle technological innovation.

Market–based – A market-based policy differs from command and control in that regulations use market signals to encourage behavior that will meet the overall policy goal. The advantages of market-based policies are that they tend to be more cost-effective and technological innovation is highly rewarded. In terms of greenhouse gas regulation, two market-based approaches have been proposed:

Carbon tax – A carbon tax sets up a “use” tax for emitting a unit of carbon dioxide equivalent. The idea is that if faced with a hefty tax, you will take steps to lower your emissions to avoid or lessen your tax. Many proponents of the carbon tax feel that the system will be simpler than a cap and trade. Others have argued that while a tax is less complicated than cap and trade it will not stimulate innovation.

Cap and trade – This approach entails capping total emissions for a region, country or globally, and then addresses various groups or entities within that geographic region. The region can reach its goals through a combination of reduction of emissions or sequestration of carbon dioxide into what is commonly referred to as a carbon “sink”. Total emission targets are set for entities that emit carbon dioxide. An organization that cannot reach a reduction goal, its cap, can locate a sequestering organization, a group that can exceed its goal or which may have the ability to create a sink (such as planting trees). Basically a group emitting in excess of their cap, can trade with another organization, or pay them to sequester enough carbon dioxide emissions to meet its cap target. Thus the region gradually reduces emissions over time until the target is achieved. A system for measuring and regulating this trade and these credits is developed by the governing body. A cap and trade system requires a commodity be traded (namely the carbon credit) in a market (known collectively as the carbon market). A cap and trade program is considered an innovative mechanism to solve the problem because it allows for innovation and flexibility in achieving a target. Cap and trade still imposes fees (you can even say a tax) on pollution; however, ultimately, the cost to society is believed to be less than the proposed carbon tax due to the opportunity for innovation. In addition, with cap and trade, a clear reduction target and plan to get there is laid out where the final outcome of a carbon tax is difficult to judge.

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