American Cap and Trade Programs
In the U.S., the EPA (Enivironmental Protection Agency) has enacted several programs in the effort to lower global warming emissions. According to data, the U.S. contributed approximately a third of the world’s emissions. This significant figure has mounted pressure on the U.S. to change their polluting ways. In 1992, the international environmental treaty, United Nations Framework Convention on Climate Change (UNFCC) was developed. The treaty is considered legally non-binding, since it does not enforce mandatory limits on greenhouse gases on countries but its intention is to stabilize greenhouse gas emissions. The treaty consists of several protocols, the main one being the Kyoto Protocol, which set stringent reductions in pollutants. The Kyoto Protocol which was signed by almost all nations except for the U.S., enforced legally binding reductions in greenhouse gas emissions of an average of 6 to 8% below 1990 levels between the years 2008-2012. The United States would have been required as member of the UNFCC to reduce its total emissions by an average of 7% below 1990 levels. However neither the Clinton administration nor the Bush administration sent the protocol to Congress for ratification. The Bush administration explicitly rejected the protocol in 2001. Despite the fact the U.S. did not ratify the contract, the U.S. has put into place several cap and trade programs within state(s) and at the national level and and the administration has expressed desire to trade internationally at some point. Some cap and trade systems function effectively and independently in U.S. as there are different needs within each state, and limits that need to be set without compromising a healthy economy.
As of 2009, the newly elected U.S. President, Barack Obama, has stated many times his support in investing in renewable sources of energy, along with reducing the harmful effects of global warming emissions at home. However, during the climate summit held in December 2009, the President has revealed that the current U.S. budget prevents the U.S. from contributing to developing nations fighting carbon emissions. Legislation to create a cap and trade program to trade carbon is stalled in the Congress.
Currently, there are several programs in the U.S. that Congress has introduced to regulate emissions other than carbon into the atmosphere:
The U.S. Environmental Protection Agency’s (EPA) Acid Rain Program (ARP) was instituted in 1990 under Title IV of the Clean Air Act (CAA) and was established by EPA in 1995. The ARP regulates the sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions which are the primary causes of acid rain. The goal was to reduce S02 emissions by 10 million tonnes from 1980 levels. In 2000, the Act also called for 2 million tonnes of NO2 emissions to be reduced which according to EPA has largely been achieved. The ARP is viewed as one of the more successful federal regulatory programs within the last 10 years with annual benefits exceeding costs by a factor of 40 to 1. EPA has used the ARP fundamental elements as a model for other cap-and-trade programs, including the NOx Budget Trading Programs (NBTP), which went into effect in 2003, and the published Clean Air Interstate Rule (CAIR) and Clean Air Mercury Rule (CAMR) in 2005. CAIR will permanently cap emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx) in the eastern United States, specifically 28 eastern states and the District of Columbia. CAIR will reduce SO2 emissions in these states by over 70 percent and NOx emissions by over 60 percent from 2003 levels. This will result in $85 to $100 billion in health benefits and nearly $2 billion in visibility benefits per year by 2015 and will substantially reduce premature mortality in the eastern United States.
SO2 and NOx emissions come from electric generating units that burn fossil fuels, such as coal, oil, and natural gas, and that serve a generator >25 MW. For these units, Part 75 of Volume 40 of the Code of Federal Regulations (CFR) requires continuous monitoring and reporting of SO2 mass emissions, carbon dioxide (CO2) mass emissions (Section 821 of the Clean Air Act requires CO2 emissions to be monitored and reported to EPA), NOx emission rate, and heat input. The SO2 component of the ARP is a cap and trade program, designed to reduce acid deposition by limiting SO2 emission levels in the “lower 48” states of the United States. EPA controls NOx emissions from coal- fired generating units through rate-based standards linked to boiler types and allows for companies to “average” rates for these generating units.
In October 1998, EPA added Subpart H to Part 75, which provides a blueprint for the monitoring and reporting of NOx mass emissions and heat input under a state or federal NOx emissions reduction program. Subpart H has since been adopted as the required monitoring methodology for NOx mass emissions and heat input under the NOx Budget Trading Program (NBTP). The ARP and NBTP are based on a monetary system of tradeable allowances (1 t of SO2 or NOx = 1 allowance) that requires rapid, end-of- year reconciliation of emissions and allowances. Because of this, EPA had to minimize the use of traditional enforcement procedures. (For the NBTP, which is an ozone season [May 1 through September 30] program, reconciliation is done at the end of the ozone season.) For an ARP source that fails to comply with the allowances it holds for a particular calendar year, Section 411 of the Clean Air Act provides for stringent automatic penalties. The excess emissions penalty for SO2 or NOx is $2000/t, adjusted for inflation each year, and payable without demand to the U.S. Treasury. This statutory penalty is significantly higher than the value of an allowance.
The Regional Greenhouse Gas Initiative (RGGI) is one of the U.S. cap-and-trade program that covers a single sector—electricity generation—in 10 northeastern and mid-Atlantic states. The program aims to achieve a 10 percent reduction in carbon emissions from power plants by 2018. The program’s most notable aspect is that states unanimously chose auctioning to distribute the vast majority of carbon emission allowances. Six of the ten states will auction nearly 100 percent of their allowances. The auctions of the other four states include fairly small portions of fixed-price sales or direct allocations. The program’s initial three-year compliance period begins in 2009, but the first multistate auctions occurred on September 25 and December 17, 2008. The first auction, which included allowances from only six states, raised $38.5 million, while the second raised $106.5 million. States and electric utilities will invest the vast majority of those funds from the carbon credits sale in energy efficiency and renewable technologies, with an emphasis on reducing demand for fossil fuel–based electricity and saving consumers money.
However, there is no national carbon trading scheme or cap and trade project in the United States and the political climate of the country means the chance of passage isn’t likely.
