\nand energy legislation—the best remaining shot at forging a
\nbipartisan consensus on this issue in 2010. Their proposal has many
\nstrengths, but there’s an issue brewing that could undermine its
\neffectiveness and drive up its costs. I wrote about this in a Boston Globe op-ed<\/a> on Earth Day, April 22.<\/p>\n
<\/p>\n
Government officials from California, New England, New York, and <\/p>\n The regional systems—including the Regional Greenhouse Gas Initiative (RGGI)<\/a> in the Northeast and Assembly Bill 32 <\/a>in <\/p>\n But times have changed. Like the House climate legislation<\/a> passed last June, the new Senate bill will feature at its heart an <\/p>\n Though the Congress has a history of allowing states to act more <\/p>\n This is because of the nature of the climate change problem. <\/p>\n If federal climate policy comes into force, the more stringent <\/p>\n A national cap-and-trade system<\/a>—which is needed to address emissions meaningfully and <\/p>\n In principle, a new federal policy could allow states to opt out if <\/p>\n Is there any possible role for state and local policies? Yes. <\/p>\n But for the core of climate policy—which is carbon pricing—the <\/p>\n California’s leaders and those in the Northeast may take great pride Related Links:<\/strong><\/p>\n What is the social cost of carbon?<\/a><\/p>\n Astute climate bill analysis from DJ Biz Markie<\/a><\/p>\n What to look for in the bipartisan climate and clean energy jobs bill<\/a><\/p>\n
\nother northeastern states are vociferously lobbying in Washington to
\nretain their existing state and regional systems for reducing
\ngreenhouse gas emissions, even after a new federal system comes into
\nforce. That would be a mistake—and a potentially expensive one for
\nresidents of those states, who could wind up subsidizing the rest of
\nthe country. The Senate should do as the House did in its climate legislation<\/a>: preempt state and regional climate policies. There’s no risk, because
\nif federal legislation is not enacted, preemption will not take effect.<\/p>\n
\nCalifornia—seek to limit carbon dioxide emissions from power plants
\nand other sources, mainly by making emissions more costly for firms and
\nindividuals. These systems were explicitly developed because the
\nfederal government was not moving fast enough.<\/p>\n
\neconomy-wide carbon-pricing scheme to reduce carbon dioxide emissions,
\nincluding a cap-and-trade system<\/a> (under a different name) for the electricity and industrial sectors.
\n(In a departure from the House version, it may have a carbon fee for
\ntransportation fuels.)<\/p>\n
\naggressively on environmental protection, this tradition makes no sense
\nwhen it comes to climate change policy. For other, localized
\nenvironmental problems, California or Massachusetts may wish to incur
\nthe costs of achieving cleaner air or water within their borders than
\nrequired by a national threshold. But with climate change, it is
\nimpossible for regions, states, or localities to achieve greater
\nprotection for their jurisdictions through more ambitious actions.<\/p>\n
\nGreenhouse gases, including carbon dioxide, uniformly mix in the
\natmosphere—a unit of carbon dioxide emitted in California contributes
\njust as much to the problem as carbon dioxide emitted in Tennessee. The overall magnitude of damages—and their location—are
\ncompletely unaffected by the location of emissions. This means that
\nfor any individual jurisdiction, the benefits of action will inevitably
\nbe less than the costs. (This is the same reason why U.S. federal
\naction on climate change should occur at the same time as other countries take actions to reduce their emissions<\/a>).<\/p>\n
\nCalifornia policy will accomplish no additional reductions in
\ngreenhouse gases, but simply increase the state’s costs and subsidize
\nother parts of the country. This is because under a nationwide
\ncap-and-trade system, any additional emission reductions achieved in
\nCalifornia will be offset by fewer reductions in other states.<\/p>\n
\ncost-effectively—will undo the effects of a more stringent cap within
\nany state or group of states. RGGI, which covers only electricity
\ngeneration and which will be less stringent than the federal policy,
\nwill be irrelevant once the federal system comes into force.<\/p>\n
\nthey implement a program at least as stringent. But why should states
\nwant to opt out? High-cost states will be better off joining the
\nnational system to lower their costs. And states that can reduce
\nemissions more cheaply will be net sellers of federal allowances.<\/p>\n
\nPrice signals provided by a national cap-and-trade system are necessary
\nto meaningfully address climate change at sensible cost, but such price
\nsignals are not sufficient. Other market failures<\/a> call for supplementary policies. Take, for example, the principal-agent problem<\/a> through which despite higher energy prices, both landlords and tenants
\nlack incentives to make economically-efficient energy-conservation
\ninvestments, such as installing thermal insulation. This problem can
\nbe handled by state and local authorities through
\nregionally-differentiated building codes<\/a> and zoning<\/a>.<\/p>\n
\nsimplest, cleanest, and best way to avoid unnecessary costs and
\nunnecessary actions is for existing state systems to become part of the
\nfederal system. Political leaders from across the country—including
\nthe Northeast and California—would do well to follow the progressive
\nlead of Massachusetts Governor Deval Patrick<\/a> and Secretary of Energy and Environmental Affairs Ian Bowles<\/a>,
\nwho have played key roles in the design and implementation of RGGI, and
\nyet have also publicly supported its preemption by a meaningful
\nnational program.<\/p>\n
\nin their state and regional climate policies, but if they accomplish
\ntheir frequently-stated goal—helping to bring about the enactment of
\na meaningful national climate policy—they will better serve their
\nstates and the country by declaring victory and getting out of the way.<\/p>\n