As the World Keeps Getting Warmer, California Begins to Cap Carbon

Carbon emissions keep rising and the world keeps getting hotter, but there's little progress at the U.N. climate summit in Doha. If you want hope on climate change, though, look West—to California

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Industrial landscape in Long Beach, Calif. The state has adopted a far-reaching carbon cap that will require companies to reduce carbon emissions

It’s not a good sign for the international effort to stop global warming that most of the news so far generated out of the U.N. climate summit being held this week in Doha has not been made by the diplomats and delegates actually involved in the negotiations. Instead, the scientists on the sidelines are generating the headlines. Researchers with the Global Carbon Project reported on Dec. 2 that global emissions of the greenhouse gas carbon dioxide hit a record high in 2011, and will almost certainly reach a new record of 35.6 billion metric tons in 2012. China led the way with 28% of global emissions in 2011, with the U.S. second at 16%—though Chinese per-capita emissions were far lower than those of the U.S.

The level of CO2 has increased by 41% since the beginning of the Industrial Revolution—enough to help warm the planet by 1.5˚ F since 1850. Globally 2012 seems likely to be the ninth-warmest year on record—thanks in part to the cooling effect of the La Niña phenomenon earlier in the year—though the U.S. could be facing the hottest year in its recorded history. And a paper published in the journal Nature Climate Change on Dec. 2  concluded that the rapid increase in carbon emissions that has boosted global temperatures by 3.6˚ F (2˚ C) — considered the maximum amount of warming that the planet might be able to endure without serious consequences—all but inevitable, no matter what we do in the future. “These latest figures come amidst climate talks in Doha,” said Corinne Le Quere, the director of the Tyndall Centre for Climate Change Research and a member of the Global Carbon Project. “But with emissions continuing to grow, it’s as if no one is listening to the entire scientific community.”

Tell me about it. But if the Doha summit seems unlikely to produce much meaningful progress on global climate efforts, that doesn’t mean we’re helpless to deal with global warming. In fact, one of the most ambitious efforts has just been launched here in the U.S.—which held off from signing the Kyoto protocol—in the state that often finds itself nudging the rest of us in a greener direction: California.

Last month, after years of debate and delay, California finally launched AB32, the official name of the state’s carbon cap-and-trade system. The result of the Global Warming Solutions Act, which was signed into law by then-Governor Arnold Schwarzenegger in 2006, AB32 commits California to reduce its greenhouse gas emissions to 1990 levels by 2020. That’s about a 17% cut from where the state’s emissions would likely be if no legislative action had been taken. The reduction is set to be achieved by putting a cap on the state’s carbon emissions that is gradually tightened by about 2 to 3% a year. Companies covered under the law need to either reduce their carbon emissions to meet the tightening cap or purchase carbon allowances on a regulated market to compensate for their emissions.

If that sounds familiar, well, it’s essentially the same program Congressional Democrats and the Obama Administration tried to put into place nationally in 2009 and 2010, before the Waxman-Markey cap-and-trade legislation floundered thanks to Republican opposition. Though AB32 was delayed for years by lawsuits and other opposition—including an eventually defeated ballot initiative in 2010 that would have suspended the system—California’s system is actually becoming a reality. The state held its first auction for carbon allowances on Nov. 14, and companies purchased all 23.1 million allowances that were up for sale—each allowance, at an average price of $10.09, allows the buyer to emit 1 ton of CO2 in 2013. Altogether the auction raised about $300 million, much of which will be sent back to regulated electric utilities and then to customers as a “climate dividend.”

That $10.09 a ton might not sound like much—and indeed, it’s only a little bit above the legally-mandated floor price for the auction—but California regulators were relieved that all the carbon allowances on sale were finally purchased. (Had the auction been under-subscribed, it would have sent the signal that companies didn’t believe the state would actually follow through with capping carbon.) As the environmental economist Robert Stavins notes, the low market price for carbon allowances might actually be a good thing for the environment:

On the one hand, it is very good news that the allowance price is as low as it is, because this is indicative of the market’s prediction of what the marginal cost of abatement will be.  Lower cost is good news for the California economy.  Of course, low prices mean smaller funds raised by the auction ($233 million raised by the 2013 auction, and $56 million by the 2015 auction).  However, given that the fundamental purpose of the auction is to cap emissions through the cap-and-trade system, not to raise revenues for the state, this doesn’t appear to be bad news either.

Still, Stavins goes onto warn that the low auction prices might also indicate that companies are worried that state legislators in California may end up backing out on the carbon cap if they become concerned about the economic cost of cap-and-trade. That would be a reflection of what Roger Pielke Jr., a professor of environmental studies at the University of Colorado at Boulder has called the “iron law of climate politics“—the notion that governments will always yield if a carbon price becomes that incurs economic pain.

Of course, AB32 is in its early stages, and it only covers one U.S. state. Meanwhile prospects for concentrated national or global action on climate change remain dim. But California’s economy is the 9th largest in the world, and it has shown a willingness in the past to push the rest of the country on environmental action ranging from air pollution to fuel efficiency. Even if the state’s cap-and-trade program is still a work in progress, it has the potential to be an important experiment, as Eric Pooley of the Environmental Defense Fund points out:

The bottom line is this: a declining cap on emissions has been put in place in California, with a carbon market to stimulate investment. Voters like it, companies are participating, investors are responding, and the program is off to a smooth start. Three (quiet) cheers for California.

Given how grim the rest of the global climate picture is, three quiet cheers might be the best we can hope for right now.