Let market fight global warming

December 01, 2006|By John A. Bewick

HINGHAM, Mass. -- Maryland Governor-elect Martin O'Malley faces a legislative mandate to join the Regional Greenhouse Gas Initiative by next June. New York, Connecticut, Vermont, New Hampshire, Maine, New Jersey and Delaware are signatories to this initiative. In Massachusetts, Governor-elect Deval Patrick has committed to join RGGI but is interested in improvements.

Although there is a wide and growing consensus on the importance of reducing emissions of greenhouse gases to prevent drastic climate changes, and to avoid the projected effects of such changes on the Earth's temperature, ocean currents and depths, and the world economy, there is not a consensus on how best to achieve these objectives.

If Mr. O'Malley and Mr. Patrick want to greatly increase every citizen's energy bill, they can sign RGGI as is. If they want to protect the pocketbook of constituents as well as safeguard the planet's climate, they can negotiate revisions to RGGI that would maximize use of marketplace mechanisms, eliminate problems of "leakage" (shifting production of emissions from controlled sources within RGGI states to uncontrolled sources elsewhere) and reduce restrictions on amounts of emissions available for offset trading that raise the price of compliance. Offset trading allows power generators to meet their carbon dioxide emission caps by "buying" reductions from other sources.

How does RGGI work? By using a cap-and-trade system in which carbon dioxide emissions from fossil-fuel-fired electricity generating plants are capped by the state. The state then meets its cap by distributing allowances to each power plant. Businesses are free to use technology to improve their efficiency so they don't exceed their allowances. They can also trade allowances with other companies or purchase "credits" from projects that reduce CO2 emissions. An example would be afforestation projects in which trees, which absorb CO2 from the atmosphere, are replanted in areas that lack them.

Why is the current RGGI unnecessarily costly to consumers? Unlike the Kyoto Protocol, RGGI limits where offsets can be obtained - first within the RGGI states and, beyond a certain price, anywhere in North America. RGGI then arbitrarily limits the use of offsets to 3.3 percent of reported emissions. This severely restricts use of offsets and eliminates using low-cost afforestation projects in Latin America that help restore rain forests being lost at great rates while simultaneously offsetting CO2 emissions that exceed the caps.

Further, RGGI requires states to set aside 25 percent of their allowances for "consumer benefit or strategic energy" purposes that are vaguely defined, further reducing use of market mechanisms to reduce CO2 emissions.

Why does it make a difference to people in Maryland? Roughly 64 percent of Maryland's electric energy comes from fossil fuels that are sources of greenhouse gas emissions. RGGI introduces uncertainties about supply and price. It is not clear what the price or availability of allowances and offsets will be. At present, the costs of new technologies to burn coal with less CO2 emissions or to capture CO2 from smokestacks and then sequester it in underground locations is prohibitively expensive. High-cost energy is a factor in driving industrial expansion to low-cost states, or off-shore, as Massachusetts has found out to its detriment.

The problem of global warming can be solved at affordable costs. The Environmental Protection Agency used market mechanisms to achieve major reductions in sulfur dioxide and nitrogen oxide emissions at reasonable costs. RGGI can achieve the full potential of these mechanisms by eliminating geographic restrictions on offsets and allocation set-asides that reduce full use of markets to lower CO2 emissions.

Greenhouse gas emissions are distributed worldwide at high altitudes. It does not matter where the emissions or offsets occur. Fostering the replanting of forests in less-developed countries will help to repair the planet. Deforestation has contributed almost 25 percent to global warming. Why not maximize the use of carbon offsets worldwide at costs that would be much less to consumers?

RGGI can be revised to allow lower-cost global solutions with the influence of Maryland and Massachusetts. Such changes would greatly benefit the region's economy - while improving the health of our planet.

John A. Bewick, a consultant on global warming who graduated from Baltimore public schools, is a former Massachusetts secretary of environmental affairs. His e-mail is jbewick@comcast.net.

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