“Essentially, what we’re doing is kicking the can,”

November 18, 2019 9:20 AM

“Experts say cap and trade is rarely stringent enough when used alone; direct regulations on refineries and cars are crucial to reining in emissions. But oil representatives are engaged in a worldwide effort to make market-based solutions the primary or only way their emissions are regulated.“ Cap and Trade Is Supposed to Solve Climate Change, but Oil and Gas Company Emissions Are Up (ProPublica)
posted by The Whelk (22 comments total)

How about we give them sports that are complicated enough to engage them, and stop gamifying things that are actually life and death.
posted by amtho at 9:55 AM on November 18, 2019 [6 favorites]

Could we switch from Cap to Decap?

Asking for a Tricoteuse of my acquaintance.
posted by GenjiandProust at 10:06 AM on November 18, 2019 [2 favorites]

Pegging your hopes on a single solution is as foolish as dismissing solutions out of hand (see also nuclear power and geoengeering)
posted by gwint at 10:21 AM on November 18, 2019 [3 favorites]

Just. Tax. It.
posted by Popular Ethics at 10:35 AM on November 18, 2019 [3 favorites]

I think the idea behind cap and trade was that it was not a single solution, rather it was justified with the argument that it would indirectly stimulate different low carbon tech by creating an incentive for FF burning, GHG producing industry to seek out these lower carbon alternatives.

However, one of the key lessons from the experience of policy to grow renewable energy is that these new industries benefit strongly from predictability and stability of the prices that the tech can access. If that stability isn't there then its a strong disincentive for consumers to buy the product and thus for the manufacturers to innovate the product. Lack of certainty causes the cost of accessing capital to go up and reduces investment. Basically manufactures need to know there is going to be demand for their tech five years down the line. Investors need to know the price for the carbon saving from their energy efficiency improvement or renewable investment or whatever, won't fall out in a couple of years for political reasons.

Basically market based mechanisms aren't that great for driving low carbon tech into maturity. Even where they do drive new tech to capacity their is evidence that it costs more than just guaranteeing a price, since the uncertainty costs money.
posted by biffa at 10:51 AM on November 18, 2019 [1 favorite]

Taxing it does the same thing as cap and trade: it lets the free market decide who really-really-really needs to keep using fossil fuels for a little longer based on who is really-really-really willing to pony up for the privilege. (As opposed to who is really willing to raise a fuss in Congress to prevent progress on emissions, which is a much larger set).

Which is a lot better than mandating particular means on particular people to achieve these emission reductions.
posted by ocschwar at 10:56 AM on November 18, 2019 [1 favorite]

I work professionally in this area. It's very simple - we need a price on carbon emissions. The mechanism to give us that price doesn't matter. Cap & trade or tax, whatever*. Climate policy is only as effective as the carbon price.

Currently, 80% of global greenhouse gas emissions have any price. Only 1% are priced high enough to cause the massive reductions in emissions needed to meet the Paris Agreement targets of not setting the fucking world on fire.

That necessary price is possibly US$50-100, which would tilt the playing field in favour of renewables, electric vehicles, waste recycling, regenerative and plant-based agriculture, etc etc.

California's price is about US$16. So they're doing better than 90% of the world, but the world is rapidly going to shit. What California is doing isn't enough.

(* Ok, there are difference in practice between cap & trade or tax. Cap&trade should deliver a certain volume of emissions; tax a certain price on emissions. Cap&trade has higher complexity so more room for game-playing; tax will cause more deadweight losses. Which is better in reality? The World Bank's fucking awesome report "State and Trends of Carbon Pricing 2019" lists 28 trading systems in regional, national, and subnational jurisdictions and 29 carbon taxes. So both are being tried. But back to the point - it's the price that matters.)
posted by happyinmotion at 11:11 AM on November 18, 2019 [17 favorites]

Canada is pricing at $20 now to $50/tonne in 2023 ($16 to $40/tonne USD), with some substantial loopholes. It's pretty widely understood that this isn't enough, that we'll need at least $100/tonne ($75-80 USD) to achieve even the modest Paris targets by 2030, quite likely more.
posted by bonehead at 11:29 AM on November 18, 2019

I agree that the price is so much more important than the mechanism. However, I've yet to see a cap & trade system that isn't effectively a giveaway to existing players, with new players put in a much more difficult position. That's entirely the opposite of what we would want (which would be that new players, who may have less carbon-intensive methods, would see a cost advantage due to their lower emissions). Systems that do deal with this problem tend to end up being intensity targets, which are not really caps. Perhaps someone has cracked this (as I'm not that up to date), but it is a tough problem.

But the bigger problem is that everyone can understand a per ton tax. No one but wonks are going to understand how cap & trade actually plays out and that leaves far too much space for lobbying to weaken rules (this and the reason above are obviously why industry favours cap & trade over a carbon tax). I can't see any system that doesn't put a clear price on carbon in such a way that special deals can't slip through the cracks working at all, when we're talking about carbon prices that are high enough to make a difference. Even carbon taxes can give too much wiggle room already (for instance, here in British Columbia coal and gas are getting a free ride on their fugitive methane emissions, which are significant, and avoiding the $40/ton tax that would definitely change their behaviour if it was applied). Any more complex system just makes it even easier for exemptions to be carved out.

We've seen exactly the same with our income and corporate tax system. Complexity gives all kinds of space for shady and unfair outcomes to sneak in.
posted by ssg at 12:18 PM on November 18, 2019 [1 favorite]

What Canada's done is pretty complex - provinces get to do their own thing plus a federal backstop that's got a tax-like bit and a trading-like bit. Quebec is also in a joint carbon market with California. Ontario was part of that market but got kicked out.

What's amazing is that this is a very popular system (as new taxes go). The revenues from the federal system go back to the provinces; the revenues from the fuel charges go back to households, with additional payments to rural communities. That's how you make it politically possible to have a high price - make the small number of emitters pay and give that money to a large number of voters.

Sure, it only covers 80% of the economy and there's big loopholes, but perfect is the enemy of progress and at this point in the climate catastrophe, we need progress more than perfection.
posted by happyinmotion at 12:54 PM on November 18, 2019 [3 favorites]

I absolutely agree, what we've got is a whole lot better than not doing anything, but, we need to be clear-eyed in that it's a start not a whole solution.

And yes, I am absolutely happy that we have this and not Alberta's TIER solution that mostly looks like a tax hiding a greenwashing program to me.
posted by bonehead at 1:09 PM on November 18, 2019

So I don't work in climate change, but I do work at a climate change institute and have asked our experts about this. They're pretty dismissive of cap and trade for the reasons stated - too low a price and it doesn't change behaviour, too high a price and the market spirals out of control, and the only one who benefits is hedge funds - and empirical evidence suggests that there's no price where you avoid both bad scenarios. It's also a solution that becomes less effective if the carbon-free process becomes cheaper - now that renewable electricity generation is cheaper than building coal-fired turbines, the carbon price is going down, which isn't really the behaviour you want!

They're actually not too impressed by carbon pricing either, although they acknowledge it's better than not having one. What they've found is that, by setting a price on it, it gives companies a reason not to transition. (Economists have a story about a daycare centre that kept having late child pickups, and when they implemented a fine, more kids were left behind because now it had a price and parents preferred to pay the fine than leave work early to pick up their kids. Same principle.) Companies can avoid it in all the usual tax minimisation ways - they don't have to adopt less carbon-intensive processes if they can just move to another country.

They've been particularly impressed by the efficacy of renewable energy targets - these are schemes that require energy retailers to purchase a certain amount of energy from certified renewable energy providers (including households). Getting the certification system up and running is the challenge here, but because the regulation artificially creates a demand that can be easily adjusted, it provides certainty to renewable energy generators and gives them an opportunity to bootstrap their setup. If they get their prices lower than coal generation, they can start competing in the general market as well. A scheme like this has pushed Australia to about 30% renewable energy, despite the conservative government, who are beholden to the coal industry, doing everything in their power to sabotage Australia's clean energy transition.
posted by Merus at 1:54 PM on November 18, 2019 [3 favorites]

→ Ontario was part of that market but got kicked out

Um, our dickweed premier doesn't believe in climate change and dropped the whole carbon thing without any consultation, lost us more than $1B of revenue, shut down wind farms under construction and did harm to the province's credit rating by reneging on contracts.

In a stroke of almost-clever evil, his actions triggered a bunch of WTO claims by the cancelled projects' owners. The claims go against the Federal government, so Doug the Thug knows that Justin will have to pay up, not him.
posted by scruss at 3:06 PM on November 18, 2019 [3 favorites]

They've been particularly impressed by the efficacy of renewable energy targets - these are schemes that require energy retailers to purchase a certain amount of energy from certified renewable energy providers (including households).

Not knocking this, but when global emissions for electricity are less than 20% of the total, this is a very limited mechanism and in no way a replacement for real carbon pricing.
posted by ssg at 6:15 PM on November 18, 2019

There has been a historical focus on electricity from renewables, to the detriment of heat and transport. The latter is looking increasingly likely to end up being a function of electrical supply because the only other option is lots and lots of biomass. Heat might also electrify but there are other options too. However, supporting renewable heat has proven to be a much more difficult job than supporting electricity. The domination of gas over heat delivery means that networks and regulatory systems favour incumbents much more strongly in the gas/heat sector. Issues with heat metering also throw up problems in terms of charging and in terms of providing support. Unit based renewable heat support is way tougher to do than it has been for electricity. Building regs have increasingly looked like the best option but this is a slow process and often starts with new build, leaving existing stock reliant on carbon emitting fuels. Theoretically the same stability that supported renewable electricity needs to be applied but doing so has not been adopted widely. Unfortunately, there has been a lack of political will and I think it is because it is more difficult. I'm not sure the carbon trading solution is likely to be a useful substitute.
posted by biffa at 4:27 AM on November 19, 2019 [1 favorite]

However, if you have a carbon tax, that very directly affects the price of natural gas used for heat. And since gas is so cheap, a carbon tax does actually significantly change the overall price (when the same carbon tax is not very significant for more expensive and already more heavily taxed gasoline).

That said, the low hanging fruit in heat is, and always has been, efficiency. Our buildings are poorly insulated and leaky and we need to fix them (and stop building them like that). More expensive gas heat through a carbon tax will help drive that change. I'm sure biomass is part of the solution in some places, but I think efficiency, heat pumps and cheap renewable electricity are much more important.

We have the solutions now, we just need to implement them.
posted by ssg at 9:13 AM on November 19, 2019 [1 favorite]

Absolutely. The EU Emissions Trading Scheme (EUETS) has been pretty fairly crap at delivering any kind of stable price. It has managed to underperform pretty reliably since 2005. However, the UK (sort of) set a minimum price a few years ago with the Carbon Price Support. Effectively this is a carbon tax. It is generally credited with driving a lot of coal out of the UK electricity generating sector. UK electricity sector emission have come down by a huge amount on the back of this plus renewables.

We have the solutions now, we just need to implement them.

We have the tech solutions. Not convinced we have all the implementation solutions.
posted by biffa at 9:36 AM on November 19, 2019 [1 favorite]

However, supporting renewable heat has proven to be a much more difficult job than supporting electricity.

Heat should be much, much easier than transport or communications or the various other uses of electricity. Greer talked about solar hot water heaters (alt link): "In most parts of the United States, a well-designed solar hot water system will cut a home’s energy use to heat water by 70%; in the Sun Belt, it’s not at all uncommon for a system of this sort to render any other hot water heater unnecessary."

He points out that, while solar hot water heaters won't fix the energy crisis and won't even drastically reduce family power bills, they are a simple and effective method of reducing some energy use and some expenses, and yet they're not common.

Heat, we have plenty of, and will have more. We need ways to focus heat on the uses we want, but we should be looking for methods that involve as little generating heat as possible, because we have plenty of raw heat. The problem with heat is that most of the solutions are small-scale (a million-gallon hot water heater for a whole town doesn't work), and (sigh) hard to use for mega-corporation profits.
posted by ErisLordFreedom at 12:11 PM on November 19, 2019 [1 favorite]

I'm sure biomass is part of the solution in some places, but I think efficiency, heat pumps and cheap renewable electricity are much more important.

Biomass works pretty well for Ag applications, but I doubt it will be any much more than that. So a few percent total, but a few percent that may be tricky to access otherwise. Solar is the other option that's floating around Eastern Ontario, but a lot of farmers think it's kind of scammy after all the nonsense of the subsidy goldrush and subsequent collapse. Bioreactors are frequently replacing fuel oil or propane heat, ime. So that's a pretty good roll over.

Biocharr is the one that seems destined for the dustbin of history though.
posted by bonehead at 1:35 PM on November 19, 2019 [1 favorite]

Solar hot water heating is actually the third most successful of the modern renewables, with something like 480GW installed globally. However, >80% of that is in China and the tech is seen much less in the west.

I mentioned some problems in promoting renewable heat but there are others. At domestic level, purchase of heating systems is a one off purchase, often undertaken in an emergency (eg when your old boiler craps out). So if a customer isn't ready to purchase a renewable system they will lock themselves into a new fossil fuel boiler for the next 10-15 years. There are issues with getting the scale right for the home, of customers being wary about getting used to a new way of managing heat and with trusting a new technology.

Heat pumps have historically not had a great rep for delivering what they promise and no-one wants to be stuck with something that underperforms on heat delivery in the winter.

On the incentive side of things, its not straightforward to replicate the conditions for supporting (for example) a domestic PV system with a renewable heat tech. Its not straightforward to sell the heat on to a third party for example. There are also complications with subsidy for heat. Governments want to avoid over-subsidising heat so that people don't burn extra just to get the subsidies, as with the screw up in Northern Ireland. IMO these are solvable but at the small-scale the cost of metering vs the value of the heat means domestic systems tend to have to have their output 'deemed' (i.e. estimated), which doesn't always encourage efficient systems.

There are also cost issues around retrofitting renewable heat systems into existing buildings.

There are a lot of factors. They're not straightforward to overcome. There are quite a few EU countries who are keen to see more renewable heat and less reliance on gas imports. I think we'll see an increasing number of countries banning gas for new homes, but there is no easy solution to converting current buildings.
posted by biffa at 3:18 PM on November 19, 2019 [1 favorite]

Solar hot water heating has actually fallen out of favour in much of North America. In Florida or Southern California, maybe it makes sense, but in more northern latitudes, solar PV plus a plain electric hot water tank is actually a better bet for single-family homes (assuming you have reasonable net metering or storage or ability to use the power you generate).

The problems with solar hot water are: 1) in a cold climate, where you can't just install an all-in-one unit on the roof and you need vacuum tubes, you're looking at a pretty complex system with many parts that can break, need for specialized maintenance, etc. and 2) either you size it for your winter hot water needs, when there is little sun available, in which case you have a huge system that costs a lot, which generates more hot water than you need for most of the year or you have a small system, sized so that you never have too much hot water even on the sunniest summer days and then you end up having to heat the vast majority of your water conventionally (and you have a small system without much benefit, but with a high degree of complexity).

If you have net metering, you can just put up PV, sell the excess back to the grid in the summer and use it in the winter. It's way less energy efficient, but it's all just sunlight, so it doesn't really matter.

This might not apply in commercial or multi-unit situations, but for single-family dwellings outside the sunniest and hottest parts of the US (and all of Canada, the UK, Northern Europe, etc), PV and an electric hot water tank are way simpler, cheaper, way more modular and are a better choice.
posted by ssg at 4:58 PM on November 19, 2019

Yeah, I think solar thermal is also out of favour in Europe, certainly in the UK. While we are obviously pretty far north solar thermal was included in the UK's domestic and commercial subsidy system. However, the government decided to set it up so that solar would only typically give a 6% return annually. Meanwhile the same subsidy mechanism gave heat pumps and biomass a typical 12% return. they then were persuaded into setting the HP subsidy a little low and the biomass a little high, with the result that only biomass really got a push.

The other problem with solar thermal in the UK is that when everyone went over to gas boilers they took their water tanks out and used them for cupboard space or whatever, so now a lot of people don't have anywhere to put the necessary tank back in. A lot of places just don't have the spare space you might find in a US home.
posted by biffa at 4:33 AM on November 20, 2019