The numbers are in and they look encouraging. An updated analysis authored by the partner jurisdictions of the Western Climate Initiative (WCI) shows that achieving emission reductions of 15% below 2005 levels by 2020 would garner net savings of about $100 billion between 2012 and 2020. These savings would be in addition to the spin-off benefits accrued through reduced healthcare costs from cleaner air, and through job creation and economic activity spurred by accelerated investment and innovation geared towards a future-oriented green economy.
The design of the WCI’s cap-and-trade system would see a phased approach to coverage. Emissions from electric utilities, large industrial sources, and industrial processes, which make up about half of emissions, would be covered in the first 3-year compliance period starting in 2012. In 2015, coverage would extend to emissions from fuel combustion in residential, commercial and remaining industrial sites, and transportation, bringing coverage to about 90% of total emissions.
Coupling the cap-and-trade system with complementary policies would help to address market barriers that would otherwise prevent cost-effective technologies and processes from being implemented. They would also help to address “carbon leakage,” or the migration of jobs and economic activity into jurisdictions with less stringent environmental controls, and would promote investment in exportable, low-carbon innovation. The WCI lists numerous possible complementary policies, including energy efficiency targets and standards, emissions performance standards for electric power, renewable energy standards, renewable/low-carbon fuels standards, transportation planning, mass transit, government procurement policies, and direct government funding and investment in key technologies. Most WCI jurisdictions are already implementing many of these polices through their own climate change action plans.
The WCI posits that compliance costs would be kept in check by the promulgation of a dynamic carbon offsets system, which would exploit low-cost emission reductions opportunities from activities that fall outside of the cap. While offsets are an important cost containment mechanism, their use would be limited, ensuring that most reductions come from sources covered by the cap-and-trade program.
The analysis stresses the importance of the planned, holistic approach to emission reductions. It states that it is the combination of the price signal and market incentives associated with the cap-and-trade program and their effect on the behaviour that would enable the complimentary policies to have their full emissions and cost-saving effects. This reinforces the notion that, rather than being piecemeal, the solutions to climate change are integrative and comprehensive.
By Jeff Beyer, .(JavaScript must be enabled to view this email address)
