ch16: IB regulation in practice Flashcards
Direct vs Indirect pollution taxes
Direct: tax on carbon emitted
Indirect: tax on environmental damage done by drivers. ie gasoline or energy taxes
direct pollution taxes can be politically unfeasible so indirect taxes are used as a compromise solution.
Why did cap and trade work to phase out leaded gasoline?
epa instituted a lead banking program to reduce compliance costs of lead phaseout in gasoline.
It succeeded in achieving stringent lead standards cost-effectively because
1. market power did not emerge since all refiners were granted permits based on their performance
2. Markets were not thin bc trading was nationwide
3. monitoring and enforcement was good since lead content in gas was already reported by refiners on a regular basis
4. Permits were shrinking so issue of permit life did not emerge
5. hot spots did not persist
what was RECLAIM? Why did cap and trade not work for this?
LA’s regional clean air incentives market (RECLAIM) cap and trade program for NOx
failed because energy crisis increased price of nox permit prices by so much that program had to be canceled and replaced with cac regulation.
Was attacked on environmental justice grounds because of potential for hot spots
what was the emissions trading program? Why did cap and trade not work for this?
Allows limited trading of emission reduction credits for five criteria air pollutants: VOCs, carbon monoxide, sulfur dioxide, particulates, nitrogen oxides.
credits are earned for controlling emissions beyond the standard. credits could be traded or banked for use in one of three trading programs: offsets, netting policy, bubble policy.
offsets: designed to accommodate the siting of a new pollution source in non-attainment areas
netting policy: allows trading within a single plant. Failed because had sig impact on compliance costs
bubble programs: allow trading within a limited geographical area.
failed because
1. Thin markets reduced the effectiveness of emissions trading
2. high transaction costs
3. nonuniformly mixed pollutants (hot spot problems)
what was the california clunkers program? Why did cap and trade not work in this case?
Stationary sources can purchase and scrap polluting vehicles and obtain pollution credits to avoid clean air upgrades at their plant.
failed because:
1. increased hot spots = environmental justice concern
2. incentivized fraud
How were cfcs sucessfully phased out?
the EPA introduced a trading program for CFCs and congress also imposed a tax, encouraging consumers to switch to substitute products.
what is acid rain? what problems does it cause?
Sulfur dioxide and nitrogen oxide are transformed while in the atmosphere into sulfuric and nitric acids
problems
1. damage to water and forest resources
2. erosion of buildings, bridges, and statues
3. reduced visibility
4. sickness and premature death in humans
What was the acid rain market? How did it perform?
clean air act capped emissions and required sharp cut. permits were given away free based on historical pollution levels.
succeeded because
1. broad, nationwide markets –> prevented market power
2. so2 nox are uniformly mixed on a regional basis —> no major hot spots
3. provided retraining programs for job losses
4. based largely on health benefits, the acid rain program easily passes an efficiency test. changes in tech occurred very quickly so saw dramatic cost savings
resulted in: sharp fall in emissions w very little non-compliance. Rather than installing expensive scrubbers (or buy extra permits), most firms met their early SO2 targets by switching to low-sulfur coal or developing new fuel-blending techniques.
Northeastern and mid-atlantic states regional greenhouse gas initiative (RGGI)
goal: cut carbon dioxide emissions from the electric power sector 45% below 2005 levels by 2020, and a further 30% below that by 2030.
90% of permits are auctioned and offsets are allowed.
offsets
reductions in greenhouse gasses achieved offsite by third parties and then packaged and sold.
to be real, offsets must be additional. this means that the project (ie reforestation, reduction in fugitive emissions from pipelines) would not have already occurred under a business-as-usual scenario.
What is the European trading system? what are the pros and cons of this system?
continent-wide cap and trade set up as part of kyoto compliance
goal of 43% below 2005 levels by 2030 with a cap shrinking 2% per year.
allows for offset trading w developing countries as part of the Clean Development Mechanism
pros:
- clear policy signal (as opposed to permit prices driving reductions).
cons:
- concerns about monitoring and enforcement
- slow growth since the global recession and rise of renewable power has kept emissions below the cap and permit prices low
- difficult to establish verifiability and additionally for CDM offsets, raising worries about poor monitoring and enforcement of the offset component
What was California’s AB32 program?
the first economy-wide cap and trade system in north America
mandated 1990 level emissions by 2020
majority of permits auctioned and auction revenues were used to further the goals of equitably reducing GHG emissions
the system attempted to manage price volatility with a price collar and limit the use of offsets.
