The agency introduced the concept of computer modeling with least-cost abatement strategies (i.e., emissions trading) in its 1972 annual report to Congress on the cost of clean air.
Under the program, which is essentially a cap-and-trade emissions trading system, SO2 emissions were reduced by 50% from 1980 levels by 2007.
Under the CSAPR, the national SO2 trading program was replaced by four separate trading groups for SO2 and NOx. SO2 emissions from Acid Rain Program sources have fallen from 17.3 million tons in 1980 to about 7.6 million tons in 2008, a decrease in emissions of 56 percent.
Gray worked with the Environmental Defense Fund (EDF), who worked with the EPA to write the bill that became law as part of the Clean Air Act of 1990.
The additional costs would be passed to end consumers. ==Trading systems== ===Kyoto Protocol=== In 1990, the first Intergovernmental Panel on Climate Change (IPCC) report highlighted the imminent threat of climate change and greenhouse gas emission, and diplomatic efforts began to find an international framework within which such emissions could be regulated.
Emission quotas (known as "Assigned amounts") were agreed by each participating 'Annex I' country, with the intention of reducing the overall emissions by 5.2% from their 1990 levels by the end of 2012.
Between 1990 and 2012 the original Kyoto Protocol parties reduced their CO2 emissions by 12.5%, which is well beyond the 2012 target of 4.7%.
The IPCC has projected that the financial effect of compliance through trading within the Kyoto commitment period will be limited at between 0.1 and 1.1% of GDP among trading countries. The agreement was intended to result in industrialized countries' emissions declining in aggregate by 5.2 percent below 1990 levels by the year of 2012.
According to the OECD Economic Survey of Norway 2010, the nation "has announced a target for 2008-12 10% below its commitment under the Kyoto Protocol and a 30% cut compared with 1990 by 2020." In 2012, EU-15 emissions was 15.1% below their base year level.
Quebec links its program with the US state of California through the Western Climate Initiative. ===United Kingdom=== ===United States=== ====Sulfur dioxide==== An early example of an emission trading system has been the sulfur dioxide (SO2) trading system under the framework of the Acid Rain Program of the 1990 Clean Air Act in the U.S.
That process began in Rio de Janeiro in 1992, when 160 countries agreed the UN Framework Convention on Climate Change (UNFCCC).
The new emissions cap on NOx and gases took effect in 1995, and according to Smithsonian magazine, those acid rain emissions dropped 3 million tons that year.
In 1997, the CoP agreed, in what has been described as a watershed in international environmental treaty making, the Kyoto Protocol where 38 developed countries (Annex 1 countries) committed themselves to targets and timetables for the reduction of GHGs.
In 1997 the Kyoto Protocol was adopted. The Kyoto Protocol is a 1997 international treaty that came into force in 2005.
state of California and the Canadian province of Quebec participate in the WCI. In 1997, the State of Illinois adopted a trading program for volatile organic compounds in most of the Chicago area, called the Emissions Reduction Market System.
The aim is to cut Tokyo's carbon emissions by 25% from 2000 levels by 2020.
Beginning in 2000, over 100 major sources of pollution in eight Illinois counties began trading pollution credits. ===South Korea=== South Korea's national emissions trading scheme officially launched on 1 January 2015, covering 525 entities from 23 sectors.
This has been based on a previous pilot project called the Industrial SO2 emission trading pilot scheme, which was launched in 2002.
Whether or not these emission savings are genuine is, however, difficult to prove (World Bank, 2010, pp. 265–267). ===Australia=== In 2003 the New South Wales (NSW) state government unilaterally established the NSW Greenhouse Gas Abatement Scheme to reduce emissions by requiring electricity generators and large consumers to purchase NSW Greenhouse Abatement Certificates (NGACs).
A 2014 EPA analysis estimated that implementation of the Acid Rain Program avoided between 20,000 and 50,000 incidences of premature mortality annually due to reductions of ambient PM2.5 concentrations, and between 430 and 2,000 incidences annually due to reductions of ground-level ozone. ====Nitrogen oxides==== In 2003, the Environmental Protection Agency (EPA) began to administer the NOx Budget Trading Program (NBP) under the NOx State Implementation Plan (also known as the "NOx SIP Call").
In March 2008, EPA again strengthened the 8-hour ozone standard to 0.075 parts per million (ppm) from its previous 0.08 ppm. Ozone season NOx emissions decreased by 43 percent between 2003 and 2008, even while energy demand remained essentially flat during the same period.
Although cap and trade also gained a significant foothold in the Senate via the efforts of Republican Lindsey Graham, Independent and former Democrat Joe Lieberman, and Democrat John Kerry, the legislation died in the Senate. ====State and regional programs==== In 2003, New York State proposed and attained commitments from nine Northeast states to form a cap-and-trade carbon dioxide emissions program for power generators, called the Regional Greenhouse Gas Initiative (RGGI).
This program launched on January 1, 2009 with the aim to reduce the carbon "budget" of each state's electricity generation sector to 10% below their 2009 allowances by 2018. Also in 2003, U.S.
The SO2 program was challenged in 2004, which set in motion a series of events that led to the 2011 Cross-State Air Pollution Rule (CSAPR).
In 1997 the Kyoto Protocol was adopted. The Kyoto Protocol is a 1997 international treaty that came into force in 2005.
It is one of the EU's central policy instruments to meet their cap set in the Kyoto Protocol. After voluntary trials in the UK and Denmark, Phase I began operation in January 2005 with all 15 member states of the European Union participating.
In the initial 2005-07 period, emission caps were not tight enough to drive a significant reduction in emissions.
It has made a voluntary pledge under the UNFCCC to lower CO2 per unit of GDP by 40 to 45% in 2020 when comparing to the 2005 levels. In November 2011, China approved pilot tests of carbon trading in seven provinces and cities – Beijing, Chongqing, Shanghai, Shenzhen, Tianjin as well as Guangdong Province and Hubei Province, with different prices in each region.
India has pledged a 20 to 25 per cent reduction in emissions intensity from 2005 levels by 2020.
The voluntary offset market, by comparison, is projected to grow to about $4bn by 2010. 23 multinational corporations came together in the G8 Climate Change Roundtable, a business group formed at the January 2005 World Economic Forum.
On June 9, 2005 the Group published a statement stating the need to act on climate change and stressing the importance of market-based solutions.
In August 2007, the Exchange announced a mechanism to create emission offsets for projects within the United States that cleanly destroy ozone-depleting substances. In 2006, the California Legislature passed the California Global Warming Solutions Act, AB-32, which was signed into law by Governor Arnold Schwarzenegger.
The Korean emissions trading scheme is part of the Republic of Korea's efforts to reduce greenhouse gas emissions by 30% compared to the business-as-usual scenario by 2020. ===China=== ==== Pollution Permit Trading ==== In an effort to reverse the adverse consequences of air pollution, in 2006, China started to consider a national pollution permit trading system in order to use market-based mechanisms to incentivize companies to cut pollution.
Carbon credits at Commodity Exchange Bratislava are traded at special platform called Carbon place. Trading in emission permits is one of the fastest-growing segments in financial services in the City of London with a market estimated to be worth about €30 billion in 2007.
This scheme has been criticised by the Centre for Energy and Environmental Markets (CEEM) of the UNSW because of its lack of effectiveness in reducing emissions, its lack of transparency and its lack of verification of the additionality of emission reductions. Both the incumbent Howard Coalition government and the Rudd Labor opposition promised to implement an emissions trading scheme (ETS) before the 2007 federal election.
This drove the carbon price down to zero in 2007.
Under the program, which is essentially a cap-and-trade emissions trading system, SO2 emissions were reduced by 50% from 1980 levels by 2007.
In August 2007, the Exchange announced a mechanism to create emission offsets for projects within the United States that cleanly destroy ozone-depleting substances. In 2006, the California Legislature passed the California Global Warming Solutions Act, AB-32, which was signed into law by Governor Arnold Schwarzenegger.
This was followed by a 5% reduction for each subsequent year until a total of 25% percent reduction was achieved in 2017. In February 2007, five U.S.
By December 2007, this had grown to encompass 150 global businesses. Business in the UK have come out strongly in support of emissions trading as a key tool to mitigate climate change, supported by NGOs.
At least one private electronic market has been established in 2008: CantorCO2e.
Under the treaty, for the 5-year compliance period from 2008 until 2012, nations that emit less than their quota will be able to sell assigned amount units (each AAU representing an allowance to emit one metric tonne of CO2) to nations that exceed their quotas.
The NZ ETS was first legislated in the Climate Change Response (Emissions Trading) Amendment Act 2008 in September 2008 under the Fifth Labour Government of New Zealand and then amended in November 2009 and in November 2012 by the Fifth National Government of New Zealand. The NZ ETS covers forestry (a net sink), energy (43.4% of total 2010 emissions), industry (6.7% of total 2010 emissions) and waste (2.8% of total 2010 emissions) but not pastoral agriculture (47% of 2010 total emissions).
Forestry, which contributed net removals of 17.5 Mts of CO2e in 2010 (19% of NZ's 2008 emissions,) entered the NZ ETS on 1 January 2008.
For Phase III (2013–20), the European Commission proposed a number of changes, including: Setting an overall EU cap, with allowances then allocated; Tighter limits on the use of offsets; Unlimited banking of allowances between Phases II and III; A move from allowances to auction. In January 2008, Norway, Iceland, and Liechtenstein joined the European Union Emissions Trading System (EU ETS), according to a publication from the European Commission.
According to the OECD Economic Survey of Norway 2010, the nation "has announced a target for 2008-12 10% below its commitment under the Kyoto Protocol and a 30% cut compared with 1990 by 2020." In 2012, EU-15 emissions was 15.1% below their base year level.
Based on figures for 2012 by the European Environment Agency, EU-15 emissions averaged 11.8% below base-year levels during the 2008-2012 period.
Under the CSAPR, the national SO2 trading program was replaced by four separate trading groups for SO2 and NOx. SO2 emissions from Acid Rain Program sources have fallen from 17.3 million tons in 1980 to about 7.6 million tons in 2008, a decrease in emissions of 56 percent.
In March 2008, EPA again strengthened the 8-hour ozone standard to 0.075 parts per million (ppm) from its previous 0.08 ppm. Ozone season NOx emissions decreased by 43 percent between 2003 and 2008, even while energy demand remained essentially flat during the same period.
Various proposals for linking these systems across markets are being investigated, and this is being coordinated by the International Carbon Action Partnership (ICAP). ===Business reaction=== In 2008, Barclays Capital predicted that the new carbon market would be worth $70 billion worldwide that year.
On December 11, 2008, Rex Tillerson, the CEO of ExxonMobil, said a carbon tax is "a more direct, more transparent and more effective approach" than a cap-and-trade program, which he said, "inevitably introduces unnecessary cost and complexity".
These international mechanisms are outlined under Kyoto Protocol. On April 17, 2009, the Environmental Protection Agency (EPA) formally announced that it had found that greenhouse gas (GHG) poses a threat to public health and the environment (EPA 2009a).
For example, one component of the American Clean Energy and Security Act (a 2009 bill that did not pass), along with several other energy bills put before US Congress, calls for carbon surcharges on goods imported from countries without cap-and-trade programs.
CDM projects are supposed to contribute to sustainable development in developing countries, and also generate "real" and "additional" emission savings, i.e., savings that only occur thanks to the CDM project in question (Carbon Trust, 2009, p. 14).
The NZ ETS was first legislated in the Climate Change Response (Emissions Trading) Amendment Act 2008 in September 2008 under the Fifth Labour Government of New Zealand and then amended in November 2009 and in November 2012 by the Fifth National Government of New Zealand. The NZ ETS covers forestry (a net sink), energy (43.4% of total 2010 emissions), industry (6.7% of total 2010 emissions) and waste (2.8% of total 2010 emissions) but not pastoral agriculture (47% of 2010 total emissions).
(From November 2009, agriculture was to enter the NZ ETS on 1 January 2015) The NZ ETS is highly linked to international carbon markets as it allows the importing of most of the Kyoto Protocol emission units.
2454), a greenhouse gas cap-and-trade bill, was passed on 26 June 2009, in the House of Representatives by a vote of 219–212.
This program launched on January 1, 2009 with the aim to reduce the carbon "budget" of each state's electricity generation sector to 10% below their 2009 allowances by 2018. Also in 2003, U.S.
This argument in favor of allocation of permits has been used in the EU ETS, where industries that have been judged to be internationally exposed, e.g., cement and steel production, have been given permits for free). This method of distribution may be combined with other forms of allowance distribution. ===Distributional effects=== The US Congressional Budget Office (CBO, 2009) examined the potential effects of the American Clean Energy and Security Act on US households.
These features reduce the quota's financial impact on business, while ensuring that the quotas are met at a national and international level. Currently, there are six exchanges trading in UNFCCC related carbon credits: the Chicago Climate Exchange (until 2010), European Climate Exchange, NASDAQ OMX Commodities Europe, PowerNext, Commodity Exchange Bratislava and the European Energy Exchange.
Besides issues of compliance with the General Agreement on Tariffs and Trade, such border adjustments presume that the producing countries bear responsibility for the carbon emissions. A general perception among developing countries is that discussion of climate change in trade negotiations could lead to "green protectionism" by high-income countries (World Bank, 2010, p. 251).
Whether or not these emission savings are genuine is, however, difficult to prove (World Bank, 2010, pp. 265–267). ===Australia=== In 2003 the New South Wales (NSW) state government unilaterally established the NSW Greenhouse Gas Abatement Scheme to reduce emissions by requiring electricity generators and large consumers to purchase NSW Greenhouse Abatement Certificates (NGACs).
This left the government unable to secure passage of the bill and it was subsequently withdrawn. Julia Gillard defeated Rudd in a leadership challenge and promised not to introduce a carbon tax, but would look to legislate a price on carbon when taking the government to the 2010 election.
The NZ ETS was first legislated in the Climate Change Response (Emissions Trading) Amendment Act 2008 in September 2008 under the Fifth Labour Government of New Zealand and then amended in November 2009 and in November 2012 by the Fifth National Government of New Zealand. The NZ ETS covers forestry (a net sink), energy (43.4% of total 2010 emissions), industry (6.7% of total 2010 emissions) and waste (2.8% of total 2010 emissions) but not pastoral agriculture (47% of 2010 total emissions).
Forestry, which contributed net removals of 17.5 Mts of CO2e in 2010 (19% of NZ's 2008 emissions,) entered the NZ ETS on 1 January 2008.
The stationary energy, industrial processes and liquid fossil fuel sectors entered the NZ ETS on 1 July 2010.
For Phase II, the cap is expected to result in an emissions reduction in 2010 of about 2.4% compared to expected emissions without the cap (business-as-usual emissions).
According to the OECD Economic Survey of Norway 2010, the nation "has announced a target for 2008-12 10% below its commitment under the Kyoto Protocol and a 30% cut compared with 1990 by 2020." In 2012, EU-15 emissions was 15.1% below their base year level.
A scheme to limit carbon emissions launched in April 2010 covers the top 1,400 emitters in Tokyo, and is enforced and overseen by the Tokyo Metropolitan Government.
The plan was subsequently challenged by the administration of President Donald Trump. Concerned at the lack of federal action, several states on the east and west coasts have created sub-national cap-and-trade programs. President Barack Obama in his proposed 2010 United States federal budget wanted to support clean energy development with a 10-year investment of US$15 billion per year, generated from the sale of greenhouse gas (GHG) emissions credits.
In July 2010, a meeting took place to further outline the cap-and-trade system.
The voluntary offset market, by comparison, is projected to grow to about $4bn by 2010. 23 multinational corporations came together in the G8 Climate Change Roundtable, a business group formed at the January 2005 World Economic Forum.
The fixed price lent itself to characterisation as a carbon tax and when the government proposed the Clean Energy Bill in February 2011, the opposition claimed it to be a broken election promise. The bill was passed by the Lower House in October 2011 and the Upper House in November 2011.
(Japan had an ineffective voluntary emissions reductions system for years, but no nationwide cap-and-trade program.) Emitters must cut their emissions by 6% or 8% depending on the type of organization; from 2011, those who exceed their limits must buy matching allowances or invest in renewable-energy certificates or offset credits issued by smaller businesses or branch offices.
The SO2 program was challenged in 2004, which set in motion a series of events that led to the 2011 Cross-State Air Pollution Rule (CSAPR).
The tentative ruling, issued on 24 January 2011, argued that the California Air Resources Board violated state environmental law by failing to consider such alternatives.
In November 2011, Arizona, Montana, New Mexico, Oregon, Utah and Washington withdrew from the WCI.
It has made a voluntary pledge under the UNFCCC to lower CO2 per unit of GDP by 40 to 45% in 2020 when comparing to the 2005 levels. In November 2011, China approved pilot tests of carbon trading in seven provinces and cities – Beijing, Chongqing, Shanghai, Shenzhen, Tianjin as well as Guangdong Province and Hubei Province, with different prices in each region.
Emission quotas (known as "Assigned amounts") were agreed by each participating 'Annex I' country, with the intention of reducing the overall emissions by 5.2% from their 1990 levels by the end of 2012.
Between 1990 and 2012 the original Kyoto Protocol parties reduced their CO2 emissions by 12.5%, which is well beyond the 2012 target of 4.7%.
The IPCC has projected that the financial effect of compliance through trading within the Kyoto commitment period will be limited at between 0.1 and 1.1% of GDP among trading countries. The agreement was intended to result in industrialized countries' emissions declining in aggregate by 5.2 percent below 1990 levels by the year of 2012.
Under the treaty, for the 5-year compliance period from 2008 until 2012, nations that emit less than their quota will be able to sell assigned amount units (each AAU representing an allowance to emit one metric tonne of CO2) to nations that exceed their quotas.
The NZ ETS was first legislated in the Climate Change Response (Emissions Trading) Amendment Act 2008 in September 2008 under the Fifth Labour Government of New Zealand and then amended in November 2009 and in November 2012 by the Fifth National Government of New Zealand. The NZ ETS covers forestry (a net sink), energy (43.4% of total 2010 emissions), industry (6.7% of total 2010 emissions) and waste (2.8% of total 2010 emissions) but not pastoral agriculture (47% of 2010 total emissions).
According to the OECD Economic Survey of Norway 2010, the nation "has announced a target for 2008-12 10% below its commitment under the Kyoto Protocol and a 30% cut compared with 1990 by 2020." In 2012, EU-15 emissions was 15.1% below their base year level.
Based on figures for 2012 by the European Environment Agency, EU-15 emissions averaged 11.8% below base-year levels during the 2008-2012 period.
Under the proposed cap-and-trade program, all GHG emissions credits would have been auctioned off, generating an estimated $78.7 billion in additional revenue in FY 2012, steadily increasing to $83 billion by FY 2019.
In 2012, under the auction, the reserve price, which is the price per ton of CO2 permit is $10.
In 2012, 7.9 billion allowances were traded with a total value of €56 billion.
The bill thus resulted in passage of the Clean Energy Act, which possessed a great deal of flexibility in its design and uncertainty over its future. The Liberal/National coalition government elected in September 2013 has promised to reverse the climate legislation of the previous government.
The waste sector (landfill operators) entered on 1 January 2013.
Some of the pilot regions can start trading as early as 2013/2014.
In July 2014, the carbon tax was repealed as well as the Emissions Trading Scheme (ETS) that was to start in 2015. ===New Zealand=== The New Zealand Emissions Trading Scheme (NZ ETS) is a partial-coverage all-free allocation uncapped highly internationally linked emissions trading scheme.
A 2014 EPA analysis estimated that implementation of the Acid Rain Program avoided between 20,000 and 50,000 incidences of premature mortality annually due to reductions of ambient PM2.5 concentrations, and between 430 and 2,000 incidences annually due to reductions of ground-level ozone. ====Nitrogen oxides==== In 2003, the Environmental Protection Agency (EPA) began to administer the NOx Budget Trading Program (NBP) under the NOx State Implementation Plan (also known as the "NOx SIP Call").
Some of the emitters obtain allowances for free, which is for the electric utilities, industrial facilities and natural gas distributors, whereas some of the others have to go to the auction. In 2014, the Texas legislature approved a 10% reduction for the Highly Reactive Volatile Organic Compound (HRVOC) emission limit.
This pilot project did not turn into a bigger scale inter-provincial trading system, but it stimulated numerous local trading platforms. In 2014, when the Chinese government started considering a national level pollution permit trading system again, there were more than 20 local pollution permit trading platforms.
In this system, Companies that are involved will be asked to meet target level of reduction and the level will contract gradually. ===India=== Trading is set to begin in 2014 after a three-year rollout period.
Some scholars have argued that linking may provide a starting point for developing a new, bottom-up international climate policy architecture, whereby multiple unique systems successively link their various systems. In 2014, the U.S.
In July 2014, the carbon tax was repealed as well as the Emissions Trading Scheme (ETS) that was to start in 2015. ===New Zealand=== The New Zealand Emissions Trading Scheme (NZ ETS) is a partial-coverage all-free allocation uncapped highly internationally linked emissions trading scheme.
(From November 2009, agriculture was to enter the NZ ETS on 1 January 2015) The NZ ETS is highly linked to international carbon markets as it allows the importing of most of the Kyoto Protocol emission units.
However, as of June 2015, the scheme will effectively transition into a domestic scheme, with restricted access to international Kyoto units (CERs, ERUs and RMUs).
Phase 1, which is similar to Japan's scheme, ran until 2015.
Beginning in 2000, over 100 major sources of pollution in eight Illinois counties began trading pollution credits. ===South Korea=== South Korea's national emissions trading scheme officially launched on 1 January 2015, covering 525 entities from 23 sectors.
In 2015, the provinces of Ontario and Manitoba agreed to join the linked system between Quebec and California.
If exposed for an extended period of time the symptoms include cancer and damage to the central nervous system. ====Greenhouse gases (federal)==== As of 2017, there is no national emissions trading scheme in the United States.
This was followed by a 5% reduction for each subsequent year until a total of 25% percent reduction was achieved in 2017. In February 2007, five U.S.
National trading is expected to start in 2017, latest in 2020. The effort to start a national trading system has faced some problems that took longer than expected to solve, mainly in the complicated process of initial data collection to determine the base level of pollution emission.
Therefore, by the end of 2017, the allocation of emission quotas have started but it has been limited to only the power sector and will gradually expand, although the operation of the market is yet to begin.
On 22 September 2017, the premiers of Quebec and Ontario, and the Governor of California, signed the formal agreement establishing the linkage. The International Carbon Action Partnership brings together regional, national and sub-national governments and public authorities from around the world to discuss important issues in the design of emissions trading schemes (ETS) and the way forward to a global carbon market.
This program launched on January 1, 2009 with the aim to reduce the carbon "budget" of each state's electricity generation sector to 10% below their 2009 allowances by 2018. Also in 2003, U.S.
Under the proposed cap-and-trade program, all GHG emissions credits would have been auctioned off, generating an estimated $78.7 billion in additional revenue in FY 2012, steadily increasing to $83 billion by FY 2019.
This is in contrast to command-and-control environmental regulations (such as best available technology (BAT) standards and government subsidies). A 2020 study found that the European Union Emissions Trading System successfully reduced CO2 emissions even though the prices for carbon were set at low prices. ==Introduction== Pollution is a prime example of a market externality.
According to the OECD Economic Survey of Norway 2010, the nation "has announced a target for 2008-12 10% below its commitment under the Kyoto Protocol and a 30% cut compared with 1990 by 2020." In 2012, EU-15 emissions was 15.1% below their base year level.
The aim is to cut Tokyo's carbon emissions by 25% from 2000 levels by 2020.
The Korean emissions trading scheme is part of the Republic of Korea's efforts to reduce greenhouse gas emissions by 30% compared to the business-as-usual scenario by 2020. ===China=== ==== Pollution Permit Trading ==== In an effort to reverse the adverse consequences of air pollution, in 2006, China started to consider a national pollution permit trading system in order to use market-based mechanisms to incentivize companies to cut pollution.
It has made a voluntary pledge under the UNFCCC to lower CO2 per unit of GDP by 40 to 45% in 2020 when comparing to the 2005 levels. In November 2011, China approved pilot tests of carbon trading in seven provinces and cities – Beijing, Chongqing, Shanghai, Shenzhen, Tianjin as well as Guangdong Province and Hubei Province, with different prices in each region.
National trading is expected to start in 2017, latest in 2020. The effort to start a national trading system has faced some problems that took longer than expected to solve, mainly in the complicated process of initial data collection to determine the base level of pollution emission.
India has pledged a 20 to 25 per cent reduction in emissions intensity from 2005 levels by 2020.
As of 2021, only the U.S.
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