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California's Cap and-Trade Law -- What You Need to Know
 

California's Cap and-Trade Law -- What You Need to Know

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Dr. Matthew Kahn provides insight into California's upcoming cap-and-trade law and a launch-point for journalists covering the green economy. ...

Dr. Matthew Kahn provides insight into California's upcoming cap-and-trade law and a launch-point for journalists covering the green economy.

Check out additional materials from the webinar at the following link: http://businessjournalism.org/2012/10/29/californias-cap-and-trade-law-what-you-need-to-know-self-guided-training/.

This webinar was co-presented by the Donald W. Reynolds National Center for Business Journalism and the Society of Environmental Journalists.

For more information on free training for business journalists, please visit businessjournalism.org.

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    California's Cap and-Trade Law -- What You Need to Know California's Cap and-Trade Law -- What You Need to Know Presentation Transcript

    • California’s  Cap-­‐and-­‐Trade  Law  –     What  You  Need  to  Know   Dr.  Mahew  E.  Kahn,  Professor,   UCLA  Ins8tute  of  the  Environment,   Departments  of  Economics  and  Public  Policy   Webinar  partner  
    • California’s  cap-­‐and-­‐trade       A  program  •  to  limit  the   state’s   carbon   emissions     Cumula8ve  carbon  dioxide  emissions  from  G20  and  non-­‐G20  countries,   1751-­‐2006.  Photo  by  Flickr  user  Carbon  Visuals.   hp://www.flickr.com/photos/carbonquilt/3986280325/    
    • Main  Issues  Today   •  Winners  and  losers:  Among  those  par8cipa8ng   in  the  trading  program,  which  industries  have   the  most  to  gain,  or  lose?         •  What  can  we  learn  from  the  implementa8on  of   similar  laws  elsewhere  about  where  likely  stories   will  surface?           •  What  stories  should  journalists  be  watching  for?  
    • What  is  Cap-­‐and-­‐Trade?  
    • Excerpt  alifornia  to  return  to  1990  levels  of  greenhouse  •  AB  32  requires  C from  ARB  Overview   gas  emissions  by  2020.  All  programs  developed  under  AB  32   contribute  to  the  reduc8ons  needed  to  achieve  this  goal,  and    will   deliver  an  overall  15%  reduc8on  in  greenhouse-­‐gas  emissions   compared  to  the  ‘business-­‐as  usual’  scenario  in  2020  if  we  did   nothing  at  all.      •  The  cap-­‐and-­‐trade  program  is  a  key  element  in  California’s   climate  plan.  It  sets  a  statewide  limit    on  sources  responsible  for   85  percent  of  California’s  greenhouse  gas  emissions,  and   establishes    a  price  signal  needed  to  drive  long-­‐term  investment   in  cleaner  fuels  and  more  efficient  use    of  energy.   hp://www.arb.ca.gov/newsrel/2011/cap_trade_overview.pdf  
    • hp://www.arb.ca.gov/cc/capandtrade/covered_en88es_list.pdf  
    • hp://www.arb.ca.gov/cc/capandtrade/market_oversight.pdf
    • Goldilocks   •  The  Air  Resources  Board  (ARB)  is  well   aware  that  there  are  interest  groups   eager  to  claim  that  it  has  “over-­‐reached”     •  If  the  price  of  permits  is  too  high,  poli8cal   backlash     •  If  the  price  of  permits  is  too  low,  then  no   incen8ve  to  innovate  or  change  behavior!  
    • Judging  Regulatory  Success   •  We  do  not  know  the  “abatement-­‐ cost  curves”  for  any  affected  en8ty.   •  In  “English”,    how  costly  is  it  for  a   given  electric  u8lity  or  other  polluter   to  reduce  its  greenhouse-­‐gas   emissions?   •  Do  we  observe  increased  investment   in  “energy-­‐efficiency”  investments?   •  Do  green  jobs  emerge?   •  Do  we  observe  breakthroughs  that   are  unlikely  to  have  taken  place  in   the  absence  of  the  cap-­‐and-­‐trade   nudge?   Photo  by  Flickr  user  CECAR  
    • Judging  Regulatory  Failure  •  The  price  of  electricity  for   residen8al,  industrial  and   commercial  consumers  •  Goldilocks  again!  •  Leakage:  Industries  in  California   that  use  a  lot  of  electricity  shut   down  factories  and  move  to   states  without  cap-­‐and-­‐trade.  •  Prices  for  consumers  rise  sharply   as  regulated  en88es  pass  the   costs  on  to  final  consumers.   Closed  steel  mill  by  Flickr  user  hanjeanwat    
    • Industries  Ranked  by  Electricity  Use   Industry   NAICS   Electricity   Index   Primary  Metal  Manufacturing   331   0.816   Paper  Manufacturing   322   0.706   TexCle  Mills   313   0.503     Nonmetallic  Mineral  Product  Manufacturing   Chemical  Manufacturing   327   325   0.454   0.402   PlasCcs  and  Rubber  Products  Manufacturing   326   0.330   Wood  Product  Manufacturing   321   0.253   Petroleum  and  Coal  Products  Manufacturing   324   0.245   Fabricated  Metal  Product  Manufacturing   332   0.185   PrinCng  and  Related  Support  AcCviCes   323   0.169   TexCle  Product  Mills   314   0.165   Food  Manufacturing   311   0.149   Electrical  Equipment,  Appliance,  and  Component  Manufacturing   335   0.137   Furniture  and  Related  Product  Manufacturing   337   0.123   Leather  and  Allied  Product  Manufacturing   316   0.110   Machinery  Manufacturing   333   0.103   Apparel  Manufacturing   315   0.102   Miscellaneous  Manufacturing   339   0.096   Beverage  and  Tobacco  Product  Manufacturing   312   0.092   TransportaCon  Equipment  Manufacturing   336   0.086   Computer  and  Electronic  Product  Manufacturing   334   0.051      Source:    Kahn  and  Mansur  (2011  NBER  Working  Paper)    
    • Lessons  from  Other  Na8ons    • Bushnell,  Chong  and  Mansur  (2012)  hp://www.dartmouth.edu/~mansur/papers/bushnell_chong_mansur_carboncost.pdf  • Stock  Price  Event  study  focused  on  how  cap-­‐and-­‐trade  regula8on  affects  profits.    • In  late  April  2006,  the  EU  CO2  allowance  price  dropped  by  50%,  they  track  daily  returns  for  552  stocks  from  the  EUROSTOXX  index.  • Australia’s  carbon  tax  • Vancouver’s  carbon  tax  • Past  U.S  success  with  the  sulfur  dioxide  permit  market    
    • Future  Stories  •  Given  that  climate  change  is  a  global   public  bad  and  given  that  California’s   emissions  are  only  a  small  share  of  the   globe’s  total  emissions,  why  is  California   unilaterally  aemp8ng  this  effort?  •  Known  unknowns  and  learning  through   experimenta8on  •  Should  the  rest  of  the  world  pay   California  for  running  this  experiment?  •  Are  permit  allowances  fair?    Why  are  the   pollu8ng  industries  receiving  so  many   permits  for  free?   Photo  by  Flickr  user  NASA  •  Will  the  challenges  observed  in  Europe   Goddard  Photo  and  Video   play  out  again?      
    • Why  Am  I  Op8mis8c? •  California’s  past   regulatory  success  -­‐-­‐-­‐   does  this  increase  the   likelihood  of  cap-­‐and-­‐ trade  success?   •  California  as  the  “Green   Guinea  Pig”   Photo  by  Flickr  user  *~Dawn~*