Why Pollution Trading Will Never Be the Climate Solution for California - or Anywhere Else
The planet’s largest carbon trading, or cap-and-trade platform, the European Union Emissions Trading System (or EU ETS) was introduced 12 years ago. Initially, the average carbon price was low, on average 7-9 euros per ton ($8-10)) of traded carbon; after 2008 prices plummeted almost to zero following the global economic downturn. The system never recovered since.
The smart money, in the hands of the world’s largest banks, exited the planet’s largest cap-and-trade system by the boatload, and effectively carbon trading writ large.
Over the intervening decade, since 2008, a great number of banks closed down carbon trading desks and operations. First, Lehman shuttered its carbon desk during the course of its bankruptcy navigation. Next, Barclays shut its U.S. emissions trading desk amidst the previous kerfuffle and uncertainty within California’s nascent trading scheme in 2012. The following year, in 2013, carbon trading desk closures spread like wildfire around the planet: No fewer than 10 banks either massively scaled back, or shut their carbon trading desks as the crisis in the EU ETS continued unabated.
By year's end, Deutsche Bank and UBS followed suit with the hordes exiting the beleaguered cap-and-trade system closing their global carbon trading operations and climate change advisory practice, respectively right on the eve of the 2013 Warsaw Climate negotiations—the precursor negotiations to the Paris climate agreement—from which President Donald Trump withdrew earlier this year.
The planet’s biggest banks haven’t jumped back fully into cap-and-trade schemes because they all know what California governor Jerry Brown and a few obscure Chinese financiers refuse to except: That carbon trading was born with one foot in the grave and another on the banana peel. Gov. Brown’s championing free-market claims of the efficacy of cap-and-trade are a hair removed from the “voodoo economics” of the Reagan-era.
Nowhere on earth—not in the largest market (the EUETS), nor in the smaller regional markets from the New England Regional Greenhouse Initiative (RGGI) market to the California cap-and-trade market to the newly minted Chinese market—has the carbon price ever been sufficiently high enough to drive the technological innovation to fully stop carbon pollution.
Last year’s 2016 European Union “Trends and Projections” report on the shortcoming of the planet’s biggest cap-and-trade platform put it succinctly: “At current levels, the price signal of the EU ETS provides limited incentive for the more expensive abatement options necessary to decarbonise the European economy in the long term.”
So why keep the drumbeat for something that has demonstrably and empirically failed for decades?
Alas, Jerry Brown is pushing a revised cap-and-trade boondoggle to give California’s biggest petroleum polluters the right to pollute and poison the state’s poorest and most marginalized black and brown communities; and provide money for his controversial bullet train.
The market-based mechanism outlined in AB 398 perpetuates the very worst elements of the current “cap-and-trade” program and does nothing to create incentives for the technological change we so desperately need to wean ourselves off fossil fuel. AB 398 strengthens future reliance on climate policy loopholes that favor the continued extraction and refining of oil and climate speculators.
The climate science is clear: that we must reduce emissions from all sources as soon as possible, especially those emissions from burning fossil fuels. There is no option but to cut fossil fuel emissions deeply, and not to continue to burn fossil fuels under the erroneous assumption that those emissions can be “neutralized” or “offset” by the uptake of carbon in forests or through other dubious offset projects. AB 398 completely ignores the consensus scientific mandate to keep fossil fuels in the ground.
By limiting the authority of local air pollution regulators this legislation is a direct attack on what have proven to be effective grassroots efforts at the local level to hold polluters accountable for their destruction of the global climate and their poisoning of California’s communities.
AB 398 undermines the goals of SB 32 and AB 197, which together set ambitious emissions reduction goals and require a future emphasis on achieving emissions reductions by a move away from the use of fossil fuels. AB 398 and AB 617 both undermine California’s ambitious pollution reduction goals by authorizing a program that will result in ephemeral emissions reductions through complex pollution credit accounting trickery. Voodoo economics, par excellence.
The very worst thing that California could do now is to adopt climate policy that gives the appearance of doing something about the climate crisis—yet ultimately does nothing to make the real reductions in carbon pollution our planet so desperately needs. And yet, that's exactly what the governor signed in late July.
AB 398 does just that: It provides the appearance of doing something about the threats of climate change to future generations, while actually undermining our communities' ability to protect ourselves and assures that the atmosphere remains a dumping ground for polluting industries.
Lackluster cap-and-trade systems in California, held at arm’s length by the planet’s biggest banks and propped up by wishful thinking from Brown or bandwagon-riding state senators in Oakland, Santa Barbara or elsewhere will never stop carbon pollution and save our children. Strong regulations, supported by diverse constituents, rooted in science are the only way to save California...and the planet.