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May 6th, 2009

Assessment of U.S. Cap-and-Trade proposals (circa 2007)

Published on May 6th, 2009 | By: pwray@ceramics.org

Credit: Union of Concerned Scientists

Yes, Cap-and-Trade issues are a great concern to lots of individuals engaged in manufacturing ceramic and glass products. And, yes, the issues are also of great concern to lots of materials scientists, researchers and lab managers. The issue is getting hashed out in lots of meetings, particularly ones in Washington, DC, and it is increasingly likely that some carbon-related bill(s) will be wrapped up by the end of the year. Until then, there will be a lot of debate, hyperbole, spin and PR campaigns.

Having said that, it is worth noting that some MIT economists and tech experts have already weighed in on the matter and seemed to have clearly concluded in 2007 that once the initial “lurches” work through the economy, Cap-and-Trade shouldn’t be a big deal:

The MIT Emissions Prediction and Policy Analysis model is applied to synthetic policies that match key attributes of a set of cap-and-trade proposals being considered by the U.S. Congress in spring 2007. The bills fall into two groups: one specifies emissions reductions of 50% to 80% below 1990 levels by 2050; the other establishes a tightening target for emissions intensity and stipulates a time-path for a “safety valve” limit on the emission price that approximately stabilizes U.S. emissions at the 2008 level. Initial period prices are estimated between $7 and $50 per ton CO2 with these prices rising by a factor of four by 2050. Welfare costs vary from near zero to less than 0.5% at the start, rising in the most stringent case to near 2% in 2050. If allowances were auctioned these proposals could produce revenue between $100 billion and $500 billion per year depending on the case. Outcomes from U.S. policies depend on mitigation effort abroad, and simulations are provided to illuminate terms-of-trade effects that influence the emissions prices and welfare effects, and even the environmental effectiveness, of U.S. actions. Sensitivity tests also are provided of several of key design features. Finally, the U.S. proposals, and the assumptions about effort elsewhere, are extended to 2100 to allow exploration of the potential role of these bills in the longer-term challenge of reducing climate change risk. Simulations show that the 50% to 80% targets are consistent with global goals of atmospheric stabilization at 450 to 550 ppmv CO2 but only if other nations, including the developing countries, follow suit.

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