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Global Warming

2. What is Global Warming?. Sunlight hits earth's surface, radiates back into atmosphere, where its absorption by GHGs heats atmosphere and warms earth's surface Warming process is natural; becomes problematic if there natural GHG levels are disrupted Among the primary GHGs is carbon dioxide (CO

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Global Warming

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    1. Global Warming

    2. 2 What is Global Warming? Sunlight hits earth’s surface, radiates back into atmosphere, where its absorption by GHGs heats atmosphere and warms earth’s surface Warming process is natural; becomes problematic if there natural GHG levels are disrupted Among the primary GHGs is carbon dioxide (CO2) Accumulating CO2 is linked to fossil fuel combustion and deforestation Capacity of each GHG to trap heat relative to CO2 is measured by a global warming potential (GWP)

    3. 3 GHGs Contribution to Global Warming

    4. 4 Separating Myth from Facts Most agree that GHGs (CO2) are rising Scientists agree that rising GHGs will affect climate Uncertainty is when this may happen and extent of effect

    5. 5 Benefits of Controlling GHGs Important to Policy Development OECD estimates ($1990) of annual damage $61.6 B (based on 2.5° C rise) $338.6 B (based on 10° C rise over 250-400 years) Beckerman (1990) cites an EPA estimate of the net effect at between -$10B and +$10B Mendelsohn and Neumann (1999) estimate the net benefit to the U.S. would be 0.1 percent of GDP Nordhaus and Boyer (2000) estimate the comparable value at approximately –0.5 percent of GDP Suggests that if time is explicitly considered, policy development motivated by benefit-cost analysis might take varying directions

    6. Controlling Global Warming International Policy

    7. 7 International Response U.N. Framework Convention on Climate Change (UNFCCC) was an agreement reached at the 1992 Rio Summit that dealt with global warming and other air quality issues Called for nations to implement national strategies to limit GHG emissions In 1997, a Conference of the Parties (COP) was held in Kyoto, Japan Goal was to reach an agreement, or protocol, that would address the issue of GHG emissions beyond 2000 In July 2001, 178 nations reached an agreement, known as the Kyoto Protocol Before the 2001 conference, President Bush had taken the United States out of the agreement

    8. 8 Kyoto Protocol Agreement reached in 2001 38 industrialized nations must cut GHG emissions to 5.2% below 1990 levels by 2012; no requirements for developing nations Emissions targets would be achieved using several market-based instruments, known as flexible mechanisms, including… GHG allowance trading system for participating developed nations. Credits available for carbon-absorbing forestry practices and for implementing emissions-reducing projects in other nations Protocol entered into force in 2005 after being ratified by developed nations representing at least 55% of carbon emissions

    9. 9 U.S. Policy Global Climate Change Policy Book (Feb 2002) Objective is to reduce GHG intensity by 18 percent over next 10 years Equivalent to the average across Kyoto participants GHG intensity is emissions/economic output Initiatives include Improving the registry program for voluntary GHG emissions reductions for which transferable credits are provided Providing funding for energy tax credits to encourage technologies like hybrid cars Developing and promoting research projects for fuel-efficient vehicles and other climate change issues

    10. Economic Analysis of Climate Change Policy

    11. 11 Market-Based Policy Option A Pollution Charge A pollution charge is a fee that varies with the amount of pollutants released Three types commonly proposed for climate change issues are: Gasoline tax – a per unit tax levied on each gallon of gasoline consumed Btu tax – a per unit charge based on the energy content of fuel, measured in British thermal units (Btu) Carbon tax – a per unit charge based on the carbon content of fuel

    12. 12 Analyzing Pollution Charges Drawbacks of a gasoline tax Targets only polluting sources using gasoline, which are relatively minor CO2 emitters Imposes a disproportionate burden on some, such as rural communities lacking good public transportation and industries like interstate trucking So the broader based carbon tax or Btu tax is often proposed as a better alternative

    13. 13 Analyzing Pollution Charges Btu tax and carbon tax each use a slightly different tax base, but both encourage fuel switching and conservation by raising fuel prices Carbon tax is more specific, targeting only carbon-based fuels The carbon tax changes relative fuel prices and could elevate the price by the MEC of the environmental damage, internalizing the negative externality

    14. 14 Market-Based Policy Option Tradeable Permit System Primary means by which developed nations are to achieve their respective emissions targets under the Kyoto Protocol European Union launched its own GHG trading program in 2005 called European Union GHG Emissions Trading Scheme (EU ETS) Trading can lead to cost-effectiveness Nations best able to reduce emissions do so and sell permits; those that could not would buy permits

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