This summer has seen a lot of activity about climate change, both in California and globally. In May, Governor Jerry Brown signed an agreement between California and 10 other U.S. states and foreign provinces to sharply limit emissions of greenhouse gases by 2050. The 10 jurisdictions that signed the agreement in addition to California are Oregon, Washington, Vermont, Ontario, Baja California, Jalisco, Catalonia, Wales, Acre (Brazil), and Baden-Württemberg (Germany). Together, these states and provinces represent 100 million people and a gross domestic product of $4.5 trillion. The signatories committed to reducing greenhouse gases by at least 80 percent below 1990 levels by 2050 or to achieve a per-capita annual emission target of less than 2 metric tons by that year. California already has this goal mandated by AB32, the Global Warming Solutions Act, and Governor Brown recently issued an executive order to establish a new mid-term California greenhouse gas reduction target of 40 percent below 1990 levels by 2030. He has characterized this ambitious goal as follows: “California basically is presenting a challenge to Washington, to other states, and to other countries. It’s going to take something like what I laid out, but what I laid out is daunting.”
Not to diminish California’s leadership on efforts to mitigate climate change, but perhaps the biggest news about the world’s most pressing environmental challenge this summer was the Pope Francis’ encyclical, Laudato Si’ or Praise Be to You. In this encyclical, the pope noted that combustion of fossil fuels by humans was responsible for most of global warming and warned of an “unprecedented destruction of ecosystems, with serious consequence for all of us” if strong and swift actions to mitigate are not taken. He put the onus on developed, industrialized countries to help low and middle income countries confront the crisis.
Pope Francis made the case that there is a moral imperative for those who have reaped great profits from industrialization based on extraction of natural resources and combustion of fossil fuels to redress the environmental devastation that has resulted. He argued for a new partnership between science and religion to combat human-driven climate change — a position that brings him into direct conflict with climate change skeptics, whom he chides for their denial of the scientific consensus.
The encyclical shows impressive command of policy strategies to mitigate climate change. Pope Francis specifically calls for increased public transit, carpooling, tree planting, limiting unnecessary power use, recycling, and even boycotts of certain products. However, his deep suspicion of the free market leads him to criticize one of California’s major mitigation strategies, a cap-and-trade mechanism, in which CO2 emissions are capped at a certain value and industrial facilities are granted allowances to emit specific levels of CO2. The allowances can be traded, i.e., a facility that installs clean technology and emits less than it is allowed can sell the unneeded allowance to a facility that has not reduced its emissions. This approach has been criticized by environmental justice groups as not providing sufficient incentive for polluting facilities to clean up their act and reduce harm to the health of residents in adjacent, often low-income neighborhoods. Pope Francis’ encyclical states that, “The strategy of buying and selling ‘carbon credits’ can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide. It may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.”
A carbon tax is often thought to be a better approach to putting a price on carbon by environmental justice advocates. A cap-and-trade system puts a cap on emissions but allows the price on carbon to vary; a carbon tax puts a price on carbon, but allows the emissions to vary. Certainly, a tax is theoretically easier to administer, avoids the potential gaming of a carbon market scheme, and could put greater pressure on polluters to clean up their act. But the biggest problem with the carbon tax approach is that while it puts a price on carbon, i.e., x $ per metric ton of CO2 emitted, it does not put a cap on emissions. In other words, the taxing jurisdiction has to correctly estimate the level of tax that will incentivize reduction of emissions. Because levying taxes is often politically difficult, increasing the tax if the jurisdiction does not get it right initially may prove problematic.
When the California legislature tasked the state Air Resources Board (CARB) with the implementation of AB32, including the ability to develop a mechanism to place a price on carbon emissions, Governor Arnold Schwarzenegger refused to allow CARB to openly discuss a carbon tax, fearing that it was a politically impossible approach. In response, CARB worked to develop a credible and a gaming-free cap-and-trade system. That system was launched in 2012 and has been a remarkable success to date. Quebec linked with California in 2014 and since the inception of the program over $2.2 billion in revenue has been raised from the sale of auctions. By California law (SB535), 25 percent of that revenue has to be spent to the benefit of disadvantaged communities as defined by the CalEnviroScreen mapping tool designed by the Office of Environmental Health Hazard Assessment. During the period that the cap-and-trade program has been in place, the California economy has shown steady growth. My assessment at this point is that the pope got it wrong about California’s cap-an-trade system.
That said, I am enthused by the pope’s weighing into the climate change debate. He is a heavy hitter when it comes to moral authority, and he has spoken out forcefully about the needs for effective and equitable mitigation policies. Jerry Brown has described the pope’s efforts as “bringing a moral and theological dimension that adds to the market and political calculation.” Brown also said that, “We face an existential threat to human existence as we know it. It’s not being taken seriously by the vast majority of powerful people. When the pope, as a powerful person, issues this encyclical, it’s a helpful addition to the mix.”
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