Keeping tabs on carbon emissions reduction trends

Keeping tabs is what counts in carbon emissions reduction. We look at the progress in US cap-and-trade programs – and how they make your efforts count.

by Twisha Balasubramanian

Without federally regulated cap-and-trade programs, the US is making progress in its carbon emissions reduction goals step by step (or, state by state). But does that mean that your business can too? While the data might point clearly to a common goal to reduce greenhouse gas (GHG) emissions, US companies find themselves unclear on the programs aimed to get there. Below, we clear the air on what’s in place for CO2 emissions management in the country – and how it’s progressing.

Cap-and-trade depends on your trade – and your state

More reports keep coming out, the results keep coming in, and goals for CO2 reduction keep going up. Or … down, as it were. Most recently, the Climate Change 2021: the Physical Science Basis report from the UN’s Intergovernmental Panel on Climate Change (IPCC) calls for “strong and sustained” reductions in CO2 and other GHG emissions. Carbon emissions trading, also known as “cap-and-trade” is a solution for some US facilities to play their part in improving this environmental impact. These programs consist of two factors: limits (or caps) on pollutants and tradable emission allowances. While limits are straightforward, the back and forth of allowances often requires a bit more explanation.

How cap-and-trade works

Much like the EU Air Emissions Trading System, the US programs set an environmental goal for the overall emissions limit of their designated region. This total is then divided into allowances that businesses may receive through allocation or purchase through auctions to cover their own emissions. If businesses emit more than what they’ve purchased, they’ll need to pay a fine. Businesses can save the allowances for the future or even trade them with other organizations in an allowance market.

Where it’s in place

In the US, there’s currently no federal cap-and-trade program for carbon emissions. And of those that exist in individual states, participation is limited to certain industries. There are some air-pollution related programs that span the country, including the federal Cross-State Air Pollution Rule and EPA’s Acid Rain Program. But they focus on reducing Sulfur Dioxide (SO2) and Nitrogen Oxide (NOX). For your facilities’ legislative obligations specific to carbon emissions reduction, you’ll need to look state by state.

Moving forward with carbon emissions reduction, without federal regulations

There are a handful of states that have market-based approaches to reduce greenhouse gases, with some setting a price on carbon as an incentive for major industry polluters to reduce their emissions. Seemingly the most aggressive in its initiatives, California is the only US state with a CO2-specific cap-and-trade program in place.

Cooling off CO2 emissions in California

California’s program, the fourth largest in the world – following those of China, the EU, and the Republic of Korea – set out in 2013 to reduce GHG emissions by 85% by 2020. Its rules first applied to electric power plants and industrial plants emitting 25,000 tons of CO2 equivalent or more per year. But the rules now extend to fuel distributors as well. Annually, the program’s overall GHG emissions cap declined by 3% and is designed to go down by an additional 5% from 2021 to 2030.

The state’s climate policies have resulted in a steady decline of its CO2 pollution. From the program launch to 2018, California’s emissions from sources subject to the cap declined 10% – without negatively impacting the state’s economy. The program has been connected with Quebec’s since 2013 through the Western Climate Initiative, demonstrating that carbon emissions trading programs work even better when countries team up.

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Cross-state carbon emissions reduction: The key to coming out on top

We can look at California’s success as a sign of what’s to come. Washington state is set to soon follow suit with its own cap-and-trade program (committed to reducing GHG emissions by 95% by 2050).  And we expect more states to come up with their own cap-and-trade programs or tap into existing ones, such as the Regional Greenhouse Gas Initiative (RGGI) of the eastern US.

RGGI leads the way for cross-state cap-and-trade

RGGI sells carbon allowances to businesses in the power sector. Its goal is to spur innovation in the green energy economy and create jobs – and it’s working. Although only focusing on carbon – and only specifically for the power industry – RGGI shows that cap-and-trade programs can work well across multiple states.

RGGI requires fossil fuel power plants with a capacity greater than 25 megawatts to obtain an allowance for each ton of CO2 they emit annually. Power plants within the region may comply by purchasing allowances from quarterly auctions, other generators within the region, or offset projects. Between 2009–2017, RGGI states have seen a net economic benefit of $4.7 billion from these auction revenues.

As increasing policies continue to drive carbon emissions reduction, you can lobby for more advantageous cap-and-trade programs from your state legislatures. The more strategic these programs are, the more achievable carbon emission reductions can be for industrial operations. And the more benefits your business can reap from the process.

Realizing carbon emissions reduction goals in your company

While it’s more essential now than ever for companies to reduce their carbon emissions, exactly how they should cut down isn’t exactly clear cut. If you feel stuck without a way for your company to contribute, remember that making great strides in global climate-change objectives can start with your business taking baby steps.

To make carbon emissions reduction a reality in your business, first start with where you stand. See what changes you can make to reduce before you try to offset. Are you fully compliant with all air regulations in your operating jurisdictions? Is it possible to adjust your infrastructure to leverage clean energy sources or for more energy resilient operations? From there, look at what trends your business can tap into, such as carbon emissions trading or carbon capture and storage systems. And if there aren’t any where you do business, turn the tables and lobby with your state legislatures for more opportunities.

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