I participated in a conference this week on the outlook for the carbon market. Yes, there really is a carbon market, and it has made big strides this year, though you wouldn’t have known it from the press.
Most of the media – and our elected officials – ignore the issue. They’re blinded by outdated views and misconceptions – what we call the Six Myths of the Carbon Market.
Attending the annual Carbon Forum conference in Washington, it was plain that there has been real progress in building a carbon market – something that is essential to combating global warming and spurring the growth of new technologies in transportation, power generation, industrial materials and other sectors.
Building a market is slow, painstaking work, and even markets we use every day – from mortgages to emerging-market stocks – had humble starts. Carbon is no different. But six myths about this nascent market continue to dominate the minds of policy makers and limit more rapid progress:
Myth 1: No one cares about climate change anymore.
It’s true that public concern about climate change fell as the economic crisis unfolded, but it is rebounding now. The National Survey of American Public Opinion on Climate Change showed that belief in global warming fell from 65% in 2009 to 52% in 2010 but jumped back up to 62% this year. Severe weather seems to be one factor behind the resurgence.
Climate policy also is important right now to a key group – undecided voters in the presidential race. A September 2012 study by the Yale Project on Climate Change Communications found that a majority of undecided voters cited climate policy among the critical issues that ultimately will sway their vote. A majority also favors stronger action by the president and congress to address global warming.
Myth 2: Cap-and-trade doesn’t cut carbon emissions.
This is a popular claim, driven by a distaste for anything that sounds like financial flim-flam in the wake of the banking crisis. But with so much focus the “trade” people overlook the “cap” – the fixed reduction in emissions imposed by a cap-and-trade system. And the cap works. Here in the U.S., the northeast states that comprise the Regional Greenhouse Gas Initiative (RGGI) have cut per-capita emissions of carbon dioxide 20 percent faster than the rest of the country over the past ten years, even as their economic growth outpaced the rest of the nation’s.
Myth 3: China isn’t doing anything to cut its emissions.
This is the biggest misconception of all. In the past, China’s cautious approach to emission cuts was a convenient excuse for stalling a U.S. climate program. But China has turned, moving aggressively in the past year to adopt cap-and-trade programs in several provinces, as a prelude to a nationwide system by the end of the decade.
And it’s not just China. Carbon programs are planned or being implemented in Japan, India, Korea, Thailand, Indonesia, Vietnam, New Zealand, Mexico and Brazil. They’ll join existing programs in the European Union and Australia. National carbon-trading plans are on the rise everywhere – except, of course, in the U.S.
Myth 4: Cap-and-trade in the U.S. died in 2010.
Although a nationwide cap-and-trade plan stalled in the U.S. Senate in 2010, several states have been moving head with their own initiatives. California will launch its much-anticipated cap-and-trade program later this month. California also plans to link with Quebec next year, which would increase the overall size of the market by 20% and boost liquidity. Linkages to RGGI and carbon-trading programs in Australia and China are also under discussion.
Myth 5: Businesses hate cap-and-trade and environmentalists love it.
This is the popular narrative used by the oil industry to thwart cap and trade. The facts tell a different story. Many of the biggest carbon polluters – from utilities to manufacturers – like the flexibility that comes with cap-and-trade. It allows them to find the most cost-effective way to reach their emissions cut. To them, it’s the alternative – old-style command-and-control measures – that is truly frightening. In California, the business community lately has tempered its opposition and focused on adjustments to make the plan more workable. But one group in California has remained stridently opposed to the program: environmentalists.
Myth 6: No U.S. public official wants to risk their neck on cap-and-trade.
Sadly, this myth comes close to the truth. Cap and trade is barely whispered in Washington and, unlike 2008, won’t be uttered on the Presidential campaign trail. The only official to buck the trend is Mary Nicholls, chairman of the California Air Resource Board and the driving force behind its cap-and-trade plan. For her courage, conviction and principled risk-taking, she will be nominated for the Risk Matters Hall of Fame.