The EU-27, U.S., U.K., and China should dump cap-and-trade as a policy option and adopt a carbon tax with reinvestment to reduce global emissions.

AuthorSewalk, Stephen
PositionI. Introduction through III. Carbon Tax B. Why Carbon Tax Beats Cap-and-Trade 2. Policy Enactment, p. 525-552

TABLE OF CONTENTS I. INTRODUCTION A. Global Climate Cause and Consequences B. Responses to Global Warming 1. Rio, Kyoto, Foreign Direct Investment, and Carbon Leakage 2. The United States and the EU-27 3. China and Other Developing Countries II. CAP-AND-TRADE A. Cap-and-Trade Explained 1. Pros of Cap-and-Trade 2. Cons of Cap-and-Trade B. Why Cap-and-Trade Has Proven Ineffective 1. U.S. Sulfur Market as an Example 2. The EU ETS and Its Failure 3. Global Recession and Continued EU ETS Failure 4. Windfalls, Burdens, and Failures 5. Border Tax Adjustments: Carbon Leakage, EU ETS, and Aviation III. CARBON TAX A. Carbon Tax as an Alternative B. Why Carbon Tax Beats Cap-and-Trade 1. Certainty of Cost Compared with Certainty of Benefit 2. Policy Enactment 3. Revenue Neutrality 4. The Impact on the Environment IV. A CARBON TAX WITH REINVESTMENT STRUCTURE (CTR) A. Everyone Emits, Everyone Pays Under a CTR B. Cost and Benefit Certainty C. Economics of a CTR D. Jobs and Economic Growth V. THE EU-27, U.S., U.K., AND CHINA SHOULD ADOPT THE CTR TO REDUCE GLOBAL EMISSIONS BY 34% IN TWENTY YEARS A. Economic and Emissions Impact 2014] THE EU-27, U.S., U.K., AND CHINA SHOULD DUMP CAP-AND-TRADE B. Equity, Autonomy, and Fairness C. Mitigation That Works?Stopping Climate Change D. CTR Complies with International Law E. An Important Step Toward European Energy Independence VI. CONCLUSION I. INTRODUCTION

  1. Global Climate Cause and Consequences

    Failure to reduce global greenhouse gas (GHG) emissions is not an option. If we fail, then we risk the future of our environment and threaten catastrophic devastation to our coastlines, cities, farms, and the entire planet's resources. (1) The changing climate, due to man-made emissions, could very well significantly alter the landscape and characteristics of planet Earth. (2) With "very high" confidence, the bulk of the rise in temperatures over the past fifty years, according to climate scientists, can be attributed to human-caused GHG3 emissions from burning fossil fuels combined with land-use changes. (4) Yet, inaction seems to be the word of the day. Emissions of global GHGs continue to grow. Hope continues to present itself at every Conference of the Parties (COP) meeting, yet disappointment soon follows, as the Kyoto, Copenhagen, Durban, and other COP meetings all have failed to produce a reduction in total emissions. The Intergovernmental Panel on Climate Change's (IPCC) fifth assessment report indicates significant legislative action is needed to control emissions. (5) Thus, there is growing demand for action on domestic and international climate change legislation leading to significant reductions in GHG emissions. The past fifteen years have seen the twelve warmest years in recorded history as oceanic temperatures reached record highs and Arctic ice melted faster than most models predicted. (6) A recently conducted study by the Proceedings of the National Academy of Sciences, covering a fifty-year period, discovered the higher temperatures caused by climate change are resulting in tropical forests being able to absorb less and less carbon dioxide (C[O.sub.2]) every year. (7)

    Based on models developed by scientists to avoid the globe warming by more than 2[degrees]C compared to pre-industrial levels, it is necessary to stabilize the concentration of GHGs in the atmosphere at 450 parts per million (PPM) (8) in carbon-dioxide equivalents (C[O.sub.2]e). (9) The challenge is that the level of atmospheric GHGs has increased 44% from pre-industrial levels of 280 to 400 PPM, as of 2013. (10) From 1970 to 2004, the amount of GHG emissions increased by 70%. (11) The concentration in the atmosphere continues to grow by approximately two PPM per year as shown in Figure 1 below, (12) briefly surpassing the symbolic 400-PPM level in May 2013. (13) Current world emissions of 30 billion tons of C[O.sub.2]e per year are not sustainable. Presently the average emissions per capita globally are more than four tons of C[O.sub.2]e per year.

    Australia, the USA, Canada, Germany, Sweden, China, India and Kenya are emitting 26.9, 23.5, 22.6, 11.9, 7.4, 5.5, 1.7 and 0.3 ton [sic] of C[O.sub.2]e per person per year, respectively. To achieve 450 PPM by 2050, it is necessary to reduce average emissions to 18 billion tons of C[O.sub.2]e per year between 2013 and 2050. (14) Furthermore, there is concern 450 PPM may be too much. The Potsdam Institute calculated the environment may only be able to manage up to 350 PPM, a level that has already been exceeded. (16) According to other calculations, even if global emissions were reduced to year 2000 levels and kept constant, the Earth would still experience a warming trend of 0.1[degrees]C every ten years due to the slow feedback of the oceans. (17) Over an average person's lifetime, this would be equivalent to an increase of 0.7 to 0.8[degrees]C. There are climate scientists who believe the rapid rate of emissions growth may have already caused permanent damage to the Earth and its ecosystems, effectively changing the atmospheric composition of our planet. (18)

    Therefore, our primary concern should be to develop the best response possible to the current level of emissions in order to prevent the forecasted increases in GHG emissions levels to avoid catastrophic climate change. (19) First, we need to ensure that we understand the causes in order to change what we are currently doing wrong. According to the IPCC, the main culprit is our fossil fuel consumption, which accounts for the majority of anthropogenic GHG emissions. (20) The very natural resources that allowed us to thrive and prosper during the Industrial Revolution, resulted in the rapid expansion and growth of our species, and continue to represent a source of livelihood for entire industries and populations, have placed the current world ecosystem in peril. (21) We have seen the impacts of unparalleled growth in China, leading to heavily polluted air and waterways. This has led to efforts to inform the general populace of the dangers of unmitigated GHG emissions and the need for countries to urgently address their carbon emissions. (22) Without a plan and a strategy leading to the correct legislation to dramatically reduce GHG emissions, the Earth's habitable environments may be irrevocably altered in the near future, potentially jeopardizing the future of our own species.

    These uncontrolled rapid increases in GHG emissions could result in global climate change leading to melting snowcaps and glaciers, rising sea levels, and changing weather patterns (including rising seawaters, floods, droughts, disappearing rivers, and altered landscapes). (23) Due to global warming, sea levels have risen approximately eight inches since 1880, and with an expanding global population, more people now live by the water. (24) Estimates by scientists predict that sea levels could rise an additional twenty to eighty inches during the twenty-first century. (25) Existing infrastructure along the shorelines could be significantly impacted, begging the question: what will we do with the infrastructure? Will we want it to simply be flooded over, polluting our oceans? In the United States and United Kingdom, there are over 3 million properties and homes that could be flooded, and most are less than four feet above high tide. (26) This will affect all countries with ocean shorelines and rivers that migrate to oceans. (27) The impact of climate change will be vast, affecting not only infrastructure (e.g., seaports, airports, highways, pipelines, etc.), but also agriculture (via droughts and floods) and lifestyles. The impact of climate change has the potential to lead to decreasing standards of living, especially in communities and countries with an economy heavily dependent on variations in climate. (28) This includes developing countries, as well as cities and states that have primarily agriculture-based economies. (29)

  2. Responses to Global Warming

    Due to the rapidly rising emissions levels, changing climate, and rising sea levels, among others reasons, many nations are searching for some form of climate change legislation to lower GHG emissions levels. (30) However, many of the proposals to date seem to have failed at regulating emissions, making governments hesitant to adopt a policy. (31) It is possible these legislatures and governments are waiting to find a well-developed, thought-out, and efficient policy, preferably adopted and operating successfully in another nation before adopting the legislation for their own country or region. (32) Despite lawmakers being cognizant of the benefits, this reluctance is due in great part to their desire to avoid certain factors including: fear of harming domestic businesses, lack of confidence in proposed climate change schemes, and the continued speculation by certain groups about the seriousness of carbon emissions in the atmosphere.

    1. Rio, Kyoto, Foreign Direct Investment, and Carbon Leakage

      Developed countries are quite concerned that if they impose heavy restrictions on carbon emissions, then these restrictions will apply only to domestic producers and not imports, leading to carbon leakage. Carbon leakage typically occurs when an industrialized country proposes legislation that will restrict emissions of carbon. This includes schemes such as the European Union Emissions Trading System (EU ETS) cap-and-trade system, the Waxman-Markey bill, the Lieberman-Warner bill, and many others. Consequently, emissions-dependent industries relocate to countries with no emissions restrictions. (33) They do so primarily to avoid restrictions on their emissions. However, in the process, greater emissions result, as will be explained below. Anecdotally, there is evidence that this occurred during the 1990s and 2000s (the era of globalization).

      The United Nations Conference on...

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