Look to Cal­i­for­nia on cli­mate

The state’s cap-and-trade pro­gram proves that emis­sions can be cut with sen­si­tiv­ity to eco­nomic con­se­quences.

The Washington Post Sunday - - SUNDAY OPINION -

CAL­I­FOR­NIA’S LEAD­ERS this month ex­panded the na­tion’s most sig­nif­i­cant op­er­at­ing cli­mate pol­icy, the state’s ground­break­ing green­house-gas cap-and-trade pro­gram. The state could have de­parted from its mar­ket-based cli­mate plan in fa­vor of much worse ideas. In­stead, Gov. Jerry Brown (D) and two-thirds of the leg­is­la­ture, with the sup­port of sev­eral Repub­li­cans, crafted a grand com­pro­mise to tighten it up. In so do­ing, they have en­sured the pol­icy will be at the cen­ter of the state’s ef­fort to slash planet-warm­ing emis­sions by 40 per­cent from 1990 lev­els by 2030. This achieve­ment will not be im­me­di­ately repli­ca­ble many other places in the coun­try. But it could pro­vide guid­ance when more states come around to deal­ing with cli­mate change.

The big­gest les­son is that green­house-gas poli­cies do not have to be dic­tated by left-wing ac­tivists who want to curb mar­ket forces. Emis­sions can be cut with proper sen­si­tiv­ity to the eco­nomic con­se­quences — and that be­comes much eas­ier when in­dus­try and Repub­li­cans ac­cept that emis­sions must go down.

Cal­i­for­nia’s sys­tem in­volves set­ting a statewide emis­sions limit — the cap — which is en­forced by re­quir­ing busi­nesses to buy per­mits in or­der to pol­lute a cer­tain amount in­side the limit. There are only as many per­mits as there is space un­der the cap. Busi­nesses can buy and sell the per­mits, cre­at­ing a mar­ket price on green­house-gas emis­sions. Those for whom it is easy to cut back on emis­sions do so, and those for whom it is harder buy per­mits.

Some en­vi­ron­men­tal­ists balked at Cal­i­for­nia’s bill, charg­ing that law­mak­ers “cov­ered them­selves in an oily sheen.” In­deed, big play­ers in the elec­tric­ity in­dus­try backed the mea­sure pub­licly, and the oil in­dus­try did so in­for­mally, ac­cord­ing to the Los Angeles Times. But these busi­nesses had a point. Cli­mate pol­icy is bet­ter when it is con­sis­tent, pre­dictable and flex­i­ble, al­low­ing for in­dus­try to plan ahead and re­duce its car­bon foot­print in a va­ri­ety of ways. A cap-and-trade pro­gram forces in­dus­try to re­duce emis­sions with a clear sched­ule but with­out dic­tat­ing ex­actly how.

Some en­vi­ron­men­tal­ists want more mi­cro­man­age­ment. But the goal should be to cut emis­sions at min­i­mal cost — not in ex­actly the way those en­vi­ron­men­tal­ists would pre­fer. Maybe it would be cheaper for two fac­to­ries to each cut their emis­sions in half. Maybe it would be cheaper for one fac­tory to keep op­er­at­ing as usual and for the other to shut down. As long as emis­sions de­cline, Cal­i­for­nia should leave these de­ci­sions to the mar­ket.

To the ex­tent Cal­i­for­nia’s cli­mate poli­cies are de­fi­cient, it is be­cause the state does not leave enough of them to pri­vate ac­tors, in­stead sup­ple­ment­ing the cap-and-trade pro­gram with other su­per­flu­ous reg­u­la­tions re­quir­ing emis­sions cuts in spe­cific sec­tors and in spe­cific ways. Af­ter re­strain­ing this in­stinct in their lat­est move, state law­mak­ers might make this mis­take if they fol­low up their cap-and-trade bill with one re­quir­ing 100 per­cent re­new­able elec­tric­ity by 2045, an ex­pen­sive man­date that Cal­i­for­nia’s ca­pand-trade pro­gram ren­ders un­nec­es­sary.

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