Wanted – Both Dead and Alive: Cap and Trade

This piece is inspired by the Navigating the American Carbon World 2011 Conference, in Los Angeles, CA.

Cap and trade is both dead and alive.  How can this be?  It’s dead on the national and international level, but alive and flourishing at the regional and state level.  Let me explain.

Amid the national and international buzz around cap and trade’s demise, the Tea Party and majority GOP congress look not too favorably to any sort of cap and trade or carbon tax, even though the Obama Administration would most likely sign a bill in favor of either.  The annual Climate Summit has been meeting for a decade and a half, with no agreement on carbon emissions, offsets, or trading.  To these entities, cap and trade appears dead.

On the one hand, there has been little attention paid to the state and regional efforts toward constructing a carbon market.  I have covered the efficacy (or lack thereof) of cap and trade or carbon tax regime before.  However, in this piece, I will focus on the struggles of implementing cap and trade from various levels of government.  Regionally, cap and trade appears to be alive and well.

In terms of the environment, we usually see governmental hierarchy from the top-down: Federal, State, then Local.  In other words, the more environmental power and control the Federal Government has, the better for us all.

No matter your personal opinion on cap and trade, it’s clear that the US Congress is not inclined to support it.

However, the Western Climate Initiative is attempting to do regionally what congress cannot do nationally.  Rather than mandate carbon regulation from the Federal level top-down, the WCI recognizes State and Provincial efforts and sovereignty.  (At least there is some entity that recognizes state sovereignty.)   Rather than a rigid hierarchy, this is similar to dynamic synergy, arguably from within.

As the WCI suggests, “The WCI is a collaboration of independent jurisdictions who commit to work together to identify, evaluate, and implement policies to tackle climate change at a regional level.  Other US States, Canadian Provinces, Mexican states and tribes that are interested in collaborating to combat climate change at a regional level are encouraged to participate in the WCI as either members or observers.”

At the Navigating the American Carbon World conference, the WCI held a stakeholder meeting discussing the challenges and steps forward it still needs to take.  Key programs and activities include:

  • emissions reporting
  • offsets
  • tracking systems
  • auction platform
  • regional administrative organization
  • market monitoring and oversight

The WCI effort seems far more mature than any cap and trade effort from the Federal Government.

From a practical point of view, the regional strategy seems to be far more effective than a national carbon mandate.  States like California and provinces like British Columbia have cap and trade legislation passed, alive and well.  Nationally, cap and trade is dead.

From a constitutional point of view, the regional strategy may be more in line with the tenth amendment, leaving the powers not explicitly granted to the Federal Government to the States or the people.  It is the closet we have seen to following the letter and intent of the law, in terms of carbon regulation.

Is state or regional regulation and collaboration the way to go?   Do we need a national, or even international regulation?  Is it better to have cap and trade alive regionally and dead nationally and internationally?  Vice versa?  What do you think?

Jonathan Mariano is an MBA candidate with the Presidio Graduate School in San Francisco, CA. His interests include the convergence between lean & green and pursuing free-market based sustainable solutions.

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