Unlike many environmental problems, which can be addressed at a local or regional scale, climate change is inherently global in nature: greenhouse gas (“GHG”) emissions from any source join with historic and contemporary GHG emissions from other sources globally to contribute to the total store of GHGs in the atmosphere. The global nature of the issue is a key reason why, from the onset of climate change efforts, policymakers and environmentalists have attempted to address GHG emissions at an international scale.
Failure of Kyoto Protocol Leaves Void in International Climate Change Efforts
The primary effort to address climate change at an international scale is the Kyoto Protocol, adopted in 1997 in connection with the United Nations Framework Convention on Climate Change. Unfortunately, through the first “commitment period” (which ended in 2012), the Kyoto Protocol has not achieved expectations, as the two largest GHG emitting countries—China and the United States—never signed the Protocol. The sense that the Kyoto Protocol will ultimately fail as a climate program was compounded by the inability of negotiators at the 2009 Copenhagen Summit to agree on a framework for climate change mitigation for the period following the end of the first commitment period in 2012. Since Copenhagen, climate policymakers have looked for a regional model to lead the way to a new international climate framework.
European Trading System in Disarray
With the Kyoto Protocol faltering, hopes have been pinned on the European Union’s climate change program—the Emissions Trading Scheme (“ETS”). These hopes are rapidly fading. In the past few months, the ETS has experience significant growing pains, with the price of carbon allowances having dropped from about € 25 per ton in 2008 to below € 3 per ton in April. Although reductions in GHG emissions in the EU are still on pace to meet the target of the Europe 2020 Strategy (20% lower than 1990 emissions), most analysts believe that carbon prices at this level are too low to spur investment. The severe drop in carbon allowance prices has led many, including The Economist, to question whether the ETS has any future.
California Expanding its Cap and Trade Program to Canadian Province of Quebec
In the midst of Europe’s difficulties, California has moved forward to link its cap and trade system with that of the Canadian Province of Quebec.
On April 19, 2013, the California Air Resources Board (“CARB”) approved a plan to formally link with Quebec beginning on January 1, 2014. Linkage will create a relatively seamless cap and trade market, with compliance instruments—carbon allowances and offset credits—being interchangeable in the two systems. California and Quebec will also hold joint auctions of carbon allowances.