Rhein on Energy and Climate

Once again the State of California takes the world by surprise. Only a few weeks after President Obama had to concede defeat in his efforts to pass national legislation on reducing green house gas emissions the biggest US State by population and GDP acts on its own.

The new legislation, due to enter into force in 2012, provides for a cap and trade system based on the EU model. Its objective is to reduce C02 emissions by 15 percent and bring them back to 1990 levels. To that end, the government will distribute emission certificates to the 360 biggest emitters. Similar to the EU system these will be tradable and, at least temporarily, free of charge. That was necessary to obtain acceptance by the State legislature.

The Californian law will only have a tiny impact on the global climate.

But from a US and a global policy perspective California has taken a giant step. It is a signal to other US states, especially on the East Coast, not to wait for US-wide action taken by the Congress or, more likely, by the Environmental Protection Agency. It is also a victory for the EU to see the most prosperous US state follow in its footsteps; but above all it should serve as an incentive to neighbouring Canada and other developed countries to follows suit.

The Californian emission market will rank second globally after the EU, far ahead of New Mexico that had introduced a cap and trade system in November. Adding New Zealand, South Korea, Canada, Australia and even China as future candidates for cap and trade programmes, California might have cleared the way towards global emission trading, however limited the geographic scope might be for the time being. The EU will no doubt take the initiative for connecting its system with that of California.

The chances for a comprehensive global agreement on limiting green house gas emissions appearing rather gloomy, the EU and like-minded countries should resolutely go ahead and search to establish regional arrangements. Thanks to the Californian deal the world might have come closer to such a solution.

Brussels 21.12. 10 Eberhard Rhein

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