Global Warming and Cap-and-Trade Policy Solutions

Introduction to Global Warming

Over the last 200 years, the burning of fossil fuels such as coal and oil, combined with deforestation, has caused the concentrations of heat-trapping greenhouse gases to increase significantly in our atmosphere. These gases prevent heat from escaping the Earth, much like the glass panels of a greenhouse. Greenhouse gases are necessary because they keep the planet's surface warmer than it otherwise would be. However, as the concentrations of these gases continue to increase in the atmosphere, the Earth's temperature is climbing to dangerous levels. According to experts, the Earth's average surface temperature has increased by about 1.2 to 1.4°F over the last 100 years. The eight warmest years ever recorded had all occurred since 1998, with 2005 being the warmest year on record. Most of the warming observed in recent decades is very likely the result of human activities. Other aspects of the climate are also changing, including rainfall patterns, snow and ice cover, and sea level (Climate Change, 2009).

If greenhouse gas concentrations continue to rise, many climate models predict that the average temperature at the Earth's surface could increase from 3.2 to 7.2°F above 1990 levels by the end of this century. Scientists are fairly certain that human activities are changing the composition of the atmosphere and that increasing greenhouse gas concentrations will alter the planet's climate. What remains uncertain is how much the climate will change, at what rate, and what the exact effects of that change will be (Climate Change, 2009).

Global warming is a major problem that we all face today, and the longer it continues, the worse the consequences will become. Greenhouse gases are building up in the atmosphere every day, causing the planet as a whole to grow warmer. A global effort to reduce greenhouse gas emissions is necessary for the sake of everyone.

Greenhouse Gases and Scientific Evidence

Greenhouse gases are gases that naturally blanket the Earth and keep it warm. These gases include carbon dioxide, methane, nitrous oxide, and fluorocarbons. Over the past century, the Earth's temperature has risen by about 0.5 degrees Celsius. Many scientists believe this is due to an increase in the concentration of the main greenhouse gases — a trend referred to as global warming. If people continue producing these gases at increasing rates, the results could be disastrous. Predicted negative outcomes include more severe floods and droughts, a greater prevalence of insects, rising sea levels, and disruption of the Earth's precipitation patterns. These environmental changes are expected to have harmful effects on society, including poorer public health and reduced economic development (Hopwood and Cohen, n.d.).

Naturally, as more greenhouse gases accumulate in the atmosphere, the greenhouse effect intensifies and raises the Earth's temperature further. According to the National Oceanic and Atmospheric Administration (NOAA), there is no doubt that both land and ocean surface temperatures have risen significantly over the last 100 years. This finding supports the trend of global warming, though it does not by itself identify a cause. The director of NOAA's Geophysical Fluid Dynamics Laboratory has stated that there is no credible explanation for the roughly one-degree Fahrenheit increase in the Earth's surface temperature over the past century other than the effects of greenhouse gases.

The leading international authority on global warming is the Intergovernmental Panel on Climate Change (IPCC), a United Nations–sponsored organization composed of approximately 2,500 scientists from around the world. The IPCC has concluded that the evidence strongly suggests human influence has had a significant impact on the global climate. The panel has projected that global warming will have severe consequences for human health, natural ecosystems, agriculture, and coastal communities if it continues at its present pace. All of this evidence supports the conclusion that global warming is occurring as a result of increased concentrations of greenhouse gases — including carbon dioxide, nitrous oxide, methane, and HFCs — in the atmosphere (Hopwood and Cohen, n.d.).

Cap-and-Trade as an Emissions Policy Tool

Cap and trade is an environmental policy tool that achieves results through a mandatory cap on emissions while giving emission sources flexibility in how they comply. Successful cap-and-trade programs reward innovation, efficiency, and early action, and they provide strict environmental accountability without inhibiting economic growth. Notable examples of successful programs include the nationwide Acid Rain Program and the regional NOx Budget Trading Program in the northeastern United States. In March 2005, the EPA also issued the Clean Air Interstate Rule (CAIR) to build on the success of these programs and achieve additional emission reductions (Cap and Trade, 2009).

These existing cap-and-trade programs offer important lessons about program design. First, the emissions cap must be tight enough to achieve meaningful cuts. Second, the method regulators use to distribute emission allowances to firms is critical — auctioning is increasingly favored as the preferred approach (Existing Cap-and-Trade Programs to Cut Global Warming Emissions, 2009).