The History of Global Climate Change, part 3

We used many resources for this article. The most important was “The Discover of Global Warming” at the site of the American Institute of Physics. It is detailed, objective, and well written, and we strongly encourage people to go to the site and read all of it.

The immediate response to the events of the Summer of 1988 was typical for a media cycle in America: a short period of intense attention, much of it sensational, followed by a gradual loss of interest. There was a lot written about receding coastlines, desserts in the heartland, mass migrations, and other extreme speculations about the consequences of global climate change. A few climate conscious bills actually passed Congress, although they were mostly for show. Then 1989 turned out to be a relatively cool year, and public attention cooled with it.

Climate scientists had been caught off guard by the sudden rush of media attention. They recognized that they had done a poor job of communicating their concern to the public, mostly because they had not presented a coherent message. This wasn’t surprising: they did’nt HAVE a coherent message. Many felt that Hansen’s claims had been too bold and too provocative, but there was no organized and measured response to put forward to counter them.

It was time for the community of climate scientists to get its act together. The Intergovernmental Panel on Climate Change (IPCC) was first convened in 1988 to improve communication, review research, reach a true consensus on the issue and publicize the results. Virtually all of the important researchers in the field would eventually join the IPCC.

The first IPCC report, issued in 1990, was overly cautious and non-controversial. It received little media attention.

The second IPCC report, issued in 1995, set a different tone. This made a clear declaration that global warming had already occurred. It made a more guarded declaration that human fossil fuel use was a contributing factor. There was considerable controversy over this report; after so many years of caution, this was a shot across the bow. But it passed the panel. A bold, unified statement had been made.

Despite the mounting evidence, the United States continued to take a back seat on the issue of global climate change. So it fell to an organization with an often testy relationship with the United States, the United Nation, to take the lead. The UN convened the first Framework Convention on Climate Change (FCCC) in 1992, with the goal of developing a united global response to the problem. The first UNFCCC established the concept of a greenhouse gas inventory.

With the greenhouse gas inventory, free market thinking became a driving factor in the history of global climate change. Let’s step outside of our history for a moment to understand what was about to be proposed.

As we said in Part II, free market thinking has played a key role in in shaping global climate change policy. It’s role has been controversial. Some see it as an “easy out” for governments who lack the resolve to take decisive action. Some see it as “the best we can get” at a time when public support for regulation is still weak. And some see it as the one way to tackle the problem that will actually work.

Free market thinkers believe that regulations alone can’t fix global climate change, for two reasons:

• There are so many different economies at so many different levels of development, and so many different cultures and beliefs, that no regulation could possible be fair everyone.
• There is no global “police” to enforce regulations, anyway.

Free market thinkers believe that humans are hard-wired to operate in free markets. They point out that free markets have sprung up everywhere in human history that they have not been directly prohibited by political ideology. They believe that you use incentives first, regulations second: carrot and stick instead of just stick. True free market thinkers prefer no regulations at all: anything that you can force people to do, you can also create a market system that gives them the incentive to do the same thing. They really like their carrots.

There is a fairly radical idea behind the free market approach to emissions control: turning emissions into a currency. For greenhouse gases, the greenhouse gas inventory was the first step. Before the inventory was taken, greenhouse gases went up into the air, and no one knew who was responsible for what. To establish a currency, you have to know how much money there is, and who has it to start with. The inventory did this: for the first time, countries looked at all of their factories and power plants, all of their cars and trucks and ships and planes, all their furnaces and air conditioners and boilers and engines, and figured out how much of the overall problem was their direct responsibility.

The idea that the smoke from a factory stack can be turned into something that is traded like a coin on an open market is called commoditization. Technically, it isn’t a currency, it’s a commodity, like a stock or a futures option. A coin always has the same value. A commodity, which is worth whatever the market will allow, gives your market more flexibility.

With the currency in place, the next step was to create a market where it could be used. The FCCC proposed a system called a “cap and trade” market. It would work like this:

• Based on their emissions history, as recorded by the greenhouse gas inventory, every country was be given a set amount of greenhouse gas that they were allowed to emit in a year.
• This allowance was called their “cap.” No one was allowed to go over their cap.
• The allowance was broken up into units called emissions credits. Each emission credit gave the owner the “right” to emit a certain amount of greenhouse gas, and whoever owned the credit owned the rights.
• Any country that ended a year without using up all their credits could sell, or “trade,” them for whatever the market would pay.
• Any country that used up their credits before the year was done would have to buy extra credits from countries who had them to sell.

How does cap and trade reduce emissions? The idea is that some countries will see the profit potential in keeping their credits. They will innovate, improve efficiencies, invest in new technologies, and bring their emissions down. At the end of the year, they will make back their investments, and more, by selling their leftover credits. Countries who lag will have to spend the money to buy credits until they are under their own cap. Seeing the economic advantage they missed, they will adopt the innovations and new technologies.

Over time, caps are lowered worldwide. This means there are fewer emissions credits to go around, which forces countries to work harder to save them. There are also fewer unused credits left on the market, so it becomes more expensive to sit bakc and buy your way to compliance. This is particularly true if a carbon tax is added to penalize countries who end up over their cap. The tax adds some “stick” to the mix. Even so, most countries will continue to focus on the “carrot” of innovation and efficiency, because those leftover credits are worth more and more with each passing year. And each passing year overall emissions keep decreasing.

The economic models associated with cap and trade are a lot more complicated than this explanation; almost as complicated as climate science! And there is considerable suspicion that most systems currently in place are built around too much “carrot” and not enough “stick.” But in the absence of a public consensus calling for more stringent regulation, these free market systems will form the backbone of the fight against global climate change.

Renewable Energy Certificates are also a free market approach and a tradable commodity. The market mechanism that allows them to support green energy is similar to cap and trade, although there are some significant differences as well. You can learn about this in another article in the REC Center titled What the HEC is a REC; click this link to read that article.

Back to our history.

The greenhouse gas inventory was finalized in 1997, at the third meeting of the UNFCC in Kyoto, Japan. The resulting Kyoto Protocol mandated greenhouse gas allowances for all participating countries, and set the first expectations for greenhouse gas reduction. Most countries eventually ratified the Kyoto Protocol and start working to meet their reductions. The United States was not one of them.

The 1997 Kyoto agreement introduced the concept of the carbon footprint. If each country has a greenhouse gas inventory, then why not each region, each state, each industry, even each individual? Your footprint makes you aware that everything you do that involves fossil fuels, from driving a car to heating your house to turning on a light bulb, adds greenhouse gases to the atmosphere. You can calculate it down to pounds of carbon dioxide (carbon dioxide was chosen to represent all the greenhouse gases because it is the most common…this make the total more impressive). That is your personal contribution to global warming.

Want to make your footprint smaller? You can drive less, turn down the heat, or turn off the light. You can also find someone who is creating a carbon sink; in other word, actively removing greenhouse gases from the atmosphere through a project such as planting new forests or capturing methane. Under the Kyoto Protocol, this person earns carbon offsets based on the greenhouse gases their project removes. You can buy these offsets. Does your lifestyle give you a big footprint? Buy enough offsets to bring yourself down to the level of a typical person, and you’ve balanced your footprint. Buy enough offsets to equal ALL of your footprint, and you’re carbon neutral. Technically speaking, you are no longer contributing to global warming.

Carbon offsets are another free market concept that has been used to combat global climate change. They are another tradable commodity, similar to renewable energy credits. We discuss the similarities and the differences of RECs and offsets in the article you can reach by clicking this link.

The scientific community continued to pursue research and hone its message. The IPCC released its third report in 2001, making the strongest statement yet about global warming and mankind’s role. From this point on, the scientific community considered itself to be in full consensus on the issue, though great effort would be made by business interests to present a different picture to the public.

Unfortunately, another event also happened in 2001. It removed all issues other than national security from the mind of the American people. President George W. Bush would reject the Kyoto Protocol in 2002.

Europe, however, got a wake-up call in 2003, when a record heat wave swept through much of the continent. The news of crop failures and people dying from heatstroke, even in countries known for their temperate climates, had a profound effect on the global climate change debate in Europe.

Not so the United States. The George W. Bush presidency, together with a Republican-controlled Congress, meant that business interests came first, so it is no surprise that global climate change was put on the back burner in America. Business interests had little interest in raising their energy costs.

Yet a curious thing was happening, even as business and industry maintained a firm public stance questioning the science of global climate change. A very different message was being presented to the American consumer. The language of global warming and climate change had entered advertising and marketing, as “green” marketing become a predominant trend.

This is often how things happen in America: an important idea, with public policy implications, gains public acceptance through the marketplace and popular culture after failing in the political arena.

To succeed in America, you have to market ahead of the curve of public opinion. Everyone, it seems, is marketing themselves as green, and the language of carbon footprints and greenhouse gas reduction has proven to be an effective way to get that message across. Wal-Mart promotes compact fluorescent light bulbs and General Electrics markets their Eco-magination. IBM and HP have greener computers. Even oil companies and car companies are trying to use greenhouse gas reduction as a way to establish their “green cred.”

And everyone, it seems, is buying RECs and talking about it.

At some point, perhaps soon, we will have to do more than “green up” our public images. We will have tough decisions to make, and we may have to make them before we’re fully ready. But the fact that you’ve read this far shows that some Americans, at least, are taking the first tough steps.