On Thursday, October 17th, I had the privilege of tapping into one of Boston’s intellectual goldmines: Harvard Kennedy School of Government. I’ve become familiar with the small campus recently, as I’ve discovered how frequently they hold events related to sustainability, environmental policy, and regulation; all weaknesses of mine. In just the past few weeks, I’ve been exposed to new people and perspectives as related to environmental policy. HKS is a worthy competitor to our very own Fletcher School as related to inciting productive and provocative discourse, yet complement may be a better word. The talk I went to see last week was given through the Regulatory Policy Program seminar series. The speaker was Billy Pizer, Associate Professor of Public Policy at Sanford School at Duke University, who expounded on delinking trading programs within the larger scope of carbon markets internationally.
In the 1990s, carbon markets used to be the light at the end of the tunnel for environmental policy (Pizer 3). It was the panacea that, once passed, would ostensibly open the floodgates to endless pieces of regulatory environmental legislation: the wet dream of most liberals. It’s attraction derived from a free market concept: this mechanism would allow the ideal of equally valued pollution internationally. If the US emits more, it will pay more; if Bolivia emits nothing, for example, it will make money for doing so. Unfortunately, the main vehicle that drove a cap and trade program was the Kyoto Protocol which turned out to be a largely symbolic international treaty. Though an international joint trading program was never adopted, many countries and regions have taken the initiative to institute one anyway. These include: California, Australia, the EU, New Zealand, Quebec, and New England. Each program has different ambitions, valuations, and jurisdictions, an important consideration to linkages.. Billy Pizer, for much of his career, believed delinking would be a harmful economic move due to this disparity. Not until New Jersey delinked from RGGI in 2011, did Pizer’s opinion shift.
During this talk, he delineated his preconceptions of delinking in terms of compliance costs in relation to remaining permits. Rationally, linking programs should reduce volatility by creating a larger market, and therefore decrease compliance costs.. With remaining permits, they could disappear or be swallowed by the partner program. The difficulty with swallowing permits though is there is no standard price. Perhaps there will be a high-price market that delinks from a low-price one in the future; the small partner will suddenly become a huge net buyer, and be flooded with excess permits. The primary concern is economic inefficiency, and sudden delinkages would plausibly arise. These questions provoke political concerns as well as economic ones. Overall, Pizer concluded that delinking can happen in a multiplicity of ways, but it is not necessarily disastrous, as he originally conceived. Accommodations will be made for the delinked program in the same way they have to for linking them.
The study of delinking is new, as the action itself is new; Pizer is a pioneer in this field, and his recent paper, “Breaking Up May Not Be Hard to Do: Terminating Links between Emission Trading Programs” will likely pique the interest of scholars elsewhere. Questions asked during this lecture were compelling: Are countries with functioning carbon markets, such as Australia, take a risk on the stability of a differently structured program such as the EU? Questions such as this help me shape my own intellectual curiosity and seek out original opportunities.
For this reason, I looked towards Tufts to see if we have ever had an affiliation with RGGI or another carbon trading initiative. In fact, we had! We were the first University signatory of the Chicago Climate Exchange in 2004. Soon after, Tufts expressed skepticism as to the sustainable value of carbon credits given the only difference in paying for the credits to pollute is a piece of paper; it doesn’t make the University any more sustainable. For this reason, Tufts delinked from the program after Phase II (2007-2010).
Tufts hesitance exhibits the issue with cap and trade right now. If other universities were held to the same environmental standards, we would likely be more inclined to retain the agreement. Tufts student, Stina Stannik, agrees, believing that, “Tufts has an ethical responsibility to stand by a carbon market, and work towards improving it so as to be a model for other potential participants”. The difficulty with carbon trading though is how disparate the structure can be; most likely, our University will take carbon trading seriously when we feel it outweighs or matches our other sustainable efforts.
Though Professor Pizer may have been a little (a lot) over my head, it still exposed me to a different angle with which to study carbon markets. From his presentation, to the people there, to the questions asked, it showed me how important the right environment is to learn something new.
Pizer, William A., and Andrew J. Yates. Breaking Up May Not Be Hard to Do: Terminating Links between Emission Trading Programs. 29 Aug. 2013. Scholarly Report.
Stannik, Stina. “Carbon Market Discussion.” Personal interview. 21 Oct. 2013.
Cooper Katz McKim is a sophomore at Tufts University with an avid interest in Environmental Studies. We are also welcoming Cooper officially as our ENVS Intern.