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National Regulation


Contents

Introduction

Carbon emissions control and the politics of economic prosperity meet at the national level. Countries face tradeoffs between the pace of emissions reduction, the cost to their citizens, the long-term cost of unchecked climate change, and the impact of regulation on their international economic competitiveness. Countries encounter these tradeoffs across three major policy spaces: regulation of emissions themselves; generation of the technologies to support future emissions reduction; and the creation of sustainable competitive advantage.


Carbon Regulation

Scientific assessment of the causes and consequences of climate change indicates a very high probability that greenhouse gas emissions from human industrial activity will cause significant changes to the global climate over the 21st century. However, each individual or firm obtains significant near-term benefits from this activity, while costs are spread across society and come at a much later date.

This pattern of costs and benefits is consistent with what researchers have termed the "tragedy of the commons", in reference to the tendency of common pasture land to suffer from overgrazing.[1] Because the individual does not incur costs from use of common goods on par with their depletion of those goods, they have no incentive to moderate their use or take steps for conservation. By implication, common goods such as infrastructure, clean air, or pure water will be under-supplied by the market. Government action has long been the remedy for this problem, whether through direct provision of roads or mandated levels of water cleanliness.

Climate change mitigation policy will require government regulation to assign costs to the greenhouse gas emissions responsible. Direct regulation, mandating the introduction of specific new technologies or methods while requiring the retirement of older, higher-emitting ones, has never been seriously considered as an economy-wide policy.[2] It imposes significant rigidities on economies by requiring them to evolve in specific directions, and responds poorly to future changes in technology that might allow equivalent or better emissions reduction at lower cost.

Indirect regulation, in which the government sets high-level rules on emissions and allows the economy to discover the best ways to comply with those rules, can come in one of two forms. Taxation can assign a price to greenhouse gas emissions. The cost of emitting then creates a price incentive for innovation and investments in lower-emissions technology. Alternatively, tradable emissions permits assign a fixed quantity of allowed emissions to an economy, and create property rights to emit that can be bought and sold. In this case, the price incentive is the cost of buying permits to pollute. Either may be adjusted over time to phase in stricter emissions limits.

Research and Development

Sustainable climate change mitigation policy will require rapid technological innovation to ensure that lower emissions and prosperity can coexist. Few countries today could sustain policy over the long term that imposed major reductions to their citizens' standards of living.

In theory, carbon regulation (taxes or cap-and-trade) will supply the price signals to companies to make R&D investments to reduce emissions. Whether this will occur quickly enough to generate the innovations required to pair prosperity with low emissions is unknown. Economic models of the link between price signals and innovation often assume that this innovation occurs in a vacuum free of other influences.[3] Past experience with cap-and-trade systems, such as that used in the United States Environmental Protection Agency's Acid Rain Program, focused on using price signals encourage adoption of known technologies. Climate change will require innovation before technologies exist for adoption.

The complex nature of this problem is reflected in most countries' use of both price signals and direct support for R&D. This is the case in Europe, where the Lisbon Agenda for R&D exists alongside the Emissions Trading Scheme; and in the United States, where energy policy investments have occurred even when price-based regulation of emissions was politically unfeasible.

Legal Matters

An interesting perspective on the legal complexities of energy and the environment may be found at Legal Planet, a collaboration between UC Berkeley School of Law and UCLA School of Law, provides insight and analysis on energy and environmental law and policy. The blog draws upon the individual research strengths and vast expertise of the law schools’ legal scholars and think tanks.

The goal is to fill a unique space on the blogosphere, not only by bridging the worlds of law and policy, but also by translating the latest developments in a way that’s understandable to a mass audience.

Contributors write about Supreme Court decisions, regulatory actions, and state and national legislation that affects water resource management, toxic waste disposal, renewable energy, air quality, land use, and more.


Industrial Policy

Improving this article or section by expansion or modification is encouraged. Further information might be found on the Discussion page.

Emissions regulation may significantly impact both domestic and international economic competitiveness.

Country Pages

Climate mitigation policy varies by country in accordance with national differences in the policies outlined above. The following pages provide additional information about national policy.

Improving this article or section by expansion or modification is encouraged. Further information might be found on the Discussion page.
  1. ↑ Garret Hardin, "The Tragedy of the Commons", Science 162(3859) pp. 1243-1248. 1968.
  2. ↑ It has, however, been used for specific industries or sectors. The CAFE fuel economy standards in the United States are one example of government-mandated emissions reductions at the sector level.
  3. ↑ Alexander E. Farrell, W. Michael Hanneman, and Christopher Busch, Managing Greenhouse Gas Emissions in California, chapter 10. Available at [1].
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