There has been a lot of environmental news lately.
At the national level, last week the White House unveiled a new plan to cut carbon emissions from power plants. The target for the emissions reductions is 30 percent below 2005 levels, but each state has its own target (performance standard) based on current emissions. Emissions from power plants are the largest single source of CO2 in the U.S., and most of the existing power plants are more than 40 years old. It's important to note that U.S. emissions have been declining since 2005, so some of the reductions have already been met.
This was interesting on a couple of levels. First, because of a 2007 Supreme Court ruling that gave the EPA authority to regulate CO2, coupled with a 2009 "endangerment finding" the President did not need approval of Congress for this new measure.
Second, the rules allow each state flexibility in terms of how they reach their target. States and power plants can use technology to directly reduce emissions (e.g. better scrubbers), they can covert coal plants to natural gas, they can subsidize or otherwise promote renewable energy sources, or they can engage in cap-and-trade systems. Combining a standard with this flexible approach should offset some of the efficiency loss, but we can probably expect energy prices to rise. However, the EPA suggests that the benefits will be 8-12 times greater than the costs. The benefits of the new rules are estimated to be between $55 and $93 billion, which includes avoiding thousands of premature deaths and over 100,000 asthma attacks per year, in addition to slowing climate change, enhancing agricultural productivity and reducing ecosystem and species loss.
Finally, one day after the announcement, China announced a plan to place a cap on CO2 emissions as part of its next 5-year plan.
Questions to consider:
Who is against the new regulations and why?
Who is in favor of the new regulations and why?
How will cap-and-trade work in this situation?
Will Pigouvian taxes or subsidies play a role?
What non-market costs and benefits might be affected?
What are the implications of China's announcement?
Objective responses please.