Recent Studies Provide Examples of Emissions Trading Successes, Failures

The emissions trading program in the northeastern United States—the Regional Greenhouse Gas Initiative (RGGI)—is responsible for about half the region’s emissions reductions—an amount far greater than reductions achieved in the rest of the country.

The study in the journal Energy Economics determined that even when controlling for other factors—the natural gas boom, the recession, and environmental regulations—emissions would have been 24 percent higher in participating states without RGGI (subscription). RGGI, the first market-based regulatory program in the United States, is a cooperative effort among states to create a “cap” that sets limits on carbon dioxide emissions from the power sector—a cap lowered over time to reduce emissions. Power plants that can’t stay under the cap must purchase credits or “emissions allowances” from others that can.

“While the study focused on the northeastern states and the RGGI program specifically, the findings suggest that emissions trading could be a cost-effective strategy for states now considering how to comply with EPA’s recently issued regulations aimed at reducing carbon dioxide from power plants,” said Brian Murray, lead author and director of the Environmental Economics Program at Duke University’s Nicholas Institute for Environmental Policy Solutions.

A separate study in the journal Nature Climate Change found significant misuse of a key carbon offsetting scheme after several factories increased their production of industrial waste products—spiking emissions. It suggests that a loophole in the United Nation’s carbon market may have led to “perverse incentives” for some industrial plants to increase emissions so they could then make money by reducing them.

A companion study indicates that the majority of credits from Russia and Ukraine were a sham and that no emissions were reduced. In fact, the study estimates use of the sham offsets actually enabled greenhouse gas emissions to increase by some 600 —> Read More