Thoughts on carbon cap and trade from U of I economist Don Fullerton

Thoughts on carbon cap and trade from U of I economist Don Fullerton

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If you’re already a campaigner for or against a national system of cap and trade for carbon in the U.S., today’s commentary probably won’t offer much interest to you. If, on the other hand, you’re still a little fuzzy on just what cap and trade is, and you’d be interested to know some thoughts on it from Don Fullerton, a UI economist who specializes in research on energy and environmental policy, stick around.

First, the simple definition. Under a cap and trade system, the government creates a market for carbon emissions by issuing a number of permits that matches the maximum target amount of carbon output. In order to emit carbon legally, a firm would have to hold a number of permits equal to its own quantity of carbon output, and these permits could be bought and sold in an open market. Firms that can reduce carbon emissions at a lower cost than the prevailing market price can sell their permits, and firms with higher abatement costs can buy permits.

On the plus side, according to Fullerton, such a system, properly implemented, can produce the intended result. That’s because 85 percent of U.S. carbon emissions come from operations that would fall under the regulation of such a plan.

He thinks it unwise, however, for supporters of cap and trade to suggest it could be implemented without any disruption to the economy because that raises expectations in an unhelpful way. “In the short term” Fullerton says, “prices on energy and energy-intensive goods are going to increase. There’s no way around that.”

From Fullerton’s perspective a rise in the price of fossil fuels is not sufficient reason to reject cap and trade. He points out that the costs of cutting greenhouse gas emissions through such a system are predictable, and that they can be minimized. On the other hand, the costs of doing nothing to avert climate change are much more difficult to anticipate, and they’re likely to be higher. In wealthy parts of the world such costs might include the economic burdens of coping with new conditions for agriculture and protecting coastal cities from sea-level rise. In developing countries, such costs would be borne more directly by the world’s poorest people, those millions who would suffer from drought in Africa, and those millions who would be displaced by sea-level rise in Bangladesh.

Fullerton acknowledges a point often made by opponents of cap and trade in the U.S., that higher prices on fossil fuel here have the greatest impact on the Americans who earn the least. But he counters that a cap and trade system could be made fair through tax credits or direct payments to people based on income. To provide the funding for such compensation, it would be essential that the government raise money by auctioning off the carbon permits rather than giving them away. Otherwise taxpayers wind up subsidizing energy companies.

Would implementing cap and trade wreck the economy? Fullerton points out there’s a lot of evidence that it won’t. Will it cause disruptions? Yes. In a world of higher prices for fossil fuel, some companies will lose and others will win, especially innovative companies that have already been looking ahead.

The biggest potential trouble with cap and trade, according to Fullerton, is what’s known as leakage, which is the movement of activities with high carbon costs to other countries. For that reason Fullerton thinks the U.S. should not go it alone. But for him that’s more an argument for making our first steps moderate than for taking none at all. Events leading up to the U.N. conference currently taking place in Copenhagen suggest that if the U.S. is willing to lead, other countries, including China and India may be willing to follow.

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For a fresh perspective on the U.N. climate change conference check out coverage by Adam Lentz on his blog "From Urbana to Copenhagen" [http://go.illinois.edu/copenhagen]. A native of Copenhagen who is studying in the U.S. as a Fulbright scholar, Lentz is currently working toward a double Master’s degree in the departments of Natural Resources and Environmental Sciences and Agricultural and Consumer Economics at the University of Illinois.

Monticello program conserves water on large scale

Monticello program conserves water on large scale

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For most of us, conserving water means buying an efficient washing machine when the old one conks out, remembering to turn off the tap when we brush our teeth, or watering the lawn only when it’s really necessary. Not Brett Thompson. He manages the City of Monticello’s infrastructure study program, which is aimed at identifying and correcting problems with the city's water and sewer systems.

Here’s the problem Thompson faced with regard to the city water system in Fall 2008. The city water plant was pumping and treating an average of 608,000 gallons of water per day. But the aggregate water used by people on the system was only approximately 517,000 gallons of water a day. That meant that every day roughly 91,000 gallons of water were being pumped from the Mahomet Aquifer, treated, and then lost to leaks somewhere between the treatment plant and the end users—a 15 percent loss. [Photo: A leak in the water line at the corner of State and Center streets sprayed like a geyser when uncovered by Monticello city employees in March.]

Clearly it was time to fix the leaks.

Of course, while fixing leaks in a water system isn’t rocket science, finding them can be tricky, since even fairly big ones are not usually visible above ground. With help from the Illinois Rural Water Association, Thompson and Scott Bailey of the city’s water department began the process of locating leaks by mapping the City’s water and sewer systems, an effort that also benefitted from the assistance of interns in the surveying program at Parkland College.

As the team did the mapping, it also worked to identify which water lines had substantial leaks by measuring the levels of vibration at fire hydrants with a device called a geophone. Higher than usual vibration at a fire hydrant is a sign of a leak somewhere in the line that feeds it.

Other evidence was useful to pinpoint the location of leaks. Thompson and company found several leaks by running a special camera through the city’s sanitary sewer system, which allowed them to see water coming into the sewer line where it was not supposed to. They found other leaks by checking for chlorine in water coming out of storm sewer lines, since the presence of chlorine indicated where treated water was making its way into storm water system. The team even found leaks by checking the output of residential sump pumps that were active during dry weather; in that way they discovered some that were sending water into the ground around people’s homes.

By the end of this past September, the City of Monticello had identified and fixed all 12 of the significant leaks in its water system. As a result, during October 2009, the first full month after all of the leaks were fixed, the water plant pumped an average of 124,000 gallons per day less than it did a year ago, which represents a 20 percent reduction in water use. It’s as though each of the city’s 5,200 residents reduced his or her water usage by almost 24 gallons a day.

Brett Thompson is justifiably proud of the water conservation his team has achieved in Monticello, and he hopes their example encourages other communities to examine their water systems. For more information he can be reached at (217) 762-2583 or bet@cityofmonticello.net.

Invitation to meet the U of I Environmental Change Institute

Invitation to meet the U of I Environmental Change Institute

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A few years back Chicago attorney Joel Friedman picked up a copy of a book called The Weather Makers by Australian scientist Tim Flannery as he awaited a flight out of London’s Heathrow airport. By the time Friedman’s plane touched down at O’Hare, he had come to understand climate change as a significant issue, and was determined to learn more about it. The more he learned, the more he was convinced of the need to act on a large scale.

With the input of long-standing connections at the University of Illinois, Friedman followed through on his conviction by channeling resources from the Alvin H. Baum Family Fund, of which he is president, into the creation of a unit on the UI campus that would enhance understanding of climate change and speed the dissemination of solutions to the problems it entails from the academy to the wider world. This new unit, the Environmental Change Institute (ECI), was constituted in early 2008 with matching funds from the College of Agricultural, Consumer and Environmental Sciences, the College of Business and the College of Law. [Photo: some of the people who make up ECI--left to right, Wes Jarrell, Rob Kanter, Jen Nelson, John Marlin, Lori Spencer, Matt Luedtke, Willie Dong, Bill Kruidenier, Eric Jackson, Crystal Bartanen]. As Wes Jarrell, who is interim director of ECI as well as a professor in the Department of Natural Resources and Environmental Sciences explains, “The complexity of challenges related to environmental change makes it essential that policy, science, and business work together to address and solve these challenges.”

The mission of ECI is to advance understanding of global environmental change and offer solutions to avoid, mitigate, or adapt to its effects through support of scholarly research, innovative teaching, and public outreach.

In specific terms, ECI currently funds twelve research projects, which are led by investigators from across campus. Among these, the project with the potential to be most visible is the Integrated Sustainable Homestead being developed on the South Farms. This project will demonstrate the workability of an integrated local organic food, energy and water system for Illinois. At the Integrated Sustainable Farm students will learn about where food comes from, how energy can be conserved and produced at the home scale, and how water can be used efficiently and sustainably, all through hands-on experience.

The Environmental Change Institute has also awarded grants to help UI faculty develop six new courses that will enable students to better help humanity mitigate and cope with environmental change. Among these are courses on energy law, biofuels and green roofs. Perhaps the most ambitious of the courses ECI has supported is the Illini Carbon Registry, which promotes a culture of sustainability on campus by encouraging local investment in carbon offsetting projects. The carbon offsetting projects this class has investigated are all sponsored by the fees UI students assess themselves to promote sustainability, and they include the purchase and installation of sensor-based lighting systems for classrooms, energy efficient computers for administrative offices, and a student-run farm to produce food for dining halls.

Beyond research and teaching, ECI has also sponsored or co-sponsored numerous presentations designed to engage people from on and off campus in responding to environmental change.

If you are interested in learning more about the work of the Environmental Change Institute please join us for our annual symposium, which is free and open to the public. The symposium will take place tomorrow, December 4, from 9:00 a.m. until noon at the Beckman Institute on the UI campus in Urbana. Details are available at http://eci.illinois.edu/.