February 29, 2009
(fourth in a series on labor and global warming after Bali)
Combating climate change requires unprecedented economic and social change. The world has never done anything like cutting greenhouse gasses before. While the need to do so is now certain, the policies that will be required to do so are not. We have to start implementing potentially promising policies immediately, while gearing up for a steep learning curve to figure out what really works.
In a series of previous posts, we have looked at the emergence of an alliance of labor and environmental advocates around the necessity for creating “green jobs” in the struggle against global warming. In this post, we look at some of the policy issues that alliance will need to address.
Blogging from the UN climate change conference in Bali, Lauren Asplen, communications director of IUE-CWA, described a meeting labor delegates from North American had with the U.S. Climate Action Network “to start a dialogue about our concerns.” It was agreed that there were many opportunities for synergies. In particular, “both groups could benefit from working cooperatively and from trying early on to work through our differences so we can present a united front.” Here are some of the potential areas for synergy, and for conflict, this alliance must face.
Cutting greenhouse gasses
According to the Intergovernmental Panel on Climate Change, a UN-sponsored scientific body that was recently awarded the Nobel Peace Prize for its work, keeping global temperature within 2 degrees C of historic levels requires reducing greenhouse gas emissions by 85% of 1990 levels by 2050. A global consensus has rapidly formed around this position. The UN, many individual countries, an important group of global corporations, the global International Trade Union Confederation (ITUC), and the environmental movement worldwide have committed themselves to realizing that goal. All major Democratic candidates for President supported this goal.
To implement this goal, the EU has proposed an interim target of a 30 percent cut from 1990 levels by 2020. The ITUC has endorsed this as a benchmark.
The Blue-Green Alliance, a strategic alliance of the Steelworkers union and the Sierra Club, calls for greenhouse gas cuts of two percent per year, which roughly corresponds to the IPCC position and the EU’s interim goal. But American labor as a whole has been more divided. Unions like the Steelworkers and Service Employees have endorsed these goals or similar ones. Others, like the Mineworkers and UAW, have opposed them. In the past, the AFL-CIO has warned against Congressional legislation that included caps on greenhouse gasses that it considered too restrictive. The subject of “global warming” does not even appear on the Change to Win website.
Whatever the means employed, actually cutting greenhouse gasses year by year is the only way to slow and eventually halt the man-made catastrophe of man-made climate change. So the first policy issue that must be addressed by any labor-environmental coalition around climate change, and by its constituent elements, is whether they are indeed committed to the cuts that the world’s leading climate scientists have declared are necessary.
Cap and trade
No one really knows how best to cut greenhouse gasses. Various kinds of laws have reduced various kinds of pollution in the past, but greenhouse gasses present two special problems. The pollution is produced and has its effect worldwide, so that the benefits of reducing it in any one location are not acquired locally but spread worldwide. And the pollution results not from a chemical used in a few processes, but from almost every process that involves burning fuel of any kind.
The Kyoto treaty emphasized one model of emissions control from the many available. It is known as “cap and trade” or creating a “carbon market.” While the model is a rather indirect, even convoluted way to realize the objective, most proposed U.S. legislation, most existing state and regional plans, and the measures being taken in the EU rely on cap and trade in one form or another. It forms the centerpiece of the Warner-Lieberman climate change bill that recently emerged from the Senate environment and public works committee and that is likely to be the basis for future global warming legislation.
Cap and trade is based on looking at global warming as a “market failure.” A factory owner or a car driver currently pays nothing for putting carbon dioxide and other greenhouse gasses into the atmosphere. But doing so has a terrible cost – ultimately, destruction of the entire biosphere. Currently, however, this cost is, as the economists say, “external”; someone besides the producer has to pay it. In this logic, the solution is to “internalize” the cost – make the producer pay it. That will give the producer an incentive to reduce its costs by reducing the amount of pollution it has to pay for.
Here’s the cap part: Cap and trade systems establish a cap on the total amount of greenhouse gasses to be permitted nationally. (Such national caps were included in the Kyoto protocol, and future caps are being negotiated for the next global climate change agreement.) This cap is lower each year, so that the total amount allowed is gradually reduced.
Here’s the trade part: A central authority issues permits for the total amount of pollutants that are allowed under the current cap. It assigns a price to those quotas. Then it auctions them off. Each major producer of carbon must either reduce their greenhouse gas emissions or purchase enough permits to cover them. But these pollution permits can be traded, thus establishing a “market for carbon” or, perhaps more aptly, a market for rights to pollute.
The potentially positive aspect of this system, at least in theory, is that greenhouse gas production will be reduced in those venues where it is least costly to do so, thereby making the necessary reductions as efficiently as possible. “Market signals” will tell producers where they should invest in cutting emissions rather than simply buying permits for them. As the cap is lowered year by year, the price of the permits will rise, creating more and more incentive for producers to cut their emissions.
Such a system presents vast potential for evasion, corruption, speculation, and favoritism. The same kind of people who gave us Enron will be seeking ways to exploit the system for their own gain. There may be no way to know for sure whether it will actually reduce greenhouse gasses until it is tried. But both labor and environmentalists are raising important issues that need to be addressed within the Warner-Lieberman bill or other global warming legislation. Here are some examples, based on analysis by the Union of Concerned Scientists and Friends of the Earth (caution: the bill is already being revised, so descriptions of it may rapidly become outdated):
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The rate at which the cap is reduced year by year is critical. The IPCC calls for an 80 percent reduction from 1990 levels by 2050. The Blue-Green Alliance’s call for a 2 percent reduction every year puts it in line with what the scientists of the IPCC say is necessary. The Warner-Lieberman bill at best would reduce emissions to 60-65 percent below current levels, which are already substantially above 1990 levels..
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If the cap excludes large parts of the economy, it obviously won’t work. The original Warner-Lieberman bill excludes about a quarter of economy.
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Amazingly, the Warner-Lieberman bill only auctions off a quarter of its emissions allowances and gives the other three-quarters away. Forty percent are actually given free to polluters! Friends of the Earth has estimated that polluters will receive a trillion dollars in benefits under the bill.
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The legislation calls for “periodic review” by the National Academies of Science, but it doesn’t authorize the EPA to do anything if the system isn’t working.
The AFL-CIO has made detailed criticisms of the cap-and-trade features in U.S. energy legislation. They have aligned with environmentalists in opposing the giveaway of free permits to pollute and the absence of protections against speculation. However, they have also advocated delay in efforts to cut carbon emissions until new technologies are available to provide “clean coal.” Such technologies are decades away at best, however, so this would amount to a long delay in even starting to reduce greenhouse gasses.
This February 19 a coalition of low-income groups in five California cities launched a statewide campaign to “fight at every turn” the carbon trading initiative proposed by Gov. Arnold Schwarzenegger. Their 21-point “California Environmental Justice Movement’s Declaration Against the Use of Carbon Trading Schemes to Address Climate Change” argues not only that the EU’s cap-and-trade strategy has failed to reduce greenhouse gasses, but that “carbon trading is undemocratic because it allows entrenched polluters, market designers and commodity traders to determine whether and where to reduce greenhouse gases and co-pollutant emissions without allowing impacted communities or governments to participate in those decisions.”
Beyond cap and trade
If this system seems like a circuitous way to accomplish the simply objective of getting people to put less carbon into the atmosphere, that’s because it is. It reflects a mindset in which the market is the measure of all things, and even market failures must be fixed by expanding the scope of the market.
South African economist Patrick Bond has put together a remarkable compendium of statements indicating that the early stages of the EU’s Emissions Trading System (ETS) is already failing. Citigroup’s Peter Atherton says the ETS has “done nothing to curb emissions” and acted as “a highly regressive tax falling mostly on poor people. . . Prices up, emissions up, profits up. . . . Who wins and loses? All generation-based utilities – winners. Coal and nuclear-based generators – biggest winners. Hedge funds and energy traders – even bigger winners.” The European Commissioner for Energy has called the ETS “A failure.” An investigation by Newsweek of the Third World carbon trading through the Clean Development Mechanism (CDM) found “It isn’t working” and that it represents “a grossly inefficient way” of cutting emissions in the developing world. It called the trade “a shell game” which has transferred “$3 billion to some of the worst carbon polluters in the developing world.”
While progressively declining caps on greenhouse gas emissions are essential, there are at least two reasons that carbon trading in itself is unlikely to provide the solution.
First, it is not clear how sensitive corporations, consumers, and markets really are to increases in fuel costs. Recent run-ups in oil prices have not even spurred significant cutbacks in use, let alone major investment in alternatives. Companies tend to treat such increases simply as a “cost of doing business”; they are likely simply to buy pollution allowances if they can and treat them as a cost of production.
Indeed, a recent study by the McKinsey consulting firm found that the U.S. could cut 28 percent of its greenhouse gasses right now at fairly modest cost and with only small technological innovations. According to director of the study Jack Stephenson, “These types of savings have been around for 20 years.” But, according to another research team member, “There is a lot of inertia, and a lot of barriers.” For example, if tenants pay for their heat, landlords have no incentive to buy any but the cheapest, least energy efficient furnaces.
Second, many of the changes required to reduce greenhouse gasses are not primarily under the control of individuals or even giant corporations. For example, a vast amount of gasoline is wasted in the U.S. because of the distance between workplaces and homes and the absence of functional public transportation. But addressing these intertwined problems requires a reorganization not only of our transportation system but of also of the spatial organization of our metropolitan regions. That requires both planning and investment of a kind that, although common elsewhere, has been largely dismantled in the U.S. Similarly, the replacement of fossil fuels by solar and wind energy requires major social decisions regarding long-term public investment, standards, system design, and siting; only then will these energy sources be introduced in a way and on a scale that will make them affordable.
A labor-environmental alliance can play a crucial role in opening the discussion of what measures beyond carbon trading are necessary. In Europe, an alliance of labor and environmental movements has already begun to play such a role.
In the Netherlands, for example, a coalition of trade unions and environmental organizations like Greenpeace and Friends of the Earth worked with an environmental research firm to develop “Green4sure,” a national energy plan designed to reduce carbon emissions by 50% by 2030 while ensuring “enough energy for continued economic growth.” It is based on allocating carbon budgets to all users, both individual and organizational, within the framework of the EU and the Kyoto protocol. But it lays out in detail the policies necessary to progressively lower those carbon budgets. They include efficiency standards for domestic appliances, vehicles and buildings; use of renewable source by energy suppliers; road pricing; suitable compensation for low income groups; new investments in utilities; green funds and research grants to promote innovation. They have begun lobbying for the plan with the Dutch government.
Ultimately, workers will need to play a direct role in monitoring and reducing greenhouse gasses. The beginnings of this process can be seen in Spain. In 2005, the two major trade union federations, two leading business organizations, and the Spanish government agreed to establish a “Framework to Institutionalize and Organize Social Dialogue, related to the Compliance with the Kyoto Protocol.” It established a tripartite “Dialogue Table” with responsibility for monitoring and assessing the country’s National Allocation Plan for Kyoto compliance. The agreement aimed to “prevent, avoid or reduce the potentially adverse social effects that could result from compliance with the Kyoto Protocol, in particular those related to competitiveness and employment.” The first round was held in 2006, with follow-on Dialogue Tables for seven industrial sectors, to review the mandatory greenhouse gas emissions reduction of the National Allocation Plan.
A national congress last October brought together 500 trade union environmental reps who have been recognized through regional, sectoral, or company agreements. They reported on trade union intervention on waste management, substitution for hazardous substances in the workplace, worker participation in company acquisition of environmental authorizations, mobility plans for workers, campaigns to oppose hazardous waste incineration, and participation at the social dialogue tables to follow up the Kyoto Protocol.
Ultimately, an effective response to climate change will have to empower American workers to play a similar role.