Abstract
By implementing an effective combination of emissions trading systems, carbon dioxide taxation, and the adoption of clean energy resources, the US will significantly reduce its carbon footprint to meet 2030 Paris Agreement goals. Industry is one of the largest sectors negatively impacting climate change, and improving US taxation systems and adopting energy-efficient programs could improve overall energy efficiency and encourage accelerated climate change mitigation. Understanding European Union (EU) progress towards 2030 goals serves as a guideline for the US in a race to the top. Further action in accordance with Al Gore's plan to combat climate change will greatly impact US climate mitigation goals by 2030, especially the implementation of aggressive carbon pricing.
Introduction
An emissions trading system (ETS) is a market-based approach to reducing greenhouse gas (GHG) emissions by placing a “carbon cap” on the total quantity of carbon allowed over a given period of time (usually one year). The government then issues a limited quantity of emissions for each participating company in the ETS, while also implementing monetary fines for companies that exceed the established limit. These trading caps can be bought, sold, and exchanged among participating companies, therefore creating a market price for the cost of carbon emissions and allowing companies the option to reduce emissions or pay a set price to the government (European Commission, 2023). Greater implementation of an ETS in the US market would be beneficial towards reaching the 2030 US climate change goals (50-52% GHG reduction from 2005 levels. The EU “Fit for 55” package includes a goal of 55% GHG reduction from 1990 levels (European Council, 2023), including an expanded ETS system. Adoption of a similar carbon emission pricing in the US market will help achieve our 2030 climate change mitigation goals at a faster rate and position the US as a global climate change mitigation leader in a race to the top.
Emissions Trading System (ETS)
The most effective way for the US to reach its climate mitigation goals by 2030 is to implement an ETS that will reduce GHG emissions and the carbon footprint of industry. This system’s “caps” create an indirect financial incentive for US companies to reduce carbon emissions, and thus promote the development of cleaner technologies in the industry sector by 2030 and beyond. One notable component of an ETS implementation is its federally-distributed tax credits to participating companies in exchange for the proper use of carbon credits (Kettner, 2023). This system creates a financial incentive for companies to reduce their carbon emissions, and this process has the effect of encouraging the development of cleaner technologies.
The EU is ahead of the US due to the European Climate Law, which ensures a fair and competitive transition of the industry sector by 2030 that would reduce industrial carbon emissions (Kettner, 2023). Legislation like the European Climate Law in US industry policies will enhance EU/US global leadership in climate change mitigation. A notable example of proper US ETS implementation can be found at the University of Illinois Urbana-Champaign (UIUC) (iCAP, 2022), where participation in a voluntary carbon offset programs has demonstrated a strong commitment to reducing its carbon footprint. UIUC is playing a significant role in mitigating and reversing climate change in Urbana-Champaign and the state of Illinois. Widespread implementation of an ETS for local use, like UIUC, could serve as an inspiration and catalyst for future US legislation.
Another benefit of the widespread adoption of ETS in the US industrial sector is that it will incentivize businesses to reduce their carbon footprints and decrease the production of other harmful greenhouse gases. Establishing caps on carbon emissions means that companies which emit less than their allotted quantity can sell their remaining carbon permits to other companies which need them, thus creating a surplus of a carbon credit supply within the industry market. As ETS allotments become stricter towards 2030, the financial incentive for companies to reduce their carbon emissions and adopt cleaner technologies will vastly improve. ETS can help to drive down carbon and GHG emissions across industry sectors and derivative businesses. ETS also encourages businesses to self-monitor their emissions because companies that participate must track their emissions and report them to local and federal authorities.
The introduction of an ETS in the US is a powerful tool for reducing greenhouse gas emissions and mitigating climate change toward 2030 goals. By giving tax credits to large industries, issuing caps on carbon emissions, and encouraging businesses to self-monitor their carbon output, ETS can help initiate a reduction in greenhouse gasses across industry and business sectors from 2005 levels. With inspiration from institutions like the University of Illinois that voluntarily participate in an ETS, we can create a commitment to reducing our carbon footprint within the US and promote global leadership toward mitigating and reversing climate change.
Carbon Pricing
With recent legislation like the 2022 Bipartisan Infrastructure Law (BIL), the US is taking positive steps towards mitigating climate change. Further climate-positive measures must be codified into US law. With $1.2 trillion aimed at improving infrastructure and public transport projects, an increase in this type of green legislation will drastically reduce climate change effects (Ponciano, 2022).
In addition to the BIL, the Inflation Reduction Act (IRA) includes federal mandates to curb methane production, and an outline for reducing GHG emissions by increasing renewable energy production and improving energy efficiency across the industry sector (The White House, 2022). The IRA methane taxes could serve as the beginning of US federal carbon pricing. An increasing number of state carbon-pricing policies can further accelerate the process (Center for Climate and Energy Solutions).
While the goal of the legislation is to enable a 40% carbon emissions reduction from 2005 levels, it does not allocate enough resources towards fighting climate change and reaching the 50% target goal by 2030 (IEA, 2022). The IRA’s allocation of $369 billion for climate mitigation efforts is a positive step and does indicate a shift towards taking action on a large-scale effort to become a global leader in combating climate change. The IRA money spent promotes new development that will help fund clean energy projects and carbon capture technologies by 2030 (EPA, 2022). Further legislation is required to fully reach 2030 goals.
Next Steps
The implementation of an ETS and strict management of carbon pricing in the US industrial sector is the most effective way for the US to meet 2030 climate change mitigation goals to reduce carbon emissions by 50-52%. A strong ETS introduction in the US market will incentivize industries to reduce their carbon footprint, adopt cleaner manufacturing technologies, and self-monitor their carbon and greenhouse gas outputs for 2030 and beyond. The US can greatly reduce GHG emissions and make considerable progress towards achieving its 2030 climate mitigation goals by implementing these forms of legislation in participating industry sectors, including voluntary ETS participation. Furthermore, the US must take a global leadership position in addressing climate change, with specific activists like Al Gore advocating legislation like the recent BIL and IRA. Through a combination of effective policies and initiatives, the US can set a positive example for other countries and gain an advantage in a race to the top in the fight against climate change.
Works Cited
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Center for Climate and Energy Solutions, US State Carbon-Pricing Policies. Available at: https://www.c2es.org/document/us-state-carbon-pricing-policies/
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European Commission, Climate Action “EU Emissions Trading System (EU ETS).” 2023, Accessed 9 May 2023. https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets_en
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ICAP University of Illinois Urbana-Champaign (2022) (Accessed: 12 May 2023). utps://icap.sustainability.illinois.edu/project/utilize-carbon-credits
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Kettner, Claudia, “Climate Policy in the EU The EU Emission Trading System” (21 March 2023)
https://drive.google.com/file/d/1QUvYkNJtl7kjrZ28cR_FY_M6F7DvCD2G/view
Ponciano, Jonathan. “Everything in the $1.2 Trillion Infrastructure Bill: New Roads, Electric School Buses and More.” Forbes, 9 Nov. 2022, Accessed 9 May 2023.
www.forbes.com/sites/jonathanponciano/2021/11/15/everything-in-the-12-trillion-infrastructure-
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The White House. “Inflation Reduction Act Guidebook.”, 2022, Accessed 8 May 2023,www.whitehouse.gov/cleanenergy/inflation-reduction-act-guidebook/
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