Mind the Climate Gap: New Study Highlights the Need to Design GHG Cap-and-Trade Policies to Improve Local Air Quality

In “Minding the Climate Gap: What’s at Stake if California’s Climate Law Isn’t Done Right and Right Away,” released Wednesday, researchers from several California universities have correlated the relationship between greenhouse gas (GHG) emissions and associated co-pollutants in several California industries. The results demonstrate that California’s climate law, AB 32, enacted in 2006, could help reduce not just carbon dioxide emissions, but a variety of co-pollutants that have contributed to the state’s persistent pollution. At the same time, the study demonstrates that if the state chooses to implement an unfettered GHG trading program, that program could continue or worsen existing racial disparities in pollution. The study proposes several carefully tailored policies that would maximize a cap-and-trade program’s benefits to public health and help narrow current inequities. The proposals, tailored to California’s emerging cap-and-trade program, could provide a model for federal policy.

GHG and co-pollutant emissions are inextricably linked: the combustion that generates GHGs also generates locally harmful co-pollutants. Trades in GHG allowances will, consequently, directly impact associated co-pollutant emissions. For example, if a facility that generates fewer co-pollutants per ton of GHGs in a lightly populated area were to sell allowances to a facility that generates more co-pollutants per ton of GHG emissions in a heavily populated area, then that trade could worsen relative public health impacts. The allowance transaction would lead to continued GHG emissions with more co-pollutants in a more heavily populated area. (See page 1 of the report for a real-world example.)

The study analyzes the California industries with the highest carbon dioxide emissions: petroleum refineries, cement plants, and power plants. It analyzes the populations associated with each industry's emissions and the racial and income demographics of the impacted communities. The researchers devised a “Pollution Disparity Index” that “measures the relative co-pollutant burden on communities of color, as compared with non-Hispanic white communities.” (15)

The analysis reveals striking disparities in current exposures. At a range of distances from a given facility, the report finds that “the relative emissions burden for all people of color combined is always above that for non-Hispanic whites.” (16) Analyzed by industry, the study revealed that refineries are the most significant source of the disparity. Eight of the top ten facilities with the highest Pollution Disparity Index are refineries.

The study’s findings have important implications for cap-and-trade policy. California’s climate law, AB 32, requires the state to consider co-pollutant consequences in its cap-and-trade program. The trading program cannot lead to pollution increases in disadvantaged areas, and regulators must attempt to maximize the benefits that would come from reducing co-pollutants. The study demonstrates that an unrestricted trading program could potentially lead to trades from less-polluted to more-polluted areas, thwarting AB 32’s co-pollutant reduction goals.

The report offers four policy proposals. First, because the report’s detailed analysis reveals that “a relatively small number of plants … are driving most of the disparity in emissions …,” the state could require the facilities emitting the most co-pollutants per ton of GHGs and causing the greatest impact to reduce emissions and limit their ability to purchase allowances. That tailored policy would directly address the most harmful facilities and would not significantly encumber the general operation of the state’s cap-and-trade program.

The second proposal would create trading zones, and limit allowance trades from facilities in less-polluted areas to facilities in more-polluted areas. The third proposal would impose a surcharge on allowances used in the most impacted areas and dedicate the additional revenue to environmental improvements in that geographic area. The fourth proposal would create a community benefits fund, financed by revenue from allowance auctions or carbon fees. Disadvantaged communities could have access to the funds to finance environmental or other climate-related needs.

These proposals would not only reduce the racial gap in pollution exposure, but provide benefits to California’s citizens more generally. The disparities in exposure by race closely track disparities in overall pollution burdens, so that addressing one disparity would simultaneously remedy the other.

The report clearly explains the risk that an unrestricted cap-and-trade program could fail to maximize the co-pollutant benefits associated with climate policy and worsen, rather than improve, existing public health and racial disparities. At the same time, the report provides constructive proposals for modifying a cap-and-trade program to improve its distributional outcomes. As the nation looks forward to how best to improve its air quality and transition to a clean energy economy, California could provide a model for integrating climate and co-pollutant objectives.

For more information on environmental justice and cap-and-trade programs, see CPR Perspective: Environmental Justice and Climate Change: Incorporating Environmental Justice into Greenhouse Gas Cap-and-Trade Programs. For additional comments on integrating environmental justice principles into California’s cap-and-trade program, see my comments on California’s preliminary draft cap-and-trade regulation (scroll down to comment 132, listed under Alice Kaswan).