How the US could lead a carbon revolution

While Joe Biden’s first 100 days will be driven by tackling the coronavirus crisis, his long-term presidential legacy is as likely to be shaped by climate change.

That is why one of his first acts as president was an executive order to restore the US to the Paris climate change treaty.  Another sign that tackling the global warming menace will be a priority was the installation of former secretary of state John Kerry as US special envoy on climate change.

Kerry, who has a close relationship with Biden from their long careers in the Senate, will enjoy strong influence in the White House and sit on the National Security Council.  And as he showed as secretary of state during the second Obama administration, he is an able diplomat too, helping broker an array of big international deals including the Paris accord itself.  

Kerry said last week that he would push for rapid action on climate change with “humility and ambition,” and declared that November’s annual UN climate summit in Glasgow will be the “world’s last most important opportunity to come together to raise ambition and to take the next step from Paris.”

Much attention in recent years has focused on the backlash to the Paris accord from populist leaders such as Donald Trump and Brazilian President Jair Bolsonaro, but there has nevertheless been important change on the ground.  One manifestation of this is the growth in domestic climate legislation and regulation. In the past two decades, the number of global warming laws and policies in about 100 countries under review by the Grantham Research Institute at the London School of Economics has grown from about 50 to over 800, and there are also important climate measures in key subnational areas, such as cities.  

One of the key possibilities, which the Biden administration should foster as part of its climate change legacy, is what may ultimately become a truly global carbon-trading market, a potentially game-changing development that few have yet to appreciate.

At the heart of this is a growing belief that carbon trading is the most economically efficient way to meet the political ambition of reducing greenhouse gas emissions.  Already, several dozen countries, cities, states and provinces use carbon-pricing mechanisms or plan to do so.  Such mechanisms raise tens of billions of dollars in schemes covering more than 20 percent of global emissions.

This is why, at a time of growing pessimism about climate change, this fledgling global carbon market should now be bolstered by the Biden team.

Andrew Hammond

While much attention inevitably focuses on the pioneering EU scheme, there is action across the world.  In Asia-Pacific, for instance, China’s planned national emissions trading system will probably eventually be bigger than in Europe.  Along with other countries in the region such as New Zealand, Thailand and Indonesia, this could become an Asia-Pacific carbon trading hub. 

This system could be linked with the EU scheme that has been widely studied by international policymakers, including in Beijing, as they consider the design of their own programs. With a view to maintaining its lead on the climate change agenda, the EU system is currently being reformed as part of Europe’s expanded targets to reduce greenhouse gas emissions.

By linking Europe and Asia-Pacific in this way, it is plausible to envisage the development of a nascent global carbon-trading hub linking the Americas and other regions too. This includes the Middle East, where the Paris deal was signed into law as early in 2016 by key countries including the UAE, Jordan, and Saudi Arabia.  

Countries in the Americas that have ratified Paris include Argentina, Canada, Mexico, Peru, Uruguay, while the US and Brazil also did so before Trump and Bolsonaro took power and sought to roll those commitments back.  With Biden in the White House for at least four years, Washington will once again pick up a global leadership baton on this issue.   

A global carbon hub linking the Americas could include the scheme in Quebec and other initiatives stemming from Canada’s carbon pricing strategy; plus existing state-level schemes in the US, including California, and the Regional Greenhouse Gas Initiative in eastern states from Virginia to Vermont, which the Biden team will now seek to augment.

This is why, at a time of growing pessimism about climate change, this fledgling global carbon market should now be bolstered by the Biden team. The initiative has the potential to revolutionize the fight against global warming, and create a key long-term legacy of the new president as Washington reassumes global leadership of this agenda alongside Beijing and Brussels.

• Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics