Auctioning the Building Blocks of Life: Carbon Auction, the Law, and Global Warming
64 Pages Posted: 9 Sep 2010
Date Written: September 9, 2010
The pursuit of money often clouds or derails even the best intentions. A recurring theme of great literature – the conflict between the pursuit of massive revenue and the best intentions, in this case to control climate change before a world crosses the tipping point of no return – is embodied in the United States’ legal requirements on global warming. A legal challenge on the new concept of auctioning rights to emit CO2, a building block of life itself, may determine the future success of carbon control of global warming. Ten Eastern states, taking the lead with their new Regional Greenhouse Gas Initiative (RGGI), have started this legal controversy with their first-in-the-U.S. regulation to control global warming CO2 gases beginning in 2009. These ten states, contrary to prior decades of U.S. emissions regulation, and even contrary to the European Union (E.U.) carbon regulation and the Kyoto Protocol, have chosen to auction or sell the right to emit CO2 to the highest bidders, raising hundreds of millions of dollars of additional revenues annually but throwing carbon control into legal limbo.
The official RGGI-state rationale is to prevent emitters of CO2 from gaining any “windfall.” The concept of auctioning emission rights to the highest bidder lacks legal precedent, while standing as one of the most significant new revenue-raising mechanisms of this century. Without legal precedent, it has provoked those entities subject to regulation, invoking legal challenge, and could even raise Constitutional impediments to the entire success of carbon control. The outcome of this legal confrontation will determine the future of U.S. and international carbon control. California, and more than a dozen Western and Midwestern states, are on the verge of following the lead of the RGGI states, as may Congress and even the next phase of the international Kyoto Protocol.
This article examines this innovative legal construct that launches the auctioning of carbon emission rights. It contrasts the GHG regulatory systems in the ten RGGI states, California, other U.S. regional carbon-regulating states, the Kyoto Protocol, and the European Union system, to compare the legal authority and vulnerability of auctions, rather than allocations, of CO2 emission allowances. The revenues and costs of these new regulatory constructs are analyzed against Constitutional and other issues.
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