In the two decades since the Kyoto Protocol mapped a path to reducing greenhouse gas emissions, emissions have, in fact, increased by approximately 50%. As anticipated, most of this increase has been the result of economic development in developing countries, such as China and India, where emissions jumped nearly 180% (Figure 14.32). These countries are following in the footsteps of the United States, where about 40% of our greenhouse gas emissions come from electricity generation that powers corporate, industrial, and residential buildings, and another 30% from the transportation sector.

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However, developing countries do not necessarily have to look to the United States as a model. Germany, for instance, is a highly developed country with a strong economy that produces about half the greenhouse gas emissions per capita as the United States. How did the Germans do it? They have achieved this, in part, by conserving fossil fuels and replacing oil, natural gas, and coal with renewable energy resources such as wind and solar power. Such a transition requires not only political incentives and advances in engineering, but also a careful accounting of the environmental and economic costs and benefits of various energy sources in different applications.

The first way we can reduce our emissions is by switching our energy sources to sources with lower CO₂ emissions. In order to do this, we need accurate measurements of each source of energy: How much CO₂ does each release from start to finish?

Consider the fact that it takes about 1 pound of coal to keep a 100-watt light bulb running for about 10 hours. As the carbon in this 1 pound of coal combusts, it combines with oxygen in the air to add about 2.86 pounds of carbon dioxide to the atmosphere. By contrast, burning enough natural gas to power that same light bulb releases half as much carbon dioxide, making it a relatively cleaner source of energy.

Nevertheless, these simple calculations only tell us how much carbon dioxide is produced during combustion at a power plant. To properly compare greenhouse gas emissions of different energy sources, including both fossil fuels and renewable energy supplies, we need to include other factors in our calculations, such as mining the materials used for solar cells, laying natural gas lines, or dismantling a nuclear power plant at the end of its life. Incorporating all these factors into calculations is called a life cycle assessment (LCA). The amount of greenhouse gases emitted in the process of generating electricity varies widely among energy sources, including fossil fuels (Figure 14.33).

The result of a life cycle assessment of a technology used for electricity generation is the carbon footprint, which is expressed as grams of CO₂ equivalent per kilowatt hour. We need to think in terms of CO₂ equivalents, since other powerful greenhouse gases (like methane or nitrous oxide) can be emitted as by-products when some technologies are deployed and operated. For example, methane can be leaked into the atmosphere during the extraction, distribution, and use of natural gas.

Using LCA for natural gas and coal, we see that natural gas is still much better than coal in terms of emissions of CO₂ equivalents. There is, however, considerable controversy over the benefits of natural gas. Some new estimates claim that gas leaks are sufficient to make the carbon footprint of natural gas as large as or larger than that of coal. Regardless, as supplies of natural gas have increased and prices have decreased, many generating stations in the United States have switched from using coal to natural gas. Consequently, current estimates of greenhouse gas emissions by the United States fell significantly in 2012. In the first quarter of that year, energy-related CO₂ emissions were the lowest since 1992 (Figure 14.34).

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Referring back to Figure 14.33, you will also notice that nuclear power has a small carbon footprint. France, for example, which generates 75% of its electricity from nuclear energy, along with about 15% from hydropower, has a very small carbon footprint. However, nuclear power is accompanied by other issues, from potential security risks to environmental contamination to nuclear accidents to issues around the safe disposal of nuclear waste (see Chapter 9).

Building dams for hydroelectric power may seem like a straightforward clean energy solution, but even they produce greenhouse gases. In Brazil, which has experienced a boom in dam-building projects, reservoirs fill with leaves and other organic matter, which release the potent greenhouse gas methane when they decompose—not to mention other major environmental impacts associated with dams.

Solar power, geothermal power, wind energy, and tidal energy are all renewable sources of energy with small carbon footprints, but they have suffered from limited availability and high costs. That seems to be changing, though. In the last three decades, the cost of solar power in the United States has plummeted from $75 per watt to $0.75 per watt, thanks to advances in technology, government subsidies, and competition from international manufacturers in China. Nevertheless, the cost of electricity from renewable energy is still greater than that produced by coal or natural gas. This means that a transition to renewable energy will likely require assistance from policy makers, which we will discuss later.

Developing more efficient transportation systems offers the second major opportunity for reducing greenhouse gas emissions. In the United States, the National Highway Traffic Safety Administration (NHTSA) sets targets for fuel efficiency through the Corporate Average Fuel Economy (CAFE) standards. Those standards are set in miles per gallon of fuel. In response to efforts by the NHTSA, engineering innovation, and increasing fuel prices, the fuel efficiency of the U.S. vehicle fleet has improved considerably over the years (Figure 14.35a). And as the amount of gasoline or diesel required for traveling a particular distance decreases, the amount of CO₂ emitted into the environment also declines (Figure 14.35b).

By NHTSA estimates, if the 2025 fuel efficiency targets are met, the amount of CO₂ emitted by passenger cars and light trucks new in 2025 will be 40% lower than those meeting 2012 fuel standards. Consumers will realize savings from this greater fuel economy more than 3 times the added vehicle costs for the technology necessary to achieve the fuel economy. As a result of improved fuel efficiency standards, 4 billion fewer barrels of oil will be consumed over the lifetimes of vehicles manufactured between 2017 and 2025, which will in turn result in a reduction of CO₂ emissions by approximately 1.8 billion metric tons.

Beyond improving fuel efficiency, urban planning is another way to decrease the impact of transportation systems in both the developed and developing world. Reducing urban sprawl, living in more compact cities, and telecommuting can decrease our reliance on fossil fuels for transportation. It would also reduce the need for new roads, which require cement production, a significant contributor to carbon dioxide emissions.

In addition, public transportation, such as buses and trains, along with bicycles, produce lower per capita greenhouse gas emissions than private cars. However, people will only take the bus or bike to work if they know it is efficient, clean, and safe. In terms of long-distance travel, life cycle assessments suggest that planes and trains are running neck-and-neck in terms of greenhouse gas emissions, but this depends on the source of airplane fuel and electric power.

According to the IPCC, the cost for stabilizing the climate represents less than 2% of the global economy, whereas the cost of doing nothing could be as high as 20%. Given those numbers, reducing greenhouse gas emissions may seem like a no-brainer. But one of the reasons why inefficient vehicles remain on the road and companies continue to use coal energy is that they have not been made to pay for the consequences of climate change. Recently, economists and policy makers have designed schemes for forcing emitters to pay the true cost of their energy choices. None of these schemes has a chance to reach its full potential unless all countries are operating on the kind of level playing field that the Kyoto Protocol or another international treaty could provide.

Like alcohol and cigarettes, carbon emissions impose a cost on society, and a tax is one way to recover those costs. Several countries, including Finland and Sweden, have already enacted modest carbon taxes, and the city of Boulder, Colorado, famously passed the first tax on carbon emissions from electricity in 2007, charging approximately $7 per ton of carbon. The $1 million the city earns every year is used to fund Boulder’s climate action plan, which helps encourage solar and wind power. In 2012 the Congressional Research Service pointed out that a tax rate of $20 per metric ton of carbon dioxide could cut the nation’s $1 trillion annual deficit in half. However, many businesses and economists strongly oppose a carbon tax, believing it would harm the country’s economic competitiveness and send business offshore. A second major criticism of the carbon tax is that it would have the greatest impact on low-income households, who spend a larger fraction of their income on energy-related items, such as gasoline.

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An alternative to a tax, and one of the most popular systems for regulating the emission of carbon dioxide and other pollutants, is known as a cap-and-trade agreement. Under cap and trade, a government agency or voluntary organization sets a “cap” on total emissions for the region. In the beginning, companies may be allocated a fraction of that total based on various factors, such as their past history of emissions. But if they need to exceed their quota, they must buy a carbon credit from another company. On the other hand, companies that decrease emissions may make money by selling their carbon credits. One of the advantages of a cap-and-trade system over a carbon tax is that lawmakers only have to set the policy goal—the market decides the price of carbon.

Although cap-and-trade schemes are popular with economists, they have faced a number of challenges in practice. When the European Union launched its Emissions Trading Scheme in 2005, it set its cap so high that the price of carbon credits collapsed. In addition, European companies were also allowed to obtain credits through the United Nation’s Clean Development Mechanism by investing in clean energy projects in the developing world. However, many of these developing world projects have come under criticism for their lax oversight, and the influx of carbon credits has further deflated the trading scheme. The many problems associated with the Clean Development Mechanism suggest that the program will not be effective at reducing greenhouse gas emissions and may collapse.

Rather than penalizing emitters, energy subsidies, which are government policies aimed at lowering the costs of energy production or the cost to energy consumers, can also be used to spur the development and adoption of cleaner technologies that we will describe in the next section. Currently, subsidies are heavily weighted in support of fossil fuel development. For example, in 2013, the International Energy Agency estimated that government subsidies to fossil fuel industries around the world amounted to $550 billion annually, compared with $120 billion to renewable energy development. The agency concluded that the disparity is slowing renewable energy development. The National Resources Defense Council (NRDC), an environmental group, has estimated that simply cutting fossil fuel subsidies could reduce global carbon emissions by 6% by 2020.