Cap and Trade One Year Anniversary and the World Has Not Come To An End
Oh yes — we already have cap and trade!
It is called the Regional Greenhouse Gas Initiative (RGGI) and it is a year old this month. 10 states in the northeast banded together to try to reduce greenhouse gas emissions from power plants in the region and installed their own version of a cap and trade program. Every power plant in the area needs to buy allowances to emit greenhouse gasses. Allowances are sold on auction quarterly. At some point, the number of allowances on the market get scaled back — increasing the price of the allowance and sending a signal to the plant that it may be cheaper to reduce their emissions.
Delaware is even making money on this — the last auction saw all of the Delaware allowances sold and the state got $1.7M. Since the program began, the state has gotten about $10M. Even better, no businesses have been run out of town, there has not been a huge jump in the price of energy (I understand that there is a proposal with the PSC to reduce the cost of natural gas to consumers now) — in short, none of the doomsday scenarios predicted by the usual suspects have come true.
In fact, this program highlights some long term issues with the way it has been structured — there are too many allowances for the current emissions inventory. In this last auction, allowances price dropped 30% in 3 months. Too many allowances means that the price signals you might get from the allowances themselves are not as effective as they could be. And this program has long intervals built in before any “look back” provisions could be invoked. So there is not much opportunity to better align the number of allowances available to the emissions in inventory.
Hope our legislators are watching this closely — there are real lessons here in crafting a cap and trade program, including that it is not the tax apocalypse as too many of the fear and loathing crowd would have you to believe.
Many companies have also made money with cap and trade. Reducing your energy use actually does reduce your bills.
We’ve had cap and trade for acid rain for many, many years. It has worked very well.
If you know what you are buying, it is possible for an individual to buy these allowances and hold on to them until they are worth more. Some environmental groups buy them with the intention of retiring them.
But you are right — cap and trade has worked pretty well. The RGGI cap and trade has too loose of a cap, but that could be fixed…
Perhaps the purveyors of the outlandish claims of the costs of cap and trade could explain why we haven’t seen our electric bills go through the roof.
Excellent question, TommyWonk, and one that I’d love to see the answer to as well. But I expect that we’ll have to wait until some EXXON-Mobil funded group tells them what to say to get an answer.
And Obama has kept us safe. Gee I thought only Dick and Bush and the republicans could keep us safe.