Bellingham Unitarian Fellowship
Green Sanctuary Program
Part 1 of 2: Explaining Cap & Trade
Submitted by Jesse Stanley from Earth Share organization NW Energy Coalition
Earth Share of Washington
In this two-part series, we will be featuring articles from two Earth Share of Washington organizations NW Energy Coalition and Climate Solutions offering potential solutions to the climate crisis. Part one delves into some of the strategies to lower CO2 emissions while part two outlines some specific legislation that makes up one of this year's Priorities for a Healthy Washington.
Global warming, and global-warming solutions, will dramatically affect Washington state residents in the coming years and decades. The state's coastal areas and shoreline cities are threatened by rising sea levels, and much of our electrical power not to mention irrigation and municipal water supplies and other Columbia River benefits depends on already diminishing mountain snow pack.
Thus, it's no accident that in the absence of a comprehensive federal approach, Washington is in the vanguard of states responding to the climate change challenge. The state has passed aggressive renewable energy and conservation standards and set limits on the amount of global-warming pollution that power plants serving its residents are allowed to emit.
And now Washington has assumed leadership of the Western Climate Initiative (WCI), an association of states and provinces that have collectively committed to substantial reductions in total emissions of carbon dioxide and other climate-changing emissions. The WCI's current task is to fashion a regional "cap-and-trade" system to help achieve the reduction goals. Staff from the NW Energy Coalition, many of its member organizations and from other environmental and energy organizations are involved in helping to refine a proposal for release next August.
While the term "cap-and-trade" is being tossed around quite a bit these days at both the local national levels, it's a hard concept to get your arms around. Basically, cap-and-trade systems are market-based approaches to reducing greenhouse gases. Government would impose a cap on total greenhouse emissions (principally carbon dioxide) and gradually lower that maximum. Government would distribute allowances basically pollution permits equal to the cap. Trading in those allowances is where the market comes in. Those with extra allowances could sell them to those wishing to pollute more than their permits allow.
Allowances would become valuable commodities. Businesses and utilities would save money by having to buy fewer of them, or make money by selling those they don't use. An electric utility that reduces its global- warming emissions through investing in energy efficiency or clean renewable power could sell its freed-up allowances in the market.
Why do we need cap-and-trade in the electricity sector in Washington when we've already passed a clean-energy initiative and greenhouse-gas emissions performance standards? These laws work well for NEW electric generation decisions, but they have limited effect on existing fossil fuel plants.
The Northwest Power and Conservation Council recently noted that coal-fired power plants produce 80 percent of the region's generation-related CO2 emissions. It says cutting climate emissions by at least 70 percent of 1990 levels by 2050 will require both aggressive development of conservation and renewables AND closure of all Northwest coal plants.
A well-designed cap-and-trade system for the electric sector could achieve that goal. We need a robust public debate because a fair and effective system requires some difficult decisions. For example:
1. Who gets the credits? Allowances can be granted to power generators based on their plants emissions, or to utilities based either on the emissions created in producing the power that serves their customers, or simply on the amount of power they sell. The latter choice rewards utilities, such as Seattle City Light, for having relied primarily on hydropower. Their customers will benefit from sales of unneeded allowances to relatively carbon-heavy utilities, such as Puget Sound Energy. That satisfies the "polluter pays" principle, but is it fair to Puget customers, who have no choice about which utility serves them?
2. Free or auction? Auctioning off allowances makes polluters pay and gives them greater incentive to reduce emissions. But again, what's the effect on consumers, especially those struggling financially, when rates rise to cover their utility's emission permits? Revenue from the auction might be used to assist low-income consumers and spur clean-energy development.
Among the myriad other issues that merit public discussion are the rate of ramping down the cap, potential purchase of offsets in place of direct reductions, and avoiding the export of pollution and jobs to other countries. The questions aren't easy to answer, but we must address them and construct a fair and effective means to slash carbon emissions . . . and do it soon.
For a more in-depth discussion of cap-and-trade issues, you may watch a debate on the subject between two noted Western energy experts, Ralph Cavanagh of the Natural Resources Defense Council and Microdesign Northwest consulting economist Jim Lazar, which was recorded at the NW Energy Coalition's fall conference this October. See the debate at www.nwenergy.org/blog.