Getting carbon cap and trade right for renewables
For the 110th Congress, this is not just a question for Saturday night.
One of the reasons why federal carbon cap and trade legislation is so slow in coming — besides coal state mendacity — is because it is damn complicated. Of the critical design choices, there is insufficient common understanding of implications, to say nothing of agreement.
We will only be successful in fighting global warming via a transition to renewable energy. Carbon capture and sequestration is not going to save us. In contrast to renewables, no one is doing it now and the technology is not game time. At best it’s years out; at worst it’s a trojan horse, locking us into a path of further dependence on coal.
The danger with carbon cap and trade is that the wrong design could seriously hurt — hurt, not help — renewable energy markets. Robert Harmon and Michelle Hirschhorn of the Bonneville Environmental Foundation have written an important paper (PDF) on the dangers of making the wrong choice. If carbon legislation is modeled on the current SO2 scheme, the markets for renewables will be severely undercut.
To their arguments I’d add that the best structure will allow people who make investments in renewables (distributed generation or wholesale) or energy efficiency to be able to monetize their carbon-free contribution. An output-based approach would not provide an obvious way for this to happen. Under a load-based cap and trade system, utilities would clearly be incentivized to encourage their customers to do both.
For the 110th Congress, it is more important to get it right than to get it right now.