ORIGINAL REPORTING: Is cap and trade the climate solution? The jury's still out

Is cap and trade the climate solution? The jury's still out; California and New England are about to find out what the market-based mechanism for reducing emissions can really do.

Herman K. Trabish, Jan. 19, 2018 (Utility Dive)

Editor’s note: With the AWOL federal government’s irresponsibility on the climate change fight, action is moving to the states, giving the idea of cap-and-trade increased breathing room.

With the Trump Administration rolling back Obama era climate regulations, action to reduce greenhouse gas emissions in the U.S. is falling increasingly to the states. Both New England and California have cut greenhouse gas (GHG) emissions since launching market-based cap and trade programs. But analysts say the programs are not the primary drivers of emissions reductions. If that is true, does cap and trade work? The numbers are impressive. In 2016, the New England Regional Greenhouse Gas Initiative (RGGI) states cut their GHGs 8.4% below the cap. Since RGGI’s 2009 launch, those states have reduced total emissions 40% while their average electricity price fell 6.4%. California has cut its emissions 10% from 2004 levels and the total revenues generated by the trading program and designated for clean energy have passed $5 billion.

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The two programs are different. RGGI caps only power sector emissions but governance is a collaboration of nine states. California’s economy-wide program is governed entirely by the California Air Resources Board (CARB). Economists and analysts agree they share one key attribute: The majority of recent emissions reductions have come not from the cap and trade programs but from other factors. Key factors limiting the impact of such trading programs include an oversupply of allowances, which grant permission to utilities and other sources to emit CO2, and the political constraints of imposing excessive costs on consumers. These and other factors will need to be addressed as the programs enter their next phases. The most important factor driving recent emissions reductions was the 2008 recession and, because of it, “cap and trade has not been stress tested,” Stanford Law Professor Michael Wara told Utility Dive… click here for more

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