03/29/2009-Pasadena: Washington Seems Intent on “Cap-and-Trade” Program

Both the State of California and the U.S. Government are intent on reducing greenhouse gas emissions through regulatory programs.

One of the schemes devised to lower greenhouse gas emissions is a cap-and-trade program that would give credits to those who have less greenhouse gas impact and allow those with a higher impact to purchase those “credits”, essentially buying the ability to create greenhouse gas.

In Washington, D.C., legislators and administration experts all promote the plan and expect it will be implemented without much opposition. On my recent trip to Washington, D.C., I heard Barbara Boxer, Dianne Feinstein and Obama’s chief environmental cabinet member, Nancy Sutley all endorse cap-and-trade as a major policy initiative.

As an implementing strategy for AB 32 which requires reduction in greenhouse gas emissions, California is moving forward with a cap-and-trade program of its own.

Cap-and-trade schemes are intended to disincentivize production of greenhouse gas by making it financially advantageous to have a lower greenhouse gas impact. In theory, that sounds reasonable, though in practice we’ve seen that other “pollution credit” schemes don’t impact emissions so much as they create a market for the credits.

In Pasadena’s case, we don’t have much of a manufacturing industry left, but we do have an electric utility that relies heavily on power generated by a coal plant in Utah. Pasadena has long term, take-or-pay contracts which require our electric company to purchase the power from the Intermountain Power Project (IPP). So, essentially, until Pasadena can implement its plan to repower using less impactful means, we’ll be paying higher electric bills. And, that additional

money will be going to others who already have less of an impact on the environment and no motivation to improve their emissions. The plan as proposed now will simply transfer money from those who have an impact to those who do not.

Don’t think for a minute that I don’t agree that reducing greenhouse gas is essential. Our species needs to reverse the negative impact we are having on the planet, period. I’m just not sure a scheme that allows a polluter to purchase the ability to pollute from a non-polluter (or not-so-polluting-polluter) is going to do anything more than create  market for credits and open the door to possible gaming of the system.  Remember Enron capitalizing on the energy markets
opened as a result of regulatory schemes by the State of California?

Maybe there is an alternative, or more accurately, an adjustment to the program that can really have a positive impact on greenhouse gas emissions.

What if the state or feds were to instutute a program that requires a large portion of payments by polluters be reinvested in reducing greenhouse gas? If a polluter is penalized, couldn’t payments be used to reduce greenhouse gas? Maybe money paid into the cap-and-trade program could be pooled and returned to polluters to help them reduce

their impact on the environment.

Paul