Whether in the form of a carbon tax or cap-and-trade regime, climate-change policy is coming and will have a profound effect on electric suppliers and consumers. EPRI studied the effects of high...
Cap and Innovate
An alternative approach to climate regulation.
linking the electric sector regulatory regime to the liquid fuel regulatory regime. We should expect electric energy requirements to go up as EVs and PHEVs proliferate. The electric sector must get credit ( e.g., offsets) for the net reductions in carbon emissions attributable to this migration.
Attention to Details
We may be approaching an inflection point in the debate over climate legislation. It’s critical that we get the details right. Cap and innovate is a common-sense approach that will efficiently reduce carbon emissions, be less disruptive to the economy, protect consumers and businesses, and avoid regional disparities.
1. See, e.g., Ellerman, A. Denny, “Ex Post Evaluation of Tradable Permits: The U.S. SO 2 Cap-and-Trade Program,” Massachusetts Institute of Technology, February 2003 and Burtraw, Dallas and Palmer, Karen, “The Paparazzi Take a Look at a Living Legend: The SO 2 Cap-and-Trade Program for Power Plants in the United States,” Discussion Paper 03-15, Resources for the Future , April 2003.
2. The Energy Information Administration reports that U.S. electricity sector produced 2,477.2 MMt (million metric tons) of carbon dioxide in 2008. A fee of $4 per ton would produce an annual research fund of $9.9 billion. This equates to 2.7 percent of the electric industry’s 2008 total revenues of $363.7 billion. Source: Energy Information Administration, “Electric Power Annual for 2008, Table ES-1,” released Jan. 21, 2010.
3. The 2010 budget line for the Department of Energy’s research into “low carbon” energy sources is $3.1 billion. Source: Department of Energy Office of the Chief Financial Officer. “FY2011 Congressional Budget Request: Budget Highlights.” February 2010.
4. Lile, Ron and Dallas Burtraw, “State-Level Policies and Regulatory Guidance for Compliance in the Early Years of the SO 2 Emission Allowance Trading Program,” Resources for the Future , May 1998.
5. See, e.g., Niemeyer, Victor, Electric Power Research Institute, “The Change in Profit Climate: How Will Carbon-Emissions Policies Affect the Generation Fleet?” Public Utilities Fortnightly , May 2007.
6. The NARUC Climate Issue Briefs are available at: http://www.naruc.org/committees.cfm?c=58.