The RGGI held its second auction for carbon allowances on Wednesday. As noted on the RGGI website:
States will sell emission allowances through auctions and invest proceeds in consumer benefits: energy efficiency, renewable energy, and other clean energy technologies. RGGI will spur innovation in the clean energy economy and create green jobs in each state.
The clearing price for Auction 2 was $3.38 per allowance.
This is slightly up from the $3.07 per ton price in the September auction. To put this in perspective, a price of $3 per ton applied to coal power would amount to about one-third of a penny per kilowatt-hour. Applied to vehicle emissions, it would amount to about three pennies per gallon.
So is $3 per ton good or bad? Should RGGI impose a meaningful price floor to more effectively “spur innovation in the clean energy economy,” or is it better to just let the market find its own low-price equilibrium?
One perspective, articulated by EDF’s media director, is that “the goal of climate policy is not to set a price, it’s to cut pollution ... If we’re reducing emissions on schedule, if we’re achieving the environmental goal with the cap, why would we not want to do it at the lowest-possible cost?”
I have some very different perspectives on this topic, which I won’t repeat here, but I’d be interested in other readers’ views.
Comments
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hapa Posted 4:12 pm
20 Dec 2008
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amazingdrx Posted 5:15 pm
20 Dec 2008
The fact that permit auction pricing is so low tells us what it would acomplish, nothing but feel goodness. Cap and trade, auctioned permits...sounds professional, reasonable. Somethings experts only really understand, it must be good right?
For real energy re-evolution, apply billions in per kwh payments directly to homeowners and small businesses that generate and save power from solar panels and ground source heating/cooling. And billion in per kwh payment with checks directly to farmers for generating power with farm biogas.
And use billions to order up millions of renewable energy sytems for government use. To save taxpayers energy costs.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Bob Wallace Posted 6:46 pm
20 Dec 2008
First Solar has brought thin film down to around $0.075 kWh. (I'm not sure that number includes cost of capital which would drive it up some.)
A six to ten cent subsidy would be giving people power for nothing. Something closer to the current two cents is most likely enough.
I do like the idea of stimulating ground effect heat pumps. Low cost loans, even rebates, might be a good move.
And make sure that there is plenty of money for research and test projects for other good ideas. There's money that will flow to green energy sources once they've been demonstrated to make a profit.
As soon as we are convinced that we can provide all the energy we need from green sources then start turning up the hurt on dirty sources.
BTW, saw this excellent bit on how the grid can easily accept far more wind/solar than the 20% number that's been used for a while. Try 50% - 70%.
Check out the very neat graph at the bottom right. Gives one a great feel for how the various types of generation fit together. It is a beautiful piece of work.
http://blog.wired.com/wiredscience/2008/12/could-the-elec ...
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Max8806 Posted 1:30 am
21 Dec 2008
However, there is a significant reason why its still better to play out like this than with a higher emissions price. The very very (very) low price for this target adds credence to our argument that a more aggressive cap could be instituted on the national level without economic catastrophe. Imagine the difficulty in pushing another reasonably ambitious federal bill if RGGI's meager carbon restraint was eliciting $20-40 carbon prices.
RGGI was never supposed to solve global warming by these eleven states alone. The point was always to spur federal action. In that sense, the low cost here is a plus.
...Although I do believe the price is undermined by unensurable offset credits that undercut its cap. But that's another story.
Max Epstein
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Sean Casten Posted 1:58 am
21 Dec 2008
Don't get me wrong - it's a start, in the same way that you have to go to first grade if you want to get a PhD someday. But it's far from complete.
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amazingdrx Posted 2:08 am
21 Dec 2008
Wholesale rates would indicate a lower subsidy, give factories that get power for 6 cents per kwh, 6 cents subsidy per kwh.
So the local shopping mall would get a 6 cent subsidy for solar power sold onto the grid, plus 6 cents from the utility.
A homeowner should get 10 cents in subsidy and 11 cents from the utility. When a homeowner or business uses battery backup to store power and make it available for the grid later on, they should get 6 cents per kwh for storage.
If a business installs a ground source heating/cooling system that cuts electric power use, that would merit a 6 cent subsidy.
Solar water heating that saves kwh should get a 10 cent subsidy for homeowners and a 6 cent subsidy for businesses that pay 6 cents per kwh wholesale power rates.
One step beyond net metering is actual payment for surplus renewable and stored power fed into the grid. Smart grid devices would control the flow and meter and bill for it.
Diverting 50 billion per year from fossil fuel industries would pay for it all and leave some billions for government orders for plugin hybrids, ground source heating, and solar cogeneration systems.
It's a fool proof, hedge fund proof, no new taxes, debt free method of stimulating a green economic re-evolution. Forget carbon permits, carbon taxes, and carbon permit "derivtatives" and bubbles.
Direct subsidy diversion rules. These subsidies would cut the payback (from energy savings and income) for renewable/conservation systems in half, from a couple of years for solar water heating or 4 to 5 years for ground source heating/cooling, and 8 to 10 years for solar PV.
A whole system would payback in a few years. After that the utility customer gets free energy, and maybe even gets enough extra money to pay their property taxes.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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Max8806 Posted 1:14 am
22 Dec 2008
Max Epstein
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Charles Komanoff Posted 1:55 am
23 Dec 2008
(i) the fact that the emissions "cap" is constant rather than declining, and
(ii) the tanking economy, which is busting electricity demand largely through belt-tightening, rather than permanent energy efficiency.
(Note to Max Epstein: You claim that RGGI's 2009 emissions target is 10% less than "current" levels, but last week's RGGI press release states clearly that the cap is constant through 2014.)
The "naturally" falling CO2 emissions are a pretty thin silver lining of the recession. An economic downturn is when emissions should be dropping substantially, if only to bank against resumed economic growth later on.
A ramped-up carbon tax would lay the groundwork for that. Meanwhile, there is nothing positive about the $3 RGGI auction price -- nothing.
Charles
http://www.komanoff.net
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Max8806 Posted 2:56 am
23 Dec 2008
Max Epstein
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danlewer Posted 7:58 pm
28 Dec 2008
--
Carbon Retirement
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