Green world unites behind auctioning carbon allowances

New U.S. Pirg report recommends 100 percent of allowances be auctioned 6

Speaking of auctioning the permits under a cap-and-trade system, yesterday U.S. PIRG released a new report: "Cleaner, Cheaper, Smarter: The Case For Auctioning Pollution Allowances In A Global Warming Cap-and-Trade Program." It argues for auctioning 100% of permits:

Auctioning all allowances under a cap-and-trade program is fair, reduces the societal cost of achieving emission reductions compared to giving allowances to polluters for free, and promotes a transition to a clean energy economy. For those reasons, allowances should be auctioned in any global warming cap-and-trade program.

Here's a statement of support for that position, signed by a gazillion green and progressive leaders.

The report recommends:

• Auction 100 percent of emission allowances.
• Use the revenues from auctions to:
  • Support clean energy technological development, including research and development funding and early market support for clean technologies.
  • Invest in energy efficiency improvements to reduce the cost of the program to consumers.
  • Provide direct consumer rebates to alleviate any increases in energy costs that result from the program.
• Adopt complementary policies that further reduce emissions, reduce the cost of the program, and help achieve the goal of transitioning America to a clean energy economy. Among those policies are stronger energy efficiency standards for vehicles and equipment, enhanced building energy codes, renewable energy standards for electricity generation, global warming performance standards for electricity generation and transportation fuels, and incentives for deployment of promising new technologies, such as solar power and extremely efficient "zero-energy" homes.

Bonus quote:

Policy-makers at all levels must immediately make clear that new coal-fired power plants will not be grandfathered under any allowance allocation scheme.

Word.

For more, see Hill Heat.

David Roberts is staff writer for Grist. You can follow his Twitter feed at twitter.com/drgrist.

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  1. ngoddard Posted 6:28 am
    21 Sep 2007

    one step forwardGreat!  Auction + cap'n'trade is economically equivalent to a tax.  Let's get the former agreed, then we can swiftly move on to the administratively much simpler tax.  I gather that is the EU plan, maybe the US can beat them to it!

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  2. Jason D Scorse's avatar

    Jason D Scorse Posted 7:23 am
    21 Sep 2007

    Thanks for this...just discussing cap and trade in class. Every economist since forever has pretty much been in favor of auctioning- it's the political issue that's tricky- we'll see if this time something can change. I'm not holding my breath. Hasn't happened in the EU scheme.

    I teach environmental economics and blog at http://www.voicesofreason.info.

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  3. Gar Lipow's avatar

    Gar Lipow Posted 8:10 am
    21 Sep 2007

    Auction vs. taxYes a tax is administratively simpler and less volatile than auctioned permits. But if we can get auctioned permits I think the difference is small enough between that and a tax that it would not be worth the political energy to fight to turn it into a real tax. I'd live with the inefficiencies and turn to other fights, and I suspect so would most carbon tax advocates.

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  4. Gar Lipow's avatar

    Gar Lipow Posted 8:14 am
    21 Sep 2007

    AllowancesThis last has a dark side



    Policy-makers at all levels must immediately make clear that new coal-fired power plants will not be grandfathered under any allowance allocation scheme.


    OK - great that they are against grandfathering of coal-powered plants.  But this seems to take for granted that there will be allowances. If this is a statement for 100% auctioning, doesn't that mean that nobody gets grandfathered.

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  5. ngoddard Posted 11:38 pm
    21 Sep 2007

    EU is auctioning permitsIt's up to member states, but they are choosing to do it e.g., UK:

    In Phase I, given the newness of the EU ETS, effectively all allowances were distributed on a free basis. The EU ETS Directive permits Member States to auction up to 10% of allowances in Phase II, which runs from 2008 to 2012. The UK's National Allocation Plan (NAP) for Phase II of EU ETS, published last summer, set out the Government's intention to auction 7% of the total UK emissions allowances.


    From here.

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  6. farnishk Posted 5:56 am
    23 Sep 2007

    Privatising The AtmosphereIt wasn't until I heard Satish Kumar of Resurgence speak last week that I realised that carbon emissions trading is simply a way of PRIVATISING THE ATMOSPHERE. Our air is now going to be chopped up into myriad global packets, into which each nation has certain rights to pump greenhouse gases. They have bought the atmosphere from the Earth and there is no way they are giving it back.
    On the surface carbon trading looks like a solution, but deeper down it looks like something a lot more sinister.
    What about accepting that the atmosphere is not ours to fill with greenhouse gases and then agreeing not to fill it with greenhouse gases? No giving out financial "rights to pollute", we set a limit (450 ppm carbon dioxide equivalent), we apply per capita quotas, the big polluters cut their emissions, the small polluters raise theirs to the limit if required. If the net effect is less carbon than 450 ppm then we all cheer and don't sell allowances to big polluters because THE ATMOSPHERE IS NOT FOR SALE!

    Keith Farnish

    www.theearthblog.org

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