With Western governors poised to announce details of a program to
cap global warming emissions in seven Western states, environmental
organizations are urging officials to make sure polluters pay for
pollution permits, rather than receive what amounts to billions of
dollars in trade-able assets for free. Economists agree that capping
emissions and making polluters pay for permits at an auction is the
most cost-effective and fair approach to cutting global warming
pollution, without increasing the cost to consumers, according to a new
report released today by environmental organizations that have been
monitoring the Western Climate Initiative and other such “cap and
trade” programs.
“The smartest, cheapest way to tackle global warming is to place a
cap on emissions and to make companies pay for every ton of pollution
they put into the atmosphere,” said Jeremiah Baumann of Environment
Oregon. “Making polluters pay prevents windfall profits, speeds our
transition away from dependence on foreign oil and fossil fuels, and
creates jobs implementing global warming solutions like
energy-efficient vehicles and buildings that also save consumers money.”
The report, “Fair Deal for Consumers or Free Ride for Polluters?:
The Case for Auctioning Pollution Permits in the Western Climate
Initiative,” recommends that Western officials maximize the percentage
of allowances that are auctioned as part of its global warming
cap-and-trade program, and ensure that the revenue from those auctions
is invested in the public interest to maximize economic benefits of a
transition to a clean energy economy and to lower costs for consumers
and business.
The report asserts that auctioning allowances prevents polluters
from gaining windfall profits as a result of an emissions trading
program. Europe’s emission trading system, which included free
distribution of the vast majority of allowances, has resulted in power
plant owners receiving billions of dollars in profits from the program,
without regard to whether they reduced pollution. In the United Kingdom
alone, windfall profits from emission trading have been estimated at
nearly $2 billion. These profits come directly from the pocketbooks of
consumers.
“Choosing how to distribute pollution permits is one of the most
important decisions that policy-makers will make on climate change
policy,” said Eric de Place of Sightline Institute. “Economists agree
that energy prices will be the same whether permits are auctioned or
given away for free. The only difference is where the value of the
permits goes: to polluters or to the public.”
The report also recommends that revenues from the auction be used to:
• Support clean energy 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;
• Invest in a low-carbon transportation infrastructure; which will also help citizens cope with rising fossil fuel costs; and
• Assist consumers and communities in the transition to a world
shaped by global warming, through rebates and other measures.
“Giving away tens of billions of dollars in pollution allowances is
a huge step backward from the clean energy future we should be
pursuing. We shouldn’t be foregoing revenues that can be invested to
help consumers with their sky-high energy bills and protect our natural
resources,” said Doug Howell of the National Wildlife Federation.
The report also shows that policy makers in other regions of the
United States and countries which have experience designing
cap-and-trade programs have decided in favor of auctioning allowances
to achieve the most emission reductions at the lowest cost to society.
The European Union has responded to the problems in its initial phase
with a plan to transition to auctioning 100 percent of its pollution
permits. Additionally, in the Regional Greenhouse Gas Initiative in the
Northeast, where 10 states have agreed to reduce global warming
pollution from power plants, all of the states have committed to
auctioning nearly or fully 100 percent of their pollution allowances.
Additionally, most of the global warming bills currently in the United
States Congress include a significant auctioning component. The
strongest of those bills requires the auctioning of 94 percent of
allowances initially, increasing to 100 percent over time.
“Western state governors are faced with a choice: side with
consumers and a clean energy economy or side with polluters,” said Rob
Sargent, Energy Program Director for Environment America. “Policy
makers in other states and regions have already decided that auctions are
preferable and we are calling on the western states to do the same.”
In addition to capping emissions and auctioning allowances,
Environment America recommends that policy-makers adopt complementary
policies that further reduce global warming emissions, including
stronger energy efficiency standards for vehicles and equipment,
enhanced building energy codes, renewable energy standards for
electricity generation, investments in public transportation, global
warming performance standards for electricity generation and
transportation fuels, and incentives for deployment of clean energy
technologies, such as solar power and “zero-energy” homes.
