| April 10, 2009 |  |
Feds Should Auction Allowances, Not Give Them Away, Science Group Says
Auction off "allowances" for heat-trapping emissions that cause global warming or give them away? That is the question.
John Holdren, President Obama's science adviser, told the Washington Post this week that the administration is considering delaying auctioning 100 percent of the heat-trapping emission credits or "allowances" that would be created under a climate program. "[W]hether you get to start with [a 100-percent auction] or get there over a period of time," he said, "is something that's being discussed."
Duke Energy, a member of a coalition of 25 companies and five environmental organizations called the U.S. Climate Action Partnership, wants to wait 10 years before moving to a 100-percent auction.
In the House of Representatives, a recently introduced discussion draft of comprehensive climate and energy legislation by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) did not include details on whether or not allowances would be auctioned or given away for free. Nor did it indicate how any potential auction revenue would be spent.
Meanwhile, candidate Barack Obama's campaign platform (pdf) affirmed the value of auctioning all pollution allowances. "A 100 percent auction ensures that all large corporate polluters pay for every ton of emissions they release," it stated, "rather than giving these emission rights away for free to coal and oil companies."
Experts at the Union of Concerned Scientists (UCS) say immediately auctioning 100 percent of allowances is the best approach. That would raise the money we need to provide consumer benefits, ensure that we meet our heat-trapping emissions reduction goals, and help transition the country to a new, cleaner economy.
"Giving away allowances would be a huge sweetheart deal for polluters," said Liz Perera, congressional representative for UCS's Climate Program. "Worse, freebies for polluters would come at the expense of energy efficiency and renewable energy programs that would benefit the public. Electric utilities and other polluters are pushing for free allowances so they can delay cutting their heat-trapping emissions, but we've already had enough delay. We shouldn't sacrifice the economic and environmental advantages of auctioning because polluters want to maintain the status quo."
AUCTIONING UNDER CAP-AND-INVEST PROGRAM: HOW IT WOULD WORK
Under a cap-and-invest system, the government would establish a national limit, or cap, on heat-trapping emissions that would decline each year. Polluters would have to purchase allowances in a periodic auction to cover the heat-trapping emissions they produce each year. The cost of those allowances would provide an incentive for polluters to cut their emissions and would provide a strong incentive to invest in clean energy technologies.
Auctioning allowances has two key advantages:
First, auctioning would allow the market to set an appropriate price for pollution, because polluters would have to estimate how much the allowances are worth. Giving away allowances for free would diminish their value, distorting the market and reducing the incentive for investments in clean energy technology.
Second, auctioning allowances would generate revenue that could fund measures to help consumers, workers and low-income families make the switch to cleaner energy as well as technologies and initiatives that help prevent the worst consequences of global warming. Those include renewable energy technologies, energy efficiency and international forest protection.
The country's first cap-and-invest program for heat-trapping emissions, the Regional Greenhouse Gas Initiative covers utilities in 10 Northeastern states. Most of the participating states have chosen to auction nearly all of their allowances and invest the proceeds in energy efficiency and renewable electricity sources. This program has already raised $262.3 million for participating states. For more information, see UCS's cap and invest fact sheet.
The Union of Concerned Scientists puts rigorous, independent science to work to solve our planet's most pressing problems. Joining with citizens across the country, we combine technical analysis and effective advocacy to create innovative, practical solutions for a healthy, safe, and sustainable future.
