Cap-and-Trade Rx from RGGI: ‘Tight Fitting’ and ‘Not Floppy’

“Tight-fitting, not floppy around the ears.”

Talk about how saying it simply often means saying it best and most clearly.

Trouble is that many of the media missing-in-action from coverage important to congressional consideration of greenhouse gas legislation are just that … missing in action. Victims of pared-down news rooms and scaled-up work loads for those still employed.

The Wall Street Journal‘s environmental capital website came up with the phrase in reporting that prices are plunging for greenhouse gas trading permits being auctioned by the Regional Greenhouse Gas Initiative, a consortium of 10 northeastern states. WSJ Reporter Keith Johnson cited three principal reasons for the fall-off:

  • states over-estimated the amount of permits power companies would need to meet their emission requirements, leading to excess pollution permits and, alas a la supply and demand, falling prices;
  • the global recession “whacked” electricity demand, so power companies actually are emitting fewer emissions than they would in a robust economy (see related news note with this posting); and
  • lower natural gas prices are enabling power companies to switch to cleaner-burning fuel, again leading to fewer greenhouse gas emissions.

RGGI’s experience doesn’t mean that a cap-and-trade approach doesn’t work for trading emissions,” Johnson wrote. “In fact, in the near term at least, it makes the burden a lot easier to bear for utilities and other companies.”

That said, the falling permit prices suggest a valuable lesson for those thinking cap-and-trade, he wrote: “If emissions are meant to drive innovation and clean-energy in the electricity business, then the caps better be tight-fitting, not floppy around the ears.”

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One Response to Cap-and-Trade Rx from RGGI: ‘Tight Fitting’ and ‘Not Floppy’

  1. Dan Rogers says:

    I would like to have someone explain to me the meaning of this statement: “Lower natural gas prices are enabling power companies to switch to cleaner-burning fuel, again leading to fewer greenhouse gas emissions.”

    There is an implication in that statement that natural gas is somehow “cleaner” than coal or oil when those fuels are burned to produce heat and power. But all three fuels are carbon fuels, and when you burn carbon you produce carbon dioxide. To my knowledge, it makes no difference if the carbon being oxidized is carbon contained in natural gas, coal or oil. Carbon is carbon. I think the public is being deceived about the comparative “virtues” of these three carbon fuels as far as carbon dioxide production is concerned, and I strongly suspect that the deception is quite intentional.