Energista - Legislative - Comments

Allotment vs. Auction

nickmark — Tue, 10 Apr 2007 08:44:44 -0500

As I understand it, the primary problem with Europe's carbon market has been that allowances were issued directly to polluters (that is, utilities) based on historical emissions levels, rather than being auctioned. It may also be that there were too many issued, but since your baseline was free, there's little incentive to reduce emissions anyway.

CCX V GHG Cap and Tax

christopher — Mon, 09 Apr 2007 12:21:49 -0500

I'm not sure what you mean by a GHG "Cap and Tax" option. There are generally two options - a carbon tax or a cap and trade program.

Caps are best for making sure GHG emissions do not exceed some arbitrary amount whereas the tax generally discourages carbon emissions by putting a price on it. The higher the price, the fewer the emissions.

For MN, there is no agreement yet as to what would be best but due to people's resistance to that three letter word starting with a 't,' the cap and trade has been assumed to be the more politically feasible.

In Europe, when they set up the cap and trade, they issued too many emissions allowances from what I understand. This made it really easy for everyone to emit lots of GHGs. I don't know who benefited from that, but I think we all lost.

The main issue with CCX is that it is voluntary to join. Despite Bush's support, voluntary approaches will not cut GHGs by the amount needed to slow climate change.

CCX Cap and Trade vs GHG Cap and Tax

nobody — Fri, 06 Apr 2007 15:09:03 -0500

Can you explain the difference between CCX's Cap and Trade versus a green house gas 'Cap and Tax' option? How come this option is not on the table in Minnesota, or is it? From what I have heard of the EU experience with cap and trade, some utilities made windfall profits because of how the exchange was set up.

Illinois joins CCX

James — Tue, 03 Apr 2007 16:46:11 -0500

here is a press release that confirms when a state joins the CCX it only covers state run facilities and other 'opt in' options, and not, say the number of private cars a new transportation project takes off the road

Good luck

nobody — Thu, 29 Mar 2007 12:29:42 -0500

Best of luck with your crunch time Christopher. I know how it goes. It'll all be over soon though, right?!

Thanks for the plug. I'll try to get a post up on the RES sometime today. It passed the Senate Environment and Natural Resources Committee on Tuesday with a bipartisan 4-1 vote and now heads to the Senate floor. The floor vote will be sometime next week, potentially as early as Tuesday, more likely on Wednesday or Thursday. Outlook is pretty good, but we've got some work to do in the next few days to shore up a few more votes.

Cheers,

Jesse

I am the CCX Expert

James — Thu, 22 Mar 2007 21:15:31 -0500

Now that I have put myself out on a limb here, let me say that I'm currently doing my capstone project on the CCX and the U so I have a lot of information.

As it stands now any company or other entity (aka municipalities) can join, but to answer one of the big questions here, yes they have to emit carbon either directly or indirectly (unless they are strictly a mitigation entity). So, if the Met Council were to join, they would average out their direct emissions from 1998-2001 to form their baseline, and then would be required to make reductions off of that.

In addition to direct emissions caused from burning fossil fuels, and I imagine that with the cold winters in Minnesota Met Council uses a lot of carbon to heat their buildings, an entity can opt in many other sources. These include purchased electricity from outside sources (Xcel), public transportation fleets, landfills, small sources, etc.

So, if the light rail line was not built in 2001, and they opted in electricity, that would be a large additional source of electricity that would need to be offset.

The state of New Mexico joined the CCX, as have a number of cities and counties. Although finding information on New Mexico is difficult, the other municipalities only count their own direct and opted in emissions. So no credits would be received for the cars off the streets, but credit is received for the bus fleets that run more efficiently. This may apply to the light rail (i do not know enough about transportation) if it replaced a number of dirty buses. Then again it might not.

It seems to me, from reading the bill, that the "market", which is focused on the power sector, would require those sectors to join the CCX as individual entities if the CCX mechanism is going to be used. To me, within the context of the bill, this does not make much sense. It seems what the bill is advocating is that Minnesota itself create a carbon market for the power sector within the state, a la California style (or REGGI if you consider that any utility within the member states are required to offset emissions), unless Minnesota can mandate that the power companies join CCX, which does not seem likely.

I am happy to answer any further questions about CCX you might have

CCX Question

nobody — Thu, 22 Mar 2007 08:08:14 -0500

I guess I don't understand how an entity like the Met Council could join the CCX ... it would seem that any participant would have to directly produce greenhouse gases (utility, industrial customer, owner of large fleet of vehicles, etc.). I tried to read more at the CCX site but there wasn't any: "who can participate" nor "how it really works" information. I wouldn't think the Met Council could join and include the Hiawatha Light Rail (because the emissions, ultimately, would come from Xcel Energy plants). I would think they could join and include their fleet of vehicles, but not things that indirectly affect the amount of GHGs.

Thoughts?

CCX only

christopher — Wed, 21 Mar 2007 14:40:16 -0500

Yes, the only discussion I heard off offsets from the utilities was related to CCX. Credits from other states' systems like RGGI would be allowed under section 5, but utilities have avoided discussing it rather than explaining why it would not work or would be too expensive...

I have not yet listened to the Senate testimony entirely though and still have 2 hours from the House

Is CCX the only option under

nickmark — Wed, 21 Mar 2007 11:13:41 -0500

Is CCX the only option under discussion? The way I read the bill, it seems like there are a number of other exchanges that could qualify under the language. I'm thinking in particular about the forthcoming California program, as well as RGGI/ECR. Has the testimony focused on CCX to the exclusion of other schemes?

saw this one too

nobody — Thu, 15 Mar 2007 04:15:29 -0500

yeah i saw this one too, and its great to see even sports illustrated to put climate change in that mass-level perspective.

One other point

Joe — Tue, 06 Mar 2007 10:19:45 -0600

A cap and trade also accounts for population and economic growth by, well, capping GHG emissions. With a tax, total emissions can still rise as population and the economy grows, unless the tax level is periodically updated, which as nick points out is not easy to do.

That said, a two-pronged approach of cap-and-trade for stationary sources and a gas tax for transportation might be the way to go. In fact, it's impossible to reach the stretch goals in the climate bill by focusing solely on the electric sector.

The issue in cap and trade

nickmark — Tue, 06 Mar 2007 08:25:28 -0600

The issue in cap and trade vs. a tax is what you think the government should be specifying. With C&T, the government puts a limit on quantity, and lets the market work out what the right price of abatement is. With a tax, it's the opposite -- government puts a price on emissions, and let emissions fall to the economically rational level. (Yes, this is a high-level generalization). One of the important questions to ask when deciding between the two is whether the government is better at determining the appropriate price or the appropriate emissions level. Given the relatively highly developed state of climate science (at least with regard to emissions and resulting CO2 concentrations), and the ferocity of the debate about how much mitigation will cost, my feeling is that I'd rather have the government specify the emissions level -- I think we're more likely to get that right than we are to accurately estimate the external cost of CO2 that should be added to the price of energy. Plus, if we get it wrong, it's easier to tweak later. See also: the debate over sulfur regulations in the 1990s, in which a cap and trade system led to significant reductions at lower-than-expected costs.

On the other hand, a tax would be much easier to make into an economy-wide tool, to spread the pain evenly over all forms of energy, and involve much less administrative rigamarole than creating and managing a carbon market. Note, for example, that at least some the global warming legislation currently under consideration in Minnesota (I haven't had a chance to read all of it) completely ignores the natural gas industry and the transportation sector, focusing solely on electric generation. That's at least partly because electric generation is centralized enough that it's a lot easier to develop a C&T system for it -- trying to do a similar thing for transportation fuels would be a tremendous pain. Much easier to slap on an extra charge at the pump.

carbon taxes

christopher — Mon, 05 Mar 2007 23:42:00 -0600

The only mention I have heard about carbon taxes was a brief question that was deferred by Michael Noble in front of the Senate energy committee on Thursday the 22 of Feb. He said he had some opinions but did not have time at that point to delve into them. I don't know if it has been brought up since.

Cap and Trade vs. Carbon Tax

Noah Kunin — Mon, 05 Mar 2007 13:53:16 -0600

Cap and Trade is unilateral? That only makes sense if you argue that the Northern Hemisphere is unilaterally adopting more and more cap and trade systems vis a vis the Southern Hemisphere. Sheesh.

Has anyone brought up a straight carbon/GHG tax? I've read some interesting reports by the CBO that argue that a tax would be more efficient then cap and trade. (Presuming there is not some huge/apocalyptic tipping point before a doubling of CO2 concentration).

Re: Climate Mitigation Act

christopher — Wed, 28 Feb 2007 11:48:57 -0600

Jenny, glad you like the site. I've been meaning to put up a post about S.F. 192 (Anderson's cap-and-trade act) but life has been hectic. If any other writers want to do something, I hope they will.

Regarding Senator Prettner Solon, my impression is that she wants to see what happens with the stakeholder groups. To her credit, she wants these policies to get massive buy-in rather than relying on the DFL majority. That being said, I know little about the political behind-the-scenes of the MN legislature.

From the discussions I have heard, the legislators have not been heavily swayed by other states and are more focused about MN needs and impacts on ratepayers.