Climate Change: Government Knows Best v. Personal Choice

By Published On: October 28, 2011

Environmental groups and utilities have fundamentally different ideas about how utilities should use the proceeds of auctioning freely granted emissions rights under the state’s new carbon cap-and-trade program. Each camp outlined their views earlier this month in filings with the California Public Utilities Commission, which must decide how to use the money. Environmental groups--including the Sierra Club and Union of Concerned Scientists--want the state to require utilities to invest some of the money in a “Carbon Trust.” It would fund more investment in energy efficiency and development of new carbon-free technologies aimed at reducing greenhouse gases. Another industry/environmental group, the Solar Alliance wants much of the money dedicated to starting a state green energy bank to help finance renewable energy development. Environmentalists don’t say how much of the money the CPUC should dedicate to the trust, but they do indicate that some money also should be returned to both residential and business ratepayers. When money is returned, they want strings attached to funnel it toward expenditures that reduce greenhouse gas emissions. For instance, they suggest that while residential customers could take cash, they also could be given a choice to dedicate their money to the carbon trust or to demand management programs. Businesses would be more constrained under the proposals, having to use their rebates solely for programs that reduce greenhouse gas emissions. In a separate joint filing, the state’s investor-owned utilities laid out a sharply contrasting idea: simply return the money in direct proportion to what customers pay for cost increases under the cap-and-trade program, no strings attached. The utilities’ approach mirrors the position of many California business interest groups, such as the California Manufacturers & Technology Association. A decision is not expected until at least next spring. * * * * * * In an interesting, but little noticed, discussion when the California Air Resources Board last week approved final amendments to the state’s carbon cap-and-trade program, two different members expressed contrasting views about the market’s potential economic effects. The quote that widely appeared in most news coverage of the action came from Mary Nichols, Air Board chair. “Cap-and-trade is another important building block in California’s effort to create a clean and vibrant economy,” said Nichols. “It sends the right policy signal to the market, and guarantees that California will continue to attract the lion’s share of investment in clean technology.” But the remark couldn’t mask the sound of stomachs churning on the dais. In a neglected counterpoint, board member Ron Roberts, a San Diego County supervisor, expressed skepticism, although he voted for the program. “I wouldn’t just assume because we have a regulation we’re going to have a robust economy,” he countered. “I want to make sure we have braking mechanisms in this. What is it doing to the average guy and business out there?” To address Roberts’ concern--and qualms voiced by other members, such as John Balmes about possible oil refinery closures--the Air Board ordered the staff to carefully monitor and report on the economic effects of the cap-and-trade program, not annually, but on an ongoing basis.

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