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Comment 124 for Design Comments for the GHG Scoping Plan (sp-design-ws) - 1st Workshop.
First Name: Robert
Last Name: Finkelstein
Email Address: bfinkelstein@turn.org
Affiliation: The Utility Reform Network (TURN)
Subject: Carbon fees over cap & trade, and no offsets
Comment:
The Utility Reform Network (TURN) is a state-wide consumer advocacy organization that advocates on behalf of California's residential and small business customers of the state's investor-owned energy utilities (PG&E, Southern California Edison, SDG&E and Southern California Gas). TURN comments on two topics -- the advantages of carbon fees over a cap and trade mechanism as the more effective and efficient mechanism for achieving the goals of AB 32, and the need to prohibit the use of offsets to achieve compliance. -- Carbon Fees Should Be Adopted, Not “Cap and Trade” TURN has read and considered the comments of Laurie Williams and Allan Zabel in support of carbon fees rather than a cap and trade system, presented to CARB earlier in the process. (Their comments may be found at http://www.arb.ca.gov/lispub/comm2/bccomdisp.php?listname=sp-design-ws&comment_num=45&virt_num=42.) Rather than simply re-state the compelling logic presented in those comments, TURN incorporates them by reference and endorses them without reservation. TURN's experience with "market-based" structures intended to achieve expected outcomes leaves us very skeptical of the premise that a cap-and-trade system would work as intended. Perhaps more importantly, such efforts to rely on market forces rather than regulation (such as the imposition of a carbon fee) tend to create unintended consequences that might not only undermine the intended goal, but create substantial disruption on their own. In the mid- to late-1990s, California congratulated itself for its successful transition from regulation to reliance on market forces for the development and operation of electric generation facilities. But from June of 2000 through January of 2001, that experiment flamed out in spectacular fashion, creating rolling black-out conditions (even though there was ample generation supply) and unexplained price increases for generation supply, and bringing the state's two largest electric utilities to their knees (with one going so far as to declare bankruptcy). The immediate solution implemented in 2001? A return to regulation, albeit with new constraints that produced far higher prices for California consumers than they'd faced previously. Whatever arguments that might continue about the unanticipated cause of the generation market melt-down and the various solutions pursued to bring some semblance of stability back to that market, there can be no dispute that the "market-based" approach that the vast majority of commenters had labeled as "innovative" when it was first adopted back-fired in a huge way and, in doing so, left California further from its original goal and paying more for the privilege of having survived the failure. If CARB needs further evidence of the cause for concern, it need only look at newspaper headlines for the past few weeks. The deregulation in financial services markets was touted as likely to produce innovative products that would better serve the U.S. economy. Now we are on the brink of seeing a $700 billion bail-out package approved, as huge financial institutions teeter and fall on a nearly daily basis. TURN suspects that various experts will float many explanations of the causes of the current economic chaos and critiques of the various solutions, both adopted and rejected. But it would seem that one point is indisputable -- when the nation's policy-makers substituted "market" forces for regulation in order to achieve their goals, they never anticipated the outcome that they unwittingly unleashed. TURN submits that CARB's first step should be to design and implement a carbon fee, thus providing the incentive to spur investment in clean energy sources that do not rely on fossil fuels, while minimizing the likelihood of producing unintended consequences. -- Offsets Should Not Be A Means of Compliance CARB should reject any reliance on offsets as a means of achieving compliance with greenhouse gas reduction requirements. TURN is extremely concerned that offsets will both undermine real emissions reductions and will reduce the potential benefits of reducing co-pollutant emissions due to carbon emissions reductions. The history of the RECLAIM program illustrates that a trading scheme with offsets can actually hinder emissions reductions. The problems caused by the initial overallocation of allowances are well-documented in the record. Generators purchased questionable offsets in the form of abandoned cars instead of installing emissions control technologies. Moreover, after the astronomical jump in RECLAIM allowance prices in 2000 due to the energy market meltdown, the generators were exempted from the RECLAIM trading system and forced to install scrubbers. Essentially, most of the emission reductions benefits of RECLAIM occurred due to a suspension and renunciation of the cap and trade system. Thank you for your consideration of these comments.
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Date and Time Comment Was Submitted: 2008-10-02 16:54:05
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