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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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