Comment Log Display

CRS appreciates the opportunity to submit these comments regarding
proposed 2017 Climate Change Scoping Plan update. 

Though we understand that the voluntary renewable electricity (VRE)
market and the VRE Reserve Account that is a part of the
cap-and-trade regulation are not explicitly addressed in the
proposed 2017 Scoping Plan, without further action by the
California Air Resources Board (ARB), allocations of allowances to
the VRE Reserve Account will not continue beyond 2020. This means
that, depending on growth in the VRE market and subscriptions to
the Reserve Account, VRE allowances will be depleted at some point
beyond 2020. VRE demand and investment in the state could suffer as
a result. Center for Resource Solutions (CRS) recommends that
allowances continue to be allocated to the VRE Reserve Account
beyond 2020 in order to ensure that it remains effective.

Cap-and-trade removes the ability of VRE to affect statewide
emissions and the VRE Reserve Account ensures that overall
emissions reductions are achieved by VRE generation. Emissions
reductions beyond the cap and moving the needle on climate change
are significant drivers of voluntary demand for renewable energy in
the state. Without continued allocations to the VRE Reserve
Account, there is significant risk that it could be depleted. Once
the Reserve Account is depleted, VRE is no longer surplus to
regulation and it no longer has an avoided emissions benefit. VRE
will simply reduce emissions to free up allowances and lower the
costs of compliance for regulated entities. This represents a shift
in compliance costs away from regulated entities and onto those
taking voluntary action. 

Unless allowances remain available to the VRE market through the
VRE Reserve Account, the cap will represent a ceiling not only for
emissions but also emissions reductions in the state. Since there
are those that want to reduce beyond the level of the cap, the
state can and should facilitate that activity, but at the very
least it should not harm or hinder the voluntary market by forcing
VRE purchasers to pay the price of carbon that should be borne by
emitters. This is not only unfair, but it will
likely disincentivize voluntary reductions. Continuing allocations
to the VRE set-aside will prevent cap-and-trade from becoming the
ceiling for reductions and will help to maintain voluntary demand.

We see no argument against continuing allocations to the VRE
Reserve Account on the basis of increased compliance cost. Even if
the VRE Reserve Account did reduce supply of allowances such that
continuing historical allocations would significantly affect price,
the set-aside is effectively cost neutral and the decrease in
supply of allowances and corresponding increase in price is offset
by the decrease in demand for allowances due to reductions from
voluntary renewable energy and corresponding decrease in price.
Likewise, discontinuing allocations to the set-aside is benefit
neutral for compliance entities: the increase in supply of
allowances that are no longer being set aside and corresponding
decrease in price is offset by the increase in demand for
allowances as VRE no longer pays for reductions and those costs
shift to compliance entities, increasing the price. But there is
great cost to the voluntary market.

In conclusion, VRE has huge benefits for California, both
economically and environmentally. The VRE Reserve Account provides
a pathway whereby the appetite for voluntary action can be
channeled to clean energy development in California, and avoids a
situation whereby the willingness to invest in voluntary action is
diverted to out‐of-state projects. The VRE Reserve Account
also allows consumer preferences for RE to drive more reductions
than those achieved by policy mechanisms alone. The state has
little if anything to gain and all of the benefits of VRE to lose
by discontinuing allocations of VRE allowances after 2020. 

Please feel to contact us with any questions about these comments,
or if we can otherwise be of assistance.