EIGHT years ago, a bipartisan coalition of Northeast and mid-Atlantic governors joined forces to reduce pollution from electric power plants. They agreed to cap overall emissions of carbon dioxide, the major pollutant driving global warming, and require the more than 200 power plants in the region to buy permits to emit the greenhouse gas.
The governors reasoned that plant operators would have an incentive to clean up their emissions if they had to pay for the carbon dioxide they discharged. Over the first three years of the Regional Greenhouse Gas Initiative, average annual emissions were indeed 23 percent less than in the previous three years, and auctions of allowances — or permits to pollute — raised $952 million, much of which has been invested in clean energy programs.
But the future effectiveness of this market-based cap-and-trade system, the first but not the only one of its kind in the nation, is now in question. The nine states in the initiative are preparing to reset the emissions cap — or the total amount of carbon dioxide that power plants can emit — and some of the proposals would allow power plants to increase the amount of carbon dioxide they dump into the atmosphere.
Cap-and-trade programs are designed to lower emissions gradually by reducing the cap and the allowances that are available. Polluters get flexibility in cutting emissions by being able to trade allowances among themselves. The idea is to achieve the reductions at the lowest cost through market forces rather than through direct regulation.
But of the four cap-adjustment proposals under consideration, three would reset the cap above current emissions and allow pollution to rise through 2020. Only a fourth option would continue to drive down pollution by resetting the cap at 91 million tons, the current emissions level, and then reducing it by another 2.5 percent a year through 2020.
Opponents of the initiative, known as R.G.G.I., argue that lower-cost natural gas has eliminated the need for the program by reducing the use of dirtier coal and oil. Growing investments in energy efficiency and renewable electricity have also helped to reduce emissions by cutting demand for electricity from power plants that burn fossil fuels.
But those developments don’t argue against R.G.G.I., which determines what electricity generators may not do — namely, discharge unlimited quantities of carbon dioxide into the atmosphere. If market forces deliver emissions reductions cheaper and faster than anticipated, then states should lock in that progress with a binding cap to ensure that emissions don’t rise and that incentives for reducing pollution remain. ...
via www.nytimes.comA quick post before class ... I think the writers are correct. If the marginal abatement costs fall (and this is what is happening with natural gas prices), then the efficient policy response is to reduce emissions.