An emerging model for reducing global pollution and promoting renewable energy is quietly gaining traction.
Two of the nation’s major carbon trading markets have recently held auctions that brought in hundreds of millions of dollars, funding expected to go toward future “clean energy” projects. Last month, the California Air Resources Board announced the results of its latest cap-and-trade allowance auction.CleanTechnica notes the August 18 auction brought in nearly $332 million, money earmarked for the Golden State’s funding of “clean energy, emissions reductions, consumer utility bill relief and the state budget.”
That deal followed earlier auctions in California this year that generated $469 million in funds. On the other side of the country, the Regional Greenhouse Gas Initiative (RGGI), a non-profit corporation made up of nine Northeastern and Mid-Atlantic states, said last week that its latest carbon dioxide (C02) allowance auction brought in close to $88 million.
RGGI is older than California’s cap-and-trade auctions, and recently marked the sixth anniversary of its launch. But its campaign is just as ambitious.
“The RGGI states’ experience demonstrates that a regional market-based carbon pollution reduction program can achieve its goals cost effectively, while maintaining electricity grid reliability and affordability for consumers,” said Kelly Speakes-Backman, commissioner of the Maryland Public Service Commission and chair RGGI’s board of directors, in a news statement.
“Cap and trade” refers to the policy of government capping or limiting the amount of greenhouse gas emissions a company or utility can produce, while allowing that firm to purchase permits to pollute from other, cleaner companies. As theEnvironmental Defense Fund puts it, the “trade” part of cap and trade “creates a market for carbon allowances, helping companies innovate in order to meet, or come in under, their allocated limit.”
“The less they emit, the less they pay,” it adds, “so it is in their economic incentive to pollute less.”
The names of the winning bidders at these carbon dioxide allowance auctions aren’t released publicly, although in the case of the RGGI auction there’s a list of potential bidders that include such high-profile companies as Consolidated Edison of New York (ED); the Morgan Stanley (MS) Capital Group; and Dominion Energy Marketing, the energy trading and marketing operation of Dominion (D).
And these auctions are just part of a larger international trend, an evolution toward an eventual global carbon market. The European Union has the world’s largest emissions-trading system. But that title is being challenged by China, which recently announced plans for a national carbon permit trading market, beginning in 2016.