Capping emissions and making polluters pay for putting global warming emissions into the atmosphere is the most economically efficient and fair approach to cutting global warming pollution nationwide, according to a report by the U.S. Public Interest Research Group (U.S. PIRG).
“Cleaner, Cheaper, Smarter: The Case for Auctioning Pollution Allowances in a Global Warming Cap-and-Trade Program” recommends that the United States and any state or region contemplating a cap-and-trade program sell 100 percent of pollution permits called “allowances” at an auction as opposed to giving them to emitters for free. U.S. PIRG also released a statement signed by more than 100 organizations and individuals, including former Labor Secretary Robert Reich, the Consumer Federation of America, MoveOn.org, and OXFAM, calling for a 100 percent auction.
“Giving away pollution allowances absolves polluters of their responsibility and even provides some polluters with a new opportunity to profit,” said Tony Dutzik, Senior Policy Analyst for the Frontier Group and an author of the report. “Auctioning allowances, on the other hand, ensures that all polluters pay based on the amount of pollution they release.”
The report recommends that revenues from the auction be used to:
Support clean energy technological development, including research and development funding and early market support for clean technologies;
Invest in energy efficiency improvements to reduce the cost of the program to consumers; and
Provide direct consumer rebates to alleviate any increases in energy costs that result from the program.
“The smartest, cheapest way to tackle global warming is to place a stringent cap on emissions and to make companies pay for every ton of pollution they put into the atmosphere,” said Rob Sargent, Energy Program Director for U.S. PIRG. “We can use the revenues to ease the transition to a clean energy economy by promoting energy conservation, clean energy and other measures that lower the cost of meeting the challenge of global warming.”
The report asserts that the auctioning of allowances prevents polluters from gaining “windfall” profits as a result of an emissions trading program. Europe’s emission trading system, which includes free distribution of the vast majority of allowances, has resulted in power plant owners receiving billions of dollars in windfall profits from the pollution program. In the United Kingdom alone, windfall profits from emission trading have been estimated at nearly $2 billion. These profits come directly from the pocketbooks of consumers.
“The decision of how to distribute pollution permits is one of the most important that policy-makers will make on climate change policy,” said Dallas Burtraw, Senior Fellow with Resources for the Future and a national expert on the economics of cap-and-trade programs. Burtraw is currently advising Northeast States on the design of an auction for the Regional Greenhouse Gas Initiative, which caps power sector emission in nine Northeast States, and he recently served on California’s advisory committee for cap-and-trade programs. “Households bear eight times as much cost as do producers under a cap-and-trade program, and households should be first in line for the assignment of allowance value created by a cap-and-trade program, as long as that is achieved in a way that reinforces climate goals. An auction can accomplish that.”
“Auctioning allowances is important to ensuring that we reduce the impact to consumers and provide important public benefits,” said Mark Cooper, Research Director at Consumer Federation of America. “Returning some of the auction revenue directly to consumers will cushion any price impacts from the effort to cap global warming emissions while giving American households a direct and tangible benefit from the program.”
In addition to auctioning allowances, U.S. PIRG recommends that federal, state and regional policy-makers adopt complementary policies that further reduce global warming emissions, including stronger energy efficiency standards for vehicles and equipment, enhanced building energy codes, renewable energy standards for electricity generation, global warming performance standards for electricity generation and transportation fuels, and incentives for deployment of clean energy technologies, such as solar power and “zero-energy” homes.
To view the report:
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