And Sarah Palin is even more wrong . . . Cap and Trade can be “Auction and Invest”

Seth Kaplan

In her post here Lesley Bunnell, CLF’s Rhode Island office manager, persuasively deflates and rebuts an attack in the Washington Post by Sarah Palin on the cap-and-trade mechanism.   One important evolution in the idea of cap-and-trade that Lesley did not have a chance to get into is the key reform of auctioning the allowances and using the money generated by the auction for good purposes that reduce emissions and save money for all our citizens.

CLF, as part of a broad coalition, successfully fought for this model in the design and creation of the Regional Greenhouse Gas Initiative regulating carbon dioxide emissions from power plants.   The states of New England have repeatedly pushed in Congress for this model to be recreated on the federal level.

The reason for embracing allowance auctions and using the money from the auction for energy efficiency is crystal clear – it will reduce the cost of the program and reduce emissions even further.  The cost reduction argument is quite powerful – analyses of the bill passed by the House by the non-partisan Congressional Budget Office and the US EPA estimate the cost of the program for an average household at between $111 and $175 per year by 2030.  Independent analysis of the bill shows that even modest gains in energy efficiency, like those that can be financed by allowance auction revenue can result in savings for citizens that dwarf these costs.

Indeed, during the presidential campaign this was precisely the position taken by President Obama:

In a recent Op-Ed in the Boston Globe CLF President John Kassel reflected on our concern that the federal bill had drifted away from 100% auction, giving out a significant number of allowances for free – but at least the bill that passed the House accepts the importance of cap and trade, auctioning the allowances from that system and moves towards the RGGI model of  “auction and invest.”

The bottom line is clear.  Cap and Trade is a tool that can work to reduce emissions of the greenhouse gases causing global warming.  It can work even better, and be implemented at even lower cost, if we do it right by auctioning the allowances at the heart of the program and using the money raised by the auction for clean energy projects like energy efficiency.

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