With Budgets Tight, Carbon Auctions Can Provide Cash

Global warming is the biggest issue facing our next president.

Photo: Getty Images/E/The Environmental Magazine

related articles

The nation's first regional cap-and-trade regulations for carbon dioxide will hit milestones this week, as Western states and Canadian provinces today publish a draft economy-wide regulation, and the Northeast auctions its first carbon pollution credits for coal-fired power plants.

These regulations are important milestones that demonstrate how seriously states take the issue of global warming, even in the absence of strong federal leadership. Cap-and-trade regulations, which were used successfully to rein in pollutants that cause acid rain, set an overall cap on a particular pollutant, and then allow polluters to trade credits so that cleaner-burning facilities can reap the rewards, and dirtier facilities can choose to upgrade or pay for extra pollution credits. The cap is lowered over time, so that overall pollution decreases.

It's long been argued that these regulations represent smart long-term economic strategy for the region, even if they could amount to a de facto carbon tax for polluters and their electricity customers in the short term. Why? Assuming the world continues to move forward into a "carbon-constrained" economy that values (with real dollars) clean air and a stable climate, these regions will spur innovation early so that they will be home for companies that can succeed in the new paradigm.

In New Jersey, an even more immediate economic angle is being discussed. Facing economic shortfalls, in part because it -- like New York -- is heavily dependent on tax revenue from the financial industry, the state's delayed adoption of the cap-and-trade regulations means the state won't benefit from the first round of carbon credit auctions this week, according to the Star Ledger. That means it's losing out on as much as $70 million in revenue.

The goal of these regulations is not to make government richer: Those funds should be re-invested in renewable energy research, tax incentives for clean energy development and rebates for taxpayers struggling with high energy bills. But there's no denying that they can generate income for cash-strapped states at a time when they face shortfalls.

COMMENTS ()