U.S. Cap and Trade, Climate Change Proposals

Dallas Burtraw from Resources for the Future (RFF) has posted a brief study analyzing the effects of cap and trade program currently in Congress. A few years ago, I was fortunate to work with with Dallas and other RFF staff on a northeast region climate change study and have a lot of respect for their work.

Personally, I would like to see a smaller share of the permits given away to industry (and a larger share auctioned) than in the current proposals for an 85% giveaway. If I recall RFF had done some interesting work on this in the past, and had proposed a 35-40% free allocation as sufficient compensation to industry. Regardless of the final form of this important detail on the permit auction %, it is good for both the environment and the California economy that climate change is being taken seriously in Washington.

This picture (from RFF) of the projected change in electricity rates from cap and trade illustrates some of the benefits to us locally. It will help close the gap between electricity rates here and the rest of the country and reduce our cost of doing business and living relative to the rest of the country. California is committing to acting alone regardless of what the U.S. does, and although I admire the spirit, it will be a lot better for our economy if others follow our lead.