Over 95 percent of climate scientists have concluded that CO2 is the primary cause of global warming. Solving the problem requires a dramatic reduction in CO2 emissions. Some people are altruistic, but almost all businesses are bottom line oriented and will not reduce their CO2 emissions unless they have an economic incentive to do so. There are two realistic incentives: taxing CO2 emissions or setting up a cap and trade program for CO2. Since increasing taxes is politically unfeasible, the most practical approach is with a cap and trade program.

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The U.S. Environmental Protection Agency implemented a cap and trade program for sulfur dioxide (the primary contributor to acid rain) in 1995. This program was a great success, and essentially eliminated the acid rain program. California passed AB32 in 2006 to accomplish the same goals for CO2 emissions. This law sets a cap on emissions from almost all sources, and gives polluting companies a certain number of allowances. If companies reduce their CO2 emissions (with renewable power generation, more efficient processes or smokestack scrubbers), they can trade these emissions to companies that still pollute.

Many California companies succeeded in reducing their emissions. In fact, utilities installed so much wind and solar (courtesy of their RPS requirements) that they now have excess allowances to trade. But the gas refining industry didn’t act, and starting on January 1, 2015 they will have to purchase extra allowances. How much? When a gallon of gas is burned it emits about 20 pounds of CO2, which is 0.009 tons. At the current market price of CO2 allowances of $12/ton, that extra CO2 amounts to about 11 cents. So the downside of cap and trade is that the price of gas in California is likely to go up by about a dime. The upside is that we get cleaner air and an even stronger green economy.

But not everyone wants this outcome. In particular, the oil and gas refining industry tried to suspend AB32 in 2010 when they sponsored Proposition 23 (which was defeated by 62 percent of voters). This year they are sponsoring AB69, which will delay the application of cap and trade to transportation fuels. It’s shaping up as a battle between deep-pocketed dirty fuel polluters — and just about everybody else in California. I’m hopeful that California’s cap and trade program continues to succeed, and maybe someday soon will be adopted by the other 49 states. Please join me on this week’s Energy Show on Renewable Energy World as we talk about the real economic impact of cap and trade.

Find more episodes of The Energy Show here.

About The Energy Show

As energy costs consume more and more of our hard-earned dollars, we as consumers really start to pay attention. But we don’t have to resign ourselves to $5/gallon gas prices, $200/month electric bills and $500 heating bills. There are literally hundreds of products, tricks and techniques that we can use to dramatically reduce these costs — very affordably.

The Energy Show on Renewable Energy World is a weekly 20-minute podcast that provides tips and advice to reduce your home and business energy consumption. Every week we’ll cover topics that will help cut your energy bill, explain new products and technologies in plain English, and cut through the hype so that you can make smart and cost-effective energy choices. 

About Your Host

Barry Cinnamon is a long-time advocate of renewable energy and is a widely recognized solar power expert. In 2001 he founded Akeena Solar — which grew to become the largest national residential solar installer by the middle of the last decade with over 10,000 rooftop customers coast to coast. He partnered with Westinghouse to create Westinghouse Solar in 2010, and sold the company in 2012.

His pioneering work on reducing costs of rooftop solar power systems include Andalay, the first solar panel with integrated racking, grounding and wiring; the first UL listed AC solar panel; and the first fully “plug and play” AC solar panel. His current efforts are focused on reducing the soft costs for solar power systems, which cause system prices in the U.S. to be double those of Germany.

Although Barry may be known for his outspoken work in the solar industry, he has hands-on experience with a wide range of energy saving technologies.  He’s been doing residential energy audits since the punch card days, developed one of the first ground-source heat pumps in the early ‘80s, and always abides by the Laws of Thermodynamics.

Lead image: Green microphone via Shutterstock