Which would be of greater benefit: a cap and trade system to limit CO2 production or an RPS approach? Recently I have been reading about the resistance of large utilities to buy into a national RPS as a means of limiting CO2 emissions, they tend to prefer a cap and trade approach to the matter. Their concern is being forced into certain technology choices and would prefer to be given CO2 caps and chose how they will meet (or trade) them. What are the pros and cons of each approach? Does there seem to be a best choice for the nation at this time? Thanks. — Gary J., Cleveland, Ohio
Gary, Thanks for the question and raising this particular point. Different incentives have different missions and yield different results. A Renewable Energy Portfolio Standard (RPS) either at the state or national level is designed to diversify electricity supply for a varied number of reasons including leveling energy price fluctuations, protecting against fuel scarcity or cutoffs, stabilizing the electric grid and reducing both regulated and unregulated emissions from the electric utility sector. Tax incentives are used to help drive demand so industry can scale-up manufacturing, assembly and installation that will eventually lower prices and make the technologies more available.
Cap and Trade is primarily a tool being considered by policymakers to reduce greenhouse gas emissions — basically allowing more polluting sectors to buy their way out of their situation by supporting low emissions applications, which may or may not include renewable energy, elsewhere. Carbon taxes, another approach to curbing greenhouse gas emissions, monetizes carbon output by adding to the cost of carbon intensive fuels so businesses and utilities look at other fuel options — which is probably a better tool to enhance the use of renewable energy.
So to directly answer your question, RPS’s were not instituted to directly deal with greenhouse gas emissions reductions, though of course they help. Other approaches now being discussed by Congress and by some state and local governments including cap and trade and, to a lesser extent, carbon taxes are focused on greenhouse gas emissions reductions.