RPS Versus Cap and Trade

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.

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Scott, founder and president of The Stella Group, Ltd., in Washington, DC, is the Chair of the Steering Committee of the Sustainable Energy Coalition and serves on the Business Council for Sustainable Energy, and The Solar Foundation. The Stella Group, Ltd., a strategic marketing and policy firm for clean distributed energy users and companies using renewable energy, energy efficiency and storage. Sklar is an Adjunct Professor at The George Washington University teaching two unique interdisciplinary courses on sustainable energy, and is an Affiliated Professor of CATIE, the graduate university based in Costa Rica. . On June 19, 2014, Scott Sklar was awarded the prestigious The Charles Greely Abbot Award by the American Solar Energy Society (ASES) and on April 26, 2014 was awarded the Green Patriot Award by George Mason University in Virginia.

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