Photo courtesy of Karen Eliot at Flickr.com.
Last week, the Regional Greenhouse Gas Initiative held the first auction for US Carbon credits. This was an important milestone because the auction may set the pattern for a federal carbon tax. Funds raised at the RGGI auction will benefit six northeast states: Connecticut, Maine, Maryland, Massachusetts, Rhode Island and Vermont. The states plan to spend this money (slightly more than $38 Million) to invest in energy efficiency, developing new technology, and other “programs to benefit electrical consumers”.
Hopefully, most of the money will be spent on the first two uses. If carbon taxes are used to subsidize the price of electricity, then that could actually accelerate climate change. In countries where the price of electricity is artificially reduced, demand is rising faster than production. This is causing some extremely dirty power plants to be built to meet short term need. Power outages and brownouts are also common.
Some people argue that revenue from carbon taxes is best used to implement programs that reduce the use of fossil fuel generated power. Possibilities include offering rebates on high-efficiency air conditioners, providing low cost loans for businesses that eliminate wasteful machinery, and building alternative power sources such as wind farms, geothermal generators, and solar arrays. When used in this way, carbon taxes can stimulate local businesses and encourage green consumption. In the long term, the economy will also benefit from energy self sufficiency.
Other states in the RGGI include New Hampshire, New York, New Jersey, and Delaware. These states didn’t participate in the first auction, but they may participate in the next auction, on December 17, 2008. Registration begins in October.
So, who bought these carbon credits? Mostly, the buyers were power utilities that operate in New England. Several environmental groups also participated, bidding on credits with the intent of retiring them from circulation. Brokers and individuals were also allowed to participate, but the RGGI hasn’t released a list of buyers yet.
Bidders had the option of concealing their identity during the sign up process. This anonymous bidding is a bit troubling, since most companies would be happy to garner free publicity from buying carbon credits. It leaves the door open for companies to make false claims and makes it hard to independently verify which utilities are responsible stewards of the environment. Hopefully, the lack of disclosure is only a temporary situation, and future carbon auctions will be more transparent than the emissions they offset.
Photo courtesy of _Krystian PHOTOSynthesis (wild-thriving) _ at Flickr.com.