Reports: Funding energy efficiency programs makes economic sense
Sacramento Business Journal by Melanie Turner, Staff Writer
As California policymakers discuss how to spend revenue generated by the state’s soon-to-be-launched carbon market, four related studies providing legal and economic analysis of different investment scenarios were released late Wednesday.
How the money is spent will have implications for the state’s economy and future, said F. Noel Perry, businessman and founder of Next 10, a nonpartisan nonprofit organization which commissioned the four studies.
“The major takeaways from these reports are that from an economic perspective funding new energy efficiency programs produce the greatest economic benefits,” Perry said in a news release. “From a legal perspective, these and other investments that further the goals of AB 32 are considered low risk. And, in terms of impacts on households, the research shows minimal impacts on electricity rates once the allowance value has been allocated.”
California is set to hold its first auctions to sell greenhouse gas emissions allowances in November.
One component of AB 32, the Global Warming Solutions Act of 2006, is a market-based emissions cap-and-trade program that will begin in 2013.
Signed into law by Gov. Arnold Schwarzenegger, AB 32 is the nation’s first legally binding policy aimed at reducing greenhouse gas emissions.
The report’s authors are experts from the University of California Berkeley, the UC Berkeley School of Law and Resources from the Future.
The first report examines 18 potential scenarios for annually allocating $100 million in revenue generated by the sale of emissions allowances to non-utility entities under the cap. The UC Berkeley study projects the effects of each spending option on job creation and revenues in 2020.
The report found that most spending options create a greater return than the initial investment, and energy efficiency projects offer the biggest boost in terms of jobs and revenue.
“The most pro-growth options would invest auction proceeds in expanding energy efficiency renewable technology at the household level,” the study’s author, UC Berkeley professor David Roland-Holst, said in a statement.
The second report examined whether courts may consider the auction proceeds to be a regulatory fee, some other fee, an unlawful tax or something else. The report then considered potential legal risks associated with each of the same 18 spending scenarios.
Generally, the report found that the same energy efficiency programs projected to give the economy the biggest boost — in the first study — are considered “low risk” on the legal front.
Spending revenue on items that do not support the goals of AB 32, such as to close budget gaps, is considered “high risk.”
The report’s authors concluded that the cap-and-trade revenue is not a tax.
“If the program is challenged in court, we consider spending scenarios that support the primary goal of AB 32 — cutting or mitigating greenhouse gas emissions — to be relatively ‘low risk’ from a legal standpoint,” co-author Dan Farber, a UC Berkeley professor, said in a statement.
The third report looks at the impact on consumer utility bills under different scenarios being considered by the California Public Utilities Commission . Next month, the commission is set to decide how to invest such proceeds in order to cut ratepayer costs.
The state’s cap-and-trade program will limit emissions from the electricity sector, and other emitters of carbon dioxide, beginning next year.
The report found that the allowance value created by the sale of investor-owned utility allowances can offset all or nearly all of the increased cost to ratepayers.
“There is a lot of misinformation circulating about the true impact of cap and trade on utility costs for California households,” co-author Dallas Burtraw, senior fellow at Resources for the Future, said in a statement.
The final report, prepared by RFF experts, aims to help Californians better understand the state’s carbon trading program, explaining what “allowance value” means and outlining key decisions still to be made.
Click here for more on all four reports at Next 10’s website.
Melanie Turner covers energy, environment, clean technology, agriculture, transportation, media and marketing for the Sacramento Business Journal.