The cost of carbon

Our view: First auction of power plant offsets shows cap-and-trade plan can work

October 2, 2008

The average Maryland consumer won't notice any immediate impact of the first greenhouse gas cap-and-trade auction on either his or her monthly utility bill or on the health of the planet. It doesn't spell the end to coal-fired power generation; the short-term effect on carbon emissions is probably going to be negligible.

But what last week'slandmark auction proved is that the philosophy of requiring polluters to pay to offset at least a fraction of the impact they are having on global warming is sound. And the $40 million raised, including $16.4 million for Maryland, means a great deal more money to finance conservation, alternative energy and related programs that can only accrue to the consumer's benefit.

For the owners of the power plants in question, it means the cost of doing business as usual has gone up. No doubt many companies, if not all, will seek to recover some portion of these new costs at the wholesale market, but that's hardly a sure thing.

Even if the new fees have some marginal impact on rates, consumers still come out ahead as the benefitsof conservation programs outweigh the potential impact. The return is greatest for consumers who participate in household energy audits, earn rebates for energy-efficient appliances or similar incentives for home improvements. But there's also a substantial benefit for all Marylanders. Without greater conservation, the state could face a significant energy shortage in several years. A portion of the earnings will also provide some relief for recent rate increases.

If there's a major shortcoming to the Regional Greenhouse Gas Initiative, it's the fact that it involves only 10 Northeastern states. It would be far better to have such auctions on a national level and see the U.S. offer more than hot air to the global warming threat. The next president would be wise to follow the Northeast's example and pursue such a reasonable, market-based strategy against the climate change threat.