The following makes perfect sense - to the government. Let companies that generate no carbon emissions now be treated like they do. Sell those 'emission rights' to companies that are heavier polluters in an auction format, highest bidder wins. Force companies to participate and bid each other up by imposing penalties if they exceed their allowed emissions. Net effect on actual pollution - none. Net effect to the government? Billions. Including a new work force to oversee it all. Then they can use the money in 'awareness' programs to promote energy efficiency. Seriously, are any of you not aware there is pollution by now? Will more television ads help? The only thing more ridiculous would be subsidizing appliances that claim to be lower energy. Government officials (yes, including Al Gore) promoting ethanol are how we got in that mandate/subsidy mess.

A University of Maryland-led research team says it's the way to go nonetheless. 'Investing' revenues (estimate for this first round - $40 million) from the Regional Greenhouse Gas Initiative (RGGI) cap-and-trade auctions will be great, for everyone except people

The new study concludes that:

  • Investing auction revenues in awareness programs may keep the state on track to meet its energy-use reduction targets.
  • Prices won't go down but consumers will save a little money because they'll be told every time they turn on the television to be cold in the winter and hot in the summer
  • Net gain - the government.

The University of Maryland's Center for Integrative Environmental Research (CIER) produced the study along with a research team from Resources for the Future, The Johns Hopkins University, and Towson University.

As a member of the 10-state RGGI pact, the state is allocated an annual budget, or a cap, for carbon dioxide emissions allowances. By auctioning these off to energy producers, the state raises money, some of which must be used to benefit consumers.

I guess forcing the state to use state money to benefit people in the state is something we all just have to live with.

The research team created a numerical model that compared the impact of investing half versus all auction revenues in efficiency improvements against a low-investment baseline of one-quarter. These scenarios assume that Maryland will sell off all of its allowances to producers, rather than giving some away.

The full CIER report is available online: http://cier.umd.edu/RGGI/index.html.

SPECIFIC FINDINGS

Among the CIER study's findings:

  • CUTS IN ELECTRIC USE: Devoting all revenues toward energy efficiency could cut electricity demand and consumption an additional six percent when compared to the minimum investment strategy, almost entirely by reducing imports from out-of-state generators.
  • CONSUMER SAVINGS: Devoting more of allowance revenues to efficiency will modestly reduce the expenditures on electricity by Maryland consumers. This is due to the combination of small effects on electricity prices and reduced usage. Maximizing auction investments could cut electric bills up to seven percent more than the minimum investment strategy. For the average household, this translates into an additional savings of roughly $72 per year by 2020.
  • GENERATOR PROFITS: Maryland electricity generators would see substantially less than a one percent drop in revenues, regardless of the investment strategy. Reductions in energy usage would primarily translate into a drop in imports from out-of-state generators. Also, generators will tend to pay less at auction as demand drops (see below).
  • AUCTION REVENUES DECLINE: Investments in efficiency will ultimately drive down revenues produced by the auctions. As consumption drops, so will the price generators will be willing to pay at auction. Maximizing investment may translate into an additional nine percent drop in auction revenues compared to the minimum investment level.
  • OVERALL POSITIVE ECONOMIC IMPACT: Maximizing investments in energy efficiencies creates the greatest economic benefit to Maryland in terms of gross state product, employment and wages. Investing 100 percent of auction revenues would translate into an additional half a billion dollars by 2020 and an additional 4,300 jobs when compared to the minimum investment scenario. While positive, these numbers represents a small portion of the total Maryland economy: less than .1 percent.
  • IMPACT ON NEIGHBORS: Some of these benefits may spill over to other RGGI members and other nearby states on the same energy production grid.

This is the second RGGI study produced by the University of Maryland-led team. In 2007, they forecast the likely effects of Maryland joining RGGI. This new report builds on their previous work. http://www.newsdesk.umd.edu/sociss/release.cfm?ArticleID=1394

METHODS

Three models were employed by the research team to determine a variety of impacts on the economy and the electric power grid. Included in the study were effects within other RGGI states and related areas.

By using three separate models, the research team was able to sharpen and customize its projections and cover the broad array of effects and geographical areas to be studied. Three subcontractors provided projections based on their proprietary models.

HAIKU MODEL: A national economic simulation model of electricity markets based on market equilibrium concepts. Haiku was created by Dallas Burtraw, Karen Palmer and Anthony Paul from Resources for the Future, a nonprofit and nonpartisan organization that conducts independent research on environmental, energy, and natural resource issues. This model helped to answer questions such as how will Maryland's electric power prices change and how will the fuel mix for power generation change at different levels of energy efficiency investment. This model also provided data for the other researchers.

JHU-OUTEC: "Johns Hopkins University-Oligopoly Under Transmission and Emissions Constraints" was developed by Ben Hobbs and Yihsu Chen. It is a regional market equilibrium model for the mid-Atlantic power generation market. It is designed to account for the possible exercise of market power in the generation sector. By incorporating details about the region's electric transmission grid, the model helped assess how market power of generation companies could be affected by the energy efficiency investment scenarios.

IMPLAN: Towson University used IMPLAN, an input-output model, to estimate statewide changes in employment levels, among other important economic indicators. Daraius Irani of Towson's Regional Economics Study Institute (RESI) and Jeffrey Michael formerly of Towson University measured statewide economic and fiscal impacts of the investment scenarios.