A closer look at the Waxman-Markey allocations

May 26, 2009

John Kemp has a very handy summary of exactly how emissions allowances are going to be allocated under the Waxman bill. And it turns out that while only 15% of the allowances are certainly going to be auctioned — at least in the first instance — another 14% or so are going to go towards pushing clean-energy objectives. As Kemp notes, this is

in effect granting valuable, saleable rights to companies promoting new technologies such as carbon sequestration and storage, energy efficiency and renewables, and clean vehicle technologies.

We’re talking a lot of money here: the “clean vehicle technology” line item gets 139 million tons of emissions allowances in 2012 alone, on top of 440 million tons slated to go to “energy efficiency and renewables”. Your guess is as good as mine when it comes to the secondary-market value of emissions rights in 2012, but we’re talking billions of dollars annually here.

I like the way that this clean-technology subsidy rises is essentially tied to the successful passage of Waxman-Markey — that’s a good way of aligning incentives. But isn’t the whole point of a cap-and-trade bill that it provides a way to monetize clean energy even without dedicated subsidies? And if we go down this road, aren’t we going to get even more sillybuggery surrounding the reclassification of various forms of energy as “clean” or “renewable”?


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