Forgetting Something?

Isaac Smith thinks O'Malley's energy plan looks pretty good.

Key to this is something the Sun article only gets into halfway through: the fund will be paid for with revenue from the auctioning of carbon credits under the Regional Greenhouse Gas Initiative -- i.e. a cap-and-trade sytem designed to fight climate change. According to Bardon Farris of the MEA, the auction could generate about $100 million in revenue for the energy investment fund, but there's nothing said about what percentage of credits would be auctioned. RGGI rules require states to auction at least 25% of their credits, but states can go beyond that level -- New York, for one, is auctioning off all of its credits. In general, the more credits auctioned off, the better -- giving away credits for free leads to windfall profits for power companies, a problem that has severely hobbled Europe's cap-and-trade system.

The question, however, is how this will affect the ordinary Marylander. Certainly, attaching a price on carbon dioxide will drive up the per unit cost of coal and natural gas, two major sources of energy in Maryland. But if these energy conservation and alternative energy measures are aggressively implemented, then overall electricity costs may well stay constant. Indeed, in many cases, energy efficiency saves money. And as the Center for Budget and Policy Priorities has noted, revenue from a carbon credit auction could easily generate enough revenue to offset any cost increases for low-income households -- both in electricity and in indirect costs.

And if you still think consumers will get a raw deal out of this energy (really a climate change) plan, consider the much higher costs of doing nothing about it.

Isaac is right when he calls O'Malley's initiative a climate change plan not an energy plan. However, we disagree mightily on the supposed "higher costs of doing nothing." Then again you already knew that. Given that it would take 30 Kyotos to see even a barely detectable effect, and that the alarmists are losing traction on both the scientific and political fronts: I say don't just do something, stand there!

I also applaud Isaac's preference for returning revenue from any carbon credit auction to low-income house holds to offset the cost increases. However, he must convince his lefty compatriots at MaryPIRG and other greens who want that revenue funneled into conservation/efficiency programs. Like Isaac said this is a climate change plan, straight out of the alarmist produced Maryland Commission on Climate Change, not an energy plan. The MCCC wants to take that revenue and put it into "education programs" on climate change. Also, I wish you good luck convincing this spendthrift legislature to give money back the public.

When Isaac claims that, "these energy conservation and alternative energy measures are aggressively implemented, then overall electricity costs may well stay constant." He is forgetting to account for the policy of decoupling, which ensures that utility companies do not lose revenue when customers conserve their energy use. That is, no matter how much you conserve, you will be charged as if you were not using less energy.

Like I mentioned yesterday, you will be paying higher costs from to the cap and trade scheme to conserve energy so that the utility company can charge you the same rate as if you were not conserving.

Isaac also ignores the fact renewable energy sources like wind and solar are extremely expensive to produce and transmit. The cost of state mandates for utility companies to purchase higher levels of wind/solar energy will also be passed on to consumers.