| Sourced From Statesman Journal |
With policies to reduce greenhouse gas emissions high on the federal and state environmental and economic agendas, lawmakers are going to be besieged by all kinds of public and private interests seeking “credit” for their efforts to reduce their own carbon “footprint.”
Before lawmakers start handing out these credits, and their associated costs, they need to make sure that they are actually getting carbon reductions in return.
The value of a credit for carbon reduction is that it can be bought and sold and applied to offset emission requirements. If an electric utility is limited in how much carbon it is allowed to emit, it can purchase credits from someplace else and use the associated reductions to meet its target.
The problem is determining whether an activity wouldn’t have occurred anyway and whether it results in any actual reduction of carbon emissions. If it doesn’t meet these two tests, then we won’t be getting what we pay for.
To understand this, it is worthwhile to distinguish between carbon emissions avoided and actual reduction of carbon emissions.
Customers can reduce their own impact on carbon reductions through energy-efficiency measures. This reduces the overall supply requirements of the utility. But those reductions are exceeded by new load from new homes and businesses. It’s an irony of the carbon dilemma that the carbon emission benefits of your energy efficiency efforts can be wiped out with the addition of an energy-intensive solar panel manufacturing plant.
Some new emissions have been avoided because energy efficiency reduced load growth. But no actual emissions were reduced because the total load growth was greater than the amount of gains from energy efficiency.
This doesn’t mean there isn’t high value to doing cost-effective energy efficiency. Cost-effective means that it is cheaper than adding higher-cost generation resources, so it lowers the overall costs of the utility supply for which all ratepayers have to pay. The efficiency means a lower bill to the consumer. And improvements to a home or business facility add value to that structure.
Furthermore, the avoidance of new carbon emissions means that the utility will have fewer emissions that it eventually has to reduce in order to meet any standards. That translates into lower costs.
Avoiding new emissions to meet load growth reduces the intensity of carbon emissions per kilowatt hour of electricity produced. However, the carbon reduction schemes don’t set targets based on this measurement. Instead they are based on actual tons emitted below existing levels.
Many states, like Oregon, require electric utilities to have a certain amount of renewable energy in their supply portfolio, and there’s a system of renewable energy credits that can be used to meet those standards. These are essentially certificates that can be unbundled from the electricity itself and sold with certifying bodies making sure they aren’t double counted. But the attribute here is renewable energy, not carbon reduction.
Similarly, there are ratepayer-funded programs to encourage cost-effective energy efficiency.
Meeting the renewable portfolio standard and securing all cost-effective energy efficiency are already embedded in the utility operations. They are the business-as-usual scenario. Utilities will be able to reduce their actual carbon emissions only if they go beyond these levels to the point that new renewable supply and energy efficiency savings result in zero or negative load growth.
When considering granting carbon credits, the Legislature should consider what would happen if the renewables meeting the portfolio standard and cost-effective energy efficiency qualified for credits and could be sold as offsets to any required reductions. There would be no actual reductions, but ratepayers would have to pay for buying the credits.
A market for carbon reductions has to have integrity. If credits or offsets are granted for actions that would otherwise occur and that do not result in any actual reduction from the current level of carbon emissions, then integrity becomes a casualty. So does the environmental objective we’re trying to reach.
