Assuming we cap carbon emissions, what’s the added benefit of enacting a federal RPS?
Posted by Rich Sweeney on February 26, 2009
I’ve been really busy since I got back from Thailand, which is why I haven’t been posting. Now I’ve got a cold and don’t really have the mental energy to come up with anything coherent or insightful. So I figure I’ll take this opportunity to ask CT readers a question, the one in the title.
I’ve been confused about this for a long time and am hoping someone can explain it to me. There’s been a lot of chatter recently about Obama’s apparent attempt to sneak a cap and trade program in through the back door of the budget. However, I’ve heard from multiple sources that the House Dems want a national renewable portfolio standard in place before a carbon cap is implemented.
As far as I know, the reason we want to promote renewable electricity is to reduce our carbon emissions. Since simply enacting an RPS will not guarantee that we reduce emission to the desired level, some sort of carbon price will be necessary anyways. If the RPS is less than or equal to the percentage of renewable electricity generated after carbon policy is in place, then the renewable credit price (REC) will go to zero, and the whole program will have contributed nothing more than red tape.
On the other hand, if the RPS still binds after we cap carbon, it will have the effect of increasing electricity prices without further reducing carbon emissions. Unless the CO2 permit price goes to zero (EIA estimates of L-W were in the $20 range), the emissions cap acts as both a floor and a ceiling on emissions.
So my question is, simply, why do we want an RPS if we know we need to price carbon anyways?