Northwest debate on Cap and Trade reflects national issue

Implications: The basis for awarding carbon credits will determine if we take steps to clean existing emissions or move to new technologies in response to global climate issues. If credits are based on production, change will be incremental as will the associated cost impacts. Awarding credits based on system load will encourage development of non-fossil generation sources and accelerate carbon reduction.

Analysis:   The Puget Sound Business Journal article discusses the local implications in the ongoing debate as to where carbon cap and trade limits will be set and how carbon credits will be allocated. This is a regional debate with national policy implications The balance point between awarding offset credits based on production vs. load will determine how aggressively fossil based generators will need to move to reduce emissions. If the majority of the credits are awarded to fossil based producer the transition to lower emissions will be slowed and the impacts on the cost of generation will be more limited.

If credits are awarded based on load it will have implication on how aggressively non-fossil based renewable energy generators can bring new facilities on line. If credits are based on megawatts generated or customer served, utilities will be encouraged to seek non-fossil based sources of generation such as hydropower, solar, wind etc. Providing new generation from these non-fossil sources not only will meet load growth without the need for additional carbon credits, it will also provide an additional revenue stream in the form of tradable carbon credits. Non-fossil based generators will have the potential to sell carbon credits regionally and eventually in a national trading system.

These credits will provide the incentive to develop available hydro potential that is not currently economic along with other intermittent renewable forms of generation such as wind and solar. Expansion of these renewable forms of energy will make regions that are early adopters more attractive for growth and new industry.

The next Congress will struggle to balance the regional economic interest with the need to respond to a global climate issue. The details of that balance will determine the rate at which the U.S. moves from fossil based generation.