Linking Carbon Markets
The government of Quebec recently announced a decision to harmonize its cap-and-trade system for greenhouse gas emissions with California’s new program. The markets, which will be connected in the spring, will hold their first joint auction in the fall of 2013.
In new research, three authors from Duke University—RFF Board Member Richard G. Newell, RFF University Fellow William A. Pizer, and Daniel Raimi—note that linking carbon markets can have various benefits, such as achieving global cost savings and lowering domestic compliance costs, among others. However, they caution that there are challenges to linking markets, such as “the distributional consequences of higher (or lower) prices.”
Wind and the Production Tax Credit
Last week, the American Wind Energy Association (AWEA) released a proposal to “phase out the production tax credit over a period of six years.” Although the Office of Management and Budget estimated the cost of the program at “$14 billion over the next 10 years,” an AWEA spokesperson said that it “pays for itself in local, state, and federal taxes over the life of the credit.”
However, in a new RFF discussion paper, Harrison Fell (Colorado School of Mines), along with RFF’s Joshua Linn and Clayton Munnings, find that “Subsidies that are financed out of tax revenue, such as the investment tax credit or the production tax credit, result in greater electricity consumption. These policies would reduce emissions more if they were financed by charges to electricity consumers.”
