Capping carbon does not create the policy structure required for sustained growth of a renewable energy industry. Renewable energy - restricted in this case to solar and wind - will only be developed to any scale in the United States if we implement a national Renewable Portfolio Standard (RPS). Our policy dialogue needs to acknowledge the difference between pricing carbon and growing an American renewable energy industry.
Discussions on capping carbon emissions focus on limiting the amount of carbon dioxide that can be emitted into the atmosphere. The policy formation and enforcement of the cap can come in different forms, but its aim is to restrict and ultimately lower the amount of carbon emitted. The argument is that by placing a cap on, and establishing a price for, carbon, industries will have an incentive to develop new processes that emit less carbon. Ostensibly, one such industry would be the power sector, where increased carbon costs would make low-carbon fuels and renewable energy more cost-competitive and therefore appealing.
Unfortunately, this is not the case as it applies to renewable energy. Fundamentally, a price on carbon creates an incentive to use the next cheapest form of low-carbon fuel - which may be solar, wind, nuclear, or most likely, natural gas. While carbon emissions from natural gas are approximately 43% less than coal and 30% less than oil, it still emits a significant amount of greenhouse gases into the atmosphere.
Recent natural gas findings have given the U.S. more than a 100-year supply utilizing current technology. Natural gas has grown from providing 9% of the fuel used for U.S. electricity generation in 1991, to more than 20% in 2009, as domestic natural gas prices have dropped and supplies have grown. Interestingly, this growth has occurred without a price on carbon. Instead of incentivizing renewable energy development, a price on carbon will just shift energy consumption towards natural gas.
By contrast, states that have implemented the RPS have been successful in boosting their renewable energy sectors. By mandating that utilities procure a given percentage of their electricity from renewable sources, states' use of the RPS has encouraged the deployment of clean energy solutions. Thanks in part to these RPS', the wind industry now accounts for close to 2% of total U.S. energy generation, up from only ~1.3% in 2008.
Although the structure and nature of the incentive program can vary widely, the RPS creates a degree of reassurance that allows the private sector to make medium-term investments in a range of renewable technology. The certainty provided by an RPS is the only way to develop our renewable energy capacity. Using a price on carbon to drive our renewable energy industry will incentivize the use of the wrong technologies and will fail to create this market certainty.
Sadly, the collapse in legislative discussions for a comprehensive climate change bill this summer relegated possible American climate legislation to the future. However, this gives us the opportunity to dispel the confusion surrounding our intentions and our policies. Let us clearly and comprehensively articulate a single policy objective and follow through on it.
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