Efficiency’s Role in Carbon Cap-and-Trade

Aug. 28, 2008
By Elisa Wood August 28, 2008 We hear a lot about how efficiency will play an increasingly important role as the United States undertakes efforts to reduce carbon dioxide emissions. But how does that play out in a practical sense under cap-and-trade programs? The Offset Quality Initiative provides insight in a new white paper on […]

By Elisa Wood

August 28, 2008

We hear a lot about how efficiency will play an increasingly important role as the United States undertakes efforts to reduce carbon dioxide emissions. But how does that play out in a practical sense under cap-and-trade programs?

The Offset Quality Initiative provides insight in a new white paper on greenhouse gas offsets: http://www.pewclimate.org/docUploads/OQI-Ensuring-Offset-Quality-white-paper.pdf

A cap-and-trade program, like the Regional Greenhouse Gas Initiative (RGGI), caps emissions at a certain level in a geographic location, and then lets players use various trading mechanisms to operate within the cap. See Lisa Cohn’s blog in August 21 issue of Energy Efficiency Markets: http://energyefficiencymarkets.wordpress.com/2008/08/21/eastern-states-ready-for-big-ee-boost/

One of those mechanisms is an offset, which acts as a counterbalance to reduce overall greenhouse gases. More specifically, an offset represents emissions reduced at one site to make up for emissions produced elsewhere.

Offsets can be bought and sold in the form of credits. A commercial building owner might install efficiency improvements that reduce the amount of carbon dioxide the building produces. The owner then translates the emissions reductions into offsets under standards set by the cap-and-trade program. A power plant might buy the offsets to ‘reduce’ its emissions. The plant does not actually cut back on what it emits, but instead piggybacks on the building’s reductions. Overall emissions fall, so the cap-and-trade program achieves its goal.

RGGI, the nation’s first cap-and-trade program set to take effect next year in ten states, allows certain efficiency measures to qualify as offsets.

The program accepts offsets from efficiency measures that reduce or avoid carbon dioxide emissions created by natural gas, oil or propane in commercial or residential buildings. The building owner might improve equipment and systems for heat and hot water, install energy management systems, improve the building envelope or engage in certain other activities. (See RGGI’s model rule, page 132-145, http://www.rggi.org/modelrule.htm.)

Of course, offsets are just one way efficiency markets benefit from today’s focus on reducing carbon dioxide emissions. Even where no cap-and-trade programs exist, policymakers see energy efficiency as a key way to address climate change. The fewer electrons we use, the less power plants run; the less they run, the lower our emissions are. Thus, many cities and states are increasingly focused on larger policies and incentives that encourage businesses and homeowners to undertake efficiency measures.

Programs like RGGI help spur such thinking. Expect growing talk nationally about energy efficiency and its importance in the coming weeks as RGGI makes the news with its first market auction September 25.

Visit energy writer Elisa Wood at www.realenergywriters.com and subscribe to her free EE Markets newsletter and podcast.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded RealEnergyWriters.com, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

“For an especially readable voice in the industry, the most consistent interpreter across these years has been the energy journalist Elisa Wood, whose Microgrid Knowledge (and conference) has aggregated more stories better than any other feed of its time,” wrote Malcolm McCullough, in the book, Downtime on the Microgrid, published by MIT Press in 2020.

Twitter: @ElisaWood

LinkedIn: Elisa Wood

Facebook:  Microgrids

Only through Standardization Can Microgrids Accelerate the Energy Transition

Jan. 18, 2024
Jana Gerber, North America microgrid president at Schneider Electric discusses how standardizing microgrids will accelerate the energy transition.

MGK_PowerSecureCover_2021-07-28_7-54-20

‘Advanced Microgrids’ Provide Advanced Solutions

This white paper from PowerSecure looks at how advanced microgrids, designed with an understanding of the dynamics and evolution of the modern power grid, can create extraordinary...