Link: http://www.nytimes.com/2008/03/15/opinion/15bowles.html

Here are the first 4 paragraphs of an excellent NYT op-ed by Ian Bowles, the secretary of energy and environmental affairs for Massachusetts.

Several things caught my eye … I’ll write about them below.

LATER this year, Massachusetts and other Northeastern states will hold the nation’s first auction of greenhouse gas emissions permits.

Auctions make sense. When Europe first tried regulating greenhouse gases under a cap-and-trade program, in 2005, it gave away, or “grandfathered,” emissions permits to its power generators, which made modest changes in their operations and then sold the permits to others at a premium. The result: windfall profits for the power companies. Europe is now switching to emissions auctions and plans to finance programs promoting climate protection, economic growth and energy security with the proceeds.

These Northeastern states, members of the Regional Greenhouse Gas Initiative, stand to raise hundreds of millions of dollars annually that can be used to help residential and business customers make the equipment upgrades that will allow them to live and work with less electricity. This will be a welcome investment. But imagine how much more money such auctions could raise if they were conducted by the federal government, and how much we would help the environment if a big chunk of the proceeds were devoted to reducing energy use and curbing emissions in all 50 states.

By setting a national cap on greenhouse gas emissions and running a national auction for emissions permits under the cap, the federal government could accrue tens of billions annually. With that money, Washington could offer irresistible financial incentives for the states to do what only states have the authority to do. It is, after all, the states that regulate utilities, determine the locations of power plants, dictate building codes and make land-use decisions. That means the low-hanging fruit for emissions cuts is to be found in the states’ orchards.

Congress should take note: this market-based, technology-neutral auction is a model for how to encourage power generators to limit their emissions. And it could provide the foundation for a federal-state partnership to revolutionize energy use. …

While I’m not persuaded that cap and trade is the way to go, I am in favor of auctioning off emissions permits, particularly in comparison to just giving those permits away, in proportion to the amount of pollution various facilities currently produce. I assume that these are not permits-to-pollute-forever, but are time limited in some way.

I’m glad to hear discussion of the revenue possibilities of something we’ve not previously treated as a revenue source, as well as of the incentives this creates. Ten billion here, ten billion there – annually – and sooner or later, we’re talking about real money! And real incentives not to pollute the air.

And this piece also speaks to the importance of reducing energy use. I don’t think enough thought has been given to what it is going to take to do that on a large scale. But I will argue on this blog that we can do it, reasonably painlessly, though adjusting our incentives – and that in the absence of those adjustments, we are not going to get very far. Lots of talk, maybe, but to little effect.