McKinsey & Company recently highlighted 78 approaches to increasing energy productivity and reducing greenhouse gas emissions, half of which save money. Most of the consulting firm’s recommendations involve using electricity and thermal energy more efficiently.

The elephant in the room, however, is the highly inefficient production of electricity and thermal energy…

Some 36 states require their electric utilities to obtain increasingly larger shares of power from renewable and efficient resources, yet a national Renewable Electricity Standard (RES) floundered recently in the United States Senate because of opposition from utilities and southeastern lawmakers who felt their region does not have sufficient solar and wind resources to meet a 15 percent requirement by 2020. Since such opposition will be hard to overcome in 2008, should RES advocates reconsider their strategy?

This is the second in a five-part series. Download pdf of full series.

First, a note to non-carbon-wonks: “Additionality” is a term of art in the world of carbon policy. It describes the degree to which a given activity causes additional carbon reductions — the idea being that we shouldn’t pay for carbon reductions that were going to occur anyway. As a fantastic oversimplification, suppose your car broke down and you had to ride your bike to work. The principle of additionality says you shouldn’t be paid for the carbon you didn’t emit. (You would have ridden anyway — what choice did you have?) But if there’s an increment of money that would tip you over into getting rid of your car and always riding your bike, that’s additional.

Theoretically, great idea. Practically? Stupid.

This is the first in a five-part series. Download pdf of full series.

Carbon policy is close to getting the macro right, but plenty of smaller decisions remain

There is a wide gulf between those details of carbon policy that are theoretically optimal and those which actually impact carbon reductions. Or, to be blunt, those that come up in our weekly staff meetings as actually affecting our decision to consider potential carbon reduction projects and those which simply elicit groans around the conference room of the “great intent, why did they screw up the execution?” variety.*

From our perspective, the good news is that our policy does finally appear to be moving not only toward putting a price on CO2 emissions, but getting the really important details (like auction vs. allocation) right. The bad news is that most of the other details are still wrong….

How will the auction vs. allocation debate affect power prices?

Last January, Rep. Ed Markey (D-Mass.) convened hearings on the ways allocation of CO2 permits under a cap-and-trade system will impact power prices and utility profit margins. The short version, drawn from the evidence of Kyoto and other systems that have given credits away for free, is that while free allocations lower power prices in theory, in reality prices rise just as much as they would otherwise — but they increase margins for exempt generators (i.e., coal plants).

Since then, there has been a growing chorus from (coal-heavy elements within) the electric sector arguing that utility regulations compel them to pass along any operating savings to the rate payers — and therefore, that free allocations really do ensure lower power costs.

So on the one hand, we have the paper trail from Kyoto, and on the other hand, we have what would appear to be a pretty robust theory based on modern utility law. Who’s right?

The short version: facts on the ground trump theory. The longer version is below the fold.

Our command-and-control air-pollution regulations are working against our climate policy

With the climate policy discussion now settling into lines of cap & trade vs. carbon tax, and allocation vs. auction, it has implicitly moved beyond the top-down, command-and-control models favored by early plans (and in particular the multi-pollutant, “4P” bills).

This market focus is a good thing, on balance. What isn’t good is that it’s only being applied to greenhouse gas pollution…