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Cap and Trade not Enough for Climate Fight, Paper Says

A new white paper argues that cap-and-trade programs by themselves will not result in emissions reductions significant enough to halt global warming; the paper's authors say ESCs are a promising, and complementary solution.

Energy efficiency is a critical means to meeting a variety of policy goals, according to a new white paper released by the Center for Resource Solutions and the Henry P. Kendall Foundation.

From increasing energy security to improving the standard of living of the poor to decreasing the human impact on the environment, the report's authors, Dr. Jan Hamrin, Dr. Ed Vine, and Amber Sharick, say the best short-term strategy for making significant and rapid GHG reductions is to launch a major energy efficiency program.

The paper, "The Potential for Energy Savings Certificates as a Major Tool in Greenhouse Gas Reduction Programs," examines the status of energy savings certificates in Europe and the United States and assesses how well they might be in fighting global climate change. Although energy efficiency measures have been suggested as a critical component for greenhouse gas reduction for years, this report is the first investigation of the potential for ESCs to help boost energy efficiency's contribution to climate change mitigation.

The report suggests that ESCs are a promising way to complement cap and trade emissions-reduction programs. Arguing that GHG cap and trade programs alone do not usually result in either energy efficiency or renewable energy, there are at least four ways that ESCs can be used to both reduce energy use and boost a cap and trade program's energy efficiency:
  • As a method for verifying compliance with an energy savings target (such as an Energy Efficiency Portfolio Standard (EEPS) program);

  • As a trading device (allowing ESCs to be bought, sold or traded) for parties required to meet an energy savings or GHG obligation;

  • As a mechanism to demonstrate eligibility for tax incentives, subsidies or carbon offset programs; and

  • Incorporating all of the above, wherever ESCs can be created and traded within a larger allowance, certificate or project credit trading regime where the ESC benefits are equal to or exceed their incremental costs.
In addition to these suggestions, the authors of the paper lay out six elements of a successful and effective energy efficiency program that uses ESCs: Transparent rules and procedures; little or no proprietary information is withheld from the public; a measurement and evaluation system that ensures real, measurable, verifiable, and additional energy savings; independent third-party auditing for verification and compliance; a process for issuing and tracking certificates that avoids double counting; and a system for detecting and penalizing noncompliance.

The report also includes a roadmap strategy that lays out the issues and possible solutions for implementing energy savings certificates as a tool to support national energy efficiency programs, energy savings portfolio standards, and as a tool for attracting financing for hard-to-reach energy efficiency measures.

The full report is available from the Kendall Foundation's website.

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