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The revised Clean Air Act could result in more complete protection from acid rain, smog, and utility toxics, and at least a first step toward climate protection. It may also be the policy event by which energy policy will be intertwined with air quality more than ever before, this time on a global scale.
The debate over the next CAA could be a major opportunity for renewable industry—if it chooses to play. All the recommendations made here require the involvement of renewable energy advocates and firms, as well as sympathetic environmental groups and government officials, early in the policymaking process.
Recommendations for Federal Policy Changes
Several activities could correct the currently dysfunctional renewable energy elements of the SO2 trading system, and to popularize the concept of renewable energy set-asides through the ozone-NOx State Implementation Plans. Also, the renewables industry must secure a place at the table when the parameters on carbon pollution regulation are set.
The following recommendations are intended for air regulators, legislators and the renewable energy industry if they are considering ways to craft air pollution regulation to accord direct benefits to renewable energy:
Conventional Air Pollution Control Programs
- Continue and expand the EPA program to encourage state efforts to adopt renewable set-asides in state and regional emissions trading programs to control ground-level ozone, attain particulate matter standards, and improve visibility in national parks.
- Reduce the sulfur dioxide cap to the level needed to protect human health and sensitive ecosystems fully and then, in a second step, reduce the cap again to reflect objectives for renewable energy development The "modified" cap could be implemented through a generation performance standard with a direct allocation of allowance to renewables, or set-aside allow-ances for renewables. Alternatively, Congress could fix the SO2 cap-and-trade system to cure the limitations on who can earn credits and could extend the period in which credits can be earned.
- Replace pollutant-by-pollutant emission credit systems with a multipollutant trading paradigm that merges allocation, verification, and tracking systems for all pollutants in order to reduce administration and transaction costs.
Climate Change
- Ensure that any CO2 emissions trading scheme contains a cap that is tight enough to stimulate markets for renewable energy resources (either domestic or international) and that, in setting emission caps, lowers the tonnage allowed from fossil fuel generators by an amount based on projected electric power generation from renewables ("modified cap").
- Make renewables eligible to earn "early reduction" credits in any U.S. early reduction credit bill.
- Create a specific allowance allocation award or set-aside for renewables in any full-blown carbon cap-and-trade system.
Recommendations for State Policy Changes
- Establish an allowance set-aside for renewables in state plans designed to implement the NOx SIP Call, visibility, and ozone and particulate nonattainment programs.
- Experiment with multipollutant trading mechanisms.
- Develop, in conjunction with EPA, low-cost systems to verify eligibility for emission allowance allocations to renewables.
- Experiment with assigning emission allowances for aggregations of small and distributed renewable energy resources (e.g., rooftop solar photovoltaic systems, small wind turbines).
- Encourage EPA to establish pilot programs with cooperating states that combine implementation of NOx trading programs with voluntary state climate change programs.
- Establish a preapproval process to provide project applicants with more certainty about the incentives to be awarded.
Steps Toward the Goal
- Draft legislative language to achieve congressional objectives and to fit into a variety of possible vehicles, including corrections to the acid rain SO2 trading reserve for renewables, modifications to pending "early reduction" bills, creation of a multipollutant trading mechanism for renewables, and some role for CO2 trading in any bill implementing future treaties on climate change.
- Form coalitions among a variety of renewables industries to seek sponsors and cosponsors of bills and to work with environmental groups.
- Draft policy papers on the proposed changes, providing a more detailed rational and factual analysis of renewable energy's role in a generation performance standard, or alternatively the size of the requested set-asides, and an estimate of the eco nomic, health, and environmental benefits of the policy changes.
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