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Markets for renewable energy and pollution emissions: Environmental claims, emission-reduction accounting, and product decoupling

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  • Moore, Michael R.
  • Lewis, Geoffrey McD.
  • Cepela, Daniel J.

Abstract

Green electricity generation can provide an indirect route to cleaner air: by displacing generation from fossil fuels, green electricity can reduce emissions of CO2 and conventional air pollutants. Several types of voluntary markets have emerged in the United States to take advantage of this relationship, including green electricity programs, carbon offsets, and renewable energy certificates. At the same time, regulators are favoring cap-and-trade mechanisms for regulating emissions. This paper describes the appropriate framing of environmental claims for green electricity products. We apply an accounting framework for evaluating claims made for capped pollutants, with entries for emissions, avoided emissions due to green electricity, and unused emission permits. This framework is applied in case studies of two major electric utilities that operate with green electricity programs and capped pollutants. The cases demonstrate that the relative magnitude of "unused permits" and "emissions avoided" is a key relationship for evaluating an emissions reduction claim. Lastly, we consider the evolution of the green electricity marketplace given the reliance on cap-and-trade. In this setting, pollution-emission products could be decoupled from one another and from the various green electricity products. Several positive consequences could transpire, including better transparency of products, lower certification costs, and more product choices.

Suggested Citation

  • Moore, Michael R. & Lewis, Geoffrey McD. & Cepela, Daniel J., 2010. "Markets for renewable energy and pollution emissions: Environmental claims, emission-reduction accounting, and product decoupling," Energy Policy, Elsevier, vol. 38(10), pages 5956-5966, October.
  • Handle: RePEc:eee:enepol:v:38:y:2010:i:10:p:5956-5966
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    References listed on IDEAS

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    1. Matthew J. Kotchen, 2006. "Green Markets and Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 816-845, August.
    2. Paul L. Joskow & Edward Kohn, 2002. "A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-35.
    3. Cullen, Joseph, 2008. "What's Powering Wind? Measuring the Environmental Benefits of Wind Generated Electricity," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6027, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Stephen P. Holland & Michael R. Moore, 2012. "When to Pollute, When to Abate? Intertemporal Permit Use in the Los Angeles NOx Market," Land Economics, University of Wisconsin Press, vol. 88(2), pages 275-299.
    5. Matthew J. Kotchen, 2009. "Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets," Economic Journal, Royal Economic Society, vol. 119(537), pages 883-899, April.
    6. Palmer, Karen & Burtraw, Dallas, 2005. "Cost-effectiveness of renewable electricity policies," Energy Economics, Elsevier, vol. 27(6), pages 873-894, November.
    7. Kotchen, Matthew J. & Moore, Michael R., 2007. "Private provision of environmental public goods: Household participation in green-electricity programs," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 1-16, January.
    8. Bird, Lori A. & Holt, Edward & Levenstein Carroll, Ghita, 2008. "Implications of carbon cap-and-trade for US voluntary renewable energy markets," Energy Policy, Elsevier, vol. 36(6), pages 2063-2073, June.
    9. Palmer, Karen L. & Burtraw, Dallas, 2005. "Cost-Effectiveness of Renewable Electricity Policies," Discussion Papers 10845, Resources for the Future.
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    Citations

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    Cited by:

    1. Daniel T. Kaffine & Brannin J. McBee & Jozef Lieskovsky, 2012. "Emissions savings from wind power generation: Evidence from Texas, California and the Upper Midwest," Working Papers 2012-03, Colorado School of Mines, Division of Economics and Business.
    2. Cech, Marek, 2016. "Panel regression analysis of electricity prices and renewable energy in the European Union," MPRA Paper 74601, University Library of Munich, Germany.
    3. Daniel T. Kaffine, Brannin J. McBee, and Jozef Lieskovsky, 2013. "Emissions Savings from Wind Power Generation in Texas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).

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