The best way to use California's carbon windfall

New studies show that using revenue from California's landmark carbon-trading system for energy efficiency and residential renewable energy programs would yield the biggest bang for the buck, and have the strongest chance of surviving a legal challenge.

Nonprofit group Next 10 commissioned studies to determine the best use of proceeds from the cap-and-trade program effective 2013. Most of the models end up generating new revenue for the state through economic growth and new jobs, with programs that improve residential lighting and make other energy-slashing upgrades generating the most. Here is a link to the report that sums up the findings.

University of California, Berkeley, and Resources for the Future examined ways state officials could spend money - the group used the sum of $100 million although the real figure could be higher - raised by the sale of emissions allowances to non-utililty entitites.
The teams modeled scenarios ranging from giving the money to taxpayers in the form of rebates to creating green lending programs to using it on portions of the high-speed rail project. A rebate program would be the most risky legally because it doesn't directly support the greenhouse gas reduction goals of AB 32, the researchers determined.

Energy-efficiency projects, however, could create many more jobs and pump more money into state coffers, depending upon the program. The strongest potential and least legal risk appear to be with programs that fund energy upgrades in lower to middle-income households.

Funding components of high speed rail with carbon-trading revenue would create fewer jobs and less money for the state. It also would be more risky legally, the analysts discovered.

"The most pro-growth options would invest auction proceeds in expanding energy efficiency and renewable technology at the household level," said the study's author, University of California professor David Roland-Holst.

This San Francisco Chronicle story and  this Sacramento Business Journal piece go into more detail about cap and trade, including other possible impacts - and offsets  - on consumers.

The carbon auction is new, so predicting the outcome of legal challenges is itself a challenge. The authors concluded, however, that the cap-and-trade program was not intended to raise revenue, and thus is not a tax. "If the program is challenged in court, we consider spending scenairos that support the primary goal of AB 32 - to cut or mitigate greenhouse gas emissions - to be relatively 'low risk' from a legal standpoint," said co-author and law professor Daniel Farber of UC Berkeley.

The conclusions of the research don't surprise us. Our nonprofit focuses much of its work on energy-efficiency programs that cut power bills. It is almost shocking the amount of money seemingly simple adjustments can make. The city of Fresno, where I live, crunched utility data and discovered that a widespread energy-saving program could pump $260 million into the local economy. Talk about an economic stimulus!

That is why energy efficiency is called the "low hanging fruit" of the clean energy movement.