Lawmakers in Congress are leaving a gaping hole in their discussions of climate legislation: the voluntary market for renewable energy.
This is no small omission.
The volume of wind, solar and biomass power voluntarily purchased by big corporations, organizations and individuals is nearly neck-and-neck with the volume of renewable energy purchased to meet mandatory state targets, according to the National Renewable Energy Laboratory.
As the American Clean Energy and Security (ACES) bill is currently written, however, these voluntary purchases of renewable power would ironically end up giving polluters more license to pollute, removing any incentive for an individual or corporation to voluntarily pay for renewable power.
"The ability of renewable energy developers and marketers to make claims about making additional contributions to fighting global warming would be severely damaged," says Chris Busch, policy director for the Center for Resource Solutions, a nonprofit organization that certifies renewable energy projects.
Independent energy consultant Ed Holt agrees:
"What's driving the voluntary market are large purchases by large organizations. Those are the ones most motivated by making claims of environmental benefits."
If companies can't claim environmental benefits, Holt fears their interest and willingness to make voluntary purchases will wane.
Voluntary renewable energy purchases, sometimes known as "green power" purchases, are made by companies, organizations and government agencies committed to reducing the carbon footprint of their offices or manufacturing facilities. These commitments — usually made by paying more for each megawatt-hour of power — enable utilities to buy more renewable power and reduce their reliance on fossil fuels, but the voluntary purchases don't count toward the utility's own renewable energy requirements.
In the compliance market, where utilities have to meet state Renewable Electricity Standards (RES) or Renewable Portfolio Standards (RPS), utilities must include a certain percentage of renewable power in the mix that is delivered to all their consumers, says Jeff Swenerton, communications director at CRS.
The Trouble with ACES
The ACES climate bill making its way through the U.S. House includes a cap-and-trade program to reduce greenhouse gas emissions, as well as a Renewable Electricity Standard, which requires utilities to buy an increasing amount of power from renewable sources.
The bill does not, however, consider the more than 22 billion kilowatt-hours of renewable energy purchases made by individuals, groups and companies. That creates a serious emissions accounting problem, say CRS and the Union of Concerned Scientists.
This is why:
Under a cap-and-trade program, allowances to emit a certain amount of carbon dioxide are distributed each year to regulated emitters, like electric utilities. The number of allowances is reduced each year, thus reducing the amount of carbon dioxide released into the atmosphere year over year.
Because voluntary purchases of renewable energy reduce carbon emissions, not retiring allowances equal to those avoided emissions simply frees up those emissions for someone else to use. In other words, polluters can pollute more.
In effect, then, "the voluntary action pays for reductions that would have been required anyway of those regulated under cap and trade," Busch wrote in May 18 a policy brief.
Voluntary "reductions aren't taken into account if there's not some mechanism that recognizes that those purchases were made and have carbon implications," says John Rogers, senior energy analyst at the Union of Concerned Scientists.
UCS made this argument in comments on the ACES discussion draft. Yet, there is still no mechanisms to account for voluntary purchases.
If the legislation isn't altered, individuals and businesses will have less incentive to put the time and money into voluntary purchases, "because emissions will occur up to the cap," Busch wrote.
"Increasingly, a primary motivation for why Intel, Pepsi, Santa Cruz Organics, REI, and tens of thousands of homeowners have made these investments, is in order to make a real difference," Busch says. Not allowing these purchases to count toward the cap "would likely lead to less clean energy development in the U.S."
The Solution: 'Off of the Top'
CRS and UCS are advocating national climate legislation include an "off-the-top" rule that would set-aside and retire allowances equivalent to the amount of carbon dioxide emissions avoided by purchasing renewable energy.
The Regional Greenhouse Gas Initiative gives participating states in its cap-and-trade program the option of adopting this approach, and nine out of 10 RGGI states have adopted an "off-the-top" rule.
"We know the voluntary renewables market has been a very important driver for more than a decade now, and even with all the states that have requirements for renewable energy purchases, voluntary renewable energy purchases continue to grow and be an important piece of the renewable energy scene," says Rogers of UCS.
"We want to make sure when we are putting in place a carbon cap, which is want, we aren't kicking the legs out form under the voluntary renewable energy market. RGGI shows how to do it right."
Busch suspects that lawmakers haven't included the voluntary market because the concept of cap-and-trade itself is so complicated, "and this issue itself is somewhat hard for people to get their minds around."
Still, he thinks there's room to bring voluntary purchases into the discussion. One approach that's been offered is to give states a small percentage of allowances to promote renewable energy and energy efficiency, Busch says. But he adds, "a lot of people are concerned about it playing out on a state-by-state basis."
The issue is simply too big to be ignored, Rogers says.
"We have to make sure this doesn't fall of the table. This is an easy way to get people to do on a voluntary basis what they are already inclined to do."