The New Carbon Cycle

The World Bank Partnership for Market Readiness Assists Countries in Developing Carbon Markets

The World Bank meeting this week amoung several countries seeking to establish or in the process of establishing carbon markets is part of a larger program called the Partnership for Market Readiness.  The participating countries include the fastest growinig and highest greenhouse gase-emitting developing countries:

• Brazil
• Chile
• China
• Colombia
• Costa Rica
• India
• Indonesia
• Jordan
• Mexico
• Morocco
• Peru
• South Africa
• Thailand
• Turkey
• Ukraine
• Vietnam

The development of emissions markets, a concept that was largely adopted and developed and continues in the US for traditional air emissions, and a growing number of states for greenhouse gases, is being widely adopted in many developed and developing countries.

In my book, Carbon Trading Law and Practice, I outline the elements of carbon markets and the legislation and regulations that form carbon markets.

The concept of bringing markets to environmental challenges and regulations is a growing form of regulation that allows market efficiencies to find the lowest cost means of addressing an environmental concern, and is far more efficient in most cases, than a pollution tax or a traditional command and control form of regulation. 

The World Bank is providing assistance to the developing countries that are seeking to address greenhouse gases through a lower cost, market-based approach.

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China, Chile, Costa Rica, and Mexico to Present Carbon Market Plans

China, Chile, Costa Rica, and Mexico will present their plans for the deployment of market-based programs to reduce greenhouse gas emissions at a March 11-13 World Bank program.  The World Bank will consider these plans for funding assistance under the Partnership for Market Readiness.  This program provides grants and technical assistance to support the development of market-based approaches for reducting greenhouse gas emissions.  As the number of carbon trading programs develop in numerous countries, it will be interesting to observe the efficacy of these programs and the degree to which trading across or among jurisdictions, as well as the similarities and differences between the regulations forming the emissions markets.

Brattle Report Concludes Solar Power Would Save on Texas Electricity Rates

The Texas electricity market within the Electric Reliabibilty Council of Texas or ERCOT, which covers 80 percent of Texas, is suffering from a deficit of peak power.  Concerns are rising that the state will be short on power during the summer months.  The Brattle Group was engaged to prepare a report for ERCOT on how to manage or address the power shortage issue.  The Brattle Group also prepared a report entitled, The Impact on Solar PV on Electricity Markets in Texas, which discusses electricity cost savings Texas could produce if it built more solar farms--the price of solar power would be less than peak power plant prices.

The irony is that many believe that solar power is always more expensive than traditional power plants like natural gas plants.  But electricity markets are complicated.  Base load power is very inexpensive in Texas because of abundant natural gas that has arisen through the technology of horizontal drilling and hydraulic fracturing in the gas shales--which has unleashed a tremendous resource of cleaner burning fossil fuel.

However, peak power prices can be very expensive.  In Texas, ERCOT raised the cap price from $3000 per MW to $4500 per MW, and the cap is going to rise to $9000.  The hope is this will encourage more natural gas power plants to be built.

Solar can be one of the answers.  With rapidly declining prices for solar PV panels and the short time to build solar farms, 90 or 120 days in some instances, solar is much less than $3000 per MW.  A natural gas plant can take a couple of years to permit, finance, and build.  We still need these plants, but solar can be a contributing factor to managing peak power--the sun shines most when peak power is needed to cool homes and businesses in the hot summers in Texas.

Solar PV can contribute to energy savings, if applied in the right way, in the right market, and at the right price.  The Brattle Report shows how solar could contribute to enhancing the Texas electricity market.  Unfortunately, the politics in the Texas legislature is likely to prevent any renewable bills from passing.

While Texas has the largest installed wind power base, it is unfortunate that we could not work to be the leader in solar, so that Texas is the all-of-the-above leader--wind, solar, and oil and gas.  It would appear to all be good for the economy and good for the environment.  Creative and empirical thinking is at a disadvantage if politics gets in the way--Democrats and Republicans both need to realize that we need at this time fossil fuels and alternative energy.  Each has their own necessary role in today's economy and with today's technology.