Tag Archives: budget

Paving the way for emissions reductions in California

July 1, 2014 |

 

California’s budget for the next fiscal year, signed by Governor Brown on June 20, includes $832 million in auction revenues from the Cap and Trade Program, which will go toward high-speed rail, public transportation, energy efficiency, and other projects to support low-carbon, sustainable communities. Where did that money come from? In some cases, from industrial firms like cement producers and food processors, which are responsible for 20% of statewide greenhouse gas emissions and are required to buy allowances to cover some of their emissions.

Our new study, Cap and Trade in Practice: Barriers and Opportunities for Industrial Emissions Reductions in California, explores how those industrial firms are making decisions under the Cap and Trade Program. More specifically, we wanted to know if industrial firms, given their typical decision-making processes, would invest in the emissions reductions options that are most cost-effective on paper — and if not, what are the barriers? We focus on the cement industry, which is a major player in the industrial sector and is also the largest consumer of coal in California.

The carbon price is making a difference

We find that the carbon price is making a difference in how cement firms approach business decisions about actions that would reduce emissions, such as investing in energy efficiency or switching to cleaner fuel. Firms are considering the carbon price when they make investment decisions, and our modeling shows that the carbon price significantly changes the financial attractiveness of several abatement options.

As an example, this graph shows how the carbon price adds to the value of an investment in energy efficiency. The additional savings from reducing the firm’s obligations under the Cap and Trade Program would add around 50% to the value of the investment if the carbon price is near the price floor — or could more than triple the value of the investment if the carbon price is at the top of its target range.

Cap and Trade - Lifetime Value of Energy Efficiency Investment

The Cap and Trade Program magnifies the value of an energy efficiency investment

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In Prop 39 agreement, mixed news for schools and the climate — and some remaining questions

June 27, 2013 |

 

Today, California Governor Jerry Brown signs the state budget for 2013-2014, including a bill that will allocate Proposition 39 funds — an estimated $2.75 billion over five years — for energy-saving projects in schools.

In our analysis of school districts’ resources and needs, we found that Proposition 39 can most effectively drive energy savings in schools if it provides financial assistance that takes into account the wide variation in school districts’ existing resources and needs, and if it also offers technical assistance to help districts identify projects and put together funding. So how did these goals fare in the legislative process?

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Supporting wind energy and saving U.S. taxpayers nearly $5 billion in three easy steps

December 18, 2012 |

 

CPI’s recent study, Supporting Renewables While Saving Taxpayers Money, showed that U.S. governments could save a lot of money by adjusting how tax incentives for renewable energy are delivered. In particular, we showed that a $21/MWh taxable cash incentive for production (TCP) for wind could provide the same support to wind projects as the current $22/MWh production tax credit (PTC) and almost halve the cost to federal and state governments.

US Government could save 4.5 billion by adjusting current wind policy

The PTC is set to expire at the end of this year. The Senate has proposed extending it by one year, but at a cost to government in excess of $12 billion – a heavy lift given budget constraints. Replacing the PTC with a TCP could reduce that cost to $7.5 billion. A similar reduction in cost would apply to any proposal to extend the PTC, including the recent proposal by the American Wind Energy Association to phase-out the PTC over six years.

How does this work?

Well, wind project developers have limited tax liabilities. That means that by themselves, most project developers can’t use federal tax benefits until years after they are received, eroding almost two thirds of the incentive value. In order to get more out of these incentives, project developers bring in outside investors who have greater tax liabilities. This is called tax-equity financing. However, tax equity financing is more expensive and complex than conventional finance, and erodes about a third of the incentive value.

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