Citation:
 | navigant_study_final.pdf | 1.2 MB |
Abstract:
Excerpt from the Executive Summary
Competitive electricity markets will play
a vital role in the success of any market- based program for controlling heat-trap- ping emissions that contribute to climate change. Restructured competitive electricity markets help promote the technological in- novation and changes in consumer behav- ior required for a greenhouse gas (GHG) reduction program to be successful.
Competitive wholesale and retail electricity markets were implemented to provide the financial incentives that encourage efficient electricity production and consumption patterns. Similarly, state and federal policy- makers are embracing“cap-and-trade”poli- cies (a.k.a the carbon market1) that rely on the same market forces and financial incen- tives to reduce GHG emissions – primar-
ily carbon dioxide (CO2). President Barack Obama recently stated that he is interested in a cap-and-trade approach precisely be- cause he thinks the market makes decisions about these technologies better than the public sector.2 Policy supporters argue that
a market-based approach to reducing GHG emissions will be the most cost-effective and result in more innovative approaches
to emission reductions than other regulatory approaches. With non-utility competi- tive suppliers owning approximately 40 percent of today’s installed electric gener- ating capacity, it is therefore important to understand the complementary interaction between competitive electricity markets and market-based GHG policies.