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California pays residents to offset higher energy costs from cap and trade

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Michael Bastasch DCNF Managing Editor
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California is trying to get people fired up about the state’s cap-and-trade program by giving out “climate credits.” But the rebate to state ratepayers has another objective: to offset higher energy costs projected from cap and trade.

Utilities are now required to give ratepayers a small rebate on their electric bill. But residents shouldn’t get too excited, as the payments will be small and only handed out twice per year — for example, Pacific Gas and Electric Co. customers will only get $29.81 in April.

But the credits are motivated more by politics than state generosity, as state officials worry that rising power costs could undermine support for the state’s efforts to fight global warming and crack down on fossil fuels.

“The credits are not just a way to make the public feel vested in the climate fight,” reports the San Francisco Chronicle. “They’re also designed to make sure that fight doesn’t give Californians a painful case of sticker shock.”

Power plants and factories are forced to buy carbon dioxide emissions permits from the state that allow them to emit the greenhouse gas during everyday operations. The idea is that, overtime, the state will bring down the amount of carbon permits, which will raise the price — causing power costs to rise.

“And while prices have stayed low since trading began in late 2012, with allowances now selling for about $11.50 per ton of carbon dioxide, they will eventually push up the cost of electricity, gasoline and other goods,” the Chronicle reports. “Just how much those costs will rise remains the subject of fierce debate.”

Rising prices would have to be offset by rising rebates to residential power customers, as well  as to ensure that the state’s program did not become wildly unpopular, officials postulate.

“What we’re hoping for is to engage ratepayers in the effort to fight climate change,” said Mary Nichols, chairwoman of the California Air Resources Board (CARB) which runs the state’s cap-and-trade system. “It’s about enlisting more soldiers in the fight.”

“It’s designed to make sure customers are not inordinately burdened by these programs, and to have the money come back to them,” said said Edward Randolph, who head CARB’s energy division.

Utilities get a certain amount of carbon credits for free, which they sell and use the revenues to offset customers’ bills, including rebates. State officials estimate $750 million will be rebated to consumers this year and another $350 million will go towards offsetting higher costs for the power companies themselves.

“They can do things that will both help lower their energy bills in the future and make them a part of the state’s program to fight global warming,” Nichols said. “It’s up to the individual, if they choose, to take that $40 credit as money in the pocket and do something else with it.”

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