Another cautionary tale about how not to fight climate change: "Cap-and-Trade" could give power companies windfall profits of up to $100 billion and undermine the fight to curb emissions.
That's the conclusion of a new study carried out by carbon-market analysts Point Carbon and commissioned by environmental group WWF, a long-time supporter now critical of emission-trading scheme. More coverage here, here, and here.
When utilities have to pay the government for permits to emit greenhouse gases, their cost of generating electricity rises, and they pass the cost along to their customers. In Europe, utilities have gotten almost all their emission permits for free, yet electricity rates have risen as if utilities had to pay for their permits. Utilities say that's only natural, reflecting the "opportunity cost" they incur in not being able to sell their permits into the market. Critics, including some investigators, allege the utilities are grabbing "windfall profits."
In Germany, for example, where coal makes up 70% of generation, and utilities pass on prices to consumers while lobbying for free permits, the windfall over the next four years could be between 15 billion euros and 34 billion euros.
That's why Europe plans to sell the permits starting in 2013 though several countries and many utilities are screaming to keep the free handouts.
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