The Town of Mountain Village is seeking to offset 20% of the electricity used to power its free gondola with on-site solar panels.
The gondola is a free public transportation system connecting the towns of Telluride and Mountain Village. Annually it transports more than 2 million passengers between the towns, over the 10,000 foot San Sophia ridge. Each year it uses 2.3 million KWh, on average, mainly from coal-sourced electricity. This amounts to emissions of more than 2,000 metric tons of CO2 equivalent (MtCO2e). That's enough gas to fill nearly 2,000 Washington Monuments (43.5 million cubic-feet) – each year.
But the Green Gondola Campaign will help this. It aims to install 250 KW of solar PV on Mountain Village structures. It's a pilot project for a community-based climate exchange: Conscientious citizens donate to the campaign and in exchange they receive the amount of CO2e their donation offset. Because the gondola is a public benefit, a public transportation system, the emissions offset can be shared community-wide. Better yet, each donation is tax deductible.
The Green Gondola Campaign is the concept of Getting Climate Change Handled, LLC, and has been designed to correct various market inefficiencies prevalent in most current carbon offset programs.
One of the main problems with 'Cap and Trade' has been the gross undervaluing of CO2e. There are many 'Carbon Funds' administered around the country, and numerous trading companies offering you a 'carbon offset'. But the trade prices are, more often than not, arbitrarily assigned. $20 a ton. $40 a ton. And the like. Like the emissions they're supposed to offset, they're just picked out of thin air.
The money then goes into a centrally regulated fund of sorts. It's administered by personnel. Annual rebates and grants are made from it, meant to engender the New Energy Economy. And yet there are several major flaws in this concept, flaws which, inadvertently, are retarding the emergence of the new energy market.
First, arbitrarily assigning value to offset carbon undermines confidence in the market. Business week, for example, calls such green tags and trading schemes "little green lies."
Arbitrarily assigning value, in attempts to get the public to buy-in, typically undervalues the true cost of offsetting carbon with relevant, small-scale technologies. Thus, renewable energy development, meant to be funded by the cap and trade doctrine, will be slow and stagnant.
Here's an example: Most carbon funds operate via rebates and grants. Someone buys a bunch of carbon to reduce their carbon footprint, and their money goes into a fund. The fund is used to help seed new renewable energy initiatives. You know, someone who can already afford to put 2 or 3 KW of PV on their roof becomes eligible to receive a rebate on their system.
But here, in San Miguel County, the rebates offered cap out at $3,000. At $20 a ton that's 150 MtCO2e that someone has 'bought' from the carbon fund to apply to their own carbon footprint. That's where that $3,000 came from. But if I install a 2 KW array, say, it won't actually offset that amount at all, at least not any time soon. In fact, considering Colorado sunshine (which is on the higher end, nationally) it would take more than 43 years for a 2 KW PV system to offset 150 MtCO2e. And, of course, the true cost of the installed system exceeds $3,000 anyway. (More like $15,000 to $20,000.) This is a serious market inefficiency. As a result, the market will not emerge.
Then, there is the need to administer this 'Carbon Fund'. Someone has to review applications for grants and rebates. People have to apply, and fill out forms. It's hugely bureaucratic, cost intensive and time consuming, requiring human labor to middleman the whole process. Typical of government mentality, this form of carbon trading predominates current government initiatives. In San Miguel County, for example, you can get rebates from The New Community Coalition (TNCC), San Miguel Power Association (SMPA) and through the Colorado Carbon Fund. All these entities are using this centralized, bureaucratic approach. (Although TNCC is also assisting with the Green Gondola Campaign.) The result: no real dent in emissions is made. People who can already afford renewable energy technologies get a bit of a boost. The market flags. Folks lose confidence.
Worse, the green electricity purchased by caring citizens more often than not is produced and consumed elsewhere. Electricity you don't use equals no real reduction in your carbon footprint, no emissions change. By purchasing the offset, or green electricity, more often than not you are merely subsidizing an existent wind farm miles away.
But there's a worse part, still. The worst part of this is that companies like San Miguel Power Association (SMPA), the local power cooperative here distributing electricity generated by Tristate coal, who offer such 'green' incentives are actually doing the opposite. They're inadvertently perverting the market from its efficient outcome. Here's how it works:
SMPA sells 100 KWh of 'green electricity' for $1. This electricity comes from a wind farm in Wyoming (which we don't use). Not only does $1 per 100 KWh "Green Block" grossly undervalue the true cost of offsetting CO2e with solar PV (it's about $13 a ton), SMPA takes the money to award rebates to folks who can already afford renewable energy development on their homes. The rebates are capped at $3,000, or 50% of the array, whichever is lower. But wait, it gets better. SMPA retains ALL rights to the Renewable Energy Certificates from your renewable system if you agree to accept their undervalued rebate. In other words, you get $3,000 off the cost of your $20,000 system after installation, to reduce your payback time a little bit, but SMPA (who got the money from people 'offsetting' their carbon) get ALL the rights to sell your electricity's 'greenness'. Yes, you lose the rights to sell your RECs to polluters like SMPA in the future. They double-sell and get super-cheap RECs to defray future costs of their continuing pollution....
Here, SMPA is utilizing the perverse incentive: posturing itself in the market to decrease the future costs it might bear in supplying emissions-intensive energy, while 'greening' its image. In fact, it's applying for a monopoly on RECs produced locally because few can compete with SMPA's market penetration (we all pay an electric bill). SMPA is a cooperative, but it's more competitive than that.
As a result inefficient market outcomes abound. The result? No new energy development. Which suits SMPA just fine. (In an interview with SMPA CEO Kevin Ritter two years ago, in which I presented a market efficient approach to offset trading, he responded "We're not in the business of making ourselves obsolete. If we were to do what you suggest, Ben, we'd make sure we owned those technologies.")
So what makes the Green Gondola Campaign different? How does it address these problems? My company, GCCH, has designed the campaign with all this in mind. In fact, GCCH has been suggesting this type of emissions market for years.
First, contributions are tax deductible. All money given would otherwise go to the government, and potentially overseas. The money is spent locally on a local initiative. If you care about emissions reductions, this is one way to be sure your tax dollars are doing what you want. In your own back yard. And there's no extra cost to bear.
Second, the carbon exchanged for each donation is priced correctly. It is priced relative to the cost of the specific project it is applied to. This is very important. Once $X is given, there will be XKWh produced. Once X MtCO2e is sold, there is no more to sell. No funny business or double sales.
Third, the gondola is a public benefit. Operated by the Town of Mountain Village the savings on the annual electric bill (more than $25,000 at current rates) are shared by everyone! These funds can be diverted to other green initiatives, or however the electorate sees fit.
Fourth, because the offset comes from a community benefit, everyone can share in the emissions reduction. This leverages the power of each offset. More than two million people ride the gondola each year. When any one of them donates, and receives a carbon offset to apply to their own carbon footprint, they can be confident their offset is real. It's local, it's tangible, and it applies to their own carbon footprint.
Fifth, because these solar panels do not currently exist, this is a reduction that otherwise would not have happened. It's a new project which makes an absolute reduction occur within the grid where the offsets are exchanged.
So, as a user of the gondola, and a member of the community or tourist, I can determine to offset the emissions of my flight in, say, or my drive, or my San Miguel County home. I give the requisite amount to cover that much, and get a tax deduction in the process. In a short while the panels appear. This really is thinking globally while acting locally. I get the emissions, but the town keeps the electricity.
The last point I'd like to leave you with is this. If a number of specific projects offered up emissions for exchange, it's easy to see a discrepancy in prices between them. The costs of 1 MtCO2e from a solar hot water system will obviously be less than 1 MtCO2e from a solar PV system. But rather than being a problem (as many statewide offset traders believe) this price difference is key: Once cap and trade becomes a reality, and polluters seek to purchase offsets to avoid fines of non-compliance, the cheaper offsets will be in higher demand. This will raise their price. The true price of carbon will then be set by supply and demand, and pareto optima will be attained.
This is the basis of environmental economics. It's simple. If only folks would get their heads round it, and stop perverting the market with their arbitrary pricing and bureaucratic administration.
Free markets give power (in this case electrical power) to the people! Remember that.
For more information about the Green Gondola Campaign, head to www.greengondola.org