Green tags
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Green tags, also known as Renewable Energy Credits (RECs) or Tradable Renewable Certificates (TRCs), are a market mechanism that represent the environmental benefits associated generating electricity from renewable energy sources. Rather than functioning as a tax on pollution-causing electricity generators, as traditional carbon emissions trading programs do, green tags function as a non-governmental subsidy on pollution-free electricity generators.
In states which have a green tag program, a green energy provider (such as a wind farm) is credited with one green tag for every 1000kWh of electricity it produces. A certifying agency gives each green tag a unique identification number to make sure it doesn't get double-counted. The green energy is then fed into the electrical grid (by mandate), and the accompanying green tag can then be sold on the open market.
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[edit] Background
Because nuclear and fossil fuel power are subsidized and their full costs are not built into the price charged, they are cheaper than most renewable sources. The wholesale price for electricity is determined by non-renewable sources and is often less than the cost of producing it through cleaner renewable methods. This is due partially to government subsidies for the nonrenewable energy industry, and partially to a market structure that does not fully capture all social and environmental costs associated with conventional electricity generation (like air pollution, costs to maintain the military in oil-rich parts of the world, disposal costs for nuclear waste, health impacts of dirty generation, etc.) A green tag or REC represents an additional payment for producing power from renewable resources, allowing the producer to create and sell electricity at the local market price and thus enabling more clean renewable energy to be made.
A green tag might be considered analogous to a carbon credit. Under the Kyoto Protocol, a market is set up where countries which produce too much carbon can buy carbon credits from countries which have a surplus. Each carbon credit equals 1 metric tonne (2205 pounds) of carbon dioxide. In the simplest sense, if a government passes the cost of Kyoto compliance on to certain industries, those industries have to pay for carbon credits to offset the CO2 (carbon dioxide) they produce--a carbon tax. The UK does this in fact, and as a result, it's cheaper for a coal plant to trap its CO2 than it is to let it into the atmosphere and pay for it with carbon credits. (Citation needed)
The U.S. has not ratified the Kyoto Protocol and doesn't require polluting industries to pay for their carbon emissions. However, rather than adding such a carbon tax, the U.S. may eventually accomplish something similar by instead apportioning a subsidy to non-polluting electricity producers for each tonne of polluting electricity they displace. These are green tag credits. Rather than paying for the right to emit, say, 1 tonne of greenhouse gas, you can buy a green tag and pay for the extra cost needed to make renewable energy. Critics point out, however, the flaw in this system in that it does not require any proof of displaced polluting power. Since some renewable energy sources, most notable wind power, are intermittent and variable, their production does not displace an equivalent amount of other sources, diminishing the effective value of the green tags.
[edit] Prices of Green Tags
According to the Center for Resource Solutions, prices of green tags can fluctuate greatly (currently from $0.30 to $300.00 per MWh).[citation needed] Prices depend on many factors, such as the location of the facility producing the green tags, whether there is a tight supply/demand situation, whether the green tag is used for RPS compliance [1], even the type of power created.
While the value of green tags fluctuates, most sellers of green tags are legally obligated to "deliver" green tags to their customers within a few months of their generation date. Other organizations(such as Native Energy) will sell as many green tags as possible and then use the funds generated to guarantee a specific fixed price to a future wind farm, for example, making the building of the wind farm a financially viable prospect. The income provided by green tags, and a long-term stabilized market for tags can generate the additional incentive needed to build renewable energy plants. (See What are TRC's?) There is only one non-profit US organization that sells RECs, Bonneville Environmental Foundation, who was instrumental in starting the market for RECs with their Green Tag product. They use the profits from Green Tags to build community solar and wind projects and to fund watershed restoration.
[edit] Green Tag Certification
The U.S. currently does not have a national registry of green tags issued. Green tags are known under functionally equivalent names such as Renewable Energy Credits (RECs) or Tradable Renewable Certificates (TRCs), depending on the market. Several certification and accounting organizations attempt to ensure that green tags (or equivalent RECs or TRCs) are correctly tracked and verified and are not double-counted. Increasingly Green tags are being assigned unique ID numbers for each 1000kWh produced. Green tags are certified by Green-e and The Climate Neutral Network. REC markets are increasingly overseen through regional tracking systems such as WREGIS, NEPOOL, GATS, ERCOT, M-RETS, and CRS
[edit] Use of Green Tags to Claim Carbon Neutrality
A popular incentive for buying green tags is to make the claim that your energy use is "carbon neutral" and hence does not contribute to global warming. Looking at the situation from a macroscopic level, buying green tags finances the increased costs of green energy producers, to make them just as financially viable a source of energy as polluting energy always was. However, it could be argued that the green energy production facilities which are already built today might still continue functioning and producing energy at the same rate even if no one were to buy another green tag. On a microscopic level, buying a few green tags has very little direct effect on the amount of CO2 produced at this very moment. As larger and larger numbers of green tags come into demand, however, renewable energy will become more and more cost effective per kWh in comparison to nonrenewable energy.
The EPA claims to have the highest percentage use of green power of any federal agency. It offsets the electricity use of 88% of its offices by purchasing corresponding number of green tags [2] [3]. Many private corporations are also working to finance green energy and claim carbon neutrality as a result of their ongoing green tag purchases. [4]
To find the number of green tags you would need to personally claim the arguable label of carbon neutrality, you can use one of many carbon calculators available online (such as the one at An Inconvenient Truth). This can give you an estimate of how many tonnes of CO2 you produce per year, based on your travel habits and home energy use. However, it will vastly underestimate your total carbon footprint. Based on the total amount of CO2 produced by the entire country, each U.S. citizen emits 24 tonnes of CO2 per year (according to U.S. Department of State (2002) U.S. Climate Action Report 2002 Popn. Pg. 10 Paragraph 2, GHG emissions Pg. 28 Paragraph 1 (note paper uses Teragrams), cited by Carbon Planet). Your carbon footprint not only involves your electricity and gasoline use but also the greenhouse emissions associated with everything else you do and consume--things you eat, wear, furnish your house with, the roads on which you drive, the hospitals, the streetlights, etc.--everything that powers the engine of the U.S. economy.
Prices for certificates currently range from $5.50 to $12 per short ton ($6 to $13 per metric ton), depending on seller.[5]
[edit] See also
- Renewables Obligation Certificates (UK)
- Green tax shift
- Green energy
- Energy development
- Nuclear power phase-out
