of Regulatory Utility
1101 Vermont Ave, NW
Washington, DC 20005
Task Force on
NARUC recognizes that greenhouse gas regulation will have impacts on energy prices.
In order to minimize undue adverse impacts, NARUC supports strategies to reduce the
costs associated with a cap-and-trade program. Such strategies include: (1) public poli-
cies that improve energy efficiency in the generation, transmission, and use of electricity,
as these policies reduce the need to produce emissions and purchase allowances; (2)
ensuring that there is an effective program of GHG offsets that reduces out-of-sector
emissions while increasing the supply of allowances; and (3) providing a mechanism that
can directly constrain allowance prices in the event that prices reach a point that would
cause unreasonable economic disruption. Successful implementation of the first two
strategies will reduce the likelihood that such a mechanism will be triggered. The follow-
ing sections provide brief overviews of the rationales for these strategies.
Reduction of Sector Emissions
Greenhouse-gas regulation that attempts to reduce emissions through price signals alone
will be more costly than one that combines a price signal with effective foundational public
policies and investments in energy efficiency, improved infrastructure, and research and
development on low-GHG energy sources, and energy storage.1 Allowance revenues,
where available, are one potential means of providing resources to fund these programs.
Successful public investments will effectively reduce both electricity rates and overall
economic costs of the country’s GHG reduction efforts.
Use of Offsets
A U.S. cap-and-trade system should include a carefully designed program for offsets that
provide real, verifiable, and permanent greenhouse gas reductions. An offset program
can help reduce GHG concentrations and enhance the supply of allowances. A program
of offsets that