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Lars G. Josefsson
CEO, Vattenfall

Lars G. Josefsson

Lars G. Josefsson is president and CEO of Vattenfall, Europe's fifth largest generator of electricity and the largest generator of heat with operations in Denmark, Finland, Germany, United Kingdom, Poland, Netherlands and Sweden. He is also a member of the UN Secretary-General's Advisory Group on Energy and Climate Change. ALL POSTS

Some benefits of cap and trade can't be replaced

While there are many policy tools needed to address climate change, there are benefits to cap-and-trade systems that can't be replaced. First and foremost, there is the cap: legislating a limit on emissions is the only way to guarantee the outcome - emissions below an agreed level. Carbon taxes may prove insufficient to incentivize the needed reductions. Subsidies may support low-emitting technologies but they will not necessarily drive out the emitting options. Regulations on minimum standards can be useful for some technologies, especially cars and buildings, where consumers are less responsive to price signals in fuel costs. But for other technologies such as power plants and factories they can cause unintended consequences, as unregulated plants and sectors pick up production or have their lifetimes extended to get around the rules.

The other major benefit is cost efficiency -- emitters can decide themselves how to meet the goal in a way that minimizes their costs. The concerns in the U.S. and elsewhere about the costs of a cap-and-trade system are misguided; to achieve the same environmental outcome, cap and trade is almost certain to cost less than the other options named above. Those other options are perceived as cheaper because they do not make the same promise: to deliver the reductions. But if you are going to pay something to achieve an environmental objective, actually achieving it should be job number one.

By Lars G. Josefsson  |  March 9, 2010; 7:30 AM ET Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati  
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Please report offensive comments below.

Isn't your company limiting investment in windmills and solar to only those projects that are subsidized with government money because otherwise they would be nonsense?

Your company purchases the electricity produced by windmills because the government says that you must. But you pass the cost on to your customers.

Cap and trade is a wonderful result for a power company. You can pass the costs on to your customers. It isn't your fault. And if the science behind CAGW is phony as a three dollar bill, it isn't your fault.

It is your job as a CEO to manage what the regulators present to your company. My guess is that your own initiatives to invest in windmills or solar power amount to no more than marketing dollars because you need to be perceived as a good soldier for the church of global warming.

Posted by: AGWsceptic99 | March 22, 2010 1:13 AM
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