The Invention of "Cap-and-Invest"
David Farnsworth met with staff of Chinese cap-and-trade pilot programs to discuss allowance auctions and revenue recycling. Based on his experience with the Regional Greenhouse Gas Initiative (RGGI), he described the evolving nature of the cap-and-trade mechanism and the need to view it in a larger context. By coordinating cap-and-trade policies with other strategies, such as energy efficiency, renewable energy, and demand response programs, an overall reduction of carbon emissions can be achieved. RGGI chose, for example, to auction allowances, rather than give them away for free, enabling investment of the auction proceeds in energy efficiency and other consumer programs. As a result, the ongoing quarterly auctions have raised over a billion dollars for states to invest in clean energy and other programs since September 2009.