Who should get carbon credits, automakers or utilities?

Governments everywhere are trying to use a carrot and stick approach to get reductions in emissions, particularly when it comes to greenhouse gases. The stick is well-known approach: fail to miss the requirements and you pay a fine. For the carrot, things get a bit more complicated. The most popular approach has been to offer credits to those that exceed emissions reduction targets. Those credits can then be sold to other emitters that are failing to hit targets for any number of reasons. However, the question is who should get the credit for reducing vehicle emissions.

California is currently planning to start giving carbon credits in 2010, but at least a part of those credits will be going to utilities in return for upgrading infrastructure to support plug-in vehicles. Toyota, which, along with other automakers, will be required to sell some number of plug-in vehicles over the next five years, is not pleased. It feels that automakers who are spending billions of R&D dollars to develop and build plug-ins should get the credits.

Ultimately, the answer is probably somewhere in between the extremes. Automakers should definitely get some credit for the vehicles they build and sell. Utilities should also get some reward for migrating energy production to less carbon-intensive sources like solar, wind and tidal power. They should also get some credit for building out public charging networks. The question is figuring out how much credit should go to each party.

[Source: Bloomberg]