I think you've figured it our pretty well.
It's a "social conscience tax" that benefits those who can manipulate the system.
In theory, it could work pretty well. If it actually resulted in a measurable
reduction in carbon emissions by existing
business' it would be a good thing. However, to pay me for not
building a plant that I wasn't really going to build anyway................ is just silly.
In our solar business I'm actually pretty good at doing this.
For the sake of argument can we change CARBON credits to ENERGY credits?
Suppose CSX railroad in Jacksonville uses a lot of PEAK time energy and Solar or Wind power could offset a lot particularly the peak power which it really as if not more important than total energy use.
Now suppose CSX has all the tax credits they need for other reasons. Now here comes Richard with $400K to invest in Solar on the CSX building.
Here is how it works.
1. I do the install and put out the $400K.
2. Florida Power and light give the installer owner of the system a $130K grant.
3. The Federal government gives 30% tax CREDIT not a deduction. $120K This goes to me the installer.
4. The Federal government allows ME to depreciate the $400K over 5 years. $80K a year write off.
1. CSX gets the solar power and they get a LOCK in on their power rate for ever!
2. CSX also gets no PEAK power bills
3. CSX gets to claim they are the good guy and all that.
Back to me
the guy that put up the $400K.
1. The grant is mine, the $130K tax credit is mine, the $80K a year write off is also mine.
2. If I don't need all those write offs I can sell them, at a premium to someone that needs them.
Renewable Energy Certificates
), also known as Green tags
, Renewable Energy Credits
, or Tradable Renewable Certificates
s), are tradable environmental commodities in the United States which represent proof that 1 megawatt-hour (MWh) of electricity
was generated from an eligible renewable energy
These certificates can be sold and traded and the owner of the REC can claim to have purchased renewable energy. While traditional carbon emissions trading
programs promote low-carbon technologies by increasing the cost of emitting carbon, RECs can incentivize carbon-neutral renewable energy by providing a production subsidy to electricity generated from renewable sources. It is important to understand however, the energy associated with a REC is sold separately and is used by another party. So when you purchase a REC you get only a certificate.
In states which have a REC program, a green energy provider (such as a wind farm) is credited with one REC for every 1,000 kWh or 1 MWh of electricity it produces (for reference, an average residential customer consumes about 800 kWh in a month). A certifying agency gives each REC 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 REC can then be sold on the open market
are created by a policy that exists in 25 U.S. states called Renewable Portfolio Standard
. In these states, the electric companies are required to supply a certain percent of their electricity from renewable generators
by a specified year. For example, in California the law is 20% renewable by 2010, whereas New York has a 24% requirement by 2013. There is a full listing of state renewable portfolio standards 
. Electric utilities
in these states demonstrate compliance with their requirements by purchasing RECs - in the California example, the electric companies would need to hold RECs equivalent to 20% of their electricity sales.
are ones where customers choose to buy renewable power, out of a desire to go green. Most corporate and household purchases of renewable energy are voluntary purchases. Renewable energy generators located in states that do not have a Renewable Portfolio Standard
can sell their RECs to voluntary buyers, usually at a cheaper price than compliance market RECs.
To be honest even though we do this, my expertise is more on the technical end and for the tax end we have a CPA and Tax lawyer that does this. It's more complicated than a simple for it or against it.