The US Senate recently passed a historic energy legislation in an 86-8 vote that significantly impacts America’s dependence on foreign oil and addresses one major source of CO2, the largest component of the greenhouse gasses believed to be responsible for global warming.
As someone who cares about both the environment and the potential economic impacts of US policy, I think this bill represents a step forward in some key respects, but also some of the contradictions that are inherent to policies trying to reconcile the often conflicting objectives of economic growth and environmental stewardship. While minimizing costs and managing tradeoffs is what optimization is all about, the magnitude of the costs and tradeoffs facing the power industry and our society indicate that there are difficult choices ahead.
Environmental community counts a win
The environmental community (if such a diverse set of stakeholders with so many different views could be called a community) did not get everything hoped for: a national renewable energy standard and a clean energy tax package that would repeal tax breaks currently afforded the oil industry. This bill has nonetheless been heralded by environmentalists as a positive development. Some environmentalists were as excited about what was not included in the bill: loan guarantees for nuclear power, further subsidies for coal gasification, and preemption of either California’s tailpipe emissions standard or the US EPA’s authority to regulate CO2 as recognized by the Supreme Court’s Massachusetts v. EPA decision.
Difficult decisions and tradeoffs are ahead
A growing number of large generators and suppliers of generation equipment firmly believe that we need a market for CO2. There are divided opinions about whether such a market would best be accomplished with a cap & trade mechanism or a carbon tax. Al Gore and many economists believe a carbon tax - substituted for the current US payroll tax - would be the most efficient mechanism.
Jeffrey Immelt, CEO of General Electric and a member of the US Climate Change Action Partnership, subscribes to the Partnership’s position that a cap and trade system is the best way to go. But in a recent USA Today/Carnegie Mellon interview, he acknowledged that there should be a dialogue between the advocates for a tax and those favoring a cap & trade approach, emphasizing the importance of market signals whichever the particular mechanism:
“If you are a utility CEO and facing a decision to invest in nuclear power, it’s a hard decision. It’s a $3 billion project. If you’re 58, you’ll be long-retired by the time it comes on-line. With no price for carbon, why would anybody take that kind of risk? That’s why these market signals are so gosh darned important.”
This quote brings to mind one of the keynote addresses at the recent Power-Gen International conference in New Orleans. Patrick Moore, a founding member of Greenpeace, described his rationale for leaving the organization he helped start to support nuclear power, which in his view is the only viable near-term means of satisfying America’s voracious appetite for electricity without further contributing to our current climate change problems.
The contradictions intrinsic to any policies designed to address environmental concerns, the economy, and the lifestyle to which we’ve all grown accustomed mean that there will necessarily be costs and difficult tradeoffs. And this new bill focusing on transportation-related CO2 emissions effectively ups the ante for power generation, which as an industry that emits even more CO2 than our entire nation of motor vehicles.
I’m interested in hearing about what others see as the tradeoffs and compromises that the power generation industry may soon face. How do you think this important new legislation may affect the power industry?
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We were leaders in the industrial age.
We were leaders in the space age.
We were leaders in the digital age.
We were leaders in the network age.
We are NOT leaders in the green power age.
Instead of collectively sinking your head in the sand, and applauding yourself for seven figure research, BUILD it!
One very possible scenario...
http://www.sciam.com/article.cfm?id=a-solar-grand-...
I would suggest using a carbon tax of about $0.01 per kilowatt hour from carbon-based supplies, with a credit of $0.03 per kilowatt hour for wind, biomass, solar, geothermal.
Same carrot and stick approach for gas/diesel, about $0.10 for either.
Across the board for all vehicles, including humvee, SUV, pickups, cars, 40 MPG, if not, each vehicle will have a credit/tax at a rate of $200 per MPG. Electric plug-in hybrid would get a credit based on the first 100 miles for MPG rating, not to exceed $5000 credit.
New buildings will be mandated to have 100 sq ft of solar panels per 1,000 sq ft of floor space, with 100 sq ft being the minimum. In the near future, any remodeling will have the same rules applied to the total square footage of the residence or commercial building.
This would be rebated by the Federal Government at 20% with matching state rebate of 20% minimum. These will be funded by the above taxes; if all goes well, with record-breaking green building going on, we may have to raise taxes to a whopping 2 cents per kilowatt and 20 cents per gallon of gas/diesel (think of how many times the price of gas has varied by 20 cents in a year?)
Joe Ruva
But from a more pragmatic perspective, I agree with the majority of the CEOs of both power producers and equipment suppliers alike: that whether taking the form of a tax or cap & trade system, that time is of the essence, and that carbon-based price signals are needed no in order to meet our climate change challenge in a timely and cost-effective manner.