WASHINGTON, March 30 (UPI) -- If continuing discussion in Congress on climate change is solidified in legislation capping emissions, electricity rates would most likely spike.
Several hearings this week both in the Senate and the House have focused on the European Union's carbon-trading system and climate-change policy. In addition to looking at the EU as an example, several bills have been proposed already. A proposal by Sen. Jeff Bingaman, D-N.M., would use a national cap and trade system as a means to regulate greenhouse-gas emissions.
Suppliers of fossil fuels and other greenhouse-gas-emitting products would be required to submit government-issued allowances based on the amount of carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride their respective products emit.
"Any price signal that's set with regards to carbon and other greenhouse gases emissions, not just a cap and trade or allowance, is going to have some impact on electricity rates," said Dan Riedinger, spokesman for Edison Electric Institute.
Coal has consistently provided cheap electricity for much of the United States, but prices have been steadily increasing as rail transportation and other infrastructure become restricted and demand and prices for steel and other manufacturers increase.
In a recent report from the Energy Information Administration, coal's low price and high emissions per unit of electricity produced cause the proposed legislation to have a larger impact on the cost of coal than other fossil fuels.
Coal prices, including the costs of holding GHG emission permits, are projected to be between 51.9 percent and 156.8 percent higher in 2020, while motor-gasoline prices will be 3 percent to 9.3 percent higher in 2020, according to the EIA.
The report suggests the cost of GHG allowances would be passed through to electricity consumers, raising the price of fossil fuels, which may be one way of incentivizing conservation.
Despite predictions of price and emissions increases, coal use is projected to continue to grow with or without a carbon trading system. Total energy from coal is projected to increase by 23 percent between 2004 and 2030 if the proposed legislation goes through, less than half of the 53-percent increase projected over the same time period without the cap and trade.
A very severe emissions-reduction requirement that had to be implemented in the very near term, whether under a cap and trade or any other type of scenario, could have a significant impact on electricity prices. Meeting a strict, near-term goal on emissions reduction would put the electric industry's focus on compliance as opposed to building a diverse portfolio of sources.
Some states have taken aim at emissions reductions through restrictions and moratoriums on new coal-fired plants. Last month the private buyout of TXU Corp led to a reduction in the number of coal plants. The Cumberland County chapter of the Sierra Club recently endorsed a proposal to revoke East Kentucky Power Cooperative's ability to build a new coal plant, even if rates would increase as a result, citing the TXU buyout as an example.
"They see increasing risks in being highly dependent on coal in the coming decades," Geoff Young of the Sierra Club told the Lexington Herald-Leader.
A moratorium is a concept that has been floated at the state level and even at the federal level.
"It's a short-sighted one in that we're going to need to be able to address carbon dioxide emissions from all types of coal-fired generation," said Riedinger. "If we as an industry were forced to retire prematurely some of our coal-fired power plants to replace them with natural gas, that would have a major impact on production costs, some of which would be reflected in electricity rates. The notion of a moratorium on coal plants is putting too much emphasis on the 'silver bullet' approach to addressing concerns about climate change."
Just addressing the coal-fired generation portion of climate change will not solve the problem, Riedinger said. Coal will most likely continue to play a role in providing energy supply as demand continues to grow over the next several decades.
"Not building any coal plants in the immediate future is really not the answer both in terms of undermining our ability to meet those energy needs and also incentivizing investments in clean-coal technologies that will be necessary," Riedinger said.
On the heels of the recent Massachusetts Institute of Technology study that suggested immediate investment in clean-burning coal technologies, Duke University in Durham, N.C., is studying the feasibility of carbon capture and sequestration. The study looks at performing CCS in the state and piping the carbon to underground storage facilities in the Appalachian Basin and Gulf Coast and suggests it may be economical.
"The best way to make sure both the industry, as well as the government and Wall Street, is on board with clean-coal technologies is to make it clear that we are going to continue to rely on coal-fired electric generation," said Riedinger.
