Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
Thursday, the Senate Environment and Public Works Committee will vote on whether to approve S. 556, "the Clean Power Act," proposed by James Jeffords, Independent of Vermont. The bill requires drastic reductions in power-plant emissions of sulfur dioxide (75 percent), nitrogen oxides (75 percent), mercury (90 percent), and carbon dioxide (26 percent) — all by 2008.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Carbon dioxide (CO2) is the inescapable byproduct of the hydrocarbon fuels (coal, oil, natural gas) that produce 70 percent of America's electricity supply and 84 percent of all U.S. energy. CO2 is also the principal greenhouse gas targeted by the Kyoto Protocol, the unratified U.N. global-warming treaty. If enacted, S. 556 will establish the Kyoto agenda of climate alarmism and carbon suppression as a central organizing principle of U.S. energy policy. It will create an energy crisis. Let's then call it by its right and proper name: the Anti-Power Act.
In an October 2001 report, the U.S. Energy Information Administration (EIA) estimated that the emission caps specified in S. 556 would, in 2010, increase overall residential-energy costs by 17 percent and household electricity costs by 25 percent. By 2020, the caps would ratchet up producers' cumulative production costs by $177 billion, and eliminate 43 percent of electricity production from coal, America's most abundant fuel source. The caps would also reduce real GDP by almost $100 billion in the year they go into effect.
The full economic impacts are actually much worse, because EIA did not analyze all of the bill's onerous restrictions, including some Chairman Jeffords added in recent weeks. For example, a provision in the latest iteration lowers the specified emission caps by the number of tons collectively emitted by small producers (less than 15 megawatts capacity).
More importantly, EIA assumed unrestricted emissions trading under all four caps. That is, power producers with high emission abatement costs would have the option to meet part or all of their obligations by purchasing emission allowances or credits from producers with low abatement costs. But the Anti-Power Act prohibits trading of mercury allowances. This could force many coal plants to pay stiff penalties and some to shut down, because even state-of-the-art facilities may only be able to achieve mercury reductions of 45 percent, not 90 percent as mandated by the act.
Further, the Anti-Power Act would require all coal-fired power plants 40 years and older to install the latest pollution control equipment for sulfur dioxide and nitrogen oxides. According to Edison Electric Institute, 74 percent of coal-fired capacity will be 40 years old in 2013, and 83 percent will be 40 years old in 2018. The "modernization" requirement would force most coal units to retrofit or retire, no matter how many emission credits they hold or purchase.At a recent hearing on the Anti-Power Act, J. Thomas Mullen, president and CEO of Catholic Charities Health and Human Services in Cleveland, Ohio, spotlighted the harm energy suppression can inflict on real people. Mullen described the economic circumstances of two households in his diocese:
<?xml:namespace prefix = v ns = "urn:schemas-microsoft-com:vml" />
Mullen emphasized that these cases are not atypical. In Cleveland, approximately half the elderly have incomes less than $15,000 per year, and one-fourth of all children live in poor households headed by a single female. Any increase in utility bills could literally force elderly persons to choose between heating and eating, and force working mothers to choose between paying the rent and buying clothes for their children. "These are not choices any senior citizen, child, or, for that matter, person in America should make," said Mullen.
Sen. Jeffords has an answer for Mr. Mullen. The latest version of S. 556 would award only 10 percent of the emission allowances to regulated facilities — and only for the first year. The percentage declines each year thereafter, with covered facilities getting only 1 percent of the credits in 2017. The rest go to "renewable" (i.e., non-fossil-fuel) energy producers (20 percent); to "trustees" who will administer "transition" assistance to dislocated workers or communities (6 percent); and to "trustees" who will provide consumer assistance to households (64 percent).
This provision is actually an enormous concession. Throughout most of the debate on the Anti-Power Act, proponents ignored, denied, or discounted the consumer impacts. Sen. Jeffords may think he has solved the problem by compelling utilities to purchase the right to produce power (emission allowances) from residential ratepayers. But all this does is create a Rube Goldberg scheme, in which consumers end up subsidizing . . . themselves!
Where, after all, does Sen. Jeffords think utilities are going to get the money to buy up to 99 percent of emission allowances after spending billions on technology controls and conversions from coal to natural gas? Compelling utilities to purchase the right to produce power on top of meeting stringent new caps is a double whammy. Consumers will end up paying the tab for this double burden, whether through higher energy bills, higher prices for energy-intensive products, or both.
But it is not the direct costs of the Anti-Power Act that are most worrisome. Even more troubling is the unlimited regulatory agenda the bill would unleash.
EPA does not currently control CO2, and has no authority to do so. The Anti-Power Act would smash that barrier. EPA currently regulates about 20,000 entities. A recent study by the Pew Center on Global Climate Change estimates that more than 186,000 U.S. firms emit upwards of 1,000 metric tons of CO2 per year. An earlier study by energy analyst Mark Mills estimated that nearly 1 million U.S. businesses, including 150,000 farms and ranches, emit more than 100 tons of CO2 per year. The Anti-Power Act would set a precedent rendering tens, perhaps hundreds of thousands of firms vulnerable to new EPA regulation, monitoring, and enforcement.
As it happens, a provision of the bill is bound to fuel corporate lobbying to expand CO2 regulation. The bill prohibits emissions trading with firms outside the electric-power industry, "except if the allowances are for carbon dioxide and are created by a cap on another non-electricity sector." So, if utilities find they cannot meet the CO2 cap without going broke, the bill tells them how to survive: pressure Congress to expand the supply of tradable credits by imposing CO2 controls on other sectors!
None of this is environmentally sound. Satellite and weather balloon measurements over the past 22 years show virtually no warming in the troposphere — the layer of air between one and five miles up, where the most warming should occur if manmade CO2 emissions are enhancing the natural greenhouse effect. As Harvard astrophysicist Sallie Baliunas points out, when it comes to modeling this critical atmospheric layer, the computer simulations underpinning the Kyoto Protocol are off by a factor of six.
Finally, even if those models were correct, the Anti-Power Act would avoid only 13/1000ths of a degree C of global warming by 2100. This infinitesimal change would not benefit people or the planet one whit.