Bush Green Light for Carbon Dioxide May Cost Consumers Millions

April 01, 2004

This is part one of a two part series.

As President Bush continues his refusal to address the connection between carbon dioxide emissions and climate change, the North American coal industry is in a mad dash to seize on the President's willfulness to lock in some long-term profits -- at the considerable future expense of the American consumer.

Bush's decision in 2001 to break his campaign pledge to regulate carbon emissions came after intense pressure from the coal industry, a major campaign contributor that has also supplied the White House with a number of key cabinet appointees.[1]

International economists generally agree that the pressure for America to take meaningful action to reduce greenhouse gas emissions from industrial sources will inevitably lead to carbon regulations within the next decade, if not sooner. Even industry experts openly acknowledge that carbon rules are a matter of "when," not "if."[2]

In anticipation of these rules, many major utilities have already begun investing in cleaner sources of power -- e.g. wind mills and energy efficiency -- in order to offset their carbon emissions. Some investors have begun to assign risk premiums to oil, gas and coal firms that don't take carbon regulation seriously.[3]

But the White House, taking its cues from GOP leadership and the fossil fuels industry, continues to use industry-funded "studies" to question climate science and delay the inevitable.

The one area of general agreement is that the cost of removing carbon dioxide from smokestack emissions will be high; removal technology is largely untested, and cannot be used on older plants, which emit the most pollutants. The costs of eventually installing the equipment on some plants could also run into the tens of millions of dollars, if not more. The looming question is over who will pay this cost: consumers or coal plant operators.

A raft of new coal-fired power plants is in the proposal stage. If they are approved prior to the enactment of carbon regulations, utilities will be able to pass the eventual cost on to consumers -- at potentially daunting prices. The reason: as part of the process for approving new coal facilities, proponents must adopt a rate structure that is acceptable to Public Utility Commissions (PUC). If subsequent regulatory action drives up the cost of electricity from coal plants, the operators can petition their PUC to recoup these costs from their consumers.

Any plants built after carbon regulations are passed will have to invest in the pollution technology up front, and so will need to reveal the costs to PUCs before they receive approval. These costs could prompt utility regulators to steer energy policy toward investments in efficiency and renewable technologies that actually cost less than a carbon-regulated coal plant.

In essence, the industry is sprinting to secure long-term profits by beating the regulators to the punch. If they succeed, America's electricity consumers -- and its children and environment -- will take the hit.

Show your support for a bipartisan effort against global warming through Environmental Defense:

[1] "How industry won the battle of pollution control at EPA," New York Times, Mar. 6, 2004..
[2] "AEP, Cinergy Disclose Details On Ways to Cut Carbon Dioxide," Wall Street Journal, Feb. 19, 2004.
[3] Ibid.



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