Archive for the ‘Carbon Tax’ Category

You have to hand it to the California Air Resources Board.  They don’t play the usual political games.
 
One week before a crucial referendum on whether the Golden State will try to solve the world’s global warming problems, the CARB has released a complete blueprint of what the regimen will look like.  Seasoned politicians usually wait until the election is over before showing their hand.
 
The blueprint is a monument to how complicated life can be if you don’t look for the simplest solution – in this case, nuclear energy.  The state could simply build base load nuclear to replace the 40 percent of its electricity generated with natural gas.  Then it could sponsor small modular reactors for factory settings. Oil refineries would have to be moved offshore to Mexico or Trinidad & Tobago, but that’s already happening anyway.  At that it would have gotten rid of nearly all stationary carbon sources.
 
Instead, the state has a labyrinthine plan that bears a very close resemblance to the Waxman-Markey bill that passed the House of Representatives.  Utilities companies will be issued free carbon permits and then are allowed to sell them to the merchant companies that provide them with electricity.  (The utilities were stripped of most of their generators during California’s electrical deregulation.)  The utilities must then use the proceeds to give rate rebates to their customers, following the principle that no voter anywhere should feel in any way impinged by this effort.  How the merchant companies are supposed to reduce carbon emissions is anybody’s guess.  Most of them now burn natural gas and would have to build colossally expensive carbon capture systems to reduce any further.
 
Industrial sites all get different treatment, depending on their likelihood to pick up and leave the state.  Cement manufacturers get the most lenient treatment. They don’t have to do anything until 2020.  Oil refineries have until 2015.  It’s anybody’s guess what they’re going to do.  The utility program kicks in by 2012.  The program also puts a tight rein on “offsets,” the ambiguous reductions in other sectors that have turned out to be such a scam in Europe.  The CARB program only allows four possibilities – forestry management, landfill management, manure management and destruction of stores of refrigerants.
 
"This transition from the current state of the marketplace is designed to be gradual, rather than sudden," the regulators write in an explanatory section. "To ensure this is the case, staff is proposing high levels of free allocation to all industries deemed to have a significant level of exposure to carbon costs."
 
Environmental groups have worked hand-in-glove with the CARB in setting up the program and officials of the Environmental Defense Fund are serving as chief mediators in explaining it to the public.
 
The CARB’s bold move in releasing the details will be a fascinating test of its impact on the electorate.  In recent weeks, Proposition 23 – the ballot initiative that postpones all this until unemployment declines to 5.5 percent – has been losing steam at the polls.  It is now losing by about 10 points.  Will the alleged moderation of the plan impress voters or will the prospect of seeing every industry in the state regulated for carbon emissions suddenly revive voter interest in Prop 23?  We’ll know by tomorrow.

Read more about it at the New York Times Green blog
 

Even as the Senate prepared to bury putting a price on carbon, Duke Energy CEO Jim Rogers has spoken up, telling Harry Reid it will be tough to do nuclear without one.

In a letter delivered to Reid on Wednesday, Rogers predicted the Senate’ failure to adopt a
utilities-only carbon tax or cap-and-trade would lead to a “dash to natural gas.”

“Today more than 70 percent of the U.S. coal fleet is over 30 years old and 33 percent of the fleet is more than 40 years old,” wrote Rogers. “As EPA implements new regulations for smog, soot mercury, etc., over the new few years, we expect that these regulations (combined with the age of the fleet) will force as much as one-third of U.S. coal plants to close. Without resolution of the carbon risk, we will not be able to replace this existing capacity with new coal plants. And without a carbon price, it is very difficult to justify nuclear power.”

Noting that industries are already worrying about a “dash to natural gas,” which would limit their gas feedstocks and raise electrical prices – Rogers said the lack of a carbon price was likely to do just that.

“Without resolution of the carbon issue for our sector, our ‘business as usual’ future will include no nuclear plants and no new coal plants­   This makes the ‘dash to gas’ the industrials so fear much more likely.”

In his remarks, Rogers relied heavily McKinsey & Company study predicting that a carbon price of $35 per ton by 2030 would prompt conservation efforts that would lower electrical rates slightly and raise GNP.

Read more at Business Week

California’s march to Energy Utopia hit a delay yesterday when state officials decided not to start collecting $63 million in fees from energy companies until learning the fate of Proposition 23 in the November election.
 
Proposition 23, put on the ballot by business and taxpayer groups, would suspend enforcement of the 2006 Global Warming Solutions Act, which compels the state to reduce carbon emissions by 25 percent and increase renewable energy sources to 33 percent by 2020.  The ballot initiative would suspend enforcement of AB 32 until state unemployment has fallen below 5.5 percent for four consecutive quarters. Californias unemployment rate now stands at 12.3 percent, third highest in the nation.
 
Early polls show Prop 23 losing in November by 48-to-36 percent.
 
The California Air Resources Board is empowered to collect the $63 million to start enforcing various provisions of its own devise, including a cap-and-trade system and a renewable portfolio standard.  The CARB has already taken early initiatives by banning fluorocarbons in do-it-yourself tire inflation devices, mandating methane collection at landfill sites and requiring auto mechanics to inflate motorists tires when they make repairs.  Nuclear power plays no part in the Air Resources Boards plans.
 
Business and taxpayers groups delayed collection of the fee last year when they sued over the transparency of the process.  The state prevailed in that case but then it became clear that CARB could not start assessing until the fees were designated in the state budget.  The legislature, facing a $40 billion deficit, has not yet adopted a 2010-2011 budget.  Seeing no early resolution, CARB has decided to postpone collection until after the election.

Read more at the Sacramento Bee

No matter what happens with an energy bill in Congress this year – if anything happens — the future doesn’t look bright for carbon. 

Congress might impose a straight up Cap-and-Trade provision limiting carbon emissions and allowing carbon-neutral energy producers to earn  credits that can be sold to carbon emitters.

Congress could just impose a simple tax on carbon emissions, or approve a deal with just the utilities to cut emissions.

And if Congress doesn’t act, the Environmental Protection Agency may issue its own carbon limits.

Utilities have known this for a long time, and they’re not waiting for Congress to figure it out.

Their websites may be graced with images of wind turbines and solar panels as carbon alternatives, but an expansion to nuclear seems a more likely hedge against carbon uncertainty and a surefire way to fill the high-energy demand/low carbon gap.

Case in point: Jacksonville, Florida’s JEA recently closed on the $2 billion purchase of part of a reactor to find safe harbor from a carbon-tax world.
According to the utility, The JEA Board of Directors approved the pursuit of nuclear energy partnerships at their March meeting with the goal of providing 10 percent of JEA’s power from nuclear sources. That is the equivalent of approximately 300 megawatts of capacity. Adding power from nuclear sources to JEA’s portfolio is part of a strategy to make the utility less dependent upon fossil fuels.

The Municipal Electric Authority of Georgia (MEAG) is developing a nuclear plant with Georgia Power that would be one of the first new plants licensed in the U.S. in decades. It is an expansion of the existing Vogtle nuclear complex outside of Augusta, Georgia.

Oglethorpe Power Cooperation, a Georgia-based cooperative, is also a player in the Voglte expansion. It operates natural gas, hydroelectric, coal and nuclear plants, but cited its Vogtle investment as a source of, “emission-free power.”

Adding heft to the project is President Obama’s decision to grant the Vogtle project $8.3 billion in loan guarantees. The administration, while sour on Yucca Mountain as a nuclear waste site, has used a 2005 funding bill to back nuclear energy as a carbon-free alternative that is already available.

Other projects are already lining up for federal loan guarantees. Rep. Steny Hoyer, a Maryland democrat and the House of Representatives majority leader, has said that Constellation Energy’s bid to build a reactor at Calvert Cliffs, Md., is "first in line" for a federal loan guarantee.

Projects in Texas also hope to snare some of the guarantees. Luminant, a Texas utility, has applied for a license to add two new reactors at Comanche Peak nuclear plant in Somervell County.

A two-reactor expansion project run by NRG Energy in San Antonio is also hoping for federal guarantees.

The International Energy Agency, in a “Nuclear Roadmap” report issued last month, found that nuclear power could generate nearly a quarter of the world’s power by mid-century.

The report cited global pressure to reduce carbon emissions. It found that reactor and fuel-cycle development will have to continue and overall capacity will have to triple if nuclear power intends to compete with other low-carbon technologies.

"Nuclear energy is one of the key low-carbon energy technologies that can contribute, alongside energy efficiency, renewable energies and carbon capture and storage, to the de-carbonisation of electricity supply by 2050," said IEA Executive Director Nobuo Tanaka.

Exelon Corporation, which operates in several states, has already made nuclear power the cornerstone of its operations. The company operates 10 power plants that utilize 17 reactors, as well as wind and solar farms. Exelon has three coal-fired plants and 31 natural gas units, but it has aggressively, and comfortably, moved to nuclear.

Exelon Chief Executive John Rowe has said that his company won’t build new reactors as long as there isn’t a price on carbon. Just the same, Exelon is expanding its current reactor capacity as the energy environment changes and a carbon price tag looms larger.

President Obama met with Senate leaders of both parties recently to press his energy agenda, which in the past has included a cap and trade provision.
During the meeting Democrats agreed to scale back proposed carbon limits.
“We believe we have compromised significantly, and we’re prepared to compromise further,” said Massachusetts Democrat John Kerry, a co-author of one energy bill. But Kerry added, “The president was very clear about putting a price on carbon."

Republican Sen. Lamar Alexander of Tennessee saw it a different way.

“We’ve got to take a national energy tax off the table in the middle of a recession,” he said.

Obama could find a way to follow the lead of the United Kingdom’s new conservative prime minister, David Cameron.

Cameron recently announced a carbon tax as a way to boost nuclear power production. He views nuclear power not as just a hedge against carbon production, but an outright alternative.

Cameron made no secret of a possible carbon tax during his recent campaign for prime minister, though his government, intent on cutting deficits, just nixed a $120 million loan to support reactor construction.

He and Obama hope that pricing carbon will give private markets enough incentive to expand other forms of energy production, including nuclear power.

It is not yet clear if Congress agrees, but some utilities are not willing to wait.