I came across a great article on the energy blog Master Resource (of which I have become a regular reader) by Robert Peltier that focuses on some of the intricacies that may result from an eventual passage of H.R. 2454. Peltier notes on how remarks of opposition from the energy industry have been few and far between so far in the discussion of Waxman-Markey and that perhaps, for some, their end of the deal is not quite that bad. One could think the large energy providers will need to shoulder a great deal of burden towards reducing our carbon footprint, but the key of how newly distributed carbon allowances actually get doled out brings a great deal to bear on how how utilities will be affected. The give and take of Capitol Hill negotiating may have left some hands far from empty. Three of Peltier’s seven points include:
- Given that existing plants will be given new allowances for free, new plants face a considerable barrier to entry in the marketplace having to purchase new allowances in order to gain a permit to build. Existing owners and operators could cement their place on the high ground for years to come.
- Nuclear providers could end up with amazing benefit given that allowances are doled out in response to the percentage of national generation. Since nuclear provides nearly 20% of our nation’s power they could wind up with 20% of the carbon allowances that are unneeded and could be resold. As Peltier puts it, “For utilities with a lot of nuclear generation, these allowances are a gift.”
- Original distributions of allowances to older coal plants could encourage them to remain open given that the allowances could be worth more than the plants themselves. As long as a utility provider can keep the plant open (and continue to be spewing carbon) long enough for allowances to be doled out, they will be handed a nice, tax-payer sponsored retirement plan.
I encourage the reading of the entire article.
Even staunch environmentalists like Joe Romm consider this a flawed bill and it is wrought with concessions and exceptions that help make its passage plausible, but in the end it may be worth it. Though large nuclear owners do not need any extra money, rewarding their low-carbon model is not exactly counter-productive (besides the fact that they produce some of the most hazardous material known to mankind.) If entry into the energy market for high carbon producers is more expensive, that seems fine as well. We should be discouraging carbon-intensive models for power. Giving allowances to coal plants on the verge of decommissioning is a more difficult one to swallow given that coal is already responsible for pollution in the country that has either been suffered or needs to be repaired. The notion of buying out the problem leaves a bitter taste in my mouth, but how much can we expect from American legislators.
Peltier does a great job in giving an overview of the issue. Being an advocate for sustainability reform is one thing, but being an educated advocate raises the likelihood of making notable progress. Though some of the contributors and frequent readers of Master Resource may not share my position of the severity of a more sustainable economy, their knowledge of the energy markets is thorough and often provide much-needed points to ground the aspirations of new technologies and bold, but sometimes half-baked, claims.