One utility’s pollution is another’s profit

If the U.S. wants to reduce energy demand and greenhouse gases blamed for global warming, the country must put a price on carbon.
That was a resonating theme at Deloitte’s 2010 energy conference today outside of Washington.

A price on carbon would allow utilities to plan long-term infrastructure projects such as transmission expansion and smart-grid development.

During a press briefing today at the conference, Dr. Joseph Stanislaw, an independent advisor to Deloitte, said “To drive this world forward, we have to have a price on carbon.”

After all, why would a utility turning a profit on electricity use, stop burning cheap coal? Why would they spend money on clean technology? Why would they invest in an interactive smart grid that might reduce peak power use and incorporate comparatively more expensive and arguably less reliable alternative energy?

Stanislaw said utilities will do what their government asks of them.

“We’re in an age of federalism; if Congress doesn’t act, the [Environmental Protection Agency] is prepared to act,” Stanislaw said.

This is not to be confused with a carbon tax, an idea floated around Capitol Hill by some Republican lawmakers including Bob Inglis of South Carolina.

A price on carbon could best be implemented through a cap and trade program, Stanislaw said. Under the program, carbon credits could be bought, sold and traded on an exchange, similar to the New York Mercantile Exchange.

Stanislaw and others said the price on carbon would encourage utilities to invest in an interactive smart grid that allows consumers to adjust their energy use based on the real-time price of power. Consumers would an make an informed decision about when to use appliances, wash clothes or run the dishwasher. They could see the cost of power through an Internet-based portal.

Branko Terzic, Deloitte’s energy and resources regulatory policy leader, said “We need to put a price on carbon even if it’s the wrong price.” He said that would help get the infrastructure and mechanisms in place to begin trading carbon credits. “Even a poorly-written cap and trade” bill is better than nothing, he said.

For a minute I thought I was listening to EPA Administrator Lisa Jackson and House Energy and Commerce Chairman Henry Waxman, D-Calif.

Over the past year, Jackson has tried to convince Americans that we’re in a clean energy race. With a sense of urgency in her voice, Jackson has said this is our only chance to beat China, mainly, before we get left behind and fall deeper into dependence on foreign governments to fill our energy needs.

Waxman has gone so far as to offer pollution allowances for oil refineries in an effort to get votes for his cap and trade bill.

When Stanislaw talked about how the U.S. needs to surge ahead in the clean energy race, I had to make sure Jackson’s soul hadn’t taken residence in Stanislaw’s body.

Alas, she is across town fighting in the ongoing battle with Alaska Sen. Lisa Murkowski over the celebrated endangerment finding.

In any case, everyone seemed pretty focused on this idea of a price on carbon today.

The morning session at the conference featured Dr. Rajendra Pauchari, chairman of the United Nations Intergovernmental Panel on Climate Change. Pauchari’s panel shared the Nobel Peace Prize with former vice president turned climate-change guru, Al Gore.

(See my next posting about Pachauri’s presentation and his plea for climate change mitigation.)

Pauchari wants a diverse energy portfolio, one that incorporates more than just 3 percent of power from renewables.

How do you do this? You guessed it—put a price on carbon, so it’s not so cheap to burn coal and oil.

This price on carbon makes alternatives wind and solar and clean nuclear energy much more attractive.
Pauchari’s speech dovetailed nicely with the presentation by Exelon CEO John Rowe.

He, like fellow speaker Federal Energy Regulatory Commission member Marc Spitzer, endorses this idea that infrastructure, markets and rule of law comprise the three-legged stool needed for a secure energy environment.
Markets work better, they argue, when there is a price on the commodity–CO2.

One Response to “One utility’s pollution is another’s profit”
  1. Steve Ellis says:

    First things first – congratulations on a great blog!! But secondly, whether Congress goes for cap and trade or carbon tax, we need a system to be completely transparent to the taxpayer and relatively subsidy free. But it appears that instead of auctioning off the credits or even setting high price, Congress wants to give them away for free to gain legislative support. We cannot afford a business as usual approach to climate and just pass any bill. Just a year ago, OMB Director Orszag observed that giving away carbon credits would be “the largest corporate welfare program that has ever been enacted in the history of the United States.” Considering that we are expected to add $10 trillion to our national debt over the next decade piling on more corporate welfare is not the answer.

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