Fairness In Allocating Greenhouse Gas Allowances: A Difficult Balancing Act

Posted on December 1, 2009 by Chuck Becker

 

“Fairness” is a relative, not an absolute, concept.  If this was not the case, lawyers would be out of a job.  Apparently, this truism can also apply to senators.

With Copenhagen fast approaching, climate change legislation will again be the topic of the day.  Cap-and-trade language, as currently proposed in both the House and the Senate, allocates free CO2 allowances to electrical distributors based on a 50/50 formula; that is, 50% on total emissions and 50% on total energy sales. Under this formula, utilities that are more coal dependent will need to purchase more allowances than they would if the allowances were allocated based only on emissions, and those higher costs will be passed on to their customers.

Fourteen Democratic senators, from coal-dependent, Midwestern states, have written a letter to Senate Democratic leaders requesting that the 50/50 formula be changed to base the allowances solely on emissions.

The effect of using the 50/50 formula is that those states that have historically relied more heavily on coal-fired electrical generation, such as Iowa, North Dakota, Wisconsin, Minnesota, Illinois and Colorado, will pay significantly more for future power, during the transition period to cleaner energy, than under a 100% emissions formula.  The fourteen senators argue that  legislation must equitably distribute transition assistance across individuals, states and regions.  Put another way, they are saying that in this transition period, we should not penalize one group or geographic area, so the 100% emission formula is the "fair" thing to do.

There are, of course, those who disagree.  They argue that the purpose of the legislation is to create financial incentives to switch to lower-carbon fuel sources, so causing higher costs to higher polluting states, is, in fact, “fair” and appropriate.  It is, in their view, not proper to let one group be bailed out for relying so heavily on coal-fired energy in the past.

So who's right?  Like most arguments that address fairness, it all depends on where you stand.

If you believe that cleaner energy is something that had to happen last week and that we must mandate an immediate change, then it would be “fair” to force the higher expense of cleaner energy on one group. If you believe that it will take some time to wean ourselves away from using coal as the primary form of electrical generation (which we have used for more than 125 years), then it would be “fair” to attempt to make the transition less painful as proposed by the senators.

Which view should prevail?  That's for you to decide, but let me add two pragmatic considerations to the mix.

First, despite the best efforts of all concerned, coal will be with us for a long time. It will likely get cleaner but, due to cost and increases in demand for electricity, it will be a significant part of the mix, along with increasing use of solar, wind, geothermal and hydro. In fact, the U.S. Energy Administration expects coal to account for 47% of U.S. electricity in 2030, which is a 2% decrease from the present.

Second, in this age when a Senate majority requires 60 votes, can 14 votes be ignored?
 

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Will Nuclear Power Be Part Of The Solution?

Posted on September 15, 2009 by Chuck Becker

For years now, environmentalists (and most Democrats) have been lauding the virtues of wind power and solar power as the answer to America’s clean energy problem while refusing to even consider the nuclear (or nucular, depending on your party) option. Never mind that the wind appears to be slowing down and solar energy companies are failing like all other businesses.

Honest discussion of nuclear power on the political front has been nonexistent. Lamar Alexander initiated his 100-new-nuclear-facilities-in-20-years campaign and was quickly relegated to crackpot-of-the-month status. Sometime shortly after August 23, 2009, that seems to have changed. 

On that morning, John McCain appeared on This Week. McCain has long been a proponent of nuclear energy but, since the presidential campaign, he has been fairly quiet on the topic. George Stephanopoulos asked him if nuclear energy should be considered as part of the energy solution. Mr. McCain’s response was that "we can't get there from here" without nuclear power and he added:

We have got to build 100 nuclear power plants in the next 20 years. We can do that. Right now, the administration’s position is against storage and they’re against recycling of spent nuclear fuel. I can’t support a genuine reduction in greenhouse gas emissions, unless nuclear power is a key part of it.

There are a lot of Republicans that the Democrats can ignore, but John McCain isn't one of them.  As is true in most negotiations, it was not a good idea for Democrats (at the insistence of the most vocal environmentalists) to simple take nuclear power off the table.  So when McCain publicly advocated the need for a nuclear discussion, it would have been a mistake to continue to ignore the call.

And they didn’t.

Barbara Boxer, Chair of the Senate’s Committee on Environment and Public Works, has now said “there will be a nuclear title in the bill.” She has not elaborated on the comment yet, but one should expect at least a serious discussion of the nuclear option in the near future. 

Nuclear power has a lot of problems, but so do the alternatives. There is no question that solar and wind power will be part of the discussion for a long time to come.  But taking any option off of the table, particularly to appease an extreme constituency, is a mistake for either party. And give credit where credit is due -- to McCain for his advocacy and to Boxer for listening. It isn’t exactly bi-partisanship at work, but at least it’s a dialog. Now if we can all just agree on how to pronounce it . . . .

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