How Congress regulates CO2 will have a significant effect on our rates
As the article on the front page of this month’s Highline Headline’s explains, meeting our obligation to protect our environment is one of our major challenges. We expect this challenge to become only larger as Congress addresses the issue of climate change. Regardless of whether you believe that climate change is the result of human activities, it is clear that Congress will be addressing this issue. Much of the debate is centered on carbon. The burning of any type of fossil fuel, be it coal or natural gas, emits carbon dioxide (CO2). The
United States is responsible for about a third of the world’s CO2 emissions with about one quarter of it coming from the production of electricity. Based on our generation mix, our typical member’s monthly electric use of 1000 kilowatt-hours produces about one ton CO2.
How Congress regulates CO2 will have a significant effect on our rates. One proposal would tax carbon emissions. The proposals I have seen would tax carbon at anywhere between ten to fifty dollars a ton. Another approach would be to use a “cap and trade” system that would be similar to the way we presently handle nitric oxide and sulfur emissions. A “cap and trade” systems create a financial incentive to reduce emissions by assigning a cost to polluting. First, a “cap” is established that limits emissions to a level lower than their current level. The emissions allowed under the new cap are then divided up into individual permits—usually equal to one ton of pollution—that represent the right to emit that amount. Because the emissions cap restricts the amount of pollution allowed, permits that allow the right to emit co2 take on financial value. Companies are free to buy and sell permits in order to continue operating in the most efficient manner. So, those that are able to reduce emissions at a low cost can sell their extra permits to companies facing high costs, which will generally prefer to buy permits rather than make costly reductions themselves. We will be working closely with our elected officials to make sure we protect our environment while keeping rates affordable.