JULY 3, 2009 -- Uncertainty over the final form that federal “cap and trade” legislation may soon take in the nation’s capital has caused concerned and vigorous debate on energy policy in and around the S.C. Statehouse.
Cap and trade is a policy effort to limit the amount of greenhouse gases the nation emits in hopes of protecting the environment from a host of negative impacts, such global warming, strip mining for coal and dependence on foreign oil.
To do this, each state would be allotted an upper limit, or capped, amount of pollution, and if its residents and industries exceeded that cap, a state would have to purchase (trade) expensive allotment portions – kind of make-up credits -- from other, cleaner states to offset the damage it was doing to the environment. (For more information, please refer to this site.)
The cost of those allotments would be passed on to power generators and consumers in hopes of giving incentives to people to use less energy, purchase or invest in more renewable power, and implement conservation measures.
On June 26, the U.S. House passed a cap and trade carbon footprint tax bill in a tight vote. The bill, if passed by the Senate, would begin in earnest in 2012 and its restrictions would be phased in over the better part of the next decade.
Coming at the issue from different angles
But because the bill is now only halfway through the federal legislative process and because major renovations were done to the original bill, players in South Carolina’s power generation future have come at the issue from all different angles.
As a result, it has seemed that no one has the same answer for: How much will cap and trade legislation cost a state like South Carolina, which has a relatively high reliance on coal-fired power plants?
Considering the state’s relative power-appetite, it could become a big number. Last year, the state consumed 105 million megawatt-hours of power, according to Dukes Scott, the executive director of state’s Office of Regulatory Staff.
Sixty-one percent of the power consumed in the state last year was generated by coal-fired plants, 31 percent from nuclear plants, and the rest from natural gas, hydro, and methane, according to Scott.
At one point on the spectrum sat state Rep. Jeff Duncan (R-Clinton), chairman of the Agriculture, Natural Resources and Environmental Affairs committee in the S.C. House, which oversees a large portion of the state‘s energy policies, laws, and future.
“First off, let me say that I believe that ‘climate change’ is unproven science and that cap and trade is a knee-jerk reaction,” said Duncan.
He said that Washington’s cap and trade could cost South Carolina consumers as little as $100 extra a month in power bills.
“But the number I’ve been hearing is closer to $300 a month,” he said, wondering if now, with the state’s and the nation’s economy slumping, was the best time to put more cost on households.
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Mike Couick said he has heard that number before. That’s because, as president and CEO of The Electric Cooperatives of South Carolina, he came up with it earlier this year.
Couick said he simply multiplied the 60 million tons of carbon dioxide that the state purportedly spews out each year by $30 per ton and then divided that number by the total number of power consumers in the state.
But now Couick said the number has likely dropped, thanks to the evolution in the U.S. House’s Waxman-Markey bill for things like exempting coal-burning energy plants that generate less the 4 million megawatts. He added that two South Carolina congressmen, Democrats John Spratt and Jim Clyburn, worked hard to ensure the bill had less of an economic impact on South Carolina families.
Additionally, Couick said he had also seen estimates inflated by those putting together using a projected cost of coal at as much as $200 a ton; he said more current projections has coal costing only $40 a ton.
Consumer costs likely to be lower with Senate bill
Couick said the exact amount of potential consumer power bill increases across the state could be greatly affected by how the Senate decides to tax carbon emissions.
John Reilly has heard the same scary estimate Duncan used, too, and for similar reasons as Couick. He came up with it -- but as the answer for a different question.
As part of the Joint Program on the Science and Policy of Global Change at MIT, Reilly helped divine that the average cost of cap and trade would be about $3,000 a year for the average American family. His program’s estimate was based on the total federal tax revenues the legislation and the resultant across-the-board increase cost of goods and services would create in the increased cost of everything. But, he said, changes to the bill, like allowing for the sale of allotments, have wiped out chunks of that cost.
Warning on impact to big companies
Increased costs could drive big, energy-dependent companies like Alcoa and Nucor out of the state, warned Otis Rawl, president and CEO of the South Carolina Chamber of Commerce.
Because of global competition, Rawl said there were only so much in extra costs that a company could pass on to its customers. “At some point, those costs will be absorbed by the company,” said Rawl, who worried the state could see plants go overseas to countries that don’t have cap and trade.
“That’s a load of bunk,” countered John Ramsburgh, point-man on cap and trade issues for the S.C. League of Conservation Voters.
“If you talk to any economist these days, they will tell you we as a country are moving away from manufacturing as the base of our economy,” Ramsburgh said, pointing to the arrival of Google as a sign of the change in South Carolina.
More conservation, efficiency needed
Ramsburgh said worrying about higher power rates missed the point: now is the time to lead the state toward better efficiency and conservation efforts.
Like Couick, Ramsburgh was not completely enamored with the cap and trade bill. Where Couick was gladdened the bill had evolved from its original iteration to a more industry-friendly model, Ramsburgh worried that it still didn’t go far enough – that it may need to be tougher to achieve meaningful emission reductions.
“Look, there’s no guy in South Carolina who more wants climate change and global warming to be wrong than me,” said Dana Beach, the executive director of the S.C. Coastal Conservation League. “Most of my personal wealth is tied up in coastal real estate.”
But Beach, who has homes in downtown Charleston and on a nearby barrier island, said the $175 per-family annual cost the Congressional Budget Office recently calculated the bill would cost, was not a price too dear to pay.
“That’s far less than the ‘Greatest Generation’ sacrificed during World War II,” intoned Beach.
Crystal ball: With an incomplete bill, the devil will be in the details, or the U.S. Senate. The final outcome of the Waxman-Markey cap and trade carbon footprint bill will be writ in the Senate, where industry hopes senators will have a wider perspective and will fight to protect their home state’s economic interests. Fans of cleaner air and water will hope senators will have an even wider perspective, say, a holistic one. Hopefully, someone in Washington, D.C. will figure out the right balance for states like South Carolina.