Kyoto Protocol

Bootleggers and Baptists Everywhere

by Ivan Osorio on October 7, 2010

in Deregulate to Stimulate, Economy, Energy, Politics as Usual

Bruce Yandle’s insight of how erstwhile alliances of “Bootleggers and Baptists” help drive state intervention into economic matters is extremely useful when looking at the political dynamics behind certain policy proposals. The “Baptists” are the self-appointed moral guardians who strive to ban certain products or behaviors under the justification of protecting the public’s morals. The “Bootleggers” are the clandestine entrepreneurs who take advantage of the prohibitions supported by the Baptists by charging (often exorbitant) prices for giving people the ability to consume or do what they want, contra the law.

Two items today show different aspects of this phenomenon at work. First, at Tech Liberation Front, Adam Thierer takes to book some Silicon Valley entrepreneurs for giving in to the temptation that makes Bootleggers & Baptists alliances possible: The seduction of political power. He cites a Politico story in which Carl Guardino, president and CEO of the Silicon Valley Leadership Group, complains: “All too often, people see Silicon Valley as the wallet and set aside the words or wisdom that [it] can provide.” Thierer retorts:

Well, boo-hoo.  If Mr. Guardino and his fellow Silicon Valley travelers don’t like being treated like an ATM, then they should stop behaving like one!  No one makes them give a dime to any politician.  And once you start playing this game, you shouldn’t be surprised by how quickly you’ll become entrenched in the cesspool that is Beltway politics and become less and less focused on actually innovating and serving consumers.

Well said. And at Biggovernment.com, filmmaker Ann McElhinney provides a good example of where businesses’ priorities shift to when they turn to politics as a business strategy. At issue is California’s ballot Proposition 23, which would suspend the state’s Global Warming Solutions Act (AB 32), a climate change bill, until unemployment in the state drops below 5.5 percent. As my colleague Marlo Lewis notes:

In a just-published study for the Pacific Research Institute, Dr. Benjamin Zycher estimates that adoption of Proposition 23 will increase aggregate employment in the State by a bit less than 150,000 in 2011, about half a million in 2012, and 1.3 million in 2020, relative to the case in which AB 32 goes into effect.

So who would benefit from a bill as destructive as AB 32, enough to fight to have it implemented right away? McElhinney provides one possible answer.

Thomas Steyer owns Farallon Capital Management, a $33bln hedge fund. He’s also donated $2.5m to blocking Prop 23 and has pledged a further $2.5m if needed.

There has been almost no investigation of why this citizen would give so much money and of course no suggestion that these donations would make Thomas Steyer a “vested interest”.

But bury deep into Farallon’s website and you will see Steyer admits his hedge fund  invests in areas which will become profitable “due to a catalyzing event or a change in circumstances, including regulatory or legislative change.”

Of course, we’ve seen this story before.

Carbon dioxide by any other name would fertilize as well: Myron Ebell quoted in Climatewire

by Marlo Lewis on September 23, 2009 · 1 comment

in Global Warming

Today’s ClimateWire (subscription required) carries an analysis by reporter Lauren Morello that begins:

Say goodbye to “greenhouse gases.” Say hello to “carbon pollution” and ”heat-trapping gases.”  

Morello observes a shift in the vocabulary U.S. government officials are using to talk about global warming — a change much in evidence in President Obama’s climate speech yesterday at the U.N.

Obama officials increasingly avoid the non-pejorative (although somewhat metaphorical) term “greenhouse gas” to describe carbon dioxide and instead refer to “carbon pollution” and “heat-trapping gases.”

Morello quotes NOAA chief Jane Lubchenco’s explanation that these terms are emphasized to “make what’s happening more understandable and more accessible to non-technical audiences.”

Fortunately, she also quotes CEI’s Myron Ebell, who cuts to the chase: “The cleverest thing that the global warming alarmists have done is to categorize carbon dioxide emissions as pollution, because it’s not true.”

The Obama administration’s shift to this terminology is actually way behind the green bamboozle curve. Al Gore repeatedly called carbon dioxide “global warming pollution” in his 2006 film and book, An Inconvenient Truth. Major environmental groups have been denouncing “greenhouse pollution” and “global warming pollution” for years.

The Supreme Court takes the cake, however, deciding in Massachusetts v. EPA (April 2007) that carbon dioxide is an “air pollutant” merely by virtue of the fact that it is “emitted into” the air. By that logic, even zero-pollution, completely clean air is an “air pollutant,” provided it is “emitted.”

This sort of terminological confusion is not harmless. By defining CO2 as an “air pollutant” merely because it is “emitted,” the Court set the stage for a gigantic regulatory chain reaction under the Clean Air Act that could easily dwarf Waxman-Markey and the Kyoto Protocol in cost and scope, as I explain here.

If Lubchenco really wants to demystify the climate debate, she might start by describing CO2 more accurately. Here’s my pick: ”a plant-fertilizing, biosphere-greening, colorless, odorless, non-polluting, trace gas.”

Yvo de Boer’s low/inflated expectations

by Marlo Lewis on September 21, 2009

in Global Warming

In today’s E&E TV interview with Monica Trauzzi (http://www.eenews.net/tv/), UNFCCC Executive Secretary Yvo de Boer did not balk at Trauzzi’s statement that, “Senate Majority Leader Harry Reid has indicated that the Senate may not see floor action on climate until next year.” Nor did he bat an eye when she said that the Obama administration seems to have ”shifted to using the Clean Air Act to regulate emissions.” Like many observers, de Boer appears to have low expectations for the Waxman-Markey bill, at least for this year.

Nonetheless, de Boer spoke as if he expected President Obama to accomplish great things at Copenhagen climate conference in December: “From an international point of view, from the point of view of U.N. negotiations it’s not essential that this legislation be finalized, but that statement of political intent from the president — that’s the thing that really counts in the international arena.”

Oh really — like President Bill Clinton’s statement of political intent when he signed the Kyoto Protocol in November 1998? Clinton’s signature proved to be worth little from ”the point of view of U.N. negotiations,” because Clinton dared not submit the treaty to the U.S. Senate for a debate and vote on ratification.

The House passed Waxman-Markey by a razor thin (219-212) margin. In the Senate, proponents will need to find a three-fifths (60-vote) super-majority to defeat a GOP filibuster.  To ratify Kyoto II, Obama would need to assemble a two-thirds super-majority. In the Copenhagen round, the EU is pushing for tougher emission reduction targets than those in Waxman-Markey.

If President Obama, Sen. Reid, and Sen. Barbara Boxer (D-CA) prove unable to assemble 60 votes to pass Waxman-Markey in the Senate, what are the odds that they could line up 67 votes to ratify Kyoto II?

Mr. de Boer is mistaken. The fate of Waxman-Markey largely foreshadows and determines the fate of Kyoto II.

Policy Peril Segment 9: Big Business

by Marlo Lewis on August 20, 2009

in Global Warming

Today’s excerpt from CEI’s film, Policy Peril: Why Global Warming Policies Are More Dangerous Than Global Warming Itself, rebuts the argument that regulatory climate policies can’t be bad for the economy because so many big businesses support them.

This is an odd argument coming from people who are usually suspicious of big business, or even hostile to corporations. When did they decide that corporate support is some kind of good-housekeeping seal of approval?

To watch today’s film excerpt, click here. To watch the entire movie, click here. The text of today’s film clip follows.

Narrator: Some big corporations call for caps on CO2 emissions. Supposedly, this proves such policies won’t harm the economy. In fact, all it proves is that special interests can make windfall profits from energy rationing schemes.

Remember that $5 trillion loss the Lieberman-Warner bill would inflict on the economy? Well, that’s only half the story.

Dr. David Kreutzer (Heritage Foundation): The Lieberman-Warner bill also enacts a huge transfer from the consumers of energy to groups that are picked out–special interest groups–that Congress would designate. So after America has lost $5 trillion in income, there will be another $5 trillion taken and transferred from energy consumers.

Commentary

A corporation may lobby for cap-and-trade for various bottom-line reasons unrelated to environmental concern:

  • In a carbon-constrained world, a company like GE, which makes nuclear reactors and wind turbines, can expect to sell more of its products.  
  • Utilities like PG&E that generate most of their electricity from hydro-electric dams, natural gas, or nuclear power can make a killing in the carbon market if the emission allowances are allocated for free based on a firm’s historic electricity output rather than historic emissions.
  • Conversely, utilities like Duke Energy that generate most of their electricity from coal can make a killing if the emission allowances are allocated for free based on a firm’s historic emissions.
  • Wall Street firms like Goldman Sachs salivate at the prospect of a new, multi-trillion-dollar market in carbon permits, futures, and derivatives. They can make big bucks as brokers and carbon portfolio managers.

The last bullet merits additional comment, because if there ever was a policy issue that pits Wall Street against Main Street, cap-and-trade is it. The Breakthrough Institute summarizes the key finding of a non-public Goldman Sachs report titled “Carbonomics: Measuring impact of US carbon regulation on select industries”:

In a section titled “Carbon exchanges — build it, and they will (must) come to trade,” it estimates the bill [Waxman-Markey] would grow the global carbon market to become one of the biggest in the world, with trading volume of 175 to 263 million contracts per year – larger than the oil and gas markets combined and approximately the third-largest commodity market in the world after U.S. interest rates and stock indexes. The analysts estimate the profit margin for financial firms resulting from the new carbon market could reach $2 billion annually.

 Baptists and Bootleggers

Corporate support for cap-and-trade should really come as no surprise, because nearly all “public-interest” regulation depends on marriages of convenience between the high-minded (or lofty-talking) and the narrowly interested–between those who seek regulation based on some moral, religious, or ideological concern and those who seek regulation to rig the market in their favor.

Economist Bruce Yandle of Clemson University was among the first to develop the theory of the Baptist-Bootlegger coalition as an explanation of public policy change. 

“The theory,” says Yandle, “draws on colorful tales of states’ efforts to regulate alcoholic beverages by banning Sunday sales at legal outlets. Baptists fervently endorsed such actions on moral grounds. Bootleggers tolerated the actions gleefully because it limited their competition.” 

Baptists provided the moral justification–the public-interest rationale–for restricting the sale of alcoholic beverages. Bootleggers provided the filthy lucre–the campaign contributions to politicians supporting the restrictions (known as ”blue laws“). 

Nothing better illustrates the “bootlegger” role of big business in advancing the climate policy agenda than Enron’s lobbying and PR campaign for the Kyoto Protocol.

Enron, that poster child of corporate fraudulance, was a leading advocate of cap-and-trade in the climate treaty negotiations culminating in the Kyoto Protocol. Enron was a natural gas distributor, and Kyoto would suppress (or kill) electricity production from coal, boosting demand for Enron’s core business. Carbon controls would also pump up the market for Enron’s wind turbines and energy management services. In addition, Enron’s energy traders  expected to make juicy commissions on the purchase and sale of emission allowances.

On December 12, 1997, the day after the Kyoto conference, Enron environmental affairs director John Palmisano, in a memorandum to colleagues, enthused:

If implemented, this agreement [the Kyoto Protocol] will do more to promote Enron’s business than almost any other regulatory initiative outside of restructuring of the energy and natural gas industries in Europe and the United States. The potential to add incremental gas sales, and additional demand for renewable technology is enormous. In addition, a carbon emissions trading system will be developed.

For both its high-profile and behind-the-scenes lobbying for Kyoto, Enron became the darling of green groups (a fact many prefer to forget). Palmisano elaborated:

Through our involvement with the climate change initiative, Enron now has excellent credentials with many “green” interests including Greenpeace, WWF [World Wildlife Fund], NRDC [Natural Resources Defense Council], German Watch, the U.S. Climate Action Network, the European Climate Action Network, Ozone Action, WRI [World Resources Institute], and Worldwatch. Such praise went like this: “Other companies should be like Enron, seeking out 21st century business opportunities” or “Progressive companies like Enron are…” or “Proof of the viability of the viability of market-based energy and environmental programs is Enron’s success in power and SO2 [sulfur dioxide] trading.” 

At the end of his memo, Palmisano exulted: ”I predict business opportunities within three years. . . This agreement will be good for Enron stock!!”

Many rent-seeking companies follow the trail that Enron blazed. For example, big-business lobbyists had a strong hand in crafting the Waxman-Markey cap-and-trade bill, the American Clean Energy and Security Act (ACES, H.R. 2454).

All the distinguishing features of the Waxman-Markey cap-and-trade provisions were spelled out months in advance of the bill’s introduction by the United States Climate Action Partnership (US-CAP), in a January 2009 report called A Blueprint for Legislative Action. Core US-CAP proposals incorporated into Waxman-Markey include:

  1. Year 2020 emission reduction targets significantly less stringent  than those called for by the European Union (17% below 2005 levels instead of 20%-30% below 1990 levels).
  2. Generous provision of free emission allowances (energy-ration coupons) rather than 100% auctioning as called for by President Obama (the Heritage Foundation’s August 6, 2009  analysis, p. 4, estimates that 85% to 101% [!] of the coupons will be given away in the early years of the program).
  3. Generous ”carbon offset” provisions authorizing regulated U.S. firms to pay non-regulated entities to reduce, avoid, or sequester emissions in lieu of reducing emissions themselves (the Breakthrough Institute estimates that the Waxman-Markey offsets will allow U.S. emissions to increase through 2030).

A Carbon Cartel

In February 2007 testimony before the Senate Environment and Public Works Committee, CEI President Fred Smith noted that cap-and-trade “is an ugly combination of two of the greatest ills to affect the market economy over the past two hundred years–cartelization and central planning.” The emissions cap, which determines how much CO2-emitting energy society may use, is set by the government–that’s the central planning element. The provision of emission allowances under the cap effectively creates a cartel.

The emissions allowances (energy-ration coupons) function just like the production quota allocated among members of OPEC (Organization of Petroleum Exporting Companies), the only difference being that the ration coupons can be bought and sold. The economic effect, though, of both oil production quota and emission allowances is the same: restrict energy supply, raise energy prices, and create monopoly profits for a favored few.  Fred commented:

As a result of this cartelization, energy costs rise, real wages fall, and output and employment fall. We know these are the effects of cartels, which is why we used to put the people who set up cartels in jail. Yet the Climate Action Partnership wants legal blessing for this new cartel. Any legislation enacting cap-and-trade would actually ennoble a new generation of robber barons and provide legal protection for their profiteering activities.

A key point to bear in mind is that the amount of wealth transferred from consumers to cartel members can greatly exceed the overall loss to the economy. See the diagram below.

wealth-transfer-under-cap-and-trade

Figure description: 1.5 gigatons of carbon (GtC) is the hypothetical amount of CO2 emissions society produces in the absence of a cap. When there is no cap, the right to emit CO2 costs zero dollars per ton of carbon. The hypothetical cap requires a 20% reduction in emissions from 1.5GtC to 1.2 GtC. The right to emit CO2 now costs $50/tC. That increases the cost of energy, which then reduces economic output (the dark shaded triangle). However, the amount taken and transferred from energy consumers–the additional dollars they must spend for home heating oil, natural gas, electricity, and gasoline (the lightly shaded square)–can be much larger.

Think again of OPEC. As long as oil prices don’t get so high that they depress the global economy, the wealth transferred from consumers to OPEC members will exceed the overall reduction in global GDP.

In the European Emissions Trading System (ETS), utilities made out like bandits during the first two years of the program. Governments gave the utilities more free ration coupons than they needed. The utilities then passed their imaginary costs onto their customers by raising rates. Then they sold the surplus coupons they didn’t need to manufacturers whose electric rates they had raised. Thanks to the ETS, the utilities achieved a two-fold (albeit short-lived) windfall profit. Open Europe, the British free-market think tank, provides the gory details in this hard-hitting report.

In the run-up to Waxman-Markey, cap-and-trade proponents repeatedly said that they had learned from Europe’s mistakes, and here in the USA all emission allowances would be auctioned in competitive bids. Yes, your electric rates would “necessarily skyrocket,” Barack Obama said, when campaigning for the White House. But, he assured us, the revenues would be returned somehow to taxpayers. Cap-and-trade would become cap-and-dividend.

That, however, was unacceptable to US-CAP, and in the sausage factory known as the legislative process, they carried the day. The Heritage Foundation’s August 6, 2009  report describes what happened:

In order to get the Waxman-Markey cap-and-trade bill through the House Energy and Commerce Committee . . . Members of Congress promised generous handouts for various industries and special interests. In the near-term, the legislation promises to distribute 85-101% of the allowances to various interest groups at no cost . . . The biggest winners are the electric utilities, receiving 43.75% of the emission allowances in 2012 and 2013.

To read previous posts in this series, click on the links below.

  • Policy Peril: Looking for antidote to An Inconvenient Truth? Your search is over.
  • Policy Peril Segment 1: Heat Waves
  • Policy Peril Segment 2: Air Pollution
  • Policy Peril Segment 3: Hurricanes
  • Policy Peril Segment 4: Sea-Level Rise
  • Policy Peril Segment 5: Is the Science Debate Over?
  • Policy Peril Segment 6: Cap and Trade
  • Policy Peril Segment 7: Fuel Economy Standards 
  • Policy Peril Segment 8: Coal

    • Policy Peril Segment 8: Coal (updated 08/26/2009)

    by Marlo Lewis on August 18, 2009 · 1 comment

    in Global Warming, Odds & Ends

    Today’s excerpt from CEI’s film, Policy Peril: Why Global Warming Policies Are More Dangerous Than Global Warming Itself, is on the global warming movement’s anti-coal campaign and the dangers it poses to U.S. consumers and the economy. To watch today’s clip, click here. To watch the entire film, click here.

    The text of today’s excerpt follows. I provide additional commentary and links to supporting information in the footnotes.

    Narrator: First and foremost, they want to ban construction of new coal-fired power plants. [1] Why? Coal is the most carbon-intensive fuel. It releases the most carbon dioxide per unit of energy produced. [2]

    More importantly, emissions from new coal plants are expected to swamp, by as much as five to one, all the emission reductions that Europe, Canada, and Japan might achieve under the U.N. global warming treaty, the Kyoto Protocol. Either global warming activists kill coal, or coal will bury Kyoto. [3]

    coal-v-kyoto

    Figure Source: Myron Clayton, New coal plants bury ‘Kyoto,’ Christian Science Monitor, 23 December 2004.

    Narrator: To be fair, the activists say they’ll allow new coal generation, if the power plants deploy something called CCS, carbon capture and storage technology. [5] The idea is that instead of releasing CO2 into the air, the power stations would capture it, liquefy it, and then transport it to underground storage sites. [6] There’s just one problem. No commercial coal plants today have CCS technology. [7]

    I asked Mary Hutzler, formerly head of analysis at the Energy Information Administration, how long it would take just to determine whether a CCS system would be economical for utilities to build.

    Mary Hutzler, former Acting Acting Administrator, Energy Information Administration: It probably requires an immense amount of research and development. People have told me 1o to 15 years alone. [8]

    Narrator: Mary also told me that building a national CCS pipeline network could take another decade. Developing the regulations would also take years. [9] So the proposed moratorium is really a ban on new coal plants for 20 years or more.

    What’s the risk here? New coal generation is forecast to supply two-thirds of all new electric power over the next two decades. By 2030, new coal generation is expected to provide 15% of all our electricity. [10] So banning it, could create one heck of a power deficit. Frequent blackouts and power failures–an energy crisis would not be an unlikely consequence. At a minimum, our electric bills would go way up.

    Narrator: But Al Gore is not content to ban new coal plants. He now proposes to scrap all existing coal plants and natural gas power plants too. He says we must replace all carbon-based electricity with carbon-free electricity in just 10 years–by 2018. [11]

    Ben Lieberman (Heritage Foundation): The idea is absolutely off the charts, unrealistic. [12]

    Dr. Patrick Michaels (Cato Institute): Al Gore is proposing the literally, physically impossible. [12]

     Commentary

    [1] James Hansen, the NASA scientist whose congressional testimony during the hot summer of 1988 launched the global warming movement, calls coal power plants ”factories of death“ and “the single greatest threat to civilization and all life on our planet.” The “top priority of any climate policy must be to stop the building of traditional coal plants,” writes climate crusader Joe Romm. He continues: “A climate policy that does not start by achieving at least the first goal, a moratorium on coal without CCS, must be labeled a failure.” “The silver bullet [for global warming] is no more coal,” says Architecture 2030. “Kill Coal. Coal is the enemy of the human race,” declares the Sustainable Development Issues Network. My Google search shows that global warming and coal are discussed on some 4,470,000 Web sites. It’s a safe bet most of those sites share the Gorethodox sentiments quoted above. 

    [2] Different fossil (carbon-based) fuels emit different amounts of CO2 in relation to the energy they produce. For a variety of fuels, the U.S. Energy Information Administration compares pounds of CO2 emitted per energy output measured in British thermal units (Btu).

    Fuel                                                        Pounds/Btu

    Natural Gas                                          117

    Liquefied petroleum gas                 139

    Gasoline                                                156

    Coal (bituminous)                             205

    Coal (subituminous)                        213

    Coal (lignite)                                       215

    Petroleum coke                                 225

    Coal (anthrocite)                              227

    From these numbers, we can calculate the emission ratios (or relative CO2 intensity) of the fuels. For example, bituminous coal is 1.37 times more CO2-intensive than gasoline, and 1.75 more CO2-intensive than natural gas.

    [3] The Christian Science Monitor chart shown above and in the film clip is based on late 2004 estimates by UDI-Platts, the U.S. Energy Information Administration (EIA), and unspecified industry sources. David Hawkins of the Natural Resources Defense Council (NRDC), in a February 2005 speech, presented a similar bottom line, based on International Energy Agency (IEA) data. He said:

     The International Energy Agency (IEA) forecasts that 1400 GW of new coal plants will be built worldwide in the next 25 years alone. To put that in context, current U.S. coal capacity is about 330 GW and global capacity is 1000 GW. This enormous increase in coal capacity will lock us into a huge additional commitment to global warming unless we use technologies that reduce CO2 emissions to minimal levels; marginal efficiency improvements will not prevent this lock-in.

    The lifetime emissions from just this next wave of coal investment will be about 580 billion tons of CO2. That amount is more than half the total loading of the atmosphere with CO2 from all forms of fossil fuel combustion in the past 250 years!

    Build scores or hundreds of new coal plants, and the Kyoto CO2 reductions barely amount to a drop in the bucket. As has been widely reported, China is building coal power plants at the rate of one a week.

    [5] A wide-ranging coalition of environmental groups called “Coal Moratorium Now“ demands that no new coal-fired power station be built unless it is equipped with carbon capture and storage. In 2008, Reps. Henry Waxman (D-CA) and Ed Markey (D-MA)–the authors of the 2009 Waxman-Markey cap-and-trade bill (H.R. 2454, the American Clean Energy and Security Act)–introduced legislation (H.R. 5575) to impose a moratorium on new coal plants lacking CCS. In March 2009, state legislators introduced a similar bill in Texas. In April 2009, the UK Government proposed regulations requiring new coal plants to install CCS on at least 400 MW of output–about 25% of the output of an average power station. In addition, the power stations would have to capture 100% of their emissions by 2025–if the applicable technology exists by then. That’s a big “if.”

    [6] A wealth of both basic and technical information on CCS is available in studies by MIT, the U.S. Government Accounting Office, the Electric Power Research Institute (EPRI), the Congressional Research Service, the Department of Energy (DOE), and Glaser et al. (2008).

    [7] Oil companies sometimes inject CO2 into wells to squeeze more petroleum out of them–a technique called enhanced oil recovery (OER). Sometimes people talk as if a CCS system could piggy-back on EOR projects. But, as MIT’s Future of Coal report points out, CO2 injection for EOR has “limited significance for long-term, large-scale CO2 sequestration–regulations differ, the capacity of EOR projects is inadequate for large-scale deployment, the geologic formation has been disrupted by production, and EOR projects are usually not well instrumented [monitored for CO2 leakage; p. xiii].”

    The Department of Energy (DOE), citing rising costs, pulled the plug on FutureGen, a $1.5 billion government-industry partnership to build the world’s first commercial scale CCS power plant. In July 2009, however, FutureGen Alliance, Inc. announced it had reached an agreement with DOE to begin “construction of the first commercial-scale, fully integrated carbon capture and sequestration project in the country in Matton, Ill.” So there is still not even a commercial-scale demonstration project, though there may be in the next few years.

    [8] MIT’s March 2007 Future of Coal report calls for large demonstration projects in 3-4 sites in different regions of the country costing “$500 million over eight years.” Better still, MIT argues, “Five large tests could be planned an executed for under $1 billion, and address the chief concerns for roughly 70% of U.S. [coal generation] capacity. Information from these projects would validate the commercial scalability of  geologic carbon storage and provide a basis for regulatory, legal, and financial decisions needed to ensure safe, reliable, economic sequestration” (p. 54).

    EPRI’s Bryan Hannegan estimated in March 2007 that CO2 capture (including compression, transportation, and storage) would increase the levelized cost of an Integrated Gassification Combined Cycle (IGCC) coal power plant by ”about 40-50%” (p. 5). IGCC is already more costly than the more common pulverized coal (PC) power plants. EPRI is confident that additional RD&D will lower carbon capture costs. But by how much and how soon is uncertain.

    A February 2009 Stanford University study, citing a September 2008 McKinsey & Co. study and other sources, says that CCS is projected to increase the capital costs of new coal power plants by almost 50%. “On the basis of avoided emissions, the cost of CCS ranges from $30-$90/ tonne CO2, which translates into a 60-80% increase in the levelized cost of electricity ($/MWh).” 

    A July 2009 Harvard University study estimates that early adopters of carbon capture technology will incur a cost of $100-$150/ton of CO2 avoided (equivalent to 8-12 cents/kWh). Once the technology matures, the additional cost will fall to $35-$50/ton of CO2 avoided (equivalent to 2-5 cents/kWh), the researchers estimate. For comparison, in 2009, residential electric rates were 20.9 cents/kWh in Connecticut, 9.2 cents/kWh in Kansas, and 14.6 cents/kWh in California.

    How long between early adoption and technological maturity? According to the researchers, increasing scale, learning by doing, and technological innovation “are expected to reduce abatement [CO2 capture] costs by approximately 65% by 2030, although such estimates are inevitably uncertain” (emphasis added). 

    In plain speak, it may take many years to sort out the economics of CCS.

    [9] The scale of the network of pipelines and storage sites required to transport and bury CO2 from U.S. coal power plants is staggering. According to MIT’s Future of Coal report (p. ix):

    • The United States produces about 1.5 billion tons per year of CO2 from coal-burning power plants.
    • If all of this is CO2 is transported for sequestration, the quantity is equivalent to three times the weight and, under typical operating conditions, one-third the annual volume of natural gas transported by the U.S. gas pipeline system.
    • If 60% of the CO2 produced from U.S. coal-based power generation were to be captured and compressed into a liquid for geologic sequestration, its volume would about equal the total U.S. oil consumption of 20 million barrels per day.
    • At present the largest sequestration project is injecting one millions tons/year of carbon dioxide (CO2) from the Sleipner gas field into a saline aquifer under the North Sea.

    Even if Congress approves such a system, and major environmental groups support it, NIMBY (“not in my backyard”) protests and litigation could block or delay implementation for many years. Some people just don’t like energy projects, regardless of how “green” the projects purport to be. For the gory details, check out the U.S. Chamber of Commerce’s ”Project No Project“ Web site. 

    [10] Two-thirds of all new generation and 15% of total U.S. electric supply–these estimates came from the Energy Information Administration’s (EIA) 2008 Annual Energy Outlook. See the figure below.

    eia-2008-coal-electric-generation

    Coal’s estimated share of new generation and total generation are lower in EIA’s Annual Energy Outlook 2009. EIA forecasts that from 2007 to 2030, new coal generation will provide 64% of all new generation and 9% of total U.S. electric supply. See the figure below.

    eia-2009-coal-electric-generation1

    Actually, it’s remarkable that EIA still forecasts a robust increase in electric generation from coal. Coal increasingly operates in a politically hostile, litigious environment. The Sierra Club, for example, claims that its activists, lawyers, and allies, working with state and local leaders, have prevented 100 planned coal power plants from being built over the past eight years. Click here for a partial list.

    For example, even in Texas, an energy-producing state, environmental activists stopped TXU Corp. from building eight of 11 planned new coal power plants, despite estimates by the Perryman Group that investment in the new plants, over five years, would add $25.8 billion to state GDP, $17.3 billion to in-state personal income, and 389,000-plus person-years of employment.

    [11] I’m not making this up. The text and video of Gore’s speech calling for carbon-free electricity by 2018 are available here.

    [12] According to the EIA, in 2008, renewable sources generated 356 billion kWh, of which 259.7 billion kWh, or 73%, came from conventional hydro-electric dams. Total net generation by the electric power sector was 3852 billion kWh. So renewables provided only 9% of total generation, which means that only about 2.4% came from the politically-correct renewables–wind, biomass, solar, and geothermal.

    Note that non-hydro renewable sources would provide even less electricity but for a plethora of market-rigging federal and state tax breaks and subsidies and Soviet-style production quotas known as renewable portfolio standards.

    Coal and natural gas provided 2654 billion kWh, or about 69% of total U.S. electric generation in 2008. Gore and his allies would undoubtedly oppose the construction of new large hydroelectric dams even if suitable sites were available. So what Gore and “We Can Solve It” are proposing to do, is replace the 69% of our electricity that comes from coal and natural gas with the non-hydro renewables that currently supply only 2.4%–all in 10 years. 

    This plan would fail–dismally. Our electricity rates would skyrocket, because the demand for renewable electricity, ramped up by mandates, would vastly exceed supply. No transition that big and that fast would be smooth. Service disruptions and blackouts would likely be frequent and perversive–a chronic energy crisis.

    Gore’s plan would also set a world record for government waste, since hundreds of profitable coal and natural gas power plants would have to be decommissioned long before the end of their useful lives.   

     To read previous posts in this series, click on the links below: