Cap on Greenhouse Gas Emissions May Cost Consumers

By Elizabeth Souder, The Dallas Morning News

Feb. 13–HOUSTON — Congress will probably pass legislation to limit greenhouse gas emissions to generate cash for lawmakers to hand out to their favorite causes, according to one expert speaking at an energy conference on Wednesday.

Larry Nettles, a lawyer with Vinson & Elkins, said in a presentation at the Cambridge Energy Research Associates conference that congress will probably place a cap on greenhouse gas emissions, but companies may buy allowances for excess emissions. Such a scheme could generate more than $15 billion in the first year of operation, he said.

“We are likely to see legislation, maybe not this year but probably next year, because this bill provides an opportunity for a gigantic, off-budget group of funds … that Congress can distribute to special interest groups,” Mr. Nettles said. “And we all know that that is what Congress likes to do.”

Who pays? Consumers.

Who benefits? Various interest groups. The money Congress collects might go toward clean energy research or to pay for installing cleaner equipment at power plants and gasoline refineries, he said. Farmers stand to get some free credits to sell, as well as state governments, if the leading legislation passes, he added.

Here’s how Mr. Nettles says a cap-and-trade system might work.

The Environmental Protection Agency would calculate how much carbon dioxide particular types of energy emit. Fuel refineries and power plants would have to retire credits each year to account for those emissions The government might give companies some credits for free at first, and then ratchet down the amount of credits over time, in order to squeeze emissions. Companies that cannot live within their emissions allotment would have to buy more credits.

Rob Barnett, a clean energy expert with CERA, said during the panel discussion with Mr. Nettles that carbon dioxide regulation could be costly for consumers. And such a scheme might not cut emissions that much at first, though the legislation is designed to ultimately slash emissions within the next couple of decades.

“It’s ultimately going to get passed thru to the consumer,” Mr. Barnett said.

For example, if carbon dioxide credits cost $10 per ton of emissions, that would add about 10 cents to the price of a gallon of gasoline, he said.

Some projections show credit prices rising as high as $100 by 2050, Mr. Nettles said.

Mr. Barnett said carbon prices would have to be relatively high for power plants to switch to less greenhouse gas-intensive fuels.

At first, power companies would most likely balance the cost of carbon credits by switching from coal plants to natural gas plants, because natural gas doesn’t emit nearly as much greenhouse gas as coal. But if natural gas costs too much, power companies might choose to just buy emission credits rather than make the switch.

He estimates if carbon credits cost $30 each, that could cost the power generation industry as much as $80 billion a year. That could boost the price of electricity, without necessarily cutting carbon dioxide emissions from power plants by very much, he said.

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