Alliance to Oppose Emissions Plan: Power Interests Want DEC to Reconsider Requiring Credits for Carbon Dioxide Dispersal

By Brian Nearing, Albany Times Union, N.Y.

Jan. 16–ALBANY — An alliance of power companies and manufacturers is lining up to oppose the state’s ambitious proposal to combat global warming, which has been three years in the making.

That alliance called upon the state Department of Environmental Conservation to reconsider a plan that could force electric plant owners to spend a quarter-billion dollars or more each year on state-issued credits to emit carbon dioxide, a leading greenhouse gas.

Gov. Eliot Spitzer sides with environmentalists and scientists who favor the plan, said spokesman Marc Violette. “He spoke in favor of this in May and he has not changed his mind,” Violette said.

During his State of the State address, Spitzer said he wants to “link and expand” Regional Greenhouse Gas Initiative with other states. Last year, as attorney general, Spitzer sued federal environmental officials, accusing them of failing to regulate power plant emissions.

RGGI, begun by then-Gov. George Pataki in 2003, involves New York and six other Northeastern states, each of which is coming up with its own rules. California Gov. Arnold Schwarzenegger also is looking to involve his state in the program.

Starting in 2009, New York would auction credits for 63.4 million tons of CO2 annually, and use the money to fund energy-efficiency programs. In 2015, the program would cut emissions 10 percent by reducing the amount of credits.

During a hearing on Friday at DEC headquarters in Albany, opposition to the plan came in a joint statement by some of the state’s largest power companies, including AES and Dynegy, as well as the state Business Council, state Independent Power Producers, which represents about 80 companies involved in generating electricity; Manufacturers Association of New York, which represents about 300 companies, and Multiple Intervenors, an association of 53 large industrial and commercial energy users.

Coal-fired plants, which emit about twice as much CO2 as a natural gas-fueled plant, would be hit hardest by the program. The state receives about 15 percent of its energy from coal, with the rest coming from natural gas, nuclear energy, hydrogeneration, as well as small amounts of alternative energies like solar and wind.

AES owns four of the 13 coal-fired power plants in New York, including facilities in Dresden, Washington County; near Buffalo, on Cayuga Lake in the Finger Lakes; and near Johnson City, Broome County.

In 2004, its Somerset plant near Buffalo released more carbon dioxide than any other in the state, about 5.3 million tons, or about 9 percent of the proposed limit, according to RGGI figures.

Last week, the industry group — which supports paying for no more than 25 percent of credits and getting the rest for free — claimed some power plants may close if forced to pay, causing an electricity shortage and driving up rates, according to a statement.

Selling credits at auction could also open up the market to speculators, which could further drive up the costs of credits.

“It is important that we strike the right balance between the competing interests,” said Robert Loughney, a lawyer representing the group.

Supporters of the plan urged its adoption. “Climate change will impose enormous costs on our economy and way of life,” said Ned Raynolds, Northeast climate policy coordinator for the Union of Concerned Scientists. “Of course we have to be concerned about short-term costs, but we have to keep our eye on the ball, on the long-term costs.”

Meanwhile, the National Oceanic and Atmospheric Administration has announced that 2006 was the warmest year on record in the United States, nearly identical to the previous record set in 1998.

“RGGI will do what it is supposed to do,” said Raynolds. “It will make carbon-intensive power less financially rewarding, and less carbon-intensive power more financially rewarding.”

Current state rules allow companies to increase electricity prices based on the value of the CO2 credits, even if credits cost them nothing, leading environmental groups and Spitzer to agree that power plant owners will reap windfall profits from free credits.

The windfall profits scenario has already unfolded in Europe, which started its own carbon trading program in January 2005. European credits were given free to electric companies, and national government regulators reported this spring that companies pocketed billions in excess profits when electric bills spiked.

Steven Keller, an engineer with the state Public Service Commission, said studies show that while coal-fired plants could see profits drop by up to 50 percent by 2015, plants would still earn profits even after paying for credits. Nearing can be reached at 454-5094 or by e-mail at bnearing@timesunion.com.

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Copyright (c) 2007, Albany Times Union, N.Y.

Distributed by McClatchy-Tribune Business News.

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