Ohio’s electric cooperatives and Butler Rural Electric Cooperative support responsible congressional action on climate change that is affordable, achievable and effective.
HR 2454, the American Clean Energy and Security Act of 2009, slated by Speaker Nancy Pelosi for floor action this summer, fails to meet those requirements. It will increase energy prices across the entire economy. Its near-term emission reduction targets cannot be met; and by design, it will take dollars from the Midwest and export them to coastal states and Washington, D.C.
HR 2454 requires a 17-percent reduction in greenhouse gas emissions below 2005 levels by 2020. Technology to accomplish this reduction cost-effectively for major sources of carbon emissions — power plants, industry and vehicles — does not exist. There is little likelihood that it will be developed or widely deployed by 2020.
Consequently, all petroleum and natural gas suppliers, industrial companies and carbon-based electric generation suppliers will be bidding for a declining sum of emission allowances set by the HR 2454 cap-and-trade system. Ohio’s electric cooperatives will have to purchase allowances or offsets for about half of their expected carbon-dioxide emissions in the first 10 years. And that percentage will grow over future years despite reductions achieved from energy conservation and noncarbon renewable energy.
Cap and trade will prove exceptionally expensive for Ohio consumers. That’s because more than 85 percent of Ohio’s electricity comes from coal-fired generation. Carbon-dioxide emissions per unit of output for coal-fired electric generation are twice that of equivalent natural gas generation. Consequently, Ohio electric suppliers will have to purchase nearly twice the quantity of emission allowances or offsets under the HR 2454 cap-and-trade program for their carbon-dioxide emissions. Because most of these allowances and offsets will be sold at prices set by auctions, higher costs will prevail and price volatility will become more the norm, rather than the exception, for electric rates.
The export of dollars from Ohio and other Midwest states is an especially punitive feature of HR 2454. The legislation grants free allowances to electric utilities with mostly noncarbon generation (hydroelectric or nuclear). These free allowances, in turn, will be sold to utilities that need them.
A government auction of emission allowances is the second glaring weakness of HR 2454. Based on conservative emission allowance prices, the Congressional Budget Office projects that auction proceeds to the federal treasury will total $846 billion by 2019. This is an energy tax on consumers and disproportionately on consumers in Ohio and other Midwest states who are dependent upon coal-fired electric generation.
For these reasons, the only responsible vote on HR 2454 is a “no” vote. Congress should go back to work on fashioning an affordable and achievable response to climate change.
Michael Sims
General manager
Butler Rural Electric
Cooperative Inc.
