MJB&A Authors Report Laying Out Potential Implications of Global Warming Carbon Allowance Proposals on Consumers and Power Companies

M.J. Bradley & Associates (MJB&A) recently developed a report for the Natural Resources Defense Council (NRDC), Ceres, Public Service Enterprise Group (PSEG), and Pacific Gas & Electric Corporation (PG&E) highlighting the implications of climate change legislative proposals for the electric power sector.

The report, Benchmarking Air Emissions of the 100 Largest Electric Power Producers in the United States, is the sixth collaborative effort highlighting environmental performance and progress in the nation's electric power sector. The Benchmarking series began in 1997 and uses publicly reported data to compare the emissions performance of the 100 largest power producers in the United States. The current report is based on 2006 generation and emissions data.

The report evaluates CO₂ pollution data from the nation's 100 largest electric power companies and provides analysis of allocation scenarios based on two existing Senate bills: the Lieberman-Warner Climate Security Act and the Bingaman-Specter Low Carbon Economy Act. The electric power sector accounts for about 40 percent of the nation's CO₂ emissions.

Under both Senate proposals, some free allowances would be allocated to power companies based on their historic CO₂ emissions. The Lieberman-Warner bill proposes to distribute 1.21 billion tons of free CO₂ allowances to power plant operators in 2012, about 45 percent of 2006 electric power CO₂ emissions. The bill would also allocate 573 million tons of allowances to regulated electric distribution companies, which could then auction them off to companies regulated by the program to raise money for consumer programs. The Low Carbon Economy Act provides a larger allocation of free allowances - 2.12 billion tons of CO₂, or about 80 percent of the power companies' 2006 emissions - to electric power producers in 2012. (The report lists the quantity of free allowances that each of the 100 largest power companies would receive under both legislative proposals, the two economy-wide bills that have specific allocation methodologies.)

The report also outlines how the allowance approach taken in the Lieberman-Warner bill could offset electricity rate increases through targeted rebates and incentives. By distributing allowances to local electric distribution companies, the bill would provide a direct benefit to households and businesses in the form of rebates or energy efficiency incentives - helping offset the added cost of a national climate policy.

The report found that overall CO₂ emissions from the nation's electric power sector rose by 29 percent from 1990 to 2006. Sulfur dioxide (SO₂) and nitrogen oxide (NO_X) emissions dropped 40 percent and 46 percent, respectively. The disparity is primarily due to CO₂ emissions not being regulated and pollution limits being in place for SO₂ and NO_X under the Clean Air Act.

M.J. Bradley & Associates (MJB&A) assists private industry, nonprofit organizations, and government agencies in the strategic assessment of environmental and energy policies, programs, and technologies.