Random Thoughts from the Chairman | May 29

Steve Gerritson, Vice President of the Economic Development Council of Seattle & King County, Chairman
Steve Gerritson, Vice President of the Economic Development Council of Seattle & King County, Chairman

By Steve Gerritson, WCTA Chair & Vice President of the Economic Development Council of Seattle and King County

As you may know, the WCTA is sponsoring a series of lunches with speakers on the subject of carbon. The first session dealt with the science of climate change; the second with federal and state regulation. In the second session, USEPA Region 10 Administrator Dennis McLerran announced that the Obama administration would set CO2 emission limits on coal-fired power plants, but would allow the states to decide how best to accomplish the reductions. He was unable to provide more specific information, since the policy will not be announced formally until next week, but according to the New York Times today, the President will use an executive order to require states to cut carbon emissions by up to 20%. Among acceptable methods for compliance would be adding more renewable energy sources, energy efficiency technology, or a cap and trade program which could (and probably would) cross state lines.

There are two active carbon cap-and-trade programs in the US right now: one in California and one in the Northeast (the Regional Greenhouse Gas Initiative, or RGGI – pronounced Reggie). Both systems allocate allowances and conduct quarterly auctions, the proceeds from which are used for energy efficiencies and other means to reduce carbon emissions. Both began recently enough so that there are no reported emission reduction results as yet. The RGGI rules require a reduction of 2.5% per year over a number of years.

While many utilities actually welcome the President’s initiative, at least one state has announced its intent to take the matter to court. The Attorney General for the State of Oklahoma has announced his opinion that a mandatory cap and trade program violates the Clean Air Act, and stated that Oklahoma would sue if forced to set up such a program. It would not be a surprise to have other states join such a suit.

In addition, the US Chamber of Commerce estimates that the rule will result in a loss of generating capacity on the order of 114 Gigawatts – about 40% of all coal-fired generating capacity. While such estimates in the past have proven wildly inflated, there is no question that some companies will choose to shut down older facilities rather than attempt expensive improvements.

The President’s action, coming as a result of Congress’ repeated failure to act on any climate change legislation, will make some people happy and others angry – but it will certainly stir the pot. Whether it will have any impact remains to be seen.

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