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Climate Change at the Stack: Posturing Toward Kyoto

Fortnightly Magazine - August 1997

electricity prices an average of 32 percent nationwide, with industrial rates 46 percent higher.

But "we're not proposing to use taxes to implement the policy," counters David Doniger, counsel to the EPA assistant administrator for air and radiation. "We've also supported the notion that there be trading between countries and between companies in countries so that as the systems mature it would be possible for a firm in the United States first to look around to say, 'What can I find in the way of a reduction opportunity in the States,' but also, 'What can I find in another country?'"

Restructuring and Trading

Besides supporting a "no regrets" policy, the EPA is considering combining pollution control technologies and market-based methods so the industry saves more money.

EPA's Doniger says there is good news with fused implementation: If you combined SOx and NOx reduction, then the costs would be lower than if those pollutants were regulated separately. (The electric power generation industry accounts for most of the sulphur, about a third of the carbon dioxide and a large block of the nitrogen oxide emitted into the atmosphere.)

Looking at pollutants as a package, Doniger believes, is one reason why electric restructuring plans will be delayed.

Doniger believes that Congress is unlikely to complete federal legislation on electric industry restructuring during the current session. But Federico Peña, energy secretary, promised to debut the administration's restructuring bill in July. Key representatives and senators promised action this summer in their perspective chambers.

"When the industry is going through such a fundamental restructuring. ... So many assets are potentially changing hands and decisions have to be made at the margin level," Doniger says. "It doesn't make sense not to know what the environmental responsibilities of those facilities are going to be."

Still, Doniger is not certain restructuring legislation would include an environmental module.

"But that is the EPA's position: that you need to have an environmental component in restructuring and there are a lot of agencies and offices that agreed," he says.

Is the EPA recommending that the White House not take action on the DOE's restructuring bill because of Kyoto and other clean air concerns?

"We're definitely not recommending that," Doniger insists. "I won't say what we are recommending ... but we think it makes sense when restructuring the utility industry for a period extending 15, 20 years into the future to be looking at all of the important issues that affect that sector, especially if they have economic feedback."

Doug Smith, the DOE's deputy general counsel for energy policy, says the department also is analyzing the consequences of various environmental policies on consumers, the environment and markets. Those policies include those that might come out of Kyoto.

Says Smith: "Almost any CO2 policy that goes beyond the sort of volunteerism we have now ... is going to have a significant effect, at least it could have a significant effect on the utility industry. Presumably we will know before any electricity legislation happens, whether or not there was an agreement in Kyoto, and if so, whether