IT TAKES LABOR, FUEL, OPERATING CASH AND INVESTMENT capital to produce and deliver electric power. Which utilities have managed to use these resources optimally to produce and sell kilowatt-hours...
Climate Change: The Heat Is On
From reporting to trading, utilities try to meet new expectations.
On the issue of global climate change, most utilities have devoted their attention to tracking developments in Washington, D.C., following the rising and falling fortunes of legislation that could result in federal greenhouse gas (GHG) reporting or regulatory requirements. For the most part, utilities have taken comfort in the resolutely anti-regulatory stance of the Bush administration on greenhouse gas emissions. Yet more and more, utilities are finding their inside-the-Beltway focus shaken by an array of outside-the-Beltway activities, ranging from state climate legislation to shareholder proxy actions and the threat of climate change tort suits.
This constellation of state, local, and shareholder activities is creating new pressures on utilities to take steps now to begin addressing their GHG emissions and their exposure to future regulation. Indeed, for all major industries, implementation of some kind of strategy on climate change is becoming a new criterion of corporate social responsibility.
Major utilities are responding to these pressures in a variety of ways. Many are taking inventory of their emissions and identifying internal mitigation opportunities. Others are participating in voluntary reporting programs or high-profile climate "leadership" groups, announcing voluntary limits on their GHG emissions, or exploring the emerging international emissions trading market.
Mushrooming State Climate Policies
Increasingly, states and municipalities under both Republican and Democratic leadership are establishing their own greenhouse gas regulatory or reporting programs. According to the , state legislatures have passed at least 29 bills in the last three years addressing climate change.
A number of the state policies are aimed at power plants:
- Massachusetts has imposed a requirement on the six highest-emitting power plants to reduce their rate of carbon dioxide (CO2) emissions to 1,800 lbs/MWh by 2006.
- New Hampshire is requiring generators to reduce their CO2 emissions to 1990 levels by 2010.
- Oregon requires all new power plants built in the state to have a CO2 emissions rate 17 percent lower than the most CO2-efficient power plant in operation in the United States. Plants may comply either "on-system" or through the purchase of CO2 emission credits.
- The governor of Washington announced that the state might require any new power plant to offset 20 percent of its CO2 emissions. And, in 2001, the city of Seattle passed a resolution directing municipal utility Seattle City Light to reduce or offset all of its CO2 emissions.
- California has enacted the first-ever U.S. law requiring the development of standards limiting GHG emissions from motor vehicles. Under the law, the standards will apply to model-year 2009 cars.
States are pursuing regional approaches as well, as the governors of California, Oregon, and Washington have pledged to work cooperatively on climate policies. In addition, work has begun on an ambitious climate change program for the Northeast. The governors of New York, Connecticut, Vermont, New Hampshire, Delaware, Maine, New Jersey, Pennsylvania, Massachusetts, and Rhode Island-six of whom are Republicans-have agreed to develop a regional GHG cap-and-trade program by April 2005. The first phase of the program will focus on the utility sector.
Non-regulatory programs also are multiplying among the