How will utilities in the next 10 years manage a multi-billion-dollar infrastructure buildout, higher interest rates/cost of capital, diminishing free cash flows, state renewable mandates, and...
Warming to the Crisis
Kyoto countries miss their targets, but scientists say climate change was already unstoppable.
Hollywood and the media are way ahead of the politicians when it comes to the greenhouse effect and global warming. An exposé in a recent issue of Time magazine (April 3, 2006) cited warnings from scientists of a “tipping point”—that we may be approaching “the point of no return” if we do nothing on climate change.
Maybe, in fact, we’re already there. That might explain why utilities dared to challenge Congress and the “wait-and-see” crowd on whether to continue to defer on various proposals to restrict emissions of carbon dioxide, at a conference before the Senate Energy & Natural Resources Committee, held in early April.
In fact, Exelon Corp. and Duke Energy Corp., PNM Resources Inc., and Sempra Energy urged Congress to impose mandatory restrictions on emissions of carbon dioxide. Southern Co. and American Electric Power urged a voluntary program, as did the Edison Electric Institute.
But even as utilities try to be good corporate citizens and help devise a federal or national plan, the question remains as to whether the domestic economy can achieve even a modest reduction in CO 2 releases—enough to put even a small dent in current predictions of global climate change.
A Faustian Deal
New scientific evidence suggests that global warming is inevitable: that our only choice is how much and how soon.
One economist states the tradeoff succinctly: “Basically, [global warming] is a choice as to the degree that we want to reduce CO 2 emissions and pay up now, and the degree we are willing to live with higher temperatures at a later date.”
Yet the main problem in this so-called tradeoff is the assumption that governments can adhere to their promises. If the failure of European Union members to meet early targets is any guide, then Kyoto’s more significant cuts may never be achieved.
Does this mean that the U.S. utilities are setting themselves up for failure? California may think so. Backing off of an initiative to set firm limits on greenhouse-gas emissions, California Gov. Arnold Schwarzenegger said recently that setting a firm cap on greenhouse-gas emissions could drive businesses away and hurt the state’s economy.
In an interview with the Contra Costa Times, Schwarzenegger called a report on climate change by the California Environmental Protection Agency “a great blueprint to take us where we need to go.” Yet he added that rushing to set firm limits on greenhouse-gas emissions could lead to the same kinds of mistakes that occurred during California’s disastrous attempt to restructure the electricity industry.
If California’s “greens” are talking this way, perhaps the time has come for all Americans to take a more realistic view of the climate change issue.
At the Senate conference, Michael G. Morris, CEO of American Electric Power, emphasized the need to attack climate change with what Peter Huber would call “hard” answers, rather than “soft” responses, such as simply cutting consumption or fuel use to get by with less:
“Technology is the key,” he advised. He advocated strategies