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WASHINGTON, DC, US, September 27, 2006
(Refocus Weekly)
U.S. legislation to implement a market-based
allowance program to cap GHG emissions would promote renewables,
natural gas and nuclear, according to a government analysis.
The Department of Energy was asked by two congressmen in May to
analyze the energy and economic impacts of H.R. 5049, the ‘Keep
America Competitive Global Warming Policy Act.’ The legislation was
introduced in March to establish a program to limit emissions at
2009 levels and to limit the potential impacts of the bill on energy
prices through the sale of additional allowances.
A ‘safety-valve’ provision, if triggered, would relax the emissions
cap and H.R. 5049 specifies guidelines for allocating tradable
emission allowances to compensate affected parties, provide
transition and low-income assistance, fund research and assist with
emissions reduction projects in developing countries. Up to 10% of
the emission allowances are to be allocated for free to the oil,
natural gas and coal industries, which must submit allowances equal
to CO2 emissions from their fuel sales.
“In the electric power sector, projected changes in the policy cases
include shifts in the types of new power plants added, with an
increased reliance on natural gas, renewable energy, and nuclear
power to supply electricity and less reliance on coal and
petroleum,” DOE’s Energy Information Administration explains in the
response to the congressmen. In that scenario, reductions in CO2
emissions in the electricity sector account for 68% of total
energy-related CO2 reductions in 2030.
“The legislation leads to lower CO2 emissions than in the reference
case, particularly in the electric power and industrial sectors,
slows the growth of GHG emissions other than CO2, and increases
carbon sequestration in forestry and agriculture,” it continues. The
allowance program achieves a combination of GHG reductions and
increases in sequestration of 827 Mt of CO2 equivalent (10%) in 2020
and 1,105 Mt (11%) in 2030.
Beginning in 2018, the market price of an allowance reaches the
safety-valve price and triggers additional allowance sales, pushing
the allowance price to US$30 per Mt by 2030, compared to $8 and $10
per Mt under the other scenarios. Less than half of projected
emissions impacts are due to reductions in energy-related CO2, but
the share of energy-related emissions reductions in total emissions
reductions grows over time.
“With the added cost of GHG allowances, projected prices of fossil
fuels and electricity increase relative to the reference case,” with
the average delivered price of coal at 46% above reference by 2030,
while gasoline is priced 3% higher, natural gas 5% higher, and
electricity 6% higher in 2030.
“Projected power-sector generation from renewable sources, mainly
biomass and wind changes most in percentage terms under the policy
cases compared to the reference case,” the report speculates. Output
from green power facilities in 2030 is 644 to 678 billion kWh under
the legislation, 28% higher than the 504 billion kWh under the
reference scenario without the law, of which biomass accounts for
82% of the change and 15% for wind.
The Energy Information Administration is the independent statistical
and analytical agency of the DOE.
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