New York (Platts)--1Jun2007

The authors of a new privately funded report say Congress should mandate a
power emissions performance standard that requires all new coal plants to
manage carbon emissions with control-and-capture systems, in conjunction with
an emissions cap-and-trade system for existing power plants.

The report, "Global Warming and the Future of Coal," analyzes various options
the authors say will increase the likelihood CCS technologies will be
deployed.

An emissions performance standard, according to the report released Thursday
by the Center for American Progress, provides certainty that new coal plants
have CCS systems. For example, plants built after 2008 would follow the
standard and be required to implement CCS technology by 2013. During the first
three years of the standard, plant developers would have the option of
building traditional coal plants without CCS as long as they offset the CO2
emissions. 

Some of those offsets could include increasing efficiencies, retiring older
coal and natural gas plants and building renewable power facilities. Then in
2011, the option would sunset and all new plants would need CCS.

While the EPS is in play, a cap-and-trade program for existing power plants
would be adopted with the cap starting at 100% of emissions and decline over
time. The declining cap encourages efficiencies at plants and acts as an
incentive for retiring older facilities, wrote co-authors Kenneth Berlin, head
of the environmental practice at Skadden, Arps, Slate, Meagher & Flom, and
Robert Sussman, a partner at the law firm Latham & Watkins. As the cap
declines, retrofitting existing plants with CCS systems could become a viable
option.

The biggest challenge to implementing the plan is mitigating electricity price
hikes, Sussman said. "There is no question that there will be price hikes
between 25% and 40%. We think it is imperative to mitigate those hikes." 

Two options are creating a fund whereby utilities are credited for all or part
of the price hikes so it isn't passed along to consumers, or creating upfront
financial incentives that offset a significant portion of the incremental
costs of building a CCS plant.

-- Regina Johnson, regina_johnson@platts.com