Washington (Platts)--10Jan2008

A non-partisan research agency at the US Department of Energy released
analysis Thursday that showed that a climate change bill proposed by Senate
Energy and Natural Resources Chairman Jeff Bingaman would encourage utilities
to reduce their greenhouse gas emissions by 2030, but would have a much
smaller impact on other major emitters like the manufacturing and
transportation sectors.

The Energy Information Administration projected that S. 1766, sponsored
by the New Mexico Democrat and Pennsylvania Republican Arlen Specter, would
likely reduce overall GHG emissions by 12-26% by 2030, encourage investment in
carbon capture and sequestration technologies and have a relatively light
impact on energy prices and gross domestic product. The analysis shows the
bill would likely fall short of its 38-43% reduction target for 2030.

The main factor that would limit both the measure's effectiveness at
reducing GHG emissions and its cost would be its "technology accelerator
payment" (TAP) provision, which would allow emitters to satisfy any amount of
their obligation by paying $10.42 per metric ton of carbon in 2012, growing to
just over $25 in 2030.

Utilities would respond to this price on carbon by retiring some coal
plants early, investing in CCS--for which the bill offers special
incentives--and increasing the use of nuclear and renewable energy.

S. 1766 would do less to encourage investment in the latter two than some
other climate change bills being discussed in Congress, however, due to the
combined effects of the TAP and the CCS credits.

Bingaman spokesman Bill Wicker said that encouraging CCS was uniquely
important because "54% of our electricity comes from coal, and that's not
going to change."

--Jean Chemnick, jean_chemnick@platts.com