U.S. Energy Policy: Setting Carbon Goals Without Nuclear Isn’t Global Leadership

U.S. Energy Policy: Setting Carbon Goals Without Nuclear Isn’t Global Leadership

(Published as an editorial in the Athens Banner-Herald on November 17, 2016.)

Since 2000, CO2 emissions in the U.S. have decreased 8% and are trending down while global emissions have increased 40% and are trending up. Does this represent global leadership by the U.S. with respect to energy policy and carbon goals?

U.S. CO2 reductions are largely due to the transition from coal- to natural gas-fired power generation, but this has an eventual limit as there are only so many coal plants to displace. More concerning, approximately 5.6 gigawatts of U.S. nuclear capacity are scheduled for closure by 2019 primarily because deregulated merchant markets can’t appropriately value zero-carbon nuclear. The majority of this loss in zero-carbon baseload power will be filled with natural gas, resulting in a net CO2 increase that will offset reductions from the coal-to-gas transition. In this context, the loss of nuclear capacity is conflicting and requires policy attention. However, the issue is more acute beyond U.S. borders.

In 2015, for the first time in history, India exceeded the U.S. in coal consumption. China passed the U.S. in 1987 and now leads the world in CO2 emissions at a rate 1.7 times that of the U.S. India is moving in the same direction. Of the three countries, only the U.S. has reduced coal consumption and CO2 emissions over the past fifteen years; but, for every ton of decrease in the U.S., China and India increased theirs by 15 tons and 3.3 tons, respectively. One step forward, 18.3 steps backward—for these two countries alone. When we consider that 2.6 billion people mired in energy poverty are living in countries prepared to consume more fossil fuel, the magnitude of what we’re facing becomes daunting.

A key U.S. policy response to this global issue is EPA’s Clean Power Plan, which proposes to reduce power plant emissions by displacing coal with natural gas (which the power sector already is doing) and providing financial incentives for zero-carbon, intermittent solar and wind to the exclusion of zero-carbon, baseload nuclear. However, this preference for solar and wind, which can’t substitute for nuclear, won’t prevent the scheduled closure of nuclear plants nor incentivize the development of additional nuclear capacity to sustain CO2 reductions over the long-term. This also doesn’t translate to the developing world.

Developing countries consume fossil fuels because fossil fuels support their near-term economic needs—regardless of U.S. CO2 targets. This is reality. We can rail against fossil fuels and warn about climate change till the ice caps melt, but accusations and warnings aren’t solutions for these countries. They need workable, proven alternatives. This is where the U.S. should provide global leadership through development of advanced zero-carbon and low-carbon technologies for deployment in the U.S. and abroad. Nuclear power and highly efficient combined-cycle natural gas plants offer near-term alternatives to coal in developing economies, whereas carbon capture and storage is needed for long-term management of CO2 in regions where fossil fuel consumption continues unabated. This would accommodate the necessary baseload for aggressive development of renewable energy, which by itself cannot scale up to meet the economic needs of billions. U.S. industry is up to this challenge, but it needs a sensible investment climate in countries where financial risk is high, regulatory frameworks are complex, and governments are inefficient and often corrupt. To this end, U.S. policy should include high level diplomatic strategies abroad and corporate tax reform in the U.S. to stimulate investment in regions where advanced technologies are most needed and the business climate is perilous.

This is arguably the most daunting energy challenge in history and the scope extends far beyond the fence lines of U.S. power plants. If developed in a political bubble, U.S. policy can create the pretense that it’s taking significant steps to stem the tide of CO2, when in reality the additional carbon squeezed from its economy is being flooded by a tsunami of CO2 coming out of southeast Asia and other countries rightfully queuing up for their turn at economic development.

There’s space between where we are and where we want to be in a low-carbon future. While setting targets is necessary, that alone isn’t leadership. Leadership is navigating that space with implementable solutions. This demands resolve from U.S. policymakers to look beyond U.S. borders and national politics, accept global realities and respond with policies that match the scale and magnitude of this issue—a global scale of billions.

…ilyh…

Advertisements

2 thoughts on “U.S. Energy Policy: Setting Carbon Goals Without Nuclear Isn’t Global Leadership”

  1. Thank you for an excellent editorial. I am interested to know your thoughts on a carbon fee and dividend plan where the US would place a small, but steadily rising fee per ton on CO2 and CO2-equivalent emissions. The fee would be returned to households as a dividend per person, allowing consumers to offset rising energy costs initially, and over the long term, invest in products produced with clean energy as products produced with cleaner alternatives become more economically competitive. The fee would be paid by energy producers at the source of entry into the market–the mine, well, or port. A border adjustment would ensure that companies producing energy off-shores would pay the fee as well. According to a report completed by Regional Economic Modeling, Inc in 2014, this policy would be more effective in reducing greenhouse gas emissions than the regulations in the Clean Power Plan. I am very interested to know your thoughts about this proposal.
    Thank you!
    Cary Ritzler

    Like

    1. Cary,
      Thanks for the comments on the editorial and the question on a carbon tax. I have a few concerns that I need to reconcile before I could consider a carbon tax. 1) The tax would have to be revenue-neutral, including all the federal processing costs associated with administering it. If it isn’t, it’s a non-starter for me. 2) The increased tax burden would impact low-income families, which would probably mean that the dividend would be structured so these families are sheltered from price increases. There’s a limit to how much electricity a family can cut out of their budgets and, with heating and air conditioning being basic needs and not luxury items, they can’t cut back too far. However, for low-income families that rent this is problematic because they’re limited as to what efficiency measures they can take to limit their electricity consumption, if not prohibited altogether. In any case, for low-income families, portions of the tax dividend would likely be used to offset price increases or spent on energy efficiency measures (for non-renting families) so that the overall impact is zero. This also raises a concern as to participation rate. I’m not sure of the participation rate for current efficiency programs that offer even 100% reimbursement for efficiency measures (my guess is it’s less than 50%). But, for example, if it’s only 25% participation then the incentives may need to be increased four times to get 100% participation. How all of this is handled is a concern for me as it is with any federal disbursement program. 3) Setting the actual price on carbon based on social and environmental costs is subjective and would be ultimately set by politicians who may take advantage of the tax assessing exercise to advance agendas in non-related areas of political interest to them. This concern is more related to skepticism on my part, but it’s a realistic skepticism. 4) How the dividend is dispersed is very concerning and also subjective. If it’s returned to households to offset the increased costs, as you suggest and as is often suggested, the question then is, “If the increased costs are offset, how does this reduce consumption, thus carbon emissions?”. The logic seems somewhat circular as it may nullify the price signal. As for investment in cleaner products, I’m not exactly sure what you mean, unless you’re referring to lower-carbon or zero-carbon power generation. If that’s the case, my concern is that preferred technologies such as solar and wind would receive the lion’s share of the dividend and nuclear would receive little, if any. I’m a staunch supporter of solar and wind where it is geographically available and economically feasible, but not to the exclusion of baseload nuclear. 5) A U.S. carbon tax, in the absence of a global carbon tax on all goods, would compromise U.S. economic competitiveness in global markets. While you included a border adjustment on companies producing offshore energy, in order to actually level the field economically the tax would have to be applied to all economic goods and products crossing our borders from other countries using fossil fuels in their supply chain, not just energy resources crossing the border. However, this has its own externalities as it would impact countries that are in the early stages of economic development and growth as well as much poorer and less-developed consumer countries as the cost of producing and consuming goods would inevitably increase, at least in the near-term. This may then require similar consumer protection measures as I mentioned for low-income families in the U.S. This would require some very in-depth economic analyses and an unprecedented global verification system that might prove to be logistically unwieldy to monitor if not impossible to implement; not to mention the propensity for international corruption. This latter concern may seem skeptical on my part, but, again, it’s a realistic skepticism. 6) The steps we take need to address the emission increases that are about to sharply increase in India, where power plants are being constructed, and the high emission levels that have already been reached in China, where power plant capacity already exceeds that of the U.S. A carbon tax may eventually incentivize zero-emission production/consumption, but in the meantime India is building coal plants and China has already built up a large base of coal plants. This translates into concerns about assets that may well be stranded under a carbon tax. 7) Electricity is generally an inelastic commodity, so price increases don’t necessarily trigger substantially lower consumption. This may well mean that in order for a carbon tax to substantially reduce consumption (thereby reduce carbon emissions) the tax may need to be very high in order to elicit a market response, which would then put price control directly into the hands of the federal government. I can handle state-level price regulation in a regulated power market, but would never accept price regulation at the federal level.
      My apologies for such a long reply, but I hope this conveys my thoughts well enough.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s