August 27, 2007

More on the McCain/Lieberman climate change bill

The EIA is known for making conservative projections on energy. They recently made an analysis of what the USA energy picture would look like if the McCain Lieberman the Climate Stewardship and Innovation Act of 2007 was adopted. It seems that sojme kind of climate bill will be passed this year. Nine climate bills are being considered. It seems likely that there will be some house of representatives bill and a senate bill. Then the bills will get merged and probably one will be passed. A question will be whether the passed bill will have a veto proof majority. If it does not then will George Bush veto it ? Business supports getting a bill done this year, since they think any bill in 2009 under a new administration will likely be far more green and less business friendly.

Here is my first article about the climate change bill

Passage of a solid climate change bill would be one of the best things that can be done to increase nuclear energy and renewable energy and reducing dangerous coal and fossil fuel usage. Contact your senator and congressman to encourage them to pass S280 and the climate change bills.

Here are some special topics in the EIA analysis

A No Nuclear case was analyzed to examine the impacts of restricting new nuclear capacity growth (beyond that added in the reference case) under the S. 280 Core assumptions. The allowance price in the No Nuclear case is 6 percent higher than the S. 280 Core case in 2030 and power sector CO2 emissions are about 3 percent higher. The power sector turns to increased investment in renewables (mainly biomass and wind) as well as significant investment in new coal plants with carbon capture and sequestration and natural gas. In the No Nuclear case, 70 gigawatts of new coal plants with carbon capture equipment are built. Total coal production in 2030 in the No Nuclear case is more than 100 million tons higher than in the S. 280 Core case. The higher allowance price and more costly capacity investment in this case lead to average delivered electricity prices in 2030 that are 8 percent higher than the S. 280 Core case. In turn, the higher prices have an impact on electricity sales, which are 2 percent lower in 2030 in the No Nuclear case than in the S. 280 Core case.

Alternative cases were prepared to explore the impacts of additional areas of uncertainty:

- The Unlimited Offsets case examines the impact of removing the 30 percent offset limit in S. 280. This limit is particularly important in the later phases of the proposal when the emissions caps, and the offset limit tied to them, are lowered sharply.

- The Low Discount case assumes that investors will only require a 4-percent return on allowances rather than the higher rate of return investors generally require for large plant investments such as power plants. Recent analysis at the Massachusetts Institute of Technology examined the returns on sulfur dioxide emission allowances (SO2) and found that they were generally not correlated with market returns, suggesting that financial investors would treat them as relatively low risk assets.16 It is unclear whether a similar relationship might be seen in GHG allowance markets since GHG emissions are so ubiquitously linked to economic activity.

- The High Auction case was prepared in response to a request from Senate staff to examine the impact of assuming that a larger share of the allowances distributed each year are auctioned rather than given out for free.

- The No Nuclear case examines the impacts of limiting the penetration of new nuclear capacity to the level seen in the reference case. Earlier EIA analyses have suggested that nuclear power could be an important option for reducing power sector GHG emissions. However, while interest in new nuclear plants appears to be growing, uncertainty about the costs of new plants and public concerns about safety and longterm waste disposal could limit their penetration.

- The Commercial Covered case examines the impacts of assuming that all entities in the commercial sector were covered. As explained, while detailed data are not available, very few buildings are expected to meet the 10,000-metric-ton facility emission threshold in S. 280, but this case examines the potential impact if a larger than expected number did.

- The S. 280 High Technology case examines the impact of the provisions of S. 280 using more optimistic assumptions about improvements in technology. This case should be seen as a “what if” case, rather than predictive of the impacts of S. 280 from innovation incentives and technology deployment programs.

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