Public Power - September 2008 - (Page 34)

Carbon Safety Valves MERCURY CONTROL A TurnKey Approach ONE STOP MERCURY CONTROL SOLUTION FROM IAC We’ve done the hard work for you IAC developed your mercury removal strategy IAC Three Step Program 1. Demonstration IAC Fully Equipped 48’ Long Test Rig Trailer 2. Select PAC Sorbent Gas Stream Removal Testing at Evolution 3. Install Permanent PAC Equipment IAC Design/Build TurnKey Solution Call Today for YOUR plant’s Mercury Analysis RELIABLE & COMPREHENSIVE 1-800-334-7431 IAC is a worldwide leader in fabric filter baghouses, bulk storage and pneumatic conveying design/build equipment technology. Industrial Accessories Company 4800 Lamar Ave. Mission, KS 66202 www.iac-intl.com in a cap-and-trade program will have an impact throughout the economy. The higher prices for emission allowances rise, the greater their economic impact on American society. Ultimately, under a cap-and-trade program without a safety valve, markets will decide the price. Markets are not rational. The price of stocks are often determined by what investors are willing to pay, and not always founded on sound investing decisions. In fact, investors frequently get caught up in buying sprees that drive up prices. Alan Greenspan called this behavior “irrational exuberance.” In addition, markets are frequently subject to both legal and illegal manipulation. Investors try to gain advantages over others for their own financial gain. Enron and its manipulation of energy markets to inflate electricity prices artificially is one recent example. In spite of safeguards in the American stock markets and various oversight mechanisms, such as the Securities and Exchange Commission, savvy and dishonest traders find new ways to manipulate markets and run the price of stocks and commodities up to artificially high levels. The same manipulation of prices could occur in an American emission allowances market. A loophole in the Kyoto protocol has already cost the international carbon trading system billions. “A few Chinese factories and carbon traders were making large profits by exploiting the regulations By installing cheap equipment, the companies could gain ’carbon credits‘ which they could sell for hundreds of millions of dollars,” according to the Feb. 7, 2007 issue of The Financial Times. Ultimately, emission allowances are a tax. It might be a variable tax, determined by the daily whims of the market, but, ultimately, the cost of emission allowances will affect nearly every facet of the American economy. Fossil fuel combustion drives the U.S. economy and, in spite of efforts to use renewable energy and alternative fuels, it is likely to remain dominant in the foreseeable future. Because so much of the U.S. economy is fossil fuel-based, each rise in the price of emission allowances will translate into a higher tax on the economy, which will be felt by every company and individual in the United States. This tax on the economy along with the possibility of irrational exuberance or market manipulation or everyday market forces all contribute to why policymakers consider a safety valve a critical component of any cap-and-trade program. The Congressional Research Service has identified four different types of safety valves: • A tax: If the price for emission allowances climbs to a determined price point, then a tax would kick in to drive down the price. The CRS says a carbon tax would essentially be “a levy on natural gas, petroleum, and coal based on their carbon content, in the approximate ratio of 0.6 to 0.8 to 1, respectively.” • Unlimited allowances: This is the only type of safety valve currently being considered by Congress. An unlimited allowances safety valve would drive down the price of emission allowances by flooding the emissions markets with allowances until their price falls to a determined level at or below the safety valve price. • Contingent reduction: Though not immediately perceived as a safety valve, contingent reductions have much the same function, which is to keep the price allowances down. A contingent reduction does not directly attempt to impact the price of allowances as a tax would. Instead, it would have staged emission-reduction levels built in, so emissions caps would be lowered each year. However, these reductions would be contingent on the price of allowances. If allowance prices stayed below a certain price, then emission reductions proceed as planned. However, if allowance prices rise too far, then the emissions cap stays consistent. There would be no cap on prices. • Excess emission penalty: If emissions exceeded the limits imposed by available allowances (permits to emit), then a fee or penalty is assessed on those who exceed the predetermined limits. This approach has the advantage of raising money through fines. As long as the fines are not particularly burdensome, but still expensive enough to encourage compliPUBLIC POWER 34 SEPTEMBER 2008 http://www.iac-intl.com

Table of Contents Feed for the Digital Edition of Public Power - September 2008

Public Power - September 2008 Contents Perspective 10 Questions What’s Good About RTOs? Capturing Coal’s Carbon Carbon Safety Valves Greater Glass, Greater Savings Getting Customers to Embrace Compact Fluorescent Lights LEEDing Green Kansas City Shows How to Build Green For Governing Boards Safety Community Broadband Hometown Connections Parting Shot

Public Power - September 2008

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