A
"cap and trade" emissions program in which Delaware participates has
adopted new guidelines to drastically cut carbon dioxide (CO2)
allowances, potentially driving-up electricity prices in the near
future.
Nine
states comprise the Regional Greenhouse Gas Initiative (RGGI) -- a "cap
and trade" program designed to reduce CO2 emissions from large power
plants by establishing annual limits. At periodic auctions, power plant
operators need to purchase allowances for the amount of CO2 produced by
their facilities.
Under
the new policy announced last week by the program, the 2014 regional
CO2 budget would be reduced 45-percent, from the current 165 million
tons to 91 million tons. The cap would then decline 2.5-percent each
year from 2015 to 2020.
The
reduction is being initiated, in part, because power companies have
produced far less pollution than was anticipated when the RGGI was first
established in 2008. The result created a surplus of unsold CO2
allowances, devaluing their worth.
State
Rep. Jack Peterman (R-Milford), who has been a long-time critic of
Delaware's participation in the cap and trade program, said that changes
in the energy market have outpaced the program's pollution reduction
goals. He noted that many of Delaware's power producers have switched
from coal to cleaner, more efficient natural gas in recent years.
Natural gas has dropped in price due to new "fracking" technology that
has allowed for vast reserves to be tapped in shale formations in
Pennsylvania and elsewhere. As a result, CO2 emissions from Delaware
power plants have dropped by at least 40-percent, far surpassing the
RGGI target of a 10-percent reduction by 2019.
"If
reducing pollution was the goal, this program has outlived its
usefulness," Rep. Peterman said. "Market forces have driven producers
to cleaner alternatives. The only reason to keep this in place is for
the state to continue its hidden tax on businesses and homeowners."
Proceeds
from the auction of the carbon dioxide allowances have been a
significant revenue-generator for the RGGI member states, producing more
than $1 billion of income. According to records supplied by the
organization, through December 2012, Delaware has reaped nearly $29.7
million in total auction proceeds. The money has reportedly been spent
on energy efficiency and renewable energy programs administered by the
Sustainable Energy Utility (SEU).
Rep. Peterman says the cost of those CO2 allowances is being passed along to consumers, usually without their knowledge.
With
the planned cap reduction next year, those stealth costs are expected
to increase. According to a published report, one economic analysis
estimates the change will add $2.2 billion to the cost of the CO2
allowances over the next eight years.
Data
from the U.S. Energy Information Agency (EIA) shows that among the 48
contiguous states, Delaware has the tenth-highest residential
electricity rate (13.7 cents per kilowatt hour) and the sixth-highest
residential average monthly bill ($132.83).
Rep. Peterman said that should be a concern for anyone who is interested in expanding quality employment in The First State.
"The
cost of power is one of the top considerations for a business," Rep.
Peterman said. "Policies that drive the price of energy higher are
hamstringing our efforts to be an attractive venue for new employers."