From the Wonk Room.
Both presidential candidates, Sen. John McCain (R-AZ) and Sen. Barack
Obama (D-IL) have called for a mandatory cap on carbon emissions in the
United States. Coal-fired power plants, which produce about 49 percent
of U.S.
electricity,
account for 83 percent of power-sector
emissions. Because
of the global warming footprint, the cheapness of coal-fired electricity
is illusory. Under a cap-and-trade system, the cost of those emissions –
now a market externality – would have a dollar cost. In a January 2008
interview
with the San Francisco Chronicle, Obama used blunt language to describe
how a cap and trade system would change the future of the power sector:
That will create a market in which whatever technologies are out there
that are being presented, whatever power plants are being built, they
would have to meet the rigors of that market and the ratcheted-down
caps that are imposed every year. So if somebody wants to build a
coal-powered plant, they can. It’s just that it will bankrupt them
because they’re going to be charged a huge sum for all that greenhouse
gas that’s being emitted. That will also generate billions of
dollars that we can invest in solar, wind, biodiesel, and other
alternative energy approaches.
Obama’s statements carry the same sentiment as his opponent. At a
September 15 townhall meeting in Orlando, FL, McCain warned against
building new coal
plants:
We’re going to build new plants that generate energy, my friends,
we’re going to build them. We’ve got to. There’s an increased demand
for it. And it seems to me, it’s going to be coal, which I believe
will increase greenhouse gas emissions dramatically, or it’s going
to be nuclear, or it’s going to be clean coal technology.
In the San Francisco Chronicle interview, Obama similarly stated that
the future of power involves coal:
But this notion of no coal, I think, is an illusion. Because the
fact of the matter is, is that right now we are getting a lot of our
energy from coal. And China is building a coal-powered plant once a
week. So what we have to do then is figure out how can we use coal
without emitting greenhouse gases and carbon. And how can we
sequester that carbon and capture it. If we can’t, then we’re gonna
still be working on alternatives.
Under either candidate’s cap and trade program, constructing new coal
plants that do not employ “clean coal technology” – that is, carbon
capture and sequestration technology – would raise costs “dramatically.”
Independent analysts have found that new coal plants would “create
significant financial risks for shareholders and
ratepayers”
because of the likely cost of their greenhouse gas emissions. Thus,
energy providers will have a financial incentive to pursue alternative
energy and energy efficiency. McCain explained the market signal of a
cap and trade program in his May 12 speech on climate
change:
And the same approach that brought a decline in sulfur dioxide
emissions can have an equally dramatic and permanent effect on carbon
emissions. Instantly, automakers, coal companies, power plants, and
every other enterprise in America would have an incentive to
reduce carbon emissions, because when they go under those limits
they can sell the balance of permitted emissions for cash. As never
before, the market would reward any person or company that seeks to
invent, improve, or acquire alternatives to carbon-based energy. . .
A cap-and-trade policy will send a signal that will be heard and
welcomed all across the American economy. Those who want clean coal
technology, more wind and solar, nuclear power, biomass and bio-fuels
will have their opportunity through a new market that rewards those
and other innovations in clean energy.
McCain emphasized who the winners under a carbon cap-and-trade system
are: “clean coal technology, more wind and solar, nuclear power, biomass
and bio-fuels.” The market “incentive,” “reward,” or “signal” is a
euphemism that the winners will make money because the losers will pay
more. And the losers, above all, are traditional coal plants—no matter
who is elected president.