May 22 2008

U.S. Electric CO2 Emissions Rise in 2007

A report released yesterday by the Energy Information Administration paints an unfortunate image of the state of U.S. greenhouse gas emissions - they are going up faster than the rate of electricity generation. 

According to the report, emissions from the electricity sector rose by three percent as electricity generation rose by 2.5 percent. This means that U.S. electricity generation was actually dirtier in 2007 than in the previous year. 

The EIA states that the relative increase in emissions reflects a decrease in hydroelectric generation due in large part to droughts, forcing utilities to use natural gas, a cleaner form of fossil generation than coal, but still one with a carbon footprint.  Natural gas produces about 40 percent less CO2 than coal. 

A more frightening finding in the report is that the vast majority of this increase did not come from industry, but from households.  According to Environmental Capital, U.S. industry continued to cut emissions, which it has done since 1990.  Households, on the other hand, increased emissions by 4.4%.  The EIA points out that this reflects the fact that more Americans are enjoying a higher standard of living, complete with flat screen TV's and central air conditioning systems.

This result provides another stark example of the need for public policy that aligns the utilities' economic incentives with environmental stewardship.  Below are a few policy steps that would create these proper incentives:

1. Extend the renewable energy tax credits:  The House again passed a bill to extend these credits and now it awaits a Senate vote.  Passing the extensions would send a clear signal to entrepreneurs to start building these renewables projects and to utilities that they could count on this clean future energy supply.

2.  Decoupling:  By decoupling a utilities' revenues from the amount of energy it sells, it creates a disincentive for utilities to sell more energy.  In other words, create a financial incentive for utilities to earn on energy savings, not energy sales.  This way utilities, who interact daily with every American and all businesses, can serve as a conservation ambassador driving good public policy.

It works.  In California we've had decoupling laws for thirty years.  During this time period, the state's per capita energy use has remained flat, while the rest of the country's has increased by 50 percent.  For PG&E's customers, it has meant savings of $22 billion and the avoidance of 135 million tons of CO2. 

Meanwhile, California - the world's sixth-largest economy - has seen economic output per unit of energy improve by 40 percent, versus only 8 percent for the remainder of the country.  In other words, we can have economic growth and help the environment.

3.  Pass federal greenhouse gas emissions reduction legislation:  A harmonized federal policy will create clear direction for utilities, industry, and citizens.  A patchwork of laws will only make it harder for these players to take action in a meaningful way. 

A recent report by the NRDC and Ceres, sponsored by PG&E and PSEG, benchmarked the greenhouse gas emissions stemming from electricity generation and looked at the abatement impact of competing emissions reduction legislation.  The report provides a good starting point to understanding the different types of approaches to legislating greenhouse gas emissions and to the complex nature of regulating utilities with varying levels of CO2 output.

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