To Output or Not to OutputTo Output or Not to Output

Is It Really A Question?Is It Really A Question?

Why Allowances Anyway?Why Allowances Anyway?

Started in Acid Rain ProgramStarted in Acid Rain Program– Reduces Litigation Which Delays Emission Reduces Litigation Which Delays Emission

ReductionsReductions– Overall Cap on Emissions is Set. Allows Companies Overall Cap on Emissions is Set. Allows Companies

to Determine Optimal and Least Cost Compliance to Determine Optimal and Least Cost Compliance PlansPlans

– Not all Plants Have to Install Identical ControlsNot all Plants Have to Install Identical Controls– Allowances Provided Based on Historical Heat Allowances Provided Based on Historical Heat

INPUT, Minus the Overall Cap for Each Phase. INPUT, Minus the Overall Cap for Each Phase. Utilities can then Determine how to Most Effectively Utilities can then Determine how to Most Effectively Control PlantsControl Plants

– Remaining Allowances Help to Smooth out Capital Remaining Allowances Help to Smooth out Capital Investments and Plant RequirementsInvestments and Plant Requirements

How Does It Really Work?How Does It Really Work?

Plant A = 1600 Allowances: InputPlant A = 1600 Allowances: Input

Must Cut Emissions by 50% = 800 Allowances Must Cut Emissions by 50% = 800 Allowances Needed to Continue OperationsNeeded to Continue Operations

Instead Plant A Cuts Emissions by 80%Instead Plant A Cuts Emissions by 80%

480 Allowances Remain to Use at More 480 Allowances Remain to Use at More Expensive Plants or to Sell in the Market, Expensive Plants or to Sell in the Market, Reducing the Total Cost of Compliance for Reducing the Total Cost of Compliance for EveryoneEveryone

Input Vs. Output ExampleInput Vs. Output Example

Plant APlant A Plant BPlant B

Spends $200 + millionSpends $200 + million Spends No $Spends No $

Receives Allowances toReceives Allowances to Wants AllowanceWants Allowance

Continue Running PlantContinue Running Plant Stranded Cost RecoveryStranded Cost Recovery

Costs ReducedCosts Reduced Plant Runs CompetitivelyPlant Runs Competitively

by Sale of Excessby Sale of Excess

AllowancesAllowances

All Power Sources:All Power Sources:Have Some Negative Have Some Negative Environmental AspectEnvironmental Aspect

Nukes:Nukes:– Waste ProblemWaste Problem

Government Subsidizes Final Nuke Waste Government Subsidizes Final Nuke Waste Resting Ground; States w/o Nukes face Increased Resting Ground; States w/o Nukes face Increased Liability due to Waste Transport.Liability due to Waste Transport.

All Power Sources Have Some All Power Sources Have Some Negative Environmental AspectNegative Environmental Aspect

Nukes: Part DuexNukes: Part Duex– Accident ProblemAccident Problem

Government Subsidizes Potential Accidents by Government Subsidizes Potential Accidents by Limiting Nuke Liability to the Tune of several Limiting Nuke Liability to the Tune of several hundred Million Per Yearhundred Million Per Year

All Power Sources Have Some All Power Sources Have Some Negative Environmental AspectNegative Environmental Aspect

Wind PowerWind Power– “ “Cussinart in the Sky” Cussinart in the Sky”

Kills Endangered Species; Cute Little Bats; Ruins Kills Endangered Species; Cute Little Bats; Ruins Views of Nantucket SoundViews of Nantucket Sound

All Power Sources Have Some All Power Sources Have Some Negative Environmental AspectNegative Environmental Aspect

HydroHydro– Fish BoulebaisseFish Boulebaisse

Gets in the Way of Barge Traffic; Ruins Salmon Gets in the Way of Barge Traffic; Ruins Salmon Sex Drive; Makes Mincemeat of Fish – Really Sex Drive; Makes Mincemeat of Fish – Really Ticking off the Bear PopulationTicking off the Bear Population

Output Based StandardsOutput Based StandardsTruth And ConsequencesTruth And Consequences

Truth: Truth: – Output Based Standards: Giant Wealth Output Based Standards: Giant Wealth

TransferTransfer– Takes Allowances from Coal Plants and Gives Takes Allowances from Coal Plants and Gives

them to Nukes, Gas and Renewablesthem to Nukes, Gas and Renewables– Then Nukes, Gas and Renewables Turn Then Nukes, Gas and Renewables Turn

Around and Sell them to Coal FacilitiesAround and Sell them to Coal Facilities– Does NOT Improve the EnvironmentDoes NOT Improve the Environment– Incentive to Move to Natural GasIncentive to Move to Natural Gas – What’s the point?What’s the point?

Output Based StandardsOutput Based StandardsTruth And ConsequencesTruth And Consequences

ConsequencesConsequences– States with Large Coal Generation Fleet: BIG States with Large Coal Generation Fleet: BIG

LOSERSLOSERS– Significantly Increases Cost of Environmental Significantly Increases Cost of Environmental

Compliance: Hurts ConsumersCompliance: Hurts Consumers– Turns Acid Rain Program on its HeadTurns Acid Rain Program on its Head

– Rewards Outmoded and Outdated Technologies Rewards Outmoded and Outdated Technologies Such as 30 year Old Nukes; Outdated Renewables; Such as 30 year Old Nukes; Outdated Renewables; Inefficient Natural Gas UnitsInefficient Natural Gas Units

– Provides Primarily Nuke or Gas States With Ability to Provides Primarily Nuke or Gas States With Ability to Sell to Coal States or Even to Sell to Coal States or Even to IncreaseIncrease Emissions Emissions

Let’s Look at One ExampleLet’s Look at One Example NOx Results: Carper

Bill  Output

Approach  Input

Approach  Output (T) –

Input (T)Annual Output

Value Difference at ($/T)

  Ph I Allocation Ph I Alloc. vs. 2001 (%)

Ph I Allocation Ph I Alloc. vs. 2001 (%)

Tons Difference $4,000

State

CT 10,040 91 6,287 57 3,753 $15,012,000

DEL 4,710 43 4,201 39 509 $2,036,000

MA 24,656 80 14,602 47 10,054 $40,216,000

ME 3,761 180 2,798 134 963 $3,852,000

NJ 19,295 72 6,770 25 12,525 $50,100,000

NH 3,484 51 3,905 58 -421 ($1,684,000)

NY 58,143 77 38,347 51 19,796 $79,184,000

RI 4,697 1,445 1,090 335 3,607 $14,428,000

OH 92,332 28 107,010 32 -14,678 ($58,712,000)

IN 87,375 29 107,728 35 -20,353 ($81,412,000)

KY 64,265 28 83,468 36 -19,203 ($76,812,000)

TN 43,146 28 49,681 32 -6,535 ($26,140,000)

How About Another Example?How About Another Example?

Handouts:Handouts:– For Mercury:For Mercury:

Big Winners: (Get more allowances then they Big Winners: (Get more allowances then they need)need)

– California; Maine; Utah; New Hampshire; Hawaii; California; Maine; Utah; New Hampshire; Hawaii; ColoradoColorado

– For NOxFor NOxBig Winners: (Get to increase NOx emissions)Big Winners: (Get to increase NOx emissions)

– Rhode Island; California; Maine; Idaho; New York (don’t Rhode Island; California; Maine; Idaho; New York (don’t they always sue us???)they always sue us???)

Final ExampleFinal Example

The Big LosersThe Big Losers– For MercuryFor Mercury

Vermont; Rhode Island; Idaho; PA; IL; NM; AL; Vermont; Rhode Island; Idaho; PA; IL; NM; AL; MD; IO; WA; DE; OH; WVA; OK; LA; MI; MO; NY MD; IO; WA; DE; OH; WVA; OK; LA; MI; MO; NY etc, etc,etc, etc,

– For NOxFor NOxOhio; KY; SD; TN; NB; KS; FL; etc.; etc.Ohio; KY; SD; TN; NB; KS; FL; etc.; etc.

What Else Is Wrong with the Ouput What Else Is Wrong with the Ouput Based Approach?Based Approach?

Acid Rain Program and all State SIPs Based on InputAcid Rain Program and all State SIPs Based on InputChange Would Result in Hybrid Output & Input Based Change Would Result in Hybrid Output & Input Based System – Confusing, Cost IneffectiveSystem – Confusing, Cost IneffectiveSome Supporters Just Want Multi-Emissions to DieSome Supporters Just Want Multi-Emissions to Die– Output Based Approach has Little Political SupportOutput Based Approach has Little Political Support

Some Supporters Simply want Cash – Without Bearing Some Supporters Simply want Cash – Without Bearing the Significant Cost of Making Reductionsthe Significant Cost of Making ReductionsSome Companies Support Output Based Approach, but Some Companies Support Output Based Approach, but Refuse to Support Economic Dispatch on a Fuel Neutral Refuse to Support Economic Dispatch on a Fuel Neutral basis Because it Would Impact Their Old, Inefficient basis Because it Would Impact Their Old, Inefficient Natural Gas PlantsNatural Gas Plants

Can’t We All Just Get Along?Can’t We All Just Get Along?

New Units Could be Awarded Allowances New Units Could be Awarded Allowances on an Output Basis – Puts all New Plants on an Output Basis – Puts all New Plants on Even Playing Field Regardless of Fuel on Even Playing Field Regardless of Fuel ChoiceChoice

Final Slide: I Really Mean It!Final Slide: I Really Mean It!Going ForwardGoing Forward– Prioritize Issues: Output Based Standards simply Prioritize Issues: Output Based Standards simply

conquers and divides – does not solve emission conquers and divides – does not solve emission problemproblem

– Multi-Emissions Legislation is Important, Every Multi-Emissions Legislation is Important, Every Moment of Delay = Moment of Delay =

Delay in Air QualityDelay in Air Quality

Improvements and Increases CostsImprovements and Increases Costs– Please Don’t Feed the LawyersPlease Don’t Feed the Lawyers

By Throwing These Issues BackBy Throwing These Issues Back

to Courtto Court