Cap and Trade
What is cap and trade?
[EPA definition] Cap and Trade is a market-based policy tool for protecting human health and the environment. A cap and trade program first sets an aggressive cap, or maximum limit, on emissions. Sources covered by the program then receive authorizations to emit in the form of emissions allowances, with the total amount of allowances limited by the cap. Each source can design its own compliance strategy to meet the overall reduction requirement, including sale or purchase of allowances, installation of pollution controls, implementation of efficiency measures, among other options. Individual control requirements are not specified under a cap and trade program, but each emissions source must surrender allowances equal to its actual emissions in order to comply. Sources must also completely and accurately measure and report all emissions in a timely manner to guarantee that the overall cap is achieved.
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Is cap and trade the same as a carbon tax?
Yes and no. They are the same in regards that the producers of carbon dioxide are required to pay a fee for each ton of CO2 emitted into the atmosphere. In both cases this cost will be passed along to the end users of electricity. They differ in how the cost is applied. The cap and trade allows the cost to be a variable cost, depending on the amount of emissions. The carbon tax is a flat fee, the amount is still undetermined, that is charged for each ton of CO2.
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Didn’t this program work for Acid Rain?
Yes. The difference is we can create infrastructure to greatly reduce other pollutants. For instance we invested $8 million on a baghouse to reduce SO2 (sulfur dioxide), NOx (nitrogen dioxide) and Hg (Mercury). Unfortunately, there is NO technology (at the present) to reduce or eliminate CO2.
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Why is there such a large range of percentages for the cap and trade tax?
There is no real direction from this legislation. The percentage varies because the proposed plans vary in their direction of implementation. Suffice it to say, any adoption of the cap and trade legislation will in fact mean a higher monthly electric bill.
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Does this affect only RP&L customers?
No. This federal legislation will effect the “whole Midwest”; Indiana, Ohio, Michigan, Illinois, Pennsylvania, West Virginia and Kentucky. This tax will be added to monthly electric bills to ALL customers. All coal-fired generation facilities will be mandated to pass along this tax, since almost all of coal fired generation occurs in the Midwest.
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Why would the Midwest be hurt harder than other areas?
The Midwest’s electricity needs, approximately 90%, come from coal-fired generation stations. These coal fired generation stations are being targeted as a location to reduce carbon emissions. The people and industries of the Midwest now enjoy a very low electric rate base compared to other parts of the country. If the carbon legislation were passed, the money charged to the end users in the Midwest would raise electric rates to the point where industries would lose this competitive edge, causing businesses to close, creating fewer jobs and more unemployment. Electric rates to both industry and residential customers could increase anywhere from 20% to 70%, causing more hardship on an already poor economy.
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How much will this cost?
Because the Washington Legislators have proposed many different variations of this issue, there is no absolute dollar figure that can yet be identified. Early estimates go as far as quoting an increase of $3,200 annually for the average residential customer.
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Where will my money go?
That is the one of the most difficult questions to answer. There is absolutely no guarantee the monies collected for the federal government will stay in the state or the Midwest. It is very likely that some monies will be used for some renewable projects and much of money could be used in other areas outside the State of Indiana for non-related programs.
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Does Richmond Power & Light want to see renewable generation?
Absolutely. RP&L is fully aware of the potential for renewables. In fact, we set out to test the winds with the help of others in the community – Kicks 96, Earlham College and the Cope Environmental Center. Our test proved less than desirable for generation. Even today, we are working with Earlham College on a solar/wind hybrid program at the Miller Farm. There in lies the solution – a hybrid system utilizing all renewables and real commitment for energy efficiency and conservation. Reliability and cost drive the economic success of a community. When renewables deliver those issues with complete competence, RP&L will be fully engaged.
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Does Richmond have the ability to generate wind?
Potentially. Our wind study proved that utility scale generation is marginal. Yet, north of here in Randolph County the wind generation is a bit more realistic. That’s not to say that wind generation will always be out of our reach. Technology will continue to drive wind generation proficiency. When that becomes a reality, RP&L will be ready to participate.
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How many wind turbines would it take serve the city of Richmond?
It would take well over 116 wind turbines to satisfy the needs of Richmond. Our service area would not be able to logistically site these turbines. That is why you see wind farms in very remote areas. Flickering (strobe effect from the movement of the rotor blades) on houses are a large issue for utility scale generation. Factor in the 30-38% reliability of wind turbines, and this greatly reduces the on demand need for electricity for our homes and businesses.
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How about solar power?
Solar is a very promising technology for sure. Unfortunately, Indiana has an average of 4.5 solar hours per day available for generation. That’s not to say it can never be done in Indiana. Cope Environmental has a very exciting project. It too is a very costly generation proposition. Once again, the inability to fully rely on the limited sun to generate electricity is yet another issue.
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What is the best alternative for local renewable generation?
RP&L has an opportunity to produce renewable (biomass) electricity at the New Paris Pike landfill. The methane gas is still being collected at the landfill while several options for its use are being explored. Unlike wind and solar generation, this would be a 365 day / 24 hour generation facility. Indiana currently has over 35 Megawatts of biomass generation around the state.
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What are some of the ways RP&L is reducing its environmental impact?
- Use of hybrid cars
- Reducing and eliminating waste by implementing a company wide recycling program
- Distributed over 30,000 trees to the community on previous Earth Days
- Distributed over 5,000 compact fluorescent light bulbs on the most recent of Earth Day celebrations
- Purchasing many of the products used from local establishments – reducing the carbon footprint of the products
- Member of P4P2 Partners for Pollution Prevention – Indiana’s Department of Environmental Management
- Reduce the chemicals used at RP&L
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Are there other examples of how RP&L is reducing CO2?
Yes. RP&L is working with Mayor Hutton and the city to install LED light bulbs in the traffic signals at 20 city owned intersections in Richmond. The City of Richmond is purchasing the LEDs and RP&L will install them over the next 12 – 16 months. This SIMPLE exchange of lights reduced the energy bill by over 80% and directly reducing the CO2 by as much as a ton per intersection!
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What is the best way to eliminate or reduce CO2?
Energy Efficiency. Applying some simple no and low cost ways to reduce your energy bill reduces your monthly energy cost and the environmental impact.
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How can I contact legislators to express any thoughts or concerns I may have about cap & trade?
Contact Information:
Senator Richard Lugar: 202-224-4814
senator_lugar@lugar.senate.gov
Senator Evan Bayh: 202-224-5623
http://bayh.senate.gov
Congressman Mike Pence: 202-225-3021
http://www.mikepence.house.gov
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