Bill may lower emissions, raise utility prices

While a proposed federal cap-and-trade bill aims to cut carbon emissions and support development of new sources of energy, some Indiana businesses and politicians say the bill could burden Hoosiers with higher utility costs.

The bill would require power companies and manufacturers to buy “credits” for a permit to emit carbons. The proposal was made by President Barack Obama as part of his plan to stimulate the economy.

The “Cap and Trade” bill would limit, or cap, the amount of carbon dioxide and other greenhouse gasses a manufacturing plant or power company could emit.

Credits would be auctioned by the government to companies, which could then trade
credits. 

Though the purpose of the bill is ultimately to lower carbon emissions, the price of fuel and utilities will rise, said Greg Efthimiou, a spokesperson for Duke Energy, which provides electricity for five states including Indiana.

The company supports finding a “fair” way to tax carbon emissions, but the cap-and-trade system could create higher utility costs, Efthimiou said.

“This could unfairly punish customers in the Midwest and South,” Efthimiou said. “Under the cap-and-trade proposals, higher costs could be passed along to customers.”

The company has to find a balance for providing “reliable, affordable and increasingly clean energy,” Efthimiou said.

Rising energy costs caused some Hoosier lawmakers to speak out against the bill.

Rep. Dan Burton, R-5, opposes the bill, saying it is essentially another way to
tax families.

John Donnelly, a spokesperson for Burton, said while the congressman supports finding a way to lower emissions, he does not want to put an extra burden on families during a recession.

“We are in the middle of a crisis, and the last thing we should do is increase the cost of operating for businesses,” Donnelly said. “There are a lot of avenues we can pursue while transitioning the energy sector, such as wind and solar power.”

Donnelly said higher taxes could lead to job loss, particularly in the coal mining and auto industry, which are major sources of jobs in Indiana and the Midwest. 

“We support taking care of the environment, but at the end of the day, people won’t have jobs,” Donnelly said. “We aren’t anti-environment, just pro-jobs.”

The cap-and-trade system was implemented in the 1990s across the country to curb sulfur dioxide and was effective, said John Graham, dean of the School of Public and Environmental Affairs.

The new bill encourages companies to switch to more sustainable sources of energy such as wind and solar power, he said. The cap-and-trade system would raise energy costs, but so would switching to renewable energy.

“It costs more to get solar and wind power,” Graham said. “Even if there was a shift to renewable energy, rates would raise either way.”

Cap-and-trade laws have also been used in the European Union, but credits were given to companies instead of auctioned.

This system proved ineffective because too many permits were given out and companies were not given enough incentive to lower emissions, Graham said.

Auctioning credits would be more of an incentive for companies to take action.
 
Other alternatives include imposing a tax on all carbon emissions. This would create an immediate incentive for companies to lower emissions without setting a fixed rate, Graham said.

He said he is in favor of a carbon tax over a cap-and-trade system.

“A carbon tax would probably be a better idea, but cap-and-trade is better than doing nothing,” Graham said.

Citizens opposed to the bill have organized a “Nationwide Tax Day Tea Party” on April 15. Spencer Leiter, who is organizing a protest in Bloomington, said he decided to do so after reading about similar protests across the country.

“Basically, we want the economy to thrive through productivity, not spending,” Leiter said.

Leiter said the cap-and-trade bill is an extra tax on families and, like higher gas prices, could hurt the economy.

“The government cannot create a healthy economy,” Leiter said. “‘Green’ initiatives will drive up the cost of power in Indiana.”

Those supporting the bill say higher prices are necessary to bolster environmental conservation.

The Hoosier Environmental Council, an organization that promotes environmental legislation in the state, supports a cap-and-trade bill.

Jesse Kharbanda, executive director of the council, said the impact of the bill would depend on how well Indiana prepared itself.

“Indiana is one of the only states in the Midwest without a significant investment in carbon-free energy,” Kharbanda said. 

Energy companies have had time to find alternative sources of energy, he said. 

“Once global warming became a credible issue, at that point utility companies should have started diversifying their portfolios,” he said. 

Duke Energy has begun to invest in wind energy and plans to develop more, Efthimiou said.

Kharbanda said a carbon tax would also be effective, along with improving building efficiency and lowering the carbon standard for refineries.

Jobs could also be created in Indiana in the manufacturing sector, Kharbanda said. 

“Putting a price on carbon is a game-changer,” Kharbanda said. “It will revitalize the Midwest and make it competitive with other markets.”

The bill is still in committee, and it could be years before it is implemented, Graham
said.

The government would most likely wait until the economy has recovered before making any major changes and would also expand the use of alternative fuels such as ethanol made from plants, Graham said.

He added that whichever choice the government makes, it must act.

“The government does need to take steps to reduce emissions,” Graham said.