By Dan Shaw, Evansville Courier & Press
Duke Energy's power plant in Gibson County released about 20.6 million tons of carbon dioxide in 2008.
Under legislation now being considered by Congress, emitting the same amount of greenhouse gas in the future could cost the utility company as much as $600 million a year. And since state regulators usually let utilities pass on the costs of electricity, Duke Energy won't take the hit itself. The cost will instead fall to customers, both residents and businesses.
Depending on how much Congress decides to charge for every ton of CO2 released, electricity bills could rise anywhere from 20 percent to 50 percent, according to Duke's estimates.
Worried about that possibility, a couple of Hoosier lawmakers are hesitating to endorse a proposal which would curtail emissions of greenhouse gases.
The House Energy and Commerce Committee is now thinking about forcing companies to pay for the right to release carbon dioxide into the air. The legislation is a priority for some Democratic leaders; President Obama has proposed using revenue raised by the bill to pay for a tax cut.
Yet others within the party - including Hoosier legislators Brad Ellsworth and Baron Hill - aren't rushing forward with endorsements. They want to prevent global warming, yet recognize any limit on carbon emissions will make burning coal more expensive.
And the cost won't be borne evenly across the country. Critics have called the bill a hidden tax on states which, like Indiana, contain many coal-fired power plants.
The difference in constituencies has led to a division in the Democratic ranks, between representatives of coal-rich states and those from places more dependent on other types of fuel.
"I will be watching this process closely and working to ensure that Hoosier consumers and businesses have a voice in this debate" said Ellsworth, whose district includes Evansville and surrounding areas. Even more influential is Hill, whose seat on the House Energy and Commerce Committee puts him at the center of the controversy. Hill, who represents much of Southern Indiana, declined to comment for this article but has expressed concerns similar to Ellsworth's in the past.
Republicans meanwhile almost uniformly object to the bill. Congressman Ed Whitfield, whose district contains Henderson, Ky., is worried about the effects of costlier energy on businesses.
"It is essential that we balance the need for cleaner fuel sources versus the need for protecting jobs in the U.S.," said Whitfield, who also sits on the House Energy and Commerce Committee.
Indiana Gov. Mitch Daniels, also a Republican, shared Whitfield's concerns.
"I view it as coastal imperialism, with the taxation landing heavily on Indiana and the Midwest to fund spending plans that have very little do with us," he said.
During the haggling over the bill, Daniels said, special interest will no doubt gain exemptions which will give them advantages under the new rules.
"A lot of people will get filthy rich doing nothing for the environment," he said.
One reason many Midwestern Democrats aren't wholeheartedly embracing the bill is their recognition of just how much the region depends on coal. According to the Energy Information Administration, 94 percent of the electricity generated in the Hoosier state in 2007 came from coal.
That is a stark contrast to California, which produced 1 percent of its electricity from coal and nearly 55 percent from natural gas that year.
Indeed, many of the chief sponsors of the cap-and-trade proposal hail from states which burn relatively little coal for electricity. Rep. Henry Waxman, an author of the legislation, is a California Democrat. The other chief sponsor, Rep. Edward Markey, hails from Massachusetts, where about 25 percent of the electricity came from coal last year.
For their part, utility companies are expressing skepticism. Vectren Energy wants to curtail global warming but is waiting for a final version of the bill before taking a strong stance, said Chase Kelley, a company spokeswoman. Too many variables have yet to be decided, she said.
For instance, she has seen the price companies will pay for releasing a ton of carbon dioxide range from $15 a ton to $60 a ton.
"That's all over the board," she said. "And we are talking about billions of tons of carbon."
Others contend the proposal will force residents of coal-rich states to pay twice, says Angeline Protogere, a Duke Energy spokeswoman. First, the cost of buying the emission allowances will be passed on to customers.
Later, utilities will try to avoid paying more for emissions by installing equipment meant to capture and store CO2. Like generation costs, the cost of such capital improvements are usually transferred to energy bills.
To avoid the double charge, government leaders should at first make the allowances free, says Duke. That is what they did in the 1990s when imposing limits on sulfur dioxide and nitrous oxide, gases which lead to acid rain and ozone.
By making allowances for those pollutants free for a while, utilities and other industries got time to buy scrubbers and other equipment needed to remove the emissions from their smokestacks. When the allowances began to cost, companies had, with the help of technology, greatly reduced their need for them.
With carbon dioxide, though, the solution is not so simple. That is because the technology proposed to reduce emissions of the greenhouse gas has never been proved to work.
Experiments are now planned - at Duke's plant in Edwardsport, Ind., and other places - to see if carbon dioxide can be stored permanently underground. But any broad use of such systems, if they prove practicable, is at least a decade away, said Angila Retherford, a Vectren environmental affairs representative.
In their latest discussions, Waxman and others have been backing away from their original plan to immediately sell the allowances through an auction. Many now favor distributing them for free at first.
And those aren't the last of the concerns. One fear is that all the United States' good intentions will do little to stop global warming. Limits on carbon-dioxide emissions will fail to have the intended effect if other countries decline to follow suit.
And two of the fastest growing economies in the world - China and India - have shown few signs they are willing to take a step which might slow their rise. If the United States goes it alone in fighting global warming, it may stunt its economy to little avail.
Matt Smorch, a refinery manager for Countrymark, thinks the legislation will fall far more heavily on small companies. Unlike the large oil producers, Countrymark makes a fairly small profit margin, meaning it has little spare cash to cushion itself against increased costs.
"It would be very hard to compete against the ExxonMobils of the world and the large oil companies," he said.