While the state of our economy dominates the news, global warming remains a high priority issue for our nation and the world. In recent years, the United Nations Intergovernmental Panel on Climate Change (IPCC) and many scientists have predicted a significant increase in the world average temperature by 2050 as a result of numerous factors, including the emission of greenhouse gases (GHGs) such as carbon dioxide (CO2), which can trap heat in the atmosphere.
The governments of many of the world's major nations have decided to reduce these emissions to avert the potentially damaging weather changes warming might cause.
As the leaders of Arizona's largest electric utilities, our goal is to provide safe, reliable power to our customers at the lowest possible cost. And while some still question some of the IPCC's conclusions, we have to address this very important issue. For a wide array of reasons, including energy independence, national security, political, environmental and societal factors, we believe Arizona and the nation must accelerate the transition to a cleaner energy future.
Currently pending in Congress is a bill that would cap the emissions of GHGs into the atmosphere. And last month, President Obama proposed that all businesses emitting greenhouse gases buy a government permit for each ton of gas emitted. The president proposed that the federal government would auction 100 percent of the permits. The president's own economists estimate the cost of a permit to be between $20 and $30 per ton.
For a state like Arizona, where a large percentage of our electricity comes from coal and natural gas (both of which emit greenhouse gases as a natural by-product of their combustion), President Obama's proposal would have dramatic and expensive effects.
In 2012, the first year of the proposed auction, at $20 a ton, the costs to our operations would amount to a greater than 10-percent increase in your price of electricity. We would expect this cost to recur annually and to increase over time. Some experts have predicted the price could reach $75 per ton, which could result in more than a 40-percent price increase for our customers.
We cannot predict the ultimate impact of the law without seeing its final language and provisions. However, our customers and state leaders should have a clear understanding that adapting our electricity generation to the requirement of climate change policy will carry considerable costs.
There are, however, several ways to mitigate these costs, including the allocation of the permits without charge in the early years, thus limiting the costs of reducing emissions. In addition, any greenhouse gas emission reduction program should incorporate well-considered alternative solutions, including off-sets from remedial actions such as planting trees that absorb CO2 from the atmosphere.
We remain committed to increasing our use of clean, renewable resources and to helping our customers achieve greater energy efficiency. In fact, Arizona regulators (the Arizona Corporation Commission and the SRP Board) have required the utilities to generate at least 15 percent of their power from renewable sources by 2025. Additionally, we will invest in new technology that reduces CO2 emissions from our coal and gas-fired generation plants when such equipment comes to market. Unfortunately, such technology does not currently exist, and even our most optimistic prediction does not envision commercial availability until after 2020.
We must craft a well-balanced climate change policy that combines realistic emission reduction goals with the technology currently available. We cannot willfully ignore the detrimental economic effects of an ill-conceived policy on our customers, especially in the light of the current economy.
In an ever more interdependent and competitive global economy, during difficult economic conditions, we must weigh carefully and appropriately the benefits of greenhouse gas reduction and its effects on climate change along with the costs to achieve those benefits. Our customers deserve nothing less.
About the authors:
Don Brandt is chairman and CEO of Arizona Public Service; Paul J. Bonavia is chairman, president and CEO of UniSource Energy Corporation, parent company of UniSource Energy Services; and Richard Silverman is general manager of Salt River Project.