Bluegrass and the Greenhouse

Campbell Wood | Business Lexington

The United States could yet take the lead in countering global warming, if the U.S. Climate Action Partnership’s Blueprint for Legislative Action (www.us-cap.org) is a sign of things to come. Last June the Lieberman-Warner Climate Security Act of 2008 brought greenhouse gas cap and trade legislation to the Senate Floor for the first time.

Work lays ahead for legislators to shape a bill that will gain passage. Such legislation will have challenges for the Bluegrass State, given that Kentuckians use about 25 percent more electricity than the average American, and over 90 percent of that energy comes from coal-fired power plants.

The U.S. Climate Action Partnership (USCAP) includes over 25 major corporations and several leading nonprofit environmental organizations. Their proposals are based on 100 percent consensus from member organizations, said USCAP spokesman Jim Luetkemeyer. Ford, G.E., Alcoa, Dupont, and Duke Energy, all with major operations in Kentucky, are members of USCAP. The Blueprint, released in January, is an urgent 24 pages of proposals for legislation to advance energy efficiencies in the economy through conservation and innovation while also moving the United States and the world as rapidly as feasible to increasing reliance on renewable energy sources. A core recommendation is the establishment of a cap and trade system to “slow, stop and reverse” greenhouse gas (GHG) emissions generated by industries and utilities burning fossil fuels. It includes support measures for vulnerable populations and industry sectors.

In November 2007, the Intergovernmental Panel on Climate Change (www.ipcc.ch) stated, “Warming of the climate is unequivocal, as is now evident from observation of increases in average air and ocean temperature, widespread melting of snow and ice and rising global average sea levels.” Despite the scientific consensus that global warming is happening and that human activities are a major cause, scientists have found it difficult to convey the gravity of the situation. Global warming effects accrue incrementally, and the public has had a “let’s wait and see” attitude, as though somehow it will be reversible.

Some states and cities across the country have taken initiative, and Lexington has been a part of that trend. “We’ve had an energy team in place since 2003 that deals with city facilities — to be better stewards of taxpayers’ dollars and the environment,” said Tom Webb, environmental compliance coordinator for LFUCG. The team works to cut costs and make energy use more efficient in government buildings and operations. “We signed the U.S. Mayors Climate Protection Agreement in 2005 (www.usmayors.org),” Webb said. “That agreement is designed to encourage communities to reduce their carbon foot print — on a local level, since there’s no national legislation on carbon emissions.”

In February of 2008, Lexington joined the International Council of Local Environmental Initiatives (http://www.iclei.org), which provides a framework along with software solutions to help facilitate reducing the carbon footprint. “We are now in the process of quantifying our emissions for city facilities and the city as a whole,” said Webb. Utility companies have provided the project with gross numbers of electricity consumption for 2005 and 2007, which are being modeled. “Once we get our emissions quantified, we’ll set reduction targets. Then we’ll set up teams and develop a local action plan.”

Emissions trading ‘won’t hurt inflation’

Garry Shilson-Josling | Sydney Morning Herald

The Reserve Bank of Australia (RBA) is confident the government’s scheme to reduce greenhouse gas emissions will not cause inflation to overheat and force it to raise interest rates. Tucked away in the back of the quarterly statement on monetary policy on Friday was an analysis of the likely effect of the government’s Carbon Pollution Reduction Scheme (CPRS). The centrepiece of the CPRS is an emissions trading scheme that will ration the right to emit greenhouse gases. Trading in permits is slated to begin in September 2010. The RBA is interested in the scheme because it will drive up the price of emissions-intensive goods and services as businesses bid for increasingly scarce permits. The desired effect will be to encourage energy efficiency and a switch to alternative energy sources. The undesired effect will be a rise in the general price level. “Assuming an initial permit price of roughly $25 per tonne of carbon dioxide emitted (or the carbon dioxide equivalent of other greenhouse gases, CO2-e), the retail prices of electricity and gas are estimated to increase by around 18 per cent and 12 per cent respectively,” the RBA said. Electricity and gas together account for 2.5 per cent of the consumer price index (CPI). The RBA estimates the first round of price rises will add 0.4 percentage points to the index in the first few quarters after emissions trading begins. By way of comparison, the GST added three percentage points to the CPI over the year following its introduction in 2000 and the spike in petrol prices added 0.9 percentage points over the year to last September. The RBA said it expected price rises from the CPRS after the first round to moderate as permits were gradually rationed, despite some possible volatility now and then.

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