I gave my presentation, A Mandatory US Federal Carbon Emissions Program (Kyoto-II) Will Reduce the Cost Advantage that Michigan Fossil Electricity has over Michigan Wind Electricity, at the 2009 Michigan Wind Conference.
Burning fossil fuel (coal, natural gas, fuel oil) to generate Michigan electricity creates greenhouse gas (GHG) emissions. Michigan wind generated electricity has no GHG emissions. GHG emissions are causing global warming. The Kyoto Protocol (Kyoto-I) was created to reduce global warming by reducing GHG emissions. The implementation of a Kyoto Protocol like mandatory US federal carbon emissions reduction program under President Obama’s new Administration (Kyoto-II) will reduce global warming by reducing US GHG emissions. Kyoto-I measures GHG in metric tons (tm) of carbon dioxide (CO2), the major GHG. The Protocol sets the first commitment period (2008-2012) by which certain signatory developed nations (Annex B) must reduce the amount ofCO2 that they can emit. A mandatory US federal carbon reduction program will add the cost of carbon emission controls to the cost of generating fossil electricity. Kyoto-II is, therefore, a great benefit to the Michigan wind industry because it will reduce the relative cost advantage of Michigan fossil electricity. Protocol sections relevant to the US electricity utility industry are discussed.
The paper is both US federal carbon cap and Michigan electric centric. Topics include the Protocol’s AAU emission unit, Protocol’s three emission control architectures (cap and control, cap and trade, carbon tax), the European Union Emissions Trading Scheme (EU ETS), the effect of Kyoto-I on global carbon emissions, the current market price of AAU emission allowances (€/AAU; US$/AAU) and the reduction in the higher relative cost of wind electricity (€/MWh; US$/MWh) over fossil electricity. The three Protocol architectures are analyzed to determine which architecture will cause the greatest reduction in the relative cost advantage that fossil electricity now has and which architecture has the greatest chance of being accepted in Lansing/Obama’s Washington. The significant structural components of each architecture is examined. For the carbon tax, it is the definition of the tax base; tm– CO2/tm-fossil fuel or tm– CO2/MWh. For cap and trade, the most popular architecture, it is auctioning verse the assignment of carbon emission units and banking. For cap and command, it is setting up of an efficient command structure. Kyoto-II will make wind electricity cost more competitive with coal or gas plants that pay market prices for fossil fuel. The presentation concludes with non-Protocol suggestions that will both reduce global carbon emissions and improve the relative cost of wind electricity in Michigan during the “Kyoto-II” commitment period. Michiganshould improve its utility regulations to make them more wind friendly (i.e. a wind-feed-in tariff; a smart grid with hydro storage at existing dams; wind access to transmission on a non-discriminatory basis).
27 January 2009