Delaware's Carbon Tax to Rise 5X; Doesn't Help the Environment

Editor’s note: Dave Stevenson will be on the Elliott in the Morning show at 8:45 A.M. on Tuesday, October 14. He will talk about the lawsuit against DNREC and former DNREC Secretary Collin O’Mara. You can listen at WILM.com 1450 AM or WDOV.com 1410 AM.

Reports from RGGI Inc., the group that runs the carbon permit auctions for the nine-state Regional Greenhouse Gas Initiative, support our contention the program is not helping the environment but will dramatically increase electric rates by five fold.


RGGI states are part of larger regional electric transmission consortiums. An August report1 shows the rate of carbon dioxide emissions from power plants inside and outside the RGGI states were virtually identical indicating the carbon tax scheme is not working to reduce emissions. The Environmental Protections Agency came to the same conclusion2. While carbon dioxide emissions have fallen, CRI estimates 68% of the decrease has been caused by power companies switching from coal to natural gas. The remaining 32% decrease has come from the closing of older, smaller power plants whose owners decided not to invest on upgrading the plants to meet new air pollution emission standards.

The same RGGI, Inc. report showed the RGGI states were importing 7% more power than before the program started. Electric generating plants bid power into the grid. The carbon tax raises the price of power from RGGI state generators causing them to win fewer bids. The tax discourages generators from building new power plants in the RGGI states, and also encourages shuttering power plants more often in RGGI states in response to new pollution controls required by the EPA. This causes a double cost whammy. Electric customers not only have to pay the tax, but the grid operators add a surcharge for grid congestion and line losses caused by delivering power from longer distances. Together these charges could raise wholesale electric rates about $10/megawatt-hour, or about 20%, in RGGI states by 2017, that’s $120/year for a typical residential customer, and would cost the largest industrial customers almost $3 million a year.

The carbon tax revenue has doubled in 2014 compared to 2012 (see table below) under new rules restricting the availability of permits, and adding a cost cap scheme. The cost cap price increases each year so by 2017 revenue will have quintupled to about $850 million a year. At the same time speculators won about 40% the bids and will now resell the permits to generators, who have to have them, at an even higher price. Realistically we can expect RGGI to add a billion dollars a year to electric bills just in direct cost.

RGGI

Notes:
1 RGGI, Inc., CO2 Emissions from Electricity Generation and Imports in the Regional Greenhouse Gas Initiative: 2012 Monitoring Report, Aug. 11, 2014 http://www.rggi.org/docs/Documents/Elec_monitoring_report_2012_15_08_11.pdf
2 Environmental Protection Agency, “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Generating Units”, page 98, https://www.federalregister.gov/articles/2014/06/18/2014-13726/carbon-pollution-emission-guidelines-for-existing-stationary-sources-electric-utility-generating
3 Caesar Rodney Institute, “Regional Greenhouse Gas Initiative Background”, 11/19/2013

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1 Comment

  • Did you seriously think even for a few minutes that there was any substance to this program? It was simply a stunt put forth by the Democratic Party, not that the Republicans are not just as guilty of publicity based falsehoods and gimmicks. Governor Markel spends at least three minutes a day reviewing legislation drafted by his staff and pushed through the legislature, so throwing facts in the way doesn’t have much of an effect. Smile and wave to the Camera.