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Climate Action Plans Would Stifle Investments Prolong Recession

February 20, 2009

Western Climate Plan Could Prolong Recession, Weaken Power Grids but Not Change Temperature

Western Business Roundtable

Plan Could "Chase Away" Tens of Billion Of Dollars In High-Tech Investment From Western States

Denver, CO (Feb. 18, 2009)-A new study says that a climate action plan promoted by several Western governors could prolong the economic recession, weaken already overburdened Western power grids and will deliver a temperature "benefit" of only one ten-thousandth of a degree Celsius even after a century of operation. (Full Report)

The study, commissioned by the Western Business Roundtable, found that the Western Climate Initiative (WCI) greenhouse gas (GHG) cap-and-trade plan could "chase away tens of billions of dollars in high technology investment from the West to other regions" and would "further stress the West's already strained electricity grid, increasing the threat of potentially catastrophic power outages."

"The key to creating new jobs while reducing emissions is not to throttle back our economic engine, but to turbo-charge it with new technologies that allow it to run faster, cleaner and more efficiently," said Jim Sims, President and CEO of the Western Business Roundtable. "The analysis we commissioned predicts that the WCI would disadvantage the West by limiting energy resources and discouraging deployment of new technologies that can help us grow to a more low-carbon economy," Sims said. "On the contrary, the West needs all the resources we can develop in order to power our way out of this recession and create millions of new high-paying jobs. We need a climate action plan that helps our economy grow while we continue to reduce emissions through cutting-edge, 21st century technologies."

The analysis of the WCI plan was conducted by Management Information Services, Inc., a highly regarded economic analysis firm that conducts studies for both renewable and fossil energy organizations. The WCI's proposed regional cap-and-trade plan was unveiled last September by the governors of California, Utah, Arizona, New Mexico, Oregon, Washington, and Montana.  Details on that plan can be seen here.

The study unveiled three findings that Sims said were "a bit shocking." The first was the WCI plan's assumption that virtually no baseload power plants would be deployed in the West through the year 2020 fueled by either hydropower, natural gas, coal or nuclear energy, even though nearly all experts predict that the West will experience significant growth in energy demand and will need more baseload power plants to maintain reliability. The second finding was that the WCI recommends that virtually all growth in the West's electricity demand should be met by mostly intermittent power generation, such as solar and wind farms, and demand reduction. Most experts believe that such a rapid and large deployment of highly variable power sources onto the region's electrical grid would greatly increase the risk of system failure.

"If the WCI is in fact recommending that we deploy virtually no new baseload power plants, that we and rely solely on renewables and demand destruction, this is a proposal that would weaken the West?s already over-burdened high-voltage transmission grid and could easily deepen or lengthen our economic recession," Sims said.  "President Obama understands the need to aggressively and rapidly build next-generation baseload power plants, including those that capture and sequester GHGs. He knows, as do policymakers across the West, that economic growth is closely tied to availability of affordable energy and a stable and reliable energy infrastructure and that carbon management policies must balance environmental goals with the demands of economic recovery and job creation."

The third finding is that "the very climate science now driving climate policy in Congress, that of the United Nation's Intergovernmental Panel on Climate Change, predicts that the WCI plan would result in a virtually immeasurable reduction of future global temperatures over the next century of one ten-thousandth of a degree Celsius." "We were frankly a bit shocked by this last finding, but the numbers come straight from the IPCC science and they pretty much speak for themselves," Sims said. "If the IPCC's own scientific assumptions and climate change formulas predict such a meager temperature benefit from scenarios that range from the WCI plan all the way to shutting down all fossil fuel power plants in America 100 years, it casts a long shadow on those who say we must take extreme action now without thinking through the entire cost-benefit equation.

The analysis also warned that the WCI plan could result in the following: The WCI plan could increase energy costs and disproportionately harm low-income and minority families, particularly minority families who are among the most vulnerable to price shocks. The WCI's plan to establish and monitor emissions caps would require the establishment of a large and powerful new government bureaucracy. This could trigger the type of influence-peddling and system "gaming" that has plagued European experiments with such regulatory approaches.

The laws, regulations, mandates and bureaucracy the WCI is proposing go so far as to give WCI climate officials authority even over private companies? organization and reorganization functions. The Roundtable analyzed the WCI plan according to how it addressed four basic objectives: Would it contribute to increased reliability of the region?s energy production and delivery infrastructure - would it help "keep the lights on" as the West works to create new jobs and pull itself out of economic recession? Would it stimulate new technology investment across the region, especially on carbon capture and sequestration technologies, so that the West can participate in, and benefit from, the deployment of these technologies? Would it deliver measurable and recognizable environmental benefits - measured in terms of reduced future global temperature - to consumers who will pay the costs of these programs and who often view the efficacy of government mandates through the lens of costs versus benefits? Does it strengthen the West's bargaining position in the upcoming federal policy debates over national GHG mitigation measures?

"This analysis concludes that the WCI plan does not meet any of these objectives," Sims concluded.

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