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Climate Legislation Focus

Kevin Leahy
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Kevin Leahy
Managing Director,
Climate Policy
Cincinnati, Ohio

The challenge we faced when we first thought about how to address climate change centered on the fact that we emit a lot of carbon dioxide (CO2). This happens when fossil fuels are burned to produce electricity. Sure, we have nuclear and hydroelectric plants, but we also have a lot of plants that use coal, the most CO2-intense fuel. We were concerned about how this would impact our region and our customers. Unlike many businesses, we can’t simply close our operations and relocate to a lower-cost country.

We need the right federal climate legislation, and we’re working to make that happen. The centerpiece has to be cap-and-trade, with provisions for a fair transition for those regions that rely on local fuels, such as coal.

We’re proud of our progress in this area, but we’ve had help. We’ve been working with many stakeholders, including the U.S. Climate Action Partnership, a coalition of businesses (including our customers) and environmental groups who don’t see business as the enemy. Working together, we’ve developed a pragmatic set of policies — a legislative blueprint for action — designed to protect the environment, keep energy prices affordable and keep the communities we serve healthy and prosperous. Learn more at www.us-cap.org.

We are also working to manage climate change risks. But to do so, the United States should set a goal to lower its greenhouse gas emissions by 80 percent by 2050. It’s possible, and while it won’t be cheap or easy, it can still be affordable.

Electric utilities can reduce their CO2 emissions to near zero by 2050. But to do that, we must replace nearly all coal-fueled power plants with new technologies. Because our economy is so large, we’ll need to use all possible options — renewables, low-emitting coal, nuclear, natural gas and energy efficiency.

To keep the program affordable, we need to more fully develop technologies that will capture the CO2 from coal and inject it deep underground in the same sorts of formations that have held oil and natural gas for millions of years — a process called “carbon capture and sequestration” or CCS. Some of the underlying technologies are ready now, but some need more federal support. We hope to use CCS at the integrated gasification combined cycle power plant we are building in southwestern Indiana.

As we decarbonize electricity, we can also use it to power our vehicles. Not all of this is ready right now, but it is doable and people are working to make it happen.

What about the cost? We are concerned about that as well, especially given the current state of the global economy. Capping greenhouse gas emissions must not drive up the price of electricity so much that it harms our customers and investors. That’s why we’ve made it our business to understand the many policy options and their impact on the economy and our customers.

We believe that the right path is a market-based cap-and-trade approach that protects customers from rate shock by giving the value of emissions allowances to customers. The local distribution company, perhaps better known as your local power company, is the most effective and efficient vehicle for delivering this allowance value to customers. Done right, climate change legislation won’t harm our economy. Done wrong, such as a cap-and-trade system with a 100 percent auction of emissions allowances, customers will unnecessarily see dramatic increases in their bills.

Putting a price on carbon will increase energy prices, and we are concerned about the impact that will have on the average household and small business, not to mention our larger customers. Our focus is on how to minimize the increases and make them happen slowly over time. We are also advancing plans, such as our save-a-watt program, to help our customers use less energy so as prices increase, the hit on their bank accounts will be less.