Permits in cap-and-trade system could be pricier than expected, driving up rural electric rates

The Obama administration initially projected that a cap-and-trade system to limit greenhouse-gas emissions would bring in $646 billion through 2019, Keith Johnson of The Wall Street Journal is reporting that federal officials now believe the revenue could be $1.3 trillion to $1.9 trillion, two to three times the initial estimate, and that the higher figure is likely due to higher permit costs.

While initial estimates were based on permit prices of $10 to $14 per ton, "to make the White House math work, the government would have to sell the same number of permits at prices ranging from $20 to more than $40 a ton," Johnson writes on the Journal's Environmental Capital blog. A $12 permit would raise electricity bills around 1 cent per kilowatt-hour for coal plants, and would raise the price of a gallon of gasoline by 11 cents. (Read more)

Rural electric cooperatives get 80 percent of their power from coal, so rural consumers would be most affected by limits on carbon-dioxide emissions. Even before speculation began on higher permit prices, many rural legislators were already concerned about the impact on their constituents. In a Reuters article last Friday, Richard Cowan wrote that as climate change legislation was being debated in Congress, House members "including lawmakers representing poor, rural areas, pressed experts for ways to mitigate the impact on the poor, who spend a greater proportion of their incomes on heating and fuel than middle-income and wealthy people." Rep. Artur Davis of Alabama, said that the legislation would disproportionally affect the South and Midwestern manufacturing areas. (Read more)