Subject: Wind Energy Weekly #5 1/3

From: [email-masked] (Howard Smith)
Date: Fri, 23 Jul 93 13:32:00 -0700

This message was from [email-masked] to HOWARD SMITH
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[The following is the electronic edition of _Wind Energy Weekly_,
Vol. 12, #552, 6.21.93, published by the American Wind Energy
Association.  For more information on the Association, contact
AWEA, 777 North Capitol Street, Suite 805, Washington, DC 20002,
USA, phone (202) 408-8988, FAX (202) 408-8536, email
[email-masked]]

UCS OUTLINES OPTIONS
ON ENVIRONMENTAL COSTS

     The Union of Concerned Scientists (UCS), a leading
environmental organization, recently published a major study,
Powering the Midwest: Renewable Electricity for the Economy and the
Environment, which concluded that wind energy is among the
renewable energy technologies holding great promise for the region.
This is one of a series of articles reprinting excerpts from the
report, by permission of UCS.

POLICIES FOR A RENEWABLE FUTURE

Account for Environmental Costs and Risks

     . . . [T]he environmental impacts of pollution generated by
fossil fuels are not fully accounted for in market prices.  In
effect, clean air is treated as a free resource to be consumed by
utilities in the production of electric power.

     Although federal and state regulations require utilities to
meet certain pollution standards--in effect setting a cap on the
amount of free clean air that can be consumed--there is little
incentive for utilities to go beyond these standards and emit less
pollution.1

     And one important class of pollutants, greenhouse gases,
remains entirely unregulated.  Estimates of the dollar costs of
pollution . . . , although uncertain, leave little doubt that
failure to consider them puts renewable energy sources at a deep
disadvantage.

     States can address this problem in several ways.

     The most direct is to raise fees on pollution generated by
fossil fuels.  This can serve two functions: increase revenues for
the state and create an incentive for electric utilities and other
energy consumers to reduce their fuel use and develop alternative
fuels.

     From the standpoint of economic efficiency, it is regarded as
one of the best approaches, as it gives utilities a clear price
signal yet allows them to change their fuel mix patterns in the
most efficient and convenient manner for them.

     In contrast, the use of "command-and-control" regulation can
sometimes lead to less than optimal choices.  Although substantial
pollution fees are most appropriate at the federal level,
relatively modest state-level fees can generate significant
revenues and help fund renewable energy research and development
projects.

     Choosing an appropriate level of pollution fee is, clearly, a
difficult task, both politically and analytically.  One option is
to base the fee on some measure of the environmental and social
costs of fossil fuels.  For example, fees could be levied in
proportion to the carbon content of fuels.  Estimates of
environmental and social costs vary over a wide range, however,
making consensus on the proper fees difficult to attain.

     In addition, it is likely that pollution fees will raise
objections from electric utilities or consumers.  Although recent
analysis by the U.S. Environmental Protection Agency suggests that
such fees need not place a burden on the economy if their revenues
are applied wisely, there is no doubt of their political
sensitivity.

     It may be possible, however, to create revenue-neutral fees
that avoid some of these problems.  For example, states could shift
some taxes on electric utilities from sales to pollution.2  At
present, states collect on average about five percent of utility
revenues, or about $8 billion a year, through sales taxes.
Shifting some or all of these taxes to pollutant emissions would
provide a simple and direct way to encourage utilities to produce
cleaner power, without increasing the overall tax burden on utility
customers.

     For example, if a five percent sales tax were replaced
entirely by an equivalent tax on carbon dioxide emissions, a
typical utility might pay about $2 per ton of carbon dioxide
emitted, a modest fee compared to those under consideration at the
national and international levels.  Over time, as the utility was
encouraged to produce less pollution, its tax burden would actually

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