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Today's IssueAlert Sponsors:=20
[IMAGE] Switch Rates, Predictions and Analysis in Retail Energy Foresight. Rely on Retail Energy Foresight for current and projected switch rates and= =20 thoughtful analysis on restructured energy markets and related issues. =20 Download FREE trial copies at www.xenergy.com/xensecure.nsf or contact Susa= n=20 Weber at 781.273.5700 or via e-mail at sweber@xenergy.com. Retail Energy= =20 Foresight is a bimonthly publication from XENERGY, a leader in energy=20 consulting and strategic information since 1975. =20 www.xenergy.com/xensecure.nsf=20 [IMAGE] Rapidpartsmart is the newest, most powerful online parts search engine in = =20 the power industry. Rapidpartsmart is the complete source to locate, buy a= nd=20 sell engineered parts worldwide. Rapidpartsmart integrates over 5 million= =20 supply items into asset management and work management systems to ensure= =20 that you know all supply sources, all the time. Rapidpartsmart increases= =20 supply options, reduces outage risks and cuts inventory investment. Contac= t=20 John Kelly at (727) 669-3006 for more information or go to=20 www.rapidpartsmart.com=20 [IMAGE] The most comprehensive, up-to-date map of the North American Power System b= y=20 RDI/FT Energy is now available from SCIENTECH. =20 [IMAGE] IssueAlert for March 15, 2001=20 President Bush Reverses Position on CO2 Emissions by Will McNamara=20 Director, Electric Industry Analysis [News Item from The Washington Post, March 14] President Bush has decided n= ot=20 to seek reductions in the carbon dioxide (CO2) emissions of the nation's=20 power plants, reversing himself on a campaign pledge after encountering=20 strong resistance from the coal and oil industries and from Republican alli= es=20 on Capitol Hill. In a letter to four Republican senators, Bush cited a rece= nt=20 Energy Department study showing that restrictions on CO2 emissions would=20 result in a shift from coal to natural gas and lead to higher energy costs.= =20 "I do not believe=01(that the government should impose on power plants mand= atory=20 emissions for carbon dioxide," Bush said.=20 Analysis: The sudden change in President Bush's position on CO2 emissions= =20 naturally has elicited strong reactions from both sides of the debate. The= =20 extent to which CO2 contributes to the nation's pollution, and whether or n= ot=20 the government should take an active role in restricting CO2 emissions, has= =20 become an intensely politicized issue. Democrats and environmental groups= =20 responded with outrage to what they perceive as a betrayal by the president= ,=20 while coal and oil industry officials believe that Bush's decision will=20 ensure a more balanced energy and environmental policy.=20 I won't attempt to debate the political aspects of the president's decision= .=20 Rather, I will analyze Bush's current position impacts the energy industry,= =20 and whether or not the lifting of CO2restrictions does indeed contribute to= a=20 sound energy policy. =20 It is true that during his campaign, the president made promises to limit C= O2=20 emissions. In a speech in late September, Bush said, "With the help of=20 Congress, environmental groups and industry, we will require all power plan= ts=20 to meet clean air standards in order to reduce emissions of sulfur dioxide,= =20 nitrogen oxide, mercury and carbon dioxide within a reasonable period of=20 time." Yet, while many critics have claimed that Bush's refusal to place=20 limits on CO2 is a philosophical turnabout, White House spokesman Scott=20 McClellan said that carbon dioxide "should not have been included as a=20 pollutant" in Bush's campaign position because it is not classified as one = in=20 the Clean Air Act. Further, the White House has said that Bush's original= =20 promise was a "mistake" inconsistent with the president's broader goal of= =20 increasing domestic energy production.=20 In fact, although many scientists believe that CO2 is a key contributor to= =20 global warming, it has not been proven to have any direct effect on human= =20 health. Consequently, CO2 has never been classified as a pollutant under th= e=20 Clean Air Act because, in the eyes of those determining Clean Air=20 classifications, it has no detrimental human health or environmental impact= ,=20 except as it applies to concerns about global warming. In his decision to= =20 abstain from placing any restrictions on CO2 emissions, Bush noted "the=20 incomplete state of scientific knowledge of the causes of, and solutions to= ,=20 global climate change and the lack of commercially available technologies f= or=20 removing and storing carbon dioxide." The president maintains that he is=20 committed to an energy policy that would seek to improve air quality=20 emissions of NOx, SO2 and mercury, which are already regulated as pollutant= s,=20 but not CO2. Bush also said that he would work with Congress to reduce=20 emissions from power plants specifically, but that any such strategy would= =20 include phased-in reductions and market-based incentives to help the indust= ry=20 meet the targets. =20 Moreover, the president apparently cannot reconcile any possible restrictio= ns=20 on CO2 emissions with ramifications that the restrictions might have on=20 domestic power supply. Clearly, any limits on CO2 emissions would have=20 tremendous impact on coal-burning power plants. By some estimates, coal, a= =20 relatively cheap and plentiful fuel which accounts for more than 50 percent= =20 of the electricity generated in the United States, produces about 40 percen= t=20 of the nation's CO2 output (more than any other fuel). Yet, industry=20 officials have warned the president that any effort to restrict CO2 emissio= ns=20 would compromise efforts to increase domestic energy production. Since Bush= =20 took office as president in January, it has become increasingly clear that = a=20 major component of the president's imminent energy plan will be efforts to= =20 increase domestic power supply through a diverse fuel mix that includes coa= l,=20 natural gas and nuclear. The president has maintained that he sees a=20 supplemental role for renewable energies such as wind and solar. However,= =20 according to reports out earlier this week, Bush is proposing to cut the=20 DOE's renewable fuels and energy efficiency budget by 30 to 40 percent. In= =20 any case, establishing this diverse fuel mix will take time, and the=20 president realizes that the country faces an immediate energy crisis=20 resulting from a growing supply / demand imbalance. =20 Aside from power supply concerns, the president also acknowledged the curre= nt=20 high prices for natural gas, and how a reduction in coal-fired generation= =20 would most likely keep prices at their high levels. In fact, the president= =20 said that conclusions made in a recent DOE report led to his decision to ba= ck=20 away from CO2 restrictions, more than any pressure he might have received= =20 from oil and coal lobbying groups, as has been reported in many recent news= =20 articles. Bush noted that the DOE study had concluded that regulating CO2= =20 emissions would have led to "significantly higher electricity prices." The= =20 translation of this is that, if restrictions were to be placed on=20 coal-burning plants, many power suppliers would turn to natural-gas=20 production as an alternative. Natural-gas supplies are already compromised = in=20 this country due to increasing demand, which has driven prices up to=20 unprecedented levels. Bush's decision reflects the concern that, if power= =20 suppliers begin turning from coal to natural gas in larger numbers, this wi= ll=20 continue to exacerbate the supply shortage and keep prices alarmingly high.= =20 "This is important new information that warrants a re-evaluation, especiall= y=20 at a time of rising energy prices and a serious energy shortage," President= =20 Bush said. =20 The DOE report also indicated that because coal-fired power plants are the= =20 major power sector emitters of CO2, compliance with the emission caps would= =20 be expected to have a major impact on coal consumption and production, both= =20 nationally and regionally. If CO2caps were to be put into place, substantia= l=20 reductions in coal consumption would result, according to the DOE, with=20 corresponding drops in the projections for coal production. Further, becaus= e=20 coal has a carbon content more than 70 percent higher per Btu than that of= =20 natural gas, the DOE report said that the carbon allowance fees related to= =20 CO2 caps would make the continued operation of many existing coal plants=20 uneconomical.=20 In addition to the DOE report, Bush continues to be counseled by an energy= =20 advisory team, including Vice President Cheney and Energy Secretary Spencer= =20 Abraham, as well as having the ear of other members of the Republican Party= .=20 Many Republican senators, including Jesse Helms (North Carolina) and Chuck= =20 Hagel (Nebraska) expressed alarm over Bush's campaign promises to reduce CO= 2=20 emissions out of concern that the promises were a step closer to ratifying = an=20 international treaty regarding pollution control. The Kyoto Protocol,=20 negotiated and signed by the Clinton administration but still not ratified,= =20 would commit 38 industrialized countries to ongoing cuts in CO2 (along with= =20 SO2 and NOx) emissions. Negotiations over the Protocol broke down last=20 November, but are expected to resume this July. If ratified, the Protocol= =20 would limit CO2 emissions below 1990 levels. Currently, CO2 emissions in th= e=20 United States are about 12 percent over 1990 levels. Reportedly, Sens. Helm= s=20 and Hagel oppose ratification of the Kyoto Protocol because they believe it= =20 could adversely impact the economy and allow American energy policy to be= =20 directed by an international treaty. =20 It is important to note how the president's new stand on CO2 emissions=20 relates to the Environmental Protection Agency (EPA). Just two weeks ago, t= he=20 U.S. Supreme Court ruled that the EPA has the power to issue new standards= =20 designed to reduce the levels of smog and soot in the air. However, the EPA= =20 does not currently regulate CO2 emissions. EPA Administrator Christine=20 Whitman, in a series of public statements, had vehemently defended and=20 supported President Bush's previously espoused commitment to controlling CO= 2=20 emissions. =20 Meanwhile, the president's change in policy precedes several bi-partisan=20 bills that are expected to be introduced in the House and Senate this week.= =20 The measures reportedly will provide incentives and set requirements to=20 modernize power plants and reduce emissions of CO2, SO2 and NOx. Given the= =20 president's new stance, however, the prospects for these bills gaining much= =20 momentum may diminish.=20 In summary, President Bush apparently felt the need to give priority to=20 short-term resolutions to the nation's energy crisis over long-term=20 environmental concerns. Given the fact that coal presently generates more= =20 than half of the nation's energy needs, the fossil fuel=01*despite its deba= ted=20 environmental impacts=01*is a critical component of the U.S. energy supply.= =20 Realizing that growing demand continues to compromise the country's power= =20 supply, it appears that Bush made the unpopular decision to allow the heavy= =20 reliance on coal to continue, at least for the near term. While some will= =20 continue to say that the president reneged on his original campaign promise= s=20 and was unduly influenced by oil and gas lobbyists, an argument can be made= =20 that the nation's supply problems have worsened since last fall when the=20 president was campaigning. After examining the mix of current factors=01* including consistently high natural-gas prices, demand that remains on the= =20 rise and a continued reliance on coal, which remains comparatively=20 inexpensive=01*it is understandable that the president would take this posi= tion.=20 However, the general consensus among scientists is that CO2 emissions=20 contribute to global warming, and that a long-term solution to curb CO2=20 emissions must be enacted. As President Bush unveils his energy plan over= =20 the next few weeks, it will be interesting to see how or if he addresses th= e=20 issue of CO2 emissions from a long-term perspective. =20 An archive list of previous IssueAlerts is available at www.ConsultRCI.com Reach thousands of utility analysts and decision makers every day. Your=20 company can schedule a sponsorship of IssueAlert by contacting Nancy Spring= =20 via e-mail or calling (505)244-7613. Advertising opportunities are also=20 available on our website.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let = us=20 know if we can help you with in-depth analyses or any other SCIENTECH=20 information products. If you would like to refer a colleague to receive ou= r=20 free, daily IssueAlerts, please reply to this email and include their ful= l=20 name and email address or register directly on our site. =20 If you no longer wish to receive this daily email, send a message to=20 IssueAlert, and include the word "delete" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis= =20 of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlert= s=20 are not intended to predict financial performance of companies discussed, = or=20 to be the basis for investment decisions of any kind. SCIENTECH's sole=20 purpose in publishing its IssueAlerts is to offer an independent perspecti= ve=20 regarding the key events occurring in the energy industry, based on its=20 long-standing reputation as an expert on energy issues. =20 Copyright 2001. SCIENTECH, Inc. All rights reserved.
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