Carbon Tax is now on the Agenda--An Alternative Approach
As the Stimulus Bill is now behind the Congress, the serious work of a comprehensive Energy Policy and Climate Change Policy is now fully underway. One major aspect of both bills that is emerging in the halls of Congress is the imposition of a Carbon Tax. While it is still unclear how a Carbon Tax will be imposed, either through a Cap and Trade system or through a per MW or BTU surcharge, there is no doubt that the cost of electricity and heat for every American will increase. Realizing that such a surcharge is, by definition, regressive, there is now talk emerging relating to giving a tax credit to less wealthier Americans to offset the Carbon Tax. At the same time, there is no consideration being given to the businesses that are the real backbone of the American economy who will see their costs increase.
Simply, there is a better way. Congress should look at a comprehensive reform that encourages the use of on-site generation, renewables and efficiency. In addition, the cost of such a program should spread over the ratepayers, which is more inclusive than the taxpayer base because of the numerous businesses that do not pay taxes because they manage to shed profit.
I welcome modifications to this idea as well since I believe that we all need to come together to get it right!!
1. Institute a national Renewable Portfolio Standard of 25%. The RPS can be achieved either through centralized power projects to distributed generation projects. The RPS would be on a statewide basis, not on a larger regional basis. In addition, the generation to satisfy the RPS must be generated in State. If we are going to be serious about reducing carbon and dependence on foreign oil, we must do enough to really make a difference. The large RPS does this. Further, making the RPS at the state level encourages innovation and does not place the burden of the RPS on one state and on the interstate transmission grid.
2. Institute real and meaningful nationwide net metering (which will help with RPS). This means that excess generation is sold back to the grid at 100% retail rate. Obviously, there is a cost to the utility to transmit and distribute this generation to other users. The cost of doing so should be paid by the ratepayers as a whole.
3. For those that install Class 1 Renewable Energy as distributed generation (i.e., solar), all demand charges, backup charges and transmission/distribution charges should be waived. In effect, the end user would only pay for the generation costs of grid power used and then only if the cost of such power exceeds the amount of excess generation sold back to the grid. Again, costs to the utility are shared over the ratebase.
4. For those that other Renewable Energy as distributed generation (each state has different definitions), the same benefits as the Class 1 Renewable would apply except that the end user would be charged distribution and transmission charges for grid power used.
5. For those that install combined heat and power (i.e., natural gas) generation, for electric the same net metering rules would apply (full net metering). In addition, only demand charges would be waived. On the gas side, the end user would only pay for the gas used and all delivery charges would be waived.
6. For CHP, the end user would be given the ability, without intervention by the utility, to have limited rights to cross a rights of way (limited by distance perhaps) to install electric lines to neighboring end users to share the excess generation and to install pipes to share the excess thermal load.
With these types of incentives, the reduction of carbon would be significant. While ratepayers would bear the burden, the burden would be fairer than a carbon tax. In addition, the incentive of installing generation is better than a punishment for using power that is needed for our homes and businesses.
I welcome your thoughts....
