Cap and Trade Rules
Western Climate Plan Could Prolong Recession

Western Business Roundtable
February 18, 2009

Weaken Power Grids and Will Not Change Future Temperatures Over A Century

A new study says that a climate action plan promoted by several
Western governors could prolong the economic
recession, weaken already overburdened Western
power grids and will deliver a temperature
"benefit" of only one ten-thousandth of a degree
Celsius even after a century of operation.
The study, commissioned by the Western Business
Roundtable, found that the Western Climate
Initiative (WCI) greenhouse gas (GHG)
cap-and-trade plan could "chase away tens of
billions of dollars in high technology
investment from the West to other regions" and
would "further stress the West's already
strained electricity grid, increasing the threat
of potentially catastrophic power outages."

"The key to creating new jobs while reducing
emissions is not to throttle back our economic
engine, but to turbo-charge it with new
technologies that allow it to run faster,
cleaner and more efficiently," said Jim Sims,
President and CEO of the Western Business

"The analysis we commissioned predicts that the
WCI would disadvantage the West by limiting
energy resources and discouraging deployment of
new technologies that can help us grow to a more
low-carbon economy," Sims said. "On the
contrary, the West needs all the resources we
can develop in order to power our way out of
this recession and create millions of new
high-paying jobs. We need a climate action plan
that helps our economy grow while we continue to
reduce emissions through cutting-edge, 21st
century technologies."

The analysis of the WCI plan was conducted by
Management Information Services, Inc., a highly
regarded economic analysis firm that conducts
studies for both renewable and fossil energy
organizations. The WCI's proposed regional
cap-and-trade plan was unveiled last September
by the governors of California, Utah, Arizona,
New Mexico, Oregon, Washington, and Montana.
Details on that plan can be seen here.

The study unveiled three findings that Sims said
were "a bit shocking."

The first was the WCI plan's assumption that
virtually no baseload power plants would be
deployed in the West through the year 2020
fueled by either hydropower, natural gas, coal
or nuclear energy, even though nearly all
experts predict that the West will experience
significant growth in energy demand and will
need more baseload power plants to maintain reliability.

The second finding was that the WCI recommends
that virtually all growth in the West's
electricity demand should be met by mostly
intermittent power generation, such as solar and
wind farms, and demand reduction. Most experts
believe that such a rapid and large deployment
of highly variable power sources onto the
region's electrical grid would greatly increase
the risk of system failure.

"If the WCI is in fact recommending that we
deploy virtually no new baseload power plants,
that we and rely solely on renewables and demand
destruction, this is a proposal that would
weaken the West’s already over-burdened
high-voltage transmission grid and could easily
deepen or lengthen our economic recession," Sims
said. "President Obama understands the need to
aggressively and rapidly build next-generation
baseload power plants, including those that
capture and sequester GHGs. He knows, as do
policymakers across the West, that economic
growth is closely tied to availability of
affordable energy and a stable and reliable
energy infrastructure and that carbon management
policies must balance environmental goals with
the demands of economic recovery and job creation."

The third finding is that "the very climate
science now driving climate policy in Congress,
that of the United Nation's Intergovernmental
Panel on Climate Change, predicts that the WCI
plan would result in a virtually immeasurable
reduction of future global temperatures over the
next century of one ten-thousandth of a degree Celsius."

"We were frankly a bit shocked by this last
finding, but the numbers come straight from the
IPCC science and they pretty much speak for
themselves," Sims said. "If the IPCC's own
scientific assumptions and climate change
formulas predict such a meager temperature
benefit from scenarios that range from the WCI
plan all the way to shutting down all fossil
fuel power plants in America 100 years, it casts
a long shadow on those who say we must take
extreme action now without thinking through the
entire cost-benefit equation.

"At the end of the day, it the government
imposes regulations with a cost-benefit ratio
that consumers reject, the entire movement to a
low-carbon economy could be greatly complicated
or even rejected by the American people," he added.

The analysis also warned that the WCI plan could
result in the following:

The WCI plan could increase energy costs and
disproportionately harm low-income and minority
families, particularly minority families who are
among the most vulnerable to price shocks.

The WCI’s plan to establish and monitor
emissions caps would require the establishment
of a large and powerful new government
bureaucracy. This could trigger the type of
influence-peddling and system “gaming” that has
plagued European experiments with such
regulatory approaches.

The laws, regulations, mandates and bureaucracy
the WCI is proposing go so far as to give WCI
climate officials authority even over private
companies’ organization and reorganization functions.

The Roundtable analyzed the WCI plan according
to how it addressed four basic objectives:
Would it contribute to increased reliability of
the region’s energy production and delivery
infrastructure – would it help “keep the lights
on” as the West works to create new jobs and
pull itself out of economic recession?

Would it stimulate new technology investment
across the region, especially on carbon capture
and sequestration technologies, so that the West
can participate in, and benefit from, the
deployment of these technologies?

Would it deliver measurable and recognizable
environmental benefits – measured in terms of
reduced future global temperature – to consumers
who will pay the costs of these programs and who
often view the efficacy of government mandates
through the lens of costs versus benefits?

Does it strengthen the West’s bargaining
position in the upcoming federal policy debates
over national GHG mitigation measures?
"This analysis concludes that the WCI plan does
not meet any of these objectives," Sims


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