North American cap and trade debate: keeping our eye on the ball

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The value of a carbon cap and trade system, or a carbon tax, hangs on whether it raises enough money to pay for meaningful carbon emission reductions. To be effective in reducing emissions, a cap-and-trade scheme, or a carbon tax, has to raise enough money to put emission-reduction technologies into action on a large scale. Which technologies, and how much money? That is what we should be debating.

The debate currently underway in both Canada and the U.S. has long been focused almost exclusively on a narrow range of technologies like wind, solar, and biofuels. Only very recently, nuclear was added to that list (see article).

Which of these approaches deserves the most money? Take the electricity generation sector. Canadian electricity generators emitted 128 million metric tons of greenhouse gases (GHGs) in 2004, the most recent year for which data are available. That’s about 17 percent of our national emissions. What size of emission reduction would qualify as meaningful? The Kyoto Treaty requires the power generation sector in Canada to reduce annual GHGs by over 38 million metric tons. Most carbon from this sector comes from coal-fired power plants, which kick out up to a kilogram of carbon for every kilowatt-hour of electricity they generate.

Achieving a 38 million ton annual emission reduction from the power generation sector in Canada means generating 38 billion kWh from non-emitting sources. That’s eighty-five percent of Alberta’s coal-fired power output in 2004, and twice Saskatchewan’s entire power output in that year (see Environment Canada’s Electricity Intensity Tables).

Considering this, nobody should be surprised that Alberta and Saskatchewan are, to put it mildly, not enthusiastic about a major carbon costing scheme. Since their power systems are coal-based, the retail cost of electricity in those provinces would skyrocket if somebody had to pay for carbon emissions.

To achieve a meaningful emission reduction in the Canadian power generation sector, any carbon costing scheme, whether it is based on cap-and-trade or an outright tax, has to raise enough money to build power plants that are capable of generating 38 billion kWh a year in the six Canadian provinces whose power generation systems are based wholly or partly on fossil-fuel sources. Since we’re talking about mostly baseload power (i.e., electricity that is available 24 hours a day, 7 days a week), this works out to around five 1,000 megawatt plants.

This is where the proponents of carbon costing schemes tend to lose sight of the ball. Most proponents think that higher costs for electricity will magically compel a shift to wind, solar, or biomass power that will solve our problems. Really? As I write this, Ontario’s 870 megawatts of wind generators are collectively producing a paltry 76 megawatts of actual energy (according to the IESO’s Hourly Generator Output Report). If carbon cost proponents really want wind to be part of the big solution, they’ll have to admit that we’ll also need a lot of parallel investment in large-scale backup low- or non-emitting generation. That means nuclear or gas.

How realistic is it to expect electricity rate payers, who will pick up the ultimate tab for the higher costs that come through a carbon tax or cap and trade scheme, will want to pay for a parallel fleet of redundant generators?

Not realistic at all. If Canada is going to embark on a cap-and-trade scheme, we should think our way through it first.

6 comments for “North American cap and trade debate: keeping our eye on the ball

  1. Brad F
    November 23, 2008 at 22:48

    The thing is, even without wind, a move to replace coal-fired generation will result in redundant generators since not all coal plants are at the end of their useful lives. Many are only at the midpoint of their anticipated life cycles. Sure, with expensive enough coal (and emissions permits) the economics will be favourable to build nuclear plants or the transmission required to connect the Lower Churchill hydro project, but you’re effectively making the coal generators redundant.

  2. November 24, 2008 at 00:14

    You certainly have a point. New reactors are needed in India, China, and Africa where they can be built instead of new coal plants. Canada should offer to build such reactors for free (we really benefit by reducing the impact of climate change, right). This offer could extend for a limited time, perhaps twenty years. We could call if Foreign Aid. Then, based on the relationships formed by this work we could negotiate a trade deal. For instance, perhaps we could continue supplying reactors, and India could repay this work by shipping us electric cars. The knowledge and expertise gained from this could then be applied to nuclearize Canada.

  3. November 24, 2008 at 10:05

    Yes, we’d be making coal generators redundant. But that’s another strike against the expensive generation sources like wind, solar, and biomass (and remote hydro, which requires lengthy new transmission lines). Why go through the bother when we have massive amounts of existing capacity, already connected to the grid, which could stay available for years?

    This is exactly why Ontario was able to delay refurbishing the Pickering and Bruce nuclear reactors in the mid-90s: why go through that political fuss when there are 6,400 MW of perfectly good coal plants ready and able to pick up the slack without a blip on the grid? Coal-fired units that had become redundant in 1994 suddenly re-entered baseload service in 1995–1997.

    The paramount criterion is ability to dispatch utility-scale baseload power at reasonable cost. The Ontario experience proves the best way to achieve this in a system where hydro is largely tapped out, while keeping power-sector emissions at a reasonable level, is with nuclear and coal. The amount of nuclear depends on how concerned you are with emissions.

  4. November 26, 2008 at 19:46

    Hi Steve ….

    I have been promoting nuclear over coal for many reasons, and carbon dioxide emissions is a minor concern for me. I would like to see a red dot on our electricity bills for every coal miner killed that year. We could watch our bills transform from light pink to deep blood red as the ten thousand dots appear. Blood diamonds, blood ivory, and blood coal should all be shunned by ethical Canadians. As I see it, the amount of nuclear we build actually depends on how good we are at walking around with our eyes closed.

  5. November 27, 2008 at 18:05

    Randal,

    Most coal in Canada is open-pit mined, and a big part of America’s coal also comes from open-pit mines. Very few casualties are associated with this kind of extraction. Deep shaft mines are of course a different story. It’s a touchy subject. Speculation that coal mining might resume in Nova Scotia has been greeted by applause from some people who hope to work in them and earn a decent wage. The truth is that nobody, on this continent at least, is forced to work in a coal mine. If there were a general refusal to work in these conditions, well we wouldn’t be having this discussion.

    I don’t know anybody who feels guilty when they are eating Atlantic salmon or cod or herring, in spite of the fact that it is dangerous to go out into the North Atlantic and reach overboard to retrieve a net or line from frigid water. People do it for a living, and are proud of it, as are those who cut timber out in BC (another dangerous job). I myself worked in a few BC sawmills back in my school days, places where I could have been crushed or dismembered or ground into hamburger—all to make a few bucks—and never felt I was forced into the job. In fact, I liked the thrill of doing a dangerous job when the rest of my friends were flipping burgers, driving delivery trucks, or doing government internships. A guy was crushed to death on one of my shifts, and it was a tragedy but not a good reason to stop using softwood.

    But like I said, it is a touchy subject with some.

    Much less equivocal, in my view, is the issue of premature death because of smokestack emissions from coal-fired generating plants. Some have quantified the number of deaths-by-coal in Ontario (667 per year, according to one study). This is pure BS.

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