Since beginning this blog, I have called for some kind of price on carbon dioxide (CO2), either through a tax or a cap-and-trade system. My reasoning is that this would spur investment in nuclear power, which is, demonstrably, the cleanest way to make electricity on a large scale. Other supporters of a CO2 price, like Lee Wasserman in today’s New York Times, pretend we can replace fossil fuels with renewable energy. I use the word “pretend” because it requires only basic arithmetic and observation skill to understand that renewables cannot hope to replace fossil sources in the baseload power market. I assume greens understand arithmetic, and that they are capable of facing reality. This begs the question of what, exactly, they expect a CO2 price to accomplish.
Let’s imagine that a CO2 price does come into force, and that nuclear is deliberately blocked from benefiting from it (which is what the greens want). What happens then?
I’ll answer the question by stating two things that most definitely will not happen. First, the preferred renewables, wind and solar, will not replace either coal or natural gas or nuclear, or any combination of the three. They physically cannot do this, on a megawatt-by-megawatt capacity basis: wind doesn’t blow all the time, and the sun doesn’t shine all day. For them to replace the baseload sources, they would have to be overbuilt to such an enormous degree that we can safely discount such a possibility. That is not going to happen, period.
The second thing that will not happen under a CO2 price regime is that society will give up its demand for on-demand electricity. Our society requires power 24 hours a day, 7 days a week. As Jan Carr, the former head of the Ontario Power Authority, pointed out in a brilliant recent article, vast areas of urban space become uninhabitable without electricity. We will have power, even if it is provided by coal or natural gas. And we will have coal- or gas-fired power if we don’t have nuclear.
Which means that if greens get their way, and a CO2 price is implemented and nuclear is phased out, the net effect would most likely be an increase in CO2 emissions. I say most likely for two reasons. First, because the price of natural gas, which at two-thirty p.m. on July 29 was US$4.80 per million Btu, will likely rise above $5.
And the second reason is that a cap-and-trade system would very likely be set up to keep the price of CO2 low.
In this circumstance—a gas price that is high relative to coal, and a low price for CO2—coal-fired power would actually be more competitive in deregulated power markets. That is, coal generating companies could underbid their gas-fired competitors, even though coal emits around 40–100 percent more CO2 than gas.
Now, imagine you are the U.S. president and that you are trying to live up to one of your more memorable election promises, which is to implement a cap-and-trade program. In light of the calculus I have described—which is not all that complicated—you decide to disagree with the mainstream green lobby’s dogmatic opposition to nuclear; you realize that no emission reductions are possible without nuclear.
So you support the construction of new nuclear plants, and the mechanism through which you manifest your support is loan guarantees.
The problem is, the greens oppose the loan guarantees, to such a degree that they have mounted a vigorous campaign in congress. And it may have worked: though a supplemental spending bill that passed the U.S. house on July 1 contained a provision for $9 billion in nuclear loan guarantees, the senate version of the bill does not contain a similar provision. And if the greens get their way, it never will.
How ironic, then, that Lee Wasserman complains about congressional and administration non-action on climate change. He calls for cap-and-trade, then opposes the only technology that would make a cap-and-trade system work. Is it any wonder there has been no progress toward policies that will actually reduce CO2?
(NB—I should be clear that I am not against renewables per se; only against the notion that they can replace the major baseload electricity sources. When it comes to off-grid situations of course renewables should be considered: often they replace expensive and emission-intensive fossil fuels like diesel and kerosene. See my recent thoughts on the Clean Development Mechanism.)