Carbon pricing and nuclear power: how to fix cap and trade

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.)

8 comments for “Carbon pricing and nuclear power: how to fix cap and trade

  1. donb
    July 29, 2010 at 3:53 pm

    There is a mistake rooted in the history of intermittent renewable power that in part causes the “Greens” to support it as much as they do. The mistake goes back to when renewables were a small part of the generation mix. Back then, the input from renewables looked like a small amount of negative load (small load decrease), and was handled much like other variations that happen every day. At this point, arguably fossil fuels were displaced.

    The problem is, this model begins to break down when intermittent renewables become a larger percentage of the generation mix. Eventually, the whole model needs to be reworked when the intermittent sources become a significant percentage of the mix.

    Just because a little bit of renewables is good does not mean that more is better, and that lots is the best.

  2. July 29, 2010 at 6:10 pm

    Don, there are some who suspect the greens know full well the renewables fallacy you point out. In Ontario, there is no question that “green” lobbyists are clearly aware that renewables really mean natural gas, and are perfectly happy to see gas—a fossil fuel—replace both coal and nuclear.

    This is the same crowd that pretends to oppose the oil sands. Oil sands emissions are almost entirely from the use of the very same natural gas the “greens” support in Ontario!

    Some, including the Ontario Clean Air Alliance, are funded by gas companies—everybody knows this. Others, like Pollution Probe, pretend to be aloof, but guess what. Pollution Probe has exactly the same street address as the OCAA, and exactly the same suite number.

    What is irritating is that media stories represent both organizations as non-aligned, objective, altruistic environmental advocates. I can almost forgive this in the case of Pollution Probe; it takes a lot of investigative work (a whopping five minutes for anybody with an internet connection) to discover their tie with the OCAA. But the OCAA is not an objective, altruistic environmental organization. They are an astro-turf front for the gas lobby.

  3. crf
    July 29, 2010 at 8:32 pm

    I agree with your demolition of the position of certain environmentalists that the nature of Nuclear means it should be excluded from participating in cap and trade, or, more generally, in any government scheme promoting lower CO2 electricity.

    But I do take issue with your conclusion: that given green-groups’ incoherence “Is it any wonder there has been no progress toward policies that will actually reduce CO2″.

    I just don’t think they are the reason there hasn’t been progress on reducing carbon dioxide emissions. Progress has been blocked because people with actual power, politicians and the armaments of government (civil service, etc) have not faced up to the issue in Canada, let alone the world. Green groups may want the shoulder the responsibility of the success or failure of policy to adapt to climate change, and those with actual power will only be happy if the general public develops the perception that green groups are responsible for our present failure on “their” issue.

  4. July 30, 2010 at 8:14 am

    CRF,

    In Canada, the federal government has made nice with the green groups, who as I mentioned support the gasification of Ontario’s power system at the expense of nuclear. Look at the greens’ position on the Darlington build. They oppose it, meaning they oppose adding 3,000 MW of zero-emission electricity to the grid. They would rather have 3,000 MW of electricity that comes with 550–700 grams of CO2 per kWh.

    Darlington is Ontario’s and Canada’s best hope for meeting the feds’ 2008 Throne Speech goal of having 90 percent of Canada’s power come from emission-free sources by 2020.

    Now we would probably agree that Darlington is held up because the feds and Ontario cannot agree on the size and nature of the risk of schedule delays and cost overruns. But if Ontario is perfectly fine with paying premium prices for low-quality wind power that requires fossil (i.e., gas) “backup” which itself costs money, that means Ontario is responsive to political pressure in that direction. And where is that pressure coming from? The greeen lobby.

    Why would Ontario not be fine with paying reasonable prices for high-quality nuclear? Because the latter suggestion does not have the same support that the former does. Quite the contrary: nuclear has out-and-out opposition. And from whom? From the green lobby.

    The greens’ complaints about the oil sands are symbolic posturing; not even they believe the oil sands will be shut down. They support using gas in Ontario, and that is the very same gas they pretend to rail about in Alberta. So it is perfectly accurate to say they are allies of gas companies—if not formal allies as in the case of the OCAA then de facto allies.

    As for the U.S. situation, others have noted links between allegedly green groups, e.g. the Sierra Club, and big gas. The green lobby just spent an enormous amount of time/money to kill the nuclear loan guarantees in the Senate. Think of it: they spent valuable time/money to block the biggest source of GHG-free power.

  5. July 30, 2010 at 1:33 pm

    Hi Steve,

    Though i don’t agree with a cap n trade (prefer not punishing but motivating ), I do agree that greens have prevented nuclear to their own detriment. What if they had not been opposing nuclear in the US for the past 30 years? It is likely that 51% of our electricity would NOT come from burning coal.

    Warmly,

    Chris Grande

  6. July 30, 2010 at 1:49 pm

    Chris, exactly. Nice counterfactual. A former (antinuclear) chairman of Ontario Hydro, who took advice from Amory Lovins, now does media interviews in which he lambastes the current Canadian federal government for non-action on climate change.

    This is the same guy who cancelled the four additional reactors at Darlington. If they had been built, they would today have been cranking out 3,200 MW of carbon-free power. Instead, that power is right now coming from gas and coal plants.

    Wind, which Lovins encourages, is right now running at a two percent capability factor, and contributing one-tenth of one percent of Ontario’s electricity.

  7. crf
    July 30, 2010 at 10:21 pm

    So greens want no nuclear, are not displeased with gas and want piddly distributed energy. Government happens to provide that. You say government is reacting to the Greens and that therefore greens seem to have power. Not necessarily.

    I agree that, currently, you can find congruences between what greens want and government provides: no new nuclear, and expensive piddly little green power projects.

    But that doesn’t mean that green groups have the power to write policy. Government is still evading the question of defining our electric future, while putting a green-gloss on things to garner votes and avoid upsetting strident voices. In the absence of rational policy, green groups will, naturally, pipe up and publicly take ownership of the government policy lead to those turbines and solar panels, and puts off nuclear. But the responsibility and the power still lie with the government to make energy policy: none of that has been delegated to the self-defined greens.

    There is no clear policy, provincially in Ontario, or Nationally in Ottawa, to define Canada’s future energy needs according to a rational accountable process which takes into account climate change and worldwide future energy needs. That’s government’s fault, not the fault of strident green voices. Don’t let government pass the buck (pass off their responsibility) to the greens, even if the greens wish to take it.

  8. July 31, 2010 at 7:49 am

    Of course it is the federal government’s fault that there is no clear strategy for living up to the 2008 Throne Speech non-emitting-electricity goal. And it is also the provincial government’s fault that Ontario is in such a shambles. Both levels have chosen the path of least resistance, and that path has been paved by professional greens.

    You are right that it is ultimately government’s decision to do or not do something. But look at the policy of capping nuclear capacity in Ontario. That was explicitly to appease green groups. That means Nanticoke, 4,000 MW, won’t be nuclearized. Instead the 4,000 MW will come from gas, which will dump millions of tons of CO2 into the atmosphere.

    Good article in today’s TorStar about the lamentable state of power sector policy in Ontario:
    http://www.thestar.com/opinion/editorialopinion/article/842179–why-you-pay-so-much-for-hydro

    The author quotes the same Jan Carr article I quote above, regarding policies for dealing with global warming. He is referring to subsidizing the “piddly” power sources you mention, wind and solar. Those policies did not come from the professional bureaucrats in the Energy Ministry. The bureaucrats understand arithmetic. Those policies came from the professional green/gas lobby.

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