How Congress Threatens to Undermine the Clean Energy Future: Protecting Coal

The new Greenpeace report Business as Usual describes "five maximum points of danger" in the House and Senate climate bills. SolveClimate will be reposting each of those arguments over the course of the week.

There is probably no better indication of the persistence of business as usual than the fact that both the House and Senate climate legislation prioritize support for the primary industrial source of greenhouse gas.

That’s right, the largest federal investment is to subsidize coal.

It was expected that climate legislation would support coal energy to make a transition to a future where its primacy as the source of electric power diminishes. But no one was prepared to see the enormous level of federal support in the bill aimed at an industry that employs fewer Americans than wind energy alone.

It is beyond reason and integrity. It has led many to wonder whether the House bill might be more aptly named the American Coal Energy and Security Act, for embedded within it are generous subsidies and boondoggles that favor coal above all other energy sources.

A good example is Section 114 of the bill, which is a giant gift to the coal-fired electric generation industry. It would create the Carbon Storage Research Corporation and funnel $10 billion to support it over the next 10 years, with 5% or $500 million designated simply for “administrative expenses” to be spent at the discretion of new corporation’s officers.

The most curious part is where all that money is going to come from: From every ratepayer who uses electricity, in the form of an almost invisible tax that would average about 50-cents-a-month. If this program makes it through Congress and gets up and running without alteration, ratepayers will likely see a small new charge on their utility bills among all the others, called something like “Federal Clean Energy Assessment.”

Talk about a light switch tax.

There is no parallel provision in the bill to set up a federally created corporation to support solar or wind or geothermal energy development, even though the House legislation is called the American Clean Energy and Security Act.

Section 114, however, is still only a very minor part of the favoritism being showered upon coal. Many times more generous and decisive is the multi-billion-dollar bonus payment mechanism described in the very next section, Section 115. The mechanism is being created to encourage the commercial development of CCS—carbon capture and sequestration. CCS is the technology that aims to prevent the escape of CO2 pollution into the atmosphere by capturing it and burying it underground instead.

The bonus payments outlined in Section 115 will essentially cover the full capital costs of constructing a CCS-capable coal plant — about $3.5 billion each. The mechanism does so by providing a bonus payment of as much as $90 a ton, and not less than $50 a ton, for sequestering carbon underground. Payments are for CO2 avoided for 10 years of operation. Assuming the midpoint bonus of $70/ton, this means that a 1 gigawatt CCS-capable plant that sequesters five million tons of CO2 a year will earn $350 million a year for 10 years — a total of $3.5 billion.

Phase I of the bonus program guarantees this rate for the first six gigawatts to come on line. Phase II of the program extends the bonus payment through a reverse auction procedure that might lower the bonus rate slightly depending on the bids submitted, but it could apply to as much as 60 gigawatts of new capacity — 10 times that of Phase I. This is an enormous level of support.

There is no parallel provision in the bill to set up a federally created bonus program to encourage solar or wind or geothermal energy development. A similar provision that would pay a $50 to $90 bonus per ton of avoided CO2 pollution to generators of emission-free power would cause an unprecedented clean energy and green jobs boom.