The Situation
In a state that relies on coal as the fuel source for 94 percent of its electricity, Indiana is facing a challenge to balance an increasing demand for affordable electricity with environmentally-responsible generating practices. The United States Congress is currently considering legislation designed to reduce greenhouse gas emissions associated with global warming. The Indiana Partnership for Fair and Affordable Energy supports environmentally-responsible generating practices to curb global warming, and is working with Hoosiers and our Congressional delegation to ensure Federal legislation will not burden rate payers with significant cost increases. An appropriate legislative framework along with a focus on new technology and energy conservation can mitigate the burden of rising costs. With your help, we can do our part to reduce our impact on the environment and make sure the cost of implementing new energy technology will not financially impact consumers all at once.
Click here to read the most recent legislative update from the Partnership.
Tax vs. Trade
Under the proposed cap and trade model, Congress will establish a baseline carbon dioxide emissions level and slowly decrease or cap the allowable level over time. In order to decrease carbon dioxide emissions, utilities would have to find ways to decompose or sequester carbon dioxide emissions or replace carbon-emitting generation with resources that do not emit carbon dioxide. Carbon-free generation resources, such as wind, solar and nuclear, are generally much more expensive than coal or other fossil fuels.
The second part of the cap-and-trade process would require electric utilities to own one “allowance” for each ton of carbon dioxide they emit. Available allowances would decline over time, in concert with the reduction in carbon dioxide emissions cap. Congress is currently considering whether these allowances should be distributed free-of-charge to utilities based on the levels of carbon dioxide emissions from existing and currently planned generation, or whether utilities should be required to purchase allowances. Independent studies have shown that a requirement to purchase allowances could raise the cost of electricity in Indiana and other coal-dependent states by 30 to 40 percent.
