Tuesday, April 04, 2006

White House environmental chief: I'm making this up as I go

AIR POLLUTION: Utility costs jump $30B to $40B without CAIR -- CEQ chief

Ben Geman, E&ENews PM senior reporter 4/4/06

Failure to implement the Bush administration's Clean Air Interstate Rule (CAIR) could cost utilities $30 billion to $40 billion more to achieve emissions reductions required by the rule, the White House's top environmental official warned today.

Jim Connaughton, chairman of the White House Council on Environmental Quality, told an industry forum that the projected cost of $50 billion to implement the rule -- which is being challenged in court -- could swell if state-by-state approaches to curbing emissions are pursued instead.

"State-by-state warfare" on emissions could "turn this $50 billion cost back into ... an $80 billion cost, a $90 billion cost," Connaughton told the U.S. Energy Association's annual meeting in Washington. "We don't know how it would play out in the end."

CAIR creates a cap-and-trade system to reduce sulfur dioxide and nitrogen oxides from coal-fired power plants in 28 Eastern states and the District of Columbia. U.S. EPA says the rule, when fully implemented, would curb SO2 emissions by more than 70 percent, and NOx emissions by more than 60 percent.

Connaughton cautioned after the speech that he was "speculating" about the increased costs to utilities without the rule and noted the acid rain trading program created under the Clean Air Act amendments of 1990 reduced the cost of compliance to achieve reductions. "I am just speculating off that prior experience," he said. "Don't take that as a hard analysis."

Utilities' costs would be higher without the rule for several reasons, Connaughton said. State-by-state planning can throw off companies' capital investment cycles and increase the cost of capital, labor and materials, he said.

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