WSJ Finds Kyoto-Inspired Carbon Trading Hikes Electric Bills for German Consumers

Wall Street Journal Finds Kyoto-Inspired Carbon Trading Hikes Electric Bills for German Consumers
Report contrasts with CBS's earlier cheerleading for a similar plan in California.

The Kyoto Protocol’s costs are coming as a shock to many German businesses and consumers. They’re finding higher utility costs resulting from their government’s implementation of the climate change treaty, The Wall Street Journal reported on September 11.

Reporter Jeffrey Ball noted that in Germany, Kyoto-inspired rules “have upset the business status quo” as they have ended up “creating winners and losers. The winners include utilities that can charge higher rates and profit from trading allowances” while the losers “include energy-intensive manufacturers.”

Later in his article Ball noted that the average German consumer also loses, with “wholesale electricity rates” going up “25% to 60% in the past few years.” Ball wrote that this is because while the tradable carbon allowance credits are free, “the utilities incorporate the value” into the price of electricity.

“It becomes part of your production cost,” explained Ralf Schafer of RWE AG, Germany’s largest utility.

Ball’s reporting contrasted sharply with a report filed 11 days earlier on the “Evening News” by CBS’s John Blackstone. Blackstone’s story portrayed a similar credit-trading plan passed into law in California as a green policy that was favorable to business.

Blackstone noted that an “unlikely supporter,” Pacific Gas & Electric CEO Peter Darbee, praised the plan. What Blackstone neglected to mention is that Darbee’s company, which can import more electricity produced out-of-state, could profit by trading unused credits.

“The utilities signed on to it because they have a way out, and in fact they may benefit because they produce everything out-of-state,” Myron Ebell of the Competitive Enterprise Institute told the Business & Media Institute.

As such, Ebell told BMI [CBS Cheers Governator's Plan to Terminate Global Warming, 09/01/06], buying energy produced out-of-state would curb emissions created in-state, but those “greenhouse gases” would still be produced outside California as the state shifted away from energy production while growing its energy consumption.

“It’s a nutty thing that they’ve done, and it’s going to have a lot of costs” passed on to the consumer, Ebell concluded of the Kyoto-inspired “greenhouse gas” legislation signed by Gov. Arnold Schwarzenegger (R-Calif.).

From the Wall Street Journal (subscription required) :

For German Firms, New Emission Caps Roil Landscape
To Prepare for Kyoto Protocol, EU Embarks on Road Test; Industry Responds, Slowly The Price of Electricity Jumps
By JEFFREY BALL
September 11, 2006; Page A1
NIEDERAUSSEM, Germany -- Last year, to help combat global warming, Europe started charging industry for the right to spew hot air. For the first time on such a scale, governments slapped limits on the carbon-dioxide emissions of power plants, steelworks and other factories. Companies exceeding the caps have to buy CO2 "allowances" that trade on a European market.
Because CO2 emissions now carry a cost, Germany's largest utility, RWE AG, is spending to improve the efficiency of its aging coal-fired power plants, including its biggest power station here in the country's industrial heartland.
Carbon dioxide also is padding the profits of RWE and other utilities, because they have been able to raise electricity rates to more than cover the new costs. Manufacturers that use a lot of juice are fuming. "The utilities get a huge amount of windfall profits, and the energy users get windfall costs," complains Markus Weber, a manager responsible for CO2-allowance trading at steelmaker ThyssenKrupp AG.
Germany's experience with Europe's new emissions constraints holds important lessons for countries that want to curb emissions of CO2, a product of fossil-fuel combustion that contributes to global warming. In Germany, the caps are starting to have their intended environmental effect: They are prodding industry to burn fossil fuels more efficiently.
At the same time, the new rules have upset the business status quo. Industries battled hard to bend the rules in their favor, creating new winners and losers. The winners include utilities that can charge higher rates and profit from trading allowances -- permits that give companies the right to emit carbon dioxide -- at opportune moments. Losers include energy-intensive manufacturers.
Although the U.S., the world's biggest emitter of CO2, has rejected the Kyoto Protocol, many U.S. business leaders say it is only a matter of time before the country imposes some sort of carbon constraint. Earlier this year, Congress discussed how such a nationwide cap might be structured. Last month, California passed a law that will impose the U.S.'s first cap on global-warming emissions. Now the state has to figure out how to put that mandate into practice.
(snip)

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