Green Wombat

photo originally uploaded by the chaninator

The mayor of Austin, Texas, today announced the nation’s most aggressive plan to cut greenhouse gas emissions, pledging that the Texas state capital and city of 720,000 will go carbon neutral by 2020.  The Austin Climate Protection Plan unveiled by Mayor Will Winn should create plenty of opportunities for green tech entrepreneurs, hybrid automakers like Toyota (TM) and Honda (HMC), and green building companies. The plan requires that all city facilities be powered with renewable energy by 2012 and that Austin’s municipal fleet go carbon neutral by 2020 by using electric and alternative fuel vehicles. All city departments will develop and implement climate protection plans to reduce their emissions of planet-warming gases.

Thirty percent of the electricity sold by Austin Energy, the city’s municipal-owned utility, must come from renewable sources by 2020. Austin Energy will be required to obtain 100 megawatts of solar power and all new power plants must be carbon neutral – effectively banning coal power in a state where Dallas-based utility TXU (TXU) has enraged environmentalists with its plan to build 11 coal-fired plants. Austin Energy will be required to save 700 megawatts by 2020 through energy efficiency and conservation programs.

Home builders will have to do their part. By 2015, all new homes must be "zero net-energy capable" and energy efficiency in other new construction must increase 75 percent. Austin’s climate plan also calls for community programs to allow individual citizens to offset their greenhouse gas emissions. "This isn’t just the strongest plan in Texas, it’s the strongest plan in the country," said Jim Marston, the regional director of green group Environmental Defense, in a statement. "This is the kind of leadership that makes us proud to live in Austin and hopeful that Texans will accept responsibility for the role we should play in solving this global crisis."

A report prepared for institutional investors puts some cold hard figures on the cost of global warming to electric utility companies worldwide. No surprise that coal-dependent U.S. utilities will see a significant hit on their bottom line if they do not begin to cut their spew and a nationwide cap on greenhouse gas emissions is imposed, as proposed in legislation now before Congress. Utilities like PG&E (PCG) that resell power from cleaner-burning natural gas and renewable energy sources stand to profit while coal-using Southern Company (SO) and American Electric Power (AEP) could lose billions. The report was prepared for the Carbon Disclosure Project, an alliance of 225 institutional investors – managing $31 trillion in assets – that annually asks corporations to reveal their greenhouse gas emissions. This year the report focused on electric utilities, one of the largest sources of planet-warming gases. "No longer can fiduciaries claim to be unaware of what is at stake," the report’s authors warned. "Taking climate risks into account is now becoming part of smart financial management. Failure to do so may well be tantamount to an abdication of fiduciary responsibility and indicative of poor management."

About 42 percent of the world’s 265 biggest public utilities disclosed emissions data to the project. That information was used to calculate the cost of the utilities’ carbon emissions based on the $22 average trading price for a ton of carbon dioxide on the European carbon market, known as the European Trading Scheme. "Remarkably, by this measure few electric utility companies were adding value to the economy," the authors concluded. "The damages they imposed exceeded the surpluses they generated, often by a large margin." The report found that American Electric Power and Southern imposed net annual costs of $3.6 billion and $2.7 billion, respectively. American Electric plants, for instance, emit 146 million tons of greenhouse gases. "These companies must be regarded as quite exposed to future restrictions on greenhouse gas emissions," the report stated. PG&E, on the other hand, emitted 536,000 tons of greenhouse gases and reaped a net benefit of $404 million by the report’s methodology. Similarly, nuclear power producer Exelon (EXC) produced a net benefit of $225 million.

The report also calculated the cost to the utilities if a California-style global warming law – requiring a 25 percent reduction in greenhouse gas emissions – was adopted nationwide. At current emissions levels, such a cap would cost American Electric nearly 7 percent of its annual revenue. Texas utility TXU (TXU), under fire from environmentalists for its coal-power plant building binge, would lose 3 percent of its revenue. Such a cap would cost PG&E just .03 percent of its sales.

In a boost for renewable energy companies, the California Public Utilities Commission today effectively banned long-term purchases of "dirty" electricity produced by coal-fired power plants as part of the state’s fight against global warming. Most California power plants operate on lower-polluting natural gas but utilities also import power from out-of-state coal-fired plants. To help fulfill California’s targets to reduce greenhouse gas emissions, utilities and other power providers will not be permitted to buy electricity from plants whose emissions are greater than those of a gas-fired plant – 1,100 pounds of carbon dioxide per megawatt hour. Most coal-fired plants exceed that limit, which is an interim standard until California regulators impose a greenhouse gas emissions cap. The standard applies to investment in new power plants and contracts of five years or more. "Today’s decision is an important step in our efforts to reduce greenhouse gas emissions,” utilities commissioner John Bohn said in a statement. “Our next task is to harness the power and creativity of the marketplace to address global warming.”
The move means that utilities like PG&E (PCG), Southern California Edison (EIX) and San Diego Gas & Electric (SRE) will need to replace their coal contracts. Given the cost of constructing new natural gas plants in California, the utilities are likely to step up purchases of renewable energy from wind farms and solar power plants. California’s investor-owned utilities are already scrambling to meet a state-mandated target that 20 percent of the electricity they sell come from renewable energy sources. The new greenhouse gas standard is also likely to discourage construction of coal-fired power plants in bordering states that were counting on California as a market or source of financing.