Articles by Sean Casten

‘Carbon-friendly’ utilities may not necessarily be in the public interest

Following the discussion under David's latest post about Edwards' position on carbon capture at coal plants, I thought it appropriate to point out a few things about the electric business that are critical to this debate -- but not widely appreciated.

An electric utility is a weird amalgam of lots of historic political philosophies -- most of which are in direct contradiction to modern ideas, but are difficult to repeal.

According to the modern pro-market ideal, businesses should have profit incentives in competitive markets, so that Adam Smith's invisible hand will create consumer value. But to an early 20th-century regulator (who wrote the rules under which most modern electric utilities were formed), certain public goods were so important as to mandate government intervention. (One of the best examples is Einstein, who thought that Karl Marx had some really good ideas, in large part because he saw the problems of the world so clearly that he couldn't conceive of an unregulated market rising to address them. See here.)

This is indicative of an era in which socialism was a live concept rather than historical record, when regulators and academics could debate the pros and cons of central planning without any evidence of the excesses such systems could create. It was also an era when the excesses of the mercantilist Gilded Age were becoming evident, and smart, well-intentioned folks were looking for a better way.

Rep. Markey asks the Federal Trade Commission to investigate voluntary carbon offsets

Rep. Markey has asked the FTC to investigate whether or not the sale of voluntary carbon offsets violates the Guides for the Use of Evaluating Environmental Marketing Claims, as laid out by the Federal Trade Commission. The FTC has responded and agreed to commence an investigation, noting that:

The FTC staff has been monitoring this nascent market as part of the Commission's ongoing consumer protection programs in the energy and environmental areas. The carbon offset market poses potential consumer protection challenges. Carbon offset claims may present a heightened potential for deception because it is very difficult, if not impossible, to verify the accuracy of the seller's claims. At the same time, the sale of carbon offset products afford interested consumers the opportunity to participate in the market for products and services that may reduce greenhouse gas emissions. Because of the benefits that this developing market may provide, we want to better understand the market to avoid acting in a way that could restrain innovation or harm consumers.

For full details, see here.

There is clearly a potential for fraud and cause for investigation, but my personal guess is that this is also a good example of the cost of not participating in Kyoto. The accounting for GHG offsets is really complicated, and the formal, audit-worthy work on that topic is now being done in London and Brussels. Voluntary markets are an attempt to bridge that gap, but will never carry the rigor of a Big-4 audited statement.

In any event, this will be worth following to see how the story develops.

U.S. energy consumption decreased from 2005 to 2006

According to new data from the DOE, total U.S. energy consumption actually declined from 2005 to 2006, in large part due to an increasing demand for renewables. Rather fascinating stuff.

Details here.

Not your father’s Old Coal

In thinking and responding to posts about the latest EPRI propaganda, a couple questions came to mind. Questions I'm a bit embarrassed I hadn't thought of before, so I pose them to you now:

1. If coal isn't cheap, is there any reason to build it?
2. If we're willing to pay 12 cents/kWh for baseload power, would you preferentially pay it to coal?

Those may seem odd questions to ask, but follow me through the math.