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Market Mechanisms Should be Implemented to the Extent
Market-based environmental strategies will produce more cost-effective environmental improvements than government micromanagement. For example, the sulfur dioxide allowance program in the acid rain title of the Clean Air Act Amendments of 1990 caps nationwide sulfur dioxide emissions, but allows sources to buy, sell, trade, and bank "rights" to emit sulfur dioxide on the open market. The cap and allowance program thereby ericourage sources to take economic and other considerations into account in their compliance planning.
In NEESPLAN 3, we are exploring market opportunities to offset or counteract greenhouse gas emissions, away from our energy sources. We believe the market approach will yield far more cost-effective control of greenhouse gases.
Narrow-Based Programs to Address Environmental Externalities
Greenhouse Gas Emissions
Some state public utility commissions' Integrated Resource Management (IRM) proceedings require that "environmental externalities" be weighed in resource selection to limit greenhouse gas and other emissions from new utility plants. The shortcomings of the externalities process are welldocumented. For example:
The evaluation process is inconsistent among the state public utility commissions that include externalities in their IRM proceedings.
The immediate role of the United States should be to support scientific efforts, both national and international, to understand the global climate phenomena, and to seek agreement on implementing a "no regrets" strategy." Now is the time to learn, as we are doing in NEESPLAN 3, how greenhouse gases can be controlled or offset in an economical way. A well-defined action plan, that commits all nations, should be part of any international agreement.
If there is an international agreement which is verifiable, the United States should consider a modest but broad-based tax on carbon dioxide and other greenhouse gas emissions from all sources (e.g., transportation, industrial/commercial, and utilities). This would send a useful long-range signal to energy markets, and should be substituted for counterproductive externalities regulation. A broad-based tax of no more than $2.00 per ton of carbon dioxide-equivalent, rising at a real rate,
would begin to implement the "no regrets" strategy. This level
Enhance the Success of Utility Energy Efficiency Efforts By
Congress should enact H.R. 1007 as proposed by Rep. Kennelly and several members of this Subcommittee, or similar legislation, which would eliminate treatment of conservation subsidies as taxable income to the customers who receive them. Taxing customers discourages participation by those
who would benefit the most.
There Should be Financial Incentives for Regulated Industries for Environmental Improvements
Regulated industries such as utilities should have a financial incentive for making environmental improvements, such as reducing greenhouse gas emissions, in a cost-effective manner.
The environmental incentive could be comparable in concept to the energy conservation incentive we currently have in place. This conservation incentive has helped us become the leading conservation utility in the United States.20
The environmental incentive clearly must be tied to cost, to avoid environmental improvements that are not costeffective. The incentive should allow and encourage a variety of options, such as offsets, emission trading, and other innovations.
Thank you for the opportunity to describe our activities, observations and recommendations regarding greenhouse gas emissions.
The name "New England Electric System" means the trustee or trustees for the time being (as trustee or trustees, but not personally) under an agreement and declaration of trust dated January 2, 1926, as amended, which is hereby referred to, and a copy which as amended has been filed with the Secretary of the Commonwealth of Massachusetts. The principal subsidiaries of New England Electric System (NEES) are The Narragansett Electric Company, Massachusetts Electric Company, Granite State Electric Company and New England Power Company.
In 1990, 67% of NEES energy came from fossil fuels (42% from coal, 22%
See attached NEES brochure, What Quality Means at NEES. The NEES
The NEES companies pledge to provide our customers
See attached NEESPLAN 3 - Environment. Economy, and Energy in the 1990's. NEESPLAN, introduced in 1979, set forth objectives to (1) introduce conservation and load management to reduce the need for new power plants and, (2) improve energy supply by reducing reliance on imported oil. NEESPLAN 2, introduced in 1985, emphasized least-cost planning of demand-side and supply-side resources to keep pace with New England's growing energy demands.
In 1991, revenues per kWh for selected New England utilities were:
Cents per kWh
11.25 11.06 10.64 9.54 9.46 9.29 9.06 8.99 8.43 8.39