Xcel's CEO among those calling for a tax on carbon

Dick Kelly, CEO of Xcel Energy Inc., is irked that Congress hasn't raised his taxes.

"We need a price on carbon," said Kelly, who runs a multistate utility in the vanguard of next-generation efficiency and cleaner-energy programs.

Kelly, Duke Power CEO Jim Rogers and other utility executives have been expecting Congress to pass cap-and-trade legislation, which would effectively place a tax on carbon emissions. Both Xcel and Duke have moved expeditiously in recent years to modernize old coal-fired plants, switch to wind and natural gas, and implement conservation programs in a bid to cut their carbon dioxide emissions by up to 25 percent by 2025 and meet state mandates to reduce pollutants that climate scientists say lead to global warming.

"The industry could have worked with the 'Kerry-Lieberman' bill in the Senate, but the Republicans backed away and started calling it 'cap-and-tax,'" Kelly said.

So instead of providing incentives for the utility industry to invest in next-generation, clean-coal programs and promising carbon-diversion efforts, the U.S. Senate is now considering more rules and mandates instead. Kelly and Rogers think that's a mistake.

'Let's move forward'

"There is growing consensus in the electric utility industry to act now, so let's move forward," Rogers wrote earlier this summer. "Duke Energy and other electric utilities are already scheduled to retire and replace virtually all coal and other large power plants with cleaner and more efficient technologies by 2050.

"A clear and predictable federal energy and climate policy can accelerate these projects and put private capital to work more rapidly. It can also create millions of jobs. This would not only reduce greenhouse gas emissions but would also reduce sulfur dioxide, nitrogen oxide and mercury emissions. That would improve air quality across the board."

Rogers and Kelly are hardly big-government advocates or fringe environmentalists. On the contrary, they are hard-headed pragmatists who run two of the nation's largest utilities.

The industry largely is dependent on coal, America's cheapest and most abundant resource. Most plants capture only one-third of the energy from coal to produce electricity; the rest mostly heads out the smokestack as exhaust.

About half the states, including Minnesota, have joined in regional compacts to cut carbon dioxide emissions by up to 25 percent over the next 15 to 20 years.

Kelly and Rogers, and other industry executives, note that 20 years ago, President George H.W. Bush signed a bill that forced coal plants to buy permits if they were going to emit more and more of the sulfur dioxide, which causes acid rain. The higher cost resulted in a trading market for the permits and also in several innovative advances in pollution control that cut emissions to an acceptable level faster than predicted. A cap-and-trade market for carbon emissions would work in a similar way.

"Without a carbon tax or cap-and-trade system, the future just gets delayed," said Mike Gregerson, a onetime coal plant engineer who now works on industry issues for the Great Plains Institute. "There are uses for that carbon dioxide. And we can make coal plants more efficient. But there has to be greater incentive to do something. Otherwise the utilities will just do what the states say. And only half the states are doing anything."

China is taking action

China, now the biggest polluter in the world, is moving more aggressively. This month the central government shut down 500 of its dirtiest manufacturing and power plants and threatened another 2,000. Pollution authorities are increasing pressure on polluters amid acute health threats in China and damage to its water and air.

Meanwhile, China is doing deals with U.S. clean-energy companies such as Minnesota-based Bixby Energy Systems, which has the potential to license hundreds of millions worth of its coal-to-gas synthesizers to Chinese industry and government. Bixby uses modular, air-sealed units to heat coal to the point that it converts to synthetic gas. Gas burns more efficiently and pollutes far less. What's left is semi-activated carbon, which instead of going up the stack as pollution, has industrial and commercial value.

Kelly believes a $20 per ton carbon tax, as considered in the now-dormant legislation, would translate to less than a 5 percent increase for ratepayers. Stepped-up conservation plans and more-efficient plants and the emerging market for carbon dioxide will drive down the ultimate cost.

Right now, America's dirtiest utilities are being rewarded for doing nothing and the public bears the cost of the pollution and related health problems.

As a stopgap measure Kelly and others are trying to persuade their utility trade group, the Edison Electric Institute, to ask Congress for tax credits for simply converting old, inefficient coal plants to cleaner-burning gas plants.

"But we need a long-term plan," Kelly said. "Bad things happen without a plan. We need a price on carbon. The industry, through innovation and alternatives, will take care of the carbon problem."

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com