With only a few weeks to go in the 2022 legislative session, a major bill was presented in the General Assembly. The bill expands the carbon dioxide (CO2) emissions-reduction goals from 26% by 2025 to 50% by 2030 and to 90% by 2050.
Additionally, the bill requires implementing programs to meet these new goals and implies that state agencies could do this through regulatory actions requiring no further input from the legislature. As explained below, this could lead to significant increases in consumer and business costs, with limited impact on emissions.
The 2025 target will likely be met, sort of.
Emission reductions have come primarily from reductions in emissions from in-state coal and natural gas-fired electric generators, driven by an emission tax on the generators. The tax is known as the Regional Greenhouse Gas Initiative (RGGI), which requires generators to buy emission allowances for each ton of carbon dioxide released.
Unfortunately, the RGGI policy just raised the cost for Delaware power plants and shifted electric generation to coal and natural gas plants in other states, so global emissions didn’t fall. Some consultants say the tax cost raises the average competitive bid price throughout the multi-state regional grid.
The cost gets passed on to every electric customer in the region and shows up as a hidden tax on electric bills. For instance, an electric utility in Virginia is passing the tax cost on to its customers as a line item on electric bills and will raise residential rates.
Meeting the higher emission-reduction targets will require new policies that may be equally ineffective but cost a lot more.
Three costly and intrusive candidate policies are already being considered in the 2021 Delaware Climate Action Plan.
Delaware’s Gov. John Carney made an executive decision to join California’s Advanced Clean Car II plan. The plan forces auto dealers to meet 35% of their sales with zero-emissions vehicles, which currently means electric vehicles (EVs), increasing each year to 100% in 2035, when gasoline- and diesel-powered vehicle sales will be effectively banned.
A Caesar Rodney Institute (CRI) study, “Electric Vehicles v. Internal Combustion Engines,” shows an EV may have a lifetime cost premium of almost $15,000 and may cost almost $300 for each ton of CO2 saved. With the best result, the cost could be almost $2,500/ton of emissions saved. The worst result is a real possibility there will be little or zero emissions savings. The price differential for the EV is driven by battery costs, which have been rising significantly because of the rising cost of key minerals used in construction. Dreams of lower battery costs appear to be misplaced.
A second policy being reviewed by the Department of Natural Resources and Environmental Control right now would force electric customers to subsidize a major offshore-wind project. A CRI study and University of Delaware research paper on offshore-wind costs we have given an “F” shows a Delaware subsidized project of similar size to the planned Skipjack project off our beaches could add $400 to $545 a year to residential electric bills and up to hundreds of thousands a year to some businesses.
It is reported the Skipjack project will create 25 permanent jobs. Higher electric rates divert money from spending on other needs and could end 5,000 permanent jobs elsewhere in the economy. Reduced emissions could cost almost $300/ton for each ton saved. For comparison, the RGGI tax is currently $13.50/ton, and President Joe Biden’s executive order on the value of reduced CO2 was estimated to be $51/ton.
Dominion Energy just increased its forecast for the total cost of an offshore-wind project by 25%, based on rising material and labor costs. So forecasts of lower future costs are unlikely to materialize.
A third policy would eventually ban the use of natural gas and propane in buildings. This means no more indoor cooking or heating with gas. Many people prefer gas for cooking, and electric heat pumps with gas backup are the most efficient way to heat a home in Delaware. However, the electric heat pump becomes less efficient when outside temperatures go below 40 degrees and don’t work at all below about 30 degrees, so gas is needed for backup.
These outcomes would hurt lower-income households the most, foiling state environmental justice priorities. The next Climate Action Plan update is not required until Dec. 31, 2025. We have to ask, what is the rush to approve this bill in the waning days of this legislative session with so many potentially serious policy implications?
David T. Stevenson is the director of the Center for Energy & Environmental Policy at the Caesar Rodney Institute.
Editor’s note: Senate Bill 305 was passed by the Senate June 9 and was assigned to the Natural Resources Committee, where Amendment HA 1 was introduced and placed with the bill.
