Failure of Federal Climate-Change Bill May Leave NJ at Competitive Disadvantage

States that are not committed to clean energy and cap-and-trade programs may be in position to undersell NJ on the price of power

The collapse of efforts to pass climate change legislation in the U.S. Congress left many clean energy advocates disillusioned, but it was doubly disappointing here in New Jersey where residents and businesses already are footing the bill to reduce greenhouse gas emissions.

With New Jersey embracing cleaner technologies like solar and offshore wind power, some analysts suggested the higher costs reflected by those alternative energy sources are turning up in electric bills. The prospect of even higher utility costs because of national climate control legislation may have doomed the bill in a year with a weak economy and mid-term elections in Congress.

“Given the current economic climate, there is some apprehension about aggressive green energy goals which could drive up electricity costs, said Paul Patterson, an energy analyst with Glenrock Associates in New York. “People are counting their nickels and dimes and green energy is not excluded from that consideration.’’

Cap and Trade

Last week, Democrats in the Senate said they would give up on a goal of passing global climate legislation involving a cap-and-trade system to limit greenhouse gases this summer. While there is some talk of trying to get a bill passed before November or in the lame-duck session, the failure to act in the wake of the nation’s worst oil spill in the Gulf of Mexico angered some.

“It’s a significant setback,” said Dave Pringle, campaign director for the New Jersey Environmental Federation. “You would think with the Gulf situation, it would have been an impetus, but it seems to have been an impediment.”

New Jersey joined with 10 other northeastern states to regulate greenhouse emissions, setting up a program to limit carbon dioxide emissions from power plants, which took effect last year. The voluntary system uses a cap-and-trade system where utilities trade allowances to emit greenhouse gases, the cost of which eventually ends up in consumers’ bills.

Carbon Tax

Environmentalists and others have praised the regional program, but noted a nationwide effort is needed because other neighboring states not participating in the program end up running older, more polluting power plants more frequently. Those plants can offer their energy at lower prices because they do not pay the carbon tax, a problem which has been dubbed “leakage.’’

Assemblyman Upendra Chivukula (D-Middlesex), one of the leading energy experts in the New Jersey legislature, noted Pennsylvania and other states in the Midwest can offer electricity from coal plants at a cheaper price than the generating stations in New Jersey and elsewhere because they are not part of the regional initiative.

“We are getting a lot of dirty energy from those states,’’ Chivukula said. “Without a nationwide program, we have no answer for leakage.’’

In the future, New Jersey ratepayers may question why the Northeast states are going it alone, clean energy advocates warned. “In the next year or two, if we don’t break this logjam in Congress, it could cause a backlash in New Jersey for sticking our necks out,” Pringle said.

Climate Change Comeback

Despite the setback, some climate change advocates say Congress will need to act eventually on the issue since the number of businesses clamoring for action has grown exponentially in recent years. Businesses need to know what form of regulation climate change legislation will take so they can begin planning business models for the future, argued Kristen Ludecke, vice president for federal affairs for Public Service Enterprise Group.

The Newark energy conglomerate and its CEO Ralph Izzo have been among the most forceful advocates for climate change legislation in Washington, D.C. Beyond reducing greenhouse gas emissions, the company views a cap-and-trade system as a way to bring the price of conventional fossil fuels more in line with renewable energy sources. The company has invested more than $1 billion in offshore wind, solar and other technologies, according to Michael Jennings, a spokesman.

“If we get a national price on carbon, then we certainly can pursue other non-carbon ventures,’’ Ludecke said. With the federal Environmental Protection Agency set to regulate carbon dioxide, states, and even, some counties looking to regulate greenhouse gas emissions, the nation could face a “piecemeal” approach to the issue, which will be far more expensive than a nationwide program, she said.

Pringle agreed. “We need a federal solution to have the real costs of fossil fuels reflected in energy costs,” he said, referring to the pollution and other impacts of burning those fuels. “If they were on the same level, playing field, they would not be competitive with renewable.”

In the absence of federal legislation, Chivukula said New Jersey needs to be more aggressive in promoting energy efficiency. One of the ways it could help residents and businesses cut their energy consumption is to pass a bill (A-2529), which would set up an energy efficiency certificate program, modeled after a similar certificate system which earns homeowners and businesses lucrative credits for electricity generated by solar systems, he said. In this case, the certificate would earn credits for the energy savings.