One of the principal allegations against the climate-change legislation the House could consider as soon as June 26 is the charge that it would compel a transfer of wealth from Midwestern states that burn large quantities of coal to coastal states that don't.
But it is more accurate to say that the bill reduces a regional disparity that allows Midwestern and other coal-dependent states to enjoy artificially low electricity prices at the expense of states elsewhere, particularly along the coasts. Rather than create a new regional inequality, the global-warming bill would lessen an existing one.
The perverse pattern of today's energy policy is that the states that contribute the most to global warming generally pay the lowest prices for electricity. That's because almost all the states with cheap electricity rely largely on coal. And coal generates much greater quantities of the carbon emissions linked to global warming than other fuels. That means one large reason the coal states enjoy such dirt-cheap electricity is that they don't bear any cost for their contributions to climate change.
This pattern screams through federal Energy Information Administration data, which track energy use in all 50 states plus the District of Columbia. Thirty states generate at least 40 percent of their electricity from coal; 23 of them rank among the 26 states with the lowest power prices. By contrast, of the 20 states (plus D.C.) that generate less than 40 percent of their power from coal, 18 rank among the most expensive in electricity costs. (The only exceptions are Idaho, Oregon, and Washington state, which benefit from inexpensive hydro power.)
Factoring in carbon-emission data collected by Purdue University's Vulcan Project completes the picture. Of the 26 states with the lowest electricity prices, 19 rank among the top half in per capita carbon emissions. Of the 25 jurisdictions (including D.C.) with the highest electricity prices, 19 rank in the bottom half of per capita carbon emissions. Coal is the key to that relationship. The 26 states that emit the most carbon per person generate 62 percent of their electricity from coal. The 25 places that generate the least carbon produce only 31 percent of their electricity from coal, half as much.
At the level of individual states, these patterns can produce enormous disparities. Indiana, a hub of opposition to climate-change legislation, relies on coal for 94 percent of its electricity, pays just 6.5 cents per kilowatt hour, and annually emits 10.3 metric tons of carbon per person. By contrast, Massachusetts relies on coal for just 25 percent of its power, pays 15 cents per kilowatt hour, and emits less than half as much carbon per person. Other coastal states such as California, Florida, and New York that use little coal and rely more on natural gas and other fuels show similar results.
Two recent authoritative analyses found that the climate bill, designed largely by Democratic Reps. Henry Waxman of California and Edward Markey of Massachusetts, would cause only modest increases in overall energy costs. The Environmental Protection Agency calculated that it would cost households $80 to $111 annually; the Congressional Budget Office put the yearly price at $175. Both figures are a fraction of what opponents claim.
Still, analysts agree that coal-dependent states would face relatively greater price increases if the U.S. caps carbon emissions. Is that unfair? As an unprecedented federal study this month documented, climate change poses risks across the United States ranging from heartland droughts to rising coastal waters. All regions would bear those costs. Yet today the coal states enjoy cheap power precisely because they are not charged for their disproportionate contribution to that threat.
The Waxman-Markey bill contains an array of provisions to cushion the price increase for coal-dependent states. As a result, notes Nathaniel Keohane, the Environmental Defense Fund's economic director, the bill might cause electricity prices to increase more in coal than coastal states, but the absolute price would remain lower in the coal states. "It is going to close the gap but not eliminate it," he says. That doesn't seem such a bad deal for the coal states -- unless they are claiming an open-ended entitlement to reduce their own power costs by increasing the environmental risks for their neighbors.
This article appears in the June 27, 2009, edition of National Journal.