In late January, Pacific Gas & Electric submitted an application to establish a three-year demonstration program termed the Climate Protection Tariff (CPT). The new tariffs would allow PG&E’s customer’s the option of paying a premium to completely negate the climate change impacts associated with their electricity and natural gas consumption.
Customers that sign up for the CPT will be providing the necessary funding to complete new greenhouse gas (GHG) emission reduction projects. In this way the customer will become “climate neutral.” The funds collected through the CPT will be invested in cost-effective in-state GHG reduction projects, starting with forest-based carbon sequestration projects certified by the California Climate Action Registry.
The CPT premiums, established in the initial application, are 0.25 cents per kilowatt-hour (kWh) and 6.5 cents per therm of natural gas. A typical residential customer (combined gas and electric) would expect to to pay about ($1.37 per month additional for electricity and $2.94 per month extra for natural gas).
PG&E is proposing to permanently retire all certified GHG reductions procured by the CPT funds. No retired reduction credit will be used to meet an existing or future mandated emission standard or emission reduction requirement. Neither PG&E nor its enrolled customers will sell certified CPT-funded GHG offset credits.
PG&E serves almost 5 percent of the United States population. For every one percent of PG&E customers who choose to enroll in this program, the CPT is expected to reduce GHG emissions by at least 300,000 tons of CO2 per year. PG&E believes that 4.5 percent of their customers will enroll in the program during the 3-year period. The utility estimates that the cost of GHG emission reduction projects would average $9.71 per ton of CO2e over the proposed three-year demonstration program (planned for 2007-2009).
A few comments from Democratic Energy:
It is worth noting that the most cost-effective way to get to “climate neutral” is to use less energy to begin with rather than pay a premium on the energy that is used.
The fact that the offsets for the CPT program will be done in California rather than in some remote jungle in South America is a nice feature of this proposal.
The voluntary nature of this program makes it essentially a re-packaged “green pricing” program, albeit at a much lower cost premium and expanded to the natural gas sector. However, sometimes marketing can make the difference in how well a program works. PG&E has proposed $16 million for marketing and administrative costs for the CPT program over four years. Those marketing costs will be borne by all PG&E ratepayers.
It is also worth noting that customers participating in this program will not really be completely “climate neutral” unless they are also offsetting their greenhouse gases from the operation of their vehicles. Depending on how much driving is done and the efficiency of the vehicle, transportation could account for a third or more of a household’s greenhouse gas emissions.
- Application of Pacific Gas and Electric Company to Establish a Demonstration Climate Protection Program and Tariff Option – submitted by PG&E to the California PUC, January 24, 2006
- Climate Protection Demonstration Program Tariff Option – Prepared Testimony – submitted by PG&E to the California PUC, January 24, 2006
- California Climate Action Registry
- Climate Neutral Bonding: Building Global Warming Solutions at the State And Local Level – This February 2006 policy brief by John Bailey provides background and analysis to support a state or local policy that would require construction projects funded with tax-exempt bonds to result in no net increases in greenhouse gases within the community.