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Addressing the risk of potential climate change successfully demands a sustained and cost-effective coordinated national and global policy. Such a policy must recognize that every government is responsible to its citizens to provide for both economic and environmental health, and must recognize that a reliable and affordable energy supply is critical to meeting those obligations. As described below, Edison International has been a national leader and continues to pioneer in the application of clean, cost-effective energy production and efficiency technologies.
At our company, we are working to contribute to the hard thinking and early action steps that can best address this issue responsibly. We believe that emphasis should be placed on developing, demonstrating and applying new technologies, on energy efficiency, and on reducing existing emissions where cost-effective technology is available. These measures can be applied globally and effectively impact the level of emissions. An approach that permits gradual reductions initially with steeper reductions later is most cost-effective, because a smooth transition minimizes the premature retirement of capital and allows time for the development and deployment of more advanced technologies that hold the promise of providing large, relatively inexpensive reductions. We are concerned that any caps, which are not grounded in technological and economic feasibility, will produce adverse economic effects without corresponding, globally significant benefits.
In California we face special challenges in meeting this responsibility. California continues to grow rapidly. We have the obligation to assure a reliable and affordable supply of energy to meet that growth. At the same time the state already is among the most carbon efficient in the country, emitting 40% less CO2 per unit of electricity produced than the nation as a whole. We are currently working with other business leaders and state officials to help develop an approach to a climate policy that is comprehensive, cost effective, equitable, and sustainable.
Policy Principles
If California chooses to adopt a “cap” approach, Edison believes the critical elements in such a policy must include:
- A comprehensive approach: All sources of all greenhouse gases, as well as ways to offset emissions worldwide, must be included.
- Cost-effective approaches: Policies to reduce emissions of greenhouse gases should achieve the greatest reduction for the least cost. If a trading system is adopted, it should be designed to assure that reductions take place in an economically efficient manner. Offsets should be recognized wherever they can be found in the world, given that the potential effect of emissions on global warming is the same wherever in the world that the emissions occur. Allowances should be distributed in a manner that incents cost-effective emissions reductions and avoids imposing a tax on the owners or users of existing assets for which cost-effective technological solutions are unavailable.
- Effective, beneficial approaches: Policies should be designed to achieve real, measurable benefits in reducing the potential threat or impact of global warming. Since California represents less than 2% of current global greenhouse gas emissions, a significant focus should be on the development and demonstration of new, clean technologies that can be exported and employed globally.
- Equitable burden sharing: No sector of the economy should bear an unfair burden of the cost of meeting climate policy goals. Reducing the rate of greenhouse gas emissions will impose substantial economic costs, within California and the United States and globally – even with a well-designed and reasonably long-term approach. Climate policy should recognize the potential impact of loss of jobs and income on disadvantaged communities and developing countries. All sources of emissions, including stationary and mobile sources, should participate fairly in reducing emissions. Within the electricity sector, care should be taken to ensure that both regulated and competitive power generators are treated even-handedly with respect to both existing generation facilities and in incenting necessary new power generation investments. Generators, such as Edison International, which have already acted to reduce their carbon emissions should receive credit for that.
- Long term, sustainable policy: The potential risk of global warming is a long-term issue. Measures to address this issue should focus primarily on new investments and on the development of cost-effective technologies that can be applied throughout the world. A long term set of obligations with a reasonable timetable for achievement of interim goals will minimize economic disruption by avoiding or minimizing costly retirement of existing infrastructure.
Implementation Strategies
Consistent with sound climate policy principles, effective implementation steps should include:
- Accurate inventories: Successful policy requires a clear understanding of the contribution of greenhouse gas sources throughout the economy. Accurate measurement and reporting of emission sources and reduction potential are necessary and should begin immediately.
- Cost-effective, short term reductions: Global greenhouse gas reductions in the short term should be achieved by employing cost-effective, available solutions, such as end use energy efficiency and renewable energy. These measures should be implemented first where the most gain can be made for the least cost.
- Technology is the driver: Technology innovation is the key to addressing the risk of potential global warming. Governments should provide incentives to stimulate private sector investment, research, development, demonstration and deployment of low carbon energy technology (including renewables, clean coal and nuclear energy).
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