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New York Wind Farms a Bad Decision; Full
Expensing of Capital Will Reduce Carbon Intensity

Cooler Heads Coalition

September 18, 2002

In August, New York Governor George Pataki announced a $17 million aid package to four private companies to develop wind farms in various parts of the state. But, according to Glenn Schleede, president of Energy Market & Policy Analysis, New Yorkers should be wary of the environmental claims of wind power.

The New York Energy Plan estimates that the eight wind farms, with a combined 250 wind turbines, would produce approximately 900,000 kilo-watt hours (kWh) of electricity per year. But this is a drop in the bucket compared to the state’s total electricity demand. For example, this amount equals 58/100 of 1 percent of the total electricity imported into New York in 2000. It is only 15 percent of the energy that will be produced from a single gas-fired combined cycle plant that is scheduled to come online in Athens, NY in 2003.

The wind power industry often claims that "electricity generated by the wind turbines will displace on a kWh for kWh basis electricity that would be generated by fossil-fuel generating units and any associated emissions." But that simply is not true, says Schleede. "Such claims are generally exaggerated. For example, they do not take into account that any fossil-fueled generating unit that is kept available to back up the intermittent electricity from the wind farm will be giving off emissions while it is running at less than peak efficiency or in ‘spinning reserve’ mode. Nor do they take into account the fact that other alternatives for reducing emissions are likely to be far more cost-effective."

New Yorkers should also be aware that there is growing opposition to wind farms wherever they are proposed, in Europe, Australia and in nearly every state in the U.S., says Schleede. "Opposition is due to a variety of reasons including scenic and property value impairment, noise, bird kills, ‘flicker’ effects of spinning blades after sunrise and before sunset, potential safety hazards from blade and ice throws, interference with telecommunications, and higher costs of electricity."

Full Expensing of Capital Will Reduce Carbon Intensity

Several climate-related initiatives pose a serious threat to America’s economic future, according to Marlo Lewis, a senior fellow at the Competitive Enterprise Institute. One such scheme is President Bush’s proposal to expand the Department of Energy’s Voluntary Reporting of Greenhouse Gases program to include the awarding of transferable carbon credits for voluntary greenhouse gas reductions.

Currently, the DOE program is a simple voluntary reporting program with no regulatory significance. But, says Lewis, writing for Tech Central Station (September 10, 2002), the addition of the awarding of credits to companies that report greenhouse gas reductions will corrupt the "politics of U.S. energy policy" and "grow the greenhouse lobby."

Under Bush’s proposal, companies that begin to comply with Kyoto before it is ratified would be awarded credits that they could sell or use to offset future regulatory obligations. In the absence of a regulatory cap on carbon emissions, the credits are worthless. Only if Kyoto or a similar regulatory program were enacted would the credits yield dividends. "Credit-holders thus acquire cash incentives to support Kyoto, or lobby for its domestic equivalent," says Lewis.

A credit scheme would be a zero-sum game where one company’s gain is another’s loss. Every credit awarded in the voluntary early action period is one that won’t be available during the mandatory period. Companies that don’t or can’t "volunteer" to reduce greenhouse gas emissions now will be penalized later under the mandatory cap, which means that the program isn’t really voluntary.

Lewis argues that the Bush administration should stop legitimizing climate alarmism by playing games within the Kyoto framework. Instead, it should embrace non-regulatory, pro-growth policies that would also have the side benefit of reducing carbon intensity. Bush should lower tax barriers to investment by allowing companies to "deduct from current-year revenues, the full cost of capital investment," says Lewis. Replacing the current system of capital depreciation with full expensing for all types of capital investment would eliminate barriers to economically efficient capital turnover.

Copyright © 2002 Cooler Heads Coalition.