DTE Energy supports an allocation approach to cap and trade

Cap-and-trade is a favorite strategy for reducing greenhouse gas emissions. A maximum emission level for an industry – a “cap” -- would be set and reduced over time. Below the cap is a quantity of emissions that are allowed. These are allowances.

Companies that have reductions greater than their cap have excess emission allowances. These allowances can be sold to another company that hasn’t made as much progress in reducing its emissions and is still exceeding its cap. That’s the trade.

Under the wrong kind of cap-and-trade mechanism, industrial states like Michigan that currently rely heavily on coal power will be unfairly penalized by effectively having to pay utilities in places like the East and West coasts that rely less on coal.  This will produce a huge jump in costs to our customers and a transfer of wealth to other states outside the Midwest.

DTE Energy opposes an auction approach to cap and trade

Some policymakers would require greenhouse gas emitters to purchase their allowances from a government pool in an auction.

This would mean that DTE Energy would spend hundreds of millions of dollars just in purchasing the allowances needed so that we can produce electricity for our customers. Purchasing the allowances in this way would produce no positive impact on the environment. In fact, we would be spending twice -- once to purchase the allowances we need and again on actions to reduce emissions.

These illustrations explain the drastic financial implications of an auction and the reduced impact of an allocation structure on Michigan residents. For a more in-depth explanation, please review our Cap and Trade Primer *.

Auctioning allowances would sharply increase costs to customers.

Allocations protect customers from huge electricity price spikes, while maintaining the environmental benefit of putting a price on carbon.

Resources

For more background about climate change, cap and trade, and current pending legislation, please refer to these external resources. 

Industry Overviews

Smart climate policy
Energy principals to protect the environment and ratepayers*
Climate change legislation we can all support*
Key Provisions for Climate Change Legislation (Edison Electric Institute)
Climate Change 101, Institute for 21st Century Energy (U.S. Chamber of Commerce)
Energy Resources Policy (National Association of Manufacturers)
Climate Change 101 (Pew Center on Climate Change)

Cap and Trade information

Cap and Trade 101 (Environmental Protection Agency)
Climate Change 101: Cap and Trade (pdf) (Pew Center on Climate Change)
“Who pays for cap and trade?” (Wall Street Journal)
"Cap-and-trade tax plan would damage Michigan" (Detroit News)

Pending Federal Legislation

American Clean Energy Security Act of 2009 summary (U.S. House of Representatives)
Testimony before the U.S. House Energy Commerce Committee (Jeff Sturba, Edison Electric Institute)

Energy Commerce Committee Climate Change hearings:

Day One - April 21, 2009
Day Two - April 22, 2009
Day Three- April 23, 2009
Day Four - April 24, 2009

DTE Energy's net CO2 emissions have declined while generation has increased

• Maximum Detroit Edison CO2 emission, 47 million metric tons, occurred in 1998, and our CO2 emissions from fossil-fueled power plants have been closer to 1990 emission levels since then.
• Since 1996, we have achieved a steady decline in CO2 emissions per megawatt-hour (MWh) for both fossil fuel generation and our total system generation.

We continue to demonstrate our commitment through our actions

DTE Energy is participating in a number of voluntary initiatives that have been shown to or have the potential to reduce, offset or sequester CO2 emissions from power plant operations.

Exploring an additional nuclear unit

Nuclear power is the nation's largest source of carbon-free electricity. It is among the safest, cleanest and most reliable forms of energy available in the United States. In fact, nuclear power plants are the only large-scale power sources that do not emit any greenhouse gases. On an annual basis, America’s 104 nuclear power stations avoided emissions of nearly as much carbon dioxide as is released from all U.S. passenger cars combined.

Detroit Edison’s Fermi 2 nuclear power plant has been providing reliable, cost-effective power to 2.2 million electric customers in Southeast Michigan for more than 20 years. The plant also has been designated as one of the nation's best-performing nuclear facilities. The Fermi 2 nuclear power plant generated nearly 9.6 million megawatts of electricity in 2008, which avoided nearly nine million tons of CO2 emissions that would have been produced by a fossil-fueled power plant.

Recognizing the increasing likelihood of federal requirements to reduce carbon emissions from nation’s power plants, the company has begun the process for a potential new unit at its Fermi site. Our analysis so far shows that nuclear power will, over the long term, be the most cost-effective base load option for our customers while at the same time helping to achieve the environmental goals of our state and nation.

In September 2008, Detroit Edison filed a Combined License Application (COLA) with the Nuclear Regulatory Commission (NRC). While the company has not committed to building a new plant, the license application preserves the option to do so in the future. By submitting the COL application in 2008, we maintain eligibility for hundreds of millions of dollars in potential federal production tax credits. These savings would be passed on to customers and effectively reduce the potential cost impact of the new plant.

Investment in Alternative Fuels

• DTE Energy is preparing to invest nearly $1 billion in renewable energy, such as that produced by the wind and the sun.
• Transportation is a large source of CO2 emissions. We've formed partnerships with the major U.S. automotive companies to further the development of electric vehicles, and converted our own medium and light-duty fleet to a biodiesel fuel blend, reducing CO2 emissions by nearly 16 percent.
• Our voluntary GreenCurrents^SM program encourages the development of renewable energy in Michigan through direct customer investment.

Increasing Energy Efficiency

• Detroit Edison works with many of its major industrial customers to identify and implement energy saving ideas at their locations. Reducing waste reduces the need for coal-fired power and the attendant emissions.
• Soon, Detroit Edison will launch a number of energy optimization programs to educate customers and assist with various types of home improvement projects to improve energy efficiency and reduce energy bills.
• Detroit Edison regularly undertakes internal energy efficiency projects like upgrading turbine-generators on coal-fired units, which means more electricity is generated by the same amount of steam production (coal consumption) and less CO2 is emitted per kilowatt-hour of electricity produced.

Eliminating or Storing Carbon Dioxide

• Detroit Edison is a leading partner in PowerTree Carbon Co, LLC, six bottomland hardwood forest restoration projects in the lower Mississippi River valley. We've also planted nearly 23 million trees in Michigan since 1995.
  
• As a member of the Midwest Regional Carbon Sequestration Partnership, DTE Energy is participating in a demonstration project near Gaylord that is testing the feasibility of using the rock formation of the Michigan Basin to inject CO2 deep underground for permanent storage.
• Methane is a very potent greenhouse gas. DTE Biomass Energy installs and operates more than 30 landfill methane recovery facilities nationwide.

Public Policy

DTE Energy was one of the first utilities to sign onto the US Department of Energy's Climate Challenge Program (pdf), and is a member of the Chicago Climate Exchange.

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