The Edison Electric Institute Board of Directors, seeking to intensify the industry’s commitment to swift enactment of federal legislation capping greenhouse gas emissions, has adopted an updated climate change framework  calling for an 80 percent reduction of carbon emissions by 2050, from current levels.

In a significant breakthrough designed to help insulate customers from the compliance costs of new climate legislation, the EEI framework for the first time also recommends to Congress a unified industry position for allocating emissions allowances distributed to the utility sector under potential cap-and-trade legislation. The EEI Board recommended that the initial emission allowance allocation to the electric power sector should be 40 percent, equal to its portion of U.S. carbon emissions.

“We believe these principles will help assure that U.S. climate policy is successful in both reducing greenhouse gas emissions and addressing the very real cost concerns of our customers as much as possible,” said EEI Chairman David M. Ratcliffe, chairman, president and CEO of Atlanta-based Southern Company.

Echoing this sentiment, EEI President Tom Kuhn said, “This is a critically important step for our industry’s engagement in the climate change policy debate, and it reinforces the urgency we attach toward enacting a bill,” said EEI President Tom Kuhn. “Our CEOs worked diligently over a period of months to reach this point, and they deserve to be commended for their efforts to make a constructive industry contribution to the deliberations that soon will be under way in Congress.”

Kuhn noted that the new document builds upon the climate change principles the EEI Board adopted in February 2007, which committed EEI to supporting the concept of mandatory federal legislation capping carbon emissions. The 2007 framework emphasized the importance of developing and using a full range of climate-friendly technologies as well as including a series of measures to contain costs to customers.

“These new points of agreement take our industry’s engagement on the climate issue to the next level,” explained Kuhn. Commenting on the issue of emissions allowances, Kuhn reiterated the industry’s advocacy of a full distribution of allowances in the early years of a climate program, followed by a gradual transition to an auction-based approach.

“Any federal climate policy will come with a hefty price tag, and it is essential that we do all that we can to mitigate costs to customers,” Kuhn said. “The best way to do this is to pass the benefits of allowances directly to them, which is precisely what our formula would do.” The EEI allocation formula would provide allowances to electricity customers through local distribution companies, and it also would provide allowances for merchant coal generators.

To protect customers and the international competitiveness of U.S. industries, the EEI framework also calls for a “price collar,” which would include both a firm price floor and ceiling for the cost of carbon. The EEI Board recommends that the cost collar start narrowly and gradually expand over time as climate-friendly technologies become more readily available. Offsets also are an important means of addressing costs, it said.

Beyond the very deep, long-range emission reduction target for 2050, the EEI document says near-term targets should be guided by efforts on energy efficiency, renewable energy and, to some extent, new nuclear. Medium-term targets (10-20 year time frame) should be synchronized with deployment of other technologies, including advanced clean coal with carbon capture and storage and new nuclear.

“We recognize that much work remains to be done to achieve a good climate change bill,” Kuhn said. “This new EEI agreement continues our industry’s pledge to help get this across the finish line.”

Download the climate change framework .