EPA Simulator Shows Potential Cost, Power Losses From Utility CO2 Cap

Despite widespread political opposition to the concept of a carbon dioxide (CO2) cap-and-trade system, EPA has quietly uploaded to its website a computer simulator allowing users to act as an “environmental compliance officer” at a power plant and take steps to meet an imaginary CO2 emissions cap, highlighting the potential high costs and lost electricity generation possible from some steps to curb utilities' CO2 emissions.

The simulator is already prompting questions from a spokesman for Sen. James Inhofe (R-OK), the ranking member on the environment committee and a long-time critic of CO2 caps, who questioned why EPA is “spending time and financial resources developing a global warming cap-and-trade game for the classroom to begin with?”

An EPA spokeswoman was unable to respond to a request for comment by press time.

EPA's Cap & Trade Simulation, was updated in March according to documents on EPA's website, though the simulator is dated July 21, 2011. The simulator is a computer program that requires the user to develop a compliance strategy for meeting either a sulfur dioxide (SO2) or CO2 emissions cap in the fictitional country of Ecoland.

Options available include switching fuels, investing in pollution controls and buying credits to comply with the country's emissions cap-and-trade programs.

When Inside EPA ran the simulator it showed that investments in carbon capture and other CO2 reduction options routinely cut into a power company's profit margins, while also reducing electricity generation -- arguments that would appear to echo critics of CO2 trading for utilities who warn of adverse impacts on the power sector.

An EPA document says the purpose of the simulator is “to allow participants to put the theory of cap and trade into practice,” and suggests that the program might be particularly appropriate for educators.

EPA has pursued trading programs to reduce SO2 emissions from power plants, and those efforts have general broad support. But the idea of regulating CO2 through a trading program -- in which companies can either invest in pollution controls and earn credits they can sell, or buy credits to comply -- has drawn strong opposition. Legislation to create a CO2 trading program is considered dead for the remainder of the 112th Congress.

Inhofe and other Republicans fought against the Senate pursuing its version of a climate cap-and-trade bill that the then-Democratic majority House passed in 2009. Critic of imposing CO2 caps on power plants warn that it will require massive up-front investment and could lead to lost power generation and reduced utility profits...

Example Scenario

When Inside EPA tried the simulator, a reporter operated the fictional Periwinkle Point Power company, subject to the Ecoland government's mandate to cut CO2 emissions 15 percent by 2014, with long-term cuts of 10 percent annually. Excess emissions above the cap would trigger a $68 penalty per ton and one future trading allowance...

...Despite the fluctuations in finances, one fact remained constant: even with renewable sites added to its portfolio, the steps Periwinkle Point Power took to comply with a CO2 cap meant it was failing to meet demand. The company was producing 9,724 GWh compared to a demand of 15,374 GWh.

“From the looks of it, they have been working on this game for quite some time. Yet a brief look at this simulation will show why EPA is not in the business of game development -- it's flat out ridiculous,” the Inhofe spokesman says. “Those who do take a few minutes to look at the game will walk away with a bit of a laugh.”