Wednesday, September 12, 2007

Now THAT's Expensive Electricity!

Today's Wall Street Journal has a chart showing how much a $15/ton carbon emissions tax would add to various energy costs. According to the Journal, such a tax would boost electricity costs by $1.63 per kilowatt hour!

Since we pay roughly 8 cents per kilowatt hour here in Virginny, that would be quite a boost, raising our electric bill for the month of August to $2994 (from $172). The only good news is that at that rate our solar panels would pay for themselves in less than two years.

The Journal made an error. One of our readers was kind enough to point us to the Journal's original source, a policy paper from the American Enterprise Institute, which calculates the rise in electricity costs from a $15/ton carbon tax at 1.63 cents per kilowatt hour, not $1.63. (We don't often agree with AEI, but it makes a compelling case for a carbon tax versus cap-and-trade.)

3 comments:

Charles said...

I wondered who made the mistake, so I checked the sources. It was the WSJ mistake.

The paper cited was from the AEI, Climate Change: Caps vs. Taxes

About 3/4ths of the way down, you find this paragraph:

A $15 CO2 tax would raise the price of gasoline by 14¢ per gallon. A similar calculation can be made for coal-fired electricity. Using the most recent data from EPA's Emissions & Generation Resource Integrated Database (eGRID), we calculate that the average emission rate for coal-fired power plants is 2,395 pounds of CO2 per megawatt-hour (MWh) of electricity. A $15 per ton CO2 tax would raise the price of coal-fired electricity by 1.63¢ per kilowatt-hour (kWh), or 20 per-cent at an average electricity price of 8.3¢ per kWh.


So as you can see, they seem to have exchanged the cent sign for the dollar sign, which is actually a factor-of-100 error, not the factor-of-10 you suggested. (YOUR post suggested a 16-cent-per-kw increase).

The cited article was actually in FAVOR of the carbon tax, btw, and was showing the relatively small impact it would have.

I'm not agreeing or disagreeing with the paper, but as with most AEI papers it's an interesting read, and something to think about.

X Curmudgeon said...

Darn--hoist on my own petard. I made a similar mistake, with decimals, to the one I criticized. I've edited the post to fix my mistake. Thanks for catching me on it.

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