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Kentucky Resources Council, PO Box 1070, Frankfort, KY 40602 Phone [502] 875-2428

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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

“Kentucky at the Crossroads: Adapting To A Carbon-Constrained World”  Posted: May 4, 2009

“Kentucky at the Crossroads: Adapting To A Carbon-Constrained World”
A Conversation at the UNA-USA Annual Meeting
April 27, 2009

The United Nations Association of the United States of America has been, for many years, a leading voice on global issues such as peace, security, health, development and human rights. Because of that proud tradition the UNA-USA is perfectly situated to address the issue that is the topic of our conversation today. Climate change is at the intersection of justice in its many facets – generational, global, ecological, racial and economic, among others.

I always like to begin with full disclosure of my background so that you may appropriately discount all that will follow. I direct the Kentucky Resources Council, a nonprofit environmental advocacy organization providing legal and technical assistance without charge to low-income individuals, to community organizations, and to local governments on air, waste, water, land use and resource extraction issues. My perspective has been forged by thirty-one years of representing those who live downhill, downwind and downstream of mining operations. In that time, I have buried one friend and client who was crushed to death by slurry from a coal waste dam collapse, and I have seen the lives and peace of mind of countless others subject to avoidable injury and damage.

If the field of environmental protection can be characterized in gross terms as the adjustment of the rights and responsibilities as among those upwind and downwind, the uphill and downhill, and those upstream and downstream, KRC represents those who live downhill, downstream and downwind, and who have borne disproportionately the adverse health and quality of life impacts of our economic and political decision-making. These are impacts that should be internalized but which are instead shifted off-budget and are paid, at dear cost, by those least able to bear them. No one ever calls KRC because they are having a good day – they call because they are in crisis – because those things most precious to them – home, health, family - have been placed in jeopardy.

Kentucky is blessed with natural resources that are the envy of other states – more flowing stream miles than any other state save Alaska; a mixed mesophytic forest in Appalachia that is among the most diverse ecosystem on the globe, mineral and biological resources that are the envy of other states. Yet our toxic cocktail of ignorance and avarice has placed these assets at risk.

This is a time of great crisis and great opportunity. We have reached an important point in Kentucky’s energy and utility policies, standing with one foot in the past where adding value for the coal industry was the preeminent political concern, and the other at the threshold of a carbon-constrained future in which a dramatic shift in how we produce and consume energy is needed to avoid catastrophic social, environmental, and economic consequences.

It is a future that demands that we account more honestly for the costs of our energy choices, that we reevaluate our production and wasteful utilization of energy and that we invest in energy strategies and choices less damaging to the land, air and water of our Commonwealth, and more capable of sustaining an economy and quality of life over the long term.

There is general consensus within the scientific community that emissions of greenhouse gases should be reduced by 60-80% by mid-century to minimize irreversible effects of climate change. There is also general scientific consensus that we have a relatively brief period in which to restructure the manner in which we produce and consume energy, before the exigencies of climate change will impose even more dramatic costs on our communities and our economy and narrow our options to mitigate, rather than adapt to, climate change.

We in Kentucky are “ground zero” on climate change. As a state that both produces a significant amount of coal and which is 98% dependent on coal and other fossil fuels for electricity, and as the 46th poorest state in the Nation, the implications for Kentucky of the coming national carbon mandate, such as that proposed in the Waxman-Markey bill or several others now pending before Congress, will be significant. Kentucky ratepayers will see significant increases in electric rates as utilities seek to recover costs associated with reduction in carbon emissions or internalization of carbon costs. The sticker shock, and the potential adverse effects on the most vulnerable ratepayers who are clinging by their fingertips to homes and rental units and spending up to 23% of their income just to provide warmth in the winter, and on our major manufacturers, many of whom are significant energy users and who are very price sensitive to utility costs, if we fail to plan now and to invest now in a strategy to reduce carbon emissions from the combustion of coal for electricity, will be staggering. With an aging fleet of coal-fired power plants, the cost of retrofitting or replacing that power to meet carbon targets is a daunting task indeed.

Just as the overwhelming weight of the scientific community acknowledges climate change as a phenomenon, there is growing consensus in the business community and in local governments, as well as Congress, on the need to reduce greenhouse gases. The debate is no longer whether we should slow, stop and then reverse loading of greenhouse gases into the atmosphere, but is how quickly we should move and how the costs should be allocated. We don’t have until 2020 to take action, for as the Climate Action Partnership noted in its “Call to Action”:

each year we delay action to control emissions increases the risk of unavoidable consequences that could necessitate even steeper reductions in the future, at potentially greater economic cost and social disruption. Action sooner rather than later preserves valuable response options, narrows the uncertainties associated with changes to the climate, and should lower the costs of mitigation and adaptation.

The General Assembly as a body has begun to understand and acknowledge that there will be a national policy response to climate change and specifically, towards a mandatory program of controls on emissions of greenhouse gases from fossil fuel utilization. In the 2007 Special Session and the 2008 Regular Session, the General Assembly took several very important steps towards a rational energy future, commissioning a report on carbon emissions, research and strategies; creating a center for renewable energy and energy efficiency; requesting a study on reform in utility regulatory policy; enacting a set of incentives for renewable energy and energy efficiency; and using the financial clout of the state to set the bar much higher on the performance of state-funded buildings.

The Beshear Administration has engaged on the issues of energy and the environment, producing what is on balance a thoughtful strategic plan, and actively recruiting partners in academia and industry to help build the new energy economy for Kentucky.

We have some basic needs.

First, and foremost, we need honesty and transparency. Honesty in how we measure the value and costs of our energy choices and transparency in how we account for those costs. The bill is coming due for our “low cost” energy source, and the sticker shock will be significant.

It is increasingly apparent that the manner in which we have defined “cost” and accounted for, or failed to account for, elements of that cost has had dramatically negative consequences, and the bill is coming due for the failure to have fully costed our energy choices. What will happen under a carbon tax or cap-and-trade system is that carbon will be “monetized” and Kentucky will be in the marketplace competing with states far less dependent on coal-fired power.

All energy choices have a footprint and need to be viewed comprehensively on a life-cycle basis, considering such issues as the potential conflicts between food and fuel, and energy production and other land uses. In order to bring honesty to energy choices, our utility policies must include health, environmental and social costs from consideration in pricing energy. We need to provide additional meaning and depth to resource planning, in order to more fully value efficiency and pollution in our choices for energy.

I could not have been more disappointed to read the recent opinion piece by the E.ON US chairman, CEO and president. We find ourselves in this position not because of “Mother Nature,” but because we have made energy choices based on shortsighted, short-term interests in defiance of rational planning and environmental limitations.

Historically, environmental costs associated with coal-fired electricity have been considered externalities. These historic “externalities” have a nasty way of eventually becoming internalized in ways that are less efficient and more costly to the ratepayers, as add-on adjustments for particulates, mercury, SO2, and now CO2. Utility resource planning processes that fully cost the fuel choices and energy approach in life-cycle terms will more honestly value fuel diversity, congestion relief, reliability enhancement, environmental and cost-savings benefits that clean energy and energy efficiency provide. We have “cooked the books,” and now they are starting to “cook” us.

It’s important that we face the issues and not lapse into denial. While the coal industry historically likes to lay blame elsewhere, whether on Congress, God, or a broader conspiracy, we are not victims of some conspiratorial scheme to transfer wealth to the coasts. We are instead reaping the bitter harvest of energy policies that have failed to fully cost our fuel choices.

That is the bad news. The good news is that we have opportunities to retool our economy and our Commonwealth and nation in order to more responsibly address energy needs and to better live within our “means.” The first step is to invest in energy efficiency and to diversify our energy portfolio to include an array of renewable energy sources.

If we are to chart a rational energy path, we need to put to rest certain myths and misconceptions. The E.ON opinion piece reflected several of these myths that have constrained effective action.

We need to dispel the myth that “opportunities for renewable energy in Kentucky are limited.” In truth, there is a significant potential for greater deployment of renewables, including some 880 MW of hydropower potential on existing locks and dams on the Ohio and Kentucky Rivers and major lakes in the state, and a largely untapped opportunity for solar and distributed generation in the residential, commercial, institutional and industrial sectors the Commonwealth. Wind power capacity expanded by 45% in 2007 alone, with 5,244 MW installed nationwide. DOE reported that an ambitious program of investment in wind could provide 20% of the nation’s electricity by 2030. Kentucky should be investing in renewables – in production, in the manufacture of components, and in the training of researchers, scientists and engineers to help advance the technological improvements needed to more efficiently harvest renewable energy.

The E.ON US statement that “Kentucky simply does not have alternative resources – sun, wind, agricultural waste and even hydro - that are sufficient to meet our energy needs” is no excuse for doing as little as E.ON has to invest in renewables. No one strategy will meet our energy needs, yet we have 800 megawatts of untapped hydro potential flowing through and over Kentucky’s dams, and a significant untapped solar potential that could greatly reduce our carbon footprint, when coupled with a substantial investment in capturing wasted electricity on both sides of the meter.

The second myth, echoed reflexively by the E.ON opinion piece, is that we need to “balance” the interest of consumers and ratepayers in environmental quality with the economy – it is as false a choice as deciding to breathe or eat on alternating days. We cannot sustain an economy unless we live within our ecological means and protect the building blocks of that economy – land, air and water resources, and the health of the populace.

Until the Congress acts to establish the carbon targets, the greatest value of our fossil fuels is in the ground, where geologic carbon remains sequestered in situ until technological solutions to minimize extraction and conversion impacts are better developed. The time has come to make our top energy priorities a real and sustained investment in energy efficiency and in diversification of our energy portfolio to include greater use of renewables. Investment in efficiencies in transmission, generation and consumption of power, and research and deployment of more efficient transportation systems that make us less rather than more reliant on fossil fuels is the prudent path, and indeed, the only path in the near term.

There are opportunities for the Commonwealth both to mitigate the impact of the carbon mandate, and to retool our economy for a carbon-constrained world. The most important area in which state investment can help hedge against the near-term impacts of a mandatory carbon reduction program is energy efficiency. According to several studies, investment in many cost-effective technologies can reduce consumption by 25-30% over the next 20-25 years. Investment in improving efficiency of conversion and use of energy offers a way to “mine” inefficiencies in the way that power is generated and consumed and to buy important time as the framework of the carbon mandate is constructed and as technological improvements in the capture, conversion, and management of various fuels are refined.

And there are abundant opportunities to mine out inefficiencies on both sides of the meter. According to the Energy Information Administration, 67% of the 41.8 quadrillion Btus of energy consumed for electricity are lost – 3% in line losses, the remainder in wasted heat.

Kentucky’s use of energy is wasteful because it has historically been artificially cheap. Kentucky’s electricity rates remain relatively low-cost, but our bills certainly are not, because we consume power inefficiently. In 2005, there were 20 states with lower monthly residential electricity bills than Kentucky’s. In that year, Kentucky’s residential ratepayers consumed more electricity than our counterparts in 43 other states; our businesses, more than 19 other states; and our industries, more than counterparts in 47 other states.

There is a tremendous untapped potential in all sectors for greater efficiency. And there has never been a better time to combine a workforce in need of meaningful employment opportunities, a housing construction sector facing significant hurdles to new construction, an economy reeling from energy volatility, and an atmosphere desperately in need of a reduction in carbon loading, into a comprehensive program to retrofit housing stock across the commonwealth for efficiency and clean energy. Patterned after the Clean Energy Corps proposal developed by the Clean Energy Corps Working Group, the Beshear Administration under the leadership of Finance Secretary Jonathan Miller, is moving forward with a program that will leverage federal stimulus funds, state financing, university support, and job creation and training programs and attract private investment to spur a statewide effort to retrofit existing housing stock for efficiency and renewables.

It is a shame that the state’s utilities have not shown more leadership.

In House Bill 1, the General Assembly sent a clear message – until a utility has demonstrated that all cost-effective DSM strategies have been deployed, including investment in energy efficiency, no new capacity should be approved. It is time to codify that principle into the Public Service Commission’s statutory mandate, and to make demand management the first step, so that ratepayers are not asked to shoulder the burden of new capacity until efficiency measures have been fully deployed. Energy efficiency investment, coupled with deployment of renewables, will buy critical time and allow avoidance of risky investments in new coal-fired base load or expensive natural gas-fired supply before the carbon targets and timeframes are adopted and strategies developed to manage the carbon.

In House Bill 2, the General Assembly asked the administration to produce recommendations on a renewable portfolio standard (RPS).

The bill introduced by the administration this session lacked any directive to the utilities to diversify their portfolio. E.ON complained in the opinion piece about “mandating renewables,” yet what successful money manager would invest only in one financial product. That we are so vulnerable to the coming carbon cap is a direct result of the lack of diversification in our portfolio and our abject reliance on fossil fueled-power. It is time for the Beshear Administration to lead, as did our neighbor to the north, Ohio, did recently in helping spur investment in renewables and efficiency by creating market demand for renewable-generated power. It is past time for the utilities, including E.ON., embrace greater diversification of their portfolio.

E.ON’s opinion piece asserted that a mandatory renewable portfolio standard would drive up costs to consumers, yet the experience of numerous other states has been that adoption of a mandatory requirement would have a negligible impact on utility rates. Renewables Portfolio Standards in the United States: A Status Report with Data Through 2007, April 2008. A Renewable Portfolio Standard will help to create a stable demand to attract capital for expansion of renewable energy, and diversifying supply sources through investment in renewables will help blunt the impact of the coming carbon mandate on low and fixed-income consumers; failing to do so will create a far greater burden.

Stable and sufficient funding for means-tested energy efficiency programs through adoption of a public benefits fund is essential to any real investment in such programs. A one mill (1/10th of one cent) per kilowatt hour dedicated to low-income efficiency efforts and housing retrofits would generate a significant fund, at a nominal cost of around $1 per year per customer, saving that customer far more in avoided “poverty costs” and in avoided power generation costs.

As we transition away from reliance on fossil-fueled power, there will be a continued need for use of coal as a bridge fuel. But it is important that we understand that so-called “clean coal” isn’t. The new generation of coal-fired power plants that are in planning and under construction are not the solution, nor is gasification or liquefaction of coal, since the sequestration of carbon is an as-yet unresolved problem with any conversion technology for coal. While the new generation of plants may be more efficient that the old, it is important that we look towards more sustainable approaches to power generation and consumption. Margaret Mead was right – “It may be necessary temporarily to accept a lesser evil, but one must never label a necessary evil as good.”

Kentucky's challenge is how to prepare for the inevitable transition from an economy that has been powered by extractive industries and low-cost electricity, to an economy that can better sustain and meet the needs of all of our state's residents, and remain competitive in a regional and global economy while more fully accounting for the ecological costs of resource extraction, energy generation, and industrial production.

For many counties in eastern and western Kentucky, the state of the environment is inextricably intertwined with extraction of coal, oil and gas, and how the costs associated with that extraction, beneficiation and transportation are accounted for. As an activist in 1972, I cut my teeth in lobbying for what would become the 1977 Surface Coal Mining Act.

It is unfortunate that the implemented law has failed to accomplish what Congress intended. The rich human and ecological capital of the Appalachian region is being squandered by mining methods that impoverish human and ecological communities. The twin promises that mining would be a temporary use of land and that full protection would be accorded coalfield citizens, have been honored in the breach.

Our challenge is to utilize existing tools in local, state and federal law, and where necessary to craft new tools, to demand full accountability from the coal industry during this transition period for the footprint they leave on land and water resources and on community safety and health. We have failed – as a state, as a nation, to fulfill Congress’ vision – that mining would be a temporary use of land; that the mined land would be restored to beneficial uses; and that mining methods would be driven by proper planning and environmental protection rather than by profit. The footprint of coal extraction, in terms of area disturbed and land and water resources diminished, is much larger than it should or could be.

So where do we go from here? What can you do to effect positive change? Just as we are each a part of the problem, you can be an important part of the solution. Your voice, your actions, can help to create the changes needed to foster a more just and sustainable community.

You have got power - as a consumer, as a voter, as a citizen, as a mentor, as a student, as a participant in electoral politics. You are that “smart grid” we hear about, making connections, causing change.

With the end use of most of the mined coal in Kentucky being coal-fired electricity, you can help cause positive change by demanding that the Public Service Commission rules create incentives for ecological stewardship and excellence and energy efficiency. The current rate-setting formulas for utility companies favor the sale of power, not efficiency and responsibility in the conversion and use of power. The formula favors the cheapest purchased fuel, which is typically coal, not the energy source that is most ecologically sound, nor even coal that is mined by the most responsible and least-impact methods. Changes in the rate-setting formula for electric and gas utilities that more fully cost and account for environmental and social costs, will help to end the artificial subsidies that skew the market by allowing those costs to be excluded from consideration and make fuel choices that cost the environment and public dearly, seem inexpensive.

Help make the Universities, your homes, places of worship and of commerce, change agents, by demanding of the utilities that their electricity needs be met from renewable sources.

Help make a healthier Kentucky, by moving your homes, your workplaces, the University and its many programs towards investing food dollars in locally owned, healthy agricultural products that provide Kentucky farmers with fair prices for their product. Just as you can‘t complain about the loss of your community’s small businesses or the plight of workers not paid a living wage while you shop at Wal-Mart, you can’t complain about the inhumane conditions and pollution problems of factory farms while you’re buying factory-produced chicken and pork or food imported from half a world away using significant fossil fuels for production and transportation. The direct link between community supported agriculture and local foods and the consumer is a simple, yet radical, rebuilding of relationships that sustain community.

Margaret Mead was right, when she said “never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever does!” Our recent history is replete with examples of how people of good will can become so much more when working together as co-conspirators for positive change.

* Approach problem-solving with an open mind, since it is in dialogue, in engagement, that we arrive at solutions.

* Connect the dots and work for reform in governance. When offices go to the highest bidder and the wealthiest candidate, decisions reflecting the broader public interest over the insular interests of those investing in the candidates are rare. When we aspire to mediocrity in governance, when democracy isn't working, the poor, children, the environment, the public's interest suffer. As we go forward together, we must remind ourselves always that accommodating injustice never made the unjust more just.

* Get your hands dirty. Roll up your sleeves and run for office.

* Be creatively intolerant. Just as accommodating injustice never made an unjust person more just, tolerating mediocrity in environmental pollution never made a polluting industry or an indifferent politician more responsible.

* Bear witness, risk being thought a fool, lest your silence in the face of injustice be regarded as complicity. We must reconnect our policies with our moral values. Our failure in stewardship of natural resources, and the careless and at times horrific damage inflicted on nature in war and in peace, reflects a moral crisis. Our policies must be driven by values more enduring and more robust, than the quarterly bottom line.

* Mentor.

Margaret Mead was right when she said “Our humanity rests upon a series of learned behaviors, woven together into patterns that are infinitely fragile and never directly inherited.” Just as Dr. Lilyalice Akers mentored many of you here in this room, you can in turn be a mentor to others. We stand on the shoulders of those who came before us – my work has been built on the work of those who were my mentors – Winnie Hepler, Ralph Madison, Joanie Noel, and the other environmental pioneers.

Think about the behaviors you pattern, and sit at the feet of those who came before you, just as you mentor those who follow. Learn from the past in order to make sense of the present and to inform the future.

How do we build a more sustaining, a more just political and economic environment?

As Mother Teresa told the interviewer who wondered how she persevered in the face of overwhelming need – "one soul at a time" beginning with our own. Never despair that your efforts are too small; too little to make a difference.

Let us aspire to be less acquisitive, less aggressive in our relationships with each other and our environment. Let us face our tomorrows with hope and humility and continue together in struggle and in fellowship to improve the environmental legacy we will leave to our children’s children.

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