Will Cutting Carbon Emissions Increase MY Energy Bill? It doesn’t have to.

, Senior Energy Analyst | November 27, 2018, 9:33 am EST
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I get this question a lot. With energy already being unaffordable for so many people, the concern is reasonable—but the answer to the question isn’t as simple as “yes” or “no.” It’s somewhere in between.

Having said that, assuming that reducing carbon pollution will only increase the costs of energy simply doesn’t hold true. There are plenty of examples that show how lowering carbon can translate into lower energy bills.

Controlling your own bill

Before we talk about carbon emission reductions and the impact on your electric bill, perhaps it’s helpful to remind ourselves that we do have some control over the matter. Taking control of your own energy consumption is the first step in making sure reducing carbon doesn’t increase your bills. Reducing how much energy you use will help reduce your energy bills AND your carbon footprint.

Energy efficiency and conservation are both about reducing your overall energy consumption.

Turning off your lights when you aren’t using them is a quintessential example of conservation. Energy efficiency is about switching to a more efficient light bulb so that you use less electricity while the lights are on. Both are effective ways to reduce your electric bill.

Walking and riding a bike (instead of driving a car) are also forms of conservation, whereas buying a more efficient car is the transportation equivalent of energy efficiency.

Speaking of transportation, it’s also possible to reduce your energy bills by increasing your electric bill.

How?

Switch to an electric vehicle (EV)!

Making the EV switch will increase your monthly electric bill because charging a vehicle requires a lot of electricity, but it will decrease the amount you spend on gasoline. As a result, EVs can simultaneously reduce the total amount you spend on energy while reducing your carbon footprint. The UCS clean transportation team has done a lot of research into this; I recommend learning more about the emissions benefits here.

Installing rooftop solar or signing up for community solar would also help lower carbon emissions and can reduce energy costs over the long-term. But it takes smart policies to be sure that the economic benefits of solar are available to all customers, not just some.

Interested in more examples of ways to reduce your carbon footprint? I recommend Cooler Smarter, which was published by experts here at UCS and which outlines practical steps for low-carbon living.

Greening the grid

The power sector recently lost its place as the number one source of US carbon emissions. This was, in part, due to some utilities transitioning to zero-carbon resources.

So, when utilities make the switch to zero-carbon resources, will it cost customers or help save them money?

There is abundant evidence that suggests reducing carbon can translate into consumer savings. A slew of reports have come out with similar conclusions: utilities can save customers money by shutting off dirty old expensive coal plants and switching to cleaner forms of energy.

Here are three of my recent favorites:

Soot-to-Solar (UCS): The Union of Concerned Scientists conducted an analysis to gauge the public health, economic, and social equity gains that could result by replacing Illinois’ coal plants with clean energy. We found that the benefits far outweigh the costs—and that the sooner the replacement is done, the greater the rewards will be.

UCS analysis found that adopting solar could significantly reduce customer bills.

Tri-State Coal Analysis (RMI): Tri-State is a multistate, member-owned, cooperative utility. Members of the utility pool resources and work together to serve their own needs. Rocky Mountain Institute conducted a study that showed Tri-State’s 1 million customers could save $600 million through 2030 by proactively transitioning to much higher levels of renewables. The results of the study were contested by the company but at least two of the coop members have now left, parting ways so that they can pursue lower cost, cleaner energy.

Tri-State’s coal fleet costs are generally higher than regional renewable energy costs

The costs of Tri-state’s existing coal fleet are largely above the costs to purchase renewables. This creates an opportunity to transition away from coal towards renewables while also providing savings to customers.

NIPSCO Fleet Analysis (NIPSCO): Northern Indiana Public Service Company NIPSCO, is the second largest electric utility in Indiana. In that utility’s long-term planning process, NIPSCO found that it could save customers over $4 billion by transitioning off coal. The analysis found that the more coal the utility retired the greater the savings, finding that a coal-free resource mix was both the lowest cost and the lowest risk option. Now the utility plans on moving from 65% coal to 15% coal over the next 12 years.

The utility’s own analysis shows that retiring coal and replacing it with clean energy is the lowest cost AND lowest risk option.

The utilities’ own analysis shows that the company is able to lower costs and risks by retiring coal plants.

False start

A painful reminder of how embarrassing a false start can be.

The examples above represent a small sample of the dozens of studies that show there are cost savings to be found in cutting carbon emissions. While economic theorists often doubt this is possible due to “the free lunch theorem” this outcome is well documented by academic institutions like Standford; think tanks like the Bipartisan Policy Center and World Resources Institute; financial groups like Lazard; and consulting firms like the Analysis Group and Synapse Energy Economics.

One of the important things to remember when seeing an analysis that says reducing carbon will increase energy bills is they often start from the assumption that everything is working exactly how it is supposed to already. They assume that there is no way for anyone to reduce their own energy bill cost effectively because if that was possible it would already be done.

Such assumptions are rarely true.

To assume that the current system is optimized to be the lowest cost is patently wrong. My own analysis finds that irrational market behavior of some utilities costs customers over a billion dollars each year. This type of behavior is assumed to be impossible by many energy economists and the models they use.

But starting from the assumption that the current system is already perfectly efficient means that any modification will, by definition, deviate from the lowest cost pathway. Some of those same economists also assume that energy efficiency cannot be cost effective because if it was cost effective it would be done.

In reality, there are plenty of perverse incentives that prevent low-cost, low-carbon solutions from being deployed.

Cost of NOT reducing carbon

Most of the analyses above don’t include any monetary value for the social or health costs of increased carbon emissions. This year, William Nordhaus shared the Nobel Prize in economics for his work analyzing how the market was failing to incorporate these social and health costs (known as externalities). As it turns out, once you start accounting for those externalities, the benefits of reducing carbon far, far exceeds the costs.

The cost of not acting to abate climate change is in the trillions.

Just last week, on Black Friday no less, the US government released a report that shows that, if left unchecked, climate change will cost the American economy over a $100 billion a year.

Let’s not forget the scale and importance of what we’re talking about. There are huge consumer consequences if we don’t reduce carbon emissions, and these consequences will disproportionately impact low income and minority communities. It’s an urgent problem that requires us all to do all that we can.

Union of Concerned Scientists
Rocky Mountain Institute
NIPSCO

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