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              Congress would impose allowance auction requirements, with varying
timetables for phasing-in up to 100% auctions.
The prospect of such “double taxation” is even more troubling because
ICCAG is not considering any form of “safety valve” to limit carbon
allowance price escalation, such as that employed in various Congressional
climate proposals.
The risk of having to pay twice for each ton of CO2 emitted – once to the
U.S. Government and once to the State of Illinois – creates a substantial
economic disincentive to new energy development in southern Illinois. The
costs of both allowance auctions would need to be recouped in higher prices
for electricity or fuels. With no limit on the increase of state allowance
costs, industry planners would be unable to estimate the future financial
liabilities associated with the Illinois auction.
We question the reasonableness of implementing a costly new state
bureaucracy to issue climate change allowances, manage a stand-alone state
cap-and-trade program, and raise a billion dollars annually through a state
carbon auction that may only survive a year or two before it is dismantled in
favor of compliance with national legislation.
Limiting energy growth options in southern Illinois
With its 105 billion tons of demonstrated reserves of bituminous coal,6
Illinois is the Saudi Arabia of North American coal. Due to sharp increases
in the price of natural gas relative to coal, Illinois is well positioned to
benefit from new advanced clean coal power and other energy projects using
local coal reserves.
The implementation of new state cap-and-trade or carbon offset
requirements affecting new sources could severely penalize these future
energy projects. To help assess the potential impacts of ICCAG policy
options on new energy development projects, CEED has commissioned a
study by James Marchetti that we will provide upon its completion.
Preliminary findings suggest that the costs of participating in a state cap-
6 Illinois State Geological Survey, Illinois Coal Reserve Assessment and Data Base
Development: Final Report, Open-File Series 1997-4.
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