Energy Unveils Goals for CO2 Emissions
As Utilities Make Own Plans Ahead of Bush

By JOHN J. FIALKA
Staff Reporter of THEWALL STREETJOURNAL

WASHINGTON -- Some major U.S. utilities are beginning to step out ahead of the Bush administration on the climate-change issue, developing their own plans for curbing emissions of carbon dioxide, which is thought to be contributing to global warming.

Meanwhile, the White House is under growing pressure to demonstrate that its plans to boost energy production can be environmentally sensitive. President Bush signed an executive order requiring the federal government to conserve energy during periods of peak demand in California and other places facing energy shortages.

Mr. Bush also said the federal government would make available power generators in case of emergencies. "Conservation has got to be an integral part of making sure we've got a reasonable energy policy," Mr. Bush said.

New Orleans-based Entergy Corp., the nation's third largest utility in terms of electricity produced, said that it will impose a limit on CO2 from its 25 power plants that burn natural gas, oil or coal and stay within that level of emissions for five years. "We understand that this is a very politically contentious subject," said company Vice President Jim Mutch. "If other companies do their fair share now, hopefully when there is a regulatory scheme, there will be less of a problem."

By running its plants with greater efficiency, improving the efficiency of its electricity and gas transmission systems and engaging in some outside CO2 reduction efforts, such as planting trees that absorb the gases, Entergy hopes to keep its overall CO2 emissions at 50 million tons per year, Mr. Mutch said. The company, which derives 61% of its power from fossil fuels, will work with the New York-based group Environmental Defense, to make sure its efforts are effective and measurable.

Meanwhile, a coalition of five other electric power companies is calling for a mandatory cap on CO2 emissions that would decline annually, if the Bush administration develops a national emissions trading system that allows a company to decide which technologies to use to reduce CO2 and other pollutants. "We're basically planning on a glide path downward" regarding emissions limits, explained Mark Irion, a spokesman for the group, which includes Enron Corp. and El Paso Energy Corp. of Houston; Calpine Corp. of San Jose, Calif.; Trigen Energy Corp. of White Plains, N.Y.; and NiSource Inc. of Merrillville, Ind.

Emissions trading gives companies incentives to introduce new technology, Mr. Irion said. Under the trading scheme, which is used currently to address sulfur-dioxide pollution, a company that reduces emissions below its target level gets trading credits that it can sell to other companies, thus helping to offset the costs of new capital investment. Sulfur dioxide plays a major role in acid rain.

The announcements come as the entire U.S. utility industry, which produces about a third of the nation's man-made CO2, is engaged in behind-the-scenes negotiations with the White House energy task force headed by Vice President Cheney over how to set up a meaningful, voluntary system for reducing CO2 nationwide.

Meanwhile, private utilities, federally owned entities such as the Tennessee Valley Authority, and rural electric cooperatives are trying to develop an industry consensus on a voluntary program.

According to one industry official involved in both discussions, who asked not to be identified, one idea of interest to the task force involves voluntary contracts that power companies would make with the government calling for CO2 emissions cuts. Once signed, the contract's target reductions would become mandatory. Called a "soft cap" program, it could become part of the U.S. position for the next round of international climate-change talks, slated for Bonn, Germany, in July.

"We have only recently begun to engage the administration," said the official. Since March when the Bush administration aroused a furor among environmental groups and European allies by announcing it was no longer interested in the Kyoto Protocol to curb climate change, it has held a series of cabinet-level seminars on climate change, bringing in industry experts and a variety of government and outside scientists.

President Bush will need to have some outline of a new U.S. climate-change policy by next month when he goes to Sweden for a summit with leaders of the European Union. ``We're well aware of the calendar,'' said one U.S. official.

Tom Kuhn, president of the Edison Electric Institute, a trade association here that represents private-sector utilities, said "I think the [Bush] administration is definitely interested in things that they can do to address this issue." He noted, however, that it is too early for a industry-government consensus on CO2 reduction. "Nobody's agreed upon specifics."

-- Bob Davis contributed to this article.