Swapping Carbon

With a mandatory cap-and-trade system for carbon emissions likely, some Florida businesses are looking for an edge — and profits — by trading in voluntary markets. But those markets, some say, are still in a “wild, wild west” stage.

For half a century, the Gannon power plant near Tampa Bay burned coal to churn out the electricity that keeps lights burning and air conditioners humming in the Tampa Bay area. But by 1999, Gannon presented both a business and regulatory problem for its owner, Tampa Electric.

Tampa Electric converted Bayside Power Station near Tampa from coal to natural gas, cutting the plant’s emissions of greenhouse gases and allowing it to accumulate “credits” on the Chicago Climate Exchange.

Tampa Electric wanted to expand its power generation. But Gannon was under EPA regulatory scrutiny for non-compliance with the federal Clean Air Act, stemming from the plant’s emissions of sulfur dioxide, nitrogen oxides and particulate matter. So the utility decided to spend $700 million to shut down the coal burners and power Gannon with cleaner-burning natural gas.

To underscore how much they’d reduced emissions at Gannon, the utility began paying $20,000 a year to participate in the Chicago Climate Exchange, a private, voluntary market known as CCX where public or private entities enter legally binding commitments to cut their emissions. If they exceed their goals, they receive credits — each representing a ton of carbon — that can be sold to other members who fail to meet their goals and must offset their excess emissions.

In joining the Chicago Exchange, Tampa Electric promised to reduce its emissions 6% by 2010. The utility surpassed that requirement easily: Refitting Gannon for natural gas cut the plant’s greenhouse gas emissions in half and reduced the company’s overall emissions by more than 20%.

Those reduced emissions at Gannon, they hoped, would sit well with regulators when newer rules arrived. Getting acknowledgement that the company had acted early "was one of our primary objectives," says Byron Burrows, manager of air programs for Tampa Electric.

Aside from whatever impression the move leaves with regulators, Tampa Electric’s participation in the voluntary carbon-trading market also gives the company experience in the kind of commerce that’s likely to emerge if the federal government mandates a national cap-and-trade system for carbon.

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