California’s Cap and Trade and its Impact on Rail Service

By Noel T. Braymer

In effect since 2013, California’s Cap and Trade program uses market forces to reduce Greenhouse Gases (GHG) by having those who release too much buy “credits” which are sold by those who come under their “carbon budget”. Cap and Trade is on track to meet its 2020 goals of cutting back GHG’s to 1990 levels in California. But a recent study by the Lawrence Berkeley National Laboratory found that meeting California’s Cap and Trade goals for 2050 which are 80 percent lower than the 1990 levels will be difficult to achieve. One reason for this is the State’s population now of roughly 38 million is expected to top 50 million by 2050. To achieve the 2050 goals of reduced GHG’s will require major changes in transportation and energy production. Rail service, both passenger and freight can be a major part of this. But even rail will need to make major changes to reduce its emission of GHG’s .

The 2 biggest GHG’s are carbon dioxide (CO2) and methane. The most common is CO2 which is mostly created by burning fossil fuels. In the United States in 2011 according to the Department of Energy 42% of CO2 emissions came from burning Petroleum, 34% came from Coal and 24% from Natural Gas. Natural Gas is methane. Unburnt methane is a more potent GHG than CO2 by volume. As more Natural Gas is used, this increases the amount leaked unburnt into the air. Natural Gas (methane) is viewed by many as not viable as an alternative for reducing GHG’s.

The largest producers of CO2 in California are oil refineries, electrical power plants and cement plants. These and other industrial sources produce 43% of the State’s CO2 emissions. Transportation produces 36 percent of the State’s CO2 emissions. This is according to the California State Air Resources Board. To make major reductions in the State’s GHG emissions will require major changes in transportation and the energy used for transportation. No wonder some owners of oil refineries in the State funded Prop 23 to try to get the voters to overturn Cap and Trade in 2010. The voters turned down Prop 23 in the 2010 election.

To meet the Cap and Trade targets for 2050 which is only 36 years away, will require most of the energy in the State to be renewable and transportation to have near zero emissions. This will include rail service for both passenger and freight. This would most likely require biofuel and electrification. The electricity for rail and everyone else would need to be mostly renewable: from solar, wind, geothermal, biomass and so on.The biggest problem with this is most renewable energy fluctuates: in other words the sun doesn’t always shine or the wind blows when you need it. The solution to this problem is energy storage.

Mr. Elon Musk of Telsa Motors has been in the news again. He is planning to build a megafactory to build batteries for his electric cars. He wants to build a model affordable for the general public. The problem Mr. Musk has is the most expensive part of electric cars are the batteries. The best way to reduce the cost of batteries is to increase production and achieve economies of scale. This is why he is investing billions into a new battery factory. The cost of electrical energy storage in general and batteries in particular are coming down as is the cost of renewable energy. This will have a major impact in the future on rail service.

Rail service providers will find themselves getting into the electrical energy business. More rail lines will be electrified and as batteries improve we will see more locomotives run with batteries either as hybrids or having multiple places to recharge on their routes. We will see more solar panels on rights of way as well as on station property, over parking lots and yards. On electrified rail services we will see more batteries or other forms of energy storage to use energy from regenerative breaking. As part of the future “smart grid” needed for renewable energy, battery charging will work both to store energy and to provide it to the grid when it needs more power. The owner of the battery would be credited for use of their electricity. As rail service providers, particularly in California get into the electrical energy business, they will have a great impact providing a reserve to keep the grid balanced from their energy storage.

Cap and Trade was fought by the fossil fuel industry when it was proposed on the Federal level back in 2009 and it was defeated. This was only one battle in an ongoing war. California is not alone in North America working to reduce its GHG’s. California is working with the States of Washington and Oregon as well as the Province of British Columbia to reduce GHG’s. Washington State is planning to implement a Cap and Trade program of its own. British Colombia has a carbon tax instead of Cap and Trade which is what Oregon is proposing to pass. On January 1st of this year California entered into an agreement with the Province of Quebec to link their Cap and Trade programs. There will be more such linkages with other States and Countries as more adopt Cap and Trade programs which are proven to provide income for government without hurting local economies. China is planning to set up regional Cap and Trade markets which together will be the largest in the world. Cap and Trade programs are already common in much of the rest of the world for reducing GHG.

Cap and Trade can be a major plus for rail service. Cap and Trade revenues should be used for expanded rail service. But also rail service providers should be able to sell credits to Cap and Trade exchanges for having a low “carbon budget”. The fossil fuel industry has long opposed rail passenger service in order to monopolize the energy needed for transportation. We are now in a transitional period away from fossil fuels. It won’t be a smooth transition and the fossil fuel industry will fight to keep their near monopoly on energy use. But in the life time of many today, the gasoline engine will seem as quaint as horse drawn carriages and reciprocating steam engines.

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