AEP ready to battle carbon, but costs loom

NEW YORK (Reuters) - U.S. utilities are ready and willing to address the problems behind global climate change, but cutting carbon emissions will come at a cost to consumers, the head of American Electric Power (AEP.N) said on Thursday.

"Understand that the electric utility business can respond to the environment challenge, but we as a people need to appreciate that means the cost of electricity will have built into it an environmental fee," Chief Executive Michael Morris told the Reuters Global Environment Summit.

AEP is the largest coal-burner in the western hemisphere, with the black rock fueling nearly three-quarters of the company's 36,000 megawatts of capacity -- enough to supply nearly 30 million homes.

Coal-fired power plants provide more than half the electricity in the United States, but are also the largest contributor of carbon dioxide emissions, the main greenhouse gas that causes global warming.

Morris said AEP is working with labor unions and politicians to craft legislation to try to slow the growth of emissions, level them off, and eventually drive them lower.

A frequent visitor to Capitol Hill, Morris said he backs a proposal that would require World Trade Organization members to either implement their own carbon cuts or buy credits to offset emissions in order to ship their products into the United States.

With support from unions such as the AFL-CIO, both Democrats and Republicans have begun including the carbon tariff into existing legislation, Morris said.

A bill introduced by U.S. senators Jeff Binghaman and Arlen Spector would push the United States to seek the WTO tariff proposal, according to Morris. In the House of Representatives, Congressman Rick Boucher is expected to address that issue.

"Meeting yesterday with Congressman Boucher, I was assured that it would be in the house bill as well," he said.

NEW U.S. PUSH

Morris said the United States is just beginning to formulate leadership on the issue of climate change.

"The House is really thinking this thing through well. The Senate is racing after a lot of political statements," Morris said, pointing to Senator Barbara Boxer's call for carbon reductions of 80 percent by 2050.

"If you to get a 90 percent reduction in carbon footprint in the next 5 to 10 years, all you've done is shut down the United States as we know it today," said Morris. "So it's nice politically, but it's meaningless in a practical sense."

Morris said coal must play a crucial role in U.S. power generation since the United States sits on centuries of supply.

"Not putting it to work is foolish," he said.

He also advocated the building of new nuclear reactors, though he estimated the United States would see only 5 to 10 new plants come on line rather than the 30 new nuclear power plants companies have proposed.

AEP intends to join in the nuclear building rush, said Morris, saying "for us, not building one is almost incomprehensible."

(For summit blog: summitnotebook.reuters.com/)