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Entergy has a very clear point of view on the climate change issue. We believe the risk is real and the time to take meaningful action is now.

At Entergy, we live with the climate change issue on an almost daily basis. Our industry is responsible for about a third of total U.S. greenhouse gas emissions. Our service territories, including our corporate headquarters and the homes of many of our employees, lie along the U.S. Gulf Coast, an area susceptible to powerful hurricanes, massive flooding and ongoing loss of wetlands.

It should be of no surprise then that we are outspoken advocates for responsible action on climate change. In last year’s annual report, we presented guidelines that we believe should shape a U.S. carbon policy. Those guidelines are:

  • Take meaningful action now to slow, stop and reduce greenhouse gas emissions.
  • Use market forces intelligently – preferably a cap-and-trade system or carbon tax – to find the most efficient solutions.
  • Be realistic about carbon prices. We believe $50 per ton by 2020 is in the right range to encourage the development of clean generating technologies.
  • Support research and development to develop a technology fix for existing coal plants.
  • Understand the social effects. We need to build in permanent low-income protection funded by CO2 allowance sales or CO2 tax revenues.

Throughout 2008, Entergy leaders met with public policy leaders, regulators and influential non-governmental organizations to present and explain our guidelines. In these discussions, the largest obstacle to reducing greenhouse gas emissions quickly took center stage.

Finding a Fix for Conventional Coal Plants

Any meaningful approach to reducing greenhouse gas emissions must address the single largest source of those emissions – conventional coal-fired power plants. Currently, existing coal plants account for nearly a third of total global energy-related CO2 emissions and emissions from these plants are forecast to increase 60 percent by 2030. With developing countries intent on building a new generation of coal-fired plants to meet their need for affordable power, finding a fix for this power source is the key to reducing greenhouse gas emissions today and in the foreseeable future. For example, China today consumes twice as much coal as the United States and it relies on coal for 80 percent of its electricity generation. There are more coal-fired power plants Continued next page

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in China today than in the United States, the United Kingdom and India combined. China’s coal power is expected to more than double in size by 2030 with CO2 emissions growing from 2,758 million metric tons today to 6,055 million in 2030.

Some government officials, utility industry leaders and environmental advocates are focused on developing clean generation alternatives, including nuclear, wind and solar. Although these are worthy efforts, they ignore the economic reality of power generation. Power generated by coal-fired plants is significantly cheaper than power from any clean generation alternative. It is simply unrealistic to expect any country to replace existing or planned coal-fired power plants with clean generation. The cost is prohibitive.

As a result, it’s unlikely that any country would have the will to impose this level of economic burden on its citizens. Even if U.S. leaders mustered the will to do it, it would not slow climate change. Without similar action in developing countries like China and India, CO2 emissions will continue to grow and impact every country around the world.

Finding a technological solution to reduce CO2 emissions from existing and planned coal power plants must be top priority.

Meeting the Challenge: Making a difference with our guidelines for a smart carbon policy

An affordable retrofit technology to capture and securely store carbon emissions from existing coal plants could be applied worldwide. A post-combustion carbon-capture and storage solution for conventional coal plants is the single biggest opportunity we have to reduce greenhouse gas emissions. And it is the one that is critically needed if we are to have any hope for meeting the forecast growth in global energy demand and making the significant emission reductions needed to reduce climate change impacts. We simply cannot get there without the global deployment of an affordable retrofit carbon-capture and storage technology for coal plants.

Avoiding an Ineffective, Expensive Renewable Portfolio Standard

Many well-intentioned environmentalists and government leaders are advocates for a national renewable portfolio standard, requiring energy companies to produce specific amounts of electricity from wind, solar and geothermal energy. While a renewable portfolio standard is a mechanism for creating and establishing renewable energy technologies, it does little to reduce greenhouse gas emissions and will make energy production excessively expensive.

Coal-fired plants are the cheapest source of electricity and are the least likely to be displaced by high-cost renewable energy sources. Instead, natural gas Continued next page

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with its low carbon content is likely to be the first source displaced by renewables because it is more expensive than coal. That means that even a renewable portfolio standard as high as 20 percent would reduce emissions by only a small fraction of what is needed to lower the risk of catastrophic climate change. That modest decrease would come at twice the cost per ton of reduction that would result from a pure cap-and-trade strategy.

A renewable portfolio standard also does nothing to help develop a technological solution for conventional coal plants. In fact, a renewable portfolio standard would only divert attention from this vital mission. A strong cap-and-trade program that puts a price on CO2 emissions is the best way to make renewable energy sources more economically attractive and spur their development.

America Must Lead Now

While the United States cannot fix the climate change problem without the cooperation of other countries, it is clearly America’s responsibility to lead on this issue. Americans use nearly six times more energy per capita than the Chinese and twice as much as other developed countries. Americans emit about four times as much CO2 per capita as the Chinese. As the largest, most developed economy in the world, we are in the most advantaged position to fund new technologies, explore policy options and set the standard for meaningful action on climate change.

We believe U.S. Congressional leaders should take the following actions to address climate change:

  • Cap future CO2 emissions in the United States immediately. We continue to believe that market forces are the best way to find climate change solutions. Therefore, we support a cap-and-trade system or carbon tax as the best approach to implementing an emissions cap. We need to force change now by putting a price on carbon emissions that is high enough to encourage new technologies, yet not so high as to be economically unsustainable. We believe $50 per ton by 2020 is in the right range.
  • Focus research and development funds on finding an affordable technology to retrofit coal plants in the U.S. with the goal of exporting this solution to China and other countries. It is naïve and unrealistic to expect clean power sources will replace the installed base of coal-fired plants. We need a real solution that addresses the real source of man-made CO2 emissions.
  • Shield those who can least afford it from the impact of climate change action. Utility customers will bear the brunt of the increased costs of an emissions cap. Low-income customers will face a greater burden as they typically spend a higher percentage of their income on energy. Recognizing the regressive Continued next page
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nature of carbon policy, Entergy believes assistance must be directed to low-income households to help offset the cost of any climate change policy.

We believe the data is clear. Now it is up to U.S. Congressional leaders to act.

No Time Like the Present

At Entergy, we spend a great deal of time and resources on measuring and managing risk. Superior risk management is one reason our utility businesses continue to succeed in spite of enduring – in the last three years – four of the worst hurricanes in our history. When we look at the climate change issue from a risk management perspective, our sense of urgency grows exponentially.

We believe there is a reasonable risk that climate change could result in an environmental catastrophe – flooding from higher sea levels, devastation from powerful hurricanes, food and water shortages and the potential loss of half the Earth’s species. This catastrophe will not occur in our lifetimes but in those of our children and grandchildren.

Faced with the risk of such a catastrophe, common sense dictates taking urgent action. If the current financial crisis teaches us anything, it is that ignoring risk and taking the chance that negative outcomes won’t occur just increases the pain when they do. We must act now to mitigate the risk of climate change – no matter our current economic condition. We must act now before it’s too late.

Speaking From Experience

At Entergy, we have already taken voluntary action to stabilize our CO2 emissions. In 2001 we made our first voluntary five-year commitment to stabilize our CO2 emissions at year 2000 levels. We successfully completed that commitment in 2005 with emission levels that were 23 percent lower than our target.

Subsequently we made our second voluntary five-year commitment – this time to stabilize our CO2 emissions for 2006 to 2010 at 20 percent below year 2000 levels. From 2006 to 2008, we have performed even better than our voluntary emission stabilization commitment.

We achieved this performance by taking a comprehensive approach that includes multiple internal and external projects, including equipment upgrades, sustainable forestry initiatives and innovative emission reduction trades.

We believe this eight-year performance record of stabilizing CO2 emissions makes Entergy a credible advocate for action on the climate change issue. We speak from experience and are hopeful that our actions will encourage a similar proactive response from others in industry and government.

From 2006 to 2008 Entergy met its second voluntary commitment to stabilize its CO2 emissions at 20 percent below year 2000 levels. We are strong advocates for a smart U.S. carbon policy that includes finding a technology fix for conventional coal plants, the single largest source of CO2 emissions worldwide.