In Other News (May 8)

In Other News (May 7)

Winners, Losers in Cap-and-Trade Scenarios Seen in New Report

This saving the planet stuff just isn't complicated enough, it seems.

Underscoring the importance of the finer points involved in establishing a market-based approach to controlling greenhouse gas emissions, a new report (accessible here) sponsored by a fascinating collection of interests shows how huge sums are at stake depending on how such a program is structured.

The most intriguing part of the document examines one of the most controversial parts of a cap-and-trade scenario: the distribution of emissions credits or "allowances" that will determine how many tons of heat-trapping gases that, say, a power plant can emit over a year. It looks at the differences in formulas contemplated by two bills now before Congress, the Lieberman-Warner Climate Security Act and the Bingaman-Specter Low Carbon Economy Act. The document also adds another twist, such as examining what would happen if credits were allocated based on each company's electricity output, versus its share of emissions.

The report generally seems to side with Lieberman-Warner. That bill would require selling more of the credits initially and it would also allocate some credits for sale to benefit the public.

The document also finds that some utilities, such as those with relatively cleaner technologies, would fare vastly better under a system in which credits were distributed on the basis of power output. However, both bills so far propose to allocate the allowances to electric providers based on their historic carbon dioxide emissions. 

The bills are named for their sponsors, Sens. Joe Lieberman, I-Conn., John Warner, R-Va., Jeff Bingaman, D-New Mexico, and Arlen Specter, R-Pa.

 

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Maryland Governor Signs Energy Bills, Including New Portfolio Standards

Maryland's Gov. Martin O'Malley has signed a package of energy bills to among other things beef up renewable portfolio standards in that state, set goals for reducing energy consumption and funnel proceeds from the sale of greenhouse gas credits to clean energy projects.

The governor (pictured) also signed a measure, SB 1013, that ratifies a settlement of a dispute with Constellation Energy Group and ends ratepayer obligations for decommissioning nuclear power plants in the future. The settlement, according to the Baltimore Sun newspaper, also gives the state some assurances a nuclear power plant will be built (see article here). 

In a statement, O'Malley, a Democrat, held out high hopes for the a package of bills on energy and other environmental issues (see text here):

"With today’s bills, we are creating a sustainable energy policy, securing relief for thousands of Maryland ratepayers through a global settlement with Constellation Energy, protecting our environment and helping to restore the Chesapeake Bay for future generations.” 

Among the bills signed by O'Malley was a measure that, according to various reports, about doubles the state's renewable power mandate. The new law, HB 375, requires 20 percent of Maryland's electricity to come from renewable sources by 2022. That's a more modest goal than some other states, including California, which is prodding utilities to meet the 20 percent goal by 2010 and is considering imposing a 33 percent goal by 2020 (see background on California mandate here). 

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New Economic Impact Report on Lieberman-Warner Fails to Settle Debate

A new federal economic analysis of the Lieberman-Warner Climate Security Act shows that the measure wouldn't impede strong growth in the United States; whereas a new federal study of the bill forecasts a gloomy future of  higher energy prices and problems for industry.

It's the same document. Just depends on who's looking at it.

Produced by the Department of Energy's statistical arm, the Energy Information Administration, the new report seems to have done little to foster agreement between the warring sides in the battle over the greenhouse gas reduction bill. The Senate is poised to take up the bill, sponsored by Sens. Joe Lieberman, I-Conn., and John Warner, R-Va., in June.

Like a previous government analysis of the bill, which would cap emissions and establish a trading program, the new report shows some economic impacts but it also predicts by mid-century the legislation would produce better than 50 percent cuts in the production of heat-trapping gases (see text of report here). 

According to the new study, the drag on the gross domestic product between 2009 to 2030 would be between 0.2 percent and 0.6 percent. The bill's impacts would fall more heavily on industry than on other parts of the economy, the report predicted. While comparing the two analyses is difficult because of differences between them, the overall economic effects forecast by the new document appear to be generally smaller than those found by the U.S. Environmental Protection Agency in its  analysis put forward earlier this year (see Climate Law Update story here).  

Perhaps not surprisingly, supporters and opponents of congressional action to address climate change saw the energy department report dramatically differently. Oklahoma Sen. James Inhofe, a leading Republican global warming skeptic (pictured), said the analysis showed the bill "is wrong for America." Environmental groups and congressional supporters of the legislation saw it as confirming the bill as economically benign.

    

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Bush Weighs in on Greenhouse Gas Reductions, Critics Rip Effort

President Bush Wednesday set a goal of halting the increase in the nation’s greenhouse gas emissions by 2025, a significantly less ambitious objective than that established by some of the states, including California.

But in a speech in the White House Rose Garden, Bush also opened the door to a binding international agreement on cutting emissions.

In his speech, the president warned against raising taxes or imposing mandates or demands for “sudden and drastic emissions cuts that have no chance of being realized and every chance of hurting our economy.” He also argued in favor of promoting “emission-free nuclear power” and encouraging investments needed to produce electricity from coal without releasing carbon (see full text of statement here; see White House fact sheet here).

Bush called the new goal to stop the growth of U.S. greenhouse emissions by 2025 “a major step forward in America’s efforts to address climate change.” Yet he outlined few specific steps, beyond some already taken such as requiring better automobile fuel efficiency, to achieve the target. Among his goals, he said, was to create a new incentive to make the development, commercialization and use of new lower-emission technologies more competitive.

By contrast, California’s anti-global warming law, AB 32, requires the state to roll back its emissions of heat-trapping gases to 1990 levels by 2020, an estimated 25 percent reduction. Even further cuts would be required later under an order issued by Gov. Arnold Schwarzenegger (see text here). Additionally, all three major presidential candidates have endorsed emissions limits and trading programs.

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IPCC Expert Sees Need, As Do Others, for Government Backing of Energy Research

A key member of the international body that has done much to warn the world of the dangers of climate change says that a needed part of the solution – government support for research into new technologies – is falling ominously short.

In a recent presentation in San Francisco sponsored by the California Public Utilities Commission, Bert Metz, co-chairman of a key group of researchers within the Intergovernmental Panel on Climate Change, added his voice to what appears to be a growing chorus calling for major new public investments into energy technology research and development. While other measures, such as market systems to promote energy efficiency and greenhouse gas reductions can help, they may not be enough, according to these experts.

In his presentation to an auditorium filled with energy experts and members of the public, Metz (pictured) foresaw the need for society "to rely on technologies that are not yet on the marketplace today. So that brings us to the area of how can we get them into the marketplace later. That means sufficient [research and development] investment." But there is a problem, he noted: 

“One sobering fact from the IPCC assessment was that energy R&D has gone down significantly since 1980. It’s now about half the level that we saw in the 80s. I’m talking about government, public R&D. That has not been taken over by the private sector. So we are worse off than we were 25 years ago. That is, of course, completely counter to the messages in this report.” 

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British Columbia Moves Toward Cap-and-Trade Amid Larger Auction Debates

British Columbia is moving forward with a cap-and-trade system to reduce greenhouse gases, laying the groundwork for the province's involvement in a Western North American regional trading system.

The development occurs as one new report strikes a cautionary note about how to establish a market, warning that free allocation of emissions credits has helped produce large windfall profits in Europe (see full document here). But the Western Climate Initiative, the regional system to which British Columbia and a number of states belong, is contemplating at least a partial sale of credits (see text here). 

British Columbia officials recently announced the introduction of the Greenhouse Gas Reduction Act, also known as the Cap and Trade Act. They said it would put British Columbia out front of other Canadian provinces as it prepares for the onset of the new trading system (see press statement here, see text of legislation here).

“The Cap and Trade Act will make British Columbia the first Canadian province to introduce legislation authorizing hard caps on greenhouse gas emissions,” said Environment Minister Barry Penner (pictured) in a statement. A “hard” cap means that each emitter will face a set target, regardless of the growth of its operations, according to a report in the Canadian newspaper the Globe and Mail (see story here).

One expert quoted by the paper said no one in North America has done what the province is proposing. Officials from the petroleum production industry and elsewhere also expressed some concerns about the measure and how it might mesh with regulations set by other provinces and the nation’s government, as well as the province’s own newly introduced carbon tax.

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Manufacturers Agree with EPA Go-Slow Approach

Stephen L. Johnson, the administrator of the U.S. Environmental Protection Agency, might be feeling a bit besieged after the reaction to his decision to go slow on regulating greenhouse gases. But he’s still got friends in the industrial community and elsewhere.

“I think he made a very sensible move,” Hank Cox, a spokesman for the National Association of Manufacturers, told Climate Law Up date Friday. The association, headed by former Michigan Gov. John Engler (pictured), has itself been urging a cautious approach to addressing climate change and it recently released a study warning of major economic and employment losses if Congress enacts legislation such as the Lieberman-Warner bill (see recent Climate Law Update story), which would establish a national emissions cap-and-trade system.

Johnson provoked outrage among Democrats and environmental organizations when he informed lawmakers he was going to take more time to study the regulation of greenhouse gases before acting. Some critics accused the Bush administration of acting according to an “industry script” on the issue.

Johnson’s action came nearly a year after a 2007 U.S. Supreme Court decision, Massachusetts v. EPA, which said the agency had the authority to regulate the emissions believed to contribute to global warming as pollutants, and it ordered its officials to look into such questions as whether the gases pose a threat to people. Critics threatened a new round of legal action to force the EPA to move on the issue (see Thursday’s Climate Law Update story).

Cox said he believed his organization made its views known to the EPA before Johnson announced his decision Thursday.

“I’m sure we did,” Cox said.

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Vermont Opens Door Wide to Net-Metering; Utah Also Promotes Renewables

Governors in Vermont and Utah have become the latest to sign legislation intended to curtail greenhouse gas emissions, boost renewable energy generation, or both.

Of the two, Vermont’s was the more comprehensive (see text of bill). Senate Bill 209, signed by Gov. Jim Douglas, establishes an efficiency program he said was intended to help homeowners and businesses reduce fuel consumption and save money (see press release). At least part of the money would come from the state’s participation in the Regional Greenhouse Gas Initiative’s cap-and-trade program.The first auction under that fast-developing program is scheduled for this fall (see press release).

One key provision in the bill appears to encourage cooperative efforts among the population to develop local renewable energy projects. 

Utah Gov. Jon Huntsman put his name to a measure that establishes a renewable portfolio standard for the state. Senate Bill 202 (see text) sets a goal for Utah utilities, both municipal and privately owned, that would mean 20 percent of their “adjusted” electric sales would come from renewable sources by 2025. That’s somewhat more modest than standards set in other states, including California, which has established a 20 percent renewable goal by 2010 and is considering efforts to increase that proportion.

 

      

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Coal Wars Heat Up: Kansas, Utah Become Battlegrounds

The coal war, it seems, is heating up by the day. And the battlegrounds are not always in places commonly associated with aggressive environmentalism

Take Kansas and Utah, for instance.

The Kansas City star reports that lawmakers are trying to revive a modified version of a bill vetoed last week by Kansas Gov. Kathleen Sebelius that would have allowed construction of two new coal-fired plants over the greenhouse gas-related opposition of a state regulator.  Among her objections was the lack of support for wind power in the legislation (see text of vetoed bill and Sebelius press release with attached veto message). 

Farther west, a dispute over a proposed new coal plant in Utah is creating a legal vortex drawing industry, environmentalists and other states, including California, into a debate over the extent of the U.S. Environmental Protection Agency’s authority to regulate emissions blamed for climate change.

All of this comes against a background of work in Congress on greenhouse legislation that would establish a market system for reducing emissions (cited by Sebelius), and more coal-specific developments, including a recent decision by a federal agency to back away from funding such projects (see recent Climate Law Update story). Lawmakers are also working on other federal legislation that would allow new coal plants to move forward only if they can capture and store the vast majority of their carbon emissions (see press release and text of bill).

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Power Plant CO2 Emissions Rise; Utility Carbon Cost Estimates Questioned

Despite all the talk about greenhouse gas reductions and the means to achieve them, including establishing new trading schemes for carbon, a pair of new studies suggests the nation has a ways to go.

One of the documents, in which a former U.S. Environmental Protection Agency official has parsed the latest government data, shows that carbon dioxide emissions from power plants appear to be back on the rise (see press release and report and appendices). That follows on the heels of government study released only this month showing overall carbon emissions, including those from power generation, had fallen just a year earlier (see study and Climate Law Update article).

In addition, a Department of Energy study of Western utilities suggested that some of them are including fairly optimistic estimates about the impact of trading mechanisms on carbon prices. The study (which can be seen here) appeared to gently urge them to boost those figures. At the same time, it found that the utilities are aggressively planning to increase efficiency and add new renewable generation to their portfolios.

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Western States Take New Steps on Greenhouse Gas, Vehicle Miles and Renewables

Led by Washington state, where the governor just signed a new law charting a path to reduced greenhouse gas emissions, Western states have made several recent moves on the climate change and renewable energy fronts.

Oregon and South Dakota put in place new laws to boost the renewable energy industry. Oregon’s statute is aimed at manufacturers of renewable energy equipment, while the South Dakota legislation gives breaks to wind energy facilities and transmission lines serving them.

The new Washington statute, signed by Gov. Chris Gregoire, firms up goals established in a law passed last year and a 2007 executive order that would reduce Washington’s climate-related emissions to 1990 levels by 2020, the same as California’s AB 32. The Washington statute also sets goals for later years, including a 50 percent reduction below 1990 levels by 2050. (See here for text of 2007 law; the 2007 executive order; Gov. Gregoire's press release upon signing the 2008 legislation, House Bill 2815, into law and the full text of the 2008 statute, as well as a legislative analysis.)

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Some Companies Push for American Action On Global Warming

Even during a period of scary economic headlines, some experts see efforts to control climate change through market mechanisms as a green light at the end of a dark tunnel.

The green lobbying group Environmental Defense Action Fund has enlisted top officials from manufacturing companies Deere & Co. and Eaton Corp. to appear in commercials touting the benefits of a national limit on emissions, as Congress nears a debate on the Lieberman-Warner bill that would establish a cap and trade system.

In a separate development, executives of Lehman Brothers, a major Wall Street firm, suggested that moves underway in the United States and elsewhere are likely to boost the carbon market, according to a Reuters report.

According to Reuters, Theodore Roosevelt, Lehman's council on climate change chairman, told reporters at a news conference in Tokyo that he was “fairly confident” the United States would pass “substantial climate change legislation” no later than 2010. The country’s involvement would then open “the possibility of a serious dialogue” with Asian countries on how to approach the problem. Another Lehman official quoted by the news service noted exchanges in Asia have recently indicated they want to get into carbon trading.

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Costs of Congress' Greenhouse Gas Bill Debated

Legislation in Congress to reduce the country’s greenhouse gas emissions might carry a hefty economic price tag, according to a new analysis released Friday by the U.S. Environmental Protection Agency. But sponsors of the bill, Sen. Joseph Lieberman, I-Conn., and Sen. John Warner, R-Va., said the report actually demonstrates that the country could accomplish the cuts without sacrificing its prosperity.

Even as the costs of addressing climate change sparked discussion,  there were new signs global warming itself could prove economically destructive. Earlier in the week, another government study suggested potentially dire consequences from unchecked climate change on the nation's Gulf Coast, a vital part of the nation's shipping and petroleum infrastructure.

EPA's forecasts covered a variety of possible impacts. The agency predicted the economy might feel a drag on growth of less than 1 percent by 2030, but that the punch could also be nearly four times as strong. Among the "many uncertainties" it cited were the availability of new technologies and what other countries do regarding climate change.   

The EPA’s report followed by a day another set of estimates – this one prepared by the National Association of Manufacturers and the American Council for Capital Formation – showing the bill dragging on the economy to the tune of millions of fewer jobs and slowing the growth of the gross domestic product (see press release). The Environmental Defense Fund, an environmental group, immediately attacked the business groups’ findings, noting they did not analyze the costs of doing nothing to stop climate change.

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CA Energy Regulators Okay Recommendations for Greenhouse Gas Cuts

Utility and power plant regulators in California this week agreed on basic approaches, including implementing a cap-and-trade system, for reducing the state’s greenhouse gas emissions. But they left some critical decisions until later in the year.

In separate unanimous votes Wednesday and Thursday the California Energy Commission and the California Public Utilities Commission approved a joint set of recommendations for how the state’s electricity and natural gas industries should meet the demands of the groundbreaking 2006 law, AB 32 (see CPUC press release here). The CPUC regulates privately owned utilities in the state, while the energy commission carries out a number of forecasting and planning duties, as well as licensing large generating plants. 

The document now goes to the California Air Resources Board, the primary agency charged with implementing the California Global Warming Solutions Act. The law aims to reduce California’s greenhouse gas emissions to 1990 levels by 2020, approximately a 25 percent cut. Electric power generation accounts for more than one-fifth of the state’s greenhouse gases, according to the energy commission.

The recommendation approved this week endorses a mix of methods for achieving the reductions, and it reflected proposals put forward by Michael R. Peevey, president of the state utilities commission, last month. They include prodding electricity providers, regardless of ownership, to exceed the state’s current goal of having 20 percent of their power come from renewable sources; backing the establishment of a cap and trade program for the electricity sector and designating the companies that deliver power to the state’s grid as the entities directly responsible for complying with AB 32’s requirements under such a program.

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Carbon Conference Draws Major Financial Players

Recession around the corner? There was no sign of that at a recent conference in San Francisco dedicated to examining issues pertaining to the brave new world of greenhouse gas emissions markets. Instead, around one corner of the vast Moscone Center was JP Morgan and around another Deutsche Bank. Cantor CO2e held down a choice booth and Bear Energy, a division of Bear Stearns Companies, also made its presence felt in a big way at Carbon Forum America 2008

As one of the event’s chief backers, Henry Derwent, president and chief executive officer of the International Emissions Trading Association, put it in the conference’s brochure, the gathering was the “first U.S. trade fair and conference dedicated to global business opportunities in the new carbon constrained economy.”

Or, as an attendant in one financial industry booth, who wanted neither his name nor affiliation revealed, bluntly described the attraction: “There’s going to be a lot of money in this.”

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Accountability: Utility Buys 'Verifiable' Carbon Offset Forest Credits While Groups Move to Boost Trust

Northern California utility Pacific Gas and Electric Company on Tuesday (Feb. 26) announced it had entered into a large carbon offset deal amounting to 214,000 metric tons of greenhouse gas emissions. A Wall Street Journal Web site reported the company was spending more than $2 million on the initiative, or about $10 per ton. The action was praised by officials as a needed example of a verifiable offset.

The announcement came on the same day as some groups called for greater accountability for offset programs, warning that bad press about them could harm legitimate reduction efforts. "Without credibility, it becomes a shell game," Janet Peace, senior economist of the nonprofit Pew Center on Global Climate Change, told a gathering at a conference in San Francisco. The conference, Carbon Forum America, drew more than 1,000 people from businesses, government and non-governmental organizations to discuss issues surrounding the burgeoning emissions trading market.

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"Environmental Justice" Opposition to Cap-and-Trade Emerges

The notion that a cap-and-trade program provides the best way of forcing and/or encouraging reductions in greenhouse gas emissions appears to be running into some opposition from one sector of the environmental community.

The Los Angeles Times reported Wednesday (Feb. 20) that Low-income community groups in five California cities launched a statewide campaign to "fight at every turn" any global-warming regulation that allows industries to trade carbon emissions. The groups warned such a move would amount to "gambling on public health."

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Maryland May Adopt Tough Greenhouse Limits, Paper Says

Maryland's Gov. Martin O'Malley will support a bill that would impose some of the nation's toughest limits on global warming pollution, according to administration and legislative sources, the Baltimore Sun reported Feb. 18.

The measure, SB 309, now under consideration in the state Legislature,  would impose a 25 percent cut in greenhouse gases from all industries in Maryland by 2020 and a 90 percent cut by 2050. Those figures are on a par with California's AB 32 and a 2005 executive order signed by Gov. Arnold Schwarzenegger.

According to the newspaper, Maryland would use a system of financial penalties and rewards to curb emissions of carbon dioxide and other gases blamed for altering the climate. The Sun reported that many environmental groups, wary of possible global warming-related flooding along the state's low-lying Eastern Shore, support the bill. But at the same time business groups and many Republicans are fighting the proposal, saying mandatory caps on carbon dioxide could drive businesses out of the state and derail the economy.

What are the prospects for the bill? Uncertain, according to the Sun. The paper noted a similar bill failed last year, although the O'Malley administration helped win approval for a more limited "clean cars" bill that will cut emissions of global warming gases from vehicles by an estimated one-third.

Sen. Paul G. Pinsky, the sponsor of the bill, told the newspaper that O'Malley (pictured above), a fellow Democrat, might offer an amendment to make cap-and-trade systems optional for industries beyond the electricity sector. The decision on how to regulate greenhouse gases would be made by the Maryland Department of the Environment. The proposal does not specify exactly how the state would cut greenhouse gases. But the bill lays out a timetable the state's environmental agencies must follow to propose a series of regulations for each business and sector of the economy, the Sun reported.

California Utilities Overseers Back Greenhouse Gas Cap-and-Trade

California's top utility regulator has endorsed a cap-and-trade program to reduce greenhouse gas emissions from electrical generation but he's advising a go-slower approach when it comes to natural gas providers. California Public Utilities Commission President Michael R. Peevey in a joint proposal with the California Energy Commission on Feb. 8 also recommended that some portion of the emission allowances be auctioned -- and that a part of the proceeds be used to benefit the state's ratepayers. The 126-page document recommended that a cap-and-trade system work in conjunction with "direct mandatory/regulatory requirements."

Peevey (pictured above) also weighed in on an issue that has caused no little debate among insiders watching the proceedings when he recommended that the state designate "deliverers of electricity to the California grid" as the entities responsible for meeting the requirements of California's groundbreaking AB 32.  

          

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