Climate Law Update: Climate Change & Sustainable Energy News : Thelen Reid Law Firm : Renewable Energy, Construction, Project Finance Lawyers & Attorneys

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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• The Arctic and the Antarctic experience similar greenhouse gas levels and solar radiation but are responding in dramatically different ways, according to the National Oceanic and Atmospheric Administration, which reported on a new study soon to be published in EOS, a publication of the American Geophysical Union.
• Consumers who reduce the amount of meat and dairy in their diets will do more to reduce their carbon footprint than buying all local all the time, writes Science Times, reporting on a new study of the issue.
• The United Nation's new top adviser on food is urging a freeze on investments in biofuels, reports the BBC.
• Great Britain is experiencing a boom in installations of  "green roofs" and rainwater harvesting technologies in response to a changing climate, reports The Times of London. 
• A company called OptiSolar wants to build the largest solar farm in the world about 100 miles north of Los Angeles, says a report on C-Net's news.com.
• Shell's decision to drop out of a large offshore wind project has caused an uproar in the United Kingdom, according to the Guardian.
• Kleiner Perkins Caufield & Byers has raised $1.2 billion in two distinct funds, one of them entirely "to help speed mass-market adoption of solutions to the world's climate crisis," the San Jose Mercury News reports.  
• Hawaii's Legislature has voted to require all new homes to have solar water heaters installed starting in 2010, says the Associated Press in a story appearing in the Houston Chronicle.  
  
  
  
  
  

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The U.S. Senate Thursday moved forward with its version of an extension of tax credits for renewable energy. But it did so without identifying how to pay for the estimated $6 billion in incentives for wind, solar and other projects.

Introduced by Sens. Maria Cantwell, D-Washington, and John Ensign, R-Nevada (pictured), only a week ago (see Climate Law Update story), the Clean Energy Tax Stimulus Act (see text here) was grafted as an amendment onto a housing bill before the Senate. Lawmakers adopted the energy amendment on an 88-8 voted and passed the entire bill 84-12.

In many ways, the Senate bill is roughly similar to a measure the House passed earlier in the year extending incentives known as the investment tax credit and the production tax credit. The renewable industry has been pushing hard for Congress to adopt some kind of legislation extending credits which expire at the end of the year.

Both bills provide short-term extensions of credits for producing electricity from renewable sources and for a longer period, until 2016, for business investment tax credits for solar and fuel cell projects. Residential solar and energy efficiency projects would also benefit under the Senate bill.

But the major difference in the Senate legislation lies in the fact that bill avoided the House approach of funding the incentives through reducing tax breaks for the oil industry. Instead, the Senate bill contains no identified funding mechanism. That could give the bill a difficult road in the House.

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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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Legislation extending tax credits for renewable energy including wind, geothermal and solar for at least a year was introduced Thursday in the U.S. Senate by a bipartisan group of lawmakers. The move drew immediate praise from the solar industry.

Senate authors of the measure, who left out a controversial hit on the oil industry that was contained in a recent House bill, hoped to break a logjam that has blocked progress on keeping incentives for renewable energy in place. Backers stressed the need to act quickly, with billions of dollars in projects possibly on the line. The bill also includes financial encouragements for energy efficient buildings, homes and appliances.

Introduction of the Clean Energy Tax Stimulus Act of 2008 in the Senate (see bill summary and text), comes more than a month after the House passed its own multi-year extension measure. The Senate legislation is sponsored by Sen. Maria Cantwell, D-Washington (pictured), and Sen. John Ensign, R-Nevada. It has 21 other co-sponsors. Cantwell urged swift action (see full statement):

“Critical tax incentives are set to expire this year. If both houses of Congress don’t pass a bill, and the president doesn't ’t sign it into law within the next one to two months, we will start to see as much as $20 billion of anticipated investments in 2008 delayed or canceled. This could result in more than 100,000 U.S. jobs lost at a time when the country is skidding into a recession, and energy prices keep getting higher.”

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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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A flurry of new reports from consultants, industry officials and scientists paint a decidedly upbeat picture for renewable energy -- with the startling possible exception of electricity from Hoover Dam. The overall conclusion: Government policies and larger market trends are boosting the fortunes of non-traditional energy, even in the face of a stressed economy.

Experts, in analyses released over recent days, see mushrooming growth in both revenues and investments in alternative energy, including wind, solar, biofuels and fuel cells. One report produced by Clean Edge Inc., a West Coast research company, showed sales for those sectors worldwide had grown by 40 percent from last year, to $77.3 billion. The four sectors are likely to be valued at $254.5 billion by 2017, Clean Edge predicted (see press release here).

At the same time, Renewable Energy Policy Network for the 21st Century (REN21), an international research organization based in Paris, reported a nearly 30 percent increase in investments in renewable capacity, to $71 billion, over 2006. Almost half of that money was going toward wind power, according to the institution's press release and report.

But still another estimate went even further. Analysts at New Energy Finance, headquartered in London, calculated that total new investment in clean energy – which the firm defines as biofuels, biomass, geothermal, small hydro, wind, marine and solar – actually hit $148.4 billion in 2007. That figure is up 60 percent compared to the year before and is even higher than an estimate produced by New Energy in January that did not include some transactions reported until later. Venture capitalists, private equity investors and public market investors all played major roles, New Energy reported.

The influx of capital is “the big story here,” Ron Pernick, co-founder of Clean Edge, told Climate Law Update Tuesday. Clean Edge’s report, which also incorporated the New Energy findings, estimated venture capitalists poured $2.7 billion into clean-energy investments, nearly 10 percent of the total VC activity for the year.

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The U.S. House of Representatives Wednesday (Feb. 27) approved a bill that would extend tax credits for renewable energy projects while reducing breaks for petroleum production. Under the measure, the tax credit for production of electricity from renewable resources would be extended through 2011 and a credit for solar energy and fuel cell projects through 2016.

However, according to news reports, the bill faced an uncertain future in the Senate and even if if passed there President Bush has threatened to veto it because of the increased burden it would place on oil companies.

Environmental groups, however, praised the action, particularly lauding the bill's extension of credits for several years. The Natural Resources Defense Council, in a statement following the House action, said it could help end the roller-coaster fortunes of the renewable energy industry:

"Extensions in HR 5351 for energy efficiency and renewable energy technologies are for multiple years, which is essential to developing the clean energy technology industry long term. While Congress historically extends clean energy incentives in two-year increments, many pieces within the bill are valid for up to eight years in some cases, reducing the impact of a boom-bust cycle for the technologies."

(Pictured: Solar plant near Barstow, California; DOE photo)

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A new contract between Calpine Corp. and Pacific Gas and Electric Co. will help allow the Northern California utility to meet the state's renewable portfolio standard. The deal, according to a report in Friday's (Feb. 15) San Francisco Chronicle, makes PG&E the first utility to reach that goal.

In an announcement, PG&E said it would seek approval from the California Public Utilities Commission for a 175-megawatt geothermal purchase agreement with Calpine. The deal consolidates six existing agreements, and adds 57 megawatts of renewable power to PG&E's supply, the utility reported. PG&E noted the agreement would deliver enough new energy from Calpine's Geysers field north of Calistoga (pictured at left; courtesy of Calpine) to supply 45,000 homes. PG&E said that with the agreement, 20 percent of the utility's contracts for future energy delivery would meet California's renewable energy standard. That attains the figure set by the state under a 2006 law that expanded on earlier legislation requiring utilities to meet renewable energy goals.

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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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