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

The automobile industry has already lost challenges in federal court to the California standards, including a decision last year by U.S. District Judge Anthony Ishii in Fresno rejecting claims that federal law trumped the state (see ruling here). 

The U.S. Supreme Court, also ruling in the context of automobile emissions, last year issued its landmark Massachusetts v. EPA decision holding that the U.S. Environmental Protection Agency had the authority to regulate greenhouse gases as pollutants under the Clean Air Act. Numerous states, including California, are now pursuing legal action to force the EPA to take further steps to comply with that ruling (see Climate Law Update story here). President Bush has criticized the effort to employ the clean air law and other federal statutes in the climate change area, citing the potential effect on the nation's economy (see Climate Law Update story here).

Dave McCurdy, president of the Alliance of Automobile Manufacturers, who attended the meeting with Schwarzenegger, told the San Diego Union-Tribune the industry is adamant about holding out for a national standard. The industry trade group was one of the plaintiffs in the case before Ishii.

The California air board's report was based on a comparison of greenhouse gas reductions from cars and trucks under the state's standards, and under the schedule for fuel economy standards proposed for 2011 through 2015 as outlined by the National Highway Traffic Safety Administration.

According to the results, by 2016, the California standards would prevent a total of 55 million metric tons of carbon dioxide from being emitted into the air in California, compared to 36 million metric tons under the federal requirements. It also looked at what would happen if all 50 states adopted California's approach, finding it would produce sharply deeper reductions than the federal standards.

 (Wikipedia photo)

Carbon capture and sequestration, as the process is known, involves injecting carbon dioxide, a chief greenhouse gas produced by burning fossil fuels, into underground formations to prevent it from reaching the atmosphere.

Promoted heavily in some quarters, the technology has become controversial with environmentalists, partly because of its association with coal. Just this week, the environmental group Greenpeace issued a scathing critique of the technology's use in conjunction with coal, concluding it won't be available in time to save the planet's climate and could consume up to a 40 percent share of a power plant's capacity (see press release here; access report here).

The California project will be located at a plant near Bakersfield operated by Clean Energy Systems. Late last year, the company described the operation as using either natural gas or synthetic gas derived from coal (see text of press release here). Carried out under the auspices of the West Coast Regional Carbon Sequestration Partnership, a public-private partnership partially funded by the energy department, about a million tons of compressed carbon dioxide is expected to be pumped into a geologic formation more than a mile underground.

Adam Gottlieb, a spokesman for the California Energy Commission, which manages the regional partnership,  said he did not believe the plant, expected to be in operation by mid-2010, would rely on coal as a fuel source. The commission's statement suggested that the technology could also be used by industries such as cement plants and refineries. 

"If we can have other industries embrace this technology, not only for economic reasons but for environmental reasons, it's a win-win all around," he told Climate Law Update. 

Keith Pronske, Clean Energy's chief executive officer, told Climate Law Update his plant, which relies on aerospace technology, would likely use natural gas but could rely on other fuels, including renewables.

"What we're focused on is the carbon capture part and it's to have clean energy with captured carbon dioxide from a multitude of fuels," Pronske said. He said carbon dioxide could also become a commercial commodity, sold to be injected under old oil fields as a way of increasing their productivity.     

In the other project, to be carried out by the Midwest Regional Carbon Sequestration Partnership, another million tons of the gas is expected to be injected into a sandstone formation in Ohio about 3,000 feet under an ethanol production facility. That project is slated to get about $61 million. Both projects also anticipate additional millions of dollars coming from industry. 

The projects are the fifth and sixth to be funded by the department in the current phase of its  carbon sequestration program involving the regional partnerships. In addition to promoting at clean coal, the department said the technology would help meet President Bush's recently stated goal of stopping the growth of greenhouse gas emissions by 2025 (see Climate Law Update story here). 

Regarding FutureGen, the energy department in January backed away from its original plan to spend upwards of $1 billion to build a virtually zero-emissions power plant, eventually slated for a site in Illinois (see press announcements here and here). Under the new program, the department outlined a plan to solicit proposals for multiple plants, toward which the government would supply between $100 million and $600 million per project. About $1.3 billion is anticipated to be available over the years, the department estimated.

One goal of the government's overall effort is to reduce the whopping $100- to $300-ton cost of the technology (see DOE background information here).

(Photo: Artist's conception of hypothetical FutureGen plant, Department of Energy) 

Such developments may come none too soon to help the planet weather the ever-increasing amount of heat-trapping gases in its atmosphere. The Chinese plans come to light shortly after a U.S. government agency, the National Oceanic and Atmospheric Administration, reported that carbon dioxide continued a steady rise in its concentration in the atmosphere in 2007. 

On April 23, the agency's press statement (see text here) noted:

"Last year alone global levels of atmospheric carbon dioxide, the primary driver of global climate change, increased by 0.6 percent, or 19 billion tons. Additionally methane rose by 27 million tons after nearly a decade with little or no increase. NOAA scientists released these and other preliminary findings today as part of an annual update to the agency’s greenhouse gas index (see text here), which tracks data from 60 sites around the world."

According to NOAA, the rate of increase in carbon dioxide concentrations accelerated over recent decades along with fossil fuel emissions. The recent data showed about a 2.4 part per million increase. Since 2000, annual increases of two parts per million or  more have been common, compared with 1.5 ppm per year in the 1980s and less than one ppm per year during the 1960s.

The data follows by a few weeks the release of a report prepared by the U.S. Environmental Protection Agency that showed some domestic declines in greenhouse gas emissions, including carbon dioxide, between 2005 and 2006 (see Climate Law Update story here; access report here). That report also showed an increase in methane releases to the atmosphere. 

Separately, NOAA recently announced it would soon install the final nine of 114 stations as part of a new  high-tech climate monitoring network. The stations track national average changes in temperature and precipitation trends. The U.S. Climate Reference Network (CRN) is on schedule to activate these final stations by the end of the summer, the agency said (see press statement here). 

(Photo: Wind farm in China, Wikipedia)

In an e-mail to Climate Law Update, EPA spokeswoman Roxanne Smith said that between the issuance of the draft and final reports, "recalculations were made to incorporate additional revised data." When that new information is incorporated, errors are addressed or "improved methodologies are adopted," she said. Those can then lead to changes for all years in the inventory, which spans 1990 to 2006, Smith added.

The inventory includes estimates of carbon dioxide, methane, nitrous oxide, hydroflourocarbons, perflourocarbons and sulfur hexafluoride. It also calculates emissions removed from the atmosphere by so-called sinks, such as forests, vegetation and soils.

According to the latest report, carbon dioxide emissions from fossil fuel combustion declined about 1.6 percent between the two years, compared to the draft document’s estimated 1.9 percent drop. Overall estimates of carbon dioxide emissions in 2006 remained unchanged in both reports, while the revised version showed a slightly lower estimate for 2005.

In addition, the newest report, which is submitted to the Secretariat of the United Nations Framework Convention on Climate Change, estimated that overall emissions of the six main greenhouse gases have grown by 14.7 percent from 1990 to 2006. The earlier report had that figure at 14.1 percent. The United Nations body monitors the Kyoto Protocol.

One of the largest tonnage differences between the draft and final reports this year appeared to be a drop in the estimate of nitrous oxide. The earlier report estimated emissions of that gas at more than 530 million tons for each of the years, while the latest document estimated the amount at 370.1 million tons in 2005 and less than 367 million tons in 2006. A portion of the report charting annual changes to the calculations noted that revisions, including incorporating state-by-state data for nitrogen fertilizer use, had produced about a 27 percent annual decrease in the estimates for nitrous oxide emissions from soil management on farms.

(Pictured: General Electric advanced gas turbine, U.S. Department of Energy photo)

Last November the IPCC, which won a share of the 2007 Nobel Peace Prize for its work sounding the global warming alarm, issued its fourth report assessing the climate threat (see text here). Researchers asserted that the climate is changing and that most of the increase in global temperatures since the mid-20th century was very likely due to human-caused increases in greenhouse gases. They also saw little time to act to prevent the most severe effects from occurring.

At the same time, the report also concluded that a combination of responses, including efforts to reduce or mitigate the growth in emissions, could significantly reduce the risks. Since 1997 Metz, a senior researcher at the Netherlands Environmental Assessment Agency, has co-chaired the IPCC's group looking at mitigation strategies (see mitigation report). Metz is also a visiting professor at Stanford University.

Metz said that in order to achieve the goals of avoiding the worst effects of climate change, government support for technology and “a lot of R&D” was needed. He also said that other steps, including setting a price on carbon by means such as a cap and trade program, were also critical:

“At that moment, emissions of [carbon dioxide] and other greenhouse gases get factored into business decisions. They become really part of the balance sheet. That’s a very good incentive for businesses to take proper action.” 

His remarks mirrored those of other experts who have recently advocated that more than a market-based approach will be needed to cope with global warming. There is a note of increasing urgency in light of information, such as that cited by Metz from the IPCC suggesting that more serious problems may occur at lower temperatures than earlier estimated.

The New York Times recently reported on the shifts in the debate over what to do (see story here). Among those it cited was prominent Columbia University economist Jeffrey D. Sachs. In a piece in Scientific American (see article here), Sachs argued that a variety of approaches, including new research, was needed:

“We will need large-scale public funding of research, development and demonstration projects; intellectual property policies to promote rapid dissemination to poor countries; and the promotion of public debate and acceptance of new options. We will need to back winners, at least provisionally, to get new systems moving.” 

He argued that even with a cutback in "wasteful energy spending," current technologies could not support both a reduction in carbon dioxide emissions and a growing global economy.  The key, Sachs wrote, "is new low-carbon technology, not simply energy efficiency."  

A critical issue is time. Metz displayed statistical graphs showing that emissions should have peaked no later than 2015 in order to prevent global temperatures from increasing by much more than 2 degrees Celsius, a kind of benchmark denoting the point at which serious human adaptation would have to occur.

“What we do in the coming ten to 20 years is of crucial importance, [determining] how much warming and how many impacts we will have in the longer term,” he said. Metz noted other estimates showing that if carbon were to achieve a price of about $100 a ton by 2030, that could drive emissions down to 2000 levels, which he called “a fairly positive signal.”

But he also noted that as of right now, emissions are still on the increase, and there were other factors at play. For instance, he said, even some actions that pay off economically are not being pursued.

“If you invest in energy savings in buildings you earn your money back quickly. It makes economic sense to do it and still it’s not happening because of all sorts of barriers and low incentives. That’s why specific action in terms of policy needs to be taken to make things happen.”

The task ahead, Metz suggested, employing a metaphor rooted in the fossil fuel industry, is formidable.

“It’s like turning around a super-tanker,” he said.

(Photo credit: Climate Law Update)

In general under a cap and trade system, credits or allowances represent the right to emit a certain amount of greenhouse gases. A debate has long been raging over whether at the beginning of the trading system to sell or give away the credits.

The British Columbia law would establish a cap for designated large sources of gases by issuing a limited number of what officials call “tradable compliance units” or emissions allowances for a given period of time. The emitters will then have to obtain units equivalent to the amount of greenhouse gases they emit within the specified time period. The units would then have to be surrendered to the government as proof of compliance.

The act identified three types of compliance units, including allowance units issued by the government; emissions reduction credits, which are offset credits from approved emission reduction or removal projects in the province, and recognized compliance units from other cap and trade systems, such as the Western Climate Initiative. Each unit would equal a ton of carbon dioxide or its equivalent.

Kate Thompson, a spokeswoman for the province's Ministry of Environment, told Climate Law Update that the legislation was silent on whether the emissions allowances would be auctioned or handed out for free. "That hasn't been decided yet," she said.

She said the legislation would likely progress through the provincial Parliament by May.

The Western Climate Initiative, which British Columbia joined last year, is considering a recommendation from a subcommittee that would require all of the partnership's participants to auction between 25 percent and 75 percent of their allowances, with the final figure not yet determined. Officials of the initiative are accepting public comments on the recommendation until April 16.

Under the April 2 proposal, the allowances would be sold through a coordinated process, with each of the states and provinces auctioning its allowances throughout the Western Climate Initiative region. Proceeds would go to the partners in the initiative, which include British Columbia and its sister province Manitoba, as well as the U.S. states of California, Oregon, Washington, New Mexico, Arizona, Utah and Montana. The initiative is expected to have its market system developed by August (see WCI document repository here).

Those hoping for an auction system would seem to have gotten some ammunition in the pages of the newest report on the subject, prepared for the environmental group WWF (also known as the World Wildlife Fund for Nature) by the market analysis firm Point Carbon. The report, which looked at the trading system set up in Europe, estimated that windfall profits for electricity generators in five countries between 2008 and 2012 could hit 71 billion Euros, or $111 billion.

According to the report:

"Windfall profits are highest in countries that have a high level of pass-through of [carbon dioxide] costs into wholesale power prices, countries with emissions intensive (coal) plant setting the price the majority of the time, and countries that allocate the highest percentage of free allowances to the power sector." 

An official of the WWF called the findings "a stark warning to the rest of the world on the danger of free allocations of pollution permits (see WWF statement here)."

The report said that when the European Union set up the system it allowed most of the allowances to be distributed free of charge, as a way of providing a "soft landing" to companies faced with having to deal with an emissions trading system for the first time. In addition, the study noted that in the first phase of the system starting in 2005 more allowances were handed out than required because the allocations were based on estimates rather than measured emissions.

Other jurisdictions are also dealing with the thorny issue of whether to charge for the allowances when they are initially distributed. California utility and energy officials recently adopted a recommendation to the California Air Resources Board that included advocating at least a partial auction of allowances. But it left for later critical details, such as what percentages should be sold or handed out for free (see Climate Law Update story here).                

(Photo of B.C. Environment Minister Barry Penner via Legislative Assembly of British Columbia)

The Time article contained the most scathing critique of a fuel that had been touted as a major factor in the effort to slow climate change:

"But several new studies show the biofuel boom is doing exactly the opposite of what its proponents intended: it's dramatically accelerating global warming, imperiling the planet in the name of saving it. Corn ethanol, always environmentally suspect, turns out to be environmentally disastrous. Even cellulosic ethanol made from switchgrass, which has been promoted by eco-activists and eco-investors as well as by President Bush as the fuel of the future, looks less green than oil-derived gasoline."

The biofuel industry does receive encouragement from the federal government, including last year’s Energy Independence and Security Act that required a five-fold increase in renewable fuels by 2022 (see White House fact sheet and text of legislation). The magazine reported that last year the country produced about 7 billion gallons of ethanol, costing taxpayers $8 billion in subsidies.

Time described a complex domino effect that starts with the demand for the fuels in the United States and elsewhere and ends up promoting the destruction of forests that, ironically, could help soak up the excess carbon dioxide in the atmosphere that contributes to global warming:

"In Brazil, for instance, only a tiny portion of the Amazon is being torn down to grow the sugarcane that fuels most Brazilian cars. More deforestation results from a chain reaction so vast it's subtle: U.S. farmers are selling one-fifth of their corn to ethanol production, so U.S. soybean farmers are switching to corn, so Brazilian soybean farmers are expanding into cattle pastures, so Brazilian cattlemen are displaced to the Amazon. It's the remorseless economics of commodities markets. 'The price of soybeans goes up,' laments Sandro Menezes, a biologist with Conservation International in Brazil, 'and the forest comes down.'"

The article appeared before last week’s report from the U.S. Department of Agriculture that suggested some shifts in the American farming pattern. That document (see text) said that corn planting is actually expected to decline by about 8 percent this year, with other crops, including soybeans, increasing significantly. Among others, a New York Times (see story) account of the report suggested that the changes could hike corn prices and cause difficulties for the “struggling” companies that make ethanol.

Nevertheless, suggestions that the ethanol industry is part of the climate change problem, rather than the solution, drew a sharp response from Matt Hartwig, a spokesman for the Renewable Fuels Association, an industry trade association. Hartwig said biofuels offer society the opportunity to begin moving toward a more sustainable future.

 “How did we get in the situation we find ourselves in today?” Hartwig said in an interview with Climate Law Update. “It wasn’t because of biofuels; it was because of a reckless use of our fossil fuel resources.”

The organization also issued its own written defenses of the industry and responses to the USDA report. The industry association noted that farmers themselves have had to react to rising fossil fuel prices and it attacked the scientific evidence cited by biofuel critics (see public statements here, here and here). 

Hartwig, who blamed much of the recent push-back against biofuels on criticisms coming from the oil, food and livestock industries, said ethanol production has helped strengthen corn prices. But he said that is by no means the only factor at work. He cited such pressures as the global demand for corn for food for people and livestock; the weak dollar that encourages exports and market speculation. And he bristled at the notion of a causal relationship between biofuel production in the United States and deforestation elsewhere.

“An acre of corn used for ethanol production here does not directly result in an acre of rainforest in Brazil being cut down,” Hartwig said. “They’ve been cutting down the rainforest for decades, long before the ethanol industry came into being.”

For instance, the association refuted the asserted connection between ethanol production and foreign impacts, including rainforest destruction. It noted that American corn exports generally have held steady and shipments of distiller's grains, a byproduct used for animal feed, have actually increased. At the same time, without renewable sources such as biofuels, fossil fuel use is destined to increase, the industry statements said.  

The association's Web site demonstrates that the latest brew-up isn't the first.  "Oil and Food Industry Attacks on Ethanol Misleading and Diversionary," proclaims one press release; "Wheat Prices Are High, But Not Because Farmers Planted Less," says another. And talk about subsidies: The association cites a study showing the U.S. government spends as much as $140 billion a year -- on military might to protect the oil shipping channels out of the Middle East. 

A report appearing in a USDA publication earlier this year appeared to lend some support to the biofuels industry position that ethanol production and higher food prices do not necessarily go hand-in-hand, at least for long. It cited a spike in corn prices in the 1990s that led to a "short-lived" impact on some foods. But the article concluded (see full text here): "For the most part, food markets adjusted to the higher corn prices and corn producers increased supply, bringing down price." 

Not all alternative energy sources took a punch from the media. A CNN report glowingly referred to algae as “the ultimate in renewable energy,” and cited several benefits, including its ability to help sequester carbon from power plants (see story).

And stationary power sources continued to gain lots of attention. Schwarzenegger last week, for instance, joined with Southern California Edison in announcing the nation’s largest rooftop solar installation project by a utility company (see Edison press release and Schwarzenegger press release).

In Ohio, Gov. Ted Strickland and legislative leaders unveiled a new $1.57 billion economic stimulus package that includes $150 million to help make the state "a powerhouse of renewable and advanced energy production such as wind, solar and clean coal (see press release here)." The announcement did not include many details of the program in a state that is both a big producer and consumer of coal (see Ohio Coal  Association background information).  

And in Northern California, Pacific Gas & Electric Company announced it had signed a deal for up to 900 megawatts of solar thermal power. The utility signed contracts with BrightSource Energy Inc. for 500 megawatts of electricity from three projects and it took out options for another 400 megawatts (see PG&E statement).

Meanwhile, the American Wind Energy Association released its latest list of who's on top in the industry. It found Texas to be the leading wind energy state, leading in both total installed capacity and in the amount of new projects added in 2007. Other leaders were California, Minnesota, Iowa, Washington, Colorado, Illinois and Oregon. Iowa generated 5.5 percent of its electricity from wind, the highest of any state, according to the findings. The study also found that FPL Energy operated the biggest farms and Vestas had installed the largest turbines in the United States (see press release and complete text of study).    

(Photo of organic corn crop, courtesy USDA Agricultural Research Service)

Backers of the Kansas bill had noted that it included other provisions that could have boosted other elements of the state’s renewable industry. Builders of the project also included plans for a bioenergy center that would capture some of the carbon dioxide and used it to grow algae for fuel.

But in her public statement and veto message, Sebelius cited not only the threat of climate change to her agricultural state but also the potential for federal legislation, which she did not specifically name, that would “have the net impact of taxing carbon.” That description could apply to proposals such as the Lieberman-Warner bill that would establish a cap-and-trade program for greenhouse emissions. Sebelius said the new plants permitted under the Kansas bill would have produced 11 million new tons of carbon every year. Building new coal plants “is likely to create a significant economic liability for Kansas in the future.”

She also had this to say about wind generation:

“I am encouraged that the Legislature made a modest attempt to address some of our alternative energy assets, but this bill fails to promote our wind assets and sends the wrong signal to potential investors for transmission lines and additional wind power.

“The new feature of net-metering does not include wind power which could have served as a powerful incentive to individuals and communities to embrace our most abundant natural resource.”

Sebelius also signed an executive order (see text) creating a new advisory group to explore strategies for reducing greenhouse emissions and protecting the economy. She named Jack Pelton, president of Cessna Aircraft Company, to head the group.

In a statement, Earl Watkins, president of Sunflower Electric Power Corporation, one of the companies that had hoped to build the 1,400-megawatt project, said the veto would “unnecessarily raise electric rates” for the state’s residents (see project description).

“We are experiencing significant growth on the Sunflower system, and we must add new coal generation to support our existing natural gas and wind generation assets,” Watkins said.

The Utah conflagration brewed up over the EPA's issuance last August of a permit allowing Deseret Power Electric Cooperative to add a 110-megawatt unit to its existing Bonanza power plant. Such "prevention of significant deterioration" permits are issued for larged stationary facilities. The decision came just months after the U.S. Supreme Court weighed in on the issue of the EPA’s authority to regulate greenhouse emissions in its Massachusetts v. EPA decision. Although the court held that greenhouse gases could be regulated as air pollutants, the EPA has yet to decide what to do.

Citing that ruling, which came in the context of a dispute over automobile emissions, the environmentalists including the Sierra Club appealed the decision through the agency’s internal processes. Those groups claim the EPA must establish new controls on carbon dioxide emissions for the project. From the Sierra Club brief (see text here):

“On April 2, 2007, the Supreme Court held that carbon dioxide and other greenhouse gases are ‘pollutants’ under the Clean Air Act. Massachusetts v. EPA, 127 S.Ct. at 1460. Now having been definitively ruled a pollutant, [carbon dioxide] is accordingly a regulated pollutant under the act and EPA is required to impose [carbon dioxide best available control technology] emission limits in the Bonanza [prevention of significant deterioration] permit.”

The EPA, however, has maintained that carbon dioxide “is not currently a pollutant regulated" under the federal Clean Air Act. In its response to the appeal, the agency cited a 1993 memorandum in which its attorneys concluded carbon dioxide was not subject to the EPA’s regulatory authority.

Last week, a coalition of trade groups representing a cross-section of energy and manufacturing, weighed in against the environmentalists’ position. In a brief (see text here) to the EPA the groups argued that the Supreme Court decision addressed only the government’s authority to regulate emissions from new motor vehicles. A finding requiring them to be covered for facilities such as Utah’s, they argued, would cause “a huge expansion of the number of sources and activities” that would require permits, which officials would not have the resources to process.

Quentin Riegel, deputy general counsel for the National Association of Manufacturers, one of the groups filing the brief, in a statement predicted “an impassable regulatory gridlock” would develop if the Sierra Club won.

But the environmental groups also had powerful allies. In another brief, eight states, including California, New York and Massachusetts, backed the environmental groups. They argued that the Supreme Court ruling “conclusively” established the EPA’s authority to regulate greenhouse emissions for the project and that the 1993 interpretation “did not survive” the court ruling.

See the EPA’s docket, with links to all the filings in the matter, here.

(Official press photo: Gov. Kathleen Sebelius)

The first report, issued by the nonprofit Environmental Integrity Project, discovered in the EPA data a nearly 3 percent increase in carbon dioxide emissions. It said that was the biggest one-year increase in nearly a decade. It also found that California, often viewed as a leader in greenhouse emissions-cutting efforts, was one of the ten states with the largest increases between 2006 and 2007. The others were Texas, Georgia, Arizona, Pennsylvania, Michigan, Iowa, Illinois, Virginia and North Carolina. However, the report noted that California generates significantly less carbon dioxide per megawatt of electricity than the national average. The report largely was based on the EPA’s “Clean Air Markets” database and it also cited information from the energy department.

It contrasted with the earlier government report, which included figures up to the year 2006. That report, which considered emissions from a wide variety of human sources, showed an overall reduction of about 1.5 percent in greenhouse gas emissions between 2005 and 2006. Among other information, it showed about a 2 percent drop in carbon dioxide emissions from fossil fuel combustion to generate electricity, and a slightly lower reduction from such emissions from all fossil fuel burning. The report attributed the figures, which came against a history of generally rising emissions since 1990, to a variety of reasons related to the weather, the economy and increased uses of natural gas and renewable sources for power generation. It was not immediately known whether the two reports’ estimates of power plant emissions were directly comparable.

Eric Schaeffer, the founder and director of the Environmental Integrity Project, in the organization’s statement announcing its report described its findings in cautionary terms:

“The current debate over global warming policy tends to focus on long-term goals, like how to reduce greenhouse gas emissions by 80 percent over the next 50 years. But while we debate, carbon dioxide emissions from power plants keep rising, making an already dire situation worse. Because carbon dioxide has an atmospheric lifetime of between 50 and 200 years, today’s emissions could cause global warming for up to two centuries to come.”

The report said the data "make clear why national environmental groups have expended so much effort trying to stop the construction of a new batch of conventional coal-firec power plants, which would make a bad situation worse."

Until 2002, Schaeffer directed the EPA’s office of regulatory enforcement. He left the agency in a dispute over what he considered the Bush administration’s laxity in enforcing air pollution laws.

The energy department report, originating from the Lawrence Berkeley National Laboratory, examined the plans made by 15 private and public utilities in the West for how they might deal with a new era of carbon regulations and costs. It discovered wide variances in their assessments but it concluded that they might have too rosy a picture of carbon prices under such mechanisms as a cap-and-trade system. Such programs are widely believed to be on their way as individual states go forward with greenhouse gas reduction plans and regional entities, such as the Western Climate Initiative develop their own strategies, including a market. Congress is also exploring legislation to establish a national market.

“Most utilities’ base-case carbon price assumptions are near the low end of the spectrum” compared to those developed by the energy department’s Energy Information Administration, the report said. It said most of the utilities analyzed their prospective portfolios’ costs in light of future carbon regulations. But it seemed to warn that they might be taking too narrow a view, and it also explicitly noted that planners were often ignoring indirect impacts that could flow from carbon regulations such as changes in wholesale electricity market prices, coal plant retirements and capital costs of generation. The report recommended that utilities take a close look at what the future might hold:

“Given the potentially far-reaching financial consequences, utilities shold consider the potential cost sof future carbon regulations – and the uncertainty of that cost – when developing their long-term resources strategies. The starting point in this process is to develop specific assumptions about the nature and timing of future carbon regulations that might realistically be implemented, at either the state or federal level, over the lifetime of the investments considered in the plan.”

It recommended that utilities evaluate their portfolios “across a broad range of carbon emission price projections” and that they consider evaluating “a diverse set of low-carbon” resources and look at portfolios “that include the maximum achievable energy efficiency potential.” In fact, the report discovered that utilities may already be moving in that direction, reporting:

“Energy efficiency and renewable generation are the dominant low-carbon resources being pursued by utilities in the West. All utilities selected preferred portfolios that include an expansion to utility-funded energy efficiency programs and new renewables, and half of the utilities selected portfolios in which energy efficiency and renewables together provide 50 percent or more of all incremental resource needs.”

The report also found only limited interest in nuclear power and carbon sequestration. But it found that most had included natural gas.

(Wikipedia photo: Castle Gate Power Plant, Utah)

Although some groups, including those concerned about pollutants affecting poor and minority populations, have opposed cap and trade markets, the idea has gained support among other environmentalists and business groups. Peevey strongly backed the approach in remarks before the commission voted Thursday:

“A cap and trade program is likely to produce additional emissions reductions beyond the mandatory programs, it can tackle a wider variety of sources, potentially at a lower cost. It also encourages investment in innovative technologies that lower greenhouse gas emissions.”

But Peevey acknowledged that officials have only just begun to take on what he called the “thorny issue of allocation,” referring to the critical question of how emissions credits or “allowances” will be distributed among those producing greenhouse gases. Under a cap and trade system, credits represent the right to emit a certain amount of greenhouse gases. The document approved by the two commissions recommends that some credits be auctioned, suggesting that the money be used to benefit ratepayers or support energy efficiency and renewable energy investments. But it does not resolve important questions such as what proportion of the credits should be auctioned and how many sold or given away for free:

"Based on the current record, we are not able to determine the proper
relative roles of auctions and administrative allocation of allowances in a
deliverer-based system. Several parties recommend that there be a gradual
transition over several years from relatively more administrative allocations
initially to relatively greater reliance on allowance distribution via auctions.
Distributing some amount of allocations administratively in the early years of
the program could reduce the immediate impact on entities that would bear the
costs of obtaining allowances, and would give them more time to develop
emission reduction strategies. Based on the current record, it may be reasonable
to provide a transition from small amounts of auctioning in the early years to
greater amounts in later years. However, we require more analysis before
making a determination on this issue."

Peevey, during his presentation, said it would not be the commissions’ intention to punish utilities based on their past investments or decisions made prior to the passage of AB 32. However, he cautioned that the state’s retail electricity providers “are starting off in very different positions” with respect to their emissions. He noted, for instance, that some large public utilities spew twice as much carbon dioxide per unit of energy produced than do the state’s private utilities and some other public entities.

The allocation recommendation is expected to be addressed in a subsequent document to be ready in August.

Although other commission members lauded the recommendation, Commissioner Timothy Alan Simon expressed some concerns about the potential impact on municipally owned utilities. He said he would “closely monitor” the next phase to make sure that those utilities, over which the commission has no regulatory authority, are “treated fairly.”

Some of the reasons for the change, according to the report, included an 8.1 percent increase in the amount of electricty generated by renewable power sources, such as hydroelectric plants, which themselves boosted production by some 7 percent. However, there was a touch of irony in other findings. For instance, the EPA reported that warmer winter weather helped contribute to the trend:

"This decrease [in carbon dioxide emissions] is primarily a result of the restraint on fuel consumption caused by rising fuel prices, primarily in the transportation sector, an increase in the cost of electricity, and decreases in the cost of natural gas. Additionally, warmer winter conditions in 2006 decreased the demand for heating fuels."

The report goes on to say that the winter "was significantly warmer than usual" but that summer temperatures were cooler than normal. 

The report also noted that 2006 emissions of carbon dioxide from burning fossil fuels was still 19 percent above the 1990 baseline. Overall greenhouse tonnage has increased by more than 14 percent during that time, while the nation's economy has grown nearly 60 percent, according to the EPA. According to a chart in the report, 2001 was the last year carbon dioxide emissions dropped compared to the year before.

Among other intriguing highlights in the mass of figures: carbon dioxide emissions from coal-fired electricity generation declined by 1.3 percent from a year earlier but those from petroleum generation plunged by a whopping 45.5 percent. It was not immediately clear what drove the large decrease in emissions from petroleum-fired generation. Meanwhile, emissions from natural gas generation climbed by more than 6 percent. 

Compiled in collaboration with other federal agencies, the document was published in the Federal Register on March 7, triggering a 30-day comment period. Eventually, the report will be submitted to the Secretariat of the United Nations Framework Convention on Climate Change.

(Photo: Bonneville Dam hydroelectric project, Columbia River, Oregon and Washington; Wikipedia photo) 

Schkolnick said those paying the largest share of the fees would include the region's five refineries, as well as power plants and landfills with methane recovery systems. The biggest emitter, a refinery, would pay an estimated $180,000, she said. Only about 800 of the 10,000 or so permit holders regulated by the district would pay anything under the program, some of them as little as $1 to $10 a year, Schkolnick said.

"As far as we understand we are the first in the United States to do this type of [fee] program," she said.

Initial reaction to the proposal was mixed, reported the San Jose Mercury News. While prominent environmentalists supported the idea, it received a decidedly cooler reception from the oil industry. Tupper Hull, a spokesman for the Western States Petroleum Association, an industry group, told the newspaper that consumers could end up paying the price.

"This proposal will raise the cost of producing energy and fuel for California consumers, and at a time when consumers have concerns about what they are paying," he said. "We can't say how much that is, but it is a significant concern."

According to the district's documents, the fee would apply to carbon dioxide, methane and a long list of other gases believed to contribute to global warming. Fees for each facility would be calculated by determining a facility's equivalent emissions of carbon dioxide, based on a table of multipliers. The fees would apply to all facilities with stationary sources of greenhouse gas emissions that are subject to a permit from the district.

The proposed new charge is part of a package of fee increases proposed by the district's regulators that are due to go into effect on July 1. The agency was to accept written comments on the hikes until March 7, 2008. Schkolnick said the district hopes to make a final decision by June 4.

The air district's jurisdiction covers all or parts of nine counties. Schkolnick said the district's authority  to impose fees is rooted in state law, specifically Section 42311 of the Health and Safety Code. She also cited last year's U.S. Supreme Court ruling, Massachusetts v. Environmental Protection Agency, 127 S.Ct. 1438. That ruling held that  greenhouse emissions could be regulated as air pollutants, although the Environmental Protection Agency has not yet decided what to do on the issue.

(Photo: Wikipedia).