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

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).  

The document is in the form of a proposed decision to be presented for consideration by the full five-member CPUC. If adopted by the panel, the paper would  then constitute a recommendation to the California Air Resources Board, which is the key body in charge of implementing AB 32,  the law that mandates big reductions in California climate-change emissions by 2020 and which officials hope to have up and running by 2012.

Peevey wrote:

We favor inclusion of the electricity sector in a cap-and-trade program for
a number of policy reasons. While we fundamentally favor a certain minimum
level of mandatory reductions from existing programs as described above, a
cap-and-trade system in combination with these mandatory reductions should
be able to produce the GHG emissions reductions required by AB 32 at a lower
cost than reliance on additional mandatory reductions. This is because emissions
trading maximizes flexibility in achieving emissions targets by allowing
obligated entities to rely on the least-cost options across the entire economy.

Significantly, Peevey wrote that any cap-and-trade program must include a component to include electricity imported from other states. While California gets about 20 percent of its juice from neighboring states, those imports represent more than half of the greenhouse gas emissions from the sector, he noted.

It was partly along those lines that he recommended that electricity deliverers to the grid bear the burden of complying with AB 32. Other options would have placed the responsibility on retail providers; in-state generators, with no inclusion of imports in the cap-and-trade system; and in-state generators, with retail providers as the point of regulation for imports. All the choices were evaluated against a set of criteria including "environmental integrity," accuracy and ease of reporting, compatibility with ongoing reforms in energy markets and legal issues.

The so-called deliverer option worked best, Peevey wrote:

After evaluating the point of regulation options against these key criteria,
we find that the deliverer option best meets the criteria. Each of the other
options has serious shortcomings regarding one or more of our priorities. The
deliverer system provides for the environmental integrity of the system by
covering imported power as well as in-state generation. It also shares a number
of common characteristics with a pure generation-based point of regulation
making it likely to be compatible with the eventual design of a cap-and-trade
system that is broader in geographic scope (regional and/or national). The
deliverer point of regulation also improves the ability to report and track
emissions in the sector and minimizes the impact of AB 32 GHG regulations on
California’s wholesale electricity markets. Finally, the deliverer method can be supported on legal grounds.

Despite advocating the inclusion of a market-based approach in efforts to control climate-changing emissions from the electricity sector, Peevey shied away from backing an immediate move along those lines for natural gas. He cited "key differences between the electricity and natural gas sectors" for his recommendation to leave gas out of the equation for now. Those included, he wrote, "significantly fewer options" for reducing greenhouse emissions in the natural gas sector and the "very limited availability of low-carbon alternatives" to gas. However, he added that as California gains experience with a cap-and-trade system and other developments occur, "it may become appropriate" to add the natural gas sector to such a system.

Peevey cited support for a cap-and-trade approach from a wide range of interests, not all of whom usually see eye-to-eye, including environmental groups, utilities, power suppliers and others.

There isn't unanimity among all of the parties, however, as reflected in written comments filed with the CPUC.  Environmentalists, including The Natural Resources Defense Council, filed comments urging officials to "move forward in designing a [greenhouse gas] cap and trade program for electricity. Those same organizations also advocated that California go ahead with "a cap and trade system that includes natural gas, even if regional and federal programs have not yet emerged." Meanwhile, El Paso Corporation, a large natural gas supplier, submitted arguments urging a wait-and-see approach to imposing a gas cap and trade system. The Utility Reform Network, a vocal California ratepayer group, asked that any cap and trade system adopted for 2012 exclude electrical generation, arguing that the state would be better off "promoting existing policies that result in real GHG reductions" and taking other steps, such as developing a regional tracking system for the emissions.