Mar08

Prospects for Energy-Intensive Industries Under Cantwell-Collins: It’s Not Quite CLEAR

Cap and Trade, Congress, Competitiveness

 

With domestic climate change legislation making its way glacially through the Senate, it seems everyone is looking for that sweet mix of proposals that might, when combined, garner 60 senate votes. Indeed Sens. Kerry, Lieberman, and Graham are trying to do just that. Whether what they are cooking up at the moment will prove successful remains to be seen. One thing that is clear, though, is that with U.S. unemployment at 9.7 percent (and the corresponding mantra of ‘jobs jobs jobs’ guiding congressional action) any successful climate plan will have to convince U.S. senators that the proposed measures do not place a disproportionate burden on the U.S. economy and, in particular, their respective constituencies.

 

One group in the U.S., energy-intensive and trade exposed industries (EITE), is widely considered the most vulnerable to the adverse impacts of any climate change bill. EITE industries are defined (in H.R. 2454) by their high reliance on energy as a production input and/or face significant competition from importers of comparable products. Firms in these industries are the most likely to move production from the U.S. to other countries without comparable emissions caps. A quick examination of how these firms might fare would be a first point to focus on when examining the how well any piece of legislation mitigates the adverse and disproportionate burdens a carbon price creates in its initial phases.

 

So how do these EITE industries fare under the Cantwell-Collins CLEAR (Carbon Limits and Energy for America's Renewal) bill?

 

The honest answer is it’s not clear. While that may seem a weak way to start developing a perspective on the issue, the fact that it isn’t clear how they will fare—and perhaps more importantly who will fit into the category—is exactly the important point.  

 

Energy Intensive and Trade Exposed: To Be or Not to Be? 

 

In Cantwell-Collins, “targeted relief funds” are established to help industries most vulnerable to a carbon pricing policy’s adverse impacts. These resources, pulled from a fund created with 25 percent of auction revenues, are to be allocated “to individuals and entities that are unable to compete due to unfair market prices arise from disparate fossil carbon limits or fees among countries.”  

 

The most obvious thing missing here is any clear set of industries that qualify for free emission shares. In addition to several points of qualification, the funds apply to an industry or economic sector if “domestic producers would be demonstrably disadvantaged economically and competitively by the program in the absence of funds.” If you don’t enjoy the company of lobbyists then you might not enjoy this statement as a part of your U.S. Code. This qualification leaves open anyone who has modest cost/profit impacts to be included, simply because “modest” is a vague term. This sort of wording leaves qualification an open question before the bill is enacted. In fact, the legislation states that the Treasury, Energy, and Commerce Secretaries, in addition to the U.S. trade representative have basically a half of a year after enactment to figure it out. Perhaps the Treasury and others would adopt a hard-and-fast rule but if not one would expect some sort of a de minimis standard to be applied by the courts after enactment.  

 

Contrast this sort of wording with that found in H.R. 2454 (namely an industry is EITE if it has an energy intensity greater than five percent and a trade intensity greater than fifteen percent or simply and energy intensity greater than twenty percent. [1] The latter approach makes it pretty clear who’s who in the EITE world (see Table 1). While one could argue that the discretion given to the president under Waxman-Markey in determining other industries that should qualify and are not listed above is equivalent, it seems likely that the hard rules for initial inclusion in H.R. 2454 will set the tone for any discretion made thereafter. With the Cantwell-Collins bill, there is not a baseline standard unless you assume the Department of the Treasury and others will simply adopt the H.R. 2454 criteria.

 

With one of the main criticisms of stalled climate change legislation being it generates uncertainty for business, the lack of a clear rule of inclusion (prior to legislative enactment) for targeted relief funds would generate something of a comparable business uncertainty (or even something worse). In the normal course of our daily lives we don’t expect people support a proposal if they don’t have a very clear understanding of how it directly impacts them (just think of the fact that the emission rebate program created under Waxman-Markey has clear rules about what industries qualify and how much they receive and yet at the firm-level decision makers still are uncertain about its ultimate effects on them). Take the uncertainty for EITE industries at the firm level and then move one step back—i.e. adding a lack of clarity at the allocation provisions at the industry level. Perhaps this is something that will be amended within a committee; however, given the language about post enactment decisions about the funds, that seems unlikely.

 

[1] Energy intensity is calculated as the total expenditures on energy consumption (fuel and electricity) divided by the industry’s output (note that I am ignoring the GHG intensity for the simple example – for the full equation, see full House text). Trade intensity is defined as (the sum of imports and exports) divided by (the sum of industry output plus imports).

 

Eric M. Moore is a research assistant with Resources for the Future.

Published: Mar-08-10 | 0 Comments

Mar04

U.S. Climate Policy and the Shape of International Agreements, Part 2: Where Can the U.S. Go From Here?

COP-15, International, Congress


The nations of the world came together in Copenhagen this past December to continue a process begun in 1992 at the Rio Summit to address the causes and consequences of climate change. The ultimate goal of that process is to reach an international agreement that will limit global greenhouse gas (GHG) emissions to “safe” levels while at the same time ensuring the nations most vulnerable to the impacts of climate change are provided the financial and technical means to adapt to a changed climate.

 

As I mentioned in my previous post, this series will provide a view of Copenhagen from a distinctly American perspective, blending global economics with domestic U.S. politics. The outcome of Copenhagen and the international process that now follows is shaped largely by the domestic politics of all the major emitting countries with U.S. domestic politics playing a particularly large role.

 

In this post, I’ll examine the suite of climate policy options before the U.S. and the circumstances that may influence the choices made by policymakers.

 

Plan A: President Obama exercises leadership and plays an active role in moving the stalled Senate negotiations forward.

 

Recognizing that regional differences will mean some Democrats will likely not support comprehensive GHG legislation, the president will have to form a bipartisan coalition of Democrats and Republicans to pass legislation in the Senate.

 

One legislative path forward for the president could be the new comprehensive climate bill being developed by Sens. John Kerry (Democrat), Joseph Lieberman (Independent), and Lindsey Graham (Republican). The trio of senators has released very little descriptive information regarding the structure of the climate legislation it would propose, but the senators have acknowledged the importance of an economy-wide price on GHG emissions (favored by the president), strengthened incentives for nuclear power and coal-fired electricity generation with carbon capture and storage technology, widely-known as “clean coal”, perhaps putting nuclear power on an equal footing with zero-carbon generation technologies like wind and solar, and expanded domestic oil and gas exploration and extraction.

 

A second path forward for the president is recent interest in the legislation co-sponsored by Sens. Maria Cantwell (Democrat) and Susan Collins (Republican). A scant 39 pages compared, to the 1500-page heft of the House’s Waxman-Markey (W-M) bill, the Cantwell-Collins legislation is considerably more straightforward and less complex. It would establish a comprehensive cap-and-trade program like W-M, but all allowances would be auctioned and the allowance trading provisions are quite restrictive compared to W-M. Three-quarters of the auction revenue would be distributed to legal residents on the basis of equal per capita shares. The remaining quarter would fund a variety of research programs and help heavily impacted industries. Importantly, the legislation would have a very robust price collar initially limiting allowance price movements to the $7 to $21 range.

 

Plan B: It becomes too difficult politically to pass a comprehensive climate bill that includes a price on carbon as one of the core components and some combination of policies, excluding an economy-wide cap on GHG emissions is put in place.

 

Many moderate senators in both parties want to pass an energy bill that would have some impact on GHGs, but avoids politically unacceptable increases in energy prices that would come about from a cap-and-trade policy.

 

Energy legislation consistent with these desires has already been crafted by the Senate Energy and Natural Resources Committee and would likely be one major component of Plan B. That legislation would, in part, significantly increase government funding to energy research and development, establish a national renewable portfolio standard for electricity at 15 percent of all generation capacity by 2021, establish federal authority over new transmission capacity perhaps over-riding state authority, deploy many new energy efficiency policies, and open the Eastern Gulf of Mexico to oil and gas production. While the emissions analysis of this legislation has not been undertaken, there is reason to believe the legislation would have a significant impact on U.S. GHG emissions.

 

The second component of Plan B involves the regulation of transport emissions under the nation’s Clean Air Act using tailpipe standards. The U.S. Supreme Court ruled in 2007 the Environmental Protection Agency (EPA) has the authority to regulate carbon dioxide emissions from transport under the Clean Air Act and EPA is developing regulations now.

 

The final component of the Plan B concerns the emissions from electricity generation. A separate piece of legislation could be developed to set up a cap-and-trade program for carbon dioxide emissions from just the electric power sector. Alternatively, the president may choose to use the existing authority of the Clean Air Act to regulate power plant emissions through technology standards, or it may be possible to establish a workable electricity sector cap-and-trade program within the existing Clean Air Act structure.

 

Plan B would be a piecemeal approach, likely inefficient when compared to a comprehensive cap-and-trade approach, and producing unknown emission reductions. But, if electric power generation were included via its own cap-and-trade program, Plan B would target the major emitting sectors and could have quite meaningful impact on U.S. emissions.

 

Plan C: Continue on a largely business-as-usual course for the near term.

 

Plan C is the path of least political resistance and the path of least emission reduction. Since it requires little economic or political sacrifice, the energy legislation of Plan B passes into law under Plan C. Legislative action of one form or another to pre-empt the authority of the Clean Air Act to regulate carbon dioxide emissions moves forward and is successful. Such action is planned, but the odds it will be successful are long. With the energy legislation passed and the Clean Air Act pre-empted, an argument can be made there are no remaining viable political paths and the U.S. takes no substantive action on climate change in the near term.

 

However, there may be a Plan D. President Obama has created by executive order the National Commission on Fiscal Responsibility and Reform to examine the huge federal deficit and likely make recommendations for tax reform to address the deficit. There is a chance GHG control policy could be recast in the next Congress as deficit reduction policy where revenues from carbon taxes or auctioned allowances are used to reduce the deficit.

 

Raymond J. Kopp is a senior fellow and director of Resources for the Future’s Center for Climate and Electricity Policy.

Published: Mar-04-10 | 0 Comments

Mar04

Some Quick Thoughts on the Rockefeller Proposal

EPA, Congress, Clean Air Act

 

Image courtesy Cliff1066 via FlickrSen. John D. Rockefeller (D-WV) today introduced a bill which, if passed, would become the “Stationary Source Regulations Delay Act.’’ This bill, like Sen. Murkowski’s proposal that I’ve written about before, would curtail the EPA’s authority to regulate greenhouse gas (GHG)emissions under the Clean Air Act (CAA). There are major differences between the proposals however and I think these are worth clearing up. I suspect media reports will group the two proposals together, even though the practical and political effects will be very different.

 

First, even though both proposals target EPA CAA authority over GHGs, they are mirror images of each other. The Murkowski proposal would kill the EPA’s endangerment finding for mobile sources (cars and trucks). In the short term, this would block all EPA efforts to regulate GHGs under the CAA, though in principle the EPA could make a new endangerment finding under a different section of the act and go after other kinds of sources. The Rockefeller proposal would leave the endangerment finding and mobile source regulation intact but, as its title indicates, would impose a two-year moratorium on EPA regulation of stationary-source (power plants, etc.) GHGs.

 

The Rockefeller bill makes much more sense, I think. This isn’t to say I personally support it, just that it addresses concerns over EPA regulation of GHGs much more effectively than the Murkowski proposal. Mobile-source regulation is the one piece of the CAA/GHG process that has broad support. The regulations the EPA plans to finalize this month were a product of compromise with the auto industry last year. All of the comprehensive climate bills I know of leave EPA authority over mobile sources intact. It’s EPA regulation of stationary sources, and in particular requirements for preconstruction GHG permits, that is causing the most controversy and putting the most pressure on Congress. If Congress wants to relieve this pressure then the Rockefeller path is the right one, not Murkowski.

 

Second, the political differences are obvious though I’m skeptical about whether the end result will be any different. Rockefeller is a Democrat, and while Murkowski has support from some moderate Dems, this new proposal seems pitched more directly at the center-left core of the Senate. Unlike Murkowski’s proposal, it will need 60 votes to pass, but it is probably more likely to get them. Similar bills are being proposed by House Dems.  This makes it much more likely, I think, that the bill will pass one or both houses—though I leave it to more adept vote-counters to make the call.

 

Even if the bill did pass both houses, it would still have to be signed by President Obama. I cannot imagine the president would sign the bill. It blocks action on GHGs that the president has publically stood behind. Also, and maybe more importantly, the bill would take an arrow out of the quiver of the executive branch. No President likes that. Until and unless that changes—or unless Congress somehow comes up with a veto-proof majority—the Rockefeller bill won’t become law.

 

Nathan Richardson is a Visiting Scholar at RFF.

Published: Mar-04-10 | 0 Comments

Mar02

U.S. Climate Policy and the Shape of International Agreements: Where the U.S. Stands and How it Got There

COP-15, Congress

 

The nations of the world came together in Copenhagen this past December to continue a process begun in 1992 at the Rio Summit to address the causes and consequences of climate change. The ultimate goal of that process is to reach an international agreement that will limit global greenhouse gas (GHG) emissions to “safe” levels while at the same time ensuring the nations most vulnerable to the impacts of climate change are provided the financial and technical means to adapt to a changed climate.

 

There are many who believe the Copenhagen process was a complete failure. Others believe it was less than a great success, but a step in the right direction. Whether you see Copenhagen as an abject failure or a moderate success has a great deal to do with prior expectations. If you hoped for and expected Copenhagen to produce a successor to the Kyoto Protocol, you were very disappointed and rightly view the process as a grand failure. If, on the other hand, you viewed Copenhagen as an opportunity to begin crafting an emissions limitation agreement that is inclusive of the world’s largest emitters and one that sets up funding and technology transfers to aid the adaptation of the most vulnerable, you found Copenhagen as progress toward that goal.

 

The outcome of Copenhagen and the international process that now follows is shaped largely by the domestic politics of all the major emitting countries with U.S. domestic politics playing a particularly large role.

 

This series of Weathervane posts will provide a view of Copenhagen from a distinctly American perspective, blending global economics with domestic U.S. politics. In this post, I’ll focus on the evolution of current U.S. domestic policy and begin to examine the influence recent political developments may have on future policy in the U.S. and worldwide.

 

A Framework for Debate from the House of Representatives

 

The U.S. Congress has been considering policies to limit greenhouse gases (GHGs) for at least two decades. But it wasn’t until this past June that the U.S. House of Representatives passed comprehensive GHG legislation under the leadership of Congressmen Henry Waxman, D-Calif., and Edward Markey, D-Mass., (for whom the legislation is named) that the nation begun to take emission limitations seriously. While there is much to dislike in Waxman-Markey (W-M), there is no denying the breadth and depth of the legislation.

 

The regulations outlined in W-M cover 85 percent of all U.S. GHG emissions. The law requires the adoption of a cap-and-trade approach to GHG regulation with caps that would lower U.S. emissions 17 percent below 2005 levels in 2020 and 83 percent below 2005 levels in 2050.\

 

The breadth and the depth of the covered emissions mean the total dollar value of the emission allowances will be very large. The U.S. Energy Information Agency (EIA) estimates allowance prices in 2020 at $31.7/ton CO2e (in 2007 dollars) and the annual value of allowances in 2020 to be in excess of $160 billion (2007 dollars). The bulk of the allowances are used diminish the cost impacts on consumers, aid trade-exposed and energy-intensive industries and support technology development and deployment.

 

W-M allows up to 2 billion tons of offsets to be used for emission reduction compliance systemwide—1 billion from domestic sources and 1 billion from international sources. If domestic sources cannot generate the full 1 billion tons, international sources can fill the gap up to an additional 500 million tons for a maximum of 1.5 billion tons. EIA estimates 1.2 billion tons of offsets entering the U.S. market in 2020 (900 billion from international sources) and 1.8 billion entering in 2030 (1.3 billion from international sources).

 

The legislation also includes unlimited banking and some borrowing that would allow regulated entities to borrow up to five years in advance to meet 15 percent of its obligation. W-M also has a mechanism to limit allowance price spikes. The mechanism, termed the “Strategic Reserve”, is a bank of allowances established by skimming a small amount of allowances off each year’s allocation from 2012 to 2050. These allowances would then enter the allowance market through a minimum price auction if the price of allowances rose above a prespecified level.

 

W-M passed the House of Representatives with 211 Democrats in favor, 44 against and 8 Republicans in favor and 168 against.

 

A Different Body, a Different Landscape in the Senate

 

In the U.S., both houses of Congress—the House of Representatives and the Senate—must pass comparable legislation in order to enact law. The U.S. Senate produced a bill similar to W-M this past fall under the leadership of Sens. Barbara Boxer, D-Calif., and John Kerry, D-Mass., (B-K). However, unlike the House of Representatives, the Senate did not pass the legislation.

Unlike the House of Representatives where legislation can pass with a simple majority, in the Senate it takes 60 percent of the 100 senators to overcome a procedural hurdle before a vote can be taken on legislation, effectively requiring 60 senators to support any bill. At the current time there are 59 Democratic Senators and 41 Republicans. No Republicans are supporting the B-K legislation and likely no more that 40 Democrats.

 

Why so little support in the Senate for efforts to limit GHG emissions? Unlike the House where representatives have comparably-sized constituencies, meaning most come from densely-populated states, each state gets the same representation in the Senate. So, a state with vast urban population of say 15 million residents gets two senators, but so does a rural state with ½ million total residents. Many low population rural states rely heavily on fossil fuels—predominately coal—for their electricity generation. They fear cutting GHG emissions will lead to significant energy price increases and negative impacts on local business and employment. In these states where the fear of GHG regulation is high, it doesn’t matter if their senator is a Democrat or Republican; if a vote were held to today a good many senators from both parties would vote no on B-K.

 

The current economic recession makes matters worse and while there is support among the American people to address climate change, it has a very low priority when compared to bread and butter economic issues.

 

Raymond J. Kopp is a senior fellow and director of Resources for the Future’s Center for Climate and Electricity Policy.

Published: Mar-02-10 | 0 Comments

Feb23

U.S. Climate Action Slogs Forward

Cap and Trade, Kerry-Boxer, Congress

 

A comprehensive climate and energy plan is “on a short track in terms of piecing together legislation” in the Senate, according Sen. John Kerry. The senior senator from Massachusetts said his work with Sens. Lindsey Graham and Joseph Lieberman on a bipartisan climate bill continues and, though he declined to give specifics, said Tuesday "it will be different than anything that has been put on the table in the House or Senate to date."

 

Kerry’s commitment to action was echoed by a series of key energy and environmental players gathered at the National Press Club to discuss the future of climate legislation. From Capitol Hill to K Street and the White House to Foggy Bottom, climate and energy legislation is still—slowly—moving forward. Indeed, the final—albeit massive—stumbling blocks appear to be determining if a carbon pricing mechanism of any form can garner 60 votes, and getting past health care to the Senate can take the measure up in earnest. And from the shape of the forum’s conversations it looks like emerging clean energy policies will be built around a few key notions:

 

A price on carbon: Clear price signals, like the kind that would be created once firms were charged for the rights to emit greenhouse gases, have the power to mobilize investment and innovation. If businesses don’t know how much climate regulation will cost them or when it may be set in motion, they can’t figure out to what extent technologies that emit less carbon will be worth investing in. Karen Harbert, president and CEO Institute for 21st Century Energy at the U.S. Chamber of Commerce, emphasized that regulatory uncertainty in health care, energy and other areas is one of the main barriers in the path of economic recovery (although she may well believe that this certainty can be created without putting a price on carbon). Sen. Kerry echoed Sen. Graham’s recent remarks that an “energy-only” bill or a bill without any carbon pricing mechanism does not have the teeth necessary to create strong incentives for business.

 

A preference for legislation over regulation: In accordance with a 2007 Supreme Court ruling, the Environmental Protection Agency is running a course parallel to Congress and designing agency plans to regulate the emission of greenhouse gases under the Clean Air Act. Nearly every participant in Tuesday’s forum expressed a clear preference in climate policy for the flexibility of legislation over EPA regulation. Legislation provides a clearer path for designing a program that is best suited for regulating greenhouse gases—whether through cost containment mechanisms or coverage tailoring—instead of the traditional air pollutants originally intended for regulation through the Clean Air Act.

 

Jobs, Jobs, Jobs (not in China, China, China): Since the economy and jobs are the top priorities of the American people, the administration and the Republican Party, the climate debate will continue to be dominated by arguments on both sides that their support or opposition for an energy and climate bill is better for the economy than the alternative. Sen. Kerry cited a variety of studies showing that hundreds of thousands to millions of jobs in clean energy industries will be created by cap-and-trade legislation. Multiple panelists pointed to China’s $400 billion in domestic clean energy financing as a critical reason for the United States to move rapidly and not risk falling behind in what many see as the greatest economic opportunity of the 21st century.

 

Andrew Stevenson is a research assistant at Resources for the Future and regular contributor to Common Tragedies.

Published: Feb-23-10 | 0 Comments

Feb10

A 'Stern' Assessment of Copenhagen

China, COP-15, Congress, International

 

Top U.S. climate negotiator Todd Stern didn’t mince words Tuesday when urging a group of key international players to sign on to the Copenhagen Accord, suggesting that not doing so would risk turning the nascent text into a “stillborn.”

 

In remarks delivered at Center for American Progress (video here), Stern said he’s confident the negotiating bloc known as BASIC—Brazil, China, India and South Africa—will come around to the Accord, given “the clear assent their leaders gave to the Accord in Copenhagen.”

 

The 194 nations party to the United Nations’ climate change negotiations had until (roughly) January 31 to submit their emissions reductions plans. According to the U.S. Climate Action Network, some 95 countries representing 80 percent of the world’s emissions—including the members of the BASIC bloc—have associated themselves with the Accord.

 

But as Andrew shrewdly pointed a few weeks back, a joint statement issued by the BASIC nations certainly isn’t making the Copenhagen Accord negotiating process any easier:

 

It appears that these countries are willing to submit their actions, as pledged in the Accord, but do not view this submission as implying any “association”—at least in the sense likely envisioned by the UN secretariat and most developed countries. Even if China, India, Brazil and South Africa technically “associate”, they do not see this as creating any obligations under the UNFCCC (such as the submission of targets, which they claim to do voluntarily), and certainly not as giving the Accord legitimacy as a negotiating text. It seems that in their view, they made a political pledge in Copenhagen to submit their actions—which just happened to be included in the Accord—and they will do so in order to uphold that pledge, but they will not do so because it is an obligation created by the Accord.

 

Despite his pointed remarks, Stern didn’t turn a blind eye to the U.S. domestic climate policy landscape. He urged Congress to pass strong energy and climate legislation this year saying doing so would provide negotiators “a foundation of both leverage and credibility.” He quick to emphasize, however, that he believed further progress on the Copenhagen Accord was possible—and indeed critical—absent U.S. legislation.

 

He drew two key contrasts between using the Accord and returning to the two tracks of the Copenhagen process. The first was the past versus the future—that returning to the two track Copenhagen process negotiations means continuing to live in a world where development and emissions levels in 1992 are all that matter. This should not be the case, and the Copenhagen Accord reflects both how the world has changed since then—a “developing” country is now the world’s largest polluter—and how it will change in the future—by covering the countries that will be responsible for 97 percent of the world’s emissions growth through 2030.

 

Stern also drew a sharp divide between negotiations in the UNFCCC—carried out by career negotiators and going nowhere—and the Copenhagen Accord—carried out by heads of state and able to crack a few key issues in a short time. Given this experience, why should the former continue to be more important than the latter? If the goal is progress, why not stick with how progress was actually achieved? Of course, the implication is that some nations prefer delay.

 

The critical point here is that, perhaps partly because of the uncertainty in Congress, Stern is trying to paint the BASIC nations into a corner in an effort to secure a more pragmatic approach to negotiations in 2010. By arguing that the Accord represents science and progress, and that the two track negotiations represent favoring procedure and living in the past, he is setting up a more fundamental choice that should not inherently depend on one country or another’s mitigation plans (even one as important as the United States). Ultimately, because this is not just a negotiating tactic but also the right thing to do from a scientific perspective, the United States may succeed after all. There is no doubt, however, that there will be plenty of diplomatic fireworks first.

 

Andrew Stevenson, a research assistant at Resources for the Future and regular contributor to Common Tragedies, contributed to this post.

 

Tiffany Clements is managing editor of Weathervane.

Published: Feb-10-10 | 0 Comments

Feb02

2011 Energy Funding Forecast: Sunny, Breezy with a Chance of Nuclear

Obama Administration, Congress, Subsidies, Oil, Renewables

 

Given the scope of problems associated with climate change—economic, environmental, foreign and domestic concerns, to name a few—it seems virtually every federal department plays some part in President Barack Obama’s policy response. Here’s a look at where climate and energy issues have cropped up in the president’s FY 2011 budget proposal.

 

Environmental Protection Agency

 

Even in the absence of accounting for a federal cap and trade program—a move some see as an acknowledgement of cap and trade’s demise—the budget throws some $44 million toward the EPA’s efforts to regulate greenhouse gases under the Clean Air Act. Moreover, it seeks to help states do the same.

 

The Office of Management and Budget sums up the EPA’s climate change mitigation requests:

 

$21 million—an increase of $4 million from 2010—to implement the Mandatory Greenhouse Gas Reporting Rule and ensure the availability of high-quality emissions data.

 

$56 million—including $43 million in new funding—for the EPA and states to address climate change effectively through regulatory initiatives to control greenhouse gas emissions

 

$25 million to aid states in permitting activities for greenhouse gas (GHG) emissions under the New Source Review and Title V operating permits programs

 

$7 million to develop New Source Performance Standards (NSPS) to control GHG emissions from major stationary sources

 

$6 million in new funding to implement the 2010 light duty vehicle rule and to develop regulations for large mobile sources

 

$5 million to develop guidance regarding the best available practices and technologies to control GHG emissions under permitting programs

 

Department of Energy

 

The DOE’s budget requests underscore a strong political will to wean the U.S. economy off fossil sources (and make good on G20 commitments) by cutting $36 billion worth of fuel subsidies and shift renewable energy sources with requests for investment in wind and solar energy research.

 

But, perhaps most notably, the proposal makes a strong statement about U.S. nuclear power, guaranteeing $55 billion in loan funding to build new nuclear power plants and recording a departmental goal to “Commit (conditionally) to loan guarantees for two nuclear power facilities to add new low-carbon emission capacity of at least 3,800 megawatts during 2010.” Reaction to the news has been predictably mixed. (And—I assume since he didn’t address the budget directly—predictably satirical from Stephen Colbert.)

 

OMB breaks down DOE requests further:

 

$36 billion in new loan authority – for a total of $54.5 billion – to expand support for DOE loan guarantees for nuclear power facilities.

 

$500 million in credit subsidy to support $3 billion to $5 billion in loan guarantees for innovative energy efficiency and renewable energy projects.

 

$144 million for research, development, and demonstration activities to modernize the grid including smart-grid technologies that will spur the transition to a smarter, more efficient, secure and reliable electric system, resulting in energy- and cost-saving choices for consumers, reduced emissions, and growth of renewable energy sources.

 

$4.7 billion in clean energy technology investments at DOE, including:

 

Nearly $2.4 billion, an increase of $113 million, for energy efficiency and renewable energy programs including $302 million for solar energy, $220 million for biofuels and biomass R&D, $325 million for advanced vehicle technologies, and $231 million for energy efficient building technologies.

 

$545 million for advanced coal climate change technologies to focus resources to develop carbon capture technologies with broad applications to advanced coal power systems, existing power plants, and industrial sources.

 

$300 million for the Advanced Research Projects Agency–Energy to accelerate game-changing energy technologies in need of rapid and flexible experimentation or engineering.

 

$793 million for clean energy activities and civilian nuclear energy programs, including research and development and infrastructure programs. The budget includes a new cross-cutting research program to address technology needs for all aspects of nuclear energy production.

 

Department of State

 

In conjunction with U.S. Agency for International Development (USAID) and the Treasury Department, the State Department put forth a budget that will provide developing nations $1.4 billion in FY 2011 to address climate change.

 

A drop in the bucket toward $100 billion a year by 2020, the proposal would concentrate international efforts on adaptation, energy development, and ecosystem management programs to improve agricultural practices and support carbon sequestration and storage. Combined with last year’s final tally of about $1.0 billion, even meeting the U.S.’ share of the $30 billion by 2012 pledge in the Copenhagen Accord (likely to be about 25 percent) will require a substantial increase in FY 2012 or some creative accounting.

 

Other notable requests, via OMB:

 

The Department of Transportation: $530 million as part of the President’s Partnership for Sustainable Communities to help State and local governments invest in sustainable transportation infrastructure that integrates with housing development and other critical investments.

 

The Department of the Interior: $73 million—a $14 million increase—to build agency capacity to review and permit renewable energy projects on federal lands.  DOI has set a goal to permit at least 9,000 megawatts of new solar, wind, and geothermal electricity generation capacity on DOI-managed lands by the end of 2011.

 

So where does it go from here?

 

The road from proposed budget to actual budget runs directly through Congress; more specifically it runs through a process outlined in this interactive graphic. (And, while we’re on the subject, NYT has this really cool graphic illustrating funding request sizes. I love alternative ways to illustrate governmental functions. I was a huge fan of School House Rock as a kid.)

 

The process of hearings and congressional consideration got underway in earnest today with Treasury Secretary Timothy Geithner testifying before the Senate Budget Committee and OMB Director Peter Orszag testifying before the House Budget Committee.

 

Tiffany Clements is managing editor of Weathervane.

Published: Feb-02-10 | 0 Comments

Jan29

Could the Murkowski Resolution be Good News for Congressional Action on Climate?

EPA, Congress

 

A somewhat odd coalition of (mostly) moderate Republicans and Democrats have signaled support for Sen. Murkowski's resolution that would kill the EPA endangerment finding for greenhouse gases (GHGs). Most people who favor GHG regulation, including most major environmental groups, have come out against the resolution. But might it actually be a good thing for congressional action on climate? I’ve heard an idea from people here at RFF (who have better D.C. intuitions than I do) that explains how it actually might be.

 

For reasons I explained in an earlier post, I don't think the resolution has any chance of becoming law. Assuming that's right, voting for the resolution is a consequence-free way of registering opposition to EPA regulation of GHGs. Having this kind of opportunity can actually make real climate legislation more likely.

 

I'm abstracting a bit, but imagine there are three groups of senators on climate issues: the left, who want climate action and are less concerned about whether it comes from Congress or the EPA; the right, who don't want any climate action; and moderates, who would support some form of GHG regulation but don't want the EPA to regulate. Even in a (now-hypothetical) world where the Democrats have 60 votes in the Senate, this third group of moderates controls whether climate legislation gets passed.

 

Now look at how the Murkowski resolution fits into this. The left will vote against it, and the right for it—their absolutist positions make the choice easy. Moderates (as always) have a tougher choice, but many will probably support it, as evidenced by those who have signed on already. The resolution presents an opportunity to show opposition to EPA GHG regulation and have it on their records. They can return to their constituencies, credibly claim opposition to looming EPA regulation and use this to defend support for work on new, comprehensive climate legislation. “I tried to stop this, it didn’t work, and now I’m working on a compromise” might be the stump speech. In short, they can use the EPA as a punching bag to defend themselves. That's no fun for the agency, of course, but you can probably see how it might help congressional action on climate over the long run.

 

If this story is right, Democrats on the Senate Environment and Public Works Committee should allow the resolution to reach the floor, even if they oppose it. If the bill dies in committee, moderates won't have a chance to register their votes.  More generally, it’s also a reason for almost everyone to be happy the resolution is out there. Even if you oppose it, it might help reach your goals eventually.

 

It's possible this account is a little optimistic, but its definitely not crazy. In fact, it’s politically very clever. I wish I could take credit for it (it’s been kicking around here at RFF for a few days, from what I gather). In any case, it certainly goes some way toward explaining the odd coalition lining up behind the resolution.

 

Nathan Richardson is a Visiting Scholar at RFF.

Published: Jan-29-10 | 0 Comments

Jan27

Will Courts Set Climate Policy through Nuisance Suits?

Adaptation, Congress, EPA, Environmental Justice

 

A polluter emits something that hurts people in a community. These people get together and sue the polluter. Courts then side with the victims under the common-law tort of nuisance, and award damages (or an injunction shutting down the polluter). Before the era of modern environmental regulation, all pollution-related disputes were solved this way.

 

Regulation has made environmental nuisance suits much less common and less necessary, but they have not disappeared completely. The problems presented by climate change are broadly similar—polluters emit greenhouse gases (GHGs) that ultimately cause harm. In the absence of government regulation of GHGs, can nuisance suits be used to force polluters to reduce emissions or to compensate for adaptation costs?

 

Suits seeking answers to these questions exist and are making their way through courts now. Some of them have made headlines, such as that filed by Kivalina, Alaska—a town on a barrier island formerly protected by Arctic sea ice, but which now faces increasing erosion. The New York Times reported on the case in an article that also discusses some similar cases, including perhaps the most widely-reported, Connecticut v. AEP.  In that case a group of states and private conservationist landowners are suing power companies under a similar nuisance theory.

 

So are these cases going to end up with major judgments that effectively set policy? Is big tobacco going to be the model for redressing harms from climate change? If tobacco is the model, I wouldn’t get your hopes up. But it is likely that these lawsuits will end up playing a big role in the policy process.

 

Despite the relatively high-profile coverage of some of the cases, there is not much for advocates of GHG regulation to be excited about. No climate nuisance case (that I know of) has been successful. The biggest “victory” so far has been in Connecticut v. AEP. Still in that case, the Second Circuit simply reversed a lower court’s comprehensive dismissal of the plaintiffs’ claims.  The appellate court ruled that courts could decide the case in principle (it was not a “political question”) and that the states did have standing to sue over climate harms. This says almost nothing about the plaintiffs’ likelihood of success on the merits of the case. Causation and damages will be big hurdles for the states when the lower court reaches the merits.

 

It’s also possible that EPA action could preempt these suits. The Second Circuit ruled that the lack of EPA GHG regulation left the field open for nuisance suits, but strongly implied that any EPA regulation would preempt them. Connecticut was decided just before the EPA released its endangerment finding for mobile sources in December. It’s likely that any nuisance suit aimed at auto manufacturers would fail for preemption reasons now that the EPA has committed to regulating mobile-source GHGs. If the EPA, as many expect, moves to regulate stationary-source GHGs, then Connecticut itself would presumably be preempted also.

 

This link between EPA regulation and nuisance lawsuits, however, creates a lever through which those suits might still have a big effect on how climate policy gets made—as Jonathan Zasloff at UCLA has pointed out. As nuisance suits proceed, they will put increasing pressure on the EPA to regulate to preempt them since regulation is generally perceived as a superior approach (especially by the EPA itself, one expects). Both nuisance suits and EPA regulation put pressure on Congress to enact climate legislation.

 

Opponents of action on climate are effectively stuck playing whack-a-mole - if they succeed in blocking action in Congress and through the EPA (possibly by getting a Murkowski-style resolution passed), nuisance suits will proceed with unpredictable results. If they quietly let the EPA regulate, those suits go away, along with a lot of pressure on Congress. But Clean Air Act regulation is a bitter pill to swallow. The most likely long-term result seems to be congressional action—opponents can’t push for inaction forever with the twin threats of EPA regulation and nuisance suits.

 

In short, nuisance suits make business-as-usual on climate much less likely, even if they are not themselves very likely to succeed. This should be cause for some optimism about the long term if you are frustrated by the current inability of Congress to enact climate legislation.

 

Nathan Richardson is a Visiting Scholar at RFF.

Published: Jan-27-10 | 0 Comments

Jan27

What I’m Watching for in the State of the Union

Obama Administration, Cap and Trade, COP-15, Congress, Green Jobs

 

Everybody with a keyboard and opinion seems to know exactly what President Obama needs to say tonight for his State of the Union address to be successful. With more than enough pontification and prognostication to go around, I humbly offer a simple snapshot of some climate and energy talking points I’ll be watching for tonight:

 

J-O-B-S: Taking a cue from recent polling data that suggests climate can go farther when paired with employment it’s safe to say the president will connect clean energy development and jobs creation. The likely depth and tone of the president's jobs and energy messages are tougher to pin down, leaving some to hope for the best-case scenario, while others consider the worst.

 

A nod to the global climate community: While President Obama probably won’t bring up this new study ranking the U.S. 61st in the world in terms of environmental performance, a mention of ongoing work on international climate mitigation plans may be in the cards. With the—apparently soft—deadline for countries to submit their emissions mitigation plans coming Sunday, the State of the Union is a good opportunity for the president to reassert his commitment to U.S. leadership on climate change and creating an international deal.

 

A presidential assessment of cap and trade’s prospects: If comments in today’s New York Times from the lone Republican sticking his neck out on climate legislation are any indicator, the Senate may be throwing in the towel—and is at least dialing back expectations—on cap and trade.

 

“Realistically, the cap-and-trade bills in the House and the Senate are going nowhere,” said Senator Lindsey Graham, Republican of South Carolina, who is trying to fashion a bipartisan package of climate and energy measures. “They’re not business-friendly enough, and they don’t lead to meaningful energy independence.”

 

Mr. Graham said the public was demanding that any energy legislation from Washington focus on creating jobs, whether by drilling for offshore oil or building wind turbines.

 

“What is dead is some massive cap-and-trade system that regulates carbon in a fashion that drives up energy costs,” he said.

 

But Sen. John Kerry says he’s not ready to scale back the Senate’s climate bill and a top White House aide is backing his statements, despite numerous suggestions a “plan B” energy-only bill is more politically feasible and likely to garner more support.

 

Given his deference to Congress thus far and the ebb and flow of public attention to the legislation, it seems unlikely that the president would wade too far into this hubbub. Still, in the wake of a move by Alaska Sen. Lisa Murkowski to cut off the Environmental Protection Agency’s authority to regulate greenhouse gas emissions if Congress fails to come up with its own plan, the president may have to say something about the state of play for one of his key issues.

 

What else should we be watching for tonight? What do you expect to hear the president say about climate and energy?

 

Tiffany Clements is managing editor of Weathervane.

Published: Jan-27-10 | 1 Comment

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