Weathervane: A Climate Policy Blog from Resources for the Future

Nov10

IEA Energy Outlook: Capped and Uncapped Futures Could Vary Greatly

Cap and Trade, International, Mitigation, Adaptation

Graph image courtesy nDevilTV via Flickr According to the International Energy Agency’s long-term energy outlook, the worldwide recession will curb energy demand in 2009 but that trend will quickly get back on an upward swing, rising to 40 percent over 2007 levels by 2030.

IEA analysts assume with business-as-usual practices, worldwide demand for fossil fuels will account for 77 percent of overall demand growth by 2030. Moreover, electricity demand will increase 76 percent, requiring the addition of generating capacity five times greater than that of current capacity in the United States.

IEA officials also calculated another scenario in World Energy Outlook 2009 to find what type of energy shift the world would need to stabilize atmospheric greenhouse gasses (GHGs) at 450 parts per million, a number that translates into a 2°C temperature increase — the target agreed upon by leaders of the world’s largest economies last year. Business-as-usual projections put global temperatures on a path to increase as much as 6°C.

Analysts say the 450 ppm goal can be met through a mix of cap-and-trade programs, multinational agreements and considerable funding for adaptation and mitigation technology to lower atmospheric concentrations of GHGs. Meeting the goal of 450 ppm, according to IEA analysts, will require the additional investment of some $10.5 trillion in the global energy sector between 2010 and 2030.

More details from the IEA’s World Energy Outlook 2009 can be found here. Environmental Capital’s Keith Johnson unpacks more of the numbers here and Joe Romm delves into the story at ClimateProgress.

Tiffany Clements is managing editor of Weathervane.

Published: Nov-10-09 | 0 Comments

Jul20

Policy, Innovation and Climate: Strategies to Spur Climate-Friendly Technology

CO2, Renewables, Mitigation

Image Courtesy solarpowerforyou via Flickr China and Great Britain made headlines in recent weeks with their large-scale plans to develop and implement clean energy technologies. With international climate negotiations looming, policymakers around the world are drafting plans, searching for new ways to reduce emissions of greenhouse gasses through green energy technology.

The main policy tools for developing climate-friendly technologies should be those that encourage the market to make good choices—pricing carbon emissions and other environmental damages, removing distorting subsidies and barriers to competition, and supporting research and development broadly, according to RFF Senior Fellow Carolyn Fischer.

In "The Role of Technology Policies in Climate Mitigation," a new RFF issue brief, Fischer suggests key ways to bring about clean-energy advances through public policy.

"The most important technology-neutral policy and the core of any cost-effective approach must be a strong and increasing price signal across the entire economy that carbon emissions are costly," she writes.

Emissions pricing can be implemented either through a carbon tax or a broad-based cap-and-trade system, she notes, but there are strong arguments for a primary reliance on carbon pricing.

First, technologies are only useful if people want to use them, and financial self-interest is the primary driver for most participants in a market economy. "Carbon pricing makes clean technologies more cost-competitive and provides 'market pull' by encouraging their adoption," says Fischer.

Second, many options are available for reducing emissions. There is a huge array of technological solutions for electricity generation, production processes, building materials, and consumer appliances. "No command-and-control regulation could efficiently prescribe all the appropriate activities that should be undertaken," Fischer says. "Carbon pricing, on the other hand, creates incentives to do all these things: use less carbon-intensive fuels and products, conserve energy, and develop and deploy emissions-reducing technologies."

While necessary, emissions pricing alone is not sufficient for supporting the scale of technology development and deployment that is needed. Appropriate technology policies are needed to complement the price signals , among them such approaches as tougher building codes and energy efficiency standards, prizes for technical innovation, directed research in publicly funded laboratories, and international technology partnerships.

“Priority should be given to policies that enhance overall economic efficiency – broad R&D support, removing distortions, addressing regulatory barriers, reducing tax burdens, improving information, and supporting fundamental research,” says Fischer.

Stan Wellborn is director of public affairs at Resources for the Future.

Published: Jul-20-09 | 0 Comments

Jul08

New U.S. Incentives for a Copenhagen Agreement

COP-15, Adaptation, International, Mitigation, Congress, Obama Administration

The new global climate agreement nations hope to reach in Copenhagen this December is different from many international agreements the United States is accustomed to negotiating. It will not be simply a reciprocal exchange of similar commitments by developed and developing nations (as with trade or arms control deals). Rather, to provide incentives for developing nations to make international climate pledges—and ensure a level playing field for U.S. manufacturers—the United States and other developed nations must provide funding for adaptation and mitigation, and allow developing countries some say in how this money is spent through existing or new international institutions. Aside from the issue of institutions, which can be dealt with later, this type of negotiation raises several key questions. How much funding is needed globally? What is an equitable U.S. share? What is included in current legislation, and how do these figures all match up?

While my last post dealt primarily with the third question, as debate moves to the Senate it is important to analyze how these funding levels compare to projected global needs, and thus how they will be perceived by the international community in the context of negotiating a new climate agreement. An initial analysis of the American Clean Energy and Security Act allowance allocations reveals several insights.

(1) The ACES is a good start, but even using conservative estimates of global needs the overall funding level in the bill is likely to be lower than the world is expecting, especially since some countries do not “count” private sector financing through offsets as a legitimate contribution. Although the U.S. State Department undoubtedly informed discussions in the House about the level of funding they need to secure an agreement, it may not have been politically possible to secure this level of allowance value and the Senate should consider alternative funding approaches.

(2) Financing for international forest conservation is much closer to the equitable U.S. share than adaptation or clean technology deployment. This is not surprising given the substantial expected cost-containment benefits from forests, and the United States’ strong bipartisan tradition of support tropical forest conservation.

(3) Financing for clean technology deployment in particular falls drastically short of what the world is expecting. Although this pool of funding has the potential to create U.S. jobs through clean energy export promotion, critics have pointed out that it could also be seen as paying other countries to become more competitive. How this funding is distributed and managed will therefore be critical, and increasing support will require innovative new programs or institutions better aligned with the interests of U.S. policymakers.

Potential 2020 Public and Private Financing Compared to Global Needs and U.S. Share (in millions)

	Global Needs	U.S. Share [1]	Included in H.R. 2454[2]
Adaptation	$10,000-30,000[3]	$2,000-6,000	Public: $721-914 Private: $0 Total: $721
International Forest Conservation	$17,000-33,000[4]	$3,400-6,600	Public: $3,243-4,580 Private: $4,680-11,636 Total: $7,923-16,216
Clean Technology Deployment	$75,000-110,000[5]	$15,000-22,000	Public: $721-914 Private: $1,560-5,818 Total: $2,281-6,732

[1] U.S. share is assumed to be at least 20% of the global total, based on past contributions to multilateral initiatives or institutions.

[2] Ranges for private sector financing are calculated based on estimates of offset price, supply, and source in 2020 from EPA, the Congressional Budget Office, and Project Catalyst.

[3] Project Catalyst, Towards a Global Climate Agreement, Synthesis Briefing Paper, 2009. page 17

[4] Johan Eliasch, Climate Change: Financing Global Forests, UK Office of Climate Change, 2008. page 76

[5] Project Catalyst, 2009. page 17

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

Published: Jul-08-09 | 0 Comments

Jun09

Tropical Forest Conservation in Waxman-Markey

Forest Carbon, International, Waxman-Markey, Mitigation

For many environmental advocates, the generous forest conservation provisions in the Waxman-Markey energy bill (summary here) are a no-brainer. They target one of the world’s largest—20 percent of the global total—and most cost-effective—about half the world’s deforestation at under $10 per-ton—sources of greenhouse gas emissions reductions while protecting some of the world’s most treasured natural places.

It seems these provisions provide something for everyone, as they have found support from a broad coalition of stakeholders. U.S.-regulated entities like the potential cost-containment benefits from offsetting up to 1.5 billion tons of their emissions by paying for cheaper reductions in developing nations, and that forest conservation does not create competitiveness concerns. The global development community likes the possible poverty reduction benefits of channeling an additional $10 billion per year by 2015 in what could be seen as U.S. foreign aid to tropical forest nations. Climate policy wonks like that this forest financing will strengthen U.S. participation in ongoing global negotiations.

Is it possible, therefore, that these provisions could survive attacks from equally-strong skeptics of offsets, foreign aid, and climate action during House and Senate debates?

As the debate unfolds, expect three key issues to come into play:

1) Whether the uncertainties in Waxman-Markey’s forest “set-aside” provisions can be clarified.

Currently the bill allocates 5 percent of allowance values (Section 753(b)(1)) for the purchase of “supplemental emissions reductions”—not offsets—solely from international forest conservation. This “set-aside” must be used to purchase 720 million tons of emissions reductions per year from 2020 to 2025 and 6 billion tons overall from 2012 to 2025, and the EPA administrator is required to increase the allowance allocation if necessary to meet this target.

Based on reasonable assumptions about the size of the cap-and-trade program and cost of forest tons, including analysis done by EPA, the U.S. will be lucky to purchase half that amount (about 300 million) with the current 5 percent set-aside. Meeting the required amount may require saving up money in the initial years to spend later, but even this approach cuts it close, and will take away funds from needed capacity building in early years. Does the EPA have the authority or the will to actually follow-through with this requirement? Where will these allowances come from (they’re certainly not going to come without a fight)?

2) Whether the U.S. can demonstrate a plausible pathway to delivering offset tons from forests when cap-and-trade kicks off in 2012.

Forest carbon transactions in voluntary carbon markets accounted for about 7.5 million tons in 2007. With the relatively stringent requirements in the bill for developing countries’ participation in U.S. carbon markets—and the current low levels of market-readiness in many of these countries—how will they be ready to potentially deliver 1 billion or even 100 million tons in 2012? One answer is that they need funding for policy-planning and capacity building, on the order of several billion dollars per year between 2010 and 2012.

The good news is that these needs are being addressed by international negotiators in Bonn as we speak—including a strong U.S. forest team—and through other initiatives. The question is, will it be enough? Should the U.S. allocate substantial additional funds in its FY10, FY11 and FY12 foreign aid budgets to specifically target this issue? Or is there another innovative solution out there?

3) Whether the institutional structure that manages these forest programs can be strengthened.

Currently, the bill places authority to manage the forest set-aside and offsets programs with the EPA, in consultation with the State Department and several other departments. This is not ideal for several reasons. First, although the EPA has expertise in environmental markets, these forest programs will require much greater on-the-ground international development and conservation experience, and international environmental negotiation experience than it possesses. With the amount of funding on the table—about $10 billion per year, as stated before—and the need to get the most bang for the buck, it may make sense to create a specialized agency with expertise in all of these key areas. What should this agency look like? How should it be structured to most effectively manage these new funds and programs?

These are some of the key questions that academics and environmental organizations—including RFF’s climate and forest carbon policy teams—will be seeking to answer over the next several months. If policymakers are going to continue to support strong forest conservation provisions in U.S. climate policy, which many stakeholders would argue are absolutely essential from a scientific and economic perspective, these salient questions will need good, robust answers.

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

Published: Jun-09-09 | 3 Comments

May27

EIA Releases Global Energy Demand Forecasts

CO2, International, Mitigation

The Energy Information Administration released the findings of its 2009 International Energy Outlook (here) today, projecting a 73 percent growth in energy demand from developing, non-OECD nations, and a 44 percent demand growth globally by 2030.

Based on its consumption projections the EIA forecasts a 39 percent increase in carbon dioxide emissions, assuming no large-scale mitigation plan is implemented. Over 90 percent of the increase comes from the developing world, and EIA forecasts that by 2030, non-OECD emissions will exceed OECD emissions by 77 percent compared to 2006.

Tiffany Clements is managing editor of Weathervane.

Published: May-27-09 | 0 Comments

May12

RFF Alums Survey Mitigation Landscape

Mitigation, Obama Administration

For a look at what several recently-appointed federal environmental and economic officials (who happen to be RFF alums) consider top priorities in planning climate mitigation policy, check out this new RFF discussion paper, produced while Aldy and Pizer were senior fellows at RFF.

In it RFF Senior Fellows Alan Krupnick and Ian Parry, along with Joseph Aldy (on leave from RFF, now serving in the Obama Administration), William Pizer (now working for the Treasury Department), and recently-nominated Energy Information Administration Administrator Richard Newell outline current thinking about how policies should be structured, what goals should be, and what instruments could help policymakers reach those goals.

Tiffany Clements is Managing Editor of Weathervane.

Published: May-12-09 | 0 Comments