Dec08 Climate Change Presentation

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The climate change public policy agenda for the United States in 2009

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Dec08 Climate Change Presentation

  1. 1. The Climate ChangeThe Climate Change Agenda in 2009Agenda in 2009 December 17, 2008 Kevin M. Dempsey
  2. 2. 2 Two Track Agenda on Climate ChangeTwo Track Agenda on Climate Change • Cap and Trade Legislation  Obama commitment: reduce emissions to 1990 levels by 2020 and 80% below 1990 levels by 2050  U.S. emissions in 2007 were 16.7% above 1990 levels  Appointments of energy/climate czar and Energy Secretary show priority of climate change agenda  EPA rulemaking under Clean Air Act remains underway • Copenhagen Conference in December 2009  Treaty to replace Kyoto Protocol in 2013  Major issues unresolved at Poznan conference  World waiting for new U.S. Administration
  3. 3. 3 U.S. Climate Change LegislationU.S. Climate Change Legislation • Cap and Trade vs. Carbon Tax  Cap and trade approach most favored on the Hill  Waxman, Dingell, Markey, Boxer, Lieberman, Bingaman  CBO and many economists favor carbon tax as more economically efficient • Advantages of Cap and Trade Approach  Environmental certainty on level of emissions  Easier to grant subsidies through free allowances  Linkage with rest of world  Kyoto Protocol endorsed emissions trading  EU, Australia, New Zealand pursuing cap and trade
  4. 4. 4 History of Cap and Trade: Acid RainHistory of Cap and Trade: Acid Rain • Adopted in 1990 after Decade of Debate  Capped SO2 emissions from coal-fired power plants  Allowances allocated based on historical data • Technological Solutions Well-Established  Scrubbers, low-sulfur coal • Main Goal: Regional Cost-Sharing  Burden focused on Appalachia and Mid-West  Bonus allowances for retrofitting scrubbers  Many companies banked allowances for later use  Regulators kept electricity prices under control
  5. 5. 5 EU Cap and Trade ExperienceEU Cap and Trade Experience • Emissions Trading System – Phases I and II  Over-allocation of allowances led to price collapse  Windfall profits for electricity producers  Criticism of Clean Development Mechanism credits • Updated Scheme for Post-2012  2020 goals: 20% emissions reduction, 20% renewable energy, 20% increase in energy efficiency  Begin auctioning allowances in 2013, full phase-in by 2027  Sectors exposed to risk of carbon leakage and eastern utilities will get free allowances for transition period  Increased ability to use international offset credits
  6. 6. 6 Major Issues in Cap and Trade LegislationMajor Issues in Cap and Trade Legislation • Allocation of Allowances  Free vs. auctions  Significant energy price impact expected • Offsets  Additionality/potential for abuse • Carbon Leakage/Competitiveness  Border measures and/or free allowances • Technology Alternatives  No silver bullets – need more research and development  Tech industry role could be key
  7. 7. 7 Timing of U.S. Climate Change LegislationTiming of U.S. Climate Change Legislation • Pressure to Move Legislation before Copenhagen • Difficult to Enact Final Bill by End of 2009  Bills to date have been extremely complex  Clean Air Act Amendments of 1990 took two years to enact  Senate dry-run on cap and trade in June 2008 failed after only 48 Senators voted to end debate (6 supporters absent) • Action in Committees and/or in House Possible in 2009  New Chairman Waxman – committed to move quickly • Key Question: Path to Senate Passage?  Letter from 10 Democratic Senators
  8. 8. 8 International NegotiationsInternational Negotiations • Kyoto Protocol  Negotiated in 2007; took effect in 2005  Developed countries to reduce emissions by 5.2% on average below 1990 levels by 2012 • Bali Roadmap in December 2007  New treaty for post-2012 to be negotiated by December 2009 in Copenhagen  Developing countries agreed to “nationally appropriate” mitigation if given technology and adaptation funding • Poznan Conference  Officially launched Adaptation Fund, but no agreement on source of funding or on technology transfer
  9. 9. 9 What Must Be Agreed in CopenhagenWhat Must Be Agreed in Copenhagen • Emissions Reductions Goals for Developed Countries  Binding obligation to reduce 80% by 2050, goal for 2020? • Commitments by Developing Countries  Environmental imperative: China now largest emitter  Political imperative: Essential for U.S. ratification (remember 1997 Byrd/Hagel Resolution) • Adaptation Fund  Estimates as high as $50-100 billion needed per year  Source of funds? • Technology Transfer  Risk of compulsory licensing?
  10. 10. 10 ConclusionsConclusions • Legislation More Likely in 2010 than 2009  Will require significant compromises, especially in Senate  Filibuster threat will be real  Opportunity for tech industry to position itself as part of the clean energy solution • Adoption of New Treaty a Serious Challenge  Developing countries must make measurable commitments  Treaty needs 67 votes in Senate for ratification  Where to get funding for developing country adaptation?  Technology transfer pressure a risk to tech industry
  11. 11. 11 Thank youThank you For additional information, please contact: Kevin M. Dempsey Dewey & LeBoeuf LLP kdempsey@dl.com (202) 346-7997

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