Climate Policy Webinar: Prospects for 2010


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April 21, 2010 - As the 111th Congress makes its spring and summer push for climate and energy legislation, at least four major proposals are under consideration. The proposals, similar in their intent to reduce carbon emissions and promote clean energy, differ in framework, reach, and importantly, the role of energy efficiency as a clean energy resource. Today, the Alliance to Save Energy held a webinar on alternative approaches to energy and climate.

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Climate Policy Webinar: Prospects for 2010

  1. 1. Climate Policy in 2010: Prospects and Alternatives Webinar - April 21, 2010 All materials from today’s webinar will be available:
  2. 2. Today’s Speakers <ul><li>Brad Penney, Director of Government Relations, Alliance to Save Energy </li></ul><ul><li>Amit Ronen , Office of Senator Maria Cantwell </li></ul><ul><li>Neil Brown , Office of Senator Richard Lugar </li></ul><ul><li>Lowell Ungar , Director of Policy, Alliance to Save Energy </li></ul><ul><li>Dave Hamilton , Director of Global Warming and Energy Program, Sierra Club </li></ul><ul><li>All materials from today’s webinar will be available: </li></ul>
  3. 3. What is the Alliance to Save Energy? <ul><li>Mission: </li></ul><ul><li>To promote energy efficiency worldwide to achieve a healthier economy, a cleaner environment, and greater energy security. </li></ul><ul><li>The Alliance is… </li></ul><ul><li>Staffed by 60+ professionals </li></ul><ul><li>31 years of experience in policy, research, education, communications, technology deployment and market transformation </li></ul>
  4. 4. The CLEAR Act C arbon L imits and E nergy for A merica’s R enewal Amit Ronen Office of Senator Maria Cantwell
  5. 5. What is the CLEAR Act? <ul><li>A simple, market-based way to reduce CO 2 emissions while protecting household incomes. </li></ul><ul><li>An innovative policy that limits fossil carbon as it enters commerce, sends consistent, economy-wide price signals on fossil fuels, and recycles most of the revenues to households. </li></ul><ul><li>A source of funding for new clean energy investments, mitigation of a broad suite of greenhouse gases, climate change adaptation, and other climate-related priorities. </li></ul><ul><li>A policy that safeguards the climate by cutting greenhouse gases in keeping with state-of-the-art science. </li></ul>
  6. 6. Policy Overview <ul><li>Upstream cap on fossil carbon achieves broad, economy-wide coverage of fossil carbon. </li></ul><ul><li>Carbon cap in conjunction with additional measures to reduce non-CO2 greenhouse gases meet global warming emissions reduction standards: </li></ul><ul><ul><li>20% emissions reduction (from 2005 level) by 2020; </li></ul></ul><ul><ul><li>30% emissions reduction (from 2005 level) by 2025; </li></ul></ul><ul><ul><li>42% emissions reduction (from 2005 level) by 2030; </li></ul></ul><ul><ul><li>83% emissions reduction (from 2005 level) by 2050. </li></ul></ul><ul><li>100% auction establishes accurate price signal and protects consumers from industry windfalls. </li></ul><ul><li>Equal monthly dividends to all individuals residing legally in the U.S. from 75% of auction revenues -- keeps all but the wealthiest 20% (who use the most energy) whole. </li></ul><ul><li>Dedicated energy and climate fund from 25% of auction revenues pays for key climate programs. </li></ul><ul><li>Price safeguards act as insurance against price volatility and excessive costs. Policy does not add to federal deficit </li></ul>
  7. 7. Upstream Cap on Fossil Carbon Upstream cap covers all fossil carbon entering the economy, completely and equitably Price signal passed downstream, leaving all midstream user revenue neutral Price signal passed through to end consumers who are reimbursed with dividend COAL NATURAL GAS PETROLEUM Mining/ Imports (500 companies) Production Wells/ Imports (750 natural gas/ petro companies) Production Wells/ Imports (750 natural gas/ petro companies) Rail, Barge, Trucking, and Power Plants Pipelines, Processing, Boilers, Furnaces, and Power Plants Refining, Mobile Sources, and Power Plants Products, Electricity, and Gasoline Upstream Midstream Consumers Dividend Only a few thousand entities with compliance obligation ensure minimal and accurate regulation
  8. 8. Fossil Carbon Limits <ul><li>Reasonable and knowable emission reduction curve allows time for technological breakthroughs and avoids premature dismantling of capital investments. </li></ul><ul><li>Emissions still decline by 80+ percent of 2005 levels by 2050. </li></ul>
  9. 9. CLEAR Act Actually Decarbonizes Economy 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2012 2015 2020 2025 2030 2035 2040 2045 2050 Percent Emissions Reduction (relative to 2005 levels) CLEAR Act: gross emissions reductions from: CLEAR Act: net emissions reductions from: HR 2454 (IGEM Scenario 2) - gross emissions reductions from: HR 2454 (IGEM Scenario 2) - net emissions reductions from: <ul><li>Fossil carbon cap </li></ul><ul><li>Assumes 12% of CERT for non-CO2 domestic mitigation </li></ul><ul><li>Gross emissions reductions </li></ul><ul><li>Assumes 30% of CERT for additional offset-like projects </li></ul><ul><li>Greenhouse gas cap (excluding HFC cap) </li></ul><ul><li>Domestic mitigation offsets </li></ul><ul><li>Projections of banking </li></ul><ul><li>Gross emissions reductions </li></ul><ul><li>All other offsets including discounted offsets </li></ul><ul><li>International forestry set-asides </li></ul>2012-2050 Cumulative Emissions: 243 Gigatons CO 2 e 2012-2050 Cumulative Emissions: 175 Gigatons CO 2 e 2012-2050 Cumulative Emissions: 185 Gigatons CO 2 e 2012-2050 Cumulative Emissions: 156 Gigatons CO 2 e
  10. 10. Price Safeguards <ul><li>Floor ($7) and ceiling ($21) prices rise annually at 6.5% and 5.5% real rates, respectively. </li></ul><ul><li>All valid bids are accommodated at the safety valve price. </li></ul><ul><li>All revenues from carbon share sales in excess of the cap at the ceiling price are directed to the CERT Fund, explicitly for non-CO2 greenhouse gas mitigation. </li></ul>
  11. 11. Refund Covers Consumer Costs Source: Boyce and Riddle (2009), assumes 80% refund, $25 per ton permit price. Net Impact of Cap and Refund Nationally, only the top two income deciles incur a net cost after the refund. <ul><li>75% of auction revenues distributed on an equal per capita basis returned tax-free each month to all individuals residing legally in the U.S. </li></ul><ul><li>Several existing programs prove this is logistically possible </li></ul>1 2 4 3 6 5 7 10 9 8
  12. 12. Energy and Climate Trust Fund (1) <ul><li>The C lean E nergy R einvestment T rust (CERT) Fund accelerates and eases the transition to a green economy through: </li></ul><ul><li>Targeted and region-specific transition assistance to workers, communities, industries, and small businesses of the United States experiencing the greatest economic dislocations due to efforts to reduce carbon emissions and address climate change and ocean acidification; </li></ul><ul><li>Targeted and region-specific compensation for early retirement of carbon-intensive facilities, machinery, or related assets in the United States that are stranded by new market dynamics; </li></ul><ul><li>Targeted relief for energy-intensive industries, including agriculture and forestry, that export their goods or products to countries that do not impose similar limits or fees on fossil fuels; </li></ul><ul><li>Training and development programs to prepare United States workers for careers in energy efficiency, renewable energy, and other emerging clean technology industries; </li></ul><ul><li>Mitigation of greenhouse gases other than carbon dioxide from fossil carbon and non-greenhouse substances that exacerbate or accelerate climate change (such as black carbon); </li></ul>
  13. 13. Energy and Climate Trust Fund (2) <ul><li>Cost-effective domestic and international projects that verifiably reduce, avoid, or sequester greenhouse gas emissions, such as agriculture, forestry, or other land use practices; </li></ul><ul><li>Investments in low and no carbon energy and fuels research, development, and deployment activities; </li></ul><ul><li>Projects or initiatives that verifiably increase energy efficiency or energy productivity; </li></ul><ul><li>Projects or initiatives that support residential fuel switching, particularly home heating oil; </li></ul><ul><li>Projects and loans that verifiably increase energy efficiency and otherwise might not be undertaken without assistance; </li></ul><ul><li>Weatherization and energy efficiency improvements of low-income and public buildings; </li></ul><ul><li>Funding for climate change or ocean acidification mitigation and adaptation projects, activities and research to increase the resilience of human populations and communities, fish and wildlife, and managed and unmanaged terrestrial, aquatic and marine ecosystems in areas and countries in which impacts are likely to be most severe; </li></ul><ul><li>Programs that protect or advocate for energy consumers; </li></ul><ul><li>Ensuring that the program does not contribute to the Federal budget deficit. </li></ul>
  14. 14. Carbon Leakage <ul><li>The CLEAR Act requires border equalization fees for the “production-process carbon” in imported, energy-intensive commodities as long as they are: </li></ul><ul><li>Consistent with all trade agreements to which the United States is a party, including World Trade Organization (WTO) obligations </li></ul><ul><li>Applied only to imports from countries without comparable carbon limits or fees </li></ul><ul><li>Restricted to industries with demonstrable disadvantages and international exposure </li></ul>
  15. 15. Carbon Sequestration <ul><li>The CLEAR Act also offers robust incentives for the commercialization and adoption of carbon capture and sequestration technologies: </li></ul><ul><li>A midstream entity sequestering carbon would be granted carbon shares commensurate with the amount of fossil carbon that is embedded or sequestered, which can then be monetized. </li></ul><ul><li>These “bonus” carbon shares are issued in addition to shares auctioned under the CLEAR Act’s upstream cap because this fossil carbon is permanently prevented from release into the atmosphere. </li></ul><ul><li>Compensation is provided to manufacturers who purchase fossil fuel feedstocks used to produce goods (like plastics or fertilizer) that permanently embed carbon and prevent its release to the atmosphere. </li></ul>
  16. 16. Carbon “Offsets” <ul><li>The CLEAR Act provides direct funding for a wide variety of agriculture, forestry and energy efficiency projects, but treats them as additional mitigation activities, rather than substitutes for emissions reductions, commonly known as “offsets.” </li></ul><ul><li>Treating these projects as additional allows the CLEAR Act to achieve its mitigation targets while avoiding excessive reliance on questionable international agriculture and forestry activities. </li></ul><ul><li>By prohibiting the use of offset-like activities to satisfy compliance obligations, the CLEAR Act achieves a true decarbonization of the economy and ensures that emitters change their behaviors and practices to reduce carbon intensity. </li></ul>
  17. 17. Carbon Equality <ul><li>Under the CLEAR Act’s upstream cap, regional fossil fuel intensities do not vary widely and fossil carbon prices are passed downstream equally to all users, so the program will not result in significant net regional redistribution of income. </li></ul>Source: Burtraw, Sweeney, and Walls (2009), Resources for the Future.
  18. 18. Neil Brown Office of Senator Lugar <ul><li>Lugar Practical Energy and Climate Plan </li></ul><ul><li>Six page legislative outline released March 25 </li></ul><ul><li>Four Titles: </li></ul><ul><ul><li>Reducing Oil Dependence </li></ul></ul><ul><ul><li>Energy Efficiency </li></ul></ul><ul><ul><li>Diverse Domestic Power </li></ul></ul><ul><ul><li>Measurement and Review </li></ul></ul><ul><li>Outline available at </li></ul>
  19. 19. Variables Affecting a Climate Bill this year <ul><li>Short legislative calendar </li></ul><ul><ul><li>mid-term elections </li></ul></ul><ul><ul><li>Supreme Court nomination factor </li></ul></ul><ul><li>Need for 60 votes in Senate </li></ul><ul><li>Impact of off shore drilling and nuclear subsidies unclear </li></ul><ul><li>Where are utilities on the bill if changes from W/M are as reported? </li></ul><ul><li>House wants to resolve differences in Conference; is there time? </li></ul><ul><li>Would House accept a Senate passed bill? </li></ul>
  20. 20. Rumors on the Kerry-Graham-Lieberman (KGL) Proposal Lowell Ungar Director of Policy Alliance to Save Energy
  21. 21. KGL Rumors - Cap <ul><li>Economy-wide with similar reductions to ACES and CEJAPA </li></ul><ul><li>Sectoral approach </li></ul><ul><ul><li>Stationary sources under cap—first power plants then industrial </li></ul></ul><ul><ul><li>Transportation may be by linked fee </li></ul></ul><ul><li>Don’t call it cap-and-trade or gas tax </li></ul>
  22. 22. KGL Rumors Cost Containment <ul><li>Hard price collar (may start at $10-30 per ton, increasing) </li></ul><ul><li>Strategic reserve of allowances </li></ul><ul><li>Offsets? </li></ul>
  23. 23. KGL Rumors – Energy Policy <ul><li>Most energy policy left to Energy Committee—presumably ACELA to be added later </li></ul><ul><li>Nuclear subsidies </li></ul><ul><li>Off-shore drilling </li></ul>
  24. 24. KGL Rumors - Allocations <ul><li>Phase out free allocations by 2030—more to consumers </li></ul><ul><li>More allocations to electric utilities in first few years </li></ul><ul><ul><li>May be change in distribution—more based on historical emissions </li></ul></ul><ul><li>May be less allocations for energy efficiency </li></ul><ul><ul><li>Natural gas companies fighting 1/3 set-aside </li></ul></ul><ul><ul><li>No separate allocation to states </li></ul></ul>
  25. 25. Climate Legislation in Context <ul><li>Dave Hamilton </li></ul><ul><li>Director of Global Warming and Energy Program </li></ul><ul><li>Sierra Club </li></ul>
  26. 26. Thank you! <ul><li>Brad Penney </li></ul><ul><li>Director of Government Relations </li></ul><ul><li>Alliance to Save Energy </li></ul><ul><li>202-530-4348 </li></ul><ul><li>[email_address] </li></ul>
  27. 27. Sen. Lisa Murkowski George David Former Chairman and CEO, United Technologies Corp. Rep. Edward Markey James E. Rogers Chairman, President & CEO, Duke Energy Christopher B. Curtis President & CEO, N.A. Operating Division & Buildings Business, Schneider Electric Robert J. Dixon Sr. VP & Global Head, Efficiency & Sustainability, Building Automation, Siemens Building Technologies Inc. David Szczupak EVP, Global Product Organizations, Whirlpool Corp. Nobuo Tanaka Executive Director, IEA Sen. Mark Pryor