Top 5 Climate & Energy Issues for US Business in 2010: Rocky Road or French Silk?
5. Where Will Things Go Internationally?
Coming out of the United Nations Conference of the Parties (COP) in Copenhagen, the role of the COP in international climate negotiations is in flux. Some issues will be negotiated in this forum, yet other issues may move out of this forum. The role of the Copenhagen Accord is uncertain. It remains to be seen what new governance structures will emerge and where different countries will place their political priorities. Relatedly, enhanced China-US bilateral cooperation on reducing emissions and sharing technology promises to be an important prong of the Obama Administration in 2010.
Business Concern: Private sector interests from both climate change risk and opportunity perspectives will need to monitor and understand the direction of international negotiations and cooperation particularly as related to climate finance and post-2012 carbon market design.
Continue Reading...Copenhagen Outcomes: Lots of Bark, But The Bite Needs Work
Heading into Copenhagen, I provided a “Fab 5” of necessary outcomes for COP-15 to be a success. The Copenhagen Accord took a number of pragmatic steps on finance, accountability and endorsing market-based approaches to tackling the challenge of global climate change. The Accord will likely play well in the US Senate with a view to getting more support for domestic action through cap-and-trade legislation as it brings China, India, Brazil and South Africa along in bending the curve of business-as-usual emissions. It also establishes accountability procedures for developing countries to report on those obligations through the Conference of the Parties. Additionally, the next commitment period of the Kyoto Protocol, never popular in domestic politics, appears dubious at best. So these issues play well domestically.
However, in the trade-off for these pragmatic steps, the United Nations Conference of the Parties process was left in tatters. While most countries signed on to the Copenhagen Accord, it was done so with a disdain for the process and skepticism for the result. It will be difficult to regain the level of political momentum and multilateral engagement that was achieved in the lead up to Copenhagen through the UN. Science-based targets to reduce emissions backed by a legally binding UN treaty to fulfill all commitments were lost, for now, in that effort.
Continue Reading...Peter Gray Discusses Copenhagen & US Climate Change Legislation on Fox Business Network
During a December 15 interview with Fox Business Network, Peter Gray discusses what has been happening in Copenhagen and how the talks there could change the way companies do business in the US.
To watch the interview, please visit: http://video.mww.com/ftpupload/FTPinbox/15/FoxBiz-Gray-12-15-09.wmv.
Economy-Wide Cap-and-Trade Doubtful; Narrower Bill May Fare Better
Climate change policy experts speaking on the first day of the "Carbon Economy" summit in Washington, DC, sponsored by The Economist, expressed skepticism over the chances of passing an economy-wide cap-and-trade bill in 2010.
Continue Reading...Two Climate Takes On Warren Buffet & Burlington
It can happen from time to time that there are different viewpoints in a practice group. Here are two perspectives from attorneys on MLA’s climate team regarding Warren Buffet’s planned purchase of Burlington Northern Santa Fe Corp. The bloggers suggest what the financial guru’s $34 billion investment implies for coal and cap-and-trade legislation.
Continue Reading...Climate Legislation and The Redskins
Its fall in Washington, DC and there are two things most have agreed upon this season: the Redskins football squad looks bad as do any hopes of the Senate passing climate legislation prior to UN negotiations in Copenhagen. While the Redskins offense continues to lack a passing game, a new playbook focused on corporate leadership and bipartisanship may be turning things around in the Senate. Yet pessimism remains as some observers believe one key political gap is a quarterback in the White House who will engage and make it a legislative priority.
Continue Reading...Health Care Legislation > Climate Change Legislation > Copenhagen Agreement on Emission Limits
President Obama's address on health care reform to joint session of Congress, as well as the rancorous reactions by some Republicans, leads me to the following inescapable conclusion: the chances of Congress passing climate change legislation in 2009 just got a lot dimmer. The President has essentially thrown down the gauntlet and staked his reputation -- indeed perhaps even his presidency -- on succeeding in passing comprehensive health care reform. We can expect a full court press by the White House to get a bill passed and signed into law. And given the obvious level of rancor and opposition, you can expect this to be an all-out brawl. That means that few resources will be diverted from this battle to pass climate change legislation. Senate leaders have already laid the groundwork for a hiatus on climate change legislation. Environment and Public Works Chairwoman Barbara Boxer (D-Calif.) had been slated to introduce the bill after returning from the August recess. In a joint statement with Foreign Relations Chairman John Kerry (D-Mass.), she said the bill is now expected “later in September.”
Continue Reading...Swing Votes in the Senate on Climate Change
As the Senate prepares to consider energy and climate legislation this Fall, the vote counting begins again on cap & trade. Assuming a cap & trade bill moves forward, 60 votes are necessary for a procedural vote (cloture) to cut off debate on a motion to proceed on a floor vote. Reaching this filibuster proof 60 vote count threshold remains a steep hill to climb despite 59-60 Democratic votes in the Senate. Climate positions don’t fall along party lines. Further, the challenge has just grown harder with Senator Kennedy’s death and no replacement likely until January 2010.
Climate Change Insights takes a look at three swing Senate votes that are indicative of the political landscape and substantive policy issues in play. There are different accounts of how various Senators might vote but it is fair to say that the following 3 Senators are representative of the key issues under consideration: the level of ambition for greenhouse gas (GHG) reduction targets, industry specific allowances, protections and incentives, a priori limits on the price of carbon and pure politics.
Continue Reading...Why the Tariff Provisions in the American Clean Energy & Security Act (ACESA) Will Survive
I previously wrote that the Obama Administration should back off its opposition to language in Waxman-Markey that imposes a tariff on imports from countries that do not require equivalent levels of GHG emissions reductions. This tariff provision is the only effective way to discourage US businesses from moving production overseas to countries with less stringent climate change laws, thereby defeating the goals of cap-and-trade by emitting over there what they cannot emit here. Opponents to the tariff provision claim that the bill's generous allocation of free emission allowances compensates firms for this disparity and thereby levels the playing field so that competitors in foreign countries lacking carbon emission controls do not enjoy a competitive advantage over carbon-capped US businesses.
Continue Reading...Palin's Folly
To kick off her new career as a pundit, Alaska Governor Sarah Palin has chosen to train her critical eyes on the climate change legislation under consideration in Congress. Unfortunately, instead of sharing new thinking, insights or ideas, Gov. Palin's punditry is nothing more than a rehash of the party line.
Palin's column does not even mention "climate change" or "renewable energy"! Instead, she frames the issue entirely as a question of how best to achieve energy independence and security. President Obama's "cap-and-trade energy tax" is the wrong approach, she says, because it makes "energy scarcer and more expensive." A better approach to energy independence, she says, would be...say it with me...drilling in the Arctic National Wildlife Refuge. (She's also comfortable with mining more coal.)
Continue Reading...House of Representatives Passes Groundbreaking Climate and Energy Bill -- The American Clean Energy and Security Act (ACESA) Now Heads to the Senate for Debate
Late last week, the House of Representatives narrowly approved game-changing climate change legislation, the American Clean Energy and Security Act (ACESA), also called Waxman-Markey (HR 2454), the first major environmental legislation to be approved by either the House or the Senate in almost twenty years. Much has already been said about ACES that industry may find confusing, and this alert sorts out what the bill does -- and doesn't -- do and identifies the key issues you will need to address as the debate moves to the Senate.
Continue Reading...How to Win China and India
Reagan-era economist Martin Feldstein weighed in on the current cap-and-trade plan under consideration in Congress with an op-ed in today's Washington Post.
I'd like to celebrate his contribution, since I noted last week how little thoughtful criticism was coming from Republicans, but unfortunately I can't. Feldstein uses dubious logic and selective inputs to argue that the Waxman Markey bill is a bad idea.
Feldstein argues that the cost of the scheme to taxpayers -- $1600 per typical household, according to a Congressional Budget Office estimate -- is too high since the impact on global warming would be "virtually unnoticeable." Instead, Feldstein argues, the United States "should wait until there is a global agreement that includes China and India."
I agree with Feldstein that climate change cannot be solved without the cooperation of China and India. But unless and until the United States takes a leadership role in battling climate change, those two countries are not going to play ball.
Continue Reading...Breaking News: Climate Compromise in the House
The big news today in Washington is that the House committee working on climate change legislation has actually reached a major compromise that allows significant progress toward federal climate legislation this year.
The new deal calls for a 15 percent renewables target for a Renewable Electricity Standard by 2020, with an additional 5 percent to come from energy efficiency measures. The deal will expand the amount of biomass generation included, a crucial concession for southern lawmakers who worry their region might suffer economic impacts dispropornal to the rest of the nation.
Continue Reading...Is a Climate Deal Imminent?
Here in Washington, every day brings a new rumor about the fate of the attempt to pass comprehensive climate change legislation this year.
Today, the same day The New York Times ran an editorial supporting quick action on climate change, the Capitol is abuzz with the possibility that a deal is in the works.
Climate Legislation Made Easy
Democrats in Congress released their most recent climate change bill yesterday.
The so-called Waxman-Markey discussion draft attempts to satisfy all constituencies:
The US Climate Partnership -- the powerful coalition of utilities, car makers, manufacturers and environmental organizations -- got its vision of a cap-and-trade scheme adopted. That means the environmentalists are pleased with strong GHG emission reduction targets (80 percent below 2005 levels by 2050). Meanwhile, heavy industrials (iron and steel, aluminum, cement, glass, chemicals and paper) will benefit from a 15 percent reserve of the system's emission allowances -- a structure designed to keep down allowance prices (and thus the cost of compliance) for businesses most vulnerable to international competition.
The renewable industry got a renewable portfolio standard, which would force utilities to provide at least 25 percent of their energy from renewable sources by 2025. The coal industry also came out with $10 billion to fund carbon capture and sequestration research. (That's on top of the billions already provided under the recently enacted stimulus plan.)
The Week in Cap and Trade: The Waiting Game
All eyes continue to be on the House Committee on Energy and Commerce chaired by Rep. Henry Waxman. Waxman has promised to deliver legislation on energy and climate change with a cap-and-trade provision to the full House by Memorial Day, but so far has released no draft bill for debate.
Committee member Congressman Mike Doyle told Point Carbon (subscription required) last week that he expects to see a draft of the bill “in the next week or two.”
Continue Reading...A Carbon Rule is Not a Carbon Law
EPA announced a proposed rule on Tuesday to create a national registry for greenhouse gas emissions reporting.
This step is crucial to any effort to enact a law pricing GHG emissions, be it a cap-and-trade system or a carbon tax. The rule would mandate annual reporting from suppliers of fossil fuels or industrial greenhouse gases, manufacturers of vehicles and engines, as well as any other facilities that emit 25,000 metric tons or more per year of GHG emissions.
Of course, this wasn’t news to us. We wrote about the rule and the 25,000 metric ton threshold last month.
Continue Reading...Why the House is Off on Offsets
So the House of Representatives won’t go carbon neutral, after all. Its decision could portend poor treatment for carbon offsets in the upcoming debate over climate change legislation.
The House’s decision came after its leadership dropped an essential part of the plan to purchase carbon offsets. The House reportedly paid $89,000 for offsets from the Chicago Climate Exchange to cover its 2007/2008 emissions. (Most of those emissions come from steam heat generated by the ancient coal-burning Capitol Power Plant that inspired a protest Monday, hailed the largest act of civil disobedience against coal.)
The House’s decision appears to be rooted in a misunderstanding of offsets. Leaders are uncomfortable with them, according to the Post, because "the money was funneled to [offset projects] that had been completed before the House paid a cent." The Post continues: "Experts said those issues make it hard to say that the House's money had caused the environmental benefits the chamber paid for." Rep. Dan Lungren (R-CA) is quoted as saying, "Maybe they're admitting that what we did [in purchasing offsets] was actually nothing."
This reveals a fundamental misunderstanding of offsets and how they work.
Continue Reading...A Glimpse from the Bright Side
I am at the RETECH conference in Las Vegas, which captures all of the challenges facing green technology in these heart-in-the-throat times -- and the opportunities as well.
Many of the large companies that enjoyed such significant profiles at gatherings like this in the recent past were absent. Instead, when I participated in a panel, the room was packed with hopeful green technology entrepreneurs. It reminded me of Tom Friedman's admonition that the US needs thousands of inventive minds working on green technology at thousands of workbenches to put the United States back on track. This moment clearly belongs to those who are willing to start out with less.
Continue Reading...How Will Obama Cut the Deficit? He's Thinking Carbon.
With the President’s stimulus enacted and more crisis-related spending on the horizon, everyone wants to know how the Obama administration can actually make good on the goal, articulated Monday, to cut the size of the budget deficit in half by the end of the President’s first term. When the 2010 budget is released today, it will make clear that the administration hopes a major source of revenue will be from a proposed carbon cap-and-trade system. But that may not be as easy as it looks.
Many observers focus on the costs of cap-and-trade to the economy. Less appreciated is the revenue that could be generated if the government chooses to auction off pollution permits in such a system. The Washington Times reported the administration expects $300 billion to come in by 2022 from cap-and-trade revenues. Obama wants to put this money to drawing down the deficit.
But Congress will need to go along with his plan and therein lies the wrinkle.
Observations on The National Clean Energy Summit
I had the privilege of attending the National Clean Energy Summit in Las Vegas on August 18th and 19th. Sponsored by Senate Majority Leader Harry Reid, the University of Nevada Las Vegas, and the Center for American Progress, the summit brought to together an extraordinary number of state and national policy makers to discuss the mandate for a clean energy agenda.
The conference opened with President Bill Clinton and included such major luminaries as T. Boone Pickens, Robert Rubin, and Michael Bloomberg, not to mention the governors of Arizona, Colorado, and Utah. In addition, there were speakers from academia, utilities, finance, and technology related initiatives.
I want to share some of my observations:
First, there is a mandate for a clean energy future. It is bipartisan and it is imminent. Greenhouse gas emissions and our dependence on foreign oil are the driving factors. While state and local governments are well in front of the federal government, policy makers are anxious for Congress to take decisive action.
Second, there were a number of common themes expressed by the vast majority of speakers -- so much so -- that they virtually became the “holy grail” of the summit. Here is what they are:
- Tax Credits - Speaker after speaker called for the extension of current energy tax credits. Beyond that, longer term tax incentives (in the form of both guarantees and credits) were considered essential to jump start and sustain solar, wind, and geothermal industries.
- Energy Conservation and Efficiency - The great low hanging fruit of clean energy. President Clinton’s “no brainer.” The thought is that through energy conservation and efficiency initiatives new generation can be avoided. Paths included utility decoupling, along with utility incentives, longer term financing, and application of new technologies, particularly in lighting and smart meters.
- A Price on Carbon - Unanimity that carbon had to have a price, for social, health, and economic reasons. Most of the time, this meant a cap and trade system. Mayor Bloomberg called for a straight-forward carbon tax. The prevailing view was that it didn’t matter who became next President as both candidates were committed to sign cap and trade legislation.
- The Electric Grid - Perhaps the most prevailing theme was the call for a revamped national transmission structure. In short, both wind and solar are located where the grid is weakest -- wind in the Midwest and solar in the Southwest. A projected $60 billion will be necessary to create an effective national grid that moves these cleaner fuels to populated markets.
The big surprise at the summit, at least to me, was Dan Reicher’s, of Google, presentation that the future of clean renewable energy lay primarily in “enhanced” geothermal energy. In essence, enhanced geothermal means uses the earth’s abundance of hot spots as a heat exchanger. Holes (using newly developed and less expensive drilling technology) are drilled to these hot zones, water is poured into the hole, and steam rises to drive turbines. Google is convinced we can produce massive amounts of clean electricity world-wide using this process.
Continue Reading...Oil, Climate, and the Politics of Greening Gasoline
It had to happen, and not a minute too soon. Oil prices are soaring, if you hadn't noticed, and the stock market is in a steep dive as a result. The major airlines have sent a remarkable email letter to their customers (and who isn't one?) asking them to agitate for regulation and enforcement to combat oil costs’ T. Boone Pickens, who can afford to field a private army, has declared war on oil with his strategy to pincer OPEC between wind on one side and domestic natural gas on the other. The candidate who jumps out ahead to answer Pickens' challenge will win the election ("it's the cost of gasoline, stupid") and garner the credit next spring when prices come down. The problem is, rolling back the price of oil and gas will cause greenhouse gas emissions to rise. Some have suggested “greening gasoline” by letting the price of a barrel of oil stay high but imposing a tax -- some say a windfall profits tax will do the job -- that is earmarked for further carbon reduction projects.
Continue Reading...Obtaining GHG Credits Through Managing Water Supply Systems
Most recent climate-oriented discussions of water supply and quality have focused on the potential for altered precipitation, stream flows, groundwater recharge, and other impacts of regional climate change. These impacts are more likely than not to be severe in some locales, and thought is being given to the development of new infrastructure to address these changes (see related item on climate adaptation). But in addition to these obvious impacts on water supply and quality, it is now apparent that "non-trivial" greenhouse gas emissions are associated with the treatment of drinking water and sewage. [summary]
Continue Reading...Carbon Accounting 101
The stars appear to be lining up for passage of federal climate change legislation in the next year or two. We could back this prediction with a wonkish reading of congressional tea leaves, e.g., industry support for climate change legislation through coalitions such as the US Climate Action Partnership, a Democratic majority in both houses, and pressure by Republican incumbents on the president not to veto climate change legislation because they fear that a presidential veto could hurt their chances in the 2008 elections, but instead we will press on to an equally compelling consideration.
The climate change issue appears to be following the typical trajectory of new environmental laws. First, scientists identify the environmental threat. Then environmental activists amplify the scientists’ findings, usually aided and abetted by dramatic, illustrative harms. Today it’s arctic melt and Hurricane Katrina. Next, the environmental issue is featured on the cover of Time Magazine. Progressive states, typically California and/or New Jersey, enact laws. The resulting patchwork of state regulation causes Congress to begin the search for a national solution. Finally, additional environmental insults (Love Canal, Bhopal) tip broad public opinion from ambivalence to insistence that Congress act.
Climate change has now crossed most of these familiar thresholds. Most scientists had reached consensus on the human role in climate change by the start of the twenty-first century. Former Vice President Al Gore’s film, An Inconvenient Truth, certainly amplified the scientists’ findings. Climate change stories have graced the cover of Time Magazine on numerous occasions during the past few years. Today, the deluge of coverage resembles the streams gushing off melting glaciers. As we go to press, for example, PBS’s Frontline is airing a devasting critique of governmental inaction and obstruction in the face of mounting scientific evidence that the climate challenge must be faced.
Government, in fact, is responding. In 2006, California enacted Assembly Bill 32, which mandates that state sources of carbon dioxide (CO2) reduce emissions to 1990 levels by 2020. In 2007, there were more than 110 climate-related hearings in Congress and 150 bills addressing climate change. For coverage of developments in Congress, see Energy and Environment Daily, or Pew Center on Global Climate Change, What’s Being Done in Congress. All that remains to complete the cycle is the climate-change-driven cataclysm, although some have painted Hurricane Katrina as that event. [summary]
