Achieving Fast Mitigation: Kerry-Lieberman and UnSNAPing a Mobile Refrigerant
It's easy to overlook crucial provisions of the Senate climate bill that address strategies to reduce non-CO2 climate-forcing that accounts for almost half of the warming effect our activities cause. In the brouhaha the bill caused, it was also easy to overlook the significance of a petition from NGOs to EPA asking it to end the privileged status of the most widely used mobile air conditioning refrigerant, which has a global warming potential (GWP) up at 1,400. Yet these two closely-related actions, despite having nothing to do with CO2 emissions from the power plants targeted by the Senate bill, may well provide the most significant climate protections the US achieves in the near term.
The Senate climate bill unveiled on May 12th by Senators John Kerry and Joe Lieberman contains a section titled “Achieving Fast Mitigation” to address non-CO2 climate forcers, including black carbon soot, methane, and hydrofluorocarbons (HFCs). When combined with other similar sources like ground-level ozone, these non-CO2 greenhouse gases and pollutants make up 40 to 50 percent of total climate forcing.
Why is this called Fast Mitigation? The non-CO2 forcers are short-lived in the atmosphere -- a few days to about fifteen years -- meaning reductions will produce benefits fast and help to avoid the tipping points for abrupt climate change. Reductions in CO2 of course are essential but will not produce cooling for centuries.
We addressed controls over HFC greenhouse gases with hundreds to thousands the global warming potential of CO2 19 months ago here. Both the Senate bill and the House's Waxman-Markey bill now address HFCs and thus complement the proposal by the US, Canada, and Mexico under the Montreal Protocol ozone treaty which, if the Parties reach agreement in November, would result in avoided emissions of at least 100 billion tonnes of CO2-equivalent.
Studies show that technology is already available to address the non-CO2 pollutants and gases. Expanding biochar production is one such strategy but the hugest GWP reductions can be made in HFC refrigeration and air conditioning applications. That's where the NGO petition on HFC 134a comes in.
The NRDC, joined by the Institute for Governance & Sustainable Development (IGSD) and the Environmental Investigation Agency, filed the petition to withdraw EPA approval for use of HFC-134a in mobile air conditioning installed in new cars. HFC-134a has a GWP 1,400 times greater than CO2, while replacements such as soon-to-be approved HFC 1234yf (GWP: 4), already-approved HFC-152a (GWP of ~140), hydrocarbons (GWP: 5), and CO2 (GWP: 1) have comparatively tiny GWPs.
Durwood Zaelke of the IGSD, one of the groups filing the petition, says that “reducing all HFCs can produce a planet-saving 100 billion tonnes or more of CO2-equivalent in climate mitigation. We can get 30 percent of this by outlawing high GWP HFCs in mobile air conditioning, as the European Union is already doing, starting with new models in 2011. And we can do it fast—easily in seven years for new cars as required in Europe, or in as little as three years if automakers get serious about improving their cars.”
Kerry-Lieberman (Minus Graham) Release "The American Power Act"
Talking Points
- Senators Kerry (D-Massachusetts) and Lieberman (I-Connecticut) have released the much anticipated discussion draft of the American Power Act (APA). Originally the bill was to include Senator Graham (R-South Carolina) as a co-sponsor as he played an integral role in the development of the legislation. However, Senator Graham withdrew from co-sponsoring prior to public release of the legislation, citing perceived Democratic shifting of priorities towards immigration reform as an act of bad faith by Senate Majority Leader Harry Reid (D-Nevada) and the White House.
- The bill has been released and is undergoing economic modeling by the Environmental Protection Agency and the Energy Information Agency. Senator Reid has indicated the bill will only go to the floor for a Senate vote if it has a real shot at passing. 60 votes necessary to overcome a likely filibuster are not yet secured. The bill could reach the floor in June or July.
- The APA has significant stakeholder support with endorsements from a range private sector interests including Dow, Florida Light & Power, General Electric and American Electric Power. The US Chamber of Commerce and the American Petroleum Institute both released statements welcoming the legislation but stopped short of specific endorsements. Several leading environmental groups including the Environmental Defense Fund support the bill.
- The bill is framed around 5 central themes: 1) Benefits to Consumers, 2) Energy Independence, 3) US Competitiveness and Job Creation, 4) Reducing Emissions differently for power plants, heavy industry and transportation, and 5) Regulatory Predictability.
- The APA takes a significantly different approach from the House-passed Waxman-Markey bill approach of economy wide cap on emissions; instead adopting a unique sector by sector approach.
- The key lynchpin of the bill is a mandatory 17 percent reduction in greenhouse gas emissions below 2005 levels by the year 2020. The power sector will fall under the cap in 2013, with industrial manufacturing sectors entering the system in 2016. The refining sector for transportation fuels will be required to purchase a set number of allowances each year but will not be engaged in carbon trading of allowances and offsets, resulting in what amounts to a fixed price carbon tax for the sector.
- Carbon markets, a key component of a cap-and-trade policy, remain part of the equation within this bill, but the market will be highly regulated in terms of trading and pricing of carbon. In addition, there will be significant distribution of allowances in early years coupled with allowance auctioning that will expand over time. Some key details of allowance allocation remain to be negotiated.
- Provisions for expanded offshore oil drilling promise to be controversial but are a key component of reaching the necessary 60 votes to pass the bill. Protections allowing states to maintain or establish bans on drilling are included.
- Provisions for scaled-up financial support for nuclear energy, transportation and carbon capture & storage are integrated into the bill. Corresponding national renewable energy standards and incentives for the industry are not in the bill, but are anticipated to be incorporated in consultation with the Senate Energy & Natural Resources Committee. The bill does, however endorse and seek to support state-level renewable energy programs.
- The natural gas industry will face new regulations for public disclosure of hydraulic fracturing chemical fluid ingredients. These provisions seek to increase public confidence and support of the industry with respect to environmental, health and safety concerns.
- Programs directed towards bilateral and multilateral funds for international climate mitigation and adaptation measures are established under the bill. However, sustainable funding for these efforts through a set-aside of emission allowances is uncertain leaving these efforts more vulnerable and requiring annual Congressional appropriation processes.
- Fast Action Mitigation provisions for reducing GHG emissions from hydroflurocarbons, black carbon, enhanced soil sequestration and methane.
Spill Baby Spill or Blow Man Blow?
This week we are seeing two starkly different uses of offshore natural resources playing out on a national stage. In the context of emerging climate and energy legislation, its worth taking another look at the risks and costs of both as Congress and the Obama Administration deliberate on policy incentives for offshore wind and oil that are pursued through legislation or Executive Branch action.
In Louisiana, an estimated 5,000 barrels of oil a day are leaking from BP's Macondo well in the Gulf of Mexico after Transocean Ltd.'s Deepwater Horizon rig exploded a few days ago. Reports are that people in Louisiana can already smell the oil. BP is working to stop the flow of oil and experts suggest BP will need to drill a “relief well” to halt the leak. Such a mitigation process can take upwards of 3 months. BP is reportedly spending $6 million a day in this effort and preparation of two relief wells will cost an estimated $200 million. (Adding in US Government support costs, Evolution Securities suggests that the “net cost to BP of the cleanup operation so far plus the drilling of two relief wells would be around $845 million.” This figure does not necessarily address harm some experts anticipate to Louisiana coastal communities and their ecosystem services, and potential punitive damages that could emerge. The punitive damage figure for ExxonMobil as a result of the Valdez spill in Alaska was approximately $507.5 million after the Supreme Court struck down the original figure of $2.5 billion as excessive.)
Meanwhile, off the coast of Nantucket, the drawn out battle over the reported 420 MW offshore Cape Wind project took a positive step forward when Department of Interior Secretary Ken Salazar announced federal approval. Reports are that the project will cost approximately $900 million to build, a remarkably similar figure to the costs of direct mitigation for BP’s Louisiana debacle noted above. Cape Wind will also reduce annual US greenhouse gas emissions by approximately 734,000 tons and replace 113 million gallons of foreign oil; both figures on an annual basis. According to the Massachusetts Energy Facility Siting Board, Cape Wind will help stabilize and lower consumer electricity costs in the region. A recent report by Charles River Associates indicates that Cape Wind will reduce the wholesale price of power in New England by an annual average of $185 million, resulting in an aggregate savings of $4.6 billion over 25 years.
It is ironic that two key offshore energy projects are in the spotlight at the same time and just as the Senate debate on climate and energy legislation heats up with consensus to pass a bill based on the right balance of incentives for fossil fuels and renewable energy. A quick comparison of the two projects suggests it might be a better investment and policy direction to develop incentives to blow instead of drill off the coasts of the United States. But will there be enough votes in the Senate to pass a climate bill if offshore drilling is scaled back? Stay tuned.
Jobs or Litigation?
It is now well-documented that Senator Graham has pulled back from co-sponsorship of a climate and energy bill. Whether Senator Graham gets assurances regarding sequencing of climate and energy before an immigration bill going to the Senate floor, and comes back into the fold over the next few days remains to be seen. But its fairly clear that a tough political hurdle to climb is now even more difficult than ever as a bipartisan vote that brings a few more Republicans on board becomes problematic without the Senator from South Carolina working his colleagues on that side of the aisle. If this is not turned around, the promise of green jobs in the US will make way to a season of litigation.
Based on best estimates of E & E, if one subtracts Senator Graham’s vote, there are at best 38 Democratic votes in favor of a climate/energy bill in the Senate. If one assumes a strictly partisan vote there are 19 Democratic “fence sitters.” If every single one of those Democrats actually voted for the bill that would result in 57 votes in favor of the bill, not the 60 necessary to overcome a Republican filibuster. There are only two other Democrats remaining after that 57, Evan Bayh (Indiana) and Blanche Lincoln (Arkansas). While Senator Bayh might be persuaded to vote for the bill given he is retiring after this session, Senator Lincoln is doubtful.
There are many tripwires on the way to this supposed 58 votes with offshore oil drilling provisions and a stripping of EPA regulatory authority under the Clean Air Act the most contentious issues for some potential Democratic votes. So even under the best of scenarios, a few Republicans led by Senator Graham are necessary to get this bill through the Senate.
Senator Graham has stuck his neck out on this climate and energy bill. But immigration reform will do more for the Democrats in turning out a base in the fall election and keeping their margins in Congress. The White House and Senator Reid face a tough decision in the next few days if they want to keep the climate and energy bill alive. Immigration is no doubt a hugely important issue and a political hot button. But if we fail to move forward now, the clean energy jobs of tomorrow will be in China while the US will be embroiled in endless climate litigation that will do nothing to reduce greenhouse gas emissions.
Another Go At Climate Consensus in the United States Senate
The much anticipated energy and climate bill from Senators Graham (R-SC), Kerry (D-MA) and Lieberman (I-CT) appears close to a public unveiling. So far there is an 8-page outline of the legislation that was reportedly provided to captains of industry such as the US Chamber of Commerce in a recent closed-door meeting, but this document has not as of yet been made public. A bill should be released to the public within days. There are a wide variety of issues that will make or break this bill in terms of achieving enough votes to pass the Senate. Here are 3 key issues to watch while assessing political feasibility:
1. A Cap Here, A Tax There
All reports indicate that the bill will take a sector-by-sector approach to the energy and climate challenge. The sector approach is a departure from the House bill passed last year that set an economy-wide cap on emissions. Electric utilities and the manufacturing sectors will undoubtedly still fall under some revised version carbon emissions limits. The political challenge will be ensuring that the emission caps are indeed hard caps while providing ample incentives to ensure industry buy-in. Other sectors will face different strategies to reduce emissions. Recognizing complaints from oil & gas constituents with a cap and trade approach, a carbon tax on transportation fuels is the likely alternative for this greenhouse gas intensive sector. A key political challenge will be finding the right approach for setting the price of such a tax based on factors including price of carbon in other sectors and carbon content of fuel. It is safe to say that a sector approach may bring on more votes. However, the corresponding environmental integrity of the US approach to reducing carbon emissions will be under close watch.
2. Avoiding Fears of “The Big Short”
The cap and trade approach found in the Waxman-Markey bill allowed for limited but generally unfettered trading of carbon allowances and offsets in the capital markets. Given the current economic crisis precipitated in large part by unregulated Wall Street derivatives trading, there is angst in the Senate with unwieldy carbon markets. At the same time, the flexible carbon market approach would allow regulated entities an efficient cost-containment strategy. It will be a challenge to thread this needle in a manner that meets both concerns and maintains environmental integrity. It is anticipated that limited carbon market trading will be part of the bill but that elements of the “cap and dividend” model put forward by Senators Cantwell (D-WA) and Collins (R-ME) will also be incorporated. Under “cap and dividend,” only regulated entities (not Wall Street traders or speculators) are allowed to participate in the auctioning of allowances, and a certain percentage of the auction revenue goes directly to consumers in the form or rebates.
3. Clean Energy: Eye of the Beholder
There will be separate sections/titles in the bill that advance an energy security agenda for the United States. These sections will include coal, renewable energy, nuclear energy, offshore and onshore oil & gas drilling, agriculture and oil refining. Some of the real tough political challenges will fall into this part of the bill. Vastly increasing offshore oil drilling may bring on board some Senators, but will certainly alienate others with environmental constituents. Likewise setting renewable energy targets might set the United States on a lower carbon path, but if the bill avoids adequate complementary incentives for natural gas, nuclear and carbon capture & storage, it will undoubtedly face regional opposition from Southeast and the Midwest Senators. As an example, Senator Graham has floated a “Clean Energy Standard” in place of a national “Renewable Energy Standard,” but it remains to be seen where the trio of Senators land on this issue.
Climate Week In New York: Hope Over Pessimism?
As President Obama spoke at the United Nations today and now heads to the G-20, international skepticism is obvious. The United States still has not taken definitive action to reduce greenhouse gas emissions. The lack of movement in the Senate on a climate bill is now cited as the primary reason that the US cannot make the level of concrete commitments necessary to forge a global agreement. This lack of Senate action does not bode well for Obama to position the US as a global leader on climate change. As Politico reported yesterday, the European Union’s ambassador to the US, John Bruton, is not happy about Senate delay stating that “(i)f this were to happen, it would open the United States to the charge that it does not take its international commitments seriously, and that these commitments will always take second place to domestic politics. I submit that asking an international Conference to sit around looking out the window for months, while one chamber of the legislature of one country deals with its other business, is simply not a realistic political position.”
Yet despite the growing gloom in climate policy circles, signs of optimism are there.
First, President Obama signaled some willingness to get out ahead of the Senate. In his speech at the UN Climate Change Summit today he indicated that the US will be “slashing our emissions to reach the targets we set for 2020 and our long-term goal for 2050." While the President still faces the Senate as well as international expectations on the specifics of this goal, the US does appear at least open to an outcome in Copenhagen that includes mid-range targets.
President Obama also expressed a desire to phase out fossil fuel subsidies in the context of the upcoming G-20 negotiation. In a recent New York Times article, Steve Kretzmann of NGO Oil Change International noted that "If the Obama administration is serious about eliminating all fossil fuel subsidies, that is wonderful and would go a long way toward correcting what Nicholas Stern called the greatest market failure of all time, which is climate change.” The details of how these subsidies are defined and what the President could agree upon internationally without requiring domestic political action remains to be seen. Nevertheless, these statements at the UN do suggest some willingness of the Administration to demonstrate positive leadership on the international stage with a view to working with Congress on the details.
With China also making a suite of commitments in New York this week, the pressure for US action continues to grow and the rationales for inaction continue to diminish.
Don't Yank the Tariff Provisions from the House Climate Change Bill
President Obama deserves a share of the credit for the historic vote by the House June 26 to pass the first climate change bill. The bill is far from perfect, but it is an important step in the right direction. In comments following the House vote, however, President Obama took a step in the wrong direction. In urging the Senate to swiftly pass their counterpart to the House bill, President Obama raised questions about a provision that would impose a tariff on the import of goods from countries where the cost of such good benefits from weaker climate change laws:
"At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there….I think we're going to have to do a careful analysis to determine whether the prospects of tariffs are necessary, given all the other stuff that was done and had been negotiated on behalf of energy-intensive industries."
Removing the tariff provision from the bill would give its opponents a strong argument for its defeat. Opponents argue that by imposing what they classify as an exorbitant energy tax on products such as steel, cement and chemicals the climate bill would simply force manufacturers to shift production to foreign countries with more favorable energy costs, resulting in no net reduction of greenhouse gas emissions AND loss of jobs in the US.
This is a potent argument which, if left unanswered, could doom the bill in the Senate. Although President Obama suggested that there may be better alternatives to the "protectionist" provision in the House bill he did not elaborate on them. One alternative that has received some favorable press is the so-called "sectoral approach" in which certain energy-intensive industries seek to reach agreement on a global standard for GHG emissions from facilities in the sector.
Although the sectoral approach is arguably sound in principle, the fear is that in practice the affected sectors would be able to push through weak standards which undermine the battle against global warming. It is almost like begging the fox to guard the henhouse. Another alternative would allow the United States to scrap its cap-and-trade system if China and India do not adopt similar programs. This avoids the fox/henhouse problem, but creates a bigger one: in effect, it cedes to foreign countries the decision of whether WE should combat climate change. The House approach avoids both problems, and should be followed in the Senate.
Chairman Waxman's Climate Bill
To paraphrase German Chancellor Otto von Bismarck, don't ask how legislation or pork pies are made.
Think of the House Energy and Commerce Committee's new compromise on climate legislation as freshly baked pork pie.
Let's first consider the US emissions reductions goals. Did the Committee bake a pie small enough to get the US on the track to meeting scientifically defensible emissions reductions targets? No.
The bill would cap emissions 17 percent below 2005 levels by 2020, instead of the original draft’s 20 percent below. Committee chair/chef Henry Waxman essentially promised (again with some poetic license to your author) to bake a smaller pie -- later. He noted the bill retains its original target reductions in the future: 42 percent by 2030 and 83 percent by 2050. We will see -- later.
Let's consider the allocation of the highly valuable rights to emit. These are akin to slices of the pork pie.
The President campaigned on selling slices to fund clean energy and beleaguered consumers. But the Congress would prefer to get the credit for giving away pieces of pie itself.
In fact, this was Chef Waxman's secret ingredient. He bought support for the climate bill by doling out valuable slices for free. The bill gives 35 percent of the allowances to local electric distribution companies -- over a third of the entire pie in one gulp. Another free slice goes to the auto industry for research on new technology. Another one may go to refineries. Still more slices will be given to ailing manufacturing industries such as steel and cement.
That's a lot of pie.
Indeed, the pie is disappearing fast. It's over halfway eaten already.
Once it seemed likely that free slices might go to leaner, fitter wind, solar, biomass, and other green technologies. But did the committee dole out slices to clean energy when it sliced up the pie? If they did, we missed it.
Chef Waxman surely understands what he is doing. But is this the way the pie-baking was supposed to go? Chancellor Bismarck was right: don't ask how legislation or pork pies are made.
