Weekly Climate Change Policy Update - October 5

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Commentary

This week, the House of Representatives gave the first indication that its climate legislative machinery is moving into gear.  House Energy and Commerce Chairman John Dingell and Energy and Air Quality Subcommittee Chairman Rick Boucher issued the first in what is expected to be a series of white papers on design issues for climate legislation.  The white paper itself did not indicate much about their ultimate positions on key issues – other than they are committed to a program that reduces GHG emissions by 60-80 percent by 2050, which is comparable to other proposals.  The paper did indicate that they contemplate “complementary” carbon tax measures, a nod to Chairman Dingell’s particular interest in that approach.  The paper signals that Reps. Dingell and Boucher and their staffs now are getting ready to work on a climate change  bill – after having been tied up for some time working on the energy bill. 

*** The Senate is a bit farther ahead.  However, it now looks as though Senator Lieberman’s stated goal of releasing a bill this week based on the Lieberman-Warner outline has slipped. 

*** The proposed listing of the polar bear under the Endangered Species Act is a development to keep an eye on.  Right now, the listing is not tied to activities in any particular geographic region – presumably because a ton of GHG emissions from any source affects the atmosphere equally.  If the listing is finalized this way, it could mean that major new land management or other projects anywhere in the country could be required to go through an ESA consultation process. 

Congress

• House Democrats Release Cap-and-Trade White Paper.  On Wednesday, House Energy and Commerce Chairman John Dingell (D-MI) and Energy and Air Quality Subcommittee Chairman Rick Boucher (D-VA) released the first installment in a series of white papers on issues in developing climate change legislation.  The first white paper addresses the scope of an economy-wide cap-and-trade program that seeks to reduce greenhouse gas emissions between 60 and 80 percent by 2050.  The paper discusses the importance of covering a wide variety of industry sectors, including electric power producers, transportation, and industrial operations such as manufacturing, construction, and mining.  Chairman Dingell has said that a cap-and-trade program is a fundamental component of any climate change bill, but has urged Congress also to pass complementary measures, such as a carbon tax on fossil fuels; energy efficiency or other industrial performance standards; and funding for research and development.  He also said that he is still working on a separate carbon tax bill.  Subsequent white papers will address other design issues, including emission limits and timetables, cost containment measures, carbon sequestration, offsets and credits for meeting a mandated limit, the role of developing countries, and how to distribute allowances. 
• EPA Says Senate’s Three Major Climate Bills Would Have the Same Effect on Atmospheric GHG Concentrations.  The Environmental Protection Agency (EPA) this week released an analysis finding that the three major climate change bills currently under consideration in the Senate would have comparable impacts on atmospheric GHG concentrations.  The three proposals considered by the EPA include the proposal offered by Sens. Bingaman (D-NM) and Specter (R-PA), S.1766, to reduce emissions to 60% below 2006 levels; the plan from Sens. Lieberman (I-CT) and McCain (R-AZ), S. 240, to cut emissions by 60% from 1990 levels; and a bill, S.485, sponsored by Sens. Kerry (D-MA) and Snowe (R-ME), that would cut emissions at least 65% below 1990 levels.  In its analysis, EPA concluded that the three bills would result in similar amounts of relatively small reductions in atmospheric CO₂ concentrations. 
• Energy Bill Talks May Proceed Informally.  Senate Majority Leader Reid (D-NV) indicated this week that he will not seek to formally name conferees and begin a conference on energy legislation until after the Senate reconvenes on October 15, and that he may opt to hold informal meetings instead.  Senator Reid was expected to offer a motion to proceed to an energy conference by the end of this week, but did not do so before the Senate adjourned on Thursday.
• Selected Committee Hearing From the Past Week.  The House Science and Technology Subcommittee on Energy and Environment held an oversight hearing on energy storage technology (October 3, 2007).

Administration

• Sierra Club Petitions for Review of Coal-Fired Power Plant Permit.  The Sierra Club filed a petition with EPA’s Environmental Appeals Board to have a permit recently issued to Deseret Power’s Bonanza coal plant in Utah remanded to the agency.  The group claims that EPA did not take into consideration the agency’s own findings with regard to the CO₂ emissions from the plant when granting the operating permit.  The Sierra Club pointed to EPA’s comments on the Draft Environmental Impact Statement (DEIS) for a Nevada coal-fired power plant, in which the agency said that the Bureau of Land Management erred in not considering alternatives to the proposed project.  The environmental group said that EPA also is bound to consider alternatives to the Bonanza plant and to explain why the agency did not require carbon capture and sequestration or other emission reduction technology.

States

• California Attorney General, Environmental Groups Petition EPA to Regulate Marine Transport GHG Emissions.  California Attorney General Jerry Brown (D) and four environmental groups petitioned EPA to regulate CO₂ emissions from oceangoing ships.  The state and Earthjustice, Oceana, Friends of the Earth, and the Center for Biological Diversity claimed in the petitions that the marine transport sector emits as much as 900 million metric tons of CO₂ per year and that emissions are expected to increase by 72 percent between 2000 and 2020.  EPA has 180 days to respond to the petition.  A spokesperson for Earthjustice said that the groups will consider filing a lawsuit to force EPA to act if the agency does not respond or concludes that such regulations are not necessary. 

Seminars

• Joint RFF and Harvard Book Discusses Post-Kyoto Planning.  Resources for the Future (RFF) held a seminar featuring a new book, Architectures for Agreement, Addressing Climate Change in the Post-Kyoto World, edited by Joe Aldy, RFF Fellow, and Rob Stavins, the Albert Pratt Professor of Business and Government at Harvard University.  The book focuses on many suggested alternative mechanisms for climate change policies in the post-2012 period.  Authors argued that U.S. participation and commitments for action by a smaller number of countries, perhaps the largest emitters, might result in a more successful international climate program.  Criticism of the Clean Development Mechanism, the need for increased funding for research, and numerous other solutions appeared in other chapters.  The authors agreed that bilateral talks with important emitting nations such as China are likely necessary to forge a successful post-Kyoto agreement.  The proposals contained in the book will be part of a Harvard project going forward.

Industry

• Banks Urged to Stop Financing Coal-Fired Power Plants.  The Rainforest Action Network launched a campaign urging Bank of America and Citigroup to stop financing coal-fired power plants.  The group said that the two banks are the leading financers of the 150 planned new coal-fired power plants in the U.S.  The Rainforest Action Network called on the banks to instead direct the expected $140 billion in financing toward cleaner and renewable energy production.

International

• European Parliament Committee Strengthens Proposal On Aviation Sector Emissions.  The European Parliament’s Environment Committee approved changes to a European Commission proposal to include the aviation sector in the European Union’s (EU) Emission Trading Scheme (ETS).  The committee amended the proposal to include all flights within, entering, and departing the EU in the ETS by 2010.  The European Commission had proposed to include intra-EU flights in the ETS by 2011 and all flights entering or leaving the EU by 2012.  The Environment Committee also recommended regulation of 90 percent of the operators’ average annual emissions during 2004 – 2006, while the European Commission’s proposal would have covered 100 percent of such emissions.  Airlines would be required to purchase allowances to cover emissions above the amount initially allocated.  The U.S. opposes the inclusion of intercontinental flights and is supporting efforts by the International Civil Aviation Organization (ICAO) to develop an alternative approach to aviation emissions.  On September 28, ICAO approved a resolution calling for an aggressive, comprehensive international approach to regulating airline emissions and formed a high-level working group to develop recommendations before the UNFCCC meetings in December.
• EIB Announces Joint Fund for Carbon Credit Projects.  The European Investment Bank (EIB) announced a €100 million (US$142 million) fund to finance carbon credit-generating projects for the post-Kyoto period.  The fund is a joint effort between the EIB, Spain’s Instituto de Crédito Oficial, Germany’s KfW Bankengruppe, and the Nordic Investment Bank.  The banks will invest in renewable energy, energy efficiency, forestry, and methane capture projects, with a focus on projects to be implemented from 2013 to 2022.  The fund is intended to provide a measure of certainty about the market for carbon credits after the Kyoto Protocol expires in 2012.
• Environmental Group Seeks Review of Canadian Government’s Plan for Meeting Kyoto Obligations.  Friends of the Earth Canada filed an application in the Federal Court of Canada seeking review of what it claims is the Canadian Federal government’s failure to follow the Kyoto Protocol Implementation Act approved by Parliament in June 2007.  The law required the Federal government to publish a detailed plan for meeting the nation’s obligations under the Kyoto Protocol within 60 days of enactment.  The environmental group argues that the government’s plan, issued in August, fails to meet the requirements of the law.
• Quebec Implements Carbon Tax.  The Canadian province of Quebec instituted the nation’s first carbon tax this week.  The provincial government will collect a tax of 0.8 cents per liter of gasoline, 0.9 cents per liter of diesel fuel, 0.96 cents per liter of heating oil, and C$8 per metric ton of coal.  The tax is expected to total more than C$202 million per year and will fund provincial GHG emission reduction programs.
• China Agrees to Phase Out Incandescent Bulbs.  China announced that it will phase out the use of incandescent light bulbs by 2017 under an agreement with the Global Environment Facility (GEF).  GEF estimates that the switch to fluorescent bulbs could prevent as much as 500 million metric tons of CO₂ emissions.  GEF will invest approximately $25 million toward assisting China with the phase-out and hopes to enter into similar agreements in the future with Costa Rica, Indonesia, Mexico, and Venezuela. 

Corrections

• The September 28, 2007 Climate Change Policy Update incorrectly stated that Rep. Dingell’s carbon tax would impose a tax of $50 per ton of CO_2­ instead of a $50 tax per ton of carbon.  Also, Rep. Wayne Gilchrest was incorrectly designated as (D-MD) instead of (R-MD).  A corrected version of last week’s update is available at: http://www.vnf.com/news-alerts-214.html.