Weekly Climate Change Policy Update - November 16, 2007

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Commentary

Chairman Boxer has decided to stick to a scheduled December 5 markup of the Lieberman-Warner bill by the full Environment & Public Works Committee -- notwithstanding calls from Republican committee members for more time to allow analyses of the bill's economic impacts.  She and Senator Lieberman are assuring Republicans -- and some restive Democrats -- that it will be possible to make further changes to the bill when it is considered on the floor of the Senate, which Senator Lieberman says could occur in February 2008.  * * * * * Six Midwestern Governors, and the Canadian province of Manitoba, are the latest group to commit to developing a regional cap-and-trade program.  Twenty US states have now committed themselves in some way to a regional cap-and-trade program.  Governor Spitzer of New York and others urged Congress this past week not to preempt these state efforts in federal legislation.  However, it is far from clear how the various state and regional initiatives will integrate with a future federal program.  * * * * * The federal courts continue to issue decisions requiring federal agencies to account for climate change impacts in their actions.  This week, it was the 9th Circuit, which rebuked the National Highway Traffic Safety Administration for failing to consider the economic costs of GHG emissions when it promulgated new fuel economy standards for light trucks and Sport Utility Vehicles. 

Congress

• EPW on Track to Markup Climate Bill on December 5.  Senate Environment and Public Works (EPW) Committee Chairman Barbara Boxer (D-CA) said this week that she will proceed with a full committee markup of America’s Climate Security Act (S.2191) on December 5.  Republican committee members raised objections to Chairman Boxer’s schedule, noting that the Environmental Protection Agency (EPA) and the Energy Information Administration (EIA) have not yet provided the requested analysis of the economic and environmental impacts of the legislation.  Senator Joe Lieberman (I-CT), a co-sponsor of the legislation, this week said that the bill should proceed through the committee, regardless of whether an EPA or EIA analysis has been conducted.  He said that the agencies will have enough time to study the legislation before the bill comes to the Senate floor, which he said was not likely to happen before February 2008.   
• Governors Ask Congress to Set Carbon Cap without Preempting State Efforts.  At a House Select Committee on Energy Independence and Global Warming hearing, the governors of New York and Arizona called on Congress to enact a federal climate change program but to allow state efforts – including the Northeast Regional Greenhouse Gas Initiative (RGGI) – to remain in place.  New York Governor Eliot Spitzer (D) said that it was time for the federal government to follow the states’ lead on climate change.  Arizona Governor Janet Napolitano said that any federal program should not preempt more aggressive state programs.
• IETA Calls for Greater Offset Use Under Lieberman-Warner Bill.  The International Emissions Trading Association (IETA) sent a letter to EPW Chair Barbara Boxer and Ranking Member James Inhofe (R-OK) urging them to increase the amount of offsets that can be used as a means of complying with the emission caps under the Lieberman-Warner bill.  IETA further said that it supports “a rigorous approval process ensuring the environmental integrity” of the projects.  In addition, the letter questioned the bill’s limit on use of offsets from projects in nations that do not have a cap on emissions, which would essentially prevent the use of offsets from Clean Development Mechanism (CDM) projects.  Finally, IETA said that “the initial high level of auctioning in Lieberman-Warner, in combination with the allocation to non-emitters, is cause for concern.”
• Ranking Member on House Energy and Air Quality Subcommittee and Former Speaker of the House to Retire.  Rep. Dennis Hastert (R-IL) announced this week his plans to retire from Congress before the end of the year.  His retirement will open up an important Republican position on the Subcommittee, which plays a key role in the climate change debate.  The Ranking Member of the House Energy and Commerce Committee, Joe Barton (R-TX), will select Rep. Hastert’s replacement. 
• No Pre-Recess Agreement on Energy Bill.  House and Senate leadership announced that no agreement on energy legislation had been reached before Congress adjourned for its two-week Thanksgiving recess.  House Speaker Nancy Pelosi (D-CA) has now indicated that she would like to see an energy bill reach the floor for debate during the first week of December.  Several points of contention remain between the House and Senate versions of the bill, including: an increase in automobile fuel efficiency standards (CAFE); an increase in the 2005 renewable fuel mandate for ethanol; the creation of a national renewable portfolio standard; and an energy tax package that would divert funds raised from oil and gas leases into funding for renewable energy research and development. 
• Selected Committee Hearings From the Past Week:
  • The Senate Environment and Public Works Committee held two full committee oversight hearings on S.2191, America’s Climate Security Act (November 13 and 15, 2007).
  • The Senate Foreign Relations Committee held an oversight hearing regarding international climate change negotiations ( November 13, 2007).
  • The Senate Commerce, Science and Transportation held a full committee oversight hearing on climate change research ( November 14, 2007).
  • The House Select Energy Independence and Global Warming Committee held a hearing on a low-carbon energy future (November 14, 2007) (discussed above). 

Administration

• 9th Circuit Remands NHTSA CAFE Standards for Light Trucks.  A three-judge panel of the U.S. Court of Appeals for the 9th Circuit remanded the National Highway Traffic Safety Administration’s (NHTSA) CAFE standards for light trucks and SUVs, holding in part that NHTSA had not adequately considered the climate change impacts of the rule.  The court held that NHTSA’s environmental assessment (EA), conducted pursuant to the National Environmental Policy Act (NEPA), did not address significant questions raised regarding the incremental and cumulative impacts of vehicle CO₂ emissions on global warming.  The 9th Circuit also held that the agency’s finding of no significant impact (FONSI) regarding the final rule’s impacts on the environment was arbitrary and capricious.  The court also held that it was arbitrary and capricious for NHTSA to fail to assign a monetary value to CO₂ emissions when conducting a cost-benefit analysis of the rule.  NHTSA must now perform a full environmental impact statement (EIS) on the rule, which could take several months. 
• EPA Will Not Consider Impacts of Climate Change in Revision of 8-Hour Ozone Standard.  Lydia Wegman, Director of the Health and Environmental Impacts Division of EPA’s Office of Air Quality and Standards, said that the agency will not consider the impacts of climate change in its final rule setting a revised National Ambient Air Quality Standard (NAAQS) for ozone.  Some researchers believe that higher temperatures will result in greater ozone levels because volatile organic chemicals react more quickly to form ozone as temperature increases.  Ms. Wegman said that the timing of a new study on the effects of climate change on ambient ozone concentrations will prevent it from being considered as part of the NAAQS rulemaking.  EPA is required to issue a revised ozone standard by March 2008 and the study is still undergoing peer review.  However, Ms. Wegman did not rule out the possibility that EPA would consider the effects of climate change in future NAAQS reviews.
• EPA Attorneys Argue that Portion of Acid Rain Program is Not Part of CAA and Therefore CO₂ Is Not an Already “Regulated Pollutant.”  In a brief to EPA’s Environmental Appeals Board (EAB), agency attorneys argued that a section of the Acid Rain Program is not part of the Clean Air Act (CAA) in order to circumvent arguments that CO₂ is already a “regulated pollutant” under the CAA.  Last month, environmental groups argued in a different EAB proceeding that the CAA requires EPA to address CO₂ emissions in all of its permits to the extent that CO₂ emissions are already a “regulated pollutant” under the CAA – and further asserted that CO₂ emissions are a “regulated pollutant” under the CAA Acid Rain Program because that program requires facilities to track and report their CO₂ emissions.  In a brief filed in an EAB proceeding on a permit issued by the EPA for a coal-fired power plant in Utah, agency attorneys claimed that § 821, which requires the tracking and reporting of CO₂, is not a part of the CAA because it was never formally incorporated into the law. 
• DOJ Suggests Congress Could Raise Major Source Threshold for CO₂.  Monica Gibson, a member of the Department of Justice Environmental and Natural Resources division, suggested at an American Bar Association event that Congress could raise the emissions threshold for a source to be considered a “major source” under the CAA for purposes of CO₂ regulation.  EPA is currently developing regulations on vehicle CO₂ emissions, which will include a finding that such emissions “endanger” public health and the environment.  Once an endangerment finding is made with regard to a particular pollutant, the CAA requires EPA to regulate emissions of that pollutant from all “major sources.”  Observers have noted, however, that for CO₂, using the CAA’s standard “major source” threshold of 250 tons per year would subject to regulation thousands of small sources that are not regulated for any other purpose.  Ms. Gibson said that Congress could raise the threshold to 1,000 tons per year to avoid this result and also suggested that Congress clarify that CO₂ is not a regulated pollutant under the New Source Review (NSR) program.
• FutureGen EIS Finds Little Risk.  The final Environmental Impact Statement (EIS) for the Department of Energy’s (DOE) FutureGen project found that there would be little risk of a “catastrophic release” of CO₂ or other stored gases from the facility.  The EIS examined the potential risks at four sites – two in Illinois and two in Texas – that are under consideration for the FutureGen integrated gasification combined cycle (IGCC) power plant and carbon sequestration site.  The EIS did not conclude whether one of the sites would be more suitable than the others.  Construction on FutureGen is scheduled to start in 2009, with operations beginning in 2012. 

States and Cities

• Transport Sector Could Provide Most of California’s Emission Reductions.  In a report issued November 14, 2007, the group Next 10, an organization with environmental and green business membership, found that motor vehicles offer the greatest potential for reducing greenhouse gas (GHG) emissions within California.  The report evaluated the actions necessary for the state to achieve its target of reducing emissions to 1990 levels by 2020.  Given the shift in the state’s economy from emissions-intensive heavy industry to the service sector, transportation now accounts for over 40 percent of the state’s annual emissions.  The study identified a number of strategies for reducing transport sector emissions, including reductions in per capita vehicle miles traveled and implementation of the state’s pending emissions standards for new motor vehicles.  If granted a waiver by the U.S. Environmental Protection Agency, the state’s vehicle standards are expected to eliminate 30 million tons of GHG emissions annually by 2020.
• Six Midwestern States, Canadian Province Commit to Regional Cap-and-Trade Program.  The pact, signed by each state’s governor, brings to 20 the number of states committed in some way to regional cap-and-trade systems.  Signatories to the Midwestern Regional Greenhouse Gas Reduction Accord include Illinois, Iowa, Kansas, Michigan, Minnesota, Wisconsin and Manitoba, Canada.  Three other states, Indiana, Ohio, and South Dakota, signed the pact as observers.  The pact contemplates that a market-based scheme will take effect in May 2010 with the aim of reducing regional GHG emissions to 60-80 percent of 1990 levels by 2050.  In a separate agreement, eight states and Manitoba pledged to increase energy efficiency, renewable energy use, and the use of carbon capture and sequestration (CCS) technology through an “energy security and climate stewardship platform.”  Among other commitments, the platform seeks to develop a regulatory framework for CCS by 2010 and to equip all new coal gasification and combustion plants with the technology by 2020.  Each state’s legislature must now pass legislation ratifying the pact’s commitments.
• Report Finds That Eight Midwestern States Emit 25 Percent of Total U.S. GHG Emissions.  On November 14, 2007, the World Resources Institute issued a report on the GHG emissions of Illinois, Iowa, Michigan, Minnesota, Missouri, Ohio, and Wisconsin.  The report noted that, in 2003, the eight states emitted approximately 1.5 billion metric tons of greenhouse gases, accounting for 25 percent of total U.S. emissions and 5 percent of global emissions.  According to the report, electricity generation is the highest emitting sector in the region and has the largest emissions growth rate.  Attributing the high emissions to the states’ reliance on coal for electric power generation, the report commended the states for recent increases in energy efficiency that resulted in a 10 percent decrease in GHG emissions during a period when economic output increased by 10 percent.  The report also noted that some of the emissions result from power generated for export to states in the eastern United States.
• Washington State Develops 1990 Greenhouse Gas Emissions Inventory.  Two Washington State agencies, the Departments of Ecology (WDOE) and Community, Trade, and Economic Development (CTED), are preparing an emissions inventory as required by the Washington Legislature.  The report, which is due to be delivered to the Legislature by December 31, 2007, will describe the total GHG emissions in Washington State for 1990 and the totals in each major sector (residential, commercial, industrial, electricity, transportation, and agriculture).  The 1990 figures will be used in setting the state's baseline and tracking the state's progress toward meeting the greenhouse gases reduction goals relative to the baseline.  The Departments are asking for comments on this draft report by November 22, 2007. 

Studies and Reports

• National Action Plan for Energy Efficiency Report Offers Ways to Reduce Energy Costs and GHG Emissions.  A report released this week outlines five recommendations for states, utilities, and regulators to consider in formulating policies for cost-effective energy efficiency measures to combat global climate change.  The U.S. EPA and DOE led a broad effort, which included a large group of gas and electric utilities, regulators, environmental NGOs, and corporations, to produce the National Action Plan for Energy Efficiency Vision for 2050.  This is the second report issued as part of the joint EPA-DOE effort.  The latest report is designed to help remove barriers to energy efficiency measures, and concludes that Americans could save over $20 billion in energy costs annually and reduce their CO₂ emissions by 200 million tons per year if existing energy efficiency programs were implemented nationally.  The report urges regulators and the regulated community to: (1) recognize energy efficiency as a high priority resource; (2) make a strong, long-term commitment to implement cost-effective energy efficiency as a resource; (3) broadly communicate the benefits of and opportunities for energy efficiency; (4) promote sufficient, timely, stable program funding to deliver energy efficiency where cost-effective; and (5) review and adopt policies to align utility incentives with the delivery of cost-effective energy efficiency and modify ratemaking practices to promote energy efficiency investments. 
• UCS Issues Report on Low-Carbon Standard for Biofuels.  The Union of Concerned Scientists (UCS) released a report recommending that a low-carbon fuel standard become part of any biofuels mandate in order to ensure that a net reduction in GHG emissions is achieved.  The report – Biofuels – An Important Part of a Low-Carbon Diet – said that fuels with very low lifetime CO₂ emissions, such as cellulosic ethanol, should be given greater credit for overall GHG emission reductions.  In contrast, the report suggested that coal-based fuels receive lower credits or possibly penalties because their use can lead to increased net GHG emissions relative to use of petroleum.
• New Database Compares Emissions of 50,000 Power Plants Worldwide.  A new database, called Carbon Monitoring for Action (CARMA) and developed by the Center for Global Development (CGB), shows the GHG emissions from more than 50,000 power plants world wide, where the plants are located, and which companies own the facilities.  A spokesperson for the company said that the database compiles this information for the first time and makes transparent the emissions associated with electricity generation.
• Research Highlights Challenges of Forestry Activity Credits in Climate Programs.  Preliminary research by Resources for the Future indicates that forest preservation activities could provide as much as one third of the reductions required to reduce the CO₂ concentrations in the atmosphere by 2050 to a level that many scientists predict would avoid the worst effects of climate change.  However, the researchers cautioned that while forestry carbon “sinks” could provide a large portion of GHG reductions, there is a significant risk of low-cost forestry reductions harming low emission technology, renewable, and nuclear development.  The research comes amidst increasing efforts to incentivize forest management and avoided deforestation in climate change programs. 
• Canadian Government Reports GHG Emissions Reduction from Large Emitters.  Results of a Canadian government-sponsored study indicate that overall GHG emissions from facilities emitting more than 100,000 metric tons per year of CO₂ fell 2.3% from 2005 to 2006.  Notably, emissions from the electricity generation sector fell, while emissions from the country’s growing fossil fuel sector rose.  Alberta, where most oil and gas extraction occurs, accounts for about 30 percent of the country’s total GHG emissions. 

International

• United Kingdom Bill Provides for Binding Medium- and Long-Term CO₂ Emissions Targets.  A bill to limit GHG emissions was published for parliamentary approval in the UK.  A draft proposal was open for several months of public consultation and comment, and the resulting bill would set a binding goal of reducing emissions to 60 percent below 1990 levels by 2050.  The bill includes a system for monitoring and reporting on the impacts of climate change and efforts to combat climate change.  The bill would also introduce a cap-and-trade mechanism for large organizations, with new trading options that could be established through additional legislation.  The UK environment secretary commented that, “This bill is a landmark in environmental legislation and will set us firmly on the path to the low-carbon economy we know is fundamental to our future.”
• European Union Cap-and-Trade System to Include Civil Aviation Beginning in 2011.  The European Parliament approved a plan to include civil aviation in the European Union’s Emissions Trading Scheme.  Airlines registered in the EU will be required to obtain CO₂ emissions permits beginning in 2011, based on their CO₂ emissions during the reference period of years 2004-2006.  Airlines will receive an allocation of allowances but must purchase additional allowances or offsets to meet their requirements.  The plan will include all flights within the EU as well those to and from third countries, including the United States.  Airline CO₂ emissions have doubled since 1991, and are projected to rise by another 50 percent by 2012.  The plan now awaits approval from the EU Council of Ministers on behalf of the 27 EU member states.