Weekly Climate Change Policy Update - August 11, 2008

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Commentary

Energy policy has moved to the front burner in the contest for the White House.  Sen. McCain has pushed to expand off-shore drilling.  Sen. Obama expresses a new openness to drilling, but only as part of a comprehensive package of funding for alternative energy, a tax credit drawn from the “windfall profits” that oil companies allegedly are enjoying, and a draw-down from the Strategic Petroleum Reserve.  It is becoming increasingly clear that any future federal climate change program will need to be wrapped into a broader energy policy package . . . Massachusetts appears prepared to adopt the most ambitious emissions cap seen yet among the states . . . Officials working on Florida’s climate program are investigating whether to join up with the Western Climate Initiative or the Regional Greenhouse Gas Initiative . . . With a federal climate change program now appearing inevitable, do the state and regional initiatives promote or complicate the overall national effort?  Carbon market analyst Point Carbon says the latter.  It released a study suggesting that the state and regional efforts will put sand in the gears without generating meaningful additional reductions. 

Congress

• Obama Promises Focus on Renewable Energy, Hybrids.  In a Lansing, Michigan speech this week, presumptive Democratic nominee for President, Sen. Barack Obama (D-IL) outlined his principles for transforming the economy to achieve energy independence.  Sen. Obama’s speech focused on commercialization of plug-in hybrid vehicles, which he said should be largely manufactured in the United States, specifically Michigan.  To this end, he offered a combination of tax credits for consumers and U.S. automakers to help make the switch to plug-in hybrid production.  Sen. Obama said he would propose extending the renewable energy production tax credit for five years to aid his proposal that 10 percent of the nation’s energy come from renewable sources by 2012, and 25 percent by 2025.  Additionally, he stated that he would propose to “modernize the national utility grid” to aid in transmission of renewable power to consumers, a hindering factor in the development of alternative energy systems.  Sen. Obama also said that while he does not support increased offshore drilling, he is “willing to consider it if it’s necessary to actually pass a comprehensive plan” on energy.  Sen. Obama said he would prefer to see every American receive a $500 tax rebate, funded by the elimination of oil companies’ “windfall profits,” and the release of some light crude oil from the Strategic Petroleum Reserve, which would be replaced with heavier crude at a later date.
• House Bill Seeks to Prevent EPA From Regulating Greenhouse Gas Emissions.  Rep. Marsha Blackburn (R-TN), along with other House Republicans, has introduced legislation to prevent the Environmental Protection Agency (EPA) from regulating carbon dioxide, methane, and other greenhouse gas emissions under the Clean Air Act.  In 2007, the U.S. Supreme Court ruled in Massachusetts v. EPA that the agency has authority to regulate carbon dioxide as a pollutant under the Clean Air Act.  However, EPA has not taken any final regulatory action on greenhouse gas emissions.  The proposed bill (H.R. 6666) would take steps to reverse the Supreme Court’s ruling and favors the Bush administration’s position that the Clean Air Act is not suitable for regulating such emissions.  H.R. 6666 has been referred to the House Energy and Commerce Committee.

Administration

• DOE Announces Zero-Net Energy Commercial Buildings Initiative.  The U.S. Department of Energy (DOE) announced the establishment of the National Laboratory Collaborative on Building Technologies (NLCBT) to aid in its launch of the Commercial Building Initiative (CBI).  This initiative will utilize cutting-edge energy efficiency technologies as well as on-site renewable energy generation to develop “Zero-Net Energy Commercial Buildings.”  DOE said that it hopes these buildings will save and generate enough energy to offset their energy use from the electricity grid.  The Energy Independence and Security Act of 2007 authorizes DOE to use collaborative efforts with the private sector, other federal agencies, non-governmental organizations, and DOE’s National Laboratories to achieve the goal of making these buildings commercially marketable by 2025.
• Record Attendance Marks GovEnergy 2008 in Phoenix, AZ.  Sponsored by the Department of Defense, the General Services Administration, the Department of Energy, the Veteran’s Administration and the Department of Homeland Security, GovEnergy 2008 drew a record crowd of 2400 to advance the federal government’s efforts to reduce its $10 billion energy bill.  By Executive Order 13423, laws enacted in 2005 and 2007, and federal guidance and targets at individual federal agencies, the federal government is obligated to reduce its energy use sharply and to embrace renewable technologies.  Federal energy and fleet managers, procurement, legal and contracting officials joined energy service companies, equipment manufacturers, state and local officials and others in more than a hundred training sessions and meetings designed to share best practices and explore the strategies, methods and technologies to meet stringent energy reduction targets.   
• EPA Denies Texas Renewable Fuels Mandate Waiver Request.  EPA denied a request by the State of Texas for a waiver to relax the federal renewable fuels standard (RFS) set forth in the Energy Independence and Security Act of 2007.  The RFS requires increased penetration of renewable fuels into the nation’s transportation fuel mix, with a per year goal of 36 billion gallons of renewable fuels by 2022.  Gov. Rick Perry requested the waiver in April contending that a mandate for more ethanol in gasoline has had a major effect on corn, food and fuel prices.  However, EPA Administrator Stephen Johnson denied the request, stating that the mandate is “not causing severe economic harm,” a criterion for waiver approval under the Clean Air Act.  While this decision has found supporters, such as Senator Chuck Grassley (R-IA), some environmentalists and members of the petroleum industry continue to oppose the expansion of ethanol use. 

States and Cities   

• Massachusetts Legislature Send Nation’s Toughest Emissions Cap to Governor.  The Massachusetts Legislature passed legislation that would impose the nation’s most stringent GHG emissions cap to date.   The Global Warming Solutions Act would establish GHG emission reduction targets of 25 percent below 1990 levels by 2020 and 80 percent below by 2050.  In addition to establishing economy-wide emissions caps, the bill would create an advisory committee to study climate change-related issues.  Massachusetts Governor Deval Patrick (D) is expected to sign the legislation.
• Florida Analyzes Regional Cap-and-Trade Membership.  Members of Florida’s “Governor’s Action Team on Energy and Climate” are reviewing the possibility of joining the Western Climate Initiative (WCI), a regional cap-and-trade program comprised of seven Western U.S. states and four Canadian provinces.   The Florida officials’ assessment of the economic impacts of joining the WCI included a review of a University of Southern California study showing that the state could save up to $286 million in 2020 by joining the WCI.  The Action Team assessment of the WCI follows a similar review of the economic impacts of joining the Regional Greenhouse Gas Initiative (RGGI) that found even greater economic benefits.  RGGI is a regional cap-and-trade program made up of 10 northeastern states.  Under legislation passed last year, Florida is developing a state-wide cap-and-trade program applicable to the electricity sector.
• South Carolina Climate Committee Submits Recommendations to Governor.  A climate change committee formed by South Carolina Governor Mark Sanford (R) submitted to the Governor a set of 51 recommendations for addressing climate change.  The committee’s proposal calls for a reduction in state GHG emissions of 5 percent from 1990 levels by 2020 through a combination of renewable power, energy efficiency and vehicle fuel economy initiatives.  The proposal does not recommend that South Carolina implement a state-wide cap-and-trade program or join one of several regional cap-and-trade programs around the country.  Committee members stated that Florida should instead wait for a possible future federal emissions trading scheme.

Studies and Reports

• Report Finds Federal Trading Program More Effective Than Regional Programs.  A report issued by the carbon market news service Point Carbon found that a federal cap-and-trade program, rather than multiple regional and state markets, would provide the best framework for reducing GHG emissions in the United States.  The report found that the existence of multiple regional emissions trading programs would result in higher administrative and compliance costs and would not necessarily achieve any additional environmental benefit.  In contrast, a federal program that preempts state and regional programs would create an efficient and transparent market that, according to Point Carbon, would achieve GHG reductions at lower cost while reducing market volatility.  

International

• Brazilian President Proposes Funds to Combat Climate Change, Deforestation.  Brazilian President Luiz Inacio Lula da Silva sent to the Brazilian Congress a proposal for two funds aimed at addressing climate change and deforestation.  The proposed Climate Change Fund would be funded through a levy on oil production that would raise approximately $192 million annually to support GHG emission reduction projects and climate change adaptation.  The Amazon Fund would use donations from foreign governments and private institutions to fight deforestation, which accounts for approximately three quarters of the nation’s GHG emissions.  The announcement of the two funds precedes the expected issuance of Brazil’s national climate change plan later this year.
• Japanese Environment Minister Calls for Interim Reduction of 25 Percent.  Incoming Japanese Environment Minster Tesuo Saito called for Japan to reduce its GHG emissions 25 percent below 1990 levels by 2020.  While both Prime Minister Yasuo Fukuda and the Japanese Cabinet have called for a long-term GHG emission reduction of 60-80 percent by 2050, the Environment Minister’s statement is the first by a Japanese government official calling for a specific interim target.  Prime Minister Fukuda is expected to announce an interim emissions goal sometime next year.