Weekly Climate Change Policy Update - July 28, 2008

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Commentary

The Western Climate Initiative stakeholders released a draft plan for the program, which outlines a cap-and-trade system that would reach large industrial sources of emissions and the “first deliverers” of electricity into the covered jurisdictions.  Yet, many details remain to be resolved, including with respect to allowance allocation and offsets.  The final plan is due out in September.  The program might have to lose its “Western” moniker; it picked up Ontario as a new member this week.  The growing Canadian footprint in the WCI would seem to complicate the ultimate integration of the Initiative with a future US federal program . . . The 60-day countdown has started for the first Regional Greenhouse Gas Initiative auction . . . The World Bank has launched a multilateral facility to support projects to reduce emissions from deforestation and degradation.  Urgency is building around the REDD concept globally, and there appears to be strong backing for building a mechanism to fund REDD-related activities into any future US federal cap-and-trade program . . . Senator Tom Carper (D-DE) is holding a hearing on July 29^th on this month’s decision by the Court of Appeals for District of Columbia Circuit that invalidated the EPA Clean Air Interstate Rule (CAIR).  The decision has created a regulatory vacuum, confounding planning both for states and for the electric power companies that would have been regulated by the CAIR.  Sen. Carper might perceive the turmoil created by the decision as a good opportunity to resurrect his legislation that would have established caps for power plant emissions of CO₂, nitrogen oxides, sulfur dioxide, and mercury. 

Congress

• House Subcommittee Holds a Hearing on Geologic Sequestration of CO₂.  Members of the Subcommittee on Environment & Hazardous Materials expressed their concern that geologic sequestration of CO₂ could lead to new environmental problems, such as contaminated groundwater, and other unforeseen problems.  The Subcommittee held the hearing in response to the Environmental Protection Agency’s (EPA) proposed rule under the Safe Drinking Water Act, which would regulate underground storage of CO₂ generated by power plants or other industrial sources in order to protect underground sources of drinking water.
• Senate Environment & Public Works Committee Vote on Subpoena of EPA Endangerment Finding on Climate Change Blocked.  According to press reports, EPA previously made a finding that CO₂ emissions endanger public health and welfare – which, under the Clean Air would trigger certain obligations for the agency to regulate sources of such emissions – but the White House refused to open and accept the document.  Chairwoman Boxer (D-CA) planned to subpoena the document but the Committee could not vote on the subpoena when none of the Republican committee attended the meeting.  EPW Committee rules require the presence of at least two Republicans for a quorum to exist; a vote cannot be held if a quorum is not present.  The Bush Administration still refuses to release the document publicly, but did allow members of the committee and their staff to read and take notes on the endangerment finding while under the supervision of White House lawyers.   

Administration

• EPA Inspector General Releases Report on Voluntary GHG Emissions Reduction Programs.  The report found that voluntary programs are unlikely to reduce more than 19 percent of the projected GHG emissions for the participating industry sectors in 2010.  Many companies have decided not to participate in these voluntary programs because of the cost of reducing GHG emissions and the reporting requirements.  The report also found that, of the eleven programs reviewed by the Inspector General, eight had flaws in the data collection and reporting systems caused by limited, unverified, or anonymous data reporting.  The report recommends that EPA review emission reduction costs annually and update them if needed.  The Inspector General also suggests that EPA have its partners sign written agreements requiring better data reporting and outlining how confidential business information will be handled. 

States and Cities     

• WCI Releases Draft Trading Program Design.  The Western Climate Initiative (WCI) has released a draft design for its regional emissions trading program.  The draft recommends a cap-and-trade program that begins in 2012 and employs three-year compliance periods to help members meet a goal of reducing GHG emissions to 15 percent below 2005 levels by 2020.  The draft calls for regulation of industrial sources emitting more over 25,000 metric tons of GHGs per year and, in the electricity sector, the regulation of the “first deliverers” of power to the covered region.  The draft does not specify a minimum percentage of emission allowances that will be auctioned.  The proposed design also would allow covered entities to use offsets to meet up to 10 percent of the compliance obligation.  WCI stakeholders expect to release a final report on the trading program design in September.  WCI members include Arizona, California, Montana, New Mexico, Oregon, Utah, Washington and the Canadian provinces of British Columbia, Manitoba, Ontario and Quebec.  (For further details on Ontario’s recent decision to join the WCI, see the discussion under “International” below).
• D.C.-Area Council of Governments Proposes 80 Percent GHG Reduction By 2050.  The Metropolitan Washington (D.C.) Council of Governments released a draft proposal that would set emissions reduction targets for the region.  The proposed plan would seek to reduce the region’s GHG emissions to 2005 levels by 2012, 20 percent below 2005 levels by 2020, and 80 below 2005 levels by 2050.  The plan recommended achieving those reductions through energy efficiency initiatives, increased reliance on renewable energy, and a number of transportation and land use proposals.  The COG Board will vote on final recommendation this fall.
• RGGI Issues Formal Notice of Inaugural Allowance Auction.  The Northeastern Regional Greenhouse Gas Initiative (RGGI), a regional cap-and-trade program made up of ten northeastern states, released a formal notice giving potential bidders 60 days to prepare for the program’s first allowance auction.  The notice contained information on registering for the auction, which requires a four-step process of creating an account, filing an auction qualification form, filing an “intent to bid” form, and submitting financial security.  Six of the ten RGGI states – Connecticut, Maine, Maryland, Massachusetts, Rhode Island, and Vermont – will participate in the auction of 12.5 million emissions allowances.
• Connecticut Legislative Committee Supports RGGI Auction Rebates for Consumers.  The Connecticut General Assembly’s Regulation Review Committee approved a plan proposed by Governor Jodi Rell (D) to provide rebates to consumers from funds raised by auctioning emissions allowances under the.  The plan would provide consumer rebates if emission allowance prices for the regional cap-and-trade program exceed $5 per ton.  The Committee approved the plan despite the state Attorney General’s ruling that it would violate the state law authorizing participation in RGGI.  Under Connecticut’s RGGI implementation statute, auction proceeds must fund energy conservation, loan management, and renewable energy programs. 

Studies and Reports

• University of Maryland Report Predicts Billions in Costs to States if No Action Taken on Climate.  The study, issued by the Center for Integrative Environmental Research at the University of Maryland, was a follow-up to its October 2007 examination of the national economic impacts of a failure to address climate change.  The new study focused on eight states – Colorado, Georgia, Kansas, Illinois, Michigan, Nevada, New Jersey, and Ohio – that have not adopted strict climate programs and concluded that local impacts could total in the billions of dollars.  The authors acknowledged that climate change must also be addressed on a national level, but said that the intent of the study was to draw greater localized attention to the issue by detailing the state-specific impacts.  The reports on each state are available at: http://www.cier.umd.edu/climateadaptation/index.html.  
• U.K. Group Calls for Climate Change “New Deal” Policy.  The New Economics Foundation issued a report calling for an overarching program to spur action on climate change from all sectors, similar to President Franklin D. Roosevelt’s 1933-38 New Deal policies aimed at stimulating the U.S. economy after the Great Depression.  The group called for a comprehensive plan, including a shift to low-carbon energy production, financial incentives and government policies to promote energy efficiency, examination of tax breaks that are counter-productive to reducing emissions, and new regulation of capital.  The report can be downloaded, after registration, at: http://www.neweconomics.org/gen/z_sys_publicationdetail.aspx?pid=258.   

International

• Ontario Becomes Fourth Canadian Province To Join WCI.  Ontario joined three other Canadian provinces as a member of the Western Climate Initiative, a regional cap-and-trade program otherwise focused on the western United States and Canada.  Ontario, the second highest emitting province in Canada, aims to reduce its GHG emissions 6 percent below 1990 levels by 2015, 15 percent below by 2020, and 80 below by 2050.  The move follows Ontario’s ratification in June of a Memorandum of Understanding (MOU) with Quebec in which the two provinces agreed to develop a joint CO₂ emissions trading program.  (For further details on the WCI’s draft trading program, see the discussion under “States and Cities” above).
• World Bank Launches Forest Program to Fight Climate Change.  The World Bank launched the Forest Carbon Partnership Facility (Facility) in an effort to reduce emissions from deforestation and degradation (REDD).  The Facility will provide funds to fourteen countries in Africa, Latin America, and Asia to develop programs aimed at fighting poverty and halting deforestation.  Approximately 20 percent of global CO₂ emissions result from deforestation and REDD has been an important issue in international discussions on a successor treaty to the Kyoto Protocol.
• Mexico City Plans to Reduce Emissions Twelve Percent By 2012.  Mexico City’s Environment Secretary Martha Delgado announced that the Mexican capital will seek to reduce its GHG emissions 12 percent from 1990 levels by 2012.  The city’s climate action plan will focus on 26 actions to reduce emissions from city, which accounts for 9 percent of Mexico’s GHG emissions.  The plan will cost 60 billion pesos ($5.9 billion) with the city providing half of those funds and the rest resulting from the sale of carbon credits and other investments.