Weekly Climate Change Policy Update - July 20, 2009

To receive the Weekly Update via email, visit our Sign Up/Subscribe page.

Commentary

Senate hearings this week were marked mostly by broad rhetorical flourishes, but there were hints at what elements might be necessary to draw the extra votes needed for ultimate passage – subsidies for nuclear power, allowance allocations to agriculture, promotion of biomass . . . An intramural battle broke out within the electric power sector.  Investor-owned utilities reached a careful compromise on an allowance allocation plan and successfully advocated for its inclusion in the ACES bill.  Now, that plan has come under attack by public power entities and cooperatives who claim it leads to windfalls for generators in unregulated markets.        

Executive Branch

• DOE Revives FutureGen Project.  The Department of Energy (DOE) announced it would provide funding for the FutureGen Project in Illinois.  Following review under the National Environmental Policy Act (NEPA), the DOE issued a formal Record of Decision finalizing plans to provide over $1 billion for the project.  However, the document does not commit to construction at this point; rather it focuses mainly on preliminary steps.  A public/private collaboration, FutureGen will utilize carbon capture and storage technology to provide low-emission coal-fired power.
• Update on Administration Nominations and Appointments.
  • The Senate Environment and Public Works Committee approved the nomination of Craig Hooks as head of the EPA’s Office of Administration and Resources Management.  A longtime EPA employee, Hooks has been acting as head of the office since February.
  • A member of the Senate Environment and Public Works Committee, George Voinovich (R-OH), placed a procedural hold on the nomination of Robert Perciasepe to EPA Deputy Administrator.  Voinovich states that the hold does not reflect his view of Perciasepe’s ability to fill the position but instead represents Voinovich’s dissatisfaction with the EPA’s very favorable cost estimates of the House-passed climate legislation.  Currently Chief Operating Officer for the National Audubon Society, Perciasepe previously served at EPA during the Clinton Administration as Assistant Administrator for Water and then Assistant Administrator for Air & Radiation.
  • Agriculture Secretary Tom Vilsack appointed Ann Mills as the Department’s Undersecretary for Natural Resources and Environment.  Mills is a former senior vice president at the conservation group American Rivers.

Congress

• Senate EPW Committee Launches Climate Hearings.  The Senate Environment and Public Works (EPW) Committee held hearings on U.S. competitiveness, transportation, and economic opportunities for agriculture and forestry in the context of climate change legislation.  Witnesses represented General Electric, the Center for American Progress, the National Black Chamber of Commerce, the Center for Clean Air Policy, Watkins and Shepard Trucking, Rio Tinto, the Environmental Defense Fund, and the American Farm Bureau, and also included Department of Transportation Secretary Ray LaHood and Mayor of Salt Lake City Ralph Becker.  While Committee Democrats heralded the potential for climate change legislation to create jobs and enhance U.S. competitiveness by driving innovation in clean energy technologies, Committee Republicans warned that climate legislation would increase energy costs and unemployment and be ineffective if high GHG emitting nations such as China and India do not also adopt caps.  EPW will hold a hearing on July 21^st to allow governors, mayors, and other public officials to testify about the potential to create green jobs and economic growth through climate change legislation. 
• Key Senators Suggest Climate Bill Asks.  Senators on the fence about cap-and-trade legislation have begun to outline what they would need to support a bill.  Sen. Richard Lugar (R-IN), ranking member of the Foreign Relations Committee, expressed concerns over the timeframe for implementing the cap-and-trade system in the House climate bill, calling for “more incremental” targets.  However, he added, “it’s conceivable” that he could support a cap-and-trade bill.  Sen. Lindsey Graham (R-SC) told reporters that he “could vote for a cap-and-trade system” if it were to include provisions for nuclear energy and increased off-shore drilling for natural gas.  Sen. Byron Dorgan (D-ND) favors a “cap-and-dividend” approach as he believes a carbon market will likely result in “unbelievable speculation.”  Sen. John McCain (R-AZ) called the nuclear provisions "vital" to his support for cap-and-trade legislation.  Sens. Blanche Lincoln (D-AR) and Mary Landrieu (D-LA) similarly want nuclear energy incentives in a climate bill, and Sen. Lincoln also hopes to incorporate more support for biomass, natural gas, and other fuels.  Sen. Lamar Alexander (R-TN), thought by some to be a possible supporter of climate legislation, told reporters that he would not support a cap-and-trade program and instead unveiled a proposal to construct 100 nuclear power plants in 20 years as a means of addressing climate change.

States and Cities     

• NF₃ Bill Passes Out of Two California Assembly Committees.  Two California Assembly committees passed a bill that would explicitly grant the California Air Resources Board (CARB) authority to regulate nitrogen trifluoride (NF₃), a potent greenhouse gas used in the production of solar panels, semiconductors, and flat-screen televisions.  The bill, which has already been passed by the state Senate, will soon head to the Assembly floor before it can be sent to Governor Arnold Schwartzenegger.  While CARB has already enacted regulations defining its views and limiting the use of NF₃ in semiconductor manufacturing, bill sponsor Sen. Jenny Oropeza (D) said that the bill is intended raise awareness of NF₃ emissions at the federal level and to give CARB authority to monitor use of NF₃ and ensure proper use.  When commercially available controls are in place, NF₃ is destroyed in use and emissions are reduced to levels that are virtually non-detectable.

Industry

• Utility Associations Spar Over ACES Allocations.  Trade associations representing the regulated electric utility sector – the American Public Power Association, the National Association of Regulatory Utility Commissioners, the National Rural Electric Cooperative Association and the National Association of State Utility Consumer Advocates – released a study, prepared on their behalf by the consulting firm Synapse Energy Economics, which concluded that any allowance allocation is likely to result in windfall profits in unregulated electricity markets.  The report also found that free allowance allocations to merchant generators – unregulated power producers that sell power at market rates – will result in those generators receiving additional windfall profits at the expense of consumers.  The report is available at http://www.synapse-energy.com/downloads/cap-and-trade.pdf.  In defense of the current ACES allocation formula, the Edison Electric Institute (EEI) – a trade association of investor-owned utilities – released a statement noting that merchant coal generators will face increased compliance costs under ACES.  EEI argued that eliminating the merchant coal allocation would lead to closures of some coal-fired power plants and increase the price of natural gas-fired electricity.
• Wal-Mart to Require Supplier Accounting of GHG Emissions.  Wal-Mart, the world’s largest retailer, announced that it would require its largest suppliers to respond by Oct. 15 to a list of fifteen questions concerning the environmental lifecycle of their products, including GHG emissions.  The information will be incorporated into an environmental label placed on Wal-Mart merchandise, including food, clothing and other goods.  Wal-Mart also plans to create a comprehensive database to track this environmental information, in partnership with a consortium of universities.

Studies and Reports

• Research Suggests that Effects of Indirect Feedbacks on Warming May Be Underestimated.  Research using sediment cores from seabeds to calculate atmospheric CO₂ concentrations during the Palaeocene-Eocene Thermal Maximum (about 55 million years ago) indicates that increases in CO₂ concentrations at that time can account for only 1-3.5° of the 5-9° Celsius temperature rise that occurred over a few thousand years.  The researchers concluded that other processes or feedbacks must have been responsible for a substantial portion of the observed warming, and that the possible amplification effects of these unidentified feedbacks on future climate change should be taken into account.  The abstract of this article is available at http://www.nature.com/ngeo/journal/vaop/ncurrent/abs/ngeo578.html.

International

• Major Developing Nations Agree on 2 Degree Celsius Temperature Target.  Following similar action by major developed nations, a group of major GHG emitting developing nations, including China and India, agreed that efforts should be made to limit global temperature increase to 2 degrees Celsius.  The 2 degree target is a goal and does not include any binding commitments. 

David Frenkil and Marisa Swenson, Summer Associates at the Firm, contributed to this Update.