Weekly Climate Change Policy Update - October 12, 2009

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Commentary

The Bangkok talks resulted in minimal progress toward a successful post-Kyoto agreement in Copenhagen . . . In the October 11 New York Times, Sen. John Kerry (D-MA) and Sen. Lindsey Graham (R-SC) suggested that the magic formula for Senate passage of a climate bill has five ingredients.  According to the new bipartisan climate duo, the bill must create a program that: (1) is market-based; (2) invests in nuclear power; (3) provides incentives for carbon capture and sequestration, and achieves an environmentally-sensitive compromise on new onshore and offshore oil and gas exploration; (4) considers a border tax that can be consistent with World Trade Organization disciplines; and (5) protects businesses (and ultimately consumers) from energy price increases, primarily through a floor and ceiling for allowance prices . . . Having decided that GHG sources should be subject to PSD rules, EPA now is canvassing opinion on what should constitute “Best Available Control Technology” for various facilities.  What happens in the case of facility types for which no technologies are even available? . . . Who is in the 25,000 mtCO₂e club (which entitles its members to allowance surrender obligations, reporting rule requirements, PSD obligations, and Title V permits)?  According to Duke’s Nicholas Institute, club members include practically every facility in the power sector, but under 2% of U.S. manufacturers . . . Businesses continue to take up sides in the Senate lobbying effort.  Apple dropped out of the U.S. Chamber and a large group of pro-legislation companies hit Capitol Hill last week.   

Executive Branch

• Executive Order Requires Federal Agencies to Reduce GHG Emissions.  President Obama issued an executive order instructing all federal agencies to set greenhouse gas (GHG) emission reduction targets for 2020 within 90 days.  These targets would exclude direct emissions from vehicles and from federally-owned electric generating units that sell their output on a commercial basis.  To track the implementation of these goals, federal agencies would submit an annual inventory of GHG emissions to the Council on Environmental Quality and the White House Office of Management and Budget.  Executive Order 13514 would also require federal agencies to achieve a 30 percent reduction in vehicle petroleum use and a 26 percent improvement in water efficiency by 2020, among other environmental goals.  The order is available at http://www.whitehouse.gov/assets/documents/2009fedleader_eo_rel.pdf.
• EPA Asks Panel for Recommendations on BACT for GHGs.  Just over a week after issuing a proposed rule that would apply the Clean Air Act’s Prevention of Significant Deterioration (PSD) program to stationary sources emitting at least 25,000 tons CO₂-equivalent of GHGs per year, the Environmental Protection Agency (EPA) convened an expert panel known as the Clean Air Act Advisory Committee (CAAAC) to solicit comment on how to interpret PSD requirements for GHGs.  In particular, EPA sought input on what technologies would constitute “Best Available Control Technology” (BACT) for GHGs.  The PSD program requires new and modified emitting facilities to obtain preconstruction permits that, among other things, require the implementation of BACT for all pollutants “subject to regulation” under the Clean Air Act (CAA).  Under EPA’s interpretation of the CAA, GHGs will become subject to regulation upon the effective date of the agency’s forthcoming GHG emission standards for vehicles – expected in spring 2010.  EPA’s Assistant Administrator for Air and Radiation, Gina McCarthy, reportedly has asked that a workgroup of the CAAAC develop recommendations on BACT for GHGs for different types of facilities and submit them to EPA before those vehicle standards become final.
• EPA Planning to Regulate GHG Emissions from Broader Universe of Vehicles.  Margo Oge, the Director of the Office of Transportation and Air Quality at EPA, indicated last week that the agency is preparing a proposed rule that would establish GHG emission standards for heavy-duty trucks.  According to Oge, the proposal should be released by early to mid-2010.  In addition, Oge stated that EPA plans to initiate a single rulemaking within the next twelve months to respond to various petitions from environmental organizations requesting that the agency promulgate GHG standards for marine vessels, aircraft, and other non-road vehicles and engines.  EPA is already in the process of taking comments on a proposed rule, undertaken jointly with the National Highway Traffic Safety Administration, to establish GHG emission standards for passenger vehicles and light duty trucks.
• Executive Branch Appointments.
  • The Senate confirmed three of President Obama’s nominees to serve on the Commodity Futures Trading Commission (CFTC) – Scott O’Malia, Bart Chilton, and Jill Sommers. 
  • The Senate Committee on Energy and Natural Resources unanimously approved the nomination of John Norris to serve as one of the five members of the Federal Energy Regulatory Commission (FERC). 
  • Joe Goffman was appointed Senior Counsel to the Assistant Administrator for Air and Radiation at EPA.  Goffman was previously Senior Counsel on Global Warming and Air Issues to the Senate Environment and Public Works Committee. 

Congress

• Swing Vote Senators Develop Climate Compromises.  Sen. Lindsey Graham (R-SC), a possible crossover Republican vote for climate legislation, writing with Senator John Kerry in the Sunday New York Times, said that they represent a “fresh attempt to find consensus” and that bipartisanship on the issue of climate should be possible.  Their policy formulation adds nuclear power incentives, environmentally sensitive oil and gas development, robust incentives for clean coal technologies, and a “price collar” on allowance prices.  They predict that policy makers who are now opposed to climate legislation will be driven to the negotiating table if EPA proceeds with its regulatory plans.  Senator Graham urged President Obama to play a role in facilitating negotiations.  Sen. George Voinovich (R-OH), however, said that the nuclear title being developed by Sen. Joe Lieberman (I-CT) and Sen. Graham, among others, will not be enough to garner 60 votes. 
• EPW Hearings Postponed.  Senate Environment and Public Works Committee Chairman Barbara Boxer (D-CA) said that a revised draft of the Kerry-Boxer cap-and-trade bill will be done within days, and that she will not hold hearings or a markup until EPA has finished analyzing the economic impacts of the bill, possibly in mid-November.
• Senate Preserves CIA Climate Funding.  The Senate voted down, 38-60, an amendment to the defense spending bill offered by Sen. John Barrasso (R-WY), which would have blocked FY 2010 funding for the Central Intelligence Agency’s new Center on Climate Change and National Security. 

States and Cities   

• Midwestern Accord Focuses on Clean Technology, CCS Development.  Governors representing the eleven member states of the Midwestern Governors Association signed the Midwestern Energy Infrastructure Accord (Accord), an agreement aimed at promoting the development and deployment of carbon capture and sequestration (CCS), smart grid, and other clean technologies in the region.  Other issues addressed by the Accord are the development of biofuels infrastructure, increasing electric transmission capacity, a series of renewable energy targets, and a goal of developing a multi-state CO₂ pipeline that will transport the GHG to geologic sequestration sites from regional coal-fired power plants.  The renewable energy goals are set at 10 percent by 2015 and 30 percent by 2030.  Previously, a Midwestern governors group – the Midwestern Greenhouse Gas Accord – had been working on a regional cap-and-trade program, but the group suspended the effort in light of activity at the federal level.
• California Climate Summit Sees Range of Sub-national Multilateral Agreements.  The Second Governors’ Climate Summit in Los Angeles, California led to three climate change agreements between governors from sub-national governments in developed and developing nations.  Most significant was a deforestation memorandum signed by five Brazilian states, three Indonesian states, and the U.S. states of California, Wisconsin, and Illinois.  The eleven leaders agreed to lobby their national governments to incorporate robust forestry provisions into a future international climate change treaty.  A second agreement between California and the Chinese province of Jiangsu will focus on clean energy cooperation and technology transfer.  In the third agreement, California signed a letter of intent with United Nations Development Programme to assist African nations in pursuing low-carbon development strategies.
• Pennsylvania Releases Action Plan With 30 Percent by 2020 GHG Target.  The Pennsylvania Department of Environmental Protection (DEP) released to the public a draft climate change action plan that calls for the state to reduce its GHG emissions to 30 percent below 2000 levels by 2020.  In addition to the 2020 target, the action plan contains 51 other recommendations for reducing the state’s GHG emissions from its largest emitting sectors.  The plan will be open to public comment for 30 days.  Pennsylvania accounts for one percent of global GHG emissions and is the third largest emitting U.S. state behind Texas and California.

Industry

• Pro-Climate Bill Companies Lobby Congress.   A coalition of utilities and other businesses, organized by the green investor organizations Ceres and the Clean Economy Network, have formed a campaign called “We Can Lead” to lobby Congress for passage of climate change legislation this year.  Coalition members include Duke Energy, Exelon, Constellation Energy, Nike, Starbucks, eBay, and Levi Strauss.  Last week, the campaign brought leaders of approximately 150 companies from more than 30 states – including many clean energy companies – to thirty-five Senate offices to lobby in favor of climate change legislation.  The meetings focused mainly on moderate Democrats and Democrats from manufacturing states, including Senators Sherrod Brown (D-OH) and Debbie Stabenow (D-MI).  A group of these executives also met with Energy Secretary Steven Chu, Commerce Secretary Gary Locke, and Director of the White House Office of Energy and Climate Change Policy Carol Browner. In addition, the U.S. Climate Action Partnership, a coalition of businesses and environmental organizations, wrote to Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) to urge passage of “smart climate change legislation” to protect the future health of the U.S. economy and the environment.  The letter is available online here. 
• Apple, Inc. Leaves Chamber of Commerce Over Climate Stance.  Computer-maker Apple, Inc. announced that it would resign its membership in the U.S. Chamber of Commerce (Chamber) because of the organization’s positions on climate change issues.  Apple is the latest of a series of major companies – including Pacific Gas & Electric, PNM Resources, Exelon Corp., and Nike - to withdraw from the Chamber or its board of directors over climate change.  Responding to the news, Chamber President and CEO Tom Donohue accused these companies of capitulating to an “orchestrated pressure campaign” from environmental organizations.

Studies and Reports

• GAO Report Suggests Agencies Coordinate on Biofuel Analysis.   A GAO report encourages EPA, the Department of Energy, and the Department of Agriculture to develop a coordinated approach for identifying and remedying existing uncertainties in assessing the lifecycle greenhouse gas emissions generated by biofuel production.  GAO also finds that Congress could eliminate the federal tax credit for ethanol production because the domestic ethanol industry has matured, and that Congress could direct EPA to consider all environmental effects of increased biofuel production.  The report is available at http://www.gao.gov/new.items/d09446.pdf.
• IEA, EIA Project Decline in Emissions.  The Energy Information Administration released projections of U.S. carbon dioxide emissions for 2009 that predict a 5.9% decline.  The International Energy Agency is similarly predicting a decline in global carbon dioxide emissions in 2009 of as much as 3%.  The reductions in emissions are due to reduced economic activity.   IEA Executive Director Nobuo Tanaka argued that the world should invest in energy efficiency and clean energy now in order to ensure that the economic rebound is less emission-intensive and to make it possible to limit average warming to 2 degrees Celsius, thereby reducing the risk of triggering the most severe climate change impacts.  The reports are available at http://www.iea.org/weo/docs/weo2009/climate_change_excerpt.pdf and http://www.eia.doe.gov/emeu/steo/pub/contents.html?featureclicked=1&.
• Report Identifies Potentially Regulated Facilities.  A report by the Nicholas Institute for Environmental Policy Solutions at Duke University found that nearly the entire fossil fuel-fired power sector likely emits over 25,000 metric tons of carbon dioxide and therefore would be regulated entities under the current House and Senate cap-and-trade proposals, and EPA’s proposed greenhouse gas reporting and Clean Air Act tailoring rules.  Only 1.3% of manufacturing facilities would meet the 25,000 ton threshold, according to the report, and less than 10% of the facilities within the majority of individual industries.  Nearly all petroleum refineries, lime manufacturing plants, and chemical manufacturers would become regulated entities, but less than a third of pharmaceutical facilities, food manufacturers, textile mills, and iron and steel mills.  The report is available at http://www.eenews.net/features/documents/2009/10/08/document_cw_01.pdf.

International

• Bangkok Climate Talks Make Modest Progress, but Many Contentious Issues Remain.  The international climate change talks in Bangkok, Thailand concluded after making only modest progress.  The talks followed two separate tracks, one called the Ninth Meeting of the Ad-hoc Working Group on the Kyoto Protocol (KP Track) and the other known as the Seventh Meeting of the Ad-hoc Working Group on Long-term Cooperative Action Under the United Nations Framework Convention on Climate Change (LCA Track).  Issues under discussion included regulation of air and sea transportation through carbon taxes or the development of emissions-capped “virtual countries” that would represent each mode of transportation; a climate change adaptation fund; proposals to move away from the KP Track and merge it into LCA Track; and another that would see all nations, developed and developing, take on binding emission targets.  Both the proposal to merge the KP Track into the LCA Track and the proposal for all nations to take on binding targets were met with significant disapproval from developing nations.