WRI Publications Feed: U.S. Climate Action

Testimony: China's Prospects for Shale Gas and Implications for the U.S.

Maggie Barron — Thu, 26 Jan 2012 09:51:49 -0500

Testimony Of Sarah M. Forbes
Senior Associate, Climate and Energy Program
World Resources Institute

HEARING BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

CHINA’S GLOBAL QUEST FOR RESOURCES AND IMPLICATIONS FOR THE UNITED STATES; CHINA’S PROSPECTS FOR SHALE GAS AND IMPLICATIONS FOR THE U.S.

Introduction

Good morning and thank you for the opportunity to contribute to the deliberations of this Commission. My name is Sarah Forbes, and I am a Senior Associate for the Climate and Energy Program at the World Resources Institute. I am also manager of the World Resources Institute’s Shale Gas Initiative.

I am delighted to speak with you today about China’s prospects for shale gas and the implications for the United States. The United States and China share an interest in the domestic and international development of shale gas resources. In this testimony I will describe the state of China’s shale gas industry as well as the governmental policies that will drive its future development in China. I will discuss the implications of U.S.-China business-to-business partnerships as well as government-to-government cooperation―including the risks and opportunities such cooperation could yield. I will also describe how shale gas development in China and the United States changes the global dynamics of energy security. In conclusion, I will provide recommendations for future actions Congress and this Commission can take. In the interest of time, I have limited the scope of my testimony to a discussion of the implications of shale gas development in China on the U.S. and China.

Considering the speed with which shale gas has shifted the U.S. energy outlook1, this is an important moment to consider the implications of the development of China’s shale gas resources. Development of shale gas in China will shift future global energy dynamics. How it is done will affect the environment and global climate picture. As I describe in this testimony, shale gas can help improve international energy security by providing an abundant domestic energy resource and reducing the need for natural gas imports. What role it plays in addressing climate change will depend in large part on the degree to which shale gas displaces inefficient coal plants and supplements continued improvements in energy efficiency and renewable energy.

As I start, I would like to emphasize the following key points, which I will describe in detail in the sections that follow.

1. Current state and future direction of China’s shale gas industry: The shale gas industry in China is in early development, but the topic has already garnered significant interest from the national government. The Chinese government is implementing new policies that support the future development of China’s gas industry broadly, as well as supporting shale gas research. State-owned and provincial-owned enterprises are conducting exploration and pilot demonstrations on shale gas in China. Through its state-owned enterprises, China2 is also investing in shale gas development in the United States.

2. U.S.-China cooperation on shale gas: The global oil and gas industry operates joint ventures (JVs) to sustain growth and defuse financial risk. The emerging international shale gas industry will rely on the same tactics, particularly given the current state of the global economy. In recent years, major investments or partnerships between U.S. and Chinese companies in the shale gas sector have been used to the near-term economic benefit of both countries and provide potential for U.S. companies to benefit domestically and abroad.

3. Impacts on the energy situation in China: Shale gas development in China will reduce natural gas imports, thus improving China’s energy security. Because total natural gas demand will continue to far outstrip all domestic production for the foreseeable future, any natural gas from shale in China is expected to be consumed domestically. From an environmental perspective, the more China can develop energy alternatives to imported oil and domestic coal, the less pressure it exerts on global energy markets and the global environment. China’s domestic use of its own natural gas resources would be unlikely to have an effect on net U.S. energy imports, as the U.S. is projected to domestically produce sufficient quantities of natural gas to meet its own demand for at least the next 25 years.

Throughout my testimony, I will also emphasize a fourth point that cross-cuts these three themes.

4. Ensuring responsible operations and creating a “level playing field”: Shale gas development should proceed in China (or any country) with environmentally and socially responsible operations which are (1) enforced by appropriate laws, regulations, and standards, (2) realized through implementation of international best practices, and (3) based on an understanding of the real risks and benefits of responsible deployment (both to industry and the public). Such approaches drive demand for U.S. products and ensure a “level playing field” between companies operating in the United States and those in China. More importantly, they help ensure that any negative environmental impacts associated with shale gas development in the United States are not repeated elsewhere.

Read the full testimony here >>> (PDF, 10 pages, 454 Kb)

Fact Sheet: EPA Mercury Rules and Power Reliability

Kevin Lustig — Wed, 14 Dec 2011 10:30:45 -0500

Recent Electricity Reliability Assessments

North American Electric Reliability Corporation (NERC). (November 2011) 2011 Long-Term Reliability Assessment.

M.J. Bradley & Associates, LLC; Analysis Group. (November 2011) Ensuring a Clean, Modern Electric Generating Fleet while Maintaining Electric System Reliability; Fall 2011 Update.

DOE. (December 2011) Resource Adequacy Implications of Forthcoming EPA Air Quality Regulations.

Bipartisan Policy Center. (June 2011) Environmental Regulation and Electric System Reliability.

CERES. (November 2011) New Jobs-Cleaner Air Part II: An investment in American Businesses and American Jobs.

Edison Electric Institute. (January 2011) Potential Impacts of Environmental Regulation on the U.S. Generation Fleet.

Electricity generation capacity adequacy and transmission and ancillary services reliability are difficult to quantify and forecast due to the inherently local scale of power flow modeling. However, the lack of reliability problems over decades of previous Clean Air Act regulation and the flexibility of the standards suggest that the U.S. can keep the lights on while cost effectively removing toxic pollutants from power plant emissions.

Power plants are the largest source of mercury emissions to the air. This mercury eventually makes its way into water, and can cause neurological problems for people who eat contaminated seafood. Because of the dangers of mercury emissions, especially to children and pregnant women, a court order mandated that the EPA issue a final set of Mercury and Air Toxics Standards (MATS) by December 16, 2011.

Recent modeling assessments have typically focused more broadly on the cumulative impacts of EPA regulations, including: the Cross-State Air Pollution Rule (CSAPR), the Coal Combustion Residuals rule, the 316 (b) Cooling Water Intake Structures rule, and the yet-to-be announced New Source Performance Standards for greenhouse gases. Recent studies have varied largely based on assumptions regarding the stringency of pending regulations, the costs of compliance measures, and the legal flexibility of regulatory enforcement.

Rules Are Flexible, and States Are Prepared

While there are modeling and forecasting limits for assessing long-term electricity system reliability, recent studies indicate that MATS and other EPA rules can be effective and implemented in a timely way while allowing for a range of compliance outcomes. The feasibility of cost-effectively complying with new regulations while maintaining electricity system reliability is supported by four key points:

Both state and federal regulators have a suite of flexible enforcement options, which they have been using for decades, to delay power plant closures when this is necessary to preserve grid reliability; for example, the Cooling Water rule requires states to first consider reliability in implementing new regulations;
While states often have the authority to set more protective pollution control standards in the interest of public health and welfare, there is no evidence that they would do so at the risk of grid reliability. Many states have already exercised this authority without imperiling electricity reliability — as of 2011, 17 states have already imposed rules on mercury and other toxic emissions from power plants, including Montana;
Adequate new plant capacity is in the pipeline to replace the majority of potentially affected power plants; most American power companies are on record as already having prepared for expected environmental regulations;
In terms of compliance, the MATS rule allows for temporal and technological flexibility. As this fact sheet goes to press, the final rule has not yet been published but is expected to allow three years for compliance, with an optional 4th year extension from the EPA or additional security-based extension from the President. A wide range of commercially viable, proven compliance technologies from Flue Gas Desulphurization (FGD) to Dry Sorbent Injection (DSI) and Activated Carbon Injection (ACI) are available to help reduce toxic air emissions and can be installed in 10 to 30 months, providing ample time for America’s skilled engineers, manufactures and technicians to conduct plant upgrades within the legally allotted time frame.

Download the fact sheet to keep reading and see full citations.

More than Meets the Eye: The Social Cost of Carbon in U.S. Climate Policy, in Plain English

Maggie Barron — Tue, 12 Jul 2011 12:25:58 -0400

Presidents since Ronald Reagan have required that significant rules issued by the federal government be accompanied through intra-governmental review by a cost-benefit analysis. In addition, the Obama administration (like the Bush administration before it) has imposed a requirement to assess climate regulation through the lens of a figure (or range of figures) known as the “social cost of carbon” (SCC). The SCC estimates the benefit to be achieved, expressed in monetary value, by avoiding the damage caused by each additional metric ton (tonne) of carbon dioxide (CO2) put into the atmosphere.

The impact of SCC numbers is not theoretical and has consequences for the government regulatory process and therefore for the strength of regulations on climate change that emerge from it. Application of this tool can be problematic to achieving optimum outcomes for society. A growing literature indicates that developing the SCC requires assumptions that go well beyond the usual boundaries of science or economics. It requires many judgment calls that are hidden in complex economic models and largely invisible to policymakers and stakeholders. The Obama administration has formulated a standardized approach to estimating the SCC for all new federal rules issued that would regulate greenhouse gases. In the case of climate change, the government calculates the cost imposed on society globally by each additional tonne of carbon dioxide (CO2), the main greenhouse gas. These include health impacts, economic dislocation, agricultural changes, and other effects that climate change can impose on humanity. The benefit to society of avoiding those costs is summed up in the social cost of carbon.

In 2009 an interagency team of U.S. government specialists, tasked to estimate the SCC, reported a range of values from $5 to $65 per tonne of carbon dioxide. The choice of a final figure (or range of figures) is, in itself, a major policy decision, since it sets a likely ceiling for the cost per tonne that any federal regulation could impose on the economy to curb CO2. At $5 a tonne, government could do very little to regulate CO2; at $65, it could do significantly more. Higher SCC numbers, such as the United Kingdom’s range of $41–$124 per tonne of CO2 with a central value of $83, would justify, from an economics perspective, even more rigorous regulation.

This paper discusses the limitations that the special nature of climate change imposes on cost-benefit analysis and its constituent parts, primarily focusing on the estimation of the SCC. It explains in plain English the various steps in calculating the SCC, the weaknesses and strengths of those calculations, and how they are used to inform climate policy. The aim is to help policymakers, regulators, civil society, and others judge for themselves the reliability of using the resulting numbers in making policy decisions. Framed as a series of questions and answers, it also allows these stakeholders to understand the current debate within the economics community as to whether climate policy is a special case for which standard cost-benefit and SCC tools of the trade are not adequate to assess policy options.

Testimony Before the Subcommittee on Energy and Power: The Transformation of China's Energy System

Deborah Seligsohn — Mon, 04 Apr 2011 14:50:47 -0400

Testimony Of Deborah Seligsohn
Senior Advisor, China Climate and Energy Program
World Resources Institute

Hearing Before the Subcommittee on Energy and Power, Committee on Energy and Commerce

The Transformation of China’s Energy System: Challenges and Opportunities

Summary

In my testimony today, I will start by discussing both where China is now and its plans for the upcoming five years, and then I will talk about some of the business opportunities this creates for other countries, including the United States, that want to compete in new energy technologies.

Energy, environment and climate policy has become increasingly important in China in the last decade. As with any policy focus, there are a number of interests and drivers involved. The confluence of concerns about energy security, environmental protection, climate change and economic restructuring has strengthened the Chinese government’s commitment to both energy efficiency and non-fossil fuel development. Under the 11th Five-Year Plan (2006-2010), China made considerable progress. It came quite close to its energy intensity target, reducing energy intensity over the five-year period by 19.1%, and it increased non-fossil fuel use by 3.1% per year, so that non-fossil energy now comprises 8.3% of China’s total energy use.

In March, China’s National People’s Congress adopted its 12th Five-Year Plan. The plan sets 2015 goals that continue to focus on energy efficiency and non-fossil energy development and set China well on the way to meeting its 2020 goals made at Copenhagen. The five‐year goals are to reduce carbon intensity by 17% and energy intensity by 16%, to increase the share of non‐fossil fuels in China’s total energy mix to 11.4%, and to increase forest cover by 12.5 million hectares and forest stock volume by 600 million cubic meters.

While decreasing as a percentage of total energy used, coal will continue to be an important energy source for many years. To address the greenhouse gas issue, China is actively pursuing a research and commercial scale pilot program looking at carbon capture and storage, a technology China has a strong interest in mastering.

International partnerships with Chinese clean technology companies are growing rapidly. What makes China attractive to U.S. and international investors is the clear policy framework which gives businesses the certainty they are looking for before investing. Companies including First Solar, GE, Duke Energy and American Electric Power have all announced new initiatives in the last year. Increasingly entrepreneurs with new ideas are looking to China to make those ideas become a reality. With a similarly supportive policy environment, the U.S., with its unsurpassed research resources and proven track record in new technologies, could be an unsurpassable winner.

Download Full Testimony (PDF, 12 pages, 119 Kb)

What’s Ahead for Power Plants & Industry? Using the Clean Air Act to Reduce GHGs, Building on Regional Programs

Maggie Barron — Wed, 16 Feb 2011 09:20:06 -0500

Executive Summary

In the absence of congressional action on climate change, all eyes are on the states and the United States Environmental Protection Agency (EPA) to see how they will regulate greenhouse gas emissions from existing large power plants and industrial facilities. Indeed, power plants and industrial facilities are the sources of half of all U.S. greenhouse gas emissions, making those plants and facilities central to any effort to reduce the country’s total emissions. This working paper explores a promising pathway for the states and EPA to make these reductions using the standards of performance under section 111 of the Clean Air Act.

EPA has announced that it will begin the process for regulating power plants and refineries under section 111. EPA has scheduled listening sessions with stakeholders and intends to issue draft performance standards for new and modified power plants by July 26, 2011, and at the same time issue to the states a draft mandatory guideline that requires states to develop plans to impose performance standards on existing power plants. The final performance standards and mandatory guidelines are expected in May 2012. The process for refineries will lag behind that for the electricity sector by about six months, with draft rules to be issued in December 2011 and final rules expected in November 2012.

Like many other requirements of the Clean Air Act (the Act), the standards of performance under section 111 are designed and implemented through a federal-state partnership. EPA lists the categories of sources and establishes performance standards for new and modified emitters within listed categories. EPA also establishes a mandatory “guideline” for states, creating a federal “floor” for regulation of existing sources that applies only if the states fail to set their own standards of performance that meet or exceed this floor. This guideline includes possible “system[s] of emission reduction” that the states may use to set standards of performance. In promulgating these plans, the states will have considerable flexibility, since the standards of performance under section 111(d) may take the form of traditional emissions rate limitations or any number of other more flexible mechanisms. The emergence of state cap-and-trade programs raises the question of whether these cap-and-trade programs could be used to meet a state’s obligations under section 111(d) of the Act.

The traditional approach to regulating power plant and industrial facilities is through performance standards that prescribe specific emissions limitations on individual sources. This approach has been used for years to control conventional pollutant emissions, and is the safest approach from a legal defensibility standpoint. Because many states have already begun regulating some existing sources using cap and trade, the traditional approach may not be the one preferred by the states or their stakeholders. Indeed, states that have already chosen to reduce emissions from power plants and industry using flexible, marketbased approaches, can be expected to develop plans calling for alternatives to the traditional source-specific performance standards. EPA under George W. Bush concluded that the Clean Air Act allows cap and trade as a demonstrated and effective form of regulation under Section 111(d), and the Obama EPA has not contested this interpretation. Until federal courts rule on this approach, however, there will be some uncertainty about its viability.

The assumption that the states and many of their stakeholders will propose cap and trade under section 111(d) of the Clean Air Act has led to a number of questions around program design features, such as whether the Act allows offsets, or trading across listed categories of sources and whether the existing regional cap-and-trade program designs would be acceptable to EPA under section 111(d). Even though many of these issues are questions of first impression and therefore cannot be answered with absolute certainty, this paper explores the arguments for and against specific cap-and-trade design features in the context of section 111, including the implications for existing and planned regional cap-and-trade programs.

Findings

This working paper examines the process for establishing performance standards covering existing power plants and industrial facilities in the United States and finds:

Congress granted the EPA and the states considerable flexibility in determining how to cover existing power plants and industrial facilities under section 111 of the Clean Air Act.
After lengthy collaboration with stakeholders, twenty-three states designed and many implemented flexible, marketbased emissions-trading mechanisms to reduce greenhouse gas emissions from existing power plants and industrial facilities.
The discretion afforded to states under the Clean Air Act should permit them to propose a variety of policy mechanisms, including cap and trade.
The regional cap-and-trade designs present specific opportunities and challenges when reconciling the designs with section 111 of the act, including the following:
- Offsets cannot be used to meet federal minimum reductions but may be allowed above and beyond federal minimums.
- Trading between regulated categories of sources depends on the EPA’s interpretation of the act.
- Borrowing and safety valve mechanisms are problematic unless they can be designed to ensure minimum reductions within federal time frames.

The Time Value of Carbon and Carbon Storage: Clarifying the terms and the policy implications of the debate

Maggie Barron — Mon, 01 Nov 2010 14:22:07 -0400

Executive Summary

The question of whether there is any value to the temporary storage of carbon is fundamental to climate policy design across a number of arenas, including physical carbon discounting in greenhouse gas accounting, the relative value of temporary carbon offsets, and the value of other carbon mitigation efforts that are known to be impermanent, including deferred deforestation. Quantifying the value of temporary carbon storage depends on a number of assumptions about how the incremental impact (or social cost) of a given ton of carbon emissions is expected to change over time. In 2009, a U.S. government interagency working group was established and assigned the responsibility of calculating social cost of carbon estimates to be used in benefit/cost analysis of regulations impacting carbon dioxide emissions. Those estimates were released in March 2010.

This working paper explores what those estimates imply about the value of temporary carbon storage, as well as the implications of those temporary storage values for several critical policy design questions relating to greenhouse gas accounting and biological offsets. This analysis suggests, for instance, that appropriate physical carbon discount rates for carbon accounting may be even lower than the social discount rates often used in intergenerational analyses. In the context of agricultural offsets, the social cost of carbon estimates are used to establish a definition of equivalence between permanent and temporary offsets; equivalence ratios are derived that vary between ~2 and 30, depending on the discount rate used and the length of the temporary offset contract period.

Bottom Line on Offsets

Maggie Barron — Sun, 01 Aug 2010 08:37:17 -0400

What are greenhouse gas offsets?

A greenhouse gas (GHG) or “carbon” offset is a unit of carbon dioxide-equivalent (CO2e) that is reduced, avoided, or sequestered to compensate for emissions occurring elsewhere. These offset credits, measured in tons, are an alternative to direct reductions for meeting GHG targets in a cap-and-trade system. In some systems, regulated facilities can buy offset credits from projects located in sectors or countries not legally required to reduce their emissions. The cost of meeting the GHG reduction targets of a cap-and-trade program can be reduced by buying offsets in cases where reducing GHG emissions at uncapped facilities or sectors is less costly than at capped sources. Many businesses and organizations currently buy GHG offsets to help meet voluntary commitments to reduce their GHG emissions.

What qualifies an activity as an offset project?

There are five commonly agreed-upon criteria that an offset credit must meet to ensure environmental integrity.

1. Real: GHG offsets must represent one ton of CO2e greenhouse gas emissions reduced or sequestered as a result of an activity undertaken for the purpose of reducing emissions. In practice, this ensures that total GHG emissions to the atmosphere are lower due to the implementation of the offset project, relative to a business-as-usual baseline scenario. Determining theoretical baseline emissions in the absence of the offset project (i.e., under the business-as-usual baseline) is not an exact science, so all baselines must be accurately and conservatively defi ned. The quantity of emission reductions should not be infl ated by incomplete accounting, which could occur if emissions were reduced at one location but increased elsewhere as a result (known as emissions “leakage”).

2. Permanent: Emission reductions or removals are permanent if they are not reversible; that is, the emissions can’t be rereleased into the atmosphere. The issue of permanence applies to projects where emissions are sequestered in ways that could be reversed over time, such as in forests (which can release carbon through fi res or decay) and through geological sequestration (where gases could potentially leak unexpectedly). There are mechanisms to account for or reduce the risk of reversal, though they can bring additional costs. These include buying insurance in case of emissions reversals, establishing a reserve “buffer” pool of credits or issuing temporary credits from the project that are valid for a period of time but must be re-certified or replaced in the future.

3. Additional: In order to generate offsets, a project must be a response to the incentives provided by a carbon offset market. Activities that would have happened without such incentives are business-as-usual and do not represent new emission reductions. Since offsets are used to compensate for continued or increased emissions elsewhere, if they are not additional then their use allows a net increase in GHG emissions. Additionality is ultimately a subjective judgment. Regulatory approaches attempt to ensure that additional projects are able to get credits while weeding out those that would occur in the absence of the incentive provided by the carbon market. For example, if regulation requires a landfi ll to capture the methane it produces, it cannot earn offsets for this activity. Since the landfi ll would have captured the emissions anyway, it is business-asusual and not additional.

There are two primary ways additionality can be determined in existing offset programs: on a project-specific basis or through standardized criteria. Project-specific additionality is determined through an evaluation of the proposed project against a range of alternative scenarios. The scenario deemed most financially viable and/or probable in the absence of the incentive provided by the carbon market is considered the business-as- usual scenario from which offset credits are calculated. Standardized additionality criteria evaluate projects against a set of consistent criteria for a particular project type and are intended to exclude non-additional projects, without developing a business-as-usual scenario for each individual project. This can include requirements that the project is not mandated by law, is not common practice (based on technology use or activity data),involves a specific pre-approved technology, and/or has an emissions rate lower than most others in its class.

The Clean Development Mechanism currently uses a project-specific additionality test to certify offsets for use to meet reduction obligations under the Kyoto Protocol. Other systems such as the Climate Action Reserve, EPA Climate Leaders, and the Regional Greenhouse Gas Initiative use standardized additionality approaches.

4. Verifiable: Credible offset programs require that emission reductions be monitored and regularly verified by an independent, qualified third party.

5. Enforceable: One credit can only credibly offset one ton of CO2e emissions; as a result, it must be tracked and it must be possible to enforce its ownership and use in order to avoid double counting. This is usually done via a registry.

Who can implement offset projects and earn emissions reduction credits?

Offset owners must be able to claim the legal right to the emission reductions of the project, usually through legal or contractual means. In addition, most offsets bought and sold today are certified by a third party certifier, who provides a “seal of approval” that the offset is providing the promised emission reduction benefit. Currently, U.S. facilities that are not operating under a regional GHG reduction program could attempt to claim offset credits. Once a federal climate program is in place, U.S. facilities will no longer be able to claim offset credits if they are located in a regulated sector.

How are offsets measured and tracked? What are standards, verifiers, and registries?

There are two primary markets for offsets: the regulatory market and the voluntary market. In regulatory markets, such as the Regional Greenhouse Gas Initiative, government agencies are responsible for establishing the standards for offset crediting and programmatic structure. In the voluntary market, the predominant market to date in the United States, there is no common standard for offset measurement and verification.

Various voluntary standards have been developed to provide independent quality assurance. A standard provides a detailed list of eligibility requirements for projects and methodologies for calculating a project’s emission reductions. Most rely on third party auditors, called verifiers, to perform the due diligence and attest to the veracity of the information provided by the project in its application. It must be verified that the project as a whole meets the standard, and that each individual offset credit issued is based on data that meets the requirements of the registry or policy program.

For a company with a voluntary commitment to reducing its carbon footprint, what value do offsets provide in GHG reduction strategies?

Purchasing and retiring (that is, not re-selling) high-quality offsets can be a useful component of an overall voluntary corporate emissions reduction strategy once internal abatement opportunities have been realized. The cost comparison of internal abatement versus offsets as a strategy is accurate only if evaluated over an appropriate time scale, such as the lifetime of the internal abatement (with appropriate discount rates) and if it includes all of the additional non-CO2 benefits of the internal abatement (such as greater efficiency or lower fuel costs). Also, it should be noted that it is more likely that future climate programs will recognize internal GHG abatement rather than offsets.

Which standard should I buy from or use to certify my project? Which is likely to be accepted in a federal program?

There is currently no bottom line on this question. The leading U.S. standards (ranked by the size of the 2009 market) include the: Climate Action Reserve (CAR), Voluntary Carbon Standard (VCS), Chicago Climate Exchange (CCX), American Carbon Registry (ACR), and The Gold Standard (GS). In general it is more likely that offsets certified under existing mandatory cap-and-trade systems (such as the Northeast’s Regional Greenhouse Gas Initiative (RGGI) or California’s AB 32) would be recognized automatically under a federal climate program, but this is not certain. Project types within sectors regulated by cap-and-trade policy will not be eligible to generate offsets because their emissions are covered by the cap. For instance, grid-connected renewable energy and energy efficiency projects are highly likely to be covered by a federal program and thus would be ineligible to produce offsets.

Additional Resources:

Broekhoff, Derik and Kathryn Zyla, 2008. Outside the Cap: Opportunities and Limitations of Greenhouse Gas Offsets. World Resources Institute Climate and Energy Policy Series. December 2008
Kelly, Alexia and Bianco, Nicholas “Options for Addressing Early Action Greenhouse Gas Reductions and Offsets in U.S. Federal Cap-and-Trade Policy”: WRI Working Paper. August, 2009
Offset Quality Initiative (OQI), 2008. Ensuring Offset Quality: Integrating High Quality Greenhouse Gas Offsets into North American Cap-and-Trade Policy. July 2008.

Reducing Greenhouse Gas Emissions in the United States Using Existing Federal Authorities and State Action

admin — Thu, 22 Jul 2010 11:16:58 -0400

Click here to explore emissions, reduction scenarios, and agency actions with our interactive tool.

WRI’s analysis of potential greenhouse gas emissions reductions by federal and state governments suggests a range of potential outcomes is possible. On the federal level, whether reductions are achieved at the lower end or upper end of the range shown in Figure 1 depends on the extent to which the Obama Administration and subsequent administrations use existing regulatory authority to go after reductions shown to be technically possible in the literature. On the state level, whether reductions are realized at the lower or upper end of the range projected in Figure 2 depends similarly on the continued resolve by governors and legislative leaders in the 25 states counted as having taken actions. The findings set out here represent an assessment of what is possible given available inputs for some key sectors. It does not include potential emissions reductions achievable through federal policies to reduce vehicle miles traveled, management of agricultural lands and forests, new federal investments in areas such as energy efficiency, renewable energy infrastructure, or other areas that could yield reductions, nor new federal legislation of any kind. Key findings are summarized below.

Figure 1: Projected U.S. Emissions under Different Federal Regulatory Scenarios

Figure 2: Projected U.S. Emissions under Different Federal Regulatory Scenarios and State Scenarios

If federal agencies and states pursue the path of “go getters” and move strongly to achieve the reductions published literature suggests are technically feasible in the sectors analyzed, the U.S. could achieve significant reductions in greenhouse gas emissions, which approach but fall short of President Obama’s Copenhagen pledge to reduce emissions 17 percent below 2005 levels by 2020.
If, however, federal agencies fail to capitalize on available reduction opportunities and states fall short on their announced plans to reduce emissions, middleof- the-road or lackluster reductions will result, falling far short of the 17 percent reduction by 2020 goal.
Longer-term reductions post-2020 are less certain under all analyzed scenarios, primarily due to uncertainty about how quickly aging power plants will be replaced and the transportation sector can be transformed. Regulatory policies can drive technology, but without knowing what technological advances will happen and when, it is difficult to project the tightening of regulatory standards.
All scenarios under current federal authority and announced state plans show the United States far off the pace of reductions the IPCC suggests are necessary by mid-century to prevent average global temperatures from increasing more than 2 degrees Celsius.
While the results of the analysis suggest that existing federal regulatory tools can be used effectively to reduce emissions alongside state actions, it is clear that the federal government and states will need to achieve reductions beyond those identified in even the most ambitious regulatory scenario if the United States is to meet its Copenhagen commitment. Some of these reductions might be found in regulatory policies not analyzed here, such as agricultural and forest lands management (approximately 7 percent of the U.S. inventory) or transportation planning (approximately 27 percent). Implementation of other environmental policies that encourage high-emitting sectors to modernize could also yield more reductions, such as mercury, sulfur dioxide, ozone and ash disposal regulations affecting aging coal plants.
Among the existing federal regulatory tools most useful to achieve reductions are the mobile source and New Source Performance Standard provisions of the Clean Air Act, as well as the existing authority under Title VI of the Act to reduce hydrofluorocarbons. The vehicle fuel efficiency authority of the Department of Transportation is also important. State action that contributes reductions beyond federal regulatory policies will likewise be essential to meeting reduction goals.
The analysis shows that a significant portion of the reductions can be achieved in non-energy emissions. It is expected that these non-energy reductions can be accomplished without energy price increases.
It is likely that the U.S. Congress and states will need to step up to augment existing regulatory tools, especially if the United States is to gear up to reduce emissions by the approximately 80 to 95 percent needed by 2050 to ward off the most deleterious effects of climate change.

Video Summary

Emissions Reductions Under Pollution Reduction Proposals in the 111th U.S. Congress

John Larsen — Tue, 08 Jun 2010 14:21:16 -0400

This analysis provides an assessment of net reductions in greenhouse gas (GHG) emissions relative to total U.S. emissions that could be achieved by pollution reduction proposals currently under consideration in the 111th Congress. This assessment is an update to a previous analysis WRI released on December 17, 2009, and includes an analysis of the American Power Act (APA), introduced as a discussion draft on May 12, 2010 by Senators Kerry and Lieberman. The APA draft is compared against S. 2877, the Carbon Limits and Energy for America’s Renewal Act (CLEARA) as introduced by Senators Cantwell and Collins, and H.R. 2454, the American Clean Energy and Security Act (ACESA) sponsored by Representatives Waxman and Markey, as passed by the House of Representatives June 26, 2009.

To account for the effects of different design elements among the analyzed bills, GHG reduction estimates are divided into three scenarios, which are consistently applied as appropriate to all proposals examined in this analysis:

Total emissions reductions achieved solely by the proposed emissions caps.
Total emissions reductions achieved by proposed caps and all other complementary requirements, such as emissions performance standards for uncapped sources, allowances set-asides for cost containment, and required components of supplemental reduction programs, as applicable.
A range of potential additional reductions that could be achieved through incentives and other measures, such as domestic supplemental reductions and requirements for the use of more than one offset for compliance, as applicable.

To summarize, this analysis depicts reductions within the cap and any additional measures that will achieve emissions reductions through the passage and implementation of each proposal. Reductions that would require additional congressional action to be realized are not included in the analysis.

Key findings

The emissions caps in the APA achieve net reductions of 14 percent relative to 2005 levels in 2020. By 2050, the APA achieves reductions of 72 percent relative to 2005 levels.
The APA’s later start year (2013) and delay of inclusion of some sources until 2016 yields slightly fewer reductions in the first five years of the program than the ACESA. The APA and the ACESA require greater net annual GHG reductions than the CLEARA.
The APA contains complementary measures in addition to emissions caps that could achieve additional reductions. Specifically:
- When all complementary requirements are considered in addition to the caps, net GHG emissions would be reduced 15 percent relative to 2005 levels by 2020 and 73 percent relative to 2005 levels by 2050.
- When additional potential emissions reductions are considered, the APA could reduce emissions up to 19 percent relative to 2005 levels by 2020 and up to 77 percent relative to 2005 levels by 2050. The actual amount of additional reductions will depend on the quantity and quality of international offsets used for compliance.
- While the APA creates programs similar to those in the ACESA that could yield additional GHG reductions in uncapped sectors as well as internationally, unlike the ACESA, APA’s programs are not funded or are subject to additional congressional action. Thus they are not considered in this analysis.

Net Estimates of Emissions Reductions Under Pollution Reduction Proposals in the 111th Congress, 2005-2050 graphically presents total net GHG reductions achieved by the APA, the CLEARA and the ACESA relative to U.S. historical and projected emissions under the three reduction scenarios.

Click here for a larger version.

Estimates of Total Net GHG Emissions and Emissions Reductions Achieved by Pollution Reduction Proposals in the 111th Congress, 2005-2050 presents a table of total net GHG reductions that could be achieved by these proposals for selected years.

Download the PDF above for a full description of the methods and assumptions behind this analysis.

Table 1. Estimates of Total Net GHG Emissions & Emissions Reductions Achieved by Pollution Reduction Proposals in the 111^th U.S. Congress
Absolute Emissions (Millions Metric Tons CO₂eq)	2010	2012	2020	2030	2040	2050
Business as usual emissions	7,120	7,185	7,390	7,765	8,102	8,379
Short-term projected emissions	6,685
CLEARA (S. 2877) Emissions caps only		7,185	7,051	5,711	3,981	2,645
ACESA (H.R. 2454) Emissions caps only		6,993	6,106	4,556	3,268	1,963
ACESA (H.R. 2454) Caps plus all complementary requirements		6,946	5,132	4,292	3,043	1,779
ACESA (H.R. 2454) Potential range of additional reductions		6,946	4,757	3,814	2,623	1,383
APA Emissions Caps only		7,185	6,106	4,556	3,268	1,963
APA Caps plus all complementary requirements		7,185	6,030	4,379	3,154	1,911
APA Potential range of additional reductions		7,185	5,780	4,129	2,904	1,661
Percent change from 2005 emissions	2010	2012	2020	2030	2040	2050
Business as usual emissions	0	1	4	9	14	18
Short-term projected emissions	-6
CLEARA (S. 2877) Emissions caps only		1	-1	-20	-44	-63
ACESA (H.R. 2454) Emissions caps only		-2	-14	-36	-54	-72
ACESA (H.R. 2454) Caps plus all complementary requirements		-2	-28	-40	-57	-75
ACESA (H.R. 2454) Potential range of additional reductions		-2	-33	-46	-63	-81
APA Emissions Caps only		1	-14	-36	-54	-72
APA Caps plus all complementary requirements		1	-15	-38	-56	-73
APA Potential range of additional reductions		1	-19	-42	-59	-77
Percent change from 1990 emissions	2010	2012	2020	2030	2040	2050
Business as usual emissions	17	18	21	27	33	37
Short-term projected emissions	10
CLEARA (S. 2877) Emissions caps only		18	16	-6	-35	-57
ACESA (H.R. 2454) Emissions caps only		15	0	-25	-46	-68
ACESA (H.R. 2454) Caps plus all complementary requirements		14	-16	-30	-50	-71
ACESA (H.R. 2454) Potential range of additional reductions		14	-22	-37	-57	-77
APA Emissions Caps only		18	0	-25	-46	-68
APA Caps plus all complementary requirements		18	-1	-28	-48	-69
APA Potential range of additional reductions		18	-5	-32	-52	-73
Bills analyzed include the American Power Act (APA) introduced as a discussion draft by Senators Kerry and Lieberman and S. 2877, the Carbon Limits and Energy for America’s Renewal Act (CLEARA) as introduced by Senators Cantwell and Collins, and H.R. 2454, the American Clean Energy and Security Act (ACESA) sponsored by Representatives Waxman and Markey, as passed by the House of Representatives on June 26, 2009. “Business as usual” emission projections are from EPA’s reference case for its analysis of the ACESA. “Short-term projected emissions” represent EIA’s most recent estimates of emissions for 2008-2010. CLEARA sets economy-wide reduction targets beginning with a 20 percent reduction from 2005 levels by 2020. However, additional action by Congress would be required before these targets could be met. Reduction estimates do not include emissions above the cap that could occur due to the safety valve. Reduction estimates assume all offsets are real, verifiable, additional and permanent. If they are not, emissions would be greater than the estimates provided here, depending on offset quality and the quantity used for compliance.

Toward a Sunny Future? Global Integration in the Solar PV Industry

Maggie Barron — Fri, 21 May 2010 09:37:58 -0400

Abstract

Policymakers seem to face a trade-off when designing national trade and investment policies related to clean energy sectors. They have pledged to address climate change and accelerate the large-scale deployment of renewable energy technologies, which would benefit from increased global integration, but they are also tempted to nurture and protect domestic clean technology markets to create green jobs at home and ensure domestic political support for more ambitious climate policies. This paper analyzes the global integration of the solar photovoltaic (PV) sector and looks in detail at the industry’s recent growth patterns, industry cost structure, trade and investment patterns, government support policies and employment generation potential.

In order to further stimulate both further growth of the solar industry and local job creation without constructing new trade and investment barriers, we recommend the following:

Governments must provide sufficient and predictable long-term support to solar energy deployment. Such long-term frameworks bring investments forward and encourage cost cutting and innovation, so that government support can decrease over time. A price on carbon emissions would provide an additional long-term market signal and likely accelerate this process.
Policymakers should focus not on solely the manufacturing jobs in the solar industry, but on the total number of jobs that could possibly be created including those in research, project development, installation, operations and maintenance.
Global integration and broader solar PV technology deployment through lower costs can be encouraged by keeping global solar PV markets open. Protectionist policies risk slowing the development of global solar markets and provoking retaliatory actions in other sectors. Lowering existing trade barriers—by abolishing tariffs, reducing non-tariff barriers and harmonizing industry standards—would create a positive policy environment for further global integration.

About the Authors

Jacob Funk Kirkegaard is a research fellow at the Peterson Institute for International Economics. Thilo Hanemann is research director at the Rhodium Group. Lutz Weischer is a research analyst with the World Resources Institute’s Climate and Energy Program. Matt Miller is a consultant in the solar industry with manufacturing and development experience.