As reported earlier today, the House Committee on Energy and Commerce and its Subcommittee on Energy and Air Quality issued the second of its planned series of “white papers” intended to identify issues to be resolved in designing comprehensive climate change legislation. The white paper on “Competitiveness Concerns and Engaging Developing Countries” focuses on a crucial set of issues insufficiently understood and infrequently addressed.

First, the white paper discusses the potential tensions between aggressive action by the United States to reduce greenhouse gas emissions and impact on the global competitiveness of domestic industries vis-à-vis industries operating in countries not subject to such stringent emissions limitation. Then, the document summarizes three approaches for addressing those tensions, each proposing a different mechanism to induce developing countries to enact their own GHG reductions systems. Central to each approach are the trade implications of the various mechanisms. As the white paper states: “[a]ny provisions inducing developing countries to limit greenhouse gas emissions will have to pass muster before the World Trade Organization (WTO).” White Paper at 12 (emphasis added).

The white paper states that the Committee’s goal is:

to craft legislation limiting U.S. carbon emissions that also induces developing countries to limit their emissions growth (1) on a timetable that meets both environmental and trade competitiveness concerns; (2) in a manner that is reasonably certain to withstand challenge before the World Trade Organization (WTO); and (3) on terms that pose acceptable risks to U.S. interests in the event of a negative WTO determination.

Id. at 2. The approach identified in the paper least likely to cause major trade disputes is the one proposed by Environmental Defense - an approach that uses trade policy as a tool and leverages access to the U.S. carbon market. This proposal includes offering “emission premiums” to countries that take early action, imposes emissions “multipliers” on emissions credits generated in uncapped countries (i.e., such credits would be devalued in the U.S.), and requiring the President to negotiate bilateral or multilateral carbon market access agreements.

Whatever the approach ultimately adopted, the “‘vague nature of WTO law’” creates major uncertainty with respect to the validity of the U.S. legislation. This uncertainty and the unrestricted nature of WTO remedies - authorized retaliatory measures need not be directed to the economic sector involved in a specific dispute. For example, a provision relating to the steel industry found to violate WTO law could result in a countermeasure directed against the automobile industry. The white paper postulates a worst case scenario: “emissions from our trading partners could increase, the environmental benefit of any U.S. reductions could be overwhelmed by emissions growth elsewhere, domestic industry could be harmed and jobs lost, and U.S. industry could face unpredictable retaliatory measures as a result of a negative WTO determination.” Id. at 14.

Parties involved in the ongoing climate change legislative activity ignore the potential trade implications of provisions they believe will protect their interests at their peril.

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The two Representatives in charge of creating a comprehensive climate change bill, Rep. John D. Dingell (D-MI) and Rep. Rick Boucher (D-VA), have just released the second in a series of white papers that will guide the Energy and Commerce Committee as they begin the process of creating a bill that can satisfy the disparate interests of a diverse group of members.

The second white paper is devoted to the issue of how best to get developing nations to reduce their greenhouse gas emissions while ensuring the United States commits to lowering its emissions.  This is important because a substantial number of members in both houses of Congress are adamant that the United States cannot be bound to targets that India, China, Russia, and Brazil are exempt from.  In their view, the legislation will result in a further outsourcing of U.S. economic growth to non-compliant countries and that this outsourcing will end up increasing greenhouse gas emissions since developing countries would remove environmental regulations.

The white paper serves as a primer on the policies the Committee is likely to consider obligations for developing countries.  It also serves to telegraph what Reps. Dingell and Boucher may be thinking as they attempt to tackle this difficult but politically crucial issue.

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Yesterday the Department of Energy announced it was officially ending its support for FutureGen, a $1.8 billion program to develop a coal-fired power plant able to sequester carbon emissions below ground.

Rather than focusing on one plant in Illinois, the department now says it will fund a number of projects at plants throughout the country, with the government agreeing to pay for carbon sequestration but leaving power generation costs to utilities.

This opens up the carbon sequestration project to competition, once again allowing companies to make their case for inclusion in the program.  The Department of Energy is seeking input by March 3, which DOE indicated will help determine how many locations are funded.  The department announced its objective to have new facilities operating by 2015.

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This post is the first part of a two part series analyzing challenges to coal-fired power plant permits under federal statutes.

Lawsuits challenging coal-fired power plant permits from Oregon to Georgia have the potential to shape the regulatory future of industries that emit large quantities of greenhouse gases. These lawsuits are taking aim at power plants under two statutes: the Clean Air Act (CAA) and the National Environmental Policy Act (NEPA). Although these cases are in the early stages, the issues raised offer insight into what regulatory requirements will look like in a carbon-constrained world.

This post reviews the two CAA petitions filed before the Environmental Protection Agency’s appeals board challenging permitting of coal-fired power plants in Utah and Illinois, with plaintiffs’ groups vowing to challenge on CAA grounds permitting decisions by state boards in Georgia, Arkansas, Montana, and Oregon.

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The states of Arkansas, California, Connecticut, Delaware, Illinois, Maine, Mississippi, New Hampshire, Oklahoma, and Vermont have joined the chorus of voices urging the Federal Trade Commission to increase its understanding of, and oversight over, the growing market for carbon offsets and renewable energy certificates (RECs).  In a seven-page letter to the Federal Trade Commission dated January 25, 2008, the states express concern that “[t]he lack of common standards and definitions, along with the intangible nature of carbon offsets, makes it difficult if not impossible for consumers to verify that they are receiving what they paid for and creates a significant potential for deceptive claims.”

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In the State of the Union address this evening, which came two days before the next U.S.-hosted Major Economies Meeting on climate change, President Bush called on America to “trust in the creative genius” of entrepreneurs and scientists creating a new generation of clean energy technologies. Sticking to the Administration’s message on the need for additional research and development, the President outlined general steps to a clean energy future, including

• reducing dependence on oil;
• taking steps to generate coal power while capturing carbon; and
• promoting renewable power, nuclear energy, and renewable fuel options.

The President promoted the idea of an “international clean technology fund” to help China, India, and developing countries reduce their greenhouse gas emissions. This fund, which was floated during the Bali negotiations and which has continued to gain traction with the Administration, would help developing countries purchase cutting edge technologies to control emissions.

The President also asserted the need for an international agreement to “slow, stop, and eventually reverse the growth of greenhouse gases,” noting that any agreement on climate change will only be effective if it includes commitments from all countries.

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The week starts off with President Bush’s final State of the Union address this evening.  During last year’s SOTU address, the President marked an historical shift in policy by acknowledging the existence of climate change and that its cause might be anthropogenic.  There is no word yet as to what the President might say this year regarding global warming, but at the very least he will take a measure of credit for the increases in fuel efficiency standards enacted in December.  The Democratic response, delivered by Kansas Governor Kathy Sebelius, will include a broader critique of the Administration’s inaction on climate change and the need to continue improving energy efficiency and alternative energy legislation.

While the House will adjourn early this week for Democratic members to attend their annual retreat, the Senate will hold two hearings on climate change, beginning with a Wednesday hearing in the Environment and Public Works Committee on efforts to add polar bears to the endangered species list due to loss of habitat by climate change.

On Thursday, the Energy and Natural Resources Committee will hold a hearing on carbon capture and sequestration technologies.

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The European Commission released a proposal this week for the governance structure of Phase 3 (2013 to 2020) of the European Union Emissions Trading System (EU ETS).

The EU ETS proposal, which was published as part of a “climate action and renewable energy package,” must be approved by the Council of the EU and the European Parliament before it becomes law. The European Commission hopes that this will take place by 2009, which could coincide with the adoption of a new international climate change agreement.

The proposal calls for an 20% reduction in emissions across the European Union compared to 1990 levels. The Commission proposes a 30% reduction if other countries agree to take similar measures under a global agreement- i.e., if a meaningful successor to the Kyoto Protocol is negotiated and implemented.

The distribution of emissions reductions is based around the concept of “effort sharing.” Member States are assigned emissions limits along a range according to the country’s “relative wealth.” Denmark and Ireland fall at the high end of the spectrum (20% reduction from 2005 emission levels by 2020), and Bulgaria at the low end (a 20% increase from 2005 levels by 2020).

The most significant features of the new proposal include: Read the rest of this entry »

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For the second time since May 2007, Republican lawmakers have asked the Government Accountability Office (GAO) to conduct an inquiry into the voluntary carbon offset market.

On January 16, Rep. Joe Barton and John Shimkus, ranking Republicans on the House Energy and Commerce Committee, expressed concerns that carbon offsets not “become the 21st century version of snake oil and patent medicine,” and noted that “[t]o our knowledge, no proven safeguards against fraud and deception presently exist, making the carbon offset market a ripe target for hucksters.”

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While U.S. and Chinese participants in the recently concluded second annual U.S. Clean Energy Trade Mission to China have lauded the commercial and environmental benefits of the mission to both countries, the mission also raised the profile of ongoing tensions related to China’s enforcement of the intellectual property (IP) rights of U.S. companies.

U.S. Assistant Secretary of Commerce David Bohigian, who led the mission, warned during a news conference that there have been “negative developments” in China’s IP enforcement efforts over the last year, exacerbated by problems in China’s efforts to enshrine the rule of law. Bohigian further noted that U.S. companies are declining to export their most innovative environmental technologies to China because they are concerned these technologies will not be protected.

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