ClimateIntel.com

California’s 20% by 2010 Renewable Portfolio Standard (RPS) is one of the most ambitious in the United States.  In their 2008 Energy Action Plan Update, the California Public Utilities Commission (CPUC) and California Energy Commission (CEC) committed to evaluating an even more aggressive 33 % by 2020.  In order to reach this 33% target, some of the barriers that have been hindering RPS projects thus far must be addressed.

According to a July 2008 CPUC RPS Quarterly Status Report, since the RPG program was adopted in 2002, the CPUC has approved  95 contracts for 5,900 megawatts (MW) for new and existing RPS-eligible capacity.  Of these, 61 contracts (totaling 4,480 MW) are for new projects.  To date, only 14 contracts for approximately 400 MW have come online.  The CPUC identified the key barriers to renewable energy project development as the expiration of the federal Production and Investment Tax Credits, transmission, developer inexperience, financing, site control, permitting, among other factors.  Although responsible public agencies may not have control over all of these barriers, they can help by streamlining their permitting processes.

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 As part of its commitment to implement its Carbon Pollution Reduction Scheme by 2010, the Australian Government released its long-awaited Australia’s Low Pollution Future Report, which presents Treasury’s key modeling assumptions on the costs and opportunities of climate change action.  The report focuses on mitigation of climate change costs and stresses significant cost savings will occur if carbon capture and storage (CCS) technology is commercially developed in Australia, and international trading of permits is actively encouraged.

The report’s frame of reference is two possible reduction target scenarios, based on whether a global climate change agreement is reached.  The first assumes a global agreement from 2013, with reduction targets of 10% and 25% below 2000 levels by 2020.  The second assumes the more likely scenario, whereby developed countries are subject to reduction obligations from 2010 and developing nations join progressively, with reduction targets of 5% and 15% below 2000 levels by 2020.  The more likely staggered approach assumes an expanded Renewable Energy Target of 45,000 GWh per year by 2020, while the former approach assumes all current renewable schemes terminate at the commencement of the Carbon Pollution Reduction Scheme.

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This month, International Maritime Organization (IMO) made substantial progress in developing proposed measures to reduce greenhouse gas emissions from international shipping.  The organization estimates that international shipping contributes approximately 2.7 percent of global CO2 emissions.  In the absence of future regulations, such emissions are predicted to increase by as much as a factor of three by 2050.  To address this issue, the IMO’s Marine Environmental Protection Committee (MEPC) met this month to discuss the development of new technical and operational measures to reduce emissions, including the development of design and operational measures to increase energy efficiency for new ships; an efficiency management plan suitable for all ships and a voluntary code of best practice to increase energy efficiency of ship operations. MEPC also approved draft interim guidelines for calculating the energy efficiency of new ships.

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Last week, the European Commission voted to include aviation emissions in the European Union Emissions Trading System (EU-ETS), beginning in 2012.  The decision means that air carriers - of passenger and freight - landing in or taking off from the European Union must obtain and surrender emission allowances. 

Notably, aviation emissions will operate under a cap that is separate from other industries captured by the EU-ETS.  The initial cap will be set at 97% of the average emissions of 2004 through 2006.  Beginning in 2013, when the EU-ETS enters its third phase, the cap will drop another 2%.  Initially, 85% of the allowances will be distributed to carriers for free, and only 15% will be auctioned.  The European Union has the option of changing the allocation percentages once the airlines begin trading emission allowances. 

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In the run-up to the fourth session of the Ad Hoc Working Group on Long-Term Cooperative Action (AWG-LCA), China, India and Brazil have sharply reiterated their views that the burden of reducing greenhouse gas (GHG) emissions lies, in the first instance, with developed countries.  The AWG-LCA, convened as part of the U.N. Framework Convention on Climate Change (UNFCCC) Bali Action Plan of December 2007, is charged with facilitating agreement on principles for long-term action to reduce GHG emissions, extending beyond the current Kyoto Protocol obligations, which are set to expire in 2012.  This agreement on principles is, under the Bali Action Plan, expected to be reached in time for the December 2009 UNFCCC Copenhagen summit.  In preparation for the fourth session of the AWG-LCA, scheduled to occur in Poznan, Poland during the first two weeks of December 2008, governmental parties to the UNFCCC are currently staking out their negotiating positions in formal submissions to the AWG-LCA.

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Also see “With Time Dwindling, Gaps in EPA’s Proposed Carbon Sequestration Framework Remain Unchallenged” for an update on this topic.

In about one month, the Environmental Protection Agency (EPA) will close the comment period on a proposed framework for regulating underground injection and long-term geological sequestration of carbon dioxide (CO2) under its Safe Drinking Water Act (SDWA) authority.  The proposal offers a useful starting point for thinking about many of the technical, policy and legal issues involved in capturing, liquefying, transporting, injecting and storing CO2 deep underground for the next thousand years.  One alarming aspect of the proposal, however, is EPA’s acknowledgment that it still lacks the authority to address many of the most critical regulatory issues related to commercializing carbon sequestration technologies.  If so, neither EPA nor Congress can afford to wait until 2010, when EPA’s final rule is expected, to start filling in the gaps.  (more…)

For the second time, a major utility company has agreed to disclose financial risks faced by coal-fired power plants in an era of global climate change.  Dynegy’s settlement follows Xcel Energy in agreeing to address these business risks. Dynegy has agreed to disclose material risks in its annual Form 10-K filings with the Securities and Exchange Commission.  The SEC is, separately, reviewing a petition to determine whether, and the extent to which, climate-related risks warrant mandatory disclosure.

Specifically, according to a press release issued by the New York Attorney General’s office, Dynegy will disclose material risks related to:

• Present and probable future climate change regulation and legislation
• Climate-change related litigation
• Physical impacts of climate change.

Other disclosures will include:

• Current carbon emissions
• Projected increases in carbon emissions from planned coal-fired power plants
• Company strategies for reducing, offsetting, limiting or otherwise managing its carbon emissions and expected emission reductions from these actions
• Corporate governance actions related to climate change, including environmental performance.

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On October 7, the Biomass Research and Development Board (Board) was charged with carrying out the National Biofuels Action Plan (NBAP).  The NBAP is the federal government’s first step toward achieving 36 billion gallons per year (BGY) of biofuel production by 2022-the congressionally mandated requirement in the Energy Independence and Security Act (EISA) of 2007. 

The NBAP is focused on research in seven key areas (Action Areas).  When combined, these Action Areas form a strategy for a biofuel industry supply-chain framework (2-6 below) and assurance that the strategy can succeed in a safe and effective manner (1&7 below). 

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After significant delay, the United Nation’s International Transaction Log (ITL) and the EU’s Community International Transaction Log (CITL) were finally connected on October 16.  The ITL tracks and trades the transfer of all Kyoto Protocol units, including Assigned Amount Units (AAUs), Certified Emission Reductions (CERs) and Emission Reduction Units (ERUs), while the CITL, its European counterpart, tracks the trade of European Emission Allowances (EUAs) under the EU ETS. 

The linking was significant not only because of the delay in its implementation, but because it allows Kyoto credits to be transferred directly into EU installation emissions accounts.  The delay caused considerable market shakiness, as, until the link was complete, the key December 2008 CER contract could not be physically delivered and most Member States, most significantly Germany and the UK, refused to issue EUAs by the February 2008 deadline.  As such, the completion of the link eases the collective concern of traders and Member States alike, as it avoids the risk of contract default, a major concern, and encourages Member States to promptly issue EUAs.  It will also simplify contractual negotiations between counterparties, as provisions, which have been included for the lack of a connection, are no longer necessary.  All these factors will encourage a flourishing spot market, which will grow alongside the exchange and OTC markets.  The resulting increased volume and liquidity should smooth out price volatility and increase opportunities for arbitrage.  

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Small-scale renewable energy systems enjoy many incentives from the Energy Improvement and Extension Act signed into law this month as part of the “bailout bill” legislation.”  Many tax credits considered essential to the renewable energy industry were set to expire at the end of the year.  Provisions in the bill, combined with various state and local incentives, are set to make renewable technologies more accessible and affordable for homes and businesses.      

The Production Tax Credit (PTC), a cent per-kilowatt hour credit, has historically promoted wind energy in United States.  Because the PTC is structured to offset only passive income, such as investment income, the PTC is unavailable for many smaller-scale wind developments absent a partner to take advantage of the credits.   Under Section 104 of the bill, a 30 percent credit investment tax credit (ITC) is available to offset costs toward installing small wind energy properties, defined as turbines having a name plate capacity under 100 kilowatts, through December 31, 2016.  Because the credit is not linked to passive income like the PTC, more small-wind developers may benefit from the credit, which is capped at $4,000.  Similarly, Section 105 of the Act extends a 10 percent investment tax credit to geothermal heat pump systems using groundwater as a thermal energy source to heat a structure or a thermal energy sink to cool a structure through December 31, 2016.

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