Last week, House Energy and Commerce Committee Chairman John Dingell and Energy and Air Quality subcommittee Chairman Rick Boucher released a draft climate change bill for consideration by the House of Representatives. Labeled a “discussion draft” for future climate legislation, the proposals included in the 461-page draft bill would impact a number of industries, as we havepreviouslydiscussed.
The automotive industry will closely monitor this draft bill, as a number of “options” are presented relating to greenhouse gas (GHG) emissions by motor vehicles. Importantly, the draft bill confirms that many crucial issues still remain on the table for developing GHG regulations.
Like the just-released Dingell-Boucher climate change bill in US and the EU’s proposed directive, the design for an Australian emissions trading scheme reflects a strong concern for protection of trade-exposed industries from countries with less stringent emissions reduction requirements. The core concern is the possibility that companies may relocate their operations to countries not subject to an emissions trading scheme, which Professor Garnaut, an eminent economist and advisor to the Rudd Government on the likely economic effects of an ETS, describes as a “truly dreadful problem.”
In Australia, this protectionist element has been a platform of both the previous Coalition party and incumbent Labor Government in their scheme designs. In its July 2008 Green Paper, the Government, as expected, proposed assistance to the newly branded Emission Intensive Trade Exposed (“EITE”) industries of 1,500 tCO2-e/$ million revenue, which was a higher threshold than previous proposals. It is intended that approximately 30% of the carbon pollution permits will be allocated to EITE industries, using a sliding scale: the largest polluters, with an emissions intensity above 2,000 tCO2-e/$ million revenue, will initially pay only 10% of their total emissions, while companies producing between 1,500-2,000 tCO2-e/$ million revenue would pay for 40% of emissions.
The California Air Resources Board today released its final scoping plan for reducing California greenhouse gas emissions to 1990 levels by 2020 as part of the Global Warming Solutions Act of 2006, or AB 32. While other states are looking to reduce greenhouse gas emissions from certain sources via the Western Climate Initiative (WCI) and the Regional Greenhouse Gas Initiative (RGGI), CARB’s final scoping plan would impact almost all industries throughout California. Despite the downturn in the economy, Governor Schwarzenegger applauds the scoping plan and believes it will strategically places California in a secure, competitive position for the future.
The plan calls for emission reductions through, among other things, vehicle emission standards, expanded energy efficiency programs, solar incentives, implementation of water efficiency and sustainable forest programs and increased utilization of renewable energy sources (by increasing the renewable portfolio standard to 33 percent by 2020). The plan also calls for a cap-and-trade program linked to regional partner programs. Industries, which feel the burden of the economic downturn, have expressed concerns that the proposed restrictions may place them at a disadvantage compared to their peers in states lacking climate change regulations. CARB, however, projects that the plan will ultimately increase economic production by $33 billion and create more than 100,000 jobs.
Like the Lieberman-Warner Climate Security Act that failed in the Senate last summer, Title VII, Part G of the just-released Dingell-Boucher climate change bill would create an “International Reserve Allowance Program” to ensure that U.S. manufacturers of greenhouse gas emissions-intensive goods are not placed at a competitive disadvantage vis-à-vis imports produced under less strenuous emissions requirements. Under these provisions, also intended to spur international efforts towards a global emissions pact to replace the Kyoto Protocol, U.S. importers of emissions-intensive goods from countries found not to be taking action “comparable” to the U.S. to reduce greenhouse gas emissions would be required to purchase and surrender emissions allowances. These allowance requirements would operate separately from, and parallel to, the domestic emissions allowance requirements established under Title VII.
The range of “covered products” under Part G is potentially vast, encompassing both “primary products” (e.g., iron, steel, aluminum, cement, glass, pulp, paper, chemicals and industrial ceramics) and “manufactured items for consumption” (other products that, in the course of manufacture, generate substantial greenhouse gas emissions), so long as the products are “closely related” to goods produced in the U.S..
Title IV of the Dingell Boucher Bill, proposed last week, would amend the Clean Air Act to regulate Hydrofluorocarbons (HFCs) as greenhouse gases. In doing so, Title IV illustrates a recurring theme regulators face in addressing new environmental issues: Today’s solutions often become tomorrow’s problems.
The Dingell Boucher climate change bill, released earlier this week, would establish a cap-and-trade program in the US. The bill contains two major provisions for carbon offset credits. Carbon offset credits are generated by projects that reduce greenhouse gas (GHG) emissions, and must be “real, verifiable, and additional” to business-as-usual emission reductions. The offset credits would be purchased from project developers by regulated entities as a way of fulfilling compliance obligations in the future cap-and-trade program.
One provision creates a domestic offset program, enabling qualifying emission-reduction projects within the United States to generate credits for use within the cap-and-trade system. The statute would initially allow credits from the following types of projects; 1) methane collection and combustion at active underground coal mines; 2) methane collection and combustion at landfills; 3) methane collection and combustion involving manure management; and 4) afforestation or reforestation of areas not forested as of January 1, 2008. Other projects types may be brought into the offset program after review by the EPA.
This week, amidst the dislocations flowing from the global financial markets, lawmakers in the US and EU advanced legislation requiring geological sequestration of CO2 emissions from future coal-fired plants. It remains to be seen how the unfolding economic landscape may affect the viability of any significant movement on new climate change legislation. For the moment, however, these proposals are signs that some lawmakers realize that implementing a comprehensive climate change framework in five (or twenty-five) years means laying the legal and regulatory foundation now.
On Wednesday, October 7, the EU Parliament’s Environment Committee added carbon capture and sequestration (CCS) provisions to the comprehensive climate package scheduled for a vote by Parliament in December 2008. The provisions establish an “emission performance standard” of 500 grams CO2 per kilowatt hour for large power plants constructed after 2015 and establish a comprehensive scheme for regulating the carbon capture and sequestration (CCS) sites that likely would be required to meet such a standard. As part of that scheme, CCS project developers would contribute to a CCS fund during the active life of a sequestration site, and remain liable for a 50-year period after the CCS site is closed.
Much ink has been spilled regarding inadequacy of the high voltage transmission grid in the U.S. vis-à-vis various ambitious plans to increase domestic windpower production. The New York Times and Wall Street Journal have covered this issue fairly recently and highlighted what has been known for some time — that without significant development of the backbone of the nation’s electric transmission grid, the significant windpower generation that is anticipated to come online will not be able to be delivered from the low population centers where the power most often is generated to the high population centers where it is most needed. Often the expense of expanding the existing electric transmission grid has been cited as the largest obstacle to transmitting the power generated by renewable energy sources located in remote locations to load centers. Another formidable obstacle to the development of the domestic transmission grid is the patchwork nature of the regulatory regimes governing the siting and construction of transmission facilities in the U.S.
The best sites for land-based windpower generation facilities generally are located in geographic areas that are located far from high demand load centers. Currently, there is not a single statutory or regulatory framework for the siting of transmission facilities necessary to bring windpower to the population centers where the power is needed. By contrast, the Natural Gas Act (NGA), which is administered by the Federal Energy Regulatory Commission (FERC), provides a single regulatory regime pursuant to which developers of interstate natural gas pipelines can site such facilities. Importantly, pursuant to the NGA, interstate natural gas pipeline developers can take, through the right of eminent domain, land required to construct gas pipelines determined by the FERC to be in the public convenience and necessity.
The National Biofuels Action Plan (NBAP) released today by Department of Agriculture (USDA) Secretary Ed Schafer and Department of Energy (DOE) Samuel W. Bodman supports the accelerated growth of biofuels as clean and affordable energy to make the U.S. less dependent on foreign oil and create stronger rural communities.
Developed in response to President Bush’s 2007 State of the Union address, detailing the plan to change the way America fuels itself, the NBAP will be implemented by the Biomass Research and Development Board and co-chaired by USDA and DOE officials.
The House Energy and Commerce Democrats just released their discussion draft for a comprehensive climate change bill. With Congress in recess until after the election, the debate surrounding this bill will have to wait until the next Congress and Administration are sworn in. The text of the legislation can be found here and an executive summary can be found here. We will have a fuller analysis of this legislation in the coming days and weeks.
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