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ClimateIntel was created in November 2007 by Akin Gump Strauss Hauer & Feld LLP to provide financial institutions, regulated businesses and other stakeholders with objective insight into legal and policy developments in the carbon market. The blog specifically focuses on U.S. federal- and state-level regulatory and policy intelligence, climate change litigation matters and international regulatory and policy intelligence.

For more information on ClimateIntel, please contact Paul Gutermann.

The Waxman-Markey American Clean Energy and Security Act (ACESA) has been voted out of the Energy and Commerce Committee; next it heads to the House floor and possibly for debate before July 4^th.  Now questions surrounding the bill turn to the magic number—218, the “yes” votes needed to gain the bill’s passage.  Ultimately, despite near unanimous Republican opposition to date, geography may be more important than political party in determining where the “yes” votes come from.  A recent paper co-authored by researcher from the Brattle Group and UCLA, “Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production” (pdf), attempts to shed light on the relationship between geography, per-capita emissions and a pro- or anti-carbon regulation stance.

The study found wide variations in the per-capita emissions of carbon.  For example, coastal, urbanized states with access to hydro or natural gas have considerably lower per-capita emissions than did midwestern and southern states, which depend on coal generation for much more of their baseload power generation.  In fact, extent of coal mining was one of the highest correlating factors for per-capita emissions; sectors like residential and commercial had much less affect on the overall distribution of emissions.

Emissions, Income, Ideology

The researchers investigated not only the geographic distribution of these emissions, but also the correlations between per-capita carbon emissions, per-capita income and ideology (the ideology measure goes beyond environmental votes to encompass all contested votes). Higher emissions correlated strongly with a decrease in per-capita income and an increase in across-the-board political conservatism.

This dichotomy—richer, more liberal and relatively decarbonized areas vs. poorer, conservative, carbon-intensive ones—informs the battle over the ACESA bill. Simply put, those areas that both face greater burdens in reducing emissions (due to more carbon-intensive economies) and less economic wherewithal in adapting to those changes (due to lower per-capita incomes) are far less likely to support making those emissions reductions in the first place. This holds for both Houses of Congress.

What this means for Waxman-Markey

Examining the various data, the authors suggest that three outcomes are most likely in the crafting of emissions control legislation:

1. Deadlock and watered down legislation.
2. Price offsets for carbon intensive regions or sectors, such as free allocation of pollution allowances.
3. Anti-regressive policies to protect sensitive consumers.

Congressmen Waxman and Markey seem to have used the second and third strategies to craft a bill that could be passed by the Committee on Energy and Commerce. While the study authors list some downsides to these policies (including wealth transfer without changing behaviors), others have disputed this, saying that “freely allocating allowances does not influence firms’ production and emission reduction decisions.”

Interestingly, this study seems to indicate that ACESA has already cleared the most difficult hurdle (at least in the House). According to the study’s examination of the 111^th Congress, districts represented by members of the Energy and Commerce Committee—both Democrats and Republicans—have higher per-capita emissions than the average emissions district by district in the Congress as a whole. Districts represented by members of the Energy and Environment Subcommittee have even higher per-capita emissions. Districts represented by House members likely to have critical roles in passage of a bill, such as Collin Peterson Chairman of the Committee on Agriculture, have “carbon geography” scores suggesting that support may be difficult to achieve.

Regional Agreements

Another interesting corollary to the concept of carbon geography is the prevalence of regional greenhouse gas reduction agreements, such as the Western Climate Initiative (WCI), or the northeast’s Regional Greenhouse Gas Initiative (RGGI). As the maps developed by the researchers show, not only do per-capita emissions vary wildly across the country, those emissions also vary considerably across sectors. This wide variation in sectoral and geographical emissions means that regional agreements can bring areas of the country with common interests—or sectors with common interests—together to achieve emissions control results that might not be possible under a national standard, where addressing regional disparities takes more primacy.

The Brattle/UCLA research paper suggests that carbon geography may produce political tensions that could prove difficult to resolve.  Unless key swing Congressmen decide that ACESA adequately addresses these regional disparities, the bill will have a difficult time passing through Congress.  The make-up of the Committee on Energy and Commerce provides at least some hope that the bill will be more palatable for the House as a whole.

The House and Senate continue their pace to the July 4 recess.  Last week, the leadership of the House Committee on Ways and Means and Committee on Agriculture met with Speaker Pelosi to discuss reporting out their sections of the cap-and-trade legislation.  The Speaker requested that the committees finalize their mark-ups by June 16, an admittedly ambitious plan.  Overall, this week is fairly quiet in the committees of jurisdiction.  The Senate Energy and Natural Resources Committee will hear the nomination of long-time climate advocate Cathy Zoi to become the new Assistant Secretary of Energy Efficiency and Renewable Energy (EERE).

On Tuesday, June 9, the House Committee on Energy and Commerce’s Subcommittee on Energy and Environment will hold a hearing on Allowance Allocation Policies In Climate Legislation: Assisting Consumers, Investing In A Clean Energy Future, And Adapting To Climate Change at 9:30 a.m. in Room 2322 of the Rayburn House Office Building.  Witnesses include Thomas F. Farrell II, on behalf of the Edison Electric Institute; Rich Wells, Vice President, Energy, Dow Chemical Company; Nat Keohane, Economist, Environmental Defense Fund; Reverend Dr. Mari Castellanos, Minister for Policy Advocacy, United Church of Christ, Justice and Peace Ministries; G. Tommy Hodges, on behalf of the American Trucking Association; David Sokol, Chairman of the Board, Mid American Energy Hodings Company; and David Montgomery, Vice President, Charles River Associates.

Also on Tuesday, the Subcommittee on Commerce, Trade, and Consumer Protection will hold a hearing at 10 a.m. in Room 2123 of the Rayburn House Office Building titled “It’s Too Easy Being Green: Defining Fair Green Marketing Practices.”  Witnesses include James Kohm, Director, Enforcement Division, Federal Trade Commission; M. Scot Case, Vice President, TerraChoice, Executive Director, EcoLogo Program, Urvashi Rangan, Ph.D., Director, Technical Policy, Consumers Union; Dara O’ Rourke, Ph.D., Associate Professor, University of California Berkeley, Co-Founder, GoodGuide; and Scott P. Cooper, Vice President, Government Relations, American National Standards Institute.

Then on Thursday, June 11, the House Agriculture Committee will conduct a hearing on the climate bill (H.R. 2454) at 2 p.m. in Room 1300 of the Longworth House Office Building.  The committee is one of eight committees that will have a say on the climate bill.

This is the second post in a two-part series reviewing recent congressional efforts to encourage development of the carbon capture and sequestration (CCS) industry in the US.  The first post addressed the House Climate Bill, H.R. 2545, that recently cleared the House Energy and Commerce Committee.  This post focuses on two recently introduced Senate bills, the Department of Energy (DOE) Carbon Capture and Sequestration Program Amendments Act of 2009, S.1013, and the Responsible Use of Coal Act, S. 1134.  Both offer additional perspectives on policy approaches to promote CCS.   

In the Senate

While all eyes have been on the House Energy and Commerce Committee in the recent push to send The American Clean Energy and Security Act of 2009 (ACES), H.R. 2545, to the House floor, the Senate also has introduced several alternative (or complementary) bills to promote the development of the US CCS industry.  Two recently introduced Senate bills offer interesting counterpoints to the CCS provisions contained in the ACES.  These bills, combined with a recent Senate Hearing on CCS, suggest that Congress is developing an awareness of the range of legal and policy issues that could influence the future of CCS and the US coal industry.

                S. 1013

On May 7, Senator Jeff Bingaman (D-NM), Chairman of the Energy and Natural Resources Committee, introduced S. 1013, the Department of Energy (DOE) Carbon Capture and Sequestration Program Amendments Act of 2009.  The 14-page bill would build on the existing federal carbon capture and storage research development program by providing technical and financial assistance for up to 10 different CCS projects, with a goal of demonstrating the capability for sites to capture and store at least 1 million tons of carbon dioxide each year from industrial sources.  DOE would provide the funding through competitively-awarded, cooperative agreements.  The agreements would be subject to all applicable regulatory requirements, as well as additional financial assurance and post-injection closure and monitoring requirements.  Most notably, and unlike other measures under consideration, the bill would authorize DOE to enter into long-term liability indemnification agreements for selected projects, assume title to CCS sites for long-term stewardship efforts and charge fees to cover the cost of the long-term liability protection.  The challenge of managing risk and long-term liability at CCS projects with a thousand-year storage life was avoided previously, so the Bingaman bill provides an important starting point for addressing this issue.

                S. 1134

On May 21, Senator Robert Casey (D-PA) introduced the Responsible Use of Coal Act, S. 1134, which would authorize $3.8 billion for additional CCS and related clean coal research and development cost-share projects, including-

• $1.45 billion for a CCS demonstration program

• $420 million to support research into improved carbon capture technology

• $820 million for research into geological storage for enhanced oil and natural gas recovery and carbon sequestration
• $1.12 billion for advanced clean coal power technologies.

Technically and economically feasible CCS is essential given the extent to which electricity generation in the U.S. comes from coal, especially in the face of future climate legislation (or EPA-driven climate regulations).  Senator Casey’s bill would provide additional research and development to expedite CCS development.

                May 14 Hearings

Beyond the pending bills themselves, a recent hearing on CCS in the Senate Energy and Natural Resources Committee offered constructive dialogue on the challenges and requirements to support widespread commercialization of CCS technologies.  The hearing brought together a mix of federal, state, industry and public interest witnesses.  Some notable points raised during the hearing included the below.

• Lowering Cost of CCS Operation:  Current estimates indicate that CCS increases the cost of electricity generated in new pulverized facilities by 80% and in advanced gasification facilities by 35%.  DOE’s Office of Fossil Energy hopes to reduce these costs to 30 percent and 10 percent, respectively.  Along with the capital costs of installing CCS equipment, the cost of CCS system operation is a major economic barrier to widespread adoption of CCS on both new and existing electric facilities.
• CO2 Transportation Infrastructure Needs:  DOE’s Office of Fossil Energy is sponsoring a study by the Southeast Regional Carbon Sequestration Partnership (SECARB) and the Interstate Oil and Gas Compact Commission (IOGCC) to evaluate the legal and regulatory feasibility of developing a pipeline infrastructure in the U.S. dedicated to the transport and storage of CO2.  As ClimateIntel noted in its earlier post, developing a network of CO2 transport pipelines is necessary to implement CCS technology in areas with limited access to nearby geological storage capacity.  The original Waxman-Markey Discussion Draft provided for such a pipeline study.  The revised Waxman Markey Bill, H.2454, removed that provision, perhaps as a result of DOE’s commitment to support the study. 
• Clarifying Subsurface Property Rights:  Federal, state and private witnesses addressed the need for state or federal officials to develop a workable scheme for allocating property rights for pore space, the tiny spaces in and between subsurface rocks that can store oil, water or injected CO2.  Currently, subsurface property rights are handled on a state-by-state basis.  States with significant oil, gas or mineral extraction tend to have more established rules governing allocation of subsurface rights.  Even there, however, existing property rights are not always suited to address injection rights rather than extraction rights.  This patchwork property right structure could impede the development of future geological sequestration storage sites on a national scale.
• Long-Term Liability and Moral Hazard.  Hearing witnesses agreed that managing long-term liability at CCS sites was a key policy issue in any CCS regulatory framework.  In the short-term, the government may need to take a larger role in helping the CCS industry estimate and hedge against uncertain long-term risks and risk management costs.  Parties generally agreed that what may make sense for early movers may not make sense once the CCS industry (and the supporting private-sector risks management tools) have evolved. 

Notably, the draft bills and the related hearing discussions in the Senate address many of the specific issues ClimateIntel identified as deficiencies in the final Climate Bill awaiting action on the House floor.  If the Senate and House can find a way to merge some of the ideas that currently reside in the various bills and testimony between the two chambers, Congress could be on its way to developing a fairly comprehensive package of CCS legislation that advances the interests of both coal and climate advocates.

Congress comes back from its Memorial Day recess this week with two very important steps towards the new Administration’s energy policy completed.  Before the break the House Energy and Commerce Committee reported an economy-wide, cap-and-trade bill, and the Senate Energy Committee found enough votes to create a new renewable energy standard.  This week will be quieter by comparison.  The most noteworthy action might be behind the scenes as various House committees fight over jurisdiction over the climate change bill.  In the past week both Chairman Rangel, in Ways and Means, and Chairman Peterson, in Agriculture, have stated that they will take a hard look at the bill, and will likely have their committees create their own stamp on its language.

Additionally, this week the House and Senate will take on more budget and nominee hearings, a long with other minor hearings.  On Wednesday, June 3, the House Science and Technology Committee will conduct a markup of the National Climate Service bill at 2 p.m. in Room 2318 of the Rayburn House Office Building.