ClimateIntel.com

To view Part 1 in the series, please click here.

On October 28, 2009, the Senate Environment and Public Works (EPW) Committee held a hearing on S. 1733, the Clean Energy Jobs and American Power Act.  The Committee heard testimony from three panels of witnesses: a panel on Clean Energy Jobs, a panel on National Security and a panel on Utilities Policy.

The Clean Energy Jobs panel consisted of Peter Brehm, Vice President of Business Development and Government Relations at Infinia Corporation; Dan Reicher, Director of Climate and Energy Initiatives for Google; Dave Foster, Executive Director for the Blue Green Alliance; Philadelphia Mayor Michael Nutter; Kate Gordon, Senior Policy Advisor for the Apollo Alliance; Bill Klesse, Chairman and Chief Executive Officer, Valero Energy Group, testifying on behalf of the National Petrochemical and Refiners Association; and Brett Vassey, President and Chief Executive Officer, Virginia Manufacturers Association. 

• Mr. Brehm stated that the significant growth over the past year in solar and other renewables technologies presents very significant potential for economic growth. He argued that, by putting a price on carbon, the proposed legislation will spur demand for renewable energy technologies and result in the creation of good, high paying energy jobs throughout the country.
• Mr. Reicher agreed that addressing climate change presents an opportunity to build an energy system and to build millions of new jobs. He argued, however, that putting a price on carbon was not, by itself, sufficient to address the problem. He urged the committee to increase public financing of advanced research for clean energy technology, such as advanced smart grid technologies, and the establishment of national standards to promote renewable energy.
• Mr. Foster said the legislative package must be comprehensive and warned against passing “one piece of the puzzle without the rest.” He also argued that the bill must include provisions for strengthening domestic manufacturing and provide sufficient free allowances for energy intensive industries. He also advocated a longer term border adjustment to prevent “carbon leakage.”
• Mayor Nutter gave his “full support” for the legislation, saying that cities can play a key role in addressing climate change. He noted Philadelphia’s use of Energy Efficiency and Conservation Block Grants to install more efficient stop lights and providing loans to businesses for retrofit and efficiency programs.
• Ms. Gordon testified that renewable energy industries will not grow to scale until the government commits to a low carbon future.
• Mr. Klesse described the legislation as “anti-competitive” and warned that the results would be “devastating,” placing American refiners at a competitive disadvantage, moving the refining business overseas, and burdening American consumers with higher costs. He predicted that the bill would impose new costs on consumers, explaining that even with a carbon price at $20 per ton, the annual industry-wide costs for domestic refiners at $4.1 billion and the cost of consumer emissions at $63 billion.
• Mr. Vassey objected to the proposals for allocating emissions allowances, characterizing them as political leaders are picking winners and losers under the climate bill. He expressed concerns that the legislation would cause a “leakage” of manufacturing from the U.S. to manufacturing worldwide.

The National Security consisted of Sen. John Warner (R-VA, retired); Kathleen Hicks, Deputy Undersecretary of Defense for Strategy, Plans and Forces; Vice Admiral Dennis McGinn (retired), Member of the Center for Naval Analyses Military Advisory Committee; Drew Sloan, Fellow, Truman National Security Project; Major General Robert Scales (retired); and Lt. Col. James Carafano, Deputy Director, Heritage Foundation’s Kathryn and Shelby Cullom Davis Institute for International Studies.

• Senator Warner led a panel of military experts that warned that climate change poses a threat to U.S. national security. He predicted that climate change would increase instability in the fragile regions of the world, threatening energy, food and water supply, resulting in social instability and undermining the economy. Ms. Hicks, Vice Admiral McGinn and Mr. Sloan supported Senator Warner’s testimony.
• Major General Scales (retired) disagreed with those conclusions, arguing that it is unlikely that mass migrations triggered by climate change would result in aggression. He warned that the bill to mitigate the impact of climate change might reduce American influence and retard the country’s ability to deter and fight in future conflicts. Lt. Col. Carafano similarly testified that the costs of the bill on the economy will have a deleterious impact on the national security, through a loss of productivity and jobs, and the continuing devaluing of the dollar.

The panel on Utilities Policy consisted of David Crane, President and Chief Executive Officer, NGR Energy; Ralph Izzo, Chairman, Chief Executive Officer and President, Public Service Enterprise Group Incorporated (PSEG); Nathaniel Keohane, Director of Economic Policy and Analysis, Environmental Defense Fund; Joel Bluestein, Senior Vice President, ICF International; Barry Hart, Chief Executive Officer, Association of Missouri Electric Cooperatives; and Dustin Johnson, Chairman, South Dakota Public Utilities Commission. 

• Mr. Crane urged Congress to adopt provisions that would speed the deployment of nuclear power, stating that nuclear, combined with renewable energy and carbon sequestration, could transform the U.S. power sector from high carbon to low carbon in the next 40 years. His other recommendations included: providing additional emission allowances to the utility industry; preventing EPA from regulating greenhouse gas emissions under the Clean Air Act; furthering the early deployment of carbon sequestration; and increasing the availability of offsets.
• Mr. Izzo echoed the call for swift action on the bill to establish a cap-and-trade system to set a price for carbon. He endorsed provisions of the bill that would impose a collar on carbon prices and allocation of the bulk of emission allowances to utilities.
• Mr. Law offered strong support for the bill and summarized his company’s efforts to deploy solar and wind facilities, reduce peak demand, lower consumer bills and avoid building a new power plant.
• Mr. Keohane recommended that the committee rely on three principles to guide the legislation: provide incentives to accelerate the deployment and development of new technologies; prevent carbon leakage; and protect consumers in the course of allocating allowances.
• Mr. Bluestein cautioned that adopting climate change legislation will not cause “a dash to gas.” He predicted that ultimately there would be a diverse mix of clean technologies, including gas, coal with carbon capture and sequestration, nuclear and increased energy efficiency.
• Mr. Hart warned about the price increases he expected for his customers and argued that regional disparities in allocation allowances would unfairly penalize electric cooperatives. He recommended that allowance be awarded based on the carbon content of generators’ fuel mix.
• Mr. Johnson echoed Mr. Hart’s testimony, stating that Midwestern consumers would see substantial increases in their utility bills under the proposed legislation. He argued further that providing a soft collar with a minimum ceiling price at $28, increasing thereafter, coupled with a reserve fund would be insufficient to protect consumers from cost increases.

To view Part 3 in the series, please click here.

With fewer than six weeks to the UNFCCC meeting in Copenhagen-the deadline set by the global community to agree on a replacement to the Kyoto Protocol-the distance to a viable climate treaty remains great.  One of the most important areas of work that remains in flux regards the commitments, if any, the developing world will make to lessen or mitigate their growing carbon emissions.

There is broad consensus that, should developing countries continue on a business-as-usual trend of emissions growth, it will swamp any reductions made by individual developed nations, including the United States.  What should be done given that fact is another matter, as the nature and scope of commitments, if any, to be made by at least some developing countries is heatedly contested.  Developing countries often have less capacity for creating a sustainable economy. At the same time, some of the heaviest costs of emissions reductions can be avoided by developing countries, because in many cases, they are working to avoid future emissions, not reduce their current levels. While clear in both principle and practice that developing countries have a right to further economic growth, it is the global community’s responsibility to find ways, including through financing mechanisms and technology transfer, for that growth to not come at the expense of the environment.

The concept that negotiators have settled upon is that of the Nationally Appropriate Mitigation Action (NAMA). Unlike the commitments made by developed countries, which are specific, mandated, measurable commitment, NAMAs are voluntary actions supported by technological and capacity assistance from the developed world.

While negotiators reached agreement on the concept at the meeting in Bali, Indonesia in December 2007, as part of the Bali Road Map, there remains considerable negotiation to be done on the specifics. Work on the issues will continue at next week’s meeting in Barcelona. The major issues include:

• The types of actions that qualify as NAMAs-including countrywide or sectoral intensity targets, energy efficiency or renewable energy goals, cap-and-trade or carbon tax systems or participation in emissions trading schemes such as the Clean Development Mechanism;
• The development of monitoring, reporting and verification principles and oversight bodies;
• The creation of a registry of NAMA projects and the development of a life-cycle analysis methodology for NAMA projects; and
• The scope and enabling mechanisms for development and capacity assistance;

In other areas, more significant differences remain.  A major continuing issue involves whether NAMAs are contingent on and congruent to funding provided by the developed world, or can be attempted unilaterally.  Also remaining to be determined is the relationship of NAMA activities to any future flexible mechanism, which might replace or modify the Clean Development Mechanism, Joint Implementation and emissions trading as we know it.

Yesterday, the Senate Environment and Public Works (EPW) Committee held a hearing on S. 1733, the Clean Energy Jobs and American Power Act.  The hearing started with opening remarks by Chairman Boxer and Ranking Member Inhofe.  As expected, they expressed radically different views of the bill.  Senator Boxer (D-CA), who coauthored the bill and released her chairman’s mark on Friday, opened the hearing with a remark that the cap-and-trade legislation will reap many benefits at a small cost to the public.  She referenced the EPA analysis of the bill, which predicted a cost of approximately 22 to 30 cents a day per family.  Senator Inhofe (R-OK) expressed the view that the bill would “fundamentally redesign” the United States’ 14 trillion dollar economy.  He characterized the legislation as a tax that would inflict “economic pain” and lead to fewer jobs, relying on recent CBO testimony to the effect that cap-and-trade legislation would result in a net loss of jobs.   The Committee heard testimony from two panels of witnesses: Senator Kerry (D-MA), the lead sponsor of S. 1733; and a second panel comprised of Energy Secretary Chu, Transportation Secretary LaHood, Interior Secretary Salazar, EPA Administrator Jackson and FERC Chairman Wellingoff. 

Senator Kerry explained that, by actively addressing climate change, we will improve every sector or our energy economy, achieve energy independence and increased national security, and create millions of new jobs and new industries that cannot be exported.  He asserted that cost analyses of cap-and-trade legislation do not factor in the cost of inaction and that the world risks catastrophic consequences if temperatures continue to rise.  He added that only 7,500 entities will be covered by the legislation, representing 2% of businesses, with small business, agriculture and portions of the transportation sector exempt. 

In the second panel, the Obama Administration officials offered strong support for the legislation.  Secretary Chu stressed that addressing climate change presents a significant economic opportunity to capitalize on the development of new energy sources.  He argued that a cap on emissions is the most critical step to drive investment decisions for clean energy.  Additionally, he said sustained commitments to research and development will be necessary for the country to meet its energy goals.  Secretary LaHood noted several promising initiatives in development in his Department to reduce GHG emissions, including improving the understanding of aviation emissions on climate and expanding access to public transportation.  Secretary Salazar emphasized the need for energy efficiency and clean energy jobs. He noted that his Department has moved to fast forward solar energy on 1,000 square miles of public land by fast tracking the application process.  He also noted that the Geological Survey is currently developing protocols for carbon capture and sequestration (CCS) technologies. 

Administrator Jackson explained that EPA did a full economic analysis on the House energy and climate change bill (H.R. 2454, the American Clean Energy and Security Act), upon which S. 1733 is based, and a similar analysis of S. 1733.  Notably, she remarked that the region-to-region cost differences for both bills would be small.  Chairman Wellingoff said that FERC is working to remove barriers to low carbon sources of energy and to reduce emissions from energy generation.  He claimed that the cost of greenhouse gas emissions is currently a market externality, but that S. 1733 would internalize this cost and thereby diversify the fuels used to generate electricity. 

A spirited question and answer session followed with Senators of both parties seeking to score points on issues of perceived importance to their constituents.  Some of the more interesting issues involved the extent to which EPA would have a role in regulating GHG emissions under the Clean Air Act (CAA) if comprehensive cap-and-trade legislation were enacted.  Administrator Jackson expressed the view that the CAA would continue to play an important role, but that is an issue that bears watching.

To view Part 2 in the series, please click here.

 The big action this week will occur in the Senate Environment and Public Works (EPW) Committee where Chairman Boxer will hold a series of hearings on the Kerry-Boxer climate change bill. Late Friday evening, Senator Boxer released a revised version that fills a number of the blanks, such as the credit allocation levels.  Simultaneously, EPA released its analysis of the bill, concluding that the bill would cost the average household $100 per year.  Senators in both parties continue to express their intent to alter the bill.  EPW will hold three days of hearings, with Administration officials, scientists, former members of Congress, think tank executives and others holding forth.  As with many other climate change hearings before the committee, the debate and questions are expected to break down along party lines.  Ranking Member Inhofe (R-OK) has suggested that Republicans might not attend a future mark up if their concerns about the EPA analysis of the legislation are not met.  A Republican boycott would stop a mark-up by denying the committee of its necessary quorum.

Tuesday, October 27, 2009

At 9:30 a.m., the Senate Environment and Public Works Committee will conduct a hearing entitled “Legislative Hearing on S. 1733, Clean Energy Jobs and American Power Act” in Room 406 of the Dirksen Senate Office Building.  Panelists include Senator John Kerry (D-MA), The Honorable Steven Chu, The Honorable Ray LaHood, The Honorable Ken Salazar, The Honorable Lisa Jackson and The Honorable Jon Wellinghoff.

The House Natural Resources Committee’s Subcommittee on Water and Power will hold a hearing on “Water Management and Climate Variability” at 10 a.m. in Room 1324 of the Longworth House Office Building.

Wednesday, October 28, 2009

At 9:30 a.m., the Senate Environment and Public Works Committee will conduct a hearing entitled “Legislative Hearing on S. 1733, Clean Energy Jobs and American Power Act” in Room 406 of the Dirksen Senate Office Building. 

The Senate Energy and Natural Resources Committee will hold two hearings.  At 10 a.m. the committee will receive testimony on the role of natural gas in mitigating climate change and at 2 p.m. they will  receive testimony on the current and expected impacts of climate change on units of the National Park System.  Both hearings will take place in Room 366 of the Dirksen Senate Office Building. 

Thursday, October 29, 2009

At 9:30 a.m., the Senate Environment and Public Works Committee will conduct a hearing entitled “Legislative Hearing on S. 1733, Clean Energy Jobs and American Power Act” in Room 406 of the Dirksen Senate Office Building. 

The House Agriculture Committee will hold a hearing on next-generation biofuels at 9:30 a.m. in Room 1300 of the Longworth House Office Building.

In introducing a hearing earlier this month on “Growing U.S. Trade in Green Technology,” Congressman Bobby L. Rush (D-IL), who chairs the House Subcommittee on Commerce, Trade, and Consumer Protection, painted a dismal picture of U.S. competitiveness in the field of emerging environmental, or green, technology.  There is no single definition of green technology, but the concept is widely understood as encompassing emerging technologies related to renewable energy, energy efficiency and the conservation of natural resources.

Citing statistics from the New America Foundation, Congressman Rush claimed that, over the last decade, the U.S. has moved from a positive overall green technology trade balance of $12 billion to a deficit of nearly $9 billion.  For some green technologies, the trade deficit has grown particularly severe.  According to written testimony submitted for the hearing by Steve F. Hayward of the American Enterprise Institute, the U.S. trade deficit for wind power components has, in recent years, grown to $20 billion.  To correct this imbalance, Congressman Rush urged the adoption of a vigorous and long-term U.S. export promotion policy to reclaim U.S. green technology leadership.

Expert testimony before the hearing addressed a variety of factors explaining the seeming decline in the global competitive position of U.S. green technology firms, including stiff tariff and non-tariff trade barriers maintained by major trading partners of the U.S.  These barriers to trade in green technology are maintained even as many U.S. trading partners provide substantial assistance to their domestic green technology firms, exacerbating the negative impact on U.S. firms.

For example, according to written testimony submitted by GE’s Managing Director for International Energy Policy, Timothy J. Richards, 91 of 153 WTO member states impose tariffs on wind turbines and solar panels.  In the case of wind turbines, the WTO-wide mean tariff rate is 7.4%.  These tariffs are also highly variable among WTO member states.  In the case of wind turbines, while the U.S. has bound its tariff rate at 1.3%, China applies a tariff rate of 8%.  Brazil’s is even higher at 14%.  Also according to Richards’ testimony, many WTO member states, including Canada, China and the U.S., have recently adopted procurement policies that effectively bar competition from foreign suppliers.

Several witnesses advocated that a central aspect of a U.S. strategy for promoting U.S. green technology exports should be a renewed commitment to an old idea - an Environmental Goods and Services Agreement (EGSA) under the WTO.  The basic principle underlying EGSA is to liberalize global trade for a defined range of green technologies to promote efficient and rapid global dissemination of these technologies.  The mandate for the negotiations dates back to the 2001 Doha Ministerial Declaration, which at paragraph 31(iii) calls for “the reduction, or as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.”  While this mandate does not expressly identify greenhouse gas emissions, the ongoing EGSA negotiations have, in recent years, come to be seen as an adjunct to the global negotiation of a successor to the Kyoto Protocol to the U.N. Framework Convention on Climate Change, which is set to expire in 2012.

The Bush Administration strongly supported EGSA, and in 2007 attempted to reinvigorate the talks with a multilateral proposal, submitted jointly with Canada, the EU, Japan, Korea, New Zealand, Norway, Taiwan and Switzerland.  This proposal identified a “Potential Convergence Set” of green technologies, mostly related to climate change mitigation, that might be more amenable to inclusion in the first phase of a market-opening agreement.  The Obama Administration recently signaled its agreement with the Bush Administration’s approach, and earlier this month resubmitted the 2007 proposal to the WTO entity overseeing the talks - the Committee on Trade and Environment - Special Session.

Notwithstanding the sense of urgency evident at Congressman Rush’s hearing to advance the competitive position of U.S. green technology industries, however, EGSA appears to face the same hurdles today as it did when sought by the Bush Administration.  One such hurdle is that the EGSA negotiations are currently linked to the broader trade negotiations in the ongoing Doha Round.  Unless WTO member states agree to sever the EGSA negotiations from the Doha Round, EGSA’s prospects will remain linked to highly controversial and difficult aspects of these negotiations - such as agricultural subsidies - that have defied resolution.  Further, the EGSA negotiations have not been able to overcome a deep divide between the proponents of the 2007 proposal and a group of developing countries, led by Brazil, that seek the inclusion of biofuels in any EGSA. 

While U.S. law- and policy-makers seem to agree that they must quickly find new ways to stimulate U.S. green technology industries, EGSA remains a distant and uncertain prospect.

The House and Senate are both relatively quiet this week as both chambers remain focused on health insurance reform.  Senator Boxer is still planning a Senate Environment and Public Works mark-up for early November on her recently released cap-and-trade legislation.  Meanwhile, Chairman Bingaman will hold a hearing on cap-and-trade allocations in the Senate Energy and Natural Resources Committee.  The hearing will be more fact finding than legislative, aiming to educate members on various aspects of climate legislation.  It will be instructive to see which Senators attend the hearing and what sort of questions are asked.

Wednesday, October 21

The Senate Energy and Natural Resources Committee will hold a hearing on greenhouse gas emission allowances at 9:45 a.m. in Room 366 of the Dirksen Senate Office Building.

The House Science and Technology Committee will conduct a hearing entitled “Biomass for Thermal Energy and Electricity: A Research and Development Portfolio for the Future” at 2 p.m. in Room 2318 of the Rayburn House Office Building.

Thursday, October 22

At 2:15 p.m. in Room 628 of the Dirksen Senate Office Building, the Senate Committee on Indian Affairs will conduct a hearing on “Indian Energy and Energy Efficiency.”

The U.S. Court of Appeals for the 5^th Circuit today reversed a district court decision that had dismissed claims for damages from GHG emissions that allegedly increased the ferocity of Hurricane Katrina on the grounds that plaintiffs’ complaint raised political questions.  Comer. v. Murphy Oil USA, No. 07-60756 (5^th Cir. Oct. 16, 2009).  One day after the Kivalina Village district court rejected the approach taken by the 2^nd Circuit in Connecticut v. AEP, the 5^th Circuit ruled that the complaint in the Hurricane Katrina litigation did not raise political questions and that plaintiffs had standing to bring their private and public nuisance, trespass and negligence claims.  The court affirmed the dismissal of plaintiffs’ unjust enrichment, fraudulent misrepresentation and civil conspiracy claims for lack of standing.  The court remanded the case to the district court for further proceedings.

The U.S. District Court for the Northern District of California today issued an Order granting the Defendants’ motions to dismiss for lack of subject matter jurisdiction.  Rejecting the approach taken by the Second Circuit in Connecticut v. AEP, the Kivalina Village court ruled that the claims presented by plaintiffs raised non-justiciable political questions and that the plaintiffs lacked standing to sue.

With the Congress engaged in all health care all the time, things have quieted down substantially on the climate change front. The House, which passed its legislation before July 4, is waiting patiently for Senate action. Rather than being active on the issue, the Senate is taking a “wait and see” approach to the draft bill released by Sens. Boxer and Kerry.

The only hearing this week, of direct consequence to an eventual cap-and-trade bill, is in the Senate Energy Committee. There, Chairman Bingaman will be holding a hearing on the economic effects of climate change legislation. Experts from the Congressional Budget Office, the Energy Information Administration, the Congressional Research Service and the Environmental Protection Agency will testify.

With the Senate examining the Boxer-Kerry climate draft and awaiting Senate Finance Committee action on health care legislation not much action is anticipated this week regarding climate policy.  The House Energy and Commerce Committee will have a subcommittee hearing on U.S. efforts to maintain competitive in the global green technology trade.  To that end, the House Science Committee will mark up legislation designed to promote more research and development of algaeal fuel.

Wednesday, October 7, 2009

The House Energy and Commerce Committee will conduct a hearing on “Growing U.S. Trade in Green Technology” at 10 a.m. in Room 2322 of the Rayburn House Office Building.

The House Science and Technology Committee will markup the algae, energy research bills at 10 a.m. in Room 2318 of the Rayburn House Office Building.