Three events this week are likely to be the focus of climate change policy in the Congress. First is the likely unveiling of the much negotiated, and long awaited, 2008 Farm Bill. What is known, from a climate and energy perspective, is that this farm bill will have a larger focus on energy and biofuels than previous iterations. The House and the Senate had substantial differences on biorefinery loan guarantees, renewable energy provisions, and incentive payments to bioenergy producers. Once a bill is released, ClimateIntel will publish a rundown of its most pertinent climate change policies.

On Tuesday, at 10:30 AM, the Senate Foreign Relations Committee will hold a hearing on “International Deforestation and Climate Change.” Stewart Eizenstat, a former Clinton Administration official and current partner at Covington and Burling will testify. Also testifying will be Kevin Gurney, the associate director of Purdue University’s Climate Change Research Center; and David Hayes, former deputy secretary of the Interior. Deforestation and forest management are a focus of post-Kyoto climate negotiations.

On Thursday, at 10:00 AM, the Senate Finance Committee will hold a hearing examining the tax aspects of an economy wide cap-and-trade system. This will be the first foray into this topic by one of the two tax writing committees, and will help create the revenue blueprint for implementation of any auction of carbon credits. Depending on the level of the cap, the revenue in the initial years of the system could reach into the hundreds of billions of dollars. The witnesses slated to appear are Peter Orzag, the director of the Congressional Budget Office, which published a report in February on “Policy Options for Reducing CO2 Emissions;” Robert Greenstein, executive director of the Center for Budget and Policy Priorities; and Henry Derwent, the president and CEO of the International Emissions Trading Association.

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President Bush’s speech announcing a new national goal to stop the growth in U.S. greenhouse gas emissions by 2025 received mixed reactions from U.S. Congressional leaders. The quotes below provide excerpts of international reactions to the President’s announcement.

Andrej Kranjc, Slovenian Undersecretary For Environment And Spatial Planning, Speaking For EU: “We expected more from the American president’s statement … The goal needs to be more ambitious. … We hope for improvement in the target announced yesterday.” (Francois de Beaupuy and Alex Morales, “EU `Expected More’ From U.S. on Climate, Slovenia’s Kranjc Says,” Bloomberg News, 4/18/08)

German Environment Minister Sigmar Gabriel: “[Bush is] lagging hopelessly behind the problems with his proposals … [his speech] does not do justice to the global challenge. His speech follows the motto: ‘losership instead of leadership,’ … We are glad that there are other voices in the U.S.A.” (”US official says German minister’s criticism of Bush climate speech unwarranted,” The Associated Press, 4/18/08)

Yvo De Boer, Executive Secretary Of The U.N. Framework Convention On Climate Change: “It’s not clear how the Bush plan would fit in with the goals set out by scientists … But for now, it’s good there is a proposal on the table from the U.S. Let’s see where this goes.” (Leila Abboud, “U.S. Climate Plan Is Panned,” The Wall Street Journal, 4/18/08)

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The California Air Resources Board (CARB) recently estimated that approximately 25% of the state’s greenhouse gas emissions come from electricity generation. In response, the California legislature established a wide variety of programs to reduce electricity consumption, to implement emission performance standards (SB 1368), and to increase the use of renewable electricity sources, such as solar and wind power (SB 1078 and SB 107). The California legislature also directed CARB to adopt rules and regulations to reduce all sources of greenhouse gas emissions in the state to 1990 levels by the year 2020 (an estimated 30% reduction in greenhouse gas emissions from business-as-usual estimates). Despite these significant steps to address global climate change, one group thinks California can do more.

Earlier this month, proponents of a renewable energy initiative submitted 735,000 signatures to qualify for the November ballot. The initiative, entitled the Solar and Clean Energy Act of 2008, would require that all utilities in California achieve 40% renewable electricity by 2020, and 50% by 2025. By comparison, current law requires that retail sellers, including investor owned utilities (IOUs), increase their share of renewable electricity by 1% per year so that, by the close of 2010, 20% of retail sales are generated from renewable energy sources (pending legislation would increase this standard to 33% by 2020). Notably, as of 2006, California’s IOUs generated only about 13% of their electricity from renewable sources.

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In remarks delivered this afternoon, President Bush announced a new intermediate national goal for stopping the growth of greenhouse gas emissions by 2025. The goal would be accomplished by encouraging technological innovation with “long-lasting” “technology-neutral” and “carbon-weighted” incentives for the most promising low-emissions energy technologies. The President further emphasized the role for innovation in second generation fuels and focused on solutions including nuclear and clean coal to ensure that power sector greenhouse gas emissions peak within 10 to 15 years.

The President recognized the need for a coordinated regulatory approach to managing greenhouse gas emissions, arguing that the major federal environmental laws (e.g., the Clean Air Act) were not designed to regulate global climate change. The President called on Congress, in its climate debates scheduled for later this year, to take an approach to regulation that sets “realistic goals for reducing emissions consistent with advances in technology,” promotes “more emission-free nuclear power,” “encourages the investments necessary to produce electricity from coal without releasing carbon into the air,” and ensures that “all major economies are bound to take action and to work cooperatively with our partners for a fair and effective international climate agreement.”

Citing this week’s Major Economies Meeting in Paris, the President called for the “meaningful participation of every major economy” in any future climate agreement, and proposed that countries set individual national goals in the context of an “environmentally effective, economically sustainable” global treaty.

Reactions to the President’s Announcement:

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In response to Congressional inquiries about how the EPA will respond to the Supreme Court’s directive in Massachusetts v. EPA, Robert J. Meyers, EPA’s Principal Deputy Assistant Administrator of Air and Radiation, testified last week before the House Subcommittee on Energy and Air Quality.  Regulations that EPA promulgates administratively in response to Massachusetts v. EPA would be separate and independent from potential Congressional legislation limiting greenhouse gas (GHG) emissions.

While stressing that EPA has not reached any conclusions for future regulations, Meyers laid out the potential for wide-ranging, costly regulation directly resulting from the Supreme Court’s decision.  Meyers noted that if the agency finds an endangerment to health and welfare under Section 202 of the Clean Air Act (CAA) it could “have ramifications for . . . other provisions of the Act.”

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This is a relatively quiet week in both the House and the Senate on climate change, with few Committee hearings and legislation that directly address the issue.

On Tuesday, the House Science and Technology Committee will hold a hearing on the Department of Energy’s FutureGen program. The apparent reversal of Bush Administration policy on the clean coal program will offer the most contentious debate this week on energy policy. The hearing will start at 10:00am on Tuesday, set to testify are C.H. “Bud” Albright Jr., undersecretary of Energy, DOE; Jeffrey Phillips, program manager of advanced coal generation, Electric Power Research Institute; Ben Yamagata, executive director, Coal Utilization Research Council; and Paul Thompson, senior vice president, E.ON U.S.

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The Western Climate Initiative (WCI), a group of seven states and two Canadian provinces, recently released draft recommendations regarding how emissions allowances should be allocated under their regional cap-and-trade program.

The WCI members will issue allowances through a single pool to regulated industries. The Draft Allocations Design Recommendations calls for an initial minimum auction of 25% to 75% of the allowances and provides for the percentage auctioned to increase over time. For the remaining allowances, the member state or province may place them up for auction, allocate free allowances, bank them within a given (three-year) compliance period, or retire them outright.

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The Federal Trade Commission recently closed the period for public comments on whether the Commission should update its “Green Guides” to address the growing corporate and consumer retail carbon market and related market claims. One major issue raised in the FTC proceeding was the interplay between Renewable Energy Certificates (“RECs”) and Carbon Offsets (“Offsets”) and how these products are being used in the voluntary carbon market.

In both the voluntary Offsets and REC markets, there can be significant variation among the providers with respect to design of marketed products and the projects underlying them. It is this variability, both within and across each type of carbon product, that has raised concerns regarding the claims being made in REC and Offset markets and the need for greater clarity as to what consumers should expect from a REC or Offset carbon instrument.

The key issues raised include:

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