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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Ahead of the United States in adopting a national scheme to cap and reduce greenhouse gas (GHG) emissions, Canada recently announced the final regulatory framework for its Turning the Corner plan to reduce GHG emissions by 20% from 2006 levels by 2020. Promulgated pursuant to the Canadian Environmental Protection Act of 1999, draft regulations to implement the Turning the Corner plan are expected in the Fall of 2008. In announcing the plan, Canada noted that its performance in reducing emissions “has lagged behind most OECD countries for well over a decade.”

While Canada’s Turning the Corner plan is analogous in many respects to the leading U.S. legislative proposal to cap and reduce GHG emissions – S.2191, the America’s Climate Security Act of 2008 (ACSA), introduced by Senators Lieberman and Warner – one major difference is the lack in Canada’s plan of a mechanism to address the competitive impact to Canadian manufacturing firms of imports produced under less stringent GHG emissions standards. According to the Turning the Corner plan, the final regulations will cover 16 industrial sectors, including refineries, chemical and fertilizer plants, and the cement, steel, and pulp and paper industries. Many of the products produced by these industries compete in Canada’s domestic market (and abroad) with products produced in China, India, and other countries that currently are not planning similar curbs on domestic GHG emissions.

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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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The European Climate Exchange (ECX) opened trading yesterday for emissions credits that extend beyond the Kyoto compliance period. The Kyoto Protocol, which went into force in 2005, will sunset in 2012. International negotiations are currently underway for a successor agreement that will run from 2013-2020.

ECX opened the futures markets for the December 2013 and 2014 settlement periods, with credits for 10,000 tons of carbon emissions being purchased by an undisclosed party for 27.7 Euros (approximately $42) per ton. These credits may be used in the European Union Emissions Trading System (EU-ETS) for compliance with future emission reduction obligations to which the European Union is expected to commit. The European Commission recently issued proposed Directives for governing the next phase (Phase III) of the EU-ETS, beginning in 2013, with the intent that the market will continue even if there were no post-Kyoto agreement in place.

London is, in many respects, the center of the carbon trading market. As recently as six weeks ago, publications such as the Financial Times and the Times of London published articles expressing doubts about the market. Two of the most critical problems facing the carbon market relate to the process for issuing credits under the United Nations process and uncertainties over the structure of the post-Kyoto regulatory system. While the inefficiencies of the Clean Development Mechanism certification process remain, this trade reflects confidence that, at least in the EU, there will likely be a functional carbon market beyond the expiration of the Kyoto Protocol.

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Residents of a small Alaska village recently sued a group of large oil companies, electric utilities, and a coal company, alleging that the defendants’ greenhouse gas emissions are destroying the village.

The Inupiat village of Kivalina, home to roughly 400 people, is located “on the tip of a six-mile barrier reef located between the Chukchi Sea and the Kivalina and Wulik Rivers on the Northwest coast of Alaska, some seventy miles north of the Arctic Circle.” The suit contends that “[g]lobal warming is destroying Kivalina and the village thus must be relocated soon or be abandoned and cease to exist” as a result of the loss of arctic sea ice that protects the village from storms. The complaint estimates the cost of relocating the village to be from $95 million to $400 million.

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The U.S. Department of Energy’s Energy Information Administration (EIA) is holding its “2008 Energy Conference” at the Washington, D.C. Convention Center. House Energy and Commerce Chairman John Dingell delivered a keynote speech this morning on the topic of “the Outlook for Energy and Climate Legislation.” During his remarks, Chairman Dingell reiterated that his committee was working feverishly to complete drafting comprehensive cap-and-trade climate change legislation, noting the difficulty of crafting legislation that would garner sufficient support to be passed.

Earlier in the year, Chairman Dingell had floated “trial balloons” concerning the comparative merits of a “carbon tax” over a cap-and-trade system. At the EIA conference, the Chairman acknowledged that very little support had developed behind the carbon tax approach. Mr. Dingell declined to predict a timetable for passage of any legislation his committee develops.

Speaking after Chairman Dingell, Frank Macchiarola, minority staff director for the Senate Committee on Energy and Natural Resources, offered a less sanguine outlook for passage of legislation. While commending the progress made so far in this Congress, Mr. Macchiarola pointedly commented that “leaner” and “more economically sensible” climate legislation could be expected in the “next few years.”

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Lifecycle greenhouse gas (“GHG”) emissions analyses seek to quantify the GHG emissions created by the manufacture of the product through transportation to the consumer, use and disposal. Such analyses are generally considered the most effective means of establishing the full impact of a product on climate change. Estimating the emissions generated at each stage, however, is difficult and controversial. The Environmental Protection Agency (“EPA”) will weigh in on the debate this year when the agency commences a rulemaking on lifecycle GHG emission reduction targets for renewable fuels. The methodology that EPA chooses to measure lifecycle GHG emissions will be critical to the burgeoning biofuels industry and will likely set the standard for future regulation of other carbon-intensive industries.

The 2007 Energy Independence and Security Act, Pub. L. No. 110-140 (2007) (the “Act”) requires for the first time that biofuels meet stringent lifecycle GHG emissions targets to qualify for the Renewable Fuel Standard (“RFS”). The Act obligates EPA to complete a rulemaking by December 2008 that would establish the appropriate model and inputs for estimation of lifecycle GHG emissions and finalize emission reduction targets that renewable fuels must meet to be considered for the RFS. EPA is working on the draft rule and expects to issue a notice of proposed rulemaking by late summer, making it highly unlikely that EPA can meet the statutory deadline.

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