By Michael T. Burr

 

President Barack Obama on Oct. 1, 2009, asked the Environmental Protection Agency (EPA) to draft new rules for regulating greenhouse gas (GHG) emissions.

 

The announcement represents a challenge to Congress to push climate legislation forward quickly—in advance of the United Nations Climate Change Conference in Copenhagen, Denmark, scheduled for December 2009. The House passed the Waxman-Markey American Clean Energy and Security Act in June, which would create a carbon cap-and-trade program and would impose a federal renewable energy standard. The Senate is considering similar legislation, but whether it will reach a floor vote this year remains uncertain.

 

Of course, these developments are huge news for the U.S. utility industry, but they aren’t happening in a vacuum. U.S. climate policy has evolved during the past several years through a series of lawsuits and state and federal policy initiatives. Here’s how we got here:

 

2003-Present, RGGI Forms: Then-Gov. George Pataki of New York proposed creating the Regional Greenhouse Gas Initiative (RGGI). During the next several years, RGGI evolved into a coalition of 10 states that have committed to implementing a CO2 cap-and-trade program. RGGI started auctioning emissions credits last year.

 

2003-2007, Massachusetts v. EPA: The EPA denied a petition by several states asking the agency to regulate GHG emissions from new motor vehicles as a pollutant under the Clean Air Act. Petitioners appealed the EPA decision all the way to the U.S. Supreme Court, which in April 2007 ruled the states had standing as injured parties to bring the lawsuit, and clarified EPA’s authority to regulate GHGs under the Clean Air Act.

 

2005-Present, California Kyoto Pledge: California Governor Arnold Schwarzenegger signed an executive order in 2005 committing his state to reduce its GHG emissions to 1990 levels by 2020. “I say the debate is over,” he told delegates at the United Nations World Environment Day Conference on June 1, 2005. “We know the science, we see the threat and the time for action is now.” Of course Schwarzenegger was wrong; the debate wasn’t over. The Bush administration EPA blocked the state’s GHG rules, but this summer the Obama EPA reversed that ruling and allowed California’s standards constraining auto GHG emissions to go into effect. More California rules are expected next year, and more than a dozen other states are using California’s regulations as a template for enacting their own GHG constraints.

 

2003-Present, Connecticut v. AEP: In 2004, another group of state attorneys general filed suit against several electric utilities. In that case, the plaintiffs alleged the utilities’ CO2 emissions contribute significantly to global warming, a “public nuisance” under common law. And last month, on Sept. 21, 2009, the 2^nd Circuit Court of Appeals agreed the states have standing to sue under common law, and that the case should go to trial to determine whether the defendants’ emissions constitute a public nuisance.

 

2009, EPA Reporting Rule: One day after the 2^nd Circuit’s decision in Connecticut v. AEP, EPA Administrator Lisa Jackson signed a final rule that will require GHG emitters to start measuring and reporting their GHG emissions beginning in January 2010. Although the rule doesn’t establish limits or require reductions, it sets the stage for federal GHG regulations—whatever form they might take.-MTB

 

Posted: October 2nd, 2009 under Current News, Uncategorized, carbon regulation, climate change, energy policy, regulation, renewables.
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By Michael T. Burr

 

The London-based Institute of Mechanical Engineers (IME) published a thought-provoking report in August examining the role of geoengineering strategies for dealing with climate change. The report is interesting partly because of the technologies it examines, but mostly because of the policy argument it raises.

The report focuses primarily on three approaches, namely:

- CO2 scrubbing artificial “trees,” containing sorbents that would require subsequent burial;

- Algae-growth strips, attached to buildings and later harvested for biofuel production; and

- Reflective roofing, intended to direct solar radiation back into space and reduce AC demand.

 

Although these approaches seem novel and interesting, I’m not sure they really comprise geoengineering. The National Academy of Sciences defines geo-engineering as “large-scale engineering of our environment in order to combat or counteract the effects of changes in atmospheric chemistry.” Examples include seeding the stratosphere with reflective sulfur aerosols, or stimulating phytoplankton blooms by fertilizing ocean shallows with iron. By contrast, the hands-on, site-specific technologies discussed in the IME report would face a very steep growth curve before they could resemble “large-scale engineering.”

 

Quibbling aside, however, the IME report merits attention, if only because it makes an important point that’s been mostly ignored in the climate policy debate. In short, most discussions seem to position geoengineering as a “Plan B” approach to addressing climate change. In other words, if Plan A fails, and greenhouse gas (GHG) reduction and mitigation fall short of what’s necessary to avoid a climate catastrophe, then we’ll default to Plan B — direct intervention in the global climate, vis-à-vis geoengineering.

 

The IME report suggests that if we wait for GHG policies to fail before putting R&D resources into geoengineering, then it might be too late for geoengineering to work — or to be more precise, reining-in a runaway climate might require desperate geoengineering measures, incurring higher costs and yielding more damaging side-effects for the environment than we’d get with more moderate approaches. Instead, the report argues, policy makers should treat Plans A and B as complementary rather than exclusive approaches, and should consider geoengineering as part of an integrated strategy — a strategy that notably includes adapting to the inevitable climate change that already is happening and almost certainly will continue, to some degree, no matter what we do.

 

“Two decades of failed global mitigation efforts should be a wake-up call,” the report states. “It could be geo-engineering that provides the global community with those extra years to introduce effective mitigation and adaptation strategies, and, in the long term, remove some of the existing CO2 from the atmosphere. As such, Plan B needs to be upgraded to become a fully integrated part of a comprehensive three-point approach embracing mitigation, adaptation and geo-engineering.”

In other words, if we’re re-tooling for a more sustainable future, then we should make sure we’re using all the tools at our disposal — not just the ones that adapt our economy, but also the ones that adapt the climate itself. In the long term this might turn out to be the inevitable strategy, given the century we’ve spent gasifying the planet’s fossilized carbon. But that strategy will be cheaper and less damaging if we accept and pursue geoengineering earlier, rather than later in the process. -MTB

Posted: September 1st, 2009 under Uncategorized, carbon regulation, climate change, energy policy, geoengineering.
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By Michael T. Burr

Every article we publish in Public Utilities Fortnightly is incomplete. The virtual cutting room floor is always littered with content that didn’t fit for one reason or another.

For this year’s CEO Forum feature story, we asked several utility leaders about climate change regulation. Very little of what they said made it into the June cover story, “Conservation Compact,” so we’re presenting a more complete edit of their responses here in the Public Utilities Blog.

While it’s fair to say none of the CEOs departed far from their corporate message about the topic, their comments illustrate growing concerns among utility executives about how to regulate greenhouse gases fairly and effectively.

Chris Dutton, Green Mountain Power

Fortnightly: Given your experience in a RGGI state, what’s your perspective on federal greenhouse gas regulation? How can utilities reach a compromise on GHG regulation and allocation methodologies?

Dutton: I think the better and fairer approach is a carbon tax. Whether that’s politically feasible is another issue, but that’s a more competitive and less cumbersome approach than a cap-and-trade program, which has a whole host of complications associated with it.

New England as a region has a relatively small carbon impact, in terms of generation, because of the predominance of natural gas and nuclear power in the supply. There’s very little coal in New England, so those issues are a little different for us than they are for parts of the country that depend on coal-fired generation.

One of the things we’ve been able to do outside the power supply arena is to change the way we behave in the four corners of our business. We’ve converted all our line trucks and operating vehicles to biofuels. And we operate with an office blueprint that is radically different from what’s typical in our business. At Green Mountain Power there are no private offices. I as the CEO have a work area that’s about 9’x9’, and we have low partitions. There’s no private office. That’s meant we require a lot less office space than is traditionally the case, and you can guess the corporate culture advantages this approach brings. We try to be very transparent in our behavior within the company and in our interactions with both regulators and the general public, and a part of that transparency is the idea there are no hidden agendas. Part of that concept is no private offices.

We’ve been operating this way for about eight or nine years and we just love it. It gives the place a sense of energy and direction that didn’t otherwise exist. But also, shen you operate in a place that doesn’t need as much space, you don’t need to heat and cool it.

J. LaMont Keen, Idaho Power

Fortnightly: What’s your perspective on mandatory greenhouse gas regulation?

Keen: GHG regulation now seems certain to happen. The presidential candidates both support regulation in some form and it has been ruled that carbon is a pollutant that EPA should regulate. The discussion now centers on how and what type of regulation will occur.

Whatever the form carbon regulation takes, it’s important that regulatory efforts be applied economy-wide. We recognize the electric utility industry is probably the easiest to regulate, but if carbon regulation is to succeed no single sector should be unfairly burdened. More importantly, time frames should also be consistent with development of the carbon capture and sequestration technologies needed to comply.

If applied appropriately, either a carbon tax or a carbon cap-and-trade mechanism could work. Either way, the key is getting adequate research dollars collected and applied toward developing the necessary technologies.

In a cap-and-trade program, how allowances would be apportioned is the million dollar question, raising serious issues of effectiveness and fairness no matter how the apportionment is done. Whatever method takes place, it is appropriate that companies gain some recognition for the wisdom of earlier decisions to invest in and develop emission-free forms of generation.

Fortnightly: How will the industry reach a compromise on that? I’m hearing diametrically opposed views on this.

Keen: I don’t believe it’s appropriate for the allocation method to come out in a way that’s biased against companies with a smaller carbon footprint today. Some of the concepts I’ve heard discussed might do that.

I think it’s very speculative at this point. The devil truly is in the details, and it’s going to be a divisive issue for the industry. It’s possible for the industry to come together and strike a balance, but we have some fundamentally different starting positions for the discussion.

Bill Johnson, Progress Energy

Fortnightly: What’s your perspective on federal greenhouse gas regulation?

Johnson: Carbon regulation is a certainty. We believe that a well-designed cap and trade system will have the least negative impact on our customers and the overall economy, and will help us make real progress toward a low-carbon economy. An effective climate change policy must be achievable with timelines that are in harmony with technology. It must also be affordable, with reasonable allowances that put all states and players on a level field, and include provisions that protect consumers from rate shock and limit the damage to the economy.

Fortnightly: What would a level field look like for a ratepayer in a state that already has a relatively small carbon footprint, and has been paying high rates for a long time? Should their climate friendly infrastructure pay off in this level field?

Johnson: This whole subject is pretty complicated. When allocating allowances, those most affected by the new standards should get the most mitigation. Coal dependent customers will carry the brunt in two ways, paying for emissions and paying for new infrastructure. We need to have no-cost allowances in the early years, and more costs as technology develops.

Allocation of allowances ought to be based on emissions levels. Carbon emissions is where the allowances ought to go. I don’t think it’s a good idea to try to increase rates in some parts of the country because rates in other parts are higher. That doesn’t seem like a sound public policy basis for addressing carbon emissions.

Mark Jacobs, Reliant

Fortnightly: What’s your position on federal GHG regulation?

Jacobs: We’re committed to environmental stewardship. The best approach is a national policy rather than state by state. We believe a cap-and-trade system is the best approach, because it has worked incredibly effectively for SOX and NOX, and we also think it’s important that any legislation provide enough lead time to allow new technologies and market forces to work.

Energy efficiency is one of the easiest and most cost-effective approaches to addressing GHG emissions, and the smart energy things we’re doing will have a meaningful impact on the carbon footprint.

What happens to credits and allocations of allowances will get a lot of attention and debate, but we believe there should be a bridge provided for existing generation, and some of the proceeds raised by the auction need to go into development of new technology. We don’t think it’s appropriate to be taking proceeds and subsidizing known technologies. Someone might say they ought to get a price break for building a nuclear plant, but the prices are such today that people will build it without the incentive. We ought to take the proceeds and put them into the technology solutions to store CO2.

Dennis Wraase, PHI Holdings

Fortnightly: Given your experience in RGGI states, what’s your perspective on federal greenhouse gas regulation? How can various utilities and generating companies, with different resource strategies, reach compromise on things like allocation methods?

Wraase: As someone who operates in four states—which fortunately are somewhat together in RGGI—I think it would be far better to have a federal standard than to have 50 states doing 50 different things. Also the sooner we get to this, it will solve an awful lot of problems with power plants that need to get built and technology that needs to get developed.

A lot of the efficiency projects we do don’t include social cost. So once a dollar value is assigned to carbon, there may be more efficiency projects that become cost beneficial. That would be helpful.

As for a compromise, I’m not sure the industry will ever come around to agreeing, and neither will the states. This is a winners-and-losers proposition. That’s why I’m one of those who’d be more in favor of a tax as opposed to cap and trade. It avoids a lot of problems associated with how you allocate allowances, which is highly controversial. A tax is easily understood and can be applied economy wide.

Posted: June 24th, 2008 under carbon regulation, climate change, energy policy.
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