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First Real Partner for California’s Cap & Trade Program

Quebec takes the plunge with California to swap carbon emissions permits

Asif A. Ali / flickr

Montreal at sunset: Quebec's economy is about one-sixth that of California.

Quebec has emerged as California’s first full-blown partner in the carbon trading program that ramps up later this year. That means that, pending final approval next month, when the two governments issue their first round of greenhouse gas pollution permits in November, industrial buyers will be able to use them both interchangeably. Continue reading

Another One Bites the Dust?

California’s cap-and-trade partners are dropping like flies.

It’s not official yet, but it’s looking like what was once envisioned as a regional carbon trading program involving seven US states and four Canadian provinces, will now involve just one US state – California – and just three provinces: Quebec, British Columbia, and Ontario.

One by one, members of the Western Climate Initiative have postponed their involvement or dropped out altogether, as Arizona did last February when Gov. Jan Brewer issued an executive order backing out of the carbon trading program.

And today, an online publisher quotes a key official in California’s carbon trading program, that the state stands to lose its last remaining US partner, New Mexico. As Colin Sullivan of E&E reported:

Kevin Kennedy, assistant executive officer in charge of the Office of Climate Change at the California Air Resources Board, told lawyers during a forum sponsored by Law Seminars International that the election results likely mean New Mexico will not participate in the fledgling WCI, at least at the outset of the market starting Jan. 1, 2012.

“The change in administration probably takes New Mexico out of the situation,” Kennedy said.

(Subscription required for full article)

Last week New Mexico’s new governor, Susana Martinez, announced that she was removing all members of the state’s Environmental Improvement Board, “because of what she said was its ‘anti-business’ policies.”  Last year, the EIB approved measures for the state to limit emissions and join the WCI’s cap-and-trade program.

Climate News Roundup

Geoengineering: Use it or Lose it?

Just as delegates from 193 nations agreed to a voluntary moratorium on geoengineering research last week at the international Convention on Biological Diversity (CBD) in Nagoya, Japan, the US House Science and Technology Committee issued a report outlining how federal geoengineering research could be pursued in the United States. The international agreement to ban the research does not apply to the US, which has not ratified the CBD. (More from The Washington Post and Climate Central.) Continue reading

A Glimpse of How Regional Carbon Trading Might Work

The Valero refinery in Benicia, CA (Photo: Craig Miller)

After three years of deliberations, participants in the regional carbon trading pact known as the Western Climate Initiative have released a “comprehensive strategy” for how the coalition will achieve its goals of reducing emissions 15% below 2005 levels by 2020.  The plan, “Design for the WCI Regional Program” lays out details for a regional cap-and-trade system, offsets and incentives, and energy efficiency programs. Continue reading

California Slogs Toward Cap-and-Trade

Dispatch from the bureaucratic trenches:

A cloud settles over the state capitol. Photo: Craig Miller

Clouds linger over California's cap-and-trade future. Photo: Craig Miller

The notion may be losing momentum in Washington but in Sacramento, California’s Air Resources Board continues the trudge toward a carbon trading program mandated under the state’s 2006 climate law, AB 32. This week its staff held the latest in a series of public meetings to discuss “program development” and “allowance allocation.” The topic may be a certified snore for most people but the CalEPA auditorium in Sacramento was nearly packed with representatives from utilities, environmental groups, public health advocates and an assortment of other interested parties, many with diametrically opposed views of how carbon allowances should be meted out for trading.

One of them was Chris Busch of the Center for Resource Solutions, who gave voice to a contingent disillusioned with what they read as momentum toward giving away allowances to industry. Busch coined what was probably the phrase of the day, accusing the Air Board of some “creative re-framing” of how carbon allowances might be distributed. Environmentalists have been pushing for something close to a “100% auction” of permits, while many business interests are hoping to get them free of charge, at least in the early stages of the program.

To many in the room, the update from the Air Board staff appeared to indicate a drift toward free permits. The Board’s Kevin Kennedy stressed that the staff had never come out officially for a 100% auction and said they’re “taking a close look” at how best to distribute them. His colleague, Matt Zaragoza put it more bluntly, saying “We’re strongly considering the need for free allocations.”

Regarding the state’s plan to join in a regional carbon market with several other states and some Canadian provinces known as the Western Climate Initiative, Kennedy insisted that “reports of it’s death have been greatly exaggerated.” But when pressed on how many US states are actually prepared to move forward, he confirmed that only New Mexico is in lockstep with California. Arizona’s governor recently signed an executive order pulling that state out of the proposed regional carbon market.

Here in the Golden State, industry is still angling for anything it can get to keep emissions fees to a minimum. Some complain that valid considerations are being left out of the plan.

“A lot of us are producing products today that are very focused on energy savings.,” said Phil Newell, who heads energy and environmental affairs for Guardian Industries, a maker of “low-E” glass products which promote energy efficiency. Newell says that a system of traded carbon permits and offsets should account for the energy savings achieved by his company’s products. “Every time we use a unit of energy in producing a coated product, we’re reducing 500 units of pollution elsewhere,” Newell claimed in a hallway interview. “We need some recognition of that.” Newell said that without that recognition, the high cost of carbon allowances might force his company to shut down manufacturing in California. Guardian operates a plate glass manufacturing plant near Fresno.

The Air Board’s staff says it is pushing for a “design document” describing a plausible allowance system by mid-summer.

Another Whack at a Federal Climate Bill

87767226The latest version of a federal climate bill sets a series of national targets for greenhouse gas emissions and would halt California’s plans for state and regional carbon trading.

Unveiled by Senators John Kerry and Joe Lieberman today, the American Power Act aims to push GHG emissions down to slightly below 2005 levels by 2013, then sets a longer-term reduction timetable of 83% (of 2005 levels) by 2020, 58% by 2030, 17% by 2050 (or to flip it around, an 83% reduction from 2005 levels by 2050), in line with the promise that President Obama made following the “Copenhagen Accord.”

The 987-page bill regulates seven greenhouse gases, with room for the Environmental Protection Agency to add others under the Clean Air Act. The cap-and-trade provisions focus on “7,500 factories and power plants,” which is to say those that put out more than 25,000 metric tons of carbon per year. That’s the same benchmark used by the federal EPA in its proposed regulations.

Like previous drafts, this one nullifies state and regional carbon regulation, setting up “one clear set of rules” for industry and providing “compensation for the revenues lost as a result of the termination of their cap-and-trade programs,” such as California’s AB 32, and regional efforts, such as the Western Climate Initiative. California’s Legislative Analyst has estimated that the state has committed about $120 million so far, to the implementation of its 2006 climate law. California regulators have already weighed in on the concept of “federal preemption,” warning against leaving the job of carbon reduction to the federal government alone. The Kerry-Lieberman bill requires “consultation” with states that currently have their own emissions plans.

Significantly, the first several sections of the Senate bill address development of energy sources. The reduction goals for greenhouse gas emissions aren’t even spelled out completely until page 265. Energy provisions that may come to bear on California policy include:

Agribusiness:

- All farms appear to be exempt from cap & trade but benefit from offset programs

Oil Industry:

- According to a summary of the bill from Kerry’s office: “Producers and importers of refined products” will get a fixed price for their carbon allowances.

– Offshore drilling is included as part of the energy strategy but states can prohibit leasing within 75 miles of the coast

Nuclear Power:

- Provides several incentives, including an “expedited procedure for issuing combined construction & operating licenses for qualified new nuclear reactors.”

– Increases loan guarantees to $54 billion

Missing from the bill is a comprehensive national strategy for storage of spent nuclear fuel, an unresolved issue that prevents California utilities from any expansion of nuclear power.

Governor Schwarzenegger issued a statement that barely acknowledged federal preemption, saying only that “California has been an unparalleled leader in clean energy, pioneering policies that have benefited the entire nation, and we must be able to continue our important, groundbreaking work that will both improve the environment and help our economy.”

Some environmentalists have already responded with raspberries. In a statement based on draft summaries of the bill, the group Friends of the Earth called it “dangerous,” claiming that the bill would “scrap crucial tools for solving the climate crisis” and provide “billions in giveaways to corporate polluters.” In a statement from the Environmental Defense Fund, on the other hand, its western regional vice president said that the bill’s announcement “marks real progress in the fight against climate change.”

Andrea Seabrook reported on the bill’s rollout and prospects for NPR’s All Things Considered.

States at Crossroads for Climate Action

Tom Banse is a Seattle-based public media reporter and a regular contributor to Climate Watch.

West Coast governors meet in Vancouver. Photo: Office of Gov. Arnold Schwarzenegger

West Coast governors meet in Vancouver. Photo: Office of Gov. Arnold Schwarzenegger

By Tom Banse

When two West Coast governors sat down with the head of British Columbia’s provincial government for a pre-Olympic confab today, the occasion brought to mind some things I’d picked up during a short fellowship in Denmark and Germany last week.

Two months after the chaotic United Nations climate summit ended, edgy “Hopenhagen” posters are one of the few visible reminders of the high-stakes gathering of world leaders, recently concluded in Copenhagen.  Ironically, the summit dashed the hopes of many climate activists for a legally binding treaty to reduce global warming emissions.

They’re not giving up, but in the aftermath acting locally may gain more prominence than acting globally.

“The Copenhagen hangover is over.  Now countries including the United States have to act,” said Denmark’s energetic Minister of Energy and Climate Lykke Friss.

The Danes are engaging other countries to try to revive momentum for international climate negotiations. “We should fight all the way for a deal in Cancun,” where the next United Nations climate summit will convene at the end of this year.  “But that depends on the will of the moment,” she said.  “There is no doubt this is a difficult process,” Friss acknowledged.

In European capitals, policymakers are eager for any clues or cues regarding the willingness of American lawmakers to regulate greenhouse gases. Cap-and-trade legislation has been stalled in the U.S. Senate for the past five months.

“If it’s not realistic that the U.S. would sign a binding international [climate] treaty, what is below this?” asked a German parliament member in Berlin.  The answer may not lie in Washington, DC.

“We do think the pendulum is starting to swing back to states,” said the former co-chair of the Western Climate Initiative Janice Adair.  In 2008, seven Western U.S. states and four Canadian provinces developed a framework to regulate greenhouse gas emissions independent of their national governments.  The plan has not taken effect.

“More and more, the UN and the national governments recognize that the ‘sub-national’ governments are really the ones that, in the end, can put the pressure on and create the action that is needed,” said Governor Arnold Schwarzenegger, on Friday.  Schwarzenegger spoke in Vancouver, Canada after a mini-summit of Pacific Coast leaders timed to coincide with the opening of the 2010 Winter Olympics. British Columbia Premier Gordon Campbell hosted the meeting to discuss common environmental topics. Washington Governor Christine Gregoire and Oregon Secretary of State Kate Brown also attended.

Gregoire said when it comes to cap-and-trade, she still maintains that a national program is better than a regional one.  Yet state and local governments can do other things to control emissions, namely what policymakers such as Adair call “complementary” measures. Schwarzenegger specifically mentioned California’s Million Solar Roofs Initiative, which seeks to attain that number of rooftop solar arrays by 2016.  Some other examples include creating incentives for consumers to buy electric cars, increasing recycling or improving rail service.  Oregon and Washington have recently toughened their building codes to increase energy efficiency in new construction.

Gerry Pollet, the director of the Seattle-based environmental watchdog group Heart of America Northwest, recently urged his members to write Oregon and Washington’s governors and legislators, “saying you want Northwest states’ climate change legislation put back on the front burner – which is a good investment for our economy as well as for the health of our planet and children.”

As in Congress, there is hesitancy in state legislatures. “Our concerns are very much is this going to put us at a distinct competitive disadvantage,” said Shelly Short, a conservative legislator from Northeast Washington. [Ed. Note: Arizona Governor Jan Brewer cited the same concern in her executive order ending that state’s participation in the WCI cap-and-trade plan]. Short says she is given pause by current controversies involving climate scientists, notably the one involving hacked e-mails that has been dubbed “Climategate” by global warming skeptics. “I’ll be honest and say some of the issues that have come forward really leave it up to whether this is something we need to be doing,” said Short.

Meaningful climate change legislation has not come up for debate this winter during the short 2010 sessions of the Washington and Oregon Legislatures.  But all the players on this issue expect global warming to return to the forefront in Salem and Olympia in 2011.

WCI Shows More Signs of Unraveling

88367460On Ground Hog Day, Arizona saw the shadow of regional carbon trading looming over it…and retreated.

In an executive order issued on February second but not widely reported until yesterday, Arizona Governor Jan Brewer rejected the regional cap-and-trade program known as the Western Climate Initiative (WCI).

In April of last year, Climate Watch first called attention to the apparent lack of momentum within the WCI, an agreement among 11 US states and Canadian provinces, in which Arizona was a founding partner.

In her order, Governor Brewer wrote that imposing cap-and-trade at this time would “cost investment and jobs in Arizona” and put the state at a “competitive disadvantage,” as industry would be forced to pay fees for their carbon emissions.

Arizona relies on coal for about a third of its electricity production (36% as of 2007, according to the US Energy Information Administration’s tally) and its renewable energy goals (15% by 2025) are less ambitious than California’s (30% by 2020). But Arizona also has a larger nuclear power component. Governor Brewer cited this in last week’s executive order, as part of the reason why Arizona’s per capita greenhouse gas emissions are “about one third less than the national average.” The Governor’s order affirms that Arizona seeks “pragmatic” approaches to climate change mitigation and implies that Arizona officials would rather wait and see what carbon regulation develops at the national level, than proceed with a regional plan.

The state’s move comes as several energy companies mount an eleventh-hour push for a national cap-and-trade program, which has languished in the Senate.

The WCI comprises both “partner” and “observer” states. The Brewer order says that Arizona will “continue to be a member of the WCI to ensure that Arizona’s unique perspective will be advanced,” but that the state will not implement regional cap and trade. As of this morning, Arizona was still listed on the WCI website as a “partner” and there was no mention of the action.

California officials have long said that while a regional carbon trading pact would be preferable, California could “go it alone” if necessary.

Sketchy First Look at California Cap & Trade

On Tuesday the California Air Resources Board put out a sneak preview of the carbon cap & trade system mandated by the Global Warming Solutions Act of 2006 (AB 32). Couched as a “preliminary draft,” the 132-page plan is intended as a broad outline for a final Cap-and-Trade regulation scheduled to go before the board late next year.

As such, the draft lacks a few key components, such as how many allowances the state plans to auction off to industry, versus give away. Air Board chief Mary Nichols says her agency is still waiting on recommendations from an expert committee on how to best handle allowances.

Environmentalists have been pushing for polluters to pay for allowances up front. In an email to me on Tuesday, in anticipation of the draft, Bernadette del Chiaro of Environment California wrote that her group is “slightly disappointed that ARB staff are punting on the issue of auctions. ARB in the scoping plan said they are committed to getting to 100% auctions. I hope the draft rules at least repeat this commitment.”

The draft appears to stop short of an outright commitment, reiterating that “transition to a 100 percent auction was a worthwhile goal.” In a conference call with reporters, Nichols said she anticipates at least a partial auction. Also undetermined is how to deploy the funds that emitters may pay for allowances. Nichols said a $10 per ton price for carbon could produce a two-to-four-billion-dollar pool of money, which could be used for such things as “buying down” utility costs for low-income families or creating incentives for development of renewable energy technology. Nichols declined to project what a cap & trade system would end up costing households in California.

You can download a PDF file of the complete report at the CARB website (under “What’s New). A public meeting is scheduled for December 14 in Sacramento, to get feedback on the Preliminary Draft Regulation released this week.

Also on Tuesday, the Governor’s Office announced that Quebec, one of California’s partners in the Western Climate Initiative for regional carbon trading, has set a target “to reduce its greenhouse gas emissions 20 percent below 1990 levels by 2020 and the introduction of a clean-car emissions standard equivalent to California’s Vehicle Tailpipe Emissions Standards.”

The WCI includes seven western states and four Canadian provinces. Any progress from the state’s WCI partners is welcome at this point, as most have been reluctant to set their intentions into law.

Check out our interactive map of California’s largest industrial emitters of greenhouse gases.

Not With a Bang, But…

This is the way the world ends. Not with a bang but with a whimper. –T.S. Eliot

With the President headed for Mexico for a two-day summit, I was struck last week by the juxtaposition of two headlines that jumped out of a daily environmental news digest.

One headline read: “MEXICO AIMS TO BRING CO2 CUT PLAN TO CLIMATE TALKS.” The other, just above it, referring to similar efforts in this country, read: “CLIMATE BILL MAY FALL BY THE WAYSIDE.”

“With the fight over health care reform absorbing all the bandwidth on Capitol Hill,” Lisa Lerer wrote for Politico, “Democrats fear a major climate change bill may be left on the cutting-room floor this year.”

Granted, Mexico’s contribution to global greenhouse gas emissions is reportedly about 2%, or a tenth of the U.S. contribution, so one might argue that there’s a lesser job to do there. But with less than four months remaining before the next major U.N. climate conference, it raises the grim prospect that while other nations press on, the U.S. could arrive in Copenhagen empty-handed, which is to say without meaningful carbon legislation to show.

At the same time last week, the 16-nation Pacific Islands Forum called for a 50/50 commitment from developed nations; a 50% reduction in greenhouse gas emissions by 2050. Many of those island nations are on the hot seat as rising seas levels could make them among the first to lose substantial real estate before the end of this century.

At his first climate summit for governors last fall, Governor Arnold Schwarzenegger introduced a video from then President-elect Obama, in which he promised that his presidency would “mark a new chapter in America’s leadership on climate change.”

Praising the governors in attendance for their own climate initiatives, the newly elected President declared that “Too often Washington has failed to show the same kind of leadership. That will change when I take office.”

Of course “Washington” includes Congress, which is still dithering over the major carbon emissions bill championed by the new President. It squeaked through the House by nine votes and now looms as a 1,400-page pig that the Senate python will attempt to digest or regurgitate. Either way, what comes out is unlikely to closely resemble what went in.

Meanwhile the whole cap-and-trade concept has been coming under increasing scrutiny and skepticism. Last month, when the non-partisan Public Policy Institute of California polled Californians on the subject, more respondents favored an out-and-out carbon tax than cap-and-trade (56% to 49%). The Western Climate Initiative, a regional cap-and-trade pact that is a keystone of California’s climate strategy, AB 32, remains in limbo while western legislatures wait on Congress.

So when the Governor convenes his second climate summit in L.A. next month, billed optimistically as “The Road to Copenhagen,” he and his fellow “subnational leaders” (Wisconsin, Michigan & Connecticut governors are currently signed up) may find that the ball is still in their court. According to a news release from the Governor’s office, “climate leaders from around the world will come together and collaborate on efforts to further the global fight against climate change.”

They’ll do it with the same question on the table as last year: Can they count on Washington to take up the reins?