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December 8, 2009

EPA: Greenhouse Gases Threaten Public Health and the Environment

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Science overwhelmingly shows greenhouse gas concentrations at unprecedented levels due to human activity.

WASHINGTON – After a thorough examination of the scientific evidence and careful consideration of public comments, the U.S. Environmental Protection Agency (EPA) announced today that greenhouse gases (GHGs) threaten the public health and welfare of the American people. EPA also finds that GHG emissions from on-road vehicles contribute to that threat.

GHGs are the primary driver of climate change, which can lead to hotter, longer heat waves that threaten the health of the sick, poor or elderly; increases in ground-level ozone pollution linked to asthma and other respiratory illnesses; as well as other threats to the health and welfare of Americans.

“These long-overdue findings cement 2009’s place in history as the year when the United States Government began addressing the challenge of greenhouse-gas pollution and seizing the opportunity of clean-energy reform,” said EPA Administrator Lisa P. Jackson. “Business leaders, security experts, government officials, concerned citizens and the United States Supreme Court have called for enduring, pragmatic solutions to reduce the greenhouse gas pollution that is causing climate change. This continues our work towards clean energy reform that will cut GHGs and reduce the dependence on foreign oil that threatens our national security and our economy.”

EPA’s final findings respond to the 2007 U.S. Supreme Court decision that GHGs fit within the Clean Air Act definition of air pollutants. The findings do not in and of themselves impose any emission reduction requirements but rather allow EPA to finalize the GHG standards proposed earlier this year for new light-duty vehicles as part of the joint rulemaking with the Department of Transportation.

On-road vehicles contribute more than 23 percent of total U.S. GHG emissions. EPA’s proposed GHG standards for light-duty vehicles, a subset of on-road vehicles, would reduce GHG emissions by nearly 950 million metric tons and conserve 1.8 billion barrels of oil over the lifetime of model year 2012-2016 vehicles.

EPA’s endangerment finding covers emissions of six key greenhouse gases – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride – that have been the subject of scrutiny and intense analysis for decades by scientists in the United States and around the world.

Scientific consensus shows that as a result of human activities, GHG concentrations in the atmosphere are at record high levels and data shows that the Earth has been warming over the past 100 years, with the steepest increase in warming in recent decades. The evidence of human-induced climate change goes beyond observed increases in average surface temperatures; it includes melting ice in the Arctic, melting glaciers around the world, increasing ocean temperatures, rising sea levels, acidification of the oceans due to excess carbon dioxide, changing precipitation patterns, and changing patterns of ecosystems and wildlife.

President Obama and Administrator Jackson have publicly stated that they support a legislative solution to the problem of climate change and Congress’ efforts to pass comprehensive climate legislation. However, climate change is threatening public health and welfare, and it is critical that EPA fulfill its obligation to respond to the 2007 U.S. Supreme Court ruling that determined that greenhouse gases fit within the Clean Air Act definition of air pollutants.

EPA issued the proposed findings in April 2009 and held a 60-day public comment period. The agency received more than 380,000 comments, which were carefully reviewed and considered during the development of the final findings.

Information on EPA’s findings: http://www.epa.gov/climatechange/endangerment.html

October 15, 2009

Arctic Ice Cap Will disappear

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Professor Peter Wadhams, head of the polar ocean physics group at Britain’s Cambridge University said, “The summer ice cover will completely vanish in 20 to 30 years but in less than that it will have considerably retreated.”

“In about 10 years, the Arctic ice will be considered as open sea.”

“An average thickness of 1.8 metres is typical of first year ice, which is more vulnerable in the summer. And the multi-year ice is shrinking back more rapidly,” said Wadhams.

“It’s a concrete example of global change in action.

“With a larger part of the region now in first year ice, it is clearly more vulnerable. The area is now more likely to become open water each summer, bringing forward the potential date when the summer sea ice will be completely gone.”

Doctor Martin Sommerkorn, senior climate change adviser for the World Wide Fund for Nature’s international Arctic programme, said the survey the ice meltdown situation which is happening “faster than we thought”.

“Remove the Arctic ice cap and we are left with a very different and much warmer world.”

Loss of sea ice cover will “set in motion powerful climate feedbacks which will have an impact far beyond the Arctic itself.”

“This could lead to flooding affecting one quarter of the world’s population, substantial increases in greenhouse gas emission from massive carbon pools and extreme global weather changes.”

“Today’s findings provide yet another urgent call for action to world leaders ahead of the United Nations climate summit in Copenhagen in December to rapidly and effectively curb global greenhouse gas emissions.”

September 30, 2009

Carbon Footprint Of Tansportation. Jump On The Bus?

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Chris asked:
What is the carbon footprint of a bicycle? Am I better off taking the bus or my bike? (for long vs short distances)

I replied:
First, you’d want to look at your whole footprint… not just carbon. Carbon dioxide is just one pollution problem carbon monoxide, which causes ozone pollution, is also very important.

The EPA lists these six:
carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride
(see http://worldcitizen.net/green/2009/04/17/epa-greenhouse-gases-pose-threat-to-public-health/)

In any event, I think the bike would win over the bus in all instances for “carbon footprint” size.

Even if the bus was full of people, the economies of scale would only put a small dent in the environmental costs of motor vehicles.

Besides the energy used to run the bus, you would want to also consider the energy and material to build the bus, replace tires and build the roads, etc.

A bus is hard on the roads. If everyone road bikes, the bike trails would reduce a huge amount of asphalt. Not only would this reduce the carbon footprint, it would reduce the problems of impervious surface.

Besides direct health risks, the EPA also considered these:
increased drought;
more heavy downpours and flooding;
more frequent and intense heat waves and wildfires;
greater sea level rise;
more intense storms; and
harm to water resources, agriculture, wildlife and ecosystems.

I’ll ask others what they think, too.

September 27, 2009

United Nations On Global Warming / Climate Change

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The United Nations says the outlook on climate change is worse than previously thought.

Press Conference on Outcome of Secretary-General’s Climate Change Summit

Yesterday’s Climate Summit at United Nations Headquarters had achieved the Secretary-General’s goal of mobilizing political will at the highest level and focusing the attention of Heads of State and Government on the urgent need for action, Robert Orr, Assistant Secretary-General for Policy Planning, said today.

Speaking at a press conference on the outcome of the Summit, in which a record 163 countries participated at the senior level, including 101 Heads of State and Government, Mr. Orr said a subtext of the day was that “leader after leader” had acknowledged that climate change was a “leaders’ issue” and that leaders had to make decisions, which was a shift in overall recognition of whose issue it was.

The event had also seen a serious and sustained dialogue between the major world economies and the most vulnerable ones, another goal of the Secretary-General, he said. One of the most striking outcomes was that many had recognized the overall goal of negotiations to limit the global average temperature rise to a maximum of 2? Celsius. Nobody had cited a higher figure, while some of the most vulnerable countries had argued for a maximum rise of 1.5? C.

He said that among important announcements had been Japan’s confirmation that it would pursue a 25 per cent reduction against 1990 emission levels by 2020, and that it would seek to create a national carbon market linked to an international one. The European Union had announced support for a “fast-track adaptation funding facility”, for which it would provide €5 billion to €7 billion between 2010 and 2012. China had announced what it would be prepared to do in the context of an international agreement, in addition to the “robust” work it was already doing, while the President of the Maldives had announced his intention to make the island nation carbon-neutral by 2020 and to take on binding emission targets under certain conditions.

One of the biggest outcomes was that financing ?? the sine qua non for achieving a final deal ?? had finally taken centre stage, he continued, noting that many leaders had rallied around a proposal for supporting $100 billion per annum over the next decade. The Secretary-General had held a dinner with 23 leaders, bringing together those from the most vulnerable countries with those of the largest economies. To a striking extent they had agreed that they must and could reach agreement at the December Copenhagen Climate Change Conference.

Janos Pasztor, Director of the Secretary-General’s Climate Change Support Team, added that leaders at the dinner had expressed a very strong willingness to break the deadlock of trust which until now had blocked agreement on core issues. They had also discussed their willingness to do much more than they had been willing to agree upon in the context of the negotiations. That was an “optimistic sign” that agreement in Copenhagen would be possible. Leaders at the dinner had also expressed strong interest in meeting again before Copenhagen, as needed, and the Secretary-General was prepared to convene such a meeting, if desired. The next stop would be Bangkok, where a 10-day round of United Nations-sponsored negotiations of the Framework Convention on Climate Change would continue on Monday in preparation for Copenhagen.

Asked whether the divide over whether 2? C or 1.5? C should be the limit on the global average temperature rise would be a stumbling block, Mr. Orr said that, on the contrary, the range had now become clear for the first time, and the difference would have to be sorted out in negotiations.

In answer to another question, he said it was premature to talk about the binding or non-binding character of a deal in Copenhagen. It had become clear yesterday that everyone wanted a deal, and the nature of such a deal must be determined.

Asked about the domestic legislative processes of a deal, the Assistant Secretary-General said most measures on treaties of an international nature had to go through such processes, but it was important that the leaders had recognized that it was a political issue rather than a technical one. Many leaders had recognized that they must come to an international agreement in order to deliver at home. Although there might be some pain domestically, there was also some gain to be made. While the legislative processes might take time, leaders had now recognized that it was important to begin work now on what must be done.

Mr. Pasztor added that, while it was a political project requiring recourse to domestic legislation, it also called for considerable domestic political work. Very often it was a question of the leaders making the political commitment to carry out that work.

Responding to another question, Mr. Orr said yesterday’s event marked the first time that financing had been recognized as a central issue. Now that some numbers had “hit the table”, discussion had become more concrete. A significant development was that nearly all speakers had stressed that financing should consist of both public and private funds, and that it should be in addition to official development assistance (ODA).

He cautioned that there was no clear outcome on whether China or other developing countries would participate in such a financial framework, or if developing countries would pay into the framework. However, some interesting ideas had been tabled, including the notion that only the least developed countries would not be expected to contribute, or that all developing countries would see a net positive outcome from the scheme.

Mr. Pasztor added that whether contributions should be determined in accordance with percentage of gross domestic product or national carbon footprint would have to be sorted out at the level of finance ministers. However, the principle was that they had to involve a mixture of public and private financing.

Asked about technical support for developing countries, he said that matter was partly linked to money and partly to intellectual property regimes. There were indications that some technologies could be made available without going through the open-market system.

Responding to a question about corporate accountability, specifically whether a company participating in the United Nations Leadership Forum on Climate Change could claim an endorsement by the Organization, Mr. Orr said participation by any company did not entail such an endorsement.

August 26, 2009

NOAA and Coast Guard Hunt for Alaska Methane

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Recent observations have suggested that the air above Alaska may already hold the first signs of a regional increase in greenhouse gas emissions that could contribute to climate change around the globe.

To learn more about the region’s emissions, NOAA’s Earth System Research Laboratory in Boulder, Colo., has teamed up with the U.S. Coast Guard at Kodiak Island. The two partners are flying NOAA air-sampling devices aboard a Coast Guard C-130 aircraft conducting flights over the state through November.

Scientists will search for natural sources of methane and carbon dioxide — the two most important heat-trapping gases — as well as methane sources from human activities, such as oil drilling in Prudhoe Bay. Gathered over three seasons, the data will help NOAA map out natural emissions sites, estimate their outflow, and set benchmarks for future changes in a warming world.

“North of the Brooks Range, the tundra is not yet melting, but south of the range, partial melting is already occurring. The south will give us clues to what’s likely to happen north of the range in the coming years,” said Colm Sweeney, of NOAA’s Earth System Research Laboratory (ESRL). Sweeney is head of a NOAA aircraft project that samples greenhouse gases around the country. NOAA ESRL monitors the gases from 60 sites worldwide.

Billions of tons of carbon are buried in the frozen Arctic tundra, now heating up because of human-caused climate change. In the future, will the warming tundra dry out, exhaling large amounts of heat-holding carbon dioxide? Or will melting ice form pools and lakes, allowing microbes to feast on buried organic matter, burping up huge amounts of methane? Only the data will tell, say the scientists.

“It’s important to locate natural sources and measure how much methane and carbon dioxide are being released now so we can watch for signs of increasing emissions,” said Sweeney. “Methane is 25 times more powerful than carbon dioxide as a greenhouse gas, though its lifetime in the atmosphere is significantly shorter. We’re especially interested in those sources.”

When related climate affects are taken into account, methane’s overall climate impact is nearly half that of carbon dioxide.

Earlier research documented large “bubbles” of methane near Arctic lakes. Satellite sensors revealed similar lakes in other areas, but whether those lakes produce methane is unknown. Last year research vessels in the Arctic Ocean observed methane vents releasing the gas from the ocean floor. Perhaps these vents have been there all along, undiscovered, say the scientists, or they could have developed recently.

“Recent observations could be isolated cases or part of a vast regional change in emissions that could accelerate climate warming to a more dangerous pace. We don’t know yet,” said Sweeney. “We’re eager to find out.”

“So far profiles north of the Brooks range indicate significant enhancements in methane emissions near the surface,” said Sweeney, “but it’s uncertain whether those are local emissions from human activities or outgassing from natural sources.”

Coast Guard Arctic flights using C-130 maritime surveillance aircraft began in the fall of 2007. When the base in Kodiak offered to carry air-sampling instruments on the twice-monthly flights out of Kodiak over the Brooks Range to Barrow in the Arctic Circle, NOAA scientists jumped at the chance. The flights will typically stop in Galena, south of the mountain range, and at Kivalina on the north coast, ending up at Prudhoe Bay. NOAA has operated an atmospheric observatory at Barrow, about 200 miles west of Prudhoe, for decades.

Last March, NOAA scientists replaced one of the plane’s windows with a plate for air inlets. The inlets lead to onboard instruments that measure greenhouse gases and ozone in real time. One instrument will measure methane and carbon dioxide every other second. Air is also stored in glass flasks that are sent back to the lab in Boulder. There scientists will analyze the air to understand the distribution of almost 40 other pollutants and trace gases.

During a recent flight, a small, driftable buoy was released from the plane. The buoy is part of the U.S. Interagency Arctic Buoy Program which collects meteorological information, tracks polar ice flows, and measures upper ocean heat content. Agencies participating in the program include NOAA, the Coast Guard, and the U.S. Navy.

The Coast Guard flights “test capabilities, build Arctic operational expertise, identify challenges, survey sea ice and monitor vessel traffic in U.S. Arctic waters,” according to a Coast Guard statement.

NOAA understands and predicts changes in the Earth’s environment, from the depths of the ocean to the surface of the sun, and conserves and manages our coastal and marine resources.

August 18, 2009

Energy Impacts of the American Clean Energy and Security Act of 2009

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Energy Market and Economic Impacts of H.R. 2454, the American Clean Energy and Security Act of 2009

This report responds to a request to the Energy Information Administration (EIA) from Chairman Henry Waxman and Chairman Edward Markey for an analysis of H.R. 2454, the American Clean Energy and Security Act of 2009 (ACESA).1 ACESA, as passed by the House of Representatives on June 26, 2009, is a complex bill that regulates emissions of greenhouse gases through market-based mechanisms, efficiency programs, and economic incentives.

The Title III cap-and-trade program for greenhouse gas (GHG) emissions, which covers roughly 84 percent of total U.S. GHG emissions by 2016, is in many respects the centerpiece of the bill and the primary driver of the results presented in this report. The program subjects covered emissions to a cap that declines steadily between 2012 and 2050. The cap requires a 17- percent reduction in covered emissions by 2020 and an 83-percent reduction by 2050, both relative to a 2005 baseline, with targets that decline steadily for intermediate years. Compliance is enforced through a requirement for entities subject to the cap to submit allowances, which are bankable, sufficient to cover their emissions. Allowance obligations may also be offset by reductions in domestic emissions of exempted sources, by international offsets, or by emission allowances from other countries with comparable laws limiting emissions. Maximum offsets from domestic and international sources are each capped separately at 1 billion metric tons (BMT) in each year of the program, with the proviso that up to 500 million metric tons (MMT) of the domestic offset cap may be shifted to the international offset cap if the Administrator of the Environmental Protection Agency (EPA) determines that a sufficient supply of domestic offsets is not available. In addition to its centerpiece cap-and-trade program, Title III also includes additional GHG standards, dedicated programs to limit hydrofluorocarbon (HFC) emissions and black carbon, and provisions governing markets in carbon-related derivatives.

Title I contains provisions related to a Federal combined efficiency and renewable electricity standard for electricity sellers, carbon capture and storage technology, performance standards for new coal-fueled power plants, research and development support for electric vehicles, support for deployment of a smart grid, and establishment of a Clean Energy Deployment Administration. Title II includes provisions related to building, lighting, appliance, and vehicle energy efficiency programs. Title IV includes provisions to preserve domestic competitiveness and support workers, provide assistance to consumers, and support domestic and international adaptation initiatives. Title V addresses the role of domestic agricultural and forestry-related offsets in the Title III cap-and-trade program.
This report considers the energy-related provisions in ACESA that can be analyzed using EIA’s National Energy Modeling System (NEMS). The Reference Case used as the starting point for the analysis in this report is an updated version of the Annual Energy Outlook 2009 (AEO2009) Reference Case issued in April 2009 that reflects the projected impacts of the American Recovery and Reinvestment Act as well as other significant energy legislation, including the Energy Improvement and Extension Act of 2008, the Energy Independence and Security Act of 2007, and the Energy Policy Act of 20052. Cumulative GHG emissions covered by the Title III cap-and-trade program over the 2012 to 2030 period are estimated to be 113.4 BMT in CO2-equivalent terms.

Key provisions of ACESA that are represented in the policy cases developed in this analysis include3:

* the GHG cap-and-trade program for gases other than HFCs, including provisions for the allocation of allowances to electricity and natural gas distribution utilities, low-income consumers, State efficiency programs, rebate programs, energy-intensive industries, and other specified purposes;
* the combined efficiency and renewable electricity standard for electricity sellers;
* the carbon capture and storage (CCS) demonstration and early deployment program;
* Federal building code updates for both residential and commercial buildings;
* Federal efficiency standards for lighting and other appliances;
* technology improvements driven by the Centers for Energy and Environmental Knowledge and Outreach; and
* the smart grid peak savings program.

While this analysis is as comprehensive as possible given its timing, it does not address all the provisions of ACESA. Provisions that are not represented include the Clean Energy Deployment Administration, the strategic allowance reserve, the separate cap-and-trade program for HFC emissions, the GHG performance standards for activities not subject to the cap-and-trade program, the distribution of allowances to coal merchant plants, new efficiency standards for transportation equipment, and the effects of increased investment in energy research and development. Of these provisions, the Clean Energy Deployment Administration may have the most significant potential to alter the reported results.

Like other EIA analyses of energy and environmental policy proposals, this report focuses on the impacts of those proposals on energy choices made by consumers in all sectors and the implications of those decisions for the economy. This focus is consistent with EIA’s statutory mission and expertise. The study does not account for any possible health or environmental benefits that might be associated with curtailing GHG emissions.
Finally, while the emissions caps in the ACESA cap-and-trade program decline through the year 2050, the modeling horizon in this report runs only through 2030, the projection limit of NEMS. As in EIA analyses of earlier cap-and-trade proposals, the need to pursue higher-cost emissions reductions beyond 2030, driven by tighter caps and continued economic and population growth, can be reflected in the modeling by assuming that a positive bank of allowances is held at the end of 2030 in all but one case.

Analysis Cases

EIA prepared a range of analysis cases for this report. The six main analysis cases discussed in this Executive Summary, while not exhaustive, focus on two key areas of uncertainty that impact the analysis results.

The role of offsets is a large area of uncertainty in any analysis of ACESA. The 2-BMT annual limit on total offsets in ACESA is equivalent to one-third of total energy-related GHG emissions in 2008 and represents nearly six times the projected growth in energy-related emissions through 2030 in the Reference Case used in this analysis.

While the ceiling on offset use is clear, their actual use is an open question. Beyond the usual uncertainties related to the technical, economic, and market supply of offsets, the future use of offsets for ACESA compliance also depends both on regulatory decisions that are yet to be made by the EPA, on the timing and scope of negotiations on international agreements or arrangements between the United States and countries where offset opportunities may exist, and on emissions reduction commitments made by other countries. Also, limits on offset use in ACESA apply individually to each covered entity, so that offset “capacity” that goes unused by one or more covered entities cannot be used by other covered entities. For some major entities covered by the cap-and-trade program, decisions regarding the use of offsets could potentially be affected by regulation at the State level. Given the many technical factors and implementation decisions involved, it is hardly surprising that analysts’ estimates of international offset use span an extremely wide range. One recent analysis doubts that even 150 MMT of international offsets will be used by 2020, while another posits that 1 BMT of international offsets will be used almost immediately from the start of the program in 2012, followed by a quick rise towards an expanded 1.5-BMT ceiling shortly thereafter.

The other major area of uncertainty in assessing the energy system and economic impacts of ACESA involves the timing, cost, and public acceptance of low- and no-carbon technologies. For the period prior to 2030, the availability and cost of low- and no-carbon baseload electricity technologies, such as nuclear power and fossil (coal and natural gas) with CCS, which can potentially displace a large amount of conventional coal-fired generation, is a key issue. However, technology availability over an extended horizon is a two-sided issue. Research and development breakthroughs over the next two decades could expand the set of reasonably priced and scalable low- and no-carbon energy technologies across all energy uses, including transportation, with opportunities for widespread deployment beyond 2030. The achievement of significant near-term progress towards such an outcome, however, could significantly reduce the size of the bank of allowances that covered entities and other market participants would want to carry forward to meet compliance requirements beyond 2030.

With these key uncertainties in mind, the main analysis cases discussed in this report are as follows:

* The ACESA Basic Case represents an environment where key low-emissions technologies, including nuclear, fossil with CCS, and various renewables, are developed and deployed on a large scale in a timeframe consistent with the emissions reduction requirements of ACESA without encountering any major obstacles. It also assumes that the use of offsets, both domestic and international, is not severely constrained by cost, regulation, or the pace of negotiations with key countries covering key sectors. In anticipation of increasingly stringent caps and rising allowance prices after 2030, covered entities and investors are assumed to amass an aggregate allowance bank of approximately 13 BMT by 2030 through a combination of offset usage and emission reductions that exceed the level required under the emission caps.

* The ACESA Zero Bank Case is similar to the Basic Case except that no banked allowances are held in 2030, reflecting the assumed availability of a broad array of reasonably priced low- and no-carbon technologies that can provide an alternative path to compliance with tighter emissions caps after 2030 through reductions across all energy uses, including transportation.

* The ACESA High Offsets Case is similar to the Basic Case except that it assumes the near-immediate use of international offsets at levels at or close to the specified aggregate ceiling, without regard to possible institutional or market impediments.

* The ACESA High Cost Case is similar to the Basic Case except that the costs of nuclear, coal with CCS, and dedicated biomass generating technologies are assumed to be 50 percent higher.

* The ACESA No International Case is similar to the Basic Case, but represents an environment where the use of international offsets is severely limited by cost, regulation, and/or slow progress in reaching international agreements or arrangements covering offsets in key countries and sectors.

* The ACESA No International/Limited Case combines the treatment of offsets in the ACESA No International Case with an assumption that deployment of key technologies, including nuclear, fossil with CCS, and dedicated biomass, cannot expand beyond their Reference Case levels through 2030.4

The full report discusses a number of additional analysis cases, including an accelerated Corporate Average Fuel Efficiency (CAFE) standards (35CAFE2016) case that incorporates the acceleration in fuel economy standards for light-duty vehicles announced by the Administration in May 2009, a 5-percent discount case that adopts an alternative view of real escalation in allowance prices (Low Discount), a case with limitations to the penetration of nuclear, CCS, and biomass gasification capacity (Limited Alternatives), an accelerated energy technology (High Tech) case, and a higher level of allowance banking (High Banking) case.

EIA cannot attach probabilities to the individual policy cases. However, both theory and common sense suggest that cases that reflect an unbroken chain of either failures or successes in a series of independent factors are inherently less likely than cases that do not assume that everything goes either wrong or right. In this respect, the No International/Limited and Zero Bank Cases might be viewed as more pessimistic and optimistic scenarios, respectively, which bracket a set of more likely cases. Similarly, if actual access to international offsets is dependent on a series of independent regulatory and negotiating outcomes, cases with intermediate access to international offsets might be viewed as more likely than those representing either complete and immediate success across the board (High Offsets), or a permanent lack of progress (No International) in such activities.
Figure ES-1. Components of Cumulative Compliance in ACESA Main Cases, 2012-2030 (billion metric tons CO2-equivalent). Need help, contact the National Energy Information Center at 202-586-8800.
Figure ES-2. Primary Energy Consumption by Fuel in Main ACESA Cases, 2030 (quadrillion Btu). Need help, contact the National Energy Information Center at 202-586-8800.
Figure ES-3. Allowance Prices in Main ACESA Cases, 2012-2030 (2007 dollars per metric ton CO2-equivalent). Need help, contact the National Energy Information Center at 202-586-8800.

Key Findings

Given the potential of offsets as a low-cost compliance option, the amount of reduction in covered emissions is exceeded by the amount of compliance generated through offsets in most of the main analysis cases (Figure ES-1). Cumulative compliance between 2012 and 2030, including reductions both in domestic emissions of covered gases and in domestic and international offsets, ranges from 24.4 BMT to 37.6 BMT carbon dioxide (CO2)-equivalent emissions in the main analysis cases, representing a 21-percent to 33-percent reduction from the level of cumulative covered emissions projected in the Reference Case.5 In the ACESA Basic Case, domestic abatement of covered gases represents only 39 percent of cumulative compliance. In the ACESA High Offsets Case, where the maximum quantity of international offsets is used immediately at the start of the program in 2012, domestic abatement in covered gases accounts for just 22 percent of the cumulative compliance. Reductions in the emissions of energy-related CO2 account for more than half of projected cumulative compliance through 2030 only in the cases where international offsets are not assumed to be available.

The vast majority of reductions in energy-related emissions are expected to occur in the electric power sector. Across the ACESA main cases, the electricity sector accounts for between 80 percent and 88 percent of the total reduction in energy-related CO2 emissions relative to the Reference Case in 2030. Reductions in electricity-sector emissions are primarily achieved by reducing the role of conventional coal-fired generation, which in 2007 provided 50 percent of total U.S. generation, and increasing the use of no- or low-carbon generation technologies that either exist today (e.g. renewables and nuclear) or are under development (fossil with CCS). In addition, a portion of the electricity-related CO2 emissions reductions results from reduced electricity demand stimulated both by consumer responses to higher electricity prices and incentives in ACESA to stimulate greater efficiency in energy use.

If new nuclear, renewable, and fossil plants with CCS are not developed and deployed in a timeframe consistent with emissions reduction requirements under ACESA, covered entities are expected to respond by increasing their use of offsets, if available, and by turning to increased natural gas use to offset reductions in coal generation. While natural gas generation is expected to fall below the Reference Case level in most ACESA Cases, in the ACESA No International/Limited Case natural gas generation is 68 percent above the Reference Case level by 2030, due to the assumed limited availability of international offsets, new plants with CCS, as well as new nuclear and dedicated biomass capacity (Table ES-1).

Emissions reductions from changes in fossil fuel use in the residential, commercial, industrial and transportation sectors are small relative to those in the electric power sector. Taken together, changes in fossil fuel use in these sectors account for between 12 percent and 20 percent of the total reduction in energy-related CO2 emissions relative to the Reference Case in 2030, reflecting both lesser percentage changes in delivered fossil fuel prices than experienced by the electricity generation sector and the low availability of alternatives in many applications (Figure ES-2). For example, motor gasoline prices in the ACESA Basic Case are only 20 cents per gallon higher than in the Reference Case in 2020 and 35 cents per gallon higher in 2030 (in 2007 dollars). In addition, since all cases include the 35-mile-per-gallon CAFE standard enacted in the Energy Independence and Security Act of 2007, many of the most cost-effective vehicle efficiency options are adopted in all cases, including the Reference Case. Beyond reductions in direct fuel use, the reduction in electricity demand, which ranges from 4.1 percent to 14.7 percent below the Reference Case level in 2030 across the main policy cases, makes an important contribution to the overall reduction in electricity-related emissions.

GHG allowance prices are sensitive to the cost and availability of emissions offsets and low-and no-carbon generating technologies. Allowance prices in the ACESA Basic Case are projected at $32 per metric ton in 2020 and $65 per metric ton in 2030. Across all main analysis cases, allowance prices range from $20 to $93 per metric ton in 2020 and from $41 to $191 (2007 dollars) per metric ton in 2030 (Figure ES-3). The lower prices in the range occur in cases where technological options such as CCS and adoption of new nuclear power plants can be deployed on a large scale before 2030 at relatively low costs, the use of international offsets helps to hold down compliance costs, and/or optimism about future technology availability holds down the near-term incentive to bank allowances for use beyond 2030 (ACESA Basic, ACESA High Offset, and/or ACESA Zero Bank cases). Higher allowance prices occur if international offsets are unavailable, particularly if it is also the case that low- or no-emission baseload electricity supply technologies cannot be expanded beyond the Reference Case level (ACESA No International and ACESA No International/Limited cases).

ACESA increases energy prices, but effects on electricity and natural gas bills of consumers are substantially mitigated through 2025 by the allocation of free allowances to regulated electricity and natural gas distribution companies. Except for the ACESA No International/Limited Case, electricity prices in five of the six main ACESA cases range from 9.5 to 9.6 cents per kilowatthour in 2020, only 3 to 4 percent above the Reference Case level.6 Average impacts on electricity prices in 2030 are projected to be substantially greater, reflecting both higher allowance prices and the phase-out of the free allocation of allowances to distributors between 2025 and 2030. By 2030, electricity prices in the ACESA Basic Case are 12.0 cents per kilowatthour, 19 percent above the Reference Case level, with a wider band of 11.1 cents to 17.8 cents (10 to 77 percent above the Reference Case level) across all six main policy cases.

ACESA increases the cost of using energy, which reduces real economic output, reduces purchasing power, and lowers aggregate demand for goods and services. The result is that projected real gross domestic product (GDP) generally falls relative to the Reference Case. Total discounted GDP losses over the 2012 to 2030 time period are $566 billion (-0.3 percent) in the ACESA Basic Case, with a range from $432 billion (-0.2 percent) to $1,897 billion (-0.9 percent) across the main ACESA cases (Table ES-2). Similarly, the cumulative discounted losses for personal consumption are $273 billion (-0.2 percent) in the ACESA Basic Case and range from $196 billion (-0.1 percent) to $988 billion (-0.7 percent). GDP losses in 2030, the last year explicitly modeled in this analysis, range from $104 billion to $453 billion (-0.5 to -2.3 percent), while consumption losses in that year range from $36 billion to $180 billion (-0.3 to -1.3 percent). The estimated 2030 GDP and consumption losses in the ACESA No International/Limited Case, at the top of these ranges, are nearly or more than twice as large as those in the ACESA No International and High Cost Cases, which have the next highest level of impacts.

Consumption and energy bill impacts can also be expressed on a per household basis in particular years. In 2020, the reduction in household consumption is $134 (2007 dollars) in the ACESA Basic Case, with a range of $30 to $362 across all main ACESA cases. In 2030, household consumption is reduced by $339 in the ACESA Basic Case, with a range of $157 to $850 per household across all main ACESA cases. By 2030, the estimated reductions in household consumption in the ACESA No International/Limited Case, at the top of these ranges, are approximately double the impacts in the ACESA High Cost Case, which has the next highest level of impacts.

The free allocation of output-based allowances reduces the impact of ACESA on energy-intensive, trade- vulnerable industries. Receiving free allowances in proportion to output softens the impacts of increased energy prices on these industries. As a result, when energy prices increase under ACESA, the reductions in output of these trade- and energy-vulnerable industries are less than overall manufacturing impacts and mirror the impacts of total industrial shipments. The discounted cumulative percent losses of energy-intensive industrial output range from -0.5 percent to -3.6 percent from 2012-2030 compared to manufacturing losses of -0.5 percent to -4.3 percent.

Additional Insights

The role of baseline assumptions. The choice of a baseline is one of the most influential assumptions for any analysis of global climate change legislation. This analysis uses the updated Reference Case of the AEO2009 as a starting point. These projections and our analysis are not meant to be exact predictions of the future but represent plausible energy futures given technological and demographic trends, current laws and regulations, and consumer behavior as derived from available data. EIA recognizes that projections of energy markets over a nearly 25-year period are highly uncertain and subject to many events that cannot be foreseen, such as supply disruptions, policy changes, and technological breakthroughs. In addition to these phenomena, long-term trends in technology development, demographics, economic growth, and energy resources may evolve along a different path than expected in the projections. Generally, differences between cases, which are the focus of our report, are likely to be more robust than the specific projections for any one case. The published AEO2009,which includes numerous cases reflecting a variety of alternative futures for the economy, energy markets, and technology, is a resource that can be used to examine the implications of alternative baselines.

The strategic allowance reserve. The strategic allowance reserve, which focuses on the important issue of short-term volatility in allowance prices, is not addressed in this analysis. As currently structured, the strategic allowance reserve, following a startup period, relies on a “trigger price” for auctions that is set in relation to recent allowance prices. Such an approach does not appear to preclude a scenario in which allowance prices evolve along a “high” trajectory given underlying conditions that would support such an outcome, such as those examined in the No International and No International/Limited cases. Also, the strategic allowance reserve, in contrast to other cost-containment mechanisms that more directly tie compliance pressure to the level of compliance costs or other measures of economic impact, would be unlikely to discourage stakeholders who view GHG emissions limitation as the highest environmental protection priority from pursuing efforts to block the deployment of nuclear power, CCS, or other technologies that, from their perspective, may raise important, but lesser, concerns. Therefore, as discussed in earlier EIA analyses, decisions regarding the design of a cost-containment mechanism can affect the public acceptance of key low- and no-carbon technologies that may be part of a cost-effective compliance mix.

Free allowance allocation to electricity and natural gas distributors. The analysis shows that the free allocation of allowances to electricity and natural gas distributors significantly ameliorates impacts on consumer electricity and natural gas prices prior to 2025, when it starts to be phased out. While this result may serve goals related to regional and overall fairness of the program, the overall efficiency of the cap-and-trade program is reduced to the extent that the price signal that would encourage cost-effective changes by consumers in their use of electricity and natural gas is delayed.

Electricity capacity siting challenges. Besides changing the projected mix of new electricity generation capacity, compliance with ACESA will also significantly increase the total amount of new electric capacity that must be added between now and 2030 due to the retirement of many existing coal-fired power plants that otherwise would be expected to continue operating beyond 2030. Obstacles to siting major electricity generation projects and/or the transmission facilities needed to support the greatly expanded use of renewable energy sources are not explicitly considered in this report. However, the additional capacity needs in all of the ACESA cases suggest the need for review of siting processes so that they will be able to support a large-scale transformation of the Nation’s electricity infrastructure by 2030.

Challenges beyond 2030. As previously noted, the modeling horizon for this analysis ends in 2030. Unless substantial progress is made in identifying low- and no-carbon technologies outside of electricity generation, the ACESA emissions targets for the 2030-to-2050 period are likely to be very challenging as opportunities for further reductions in power sector emissions are exhausted and reductions in other sectors are thought to be more expensive.

June 4, 2009

Warming Threat

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MIT Finds Increased Warming Threat if Greenhouse Gases Stay Unchecked

In the absence of new policies to limit greenhouse gas emissions, calamitous global warming appears much more likely now than it did six years ago, according to comprehensive climate modeling by the Massachusetts Institute of Technology (MIT). The MIT Joint Program on the Science and Policy of Global Change uses a detailed computer simulation of global economic activity and climate processes and runs it 400 times, making slight changes to both the climate responses and the economic growth projections. The result is a probabilistic assessment of climate outcomes.

A similar study in 2003 found that a global temperature increase of 2.4°C by 2100 was the most likely outcome, but the newly updated study raised that to 5.2°C, with a 90% probability that the temperature increase would fall between 3.5°C and 7.4°C. In contrast, most climate scientists recommend that global temperature increases be maintained below 2°C. The scientists also examined the outcomes for greenhouse gas control measures that would stabilize the concentration of carbon dioxide in the atmosphere at 550 parts per million (an equivalent of 675 parts per million when all greenhouse gases are accounted for), and found a median warming level of 2.3°C, with a 20% chance of keeping global warming below 2°C.

According to the MIT researchers, the new study differs from the older study in several ways. First, it draws on improved economic modeling and newer data that shows less chance of lower greenhouse gas emissions. It also accounts for the effects of volcanoes, which masked some warming in the 20th century; for soot, which causes warming; and for a lower removal of carbon dioxide by the oceans. Yet the model does not include potential positive feedbacks, such as the emission of methane by melting permafrost, which would make the outcomes even more drastic. See the MIT press release, the study, and an in-depth description of the scenarios and outcomes examines in the study.

May 6, 2009

Increase In Renewable Fuels

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EPA Lays out a Plan for the Nation’s Increase in Renewable fuels

(Washington, D.C. – May 5, 2009) The U.S. Environmental Protection Agency is proposing its strategy for increasing the supply of renewable fuels, poised to reach 36 billion gallons by 2022, as mandated by the Energy Independence and Security Act of 2007.

“As we work towards energy independence, using more homegrown biofuels reduces our vulnerability to oil price spikes that everyone feels at the pump,” EPA Administrator Lisa P. Jackson said. “Energy independence also puts billions of dollars back into our economy, creates green jobs, and protects the planet from climate change in the bargain.”

Increasing renewable fuels will reduce dependence of foreign oil by more than 297 million barrels a year and reduce greenhouse gas emissions by an average of 160 million tons a year when fully phased in by 2022. EISA will establish four categories of renewable fuels.

The new categories include:

* cellulosic biofuels;
* biomass-based diesel;
* advanced biofuels; and
* total renewable fuel.

In 2022, the proposal would require:

* 16 billion gallons of cellulosic biofuels;
* 15 billion gallons annually of conventional biofuels;
* 4 billion gallons of advanced biofuels; and
* 1 billion gallons of biomass-based diesel.

To achieve the volume requirements, each year EPA calculates a percentage-based standard that refiners, importers and blenders of gasoline and diesel must ensure is used in transportation fuel. For the first time, some renewable fuels must achieve greenhouse gas emission reductions compared to the gasoline and diesel fuels they displace. Refiners must meet the requirements to receive credit toward meeting the new standards.

The thresholds for new categories would be 20 percent less greenhouse gas emissions for renewable fuels produced from new facilities, 50 percent less for biomass-based diesel and advanced biofuels, and 60 percent less for cellulosic biofuels.

EPA also will conduct peer-reviews on the lifecycle analysis of the four renewable fuel categories. Lifecycle refers to the greenhouse gas emissions over the life of the fuels.

The 60-day comment period on this proposal will begin upon publication in the Federal Register. During the comment period EPA will hold a public workshop on lifecycle analysis to assure full understanding of the analyses conducted, the issues addressed and the options that are discussed.

April 23, 2009

Energy Cooperatives Oppose Obama

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The National Rural Electric Cooperative Association (NRECA) is opposed to the President’s Cap-And-Trade auction plan. Their position statement:

Cooperatives Oppose Full Auction of Allowances Under Carbon Cap-and-Trade

Under a “Cap and Trade” approach to reducing greenhouse gases, Congress must decide how to distribute emissions allowances. Congress can choose to freely allocate allowances to the regulated community or others; it can auction all allowances to the highest bidder; or it can adopt a hybrid approach of allocating some allowances freely and auctioning the remainder.

President Obama’s FY2010 budget proposes to auction 100% of all emission allowances under a cap-and-trade climate change program that has yet to be developed.

* Consumer-owned electric cooperatives strongly oppose a 100% auction of emission allowances and urge Congress to minimize the economic impacts of climate change legislation on consumers.

Auctioning Raises Costs to Rural Electric Cooperative Consumers

Unfortunately, auctioning all allowances only serves as a backdoor, variable tax on electric cooperative consumers to raise revenue for the government. Even worse, the level of the tax would be determined by Wall Street and large multi-national energy companies who would likely be the highest bidders in any auction. Cooperatives would likely be price takers under an auction. If the government needs to raise revenue to fund important national priorities, those taxes should be set by the government and collected by the IRS, not set by Wall Street and collected by utilities.

Further, auctioning allowances is not necessary to achieve the environmental objective of a cap-and-trade plan – namely to achieve significant, long-term reductions in greenhouse gas emissions. Those reductions are achieved by the cap established in the legislation. An auction of allowances will not result in any further reductions of CO2 emissions. It won’t reduce emissions, it will only raise revenue.

Additionally, one of the main reasons given by advocates, including President Obama’s budget, for auctioning allowances to the highest bidder is to avoid giving industries “windfall profits.” However, electric cooperatives are not-for-profit, consumer-owned utilities that provide electricity to our members. As not-for-profit entities, it is by definition impossible for cooperatives to receive “windfall profits.”

Since cooperatives provide electricity on an at-cost basis, any additional costs borne by cooperatives gets passed directly through to our member-consumers. Conversely, any costs avoided save on our consumers’ monthly electric bills.

In the case of cooperatives, the most straightforward, efficient method of minimizing higher costs to our member-consumers is to freely allocate allowances to cooperatives. Co-op consumers will still face higher costs resulting from efforts to reduce emissions, and those costs will grow over time as the emissions cap declines. However, consumers can be protected from unnecessary higher costs that would result if co-ops have to bid on allowances against other for-profit entities.

Avoid the “Enronization” of any Auction

Some proposals contain explicit language allowing any entity to bid on allowances in an auction. Under this structure, rural electric cooperatives not only would be competing for allowances with large investor-owned utilities, manufacturing giants, and multi-national oil companies, but also deep-pocketed financial firms.

Investment houses and other brokers have a role to play in ensuring a liquid market, but should not be enticed to buy allowances at the auction, hold them to drive up prices, and then sell them purely to make a profit. Those profits would come directly from the pockets of consumers and would not provide any CO2 reductions.

Greenhouse gas emission allowances should not be treated as just another commodity like pork bellies. Much like how Enron manipulated the electricity markets in California in 2000, such a structure could drive up prices, promote extraordinary market volatility, and threaten the economic and energy security of the country without providing any additional environmental benefits.

* NRECA strongly urges Congress to restrict the use of allowances to only those entities which have a regulatory compliance obligation under the legislation, and clearly define the role of non-regulated actors in ensuring a liquid market.

February 28, 2009

Proposed Budget Includes Cap And Trade

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The new budget proposed by the President includes a new cap-and-trade program for greenhouse gas emissions. Revenues from a national cap-and-trade system for greenhouse gas emissions would come from auctions of emissions permits. The program will generate $650 billion between 2012 and 2019.

The President said, “Because our future depends on our ability to break free from oil that’s controlled by foreign dictators, we need to make clean, renewable energy the profitable kind of energy. That’s why we’ll be working with Congress on legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy.

And to support this effort, we’ll invest $15 billion a year for 10 years to develop technologies like wind power and solar power, and to build more efficient cars and trucks right here in America. It’s an investment that will put people back to work, make our nation more secure, and help us meet our obligation as good stewards of the Earth we all inhabit.”

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