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California Dream Come True

2009-06-30T05:00:01Z

Today the Environmental Protection Agency will give California the long-awaited green light to enforce its landmark standards to cut global warming pollution from new motor vehicles.

This is a major step in implementing the clean car peace treaty unveiled by President Obama in the White House Rose Garden last month. By granting the waiver needed under the Clean Air Act, EPA is putting the federal seal of approval on California's leadership in cleaning up global warming pollution from our cars, SUVs, pickups, and minivans.

The saga of the California standards started seven years ago, when nothing was being done in Washington to fight global warming. NRDC and others - including the Coalition for Clean Air, Bluewater Network, Sierra Club, Environmental Defense Fund - campaigned to pass AB 1493, sponsored by then-Assemblywoman (now State Senator) Fran Pavley, in the California legislature. Signed into law by Gov. Gray Davis and implemented with gusto by Gov. Arnold Schwarzenegger, the California initiative was soon embraced by 14 other states, altogether covering 40 percent of new vehicle sales. The standards take effect immediately and will ramp up steadily to cut emissions of four heat-trapping pollutants - carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons (HFCs) - 30 percent by the 2016 model year.

The car makers fought the states bitterly in the courts and the political arena for more seven years. But they lost one court case after another. They tried, and failed, to get Congress to strip California's authority in the 2007 energy bill. They counted on the Bush administration, but that shield expired in January. The Obama team promised a fresh look at the waiver, and now they have delivered.

As a part of the clean car peace treaty, the car makers have agreed not to file more court challenges to the California waiver. (See their commitment letters here). So after seven years, this part of the story comes to a close today.

The Obama administration's next step will be to issue federal greenhouse gas and mileage standards for 2012-2016 models that extend the benefits of California's standards nationwide. These national standards will be a win for everyone. We'll have cleaner cars that cut dangerous global warming pollution nationwide. We'll save money every time we fill up at the pump. We'll cut our country's dangerous dependence on oil. The car makers will get the practical national uniformity they've been craving. And we'll help them get back to health by making cars that fit the market in a world of higher oil prices and global warming.

Today's decision will have lasting impacts even beyond the current standards. We'll need even cleaner cars in the future, beyond 2016, to curb global warming and protect our energy security. California will play a key role in getting us there.

House to Vote on American Clean Energy and Security Act

2009-06-10T21:28:30Z

The House of Representatives will soon vote on the American Clean Energy and Security Act (H.R. 2454). This will be the most important clean energy and climate protection vote that Congress has ever cast.

The ACES bill passed the Energy and Commerce Committee May 31, 2009, by a 33-25 bipartisan vote. It will help power our economic recovery by investing in clean energy technologies and creating millions of good-paying jobs. The bill will enhance America's security and global leadership by cutting our oil dependence and curbing the carbon pollution that drives global warming.

The ACES bill can be further improved with more investments in energy efficiency measures that will cut consumer costs and carbon pollution, stronger requirements to scale up renewable electricity generation, and greater authority for EPA to reduce emissions from the largest pollution sources. It is also essential to prevent any weakening of the emission limits and environmental integrity of ACES. NRDC urges the House to strengthen and pass H.R. 2454.

The bill combines standards and incentives in a powerful clean energy package.

Renewable energy and energy efficiency standards will save energy consumers billions of dollars per year while cutting global warming pollution.
Emissions standards for carbon dioxide and other greenhouse gases will cut pollution from power plants, vehicles, and other industries.
A cap on carbon emissions will gradually cut global warming pollution 17 percent by 2020, 42 percent by 2030, and 83 percent by 2050, compared to 2005 levels.
More than 80 percent of the bill's valuable pollution allowances will be used to meet public objectives: protecting consumers, preserving and creating jobs, deploying clean energy and energy efficiency technologies, cutting more carbon emissions, and coping with climate change impacts.

CLEAN ENERGY AND ENERGY EFFICIENCY

Renewable and Efficiency Electricity Standard. The ACES bill requires retail electricity distributors to meet a rising fraction of demand with renewable energy and electricity savings, starting with 6 percent in 2012 and rising to 20 percent in 2020.

At least three-quarters of that amount must come from renewable resources (although FERC, on a governor's petition, may lower the renewable component to three-fifths of a utility's obligation, with the remainder to come from efficiency).
Provisions are needed to increase renewables deployment, delete credit for non-renewable resources, and protect environmentally sensitive lands.

Carbon Capture and Storage. The ACES bill includes standards and incentives to shift away from building conventional industrial facilities and coal-burning power plants and towards newer designs that employ carbon capture and storage (CCS) technology. The bill also promotes retrofits.

CCS regulation and R&D. EPA is to issue CCS regulations to prevent leakage from underground reservoirs. A Carbon Storage Research Corporation is tasked with developing and demonstrating new CCS technologies, financed by a small "wires charge" on existing fossil generation.
CCS deployment incentives. The bill creates a large-scale deployment program funded by allowance allocations. Enough funds are provided to support up to 72 gigawatts of CCS-equipped generating capacity. Industrial facilities (e.g., ethanol and fertilizer plants) are also eligible. Participants are rewarded for performance, with more compensation provided for early projects and higher capture rates.
Coal-fired power plant standards. New coal-fired power plants must reduce their emissions by at least 65 percent if they receive air permits after 2020. Plants permitted between 2009 and 2015 have to cut emissions by at least 50 percent within four years after a threshold amount of CCS-equipped capacity is operating.Earlier adoption of CCS is encouraged by time limits on new plants' eligibility for incentives.

Clean Transportation. The ACES bill encourages cleaner transportation through standards and incentives that will reduce oil dependence and curb global warming.

Vehicle standards. The bill retains EPA's and California's existing authority over passenger vehicle emissions. President Obama has announced that EPA and the Transportation Department will issue new greenhouse gas and mileage standards that equal California's landmark standards. The bill also requires EPA to set greenhouse gas standards for big trucks, locomotives, airplanes, and other mobile sources.
Plug-in electric vehicle deployment. The Energy Department is to develop a large-scale plug-in hybrid program in selected regions, funding battery exchanges, charging infrastructure, and other measures with a share of revenue from auctioning allowances. Domestic production of plug-in hybrids, assembly plant retooling, and domestic battery production would also receive financial support.
Investments in cleaner vehicles. The bill uses allowance auction revenue to create an auto manufacturing retooling incentive paying up to 30 percent of the cost of retooling facilities to make advanced technology vehicles and components.
Transit and other transportation efficiency investments. The bill changes the direction of transportation planning by requiring state transportation and regional planning agencies to set regional greenhouse gas emission reduction goals. Transportation efficiency planning is eligible for funding through state energy efficiency programs, described next.

State Energy and Environment Deployment ("SEED") Fund. The ACES bill funds state programs to promote investments in energy efficiency and renewable energy production. SEED funds initially receive 10 percent of the allowances, ramping down to five percent in 2022 and later years.

Funding goes to renewable energy and efficiency programs that can substantially reduce consumer energy bills and the overall cost of meeting emission reduction targets. Funds can also be used for transportation efficiency planning.
Increasing the SEED funds would allow states to capture even more of the cost-effective energy efficiency potential, further lowering the cost of capping carbon.

Clean Energy Development Authority. The bill creates a financing arm in the Energy Department to fund a range of low- and no-carbon energy projects.

Smart Grid and Electricity Transmission. The bill encourages deployment of a smart grid to reduce utility peak loads and new transmission to carry renewably-generated electricity.

Building Energy Efficiency. The ACES bill sets strong targets for energy efficiency improvements in new residential and commercial buildings.

National building energy performance code. The Energy Department is directed to adopt a model national code raising the efficiency of new residential and commercial buildings by 30-50 percent, depending on the year. A share of the allowances is given to state and local governments that adopt or exceed these codes. Certain other funds are conditioned on compliance with the national target.
Building retrofits. The bill creates incentives to retrofit existing residential and commercial buildings, a rebate program for replacing old manufactured homes, and a building energy performance labeling program.

Lighting and Appliance Efficiency. The ACES bill strengthens the Energy Department's energy efficiency standards.

DOE must upgrade standards for products already regulated and add standards for outdoor lighting, other light fixtures, and more appliances.
The bill establishes a "best-in-class" appliance deployment program with incentives to retailers, a "golden carrot" prize program for manufacturers of super-efficient appliances, and bounty payments for early retirement of inefficient equipment.

Industrial Energy Efficiency. The ACES bill authorizes DOE to make awards for innovative energy recovery methods such as efficient motors, combined heat and power, and process engineering.

REDUCING GLOBAL WARMING POLLUTION

Greenhouse Gas Emission Reduction Targets. The ACES bill establishes a cap-and-trade program to limit total emissions of carbon dioxide and other heat-trapping pollutants from major sources.

Covered entities. Facilities responsible for about 85 percent of U.S. emissions are under the cap, including power plants, refineries, and industrial plants emitting at least 25,000 tons of carbon dioxide per year.
Emission targets. The emission caps are consistent with recommendations of the U.S. Climate Action Partnership of companies and environmental organizations:

Year	Reduction below 2005 levels
2012	3%
2020	17
2030	42
2050	83

Scientific review. The bill directs the National Academy of Sciences to review the targets periodically, and the President is required to respond to latest scientific findings by recommending program changes to Congress.

Supplemental Reductions. The ACES bill achieves significant emission cuts beyond the cap through a program to reduce tropical deforestation (which now accounts for about one-fifth of global carbon emissions).

Funding comes from auctioning five percent of the emissions allowances. The goal by 2020 is to cut partner countries' tropical deforestation emissions by an amount equal to 10 percent of our own 2005 emissions.
More emission reductions come through international offsets (described below).
All told, the combination of domestic and international efforts is equivalent to reducing U.S. emissions 28-33 percent below 2005 levels in 2020, according to estimates by the World Resources Institute.[i]

Complying with the Cap. The ACES bill requires each covered entity to report the amount of emissions that it releases into the air - or in the case of refiners and some chemical producers, the amount that will be released when its products are burned or used downstream.

The covered entity must have an emissions allowance for each ton of emissions. The number of emissions allowances issued is limited to the cap, and declines each year. The only other way to comply is to acquire offsets - reductions made outside the cap (see below).
A firm that does not have enough emission allowances or offsets at the end of the year has to make up the missing allowances and pay a penalty of double the allowance cost, a strong incentive to comply.

Cost-Control Measures. The ACES bill includes many tools to reduce the costs of meeting carbon pollution targets.

Investing in efficiency. Energy efficiency is the cheapest way to reduce carbon emissions - offering billions of dollars in savings for consumers and businesses. Supplementing the standards and incentives already mentioned, the bill dedicates one-third of the emissions allowances given to natural gas local distribution companies to helping their customers make cost-saving energy efficiency investments. If Congress did the same for electricity local distribution companies, national energy efficiency investments would increase by about $10 billion per year, lowering consumer energy bills and allowance prices for all sources.
Emissions trading. The bill employs tried-and-true tools of allowance trading, banking, and limited borrowing, measures that allow firms to find their cheapest compliance path.
Offsets. Covered sources may use up to two billion tons per year of offsets -reductions achieved outside the cap - split between domestic and international sources. The bill includes an Offsets Integrity Advisory Board and other requirements to assure the quality of offsets. Starting in 2017, a company using international offsets must have 1.25 tons of those offsets to cover a ton of its own emissions - the extra quarter ton is a net emission reduction. This increases the ACES bill's total reductions, as described above.
Strategic reserve. An innovation in the ACES bill is a pool of emissions allowances to address the potential for carbon price spikes. The strategic reserve pool is filled using 1% of allowances from 2012-2019, 2% from 2020-2029, and 3% thereafter. A portion of the reserve can be auctioned each year if carbon prices spike above 1.6 times the average of recent years' prices.
Minimum auction price. In case allowance prices move in the other direction - much lower than expected - the bill includes a minimum price (starting at $10 per ton and rising each year) below which allowances are withheld from auction and added to the strategic reserve.

Distributing Allowances. The ACES bill distributes emissions allowances to a variety of recipients. While the auction component starts relatively small, it will grow steadily as most specific allocations phase out over the next two decades. Even though most allowances are given without charge at the outset, the vast majority - over 80 percent, according to Harvard economist Robert Stavins[ii] - are distributed for public purposes, not private windfalls. Here are the most significant categories:

Consumer protection. The largest fraction of the initial allowance distribution goes to electric and natural gas local distribution companies (30-35 percent and 9 percent, respectively, phasing out by 2030). The LDCs, which are regulated by state public utility commissions, are strictly required to use the value of these allowances for the benefit of their customers. They can invest in cost-saving efficiency or pass the value to their customers in lump-sum rebates. As noted above, gas utilities are required to invest at least one-third of their allowances in efficiency, a requirement that also should apply to electric utilities.
Low-Income Consumer Assistance. Fifteen percent of the allowances are devoted throughout the bill's life to protecting low-income consumers, who spend a higher percentage of their income on food, transportation, and other necessities. The revenue from auctioning these allowances is to be delivered to low-income families through tax credits and energy refunds.
Preserving Domestic Competiveness. The bill provides as much as 15 percent of the allowances to energy-intensive manufacturers of products such as steel, aluminum, cement, and chemicals that are subject to strong international competition. The rebates are intended to counter pressures to shift production, jobs, and emissions to countries without comparable carbon reduction programs. Rebates are based on an industry average emission rate (e.g., tons of CO2 per ton of cement) and facility-specific output data (e.g., tons of cement produced) and phase out by 2035. (The bill also provides for border adjustments after 2025 if rebates do not adequately address competitiveness.) Refinements are needed, however, to ensure that firms are not overcompensated and that rebates phase out as other countries step up to the plate.
Energy efficiency, renewables, and domestic adaptation. Other major slices of allowances go to the state SEED fund for energy efficiency and renewable energy programs, and to promote new technologies such as carbon capture and storage, cleaner vehicle retooling, and efficient appliance deployment. Some allowances go to domestic public health and natural resources adaptation programs.
Green jobs and worker transition. The bill creates a program of worker training, education, and transition for clean energy jobs. It also provides transition assistance to qualifying workers who may be displaced by the effects of the legislation.
International objectives. A portion of the allowances is devoted to international objectives, including reducing deforestation, helping the most vulnerable countries adapt to climate change impacts, and promoting clean technology exports. The bill recognizes that global warming impacts can significantly increase threats to our national security. The bill also encourages new markets for American innovators' clean technologies.

Oil Refiners and Merchant Coal Generators. These sources initially receive a total of seven percent of the allowances for free, but the merchant coal allocation may be reduced if EPA finds it will lead to windfall profits.

Carbon Market Regulation. The bill charges the Commodity Futures Trading Commission to prevent market manipulation. The bill also goes beyond carbon markets to give the CFTC new regulatory powers over financial derivatives.

Additional GHG Standards. EPA is required to set new source performance standards for emission sources outside the cap, including enough sources so that 95 percent of all industrially-related emissions are covered either by the cap or supplementary standards.

HFCs and Black Carbon. A separate cap representing about two percent of U.S. emissions is established for hydrofluorocarbons (HFCs) - heat-trapping cousins of the ozone-destroying chemicals already being phased out under the current Clean Air Act. The bill also creates a program to reduce domestic and international emissions of black carbon.

Clean Air Act Modifications. The cap-and-trade program is a new title of the Clean Air Act. At the same time, the bill repeals some existing Clean Air Act authorities. Congress should reconsider some of these provisions:

The bill retains provisions for regulating motor vehicle emissions and it creates performance standards for new coal plants (reviewed above). It keeps EPA's authority to set performance standards for new and existing sources that are not covered by the cap.
In light of the national cap, the bill drops authority for setting ambient air quality standards and hazardous air pollutant standards for greenhouse gases. It also drops authority to set performance standards for new and existing sources that are under the cap and to conduct case-by-case review of new and expanded sources of these pollutants. Some of these changes are reasonable, but others are overly broad.
The bill generally protects state authority to set clean energy, energy efficiency, and greenhouse gas control programs more stringent than federal requirements. The one exception, however, is a six-year suspension of authority to impose state cap and trade programs.

* * *

The dangers of global warming are real and action is long overdue. Clean energy solutions in this bill are a critical part of our economic recovery. America needs to lead again. Congress must strengthen and pass the American Clean Energy and Security Act without delay.

[i] John Larsen and Robert Heilmayr, Emission Reductions under the American Clean Energy and Security Act of 2009 (World Resources Institute, May 19, 2009), http://pdf.wri.org/usclimatetargets_2009-05-19.pdf.

[ii] Robert Stavins, The Wonderful Politics of Cap-and-Trade: A Closer Look at Waxman-Markey (May 27, 2009), http://belfercenter.ksg.harvard.edu/analysis/stavins/.

When In A Hole, Stop Digging

2009-05-20T18:30:23Z

As the urgency of global warming increases, old divides are breaking down and old adversaries are starting to cooperate.

Fortune 100 companies have come together with leading environmental organizations in the U.S. Climate Action Partnership, which produced a Blueprint for Legislative Action and is urging the House Energy and Commerce Committee to adopt cap and trade legislation this week (here, p.26). Yesterday, supporters of the Waxman-Markey bill soundly defeated a series of amendments that die-hard opponents of action on climate change hoped in vain would split the progressives and moderates and derail the bill.

Also yesterday, auto makers, states, environmentalists, and the federal government buried the hatchet in the White House Rose Garden and agreed on new global warming and mileage standards for cars and trucks. A conservative Detroit talk radio host was impressed - he told me, "normally you're the enemy, but not today."

With peace, or at least détente, breaking out between business and environmental interests, and with Chairman Waxman so far winning the votes in committee, what is the bill opponents' strategy?

So far, it's all negative. Rhetoric about economic Armageddon, poison pill amendments, and delay.

The committee's ranking Republican, Joe Barton of Texas, reportedly had to be talked out of a strategy of obstruction and delay. He wanted to force the committee clerks to read the entire 900+ page bill out loud. When Senate Republicans tried that in last summer's debate over climate legislation, a violent thunderstorm swept through Washington, with lightning, rain, wind, and tornado warnings.

On the third day of the mark-up, bill opponents are still threatening to force votes on hundreds of time-wasting amendments.

After years of being America's biggest businesses' best friends, some members of the GOP are experimenting with another strategy: let's attack the USCAP companies that have stood up for climate action.

Do they have anything positive to offer? The so-called Republican "alternative," proposed by Rep. Barton last week, stitches together a bunch of tired old ideas that would just dig us in deeper on fossil fuel dependence and global warming. In the simplest terms, Barton's amendment would increase our carbon pollution, deepen dependence on coal and oil, and reduce our energy security.

As more and more businesses join President Obama and Congressional leaders to make real progress on energy and climate, the hold-outs find themselves increasingly isolated in overheated rhetoric that appeals to a narrower and narrower base. Some of them know that's just painting themselves into a corner.

There's a better way. That's why Governor Schwarzenegger was at the White House yesterday, with the auto executives and the president. Let's hope more of them figure this out.

Clean Car Peace Treaty at White House

2009-05-20T00:39:01Z

What a gas! Today I was on hand for President Obama's announcement of new national standards for cars and trucks to cut their global warming pollution and raise their fuel economy. It was a picture-perfect day in the White House Rose Garden. It was amazing to see the president flanked by the heads of 10 domestic and foreign auto companies and the United Auto Workers, and by the governors of California, Michigan and Massachusetts, and leading members of Congress. Also present were industry and environmental leaders (including NRDC's president Frances Beinecke, our vehicle guru Roland Hwang, and me) who've been fighting for years in state houses and Congress.

But today there was agreement. President Obama brought about a peace treaty that takes three regulatory regimes - the Environmental Protection Agency and California curbing greenhouse gases under the Clean Air Act and the Transportation Department raising fuel economy under the Energy Independence and Security Act - and delivers one coherent set of standards at the highest possible level of performance. This is a formula that will cut global warming pollution, reduce our oil dependence, strengthen our economy, and put the auto industry on the path to a clean energy future.

(Roland Hwang, State Sen. Fran Pavley, Frances Beinecke, CARB Chair Mary Nichols, and David Doniger at the White House.)

Everybody wins. We'll have cleaner cars nationwide that meet California's landmark standards for cutting dangerous global warming pollution. We'll drive cars that save us money every time we fill up at the pump. We'll cut our country's dependence on oil from dangerous parts of the world. The car makers will get the practical national uniformity they've been craving. And we'll help the auto industry get back to health by making cars that make sense in a world of higher oil prices and ever-growing concern about global warming.

Here are the key details:

The Environmental Protection Agency will set national emission standards by next March for carbon dioxide and three other global warming pollutants from new cars, SUVs, minivans, and pick-ups. These standards will make good on the Supreme Court's 2007 ruling that carbon dioxide is an air pollutant under the Clean Air Act, and EPA's determination last month that global warming pollution is dangerous to our health and our environment.
Acting jointly with EPA, the Department of Transportation will set stronger gas mileage standards for the same vehicles, under the 2007 Energy Independence and Security Act. These nationwide EPA and DOT standards will ramp up over five years in model year 2012 through 2016.
The federal government will give the green light to California's landmark clean car standards - standards NRDC worked for seven years to get adopted. In turn, California has agreed that if the federal standards are as stringent as the state's, then California will treat compliance with the federal standards as compliance with its own.
The car makers have agreed to drop their lawsuits against California and other states that have adopted California's standards. They've lost all their cases so far, but ending their litigation is worth something. And the automakers have also agreed not to sue over the new federal standards.

What's not to like? President Obama has delivered an agreement that gets car makers, states, environmentalists, and the federal government behind standards that will deliver clean, high-mileage cars nationwide.

What a gas!

The American Clean Energy Security Act - Quick Survey of Changes from the Discussion Draft

2009-05-18T03:48:46Z

On Monday, the House Energy and Commerce Committee will begin a week-long marathon to pass long-overdue clean energy and climate legislation. After more than a month of extensive negotiations among members of the committee, Chairmen Henry Waxman and Ed Markey introduced the American Clean Energy Security Act, H.R. 2454, on Friday.

The ACES bill builds upon the discussion draft that Waxman and Markey circulated in March. Though the bill's major components are the same, Waxman and Markey made important additions and changes to win support from moderates as well as progressives. They enter next week poised to make good on Chairman Waxman's pledge to pass this landmark legislation through his committee by Memorial Day.

With the help of my NRDC colleagues, I've collected our initial read on the bill introduced yesterday. You should read this alongside our "first read" on the discussion draft, posted March 31, because here we focus on some of the key changes from that draft. Where things are pretty much the same, I haven't always repeated what we said before.

The biggest addition, of course, was to specify how the valuable emissions allowances should be distributed. My colleague Dan Lashof posted an analysis yesterday of how the allowances are to be distributed initially, the purposes behind and strings attached to those allocations, and how the initial distributions change over time. I won't repeat that here, but will comment on some of the distributions in covering other changes in the bill.

So let's dive in again. As before, the bill has four titles: Clean Energy, Energy Efficiency, Reducing Global Warming Pollution, and Transitioning to a Clean Energy Economy. Here are the highlights of each section, calling attention to big items that have changed significantly:

Title I - Clean Energy

Combined Renewable and Efficiency Electricity Standard. The Renewable Electricity Standard (RES) and Energy Efficiency Resource Standard (EERS) have been combined into one.

The combined standard requires covered utilities to obtain 20 percent of their electricity from renewable resources by 2020, but up to 5 percent of that amount may be met through energy savings. A governor may petition to reduce the renewable component of a utility's obligation to as low as 12 percent and increase the efficiency component to as much as 8 percent. The new provision is substantially less ambitious than the separate provisions of the discussion draft.
The provision also gives utilities credit for some resources that are not genuinely either renewable or efficiency. Utilities also receive credit for using coal mine methane and municipal solid waste.
The definition of eligible biomass has been expanded, resulting in the removal of important safeguards. While important protections remain on both federal and non-federal lands, including roadless areas and old-growth and mature forests, the new definition allows more biomass to be taken from federal lands, putting carbon sequestration and ecological values in national forests at risk.

New Coal Plants and Carbon Capture and Storage. To supplement the emissions cap, the ACES bill includes emission standards and incentives for new coal plants and CCS deployment. Provisions to set CCS regulations and undertake research, development, and early demonstrations are largely unchanged from the discussion draft. The biggest changes are as follows:

Incentives for commercial deployment of CCS technology. The bill allocates 2-5 percent of the emissions allowances to fund CCS deployment. Coal-fired power plants and industrial sources can receive incentives on a dollar-per-ton-of-CO2 basis to deploy CCS technology. Higher performance, early movers, and lowest bids are favored.
Coal-fired power plant standards.The billretains the discussion draft's CO2 emission standards for new coal- and petroleum coke-firedpower plants, though now they are expressed in terms of percent reduction from uncontrolled emissions. The schedules for meeting those standards are more extended than in the discussion draft, with an outer limit compliance date of 2025. Thus, units that receive permits between 2009 and 2020 must achieve a 50 percent CO2 emission reduction four years after the date on which a specified (relatively modest) amount of U.S. CCS capacity is operational, and not later than 2025. Units permitted in 2020 or after must achieve a 65 percent CO2 emission reduction upon startup.The CCS incentive payments will serve as a driver for earlier compliance, since plants that do not meet the standards within a specified time after start-up will lose some or all of their CCS payments.

Clean Transportation. The ACES bill encourages cleaner transportation through a mixture of incentives and standards to enhance energy security and curbing global warming by reducing our reliance on oil.

Low carbon fuel standard. The bill drops a low carbon fuel standard that would have replaced the renewable fuels standard in 2023 and prevented total carbon emissions associated with fuels production and use from growing in the interim. Oil companies opposed the interim measure, which would constrain emissions from high-carbon fuels from tar sands and other sources.
Plug-in electric vehicle deployment. The bill directs the Energy Department to develop a large-scale plug-in hybrid vehicle program in selected regions. It funds deployment measures such as battery exchanges and charging infrastructure, with the revenue from auctioning 0.375% of the allowances in 2012- 2017. It also provides the same amount over the same years for domestic production of plug-in hybrids vehicles, assembly plant retooling, and domestic battery production.
Investments in clean vehicles. The bill adds a new manufacturing retooling incentive to defray up to 30 percent of the retooling cost for facilities to manufacture advanced technology vehicles and components. For 2012-2016, vehicles must be 25 percent more fuel efficient than similar 2009 models; the reference point rises in later years. The retooling incentive is funded by 2.25 percent of the allowances for 2012-2017, dropping to 1 percent for 2018-2025.
Vehicle standards. As in the discussion draft, the efficiency title of the bill includes provisions for federal greenhouse gas and mileage standards for passenger vehicles, and GHG standards for other classes of mobile sources.
Transit and other traffic-reducing investments. These are eligible to receive support from allowance revenue through state energy efficiency programs, described next.

State Energy and Environment Deployment ("SEED") Fund. States would receive allowances to promote investments in energy efficiency and renewable energy production. The allocation begins with 10 percent in 2012, ramps down to 5 percent by 2022, and goes to states based on a formula taking into account population and energy consumption. Funding goes to a range of renewable and efficiency programs (including building code enforcement and building retrofits) which can substantially reduce consumer energy bills and the overall cost of meeting the emission reduction targets. As mentioned, funds can also be used for transportation efficiency improvements. More funds would allow states to capture even more of the cost-effective energy efficiency potential, which would further lower the cost of capping carbon.

Smart Grid and Electricity Transmission. The bill's provisions on these two topics are little changed from the discussion draft.

Clean Energy Innovation Centers. As a new item, the ACES bill creates eight Clean Energy Innovation Centers, each a consortium of at least two universities and each focused on a priority area such as buildings, transportation, energy storage and smart grid transmission, and water technologies. They are supported by the revenue from 1 percent of the allowances.

Planning for Offshore Energy Development. Another new provision aims to facilitate development of offshore renewable energy facilities in a manner that protects the marine environment. It requires the Federal Energy Regulatory Commission, the Department of Interior, and the National Oceanic and Atmospheric Administration to jointly recommend an approach for developing regional plans for offshore siting of renewable energy facilities. The Council on Environmental Quality would decide whether to implement the recommended approach and then coordinate implementation.

Title II - Energy Efficiency

Building Energy Efficiency. The ACES bill improves upon the targets for energy efficiency improvements in new residential and commercial buildings proposed in the discussion draft. The Energy Department must adopt a model national code that meets these targets, based on the work of designated standard-setting organizations (ASHRAE and IECC). One-half of one percent of the allowances is available to state and local governments that adopt codes meeting or exceeding the national model code. Certain other funds are conditioned on the degree of their compliance with the national target. The bill also now authorizes federal enforcement of the national code through civil penalties and injunctions. Other building energy provisions in the discussion draft are retained, including incentives for retrofitting existing residential and commercial buildings, a rebate program to replace old inefficient manufactured homes, and a building energy performance labeling program.

Lighting and Appliances. The bill retains the discussion draft's strong new standards and incentives for classes of lighting equipment and appliances, including the best-in-class program and bounties for early retirement.

Transportation Efficiency. As in the discussion draft, the bill protects California's greenhouse gas emission standards and directs EPA and the Transportation Department set federal GHG and mileage standards, respectively, equivalent to California's. EPA standards are also required for other classes of mobile sources. The bill retains and improves upon the discussion draft's new requirements for state transportation agencies to set and achieve regional greenhouse gas emission reduction goals. EPA must certify that the plans are likely to succeed, and assess the overall transportation sector's progress in reducing emissions every six years.

Energy Efficiency Resource Standard. As mentioned above, the EERS has been combined with the Renewable Electricity Standard.

Industrial Energy Efficiency. These provisions are essentially the same as in the discussion draft.

Low Income Community Energy Efficiency. The bill adds a new program authorizing the Energy Department to make grants to community development organizations to promote energy efficiency and clean energy projects in low-income rural and urban communities. (Other low-income assistance is address under Title IV.)

Title III - Reducing Global Warming Pollution

GHG emission reduction targets. The ACES bill places firm limits on emissions of carbon dioxide and other designated heat-trapping pollutants. Though still consistent with USCAP recommendations, the 2020 cap has changed from the discussion draft.

Economy-wide goals. The bill has two different percentage reduction targets. The first are economy-wide goals, and these have not changed: 3 percent below 2005 levels by 2012, 20 percent below by 2020, 42 percent below by 2030, and 83 percent below by 2050. These economy-wide goals are less significant than the firm cap on covered sources, but they guide emission reduction expectations for sources outside the cap.
Enforceable pollution cap on covered sources. As before, sources representing about 85 percent of U.S. carbon emissions are covered by a firm, enforceable cap on their emissions. Electric generating units and fuel refiners and importers are covered starting in 2012, major industrial emitters in 2014, and natural gas local distribution companies in 2016. The cap in 2020 has been relaxed to 17 percent below 2005 levels. That's less reduction than the 20 percent cut proposed in the discussion draft, but the revised target is in the middle of the USCAP recommended range.
Scientific review. Like the discussion draft, the bill directs the National Academy of Sciences to review the targets periodically in light of the best available science, and the President is to recommend program changes to Congress.

Supplemental Reductions. Like the discussion draft, the bill provides for further reducing emissions through reductions in tropical deforestation in other countries (which now accounts for a fifth of global carbon emissions). The bill provides for auctioning 5 percent of the emissions allowances to fund a program to achieve in 2020 supplemental reductions equal to 10 percent of U.S. 2005 emissions.

Cost-Control. In addition to trading, banking, and limited borrowing of emissions allowances, the bill provides other cost-reducing measures.

Offsets. The bill retains the 2 billion ton limit on offsets, split evenly between domestic and foreign sources, but EPA can allow up to 1.5 billion tons of international offsets if there are insufficient domestic ones. The bill retains the 20 percent environmental premium with the use of international offsets starting in 2017. A capped source using international offsets after that date must turn in 1.25 tons of offset credit to cover 1 ton of domestic emissions. This is a change from the discussion draft, which provided the 1.25-to-1 compliance ratio for both domestic and international offsets starting in 2012. The bill also retains draft provisions, including an Offsets Integrity Advisory Board, to assure that offsets are high-quality and produce environmental progress as well as cost-reduction.
Strategic reserve. A pool of emissions allowances is established to address the potential for carbon price spikes. As before, the strategic reserve pool is funded using 1% of allowances from 2012-2019, 2% from 2020-2029, and 3% thereafter. The trigger price has been changed, however, so that in general reserve allowances will be auctioned if allowances prices reach 1.6 times (rather than double) their historical prices. There are limits on how much of the reserve pool can be drawn down in any one year. Proceeds from any reserve auctions will be used to purchase international forestry offset credits, which generally will be used at the same 1.25-to-1 ratio as other international offsets.

Allocating and Auctioning Allowances. The bill fills the largest gap in the discussion draft by distributing the emissions allowances to a variety of purposes and recipients. While the auction component starts relatively small, it will grow steadily as most specific allocations phase out over the next two decades. My colleague Dan Lashof has laid out the details here. Briefly:

Consumer and job protection. The largest fraction of the allowances go for consumer protection (to electric and natural gas local distribution companies (LDC) as well as to low-income consumers) and to avoid shifting production - and the accompanying jobs and emissions - overseas in certain trade-sensitive and energy-intensive manufacturing industries. The LDC allocations should avoid the generator windfalls that occurred in the early stages of the European emissions trading program, but they could be improved to better promote cost savings through energy efficiency. The allocation to trade-sensitive industries also needs to be refined (see below).
Energy efficiency, renewables, and domestic adaptation. Other major slices of allowances go to states for money-saving energy efficiency and renewable programs, although a larger allocation to these objectives would further reduce the cost of curbing carbon. Some go to industries to promote new technologies such as carbon capture and storage, cleaner vehicle retooling, and efficient appliance deployment. Some allowances go to domestic natural resources adaptation programs. A greater investment in energy efficiency would help lower the costs of capping carbon.
International objectives. A portion of the allowances are made available for international objectives, including reducing deforestation, helping most vulnerable countries adapt to climate change impacts, and promoting clean technology exports.

Auction Reserve Price. The bill includes a new provision, originally recommended by USCAP, for a minimum price below which a portion of the allowances slated for auction will not be sold. The minimum reserve price is set initially at $10 dollars per ton and rises 5 percent above inflation each year.

Carbon Market Regulation - The bill names both the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission as regulators to protect against market manipulation (only FERC was included in the discussion draft). Key requirements are included to limit positions in auctions and derivative markets and to punish market manipulation. The bill also goes far beyond carbon market regulation to give the CFTC new regulatory powers over financial derivatives.

Additional GHG Standards. As before, new source performance standards (NSPS) are to be set for emission source categories not covered by the cap, using EPA's existing Clean Air Act authority. EPA has to include enough uncapped sources so that 95 percent of all industrially-related emissions are covered by the cap or these supplementary standards.

HFCs. Separate limits and emissions allowances are established for hydrofluorocarbons (HFCs) under provisions of the existing Clean Air Act that regulate ozone-depleting chemicals. The bill further accelerates the HFC reduction schedule provided in the discussion draft. The vast majority of HFC allowances will be auctioned within 10 years.

Black Carbon. The draft creates a program to reduce domestic and international emissions of black carbon.

Clean Air Act Modifications. The cap and trade program under the bill will be added as a new title of the Clean Air Act. At the same time, the bill repeals some existing Clean Air Act authorities.

It retains unchanged provisions for regulating motor vehicle emissions and it creates new performance standards for coal plants (reviewed above). It modifies the current authority to set new source performance standards (NSPS) so that they will cover only sources outside the cap. It clarifies that in light of the national cap, there is no need for setting ambient air quality standards or hazardous air pollutant standards for greenhouse gases.
However, like the discussion draft, the bill contains an overly broad elimination of case-by-case review of whether large new sources should install state-of-the-art technology to curb greenhouse gas emissions (New Source Review). It would be sufficient to raise the threshold for this review to new sources emitting more than 25,000 tons of CO2 or an equivalent amount of other greenhouse gases.

State authority. In general, the bill strenuously protects state authority to establish clean energy, energy efficiency, and greenhouse gas control programs that are more stringent than federal requirements. The one exception, however, is a six-year suspension (from 2012 through 2017) of authority to impose state cap and trade programs.

Title IV - Transitioning to a Clean Energy Economy

This portion of the bill fine-tunes a number of programs in the discussion draft to be funded using allowance allocations or revenue from auctions.

Low-Income Consumer Assistance. New provisions have been added to benefit low-income consumers above and beyond the consumer protection allocations made to electricity and natural gas local distribution companies. Low-income families spend a higher percentage of their income on food, transportation, and other basic needs and are the most vulnerable to cost increases that may be reflected in prices for those products. To address this, 15 percent of the allowances are to be auctioned every year and the revenue delivered to low-income families through a combination of existing delivery mechanisms such as tax credits and "energy refunds" delivered to bank accounts or through existing electronic benefits cards.

Preserving Domestic Competiveness. Like the discussion draft, the bill employs the Inslee-Doyle proposal for transitional rebates to certain energy-intensive manufacturers of basic commodity products that are subject to strong international competition. The goal is to counter pressures to shift production, jobs, and emissions to countries that do not have comparable carbon emission reduction programs. Rebates are intended to cover increased costs associated with both direct emissions and indirect emissions (if the latter are not covered by the allocation to local electricity distribution companies). Rebates are based on an industry benchmark emission rate (e.g., tons of CO2 per ton of cement) and facility-specific output data (e.g., tons of cement produced). Done right, this approach could promote investments in world-class efficiency that reduces emissions while also ensuring American competitiveness. Some refinements in the proposal are needed, however.

The bill raises the benchmark emission rates to 100 percent of the pertinent sector's average emission rate, up from 85 percent in the discussion draft. Since most firms can pass on at least a part of the cost of purchasing allowances, this will result in an overly-large rebate for most firms and tend to shift production towards domestic companies. In addition, the rebates are slated to continue until at least 2025, even if cost disparities with other countries are eliminated before then by their joining in actions to curb emissions. The discussion draft had allowed the president to review the rebates as early as 2017, and to reduce them if appropriate in light of other countries' actions.
The legislation should be refined to better account for varying degrees of trade exposure from industry to industry, and also to respond to evolving international conditions, including international progress towards global warming pollution controls.Technical changes are also needed to assure that firms must be both energy-intensive and trade-exposed to be eligible for rebates, and to use contemporary data wherever possible.

International Reserve Allowances. The bill also provides for border adjustments if the rebate program does not adequately address competitiveness concerns. U.S. importers of competing products would have to purchase special "international reserve allowances" to cover the emissions associated with those products. The date on which such reserve allowances must be purchased was moved to 2025, from 2019 in the discussion draft. Products from the least-developed and smallest-emitting countries would be exempt.

Green Jobs and Worker Transition. The bill creates a program of worker training, education, and transition for jobs in renewable energy, energy efficiency and climate change mitigation. It also provides compensation and health benefits, training and relocation support to qualifying workers whose jobs have been lost due to the effects of the legislation.

Domestic adaptation. The bill has expanded provisions for preparing for and adapting to human health and natural resource impacts of climate change that cannot be avoided. Funding is provided for these activities.

It establishes a climate change adaptation program within the U.S. Global Change Research Program and a National Climate Service within the National Oceanic and Atmospheric Administration (NOAA). States that adopt an EPA-approved adaptation plan are eligible for funds to implement such projects as responding to extreme weather events such as flooding or hurricanes, changes in water availability, heat waves, sea level rise, ecosystem disruption, and air pollution.
The bill requires the Department of Health and Human Services to develop plans to assist health professionals in preparing for and responding to the climate change health impacts.
The bill establishes a panel chaired by CEQ as a forum for interagency coordination on natural resources adaptation. The panel must develop a strategy for making natural resources more resilient to impacts from climate change and ocean acidification.

International Adaptation and Exporting Clean Technology. In addition to funding a program to reduce tropical deforestation, the bill provides allowance revenue to fund these two other key international needs. Together with its deforestation component, the bill will enable the U.S. to engage other countries on three key elements of the international climate negotiations.

The bill recognizes that global warming is a significant national and global security "threat multiplier." The most vulnerable countries, which have contributed little to global warming pollution, have the least capability to deal with its consequences. To address these needs, the bill provides allowance revenue for an International Climate Change Adaptation Program. The amount starts at 1% of allowances from 2012-2021, and increases to 2% for 2022-2026 and 4% for 2027-2050. Funding can be provided to these countries through bilateral assistance or multilateral funds and institutions agreed under an international climate agreement.
Recognizing that protecting Americans from global warming requires actions by all major emitters, the bill encourages developing countries to adopt emissions reduction policies and expand markets for American innovators' clean technologies. It provides allowance revenue to support an Exporting Clean Technology Program to encourage developing countries to take emission-reducing actions. The amount of allowances set aside is 1% from 2012-2021, increasing to 2% from 2022-2026 and 4% 2027-2050. In order to receive incentives, the developing country has to have entered into a multilateral agreement to undertake measurable, reportable, and verifiable emissions reduction actions, have put in place national policies and measures to reduce their emissions; and have developed a substantial emissions mitigation strategy. When developing countries need clean energy technologies, market opportunities will open up for U.S. companies.

* * *

Once again, my NRDC colleagues will post blogs over the next few days digging even more deeply into the American Clean Energy and Security Act. We will do everything we can to support Chairmen Waxman and Markey in improving the bill and passing it through the Energy and Commerce Committee next week.

Climate Week in Congress and at the EPA

2009-05-15T18:08:29Z

New polls (here, here, and here) show that Americans are eager for Washington to tackle clean energy and global warming. And next Monday, both the Executive and Legislative Branches will swing into action.

On Capitol Hill, the House Energy and Commerce Committee will begin a week-long marathon to pass a new clean energy and climate protection law - the American Clean Energy Security Act - under the leadership of Chairmen Henry Waxman and Ed Markey.

Also on Monday, across the Potomac River in Alexandria, the Environmental Protection Agency will hold the first of two public hearings (the other in Seattle on Thursday) on plans to curb global warming pollution under the law we already have, the Clean Air Act.

In Congress...

After weeks of tough negotiations, Democratic progressives and moderates on the Energy and Commerce Committee have come together on a comprehensive bill that sets new energy efficiency and clean energy standards and caps and cuts the carbon pollution that drives global warming. Though all the details are not out yet, by the key mid-term date of 2020, the bill will cut heat-trapping emissions 17 percent below 2005 levels. That's three percent less than Waxman's initial draft, but three percent more than President Obama's proposal from earlier this year. It will also put billions of dollars into investments in energy efficiency and clean energy, while protecting American consumers and workers. (We'll post more information on the ACES bill later today and over the weekend.)

The ranking Republican, Joe Barton, vows never to "surrender" and threatens hundreds of amendments. His substitute plan, unveiled yesterday, won't pass the laugh test, let alone the committee - it just lets emissions keep rising and increases our dependence on fossil fuels. With hands outstretched to Republican moderates, Waxman's coalition is prepared to press ahead for long hours to pass his bill by Memorial Day.

...and at the EPA

Last month the EPA responded to the Supreme Court's landmark ruling that the air pollution that causes global warming can be curbed under the existing Clean Air Act. EPA administrator Lisa Jackson issued the long-awaited "endangerment determination" officially recognizing that global warming pollution is a dangerous to our health and the environment, and that heat-trapping emissions from motor vehicles contribute to that pollution.

The EPA identified the range of serious health effects - let's not mince words: death, illness, and injury - connected to global warming that are occurring now and expected to worsen in the future, as a result of higher smog levels, killer heat waves, more frequent and severe floods, wildfires, and hurricanes, and the spread of infectious diseases.

Both the public and the industries that may be regulated will have their chance to comment on the endangerment determination in public hearings next week on Monday in EPA's offices in Alexandria, and on Thursday in Seattle. Most EPA public hearings are quiet affairs, but given public concern about global warming, expect big crowds for these.

Technically, the EPA's endangerment determination applies directly only to global pollution from motor vehicles, the specific subject of the Supreme Court case. But the implications are clear for power plants - which emit even more carbon pollution than vehicles - and other big industrial sources of heat-trapping emissions. We expect EPA soon to issue proposed new national standards for vehicles (as well as to give California the green light on its own standards). And we'll be asking EPA to follow up fast with action on CO2 from power plants.

At the same time, EPA has the tools to make sure that (despite hyperventilating from the Chamber of Commerce) small operations such as donut shops, barbeques, stores, and apartments have nothing to lose sleep over.

In short, we can take a big bite out of global warming pollution from cars, power plants, and other large sources using the Clean Air Act we have today, and we applaud EPA and the Obama administration for acting. But we cannot do all that is needed under the current law, and that's why we've joined with the administration and leaders in Congress to pass new clean energy and climate legislation.

Next week, big steps will be taken to reach both goals.

Schooling ABC on the ABCs of "Endangerment"

2009-05-13T01:36:37Z

ABC News is making a big deal about a document attributed to the White House Office of Management and Budget critiquing the Environmental Protection Agency's finding that carbon dioxide and other greenhouse gases are dangerous to public health and the environment. As I explain here, with this endangerment determination, EPA administrator Lisa Jackson and the Obama administration have finally started taking long-overdue action to curb carbon pollution under the Clean Air Act.

ABC and other news outlets would have you believe they've stumbled on a fight within the Obama administration about whether to regulate the pollution that's driving global warming. But there's much less here than meets the eye.

The document they've found was written in March or April during the OMB's review of the draft of EPA's determination, pursuant to the Supreme Court's landmark 2007 decision on global warming, that CO2 and other heat-trapping pollutants are dangerous to public health and the environment. [Update May 13: Grist, The Atlantic, and others reported late Tuesday that the document was written by a Bush-holdover in the Small Business Administration. So much for the theory of internal dissension.] It parrots a hodgepodge of tired arguments offered by industry groups throughout the Bush administration. But those arguments were not followed by OMB's current managers, who cleared EPA's action without delay, nor by EPA, which issued the determination on April 17.

In his own blog, OMB director Peter Orszag writes today that this was "a document in which OMB simply collated and collected disparate comments from various agencies during the inter-agency review process of the proposed finding," and that those comments "do not necessarily represent the views of either OMB or the Administration." "Any reports suggesting that OMB was opposed to the finding are unfounded," Orszag writes, and claims that OMB "had concerns about whether EPA's finding was consistent with either the law or the underlying science" are "simply false."

In fact, EPA's endangerment determination rests solidly on the scientific conclusions of the Nobel prize-winning Intergovernmental Panel on Climate Change, the National Academy of Sciences, and (ironically) the government's own climate change studies conducted during the Bush administration.

Here are some of the highlights (or lowlights) that ABC and other news outlets have seized on. For example, the document suggests "there is a concern that EPA is making a finding based on . . . 'harm' from substances that have no demonstrated direct health effects, such as respiratory or toxic effects."

But EPA has the broad responsibility under the Clean Air Act to protect us from pollutants that "endanger public health" - there's nothing in the law that limits matters just to the dangers of direct inhalation. As EPA quite properly found, the air pollutants that drive global warming pollution harm our health by many means: by causing more severe heat-waves, by enhancing smog formation, by expanding the range of infectious diseases, and by causing more frequent and severe floods, wildfires, hurricanes, and other deadly weather events.

The document also complains that EPA is "applying a dramatically expanded precautionary principle" by taking into account well-documented risks of global warming expected to unfold in the future.

Maybe "dramatically expanded" compared to the pinched practices of the last eight years, but this is actually a return to the Clean Air Act as it was written. More than 30 years ago, in a landmark case called Ethyl Corp. v. EPA, the federal courts upheld EPA's decision to take lead out of gasoline because of scientific evidence strongly indicating - but not proving beyond a reasonable doubt - that lead exposure caused neurological damage to children. (For those with access to legal research tools, the Ethyl decision can be found at 541 F.2d 1 (1976) - it's a great read.) In 1977 Clean Air Act amendments, Congress ratified the Ethyl decision's "precautionary" approach by adopting the requirement that EPA act when scientific evidence shows that a pollutant "may reasonably be anticipated to endanger public health or welfare." That's the legal mandate EPA is following now.

The document also charges that EPA regulation of global warming pollution from cars or power plants "is likely to have serious economic consequences for regulated entities throughout the U.S. economy, including small businesses and small communities."

That's the Chamber of Commerce's favorite argument - that if EPA ever starts using the Clean Air Act, it will never be able to stop. That using the Clean Air Act to address big sources - like cars and power plants - will inevitably lead to regulating every donut shop and barbeque in the land. But EPA has plenty of tools for focusing on the big sources, not the tiny ones. Check out Administrator Lisa Jackson's exchange today with Senator John Barrasso, posted here (starting at 4:32), in which she explained that EPA is focusing on the big sources, not small ones. In short, donut and barbeque lovers can sleep soundly at night.

NRDC applauds President Obama and Administrator Jackson for taking swift action to recognize the dangers of global warming and start using the Clean Air Act that's on the books today. We can take a big bite out of global warming pollution from cars and power plants using the Clean Air Act we have today. But NRDC also joins with the president in recognizing that we cannot do all that is needed under the current law. We also need new legislation to cap and cut carbon emissions, to raise energy efficiency and renewable energy standards, and to rebuild the economy and create millions of new jobs on a foundation of clean energy.

"Degree of Difficulty" - How to Judge the Waxman-Markey Carbon Reduction Targets

2009-04-30T22:27:26Z

This post written with Dan Lashof

In Olympic diving, the judges score each dive based on a mutually-agreed "degree of difficulty." So too in evaluating proposed carbon emission reduction targets for 2020, the judges - in this case the members of the House Energy and Commerce Committee - need to be using the same scoring system. They need to have the same information on how big a lift various targets may be. It turns out that judged against the appropriate benchmark the Waxman-Markey target is less of a lift than less stringent targets appeared to be when they were adopted two years ago.

Right now members of the Energy and Commerce committee are weighing a range of targets for 2020: Reps. Waxman and Markey have proposed reducing emissions 20 percent below 2005 levels. Others have voiced support for a 14 percent reduction (equivalent to President Obama's proposal to return to 1990 levels by 2020). And some committee members are reported to be advocating even smaller reductions.

It is not clear, however, that all of the committee members are using the same information on "degree of difficulty." The members may not all be aware of recent changes in the government's business-as-usual emissions forecast - leading some members to think that a given reduction target is much more challenging than others do. It's as though some Olympic diving judges think the board is three meters above the water, while others think it is six.

The Energy Information Administration produces a baseline emissions forecast each year - the "Annual Energy Outlook" - with projections of emissions through 2020 and beyond based on forecasts of economic growth, the price and mix of fuels, trends in the introduction of new energy production and use technologies, and the effect of already adopted energy and environmental policies. This baseline forecast determines how much additional emissions reduction is needed to meet any given carbon target.

Here's the key point: with each successive Annual Energy Outlook, the Energy Information Administration has been lowering its baseline forecast. Projected 2020 emissions were lower in AEO 2008 than AEO 2007, and they are lower still in AEO 2009, and the most recent forecast, AEO 2009 with ARRA, which is a revised forecast accounting for the clean energy investments in the stimulus bill.

So if you judge a target's degree of difficulty on the basis of AEO 2007, it looks a lot harder to achieve than on the basis of AEO 2009.

When then-candidate Obama first articulated his carbon emissions target, equivalent to a 14 percent reduction from 2005 levels, the most recent baseline forecast was AEO 2007. The Waxman-Markey target, 20 percent below 2005 levels, is based on AEO 2009.

When you compare these two targets with their contemporary baselines, you can see how much emissions reduction was thought to be needed to meet each target - the target's "degree of difficulty." In short, judged against the contemporary baseline, the Waxman-Markey target is less of a lift than the Obama target was thought to be at the time Senator Obama endorsed it.

This is illustrated in the figure below, which compares the two 2020 targets against their contemporary baselines. (The same comparisons are given for 2012 and 2030 as well.)

Source: The reference case for the Waxman-Markey targets is the revised Energy Information Administration Annual Energy Outlook 2009, including the effects of the American Recovery and Reinvestment Act, released April 2009. The reference case for the Obama targets is the 2007 Annual Energy Outlook. Energy-related carbon dioxide emissions are used as a proxy for emissions covered by the targets. The Waxman-Markey targets are 97% of 2005 levels in 2012, 80% of 2005 levels in 2030 and 58% of 2005 levels in 2030. The Obama targets are taken as 100% of 2005 levels in 2012, 86% of 2005 levels in 2020 and 58% of 2005 levels in 2030.

What does this mean for the Energy and Commerce negotiations?

First, that the members need to be judging the difficulty of proposed targets against the AEO 2009 baseline, not older, out-of-date forecasts.
Second, that when you use AEO 2009, you can see that the 20 percent reduction target Waxman and Markey have proposed is less of a lift than targets that might have seemed ambitious a year ago.

LIVE CHAT on EPA Determination that Global Warming Pollution Endangers Public Health

2009-04-20T18:57:40Z

Join David Doniger, NRDC's chief global warming attorney, at 1 p.m. Eastern today, April 20, for a special online chat. Doniger will take questions on Friday's official determination by the EPA that global warming pollution endangers public health, and the implications of that decision for regulating greenhouse gas emissions.

Submit your questions via the comments form in the application below once the chat starts. You can also participate via Twitter using the hashtag #greenchat.

&amp;amp;lt;a href="http://www.coveritlive.com/mobile.php?option=com_mobile&amp;amp;amp;task=viewaltcast&amp;amp;amp;altcast_code=78984991f1" mce_href="http://www.coveritlive.com/mobile.php?option=com_mobile&amp;amp;amp;amp;task=viewaltcast&amp;amp;amp;amp;altcast_code=78984991f1" &amp;amp;gt;Live Chat with David Doniger on EPA Endangerment Finding&amp;amp;lt;/a&amp;amp;gt;

Terms of Endangerment: EPA to Cut Global Warming Pollution

2009-04-17T16:06:00Z

At long last, the Environmental Protection Agency today officially recognized that the carbon pollution from our cars and power plants leads to killer heat waves, stronger hurricanes, higher smog levels, and many other direct and indirect threats to human health.

With this step, the Obama administration has gone a long way to restore respect for both science and law. The era of defying science and the Supreme Court has ended.

SPECIAL NRDC LIVE CHAT: Join David Doniger for a live online discussion about the EPA's endangerment determination on Monday, April 20, at 1 p.m. Eastern here on NRDC's Switchboard blog. Click here to join the chat.

Administrator Lisa Jackson issued an "endangerment determination" under the Clean Air Act -- a finding that carbon dioxide and other heat-trapping air pollutants "may reasonably be anticipated to endanger public health or welfare" and that motor vehicle emissions of those pollutants "contribute" to that dangerous air pollution.

Jackson's EPA and the Obama White House actually have acted quite quickly, producing the endangerment determination less than 90 days into the new president's term. But it has been a long wait. The simple acknowledgment that global warming pollution is dangerous to our health and our environment proved to be too much for the Bush administration. Eight years of scientific and legal denial -- our "little ice age" in Washington -- are finally over (see my previous post "See No Email").

Ten years ago, in the Clinton administration, EPA's general counsel ruled that CO2 is an air pollutant just like any other air pollutant, and is subject to regulation under the Clean Air Act -- the nation's most effective environmental law -- if the administrator makes an endangerment determination. But in 2003 the Bush EPA revoked that legal ruling and announced that the Clean Air Act simply does not apply to global warming pollution from motor vehicles. The next year, EPA took the same position on global warming pollution from power plants.

NRDC played a leading role in a grand coalition of states and environmental organizations that challenged the EPA rulings. It took a while, but in 2007 the Supreme Court issued a landmark ruling, Massachusetts v. EPA, flatly rejecting the Bush administration's position. The Court ruled that CO2 and other greenhouse gases from motor vehicles are air pollutants. The Court further held that EPA must determine, based on scientific considerations alone, whether those emissions are dangerous to health or welfare, and if so, issue standards to cut their emissions from new cars with available technology.

Today EPA has issued a bullet-proof scientific review, based on reports from the Nobel prize-winning Intergovernmental Panel on Climate Change, the National Academy of Sciences, and a host of other studies. The EPA review catalogues the full range of human health and environmental harms attributable to global warming pollution.

The endangerment determination issued today has important consequences. It requires EPA to follow up with standards under the Clean Air Act to curb emissions of carbon dioxide and other heat-trapping pollutants from new cars. While EPA has not said exactly what it will do and when, there are strong indications the administration is working on a plan to issue national standards for vehicles that equal or exceed those set by California ("Smile and Waive" ) -- that would be a great achievement.

EPA also will soon have to address whether power plants' CO2 emissions "contribute" in the same way to dangerous global warming pollution. Since power plants are responsible for twice as much heat-trapping emissions as cars, the answer is obvious.

To be sure, today's announcement is a proposal, and everyone - including the dwindling ranks of climate deniers - will have a chance to comment on EPA's scientific conclusions. The final determination will likely be issued in conjunction with the final national vehicle standards next year. But given the state of the science, there's not the slightest doubt about the outcome.

The Chamber of Commerce and others will claim that using the Clean Air Act against global warming pollution will lead to economic disaster. But those are just scare tactics (see "The Phony 'Train Wreck'").

We have the technology to cut global warming pollution from our cars, power plants, and other sources, mainly by making and using energy more efficiently, and by adopting renewable and cleaner energy sources. The energy technology revolution will help our economy recover, create millions of green jobs, save consumers billions of dollars, and cut our dangerous dependence on foreign oil.

NRDC salutes President Obama and Administrator Jackson for their actions to tackle global warming. We will work with them to carry out the existing Clean Air Act, and we'll work with them and with leaders in Congress, including Henry Waxman and Ed Markey, to enact comprehensive new climate legislation ("'First Read'").

The climate is too big to be allowed to fail.

"First Read" of the Waxman-Markey Energy and Climate Discussion Draft

2009-04-01T00:04:08Z

corrected copy, posted April 1

Congressmen Henry Waxman and Ed Markey today released their long-awaited "discussion draft" of the American Clean Energy and Security Act - a bold starting point for passing comprehensive energy and climate legislation through Congress this year.

Release of the draft starts an eight-week sprint to negotiate and adopt a bill in the House Energy and Commerce Committee, which Rep. Waxman chairs. Waxman and Markey (head of the key Subcommittee on Energy and the Environment) have pledged to complete work on a bill by Memorial Day. Speaker Nancy Pelosi has promised action by the full House of Representatives later this year.

The draft bill draws heavily on recommendations of the U.S. Climate Action Partnership, the business-environmental coalition that supports enacting climate legislation this year. It is also consistent with the legislative principles announced last week by the labor-environmental Blue-Green Alliance. NRDC is a member of both groups.

Here's our first read of the details of this important and bold draft legislation, compiled with the help of NRDC's crack team of energy and climate experts. First, some top-line observations:

The draft combines standards and incentives for rapidly deploying clean energy and energy efficiency technologies with firm economy-wide limits on the carbon pollution that is driving global warming. Investments in clean energy and energy efficiency will help power our economic recovery, cut consumers' energy bills, create good-paying green jobs, and lower the cost of meeting carbon limits. A steadily declining cap on carbon pollution will enable America to lead again in world-wide efforts to avoid the worst effects of global warming.

While the 648-page draft provides detailed proposals on most issues, it is deliberately open-ended on how to distribute the valuable emissions "allowances" that polluters must have at the end of each year to cover their global warming emissions. How many will be given away, and with what performance conditions? How many will be auctioned, and how will the revenue be used? Congressmen Waxman and Markey have left these key questions for discussion and negotiation with other members of their committee.

As a member of both USCAP and the Blue-Green Alliance, NRDC believes it is critical that the formula for distributing allowances must lead not to private windfalls but to achieving public objectives. The Waxman-Markey draft opens the door to using the value of the allowances for a wide range of critical needs - supporting investments in the clean energy economy, protecting consumers (especially low-income consumers), dealing with unavoidable climate change impacts, and doing our part to achieve international cooperation against global warming.

Now let's dive deeper into the details. The bill has four titles: Clean Energy, Energy Efficiency, Reducing Global Warming Pollution, and Transitioning to a Clean Energy Economy. Highlights of each section:

Title I - Clean Energy

Renewable energy standard. The draft requires an increasing percentage of electricity sold by utilities to come from renewable sources, reaching 25 percent by 2025.

Broad coverage. Includes retail electric utility service providers -investor-owned, municipals, rural cooperatives - who sell at least 1 million megawatt-hours of electricity each year.
Compliance flexibility. Allows utilities to meet their obligations by buying, selling, and trading federal Renewable Energy Credits (RECs).
Extra credit for distributed resources. Provides three times the amount of RECs for electricity generated by distributed renewable sources such as solar photovoltaics.
Protects state RPSs. The bill provides that the federal RES will not interfere with individual states RPSs and associated policies.
Critical lands and habitat protections. Certain resources, such as old-growth and mature forests, are excluded in order to protect critical lands and habitats.
Governor's petition. Governors may petition to reduce a utility's RES requirement by up to 20 percent in any given year if all entities in the state subject to the Energy Efficiency Resource Standard (EERS) established by Title II of the draft bill are in compliance that year.

Carbon capture and storage. The draft bill creates an integrated program modeled on USCAP recommendations to assure new coal plants will employ carbon capture and storage (CCS) technology to cut their global warming pollution.

CCS safety regulations and demonstrations. EPA is to issue CCS regulations to safeguard health and environment and prevent atmospheric releases from underground reservoirs. DOE and FERC are to study CO2 pipeline needs and barriers. A Carbon Storage Research Corporation is tasked with the research and development of new CCS technologies and some early demonstrations, financed through a small "wires charge" on existing fossil generation.
CCS deployment incentives. A 10 year carbon intensity assessment program is established to provide $1-1.1 billion annually for research, development, and demonstration of carbon capture and storage technology. Additionally, a larger scale performance-based deployment program is authorized that would reward companies based on the volumes of CO2 captured, with higher levels of compensation provided for early projects and higher capture rates.
Coal-fired power plant standards. New coal-fired power plants have to emit less than 1,100 pounds of CO2 per MWh if permitted after 2015, less than 800 pounds of CO2 per MWh if permitted after 2020. Plants permitted between 2009 and 2015 have to comply withthe 1,100 pounds limit within 4 years of start-up if certain targets for operational CCS capacity are met.

Clean fuels and vehicles. The draft encourages clean vehicles and fuels through a mixture of incentives and standards - promoting energy security and curbing global warming by minimizing our reliance on oil.

Low carbon fuel standard. The draft bill improves on the existing renewable fuels standard through 2022 with safeguards against dirtier fuels. The bill then phases in a low carbon fuel standard (LCFS) to cut the lifecycle emissions intensity of transportation fuels by five percent in 2023 and 10 percent in 2030.
Plug-in Electric Vehicle Deployment. The draft requires electric utilities to plan for an electric vehicle infrastructure, including charging stations and battery exchanges. It directs the Energy Department to develop a large-scale plug-in hybrid vehicle program in selected regions. It also provides financial support for domestic production of plug-in hybrids vehicles, supporting assembly plant retooling and domestic battery production.
Passenger car standards. The draft bill directs the President to use existing statutory authority to set vehicle performance standards for light-duty vehicles, to the extent practicable, harmonizing fuel economy standards set by NHTSA and greenhouse gas emissions standards set by EPA and California. Standards have to achieve at least as much emissions reductions as would California's standards, and California's authority to set future standards is preserved. EPA is also directed to set greenhouse gas standards for heavy-duty vehicles, marine vessels, locomotives, and other vehicles. The bill also authorizes EPA's SmartWay program to improve passenger and goods transport.

State Energy and Environment Deployment ("SEED") Fund. The draft creates a fund for managing federal financial assistance to states related to clean energy, energy efficiency and climate change, including appropriations for weatherization assistance, State Energy Program funds, and recovery bill funds.

Smart grid and electricity transmission. The draft bill encourages deployment of a smart grid, with measures to reduce utility peak loads. It also seeks to develop home appliances with the capability to interact with the smart grid. The Federal Energy Regulatory Commission is directed to reform regional planning to modernize the electric grid and provide for new transmission lines to carry electricity generated from renewable sources. Transmission needs assessments must take into account both demand and supply options.

Federal renewable energy purchases. The draft authorizes federal agencies to sign contracts of as long as 30 years for purchase of renewable energy.

Title II - Energy Efficiency

Building energy efficiency. The draft calls for a 30 percent improvement in the next version of widely-used model energy codes for new commercial buildings (ASHRAE) and homes (IECC), and a 50 percent improvement after 2016. The Energy Secretary is authorized to adjust the code if these organizations don't. States have to adopt them within one year, and then show compliance to receive certain funds. The bill would allow states to implement nationally-consistent energy retrofit programs for residential and commercial buildings, with the rules set by EPA and money handled by DOE. Both programs would be performance-based, meaning that greater energy savings reap larger incentives. A rebate program is created to purchase and destroy certain pre-1976 manufactured housing and replace it with EnergyStar manufactured homes. The draft also creates a building energy performance labeling program.

Lighting and appliances. The draft sets efficiency standards for outdoor lighting and portable light fixtures, and for water dispensers, hot food cabinets, and spas. More far-reaching changes are made to the DOE appliance energy standard-setting process to strengthen future standards for products already regulated. The draft establishes a "best-in-class" appliance deployment program, with incentives to retailers and a prize ("golden carrot") program for manufacturers of super-efficient appliances. Early retirement bounties also have been added.

Transportation efficiency. The draft bill changes the direction of transportation planning and investment by requiring regions to set greenhouse gas emission reduction goals, revising them every four years; investing in public transportation, technology and other measures to reduce emissions; making regional plans available to the public via the internet; and authorizing a competitive grant program for regions implementing these plans.

Energy efficiency resource standard. The draft bill requires natural gas and electric utilities to accomplish energy savings equal to 10 and 15percent, respectively, of their sales by 2020. Eligible energy savings include end-use customer savings, increased distribution efficiency, savings attributable to combined heat and power, and savings achieved through efficiency codes and standards.

Industrial energy efficiency. The draft authorizes DOE to make awards for innovative energy recovery methods, such as efficient motors, combined heat and power, and process engineering. The awards can be as much as one fourth the value of the energy projected to be recovered or generated during the first 5 years of a facility's operation.

Title III - Reducing Global Warming Pollution

Economy-wide emission reduction goals. The draft bill places firm limits on emissions of carbon dioxide and other designated heat-trapping pollutants. Targets are based on USCAP recommendations:

Year        Reduction below 2005 levels

2012                3%

2020                20%

2030                42%

2050                83%

Supplemental reductions. Emissions are reduced further through international agreements to slow tropical deforestation (which accounts for a fifth of global carbon emissions), funded by auctioning a fraction of the emissions allowances. Criteria are included to set declining rates of deforestation as the baseline for supplemental emission reductions. By 2020, the goal is to achieve supplemental annual emission reductions equal to 10 percent of U.S. 2005 emission levels.

Scientific review. The National Academy of Sciences is tasked to review the targets periodically in light of the best available science, and the President is to recommend program changes to Congress.

Firm pollution limits on covered sources. Sources representing about 85 percent of U.S. carbon emissions are covered by a firm limit - a cap - on their emissions. Electric generating units and fuel refiners and importers are covered starting in 2012, major industrial emitters in 2014, and natural gas local distribution companies in 2016.

Cost control. The draft bill includes cost-control provisions, mostly modeled on USCAP recommendations:

Emissions trading and banking - proven tools for lowering costs developed in the acid rain program and other programs.
Emissions offsets - reductions achieved from domestic and foreign sources outside the cap - provide further cost control. Offsets are allowed in amounts of up to two billion tons per year. The draft bill seeks to assure that offsets are high-quality and produce environmental progress as well as cost-reduction.

An Offsets Integrity Advisory Board is created to help assure that reductions are real, enforceable, and would not have happened anyway.

Effective agreements are required with other countries to assure international offset quality.

When offsets are used, firms must turn in 1.25 tons of credits for each ton of emissions from covered sources they wish to offset.

Strategic reserve - A pool of emissions allowances is established to address the potential for spikes in carbon prices. Allowances are to be auctioned from the strategic reserve if allowances prices reach double the value predicted by EPA in the early years, or double their historical price once the program has been in operation for three years. The strategic reserve pool would be funded using 1% of allowances from 2012-2019, 2% from 2020-2029, and 3% thereafter. There would be limits on how much of the reserve pool can be drawn down in any one year. Ways are provided to supplement the strategic reserve with international offsets.

Carbon market regulation - The draft bill gives the Federal Energy Regulatory Commission responsibilities to protect against market manipulation. Key requirements include limiting any emitting company from purchasing more than 20 percent of the allowances sold in any one auction, fining companies involved in market manipulation up to $25 million, and preventing any single participant from owning more than 10% of any class of derivatives.

Disposition of allowances. The draft bill creates a skeletal framework for distributing allowances - some by allocation, and some by auction. As mentioned at the outset, however, the details are mostly left blank for future negotiation within the Energy and Commerce Committee.

Additional GHG standards. The draft provides for setting new source performance standards (NSPS) for categories of emission sources not covered by the cap, using EPA's existing Clean Air Act authority. These standards will provide for use of the best demonstrated technology to reduce emissions. EPA has authority to decide which types of sources to cover, so long as they bring the total program coverage (sources under the cap plus sources subject to NSPS) to 95 percent of the heat-trapping emissions from industrial sources.

HFCs. Separate limits are established for hydrofluorocarbons (HFCs) under existing Title VI of the Clean Air Act (which regulates related ozone-depleting chemicals), with a faster emission reduction schedule and a specific allocation and auction system.

Black carbon. The draft creates a program to reduce domestic and international emissions of black carbon.

State authority. In general, the draft bill strenuously protects state authority to establish clean energy, energy efficiency, and greenhouse gas control programs that are more stringent than federal requirements. The one exception, however, is a six-year suspension (from 2012 through 2017) of authority to impose state cap and trade programs. (We will work with the states and the committee to clarify the intent of this provision.)

Title IV - Transitioning to a Clean Energy Economy

This portion of the draft bill authorizes a number of programs that may later be funded, depending on committee negotiations, by allowance allocations and auction revenues.

Preserving domestic competiveness. The draft adopts the Inslee-Doyle proposal for transitional rebates to certain energy-intensive manufacturing facilities making basic commodity products that are subject to strong international competition. The goal is to counter pressures to shift production, jobs, and emissions to countries that do not have carbon emission reduction programs. Rebates cover both direct and indirect (e.g., electricity-related) emissions and are based on a formula based on an industry benchmark emission rate and facility-specific output data.

International reserve allowances. A second provision addresses international competition concerns. Not later than 2017, the President is to report to Congress on the impact of the "Inslee-Doyle" program on specified energy-intensive. If negative impacts are found on these industries, then starting in 2019 U.S. importers of competing products must purchase special allowances to cover the emissions associated with their imports. Products from least developed countries and countries responsible for less than a half percent of world GHG emissions are exempted.

Green jobs. The draft bill creates a program of worker training, education, and transition to support the growth of green jobs and the new energy economy.

Exporting clean technology. The draft bill authorizes assistance for deploying clean technologies to developing countries - to projects that achieve substantial reductions in greenhouse gas emissions through deployment of low- or zero-carbon technologies. Only developing countries that have ratified an international treaty and undertaken substantial greenhouse gas reductions are eligible. An International Clean Technology Fund is established in the Treasury Department.

Domestic adaptation. The draft would require the National Oceanic and Atmospheric Administration (NOAA) to perform a national vulnerability assessment, evaluating regional vulnerabilities to climate change impacts on human health, natural resources, and infrastructure. The legislation would provide funding for state, local, and tribal projects to assist communities with adapting to climate change. It would require federal natural resources agencies to develop and implement adaptation plans for natural resources under their management.

International adaptation. The draft creates an International Climate Change Adaptation Program within the US Agency for International Development (USAID) to help the most vulnerable developing countries adapt to climate change. The draft identifies eligible activities and projects, including promotion of renewable and efficient energy technologies; development of national and regional adaptation plans; and protection and rehabilitation of natural ecosystems. It provides for community engagement through consultation, information disclosure, and public participation.

* * *

My NRDC colleagues will post blogs over the next few days digging even more deeply into the draft bill. We'll make recommendations on improvements to Chairman Waxman and Chairman Markey. And we'll work with other members of the committee to hear their concerns and help forge a majority around a strong bill.

The climate is too big to fail!

Smile and Waive

2009-03-05T16:45:26Z

Today the Environmental Protection Agency takes another step towards finally giving California the green light to enforce its landmark standards to cut global warming pollution from new motor vehicles. The Bush administration had blocked California last year by denying the state a normally-routine waiver under the Clean Air Act.

President Barack Obama, acting quickly on his first Monday in office, directed his new EPA administrator, Lisa Jackson, to take a fresh look at the waiver. Today EPA is holding a public hearing required by law to give all sides - California and other states, environmentalists, automakers, and car dealers - a chance to have their say.

I'll present NRDC's testimony today along with testimony by our vehicles policy guru, Roland Hwang. Our message will be simple and direct: California has met every requirement of the Clean Air Act. EPA needs to grant California its waiver without further delay.

Since 1967, the Clean Air Act has allowed California to set its own standards for vehicle air pollution. California has to apply to EPA for a waiver, but over four decades and under presidents of both parties this has never been a barrier before. More than 50 waivers were granted over the past 40 years and this was the first one refused. Other states can then choose between federal emission standards or California's.

California's legislature passed a law in 2002, sponsored by then-Assemblywoman (now-Senator) Fran Pavley, requiring the Air Resources Board to set standards for greenhouse gas emissions from new cars, SUVs, minivans, and pick-ups. In 2004, under Governor Arnold Schwarzenegger, the ARB set standards for a combination of four pollutants - carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons (HFCs, the coolant in air conditioners).

Since then, 13 other states (Arizona, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington) and the District of Columbia have chosen the California standards. Other states, including Colorado, Florida, Illinois, Minnesota, and Utah, are in the process of joining them.

In 2005 the governor asked EPA Administrator Steven Johnson and his boss, President George W. Bush for the Clean Air Act waiver. That's where the trouble began.

To begin, automakers and dealers brought a series of lawsuits against California and other states, arguing that California can't regulate global warming pollution under the Clean Air Act and is preempted by a second federal law that calls for CAFE standards. They've lost every case so far. The Supreme Court ruled that greenhouse gases are "air pollutants" subject to EPA regulation under the Clean Air Act, and that the federal CAFE law doesn't stand in the way. Three district courts reached the same conclusion regarding California's standards.

But the automakers didn't stop there. They went to the Bush White House. And sure enough, going against the unanimous recommendations of his lawyers, scientists, and engineers, EPA Administrator Johnson turned thumbs down on the waiver.

Now, at President Obama's direction, Administrator Jackson is taking a fresh look, and we have every hope she will turn her thumbs up, because:

California has demonstrated its standards are more protective than the federal ones - not hard since there are no federal standards for global warming pollutants.
California has demonstrated it needs these standards to meet "compelling and extraordinary conditions."

California has a greater variety of severe global warming impacts than any other state - including increased smog levels, reduced water storage in the Sierra snowpack, sea level rise, salt water intrusion, agricultural damage, increasing wildfires - you name it, California's got everything except melting permafrost.

Motor vehicles account for 40 percent of the state's heat-trapping emissions. Reducing those emissions (and vehicle pollution in other participating states) will help mitigate California global warming impacts.
California has demonstrated car makers can meet its standards using technology already on the road in some cars - it only needs to be used in more cars.

The job can be done even without hybrids (though hybrids will help, of course.) And consumers will save money because their cars will use less fuel.

Some car makers' own product plans show they can meet California's standards on a nationwide basis - see Roland Hwang's testimony and his blog for more on that.

More and more, car makers and dealers understand that their market has fundamentally changed. Global warming isn't going away. And when the economy recovers and people start buying cars again, the automakers know oil prices are going back up. In its latest request for federal taxpayer assistance, GM projects a return to $130 per barrel oil by 2014.

If taxpayers are going to put more money into these companies, we need to be sure they'll be making products that make sense when the customers come back. To survive in the world that's coming, they need to be making the cleaner, more efficient vehicles California's standards will drive.

What will the auto makers and car dealers say today? My guess is that they see the handwriting on the wall. They'll not use all their chips making losing arguments against the need to cut California's global warming pollution, or the feasibility of the state's standards. Rather, they'll lament state-by-state action and call for national uniformity.

As I've written in recent posts (here, here, and here), there are practical ways to get the highest possible emissions standards we need nationwide and also achieve the practical uniformity the auto industry wants.

But it all starts with granting the California waiver.

The Latest Auto Bailout Plans II - So What Did We Find?

2009-02-20T23:18:59Z

A few days ago, on the eve of the auto companies' submittal of their latest restructuring plans, I wrote about what to look for in terms of commitments to meet higher standards for global warming emissions and fuel economy. Now that GM and Chrysler have filed their plans with the Treasury, let's see what they said.

General Motors' plan, which asks for $22.5 to 30 billion dollars in federal loans, had this to say about emissions and fuel economy standards (pp.21-22):

[T]he Company has complied with Federal fuel economy rules since their inception in 1978, and is fully committed to meeting the requirements in the 2007 Energy Independence and Security Act (which specifies the 2020 fuel economy requirement). Going forward, the Company will work closely with the Administration on future requirements, and work to meet them in the most cost effective way. Compliance with other regulatory schemes, including the California CO2 program, will be addressed as any such programs are finalized. General Motors will work with the Administration, and others, to develop any changes needed to the Company's product and financial plans to meet such additional requirements.

The last two sentences are intriguing. In place of GM's former just-say-no stance on California's global warming emission standards, now the company pledges that compliance with those standards "will be addressed as any such programs are finalized." And the company pledged to "work with the Administration, and others" (Who could that be? California? Environmental organizations?) "to develop any changes needed to the Company's product and financial plans to meet such additional requirements."

The Wall Street Journal characterized the company's new tone this way: "General Motors: Maybe We Can Live With California Emission Rules." The Journal said that GM "appears to have softened resistance to government fuel-economy standards" and "hinted it might be open to California regulating auto emissions after all."

We'll have to see about that. In a subsequent conversation with NRDC, GM's chief Rick Waggoner reiterated his desire for a single national standard, but said the $64,000 question is what that would be. As I reported, an analysis of automakers' previous restructuring plans, prepared by my colleague Roland Hwang, found that the companies are now positioned to comply with California's standards if they were extended to apply nationwide. GM's officials quibble with that conclusion, but say they want to talk. We'll keep pressing.

Chrysler

Chrysler's plan, which seeks another $5 billion in loans, also seems to have softened the company's stance against to the California standards - at least in tone. Chrysler's report says this (p.116):

California and thirteen other states have adopted greenhouse gas vehicle emissions standards ("AB 1493 standards") that require increases in fuel economy. These states comprise about 50% of the domestic car market.

If the US Environmental Protection Agency allows these states to enforce the AB 1493 standards, Chrysler will try its best to comply using available technology, however as a last resort it may be necessary to restrict sales of certain vehicle models in those states. The ultimate effect of the California standards on Chrysler's product plans depends on a number of developments, as indicated in the Appendix.

Chrysler now says that if EPA approves the California waiver, it will "try its best to comply using available technology." The company does say that "as a last resort it may be necessary to restrict sales of certain vehicle models in those states," but this is a step back from Chrysler's shrill claims of doom and gloom two years ago, in the auto industry's unsuccessful lawsuits to block the California standards.

There's more to explore with Chrysler too. The last sentence mentions an appendix that explores "a number of developments" that will shape the effect on Chrysler's product plans, but that appendix was not made public. We'd like to know what it says.

So, do the plans show some movement? Maybe. As I told the Wall Street Journal: "If you have your hand out for federal dollars, it is harder to thumb your nose at these requirements as they used to." But we still need to see if the movement is real.

The solution is in still their hands. All they have to do is agree to meet standards that deliver emissions and fuel economy at least equal to applying California's standards nationwide.

The Latest Auto Bailout Plans – What to Look For

2009-02-17T22:58:55Z

General Motors and Chrysler are expected to submit "restructuring plans" later today under the terms of the multi-billion dollar loans from the outgoing Bush administration under the "troubled asset relief program" (TARP).

The loans were provided to enable the companies "to develop a viable and competitive business that minimizes adverse effects on the environment" (see p. 1 of the GM loan agreement, for example). There's been a lot of attention, and rightly so, to the steps they'll take to reduce costs, discontinue certain brands, and adjust their market shares. But the loan agreements also require the companies to show in their restructuring plans how they will "comply with applicable federal fuel efficiency and emissions requirements" (GM agreement, p. 54).

The handwriting is on the wall that the "applicable federal fuel efficiency and emissions requirements" are likely to become stronger, and soon.

As I described here, on January 26th President Obama put the nation on a new path towards cleaner, more efficient cars by directing his agencies to review two key Bush administration decisions on auto standards. As a result, the Environmental Protection Agency is likely to give California the green light - denied under the Bush administration - to enforce its landmark greenhouse gas emission standards for new cars and light trucks. And the Department of Transportation is expected to strengthen the lax fuel economy standards proposed during the previous administration.

Expectations for higher emissions and fuel economy standards have been rising in Congress as well. As Speaker Nancy Pelosi and House Financial Services Committee Chairman Barney Frank wrote in a February 13th letter to GM and Chrysler, their restructuring plans need to include:

A demonstration of your ability to achieve or exceed the fuel efficiency requirements set forth in the Energy Independence and Security Act of 2007, and the emissions standards adopted by California and other states, if they receive Federal approval, and become a long-term global leader in the production of fuel-efficient and advanced technology vehicles.

Meeting the California standards is well within the companies' reach. An analysis of GM's and Ford's plans submitted to Congress last November, prepared by my colleague Roland Hwang, shows that they are now positioned to comply with California's greenhouse gas standards if they were extended to apply nationwide.

GM's and Chrysler's new reports are likely to complain again about a "patchwork" of environmental standards. They will say they want uniform national standards.

A nationally uniform solution is in their hands. All they have to do is agree to meet federal emission and mileage standards that deliver performance at least equal to applying California's standards nationwide. Let's see if that is in their reports.

Cleaner Cars -- The Race to the Top?

2009-02-04T01:37:51Z

Just a short time ago, the nation's biggest automakers - including General Motors, Ford, and Chrysler - had Washington tied up in knots and California bent around the axle. But last week President Obama put the nation on a new path towards cleaner, more efficient cars.

The president directed the Environmental Protection Agency (EPA) to take a fresh look at giving California the green light for its landmark global warming pollution standards - standards already adopted by 13 other states. The Bush administration had blocked California last year by denying a normally-routine Clean Air Act waiver.
President Obama also told the National Highway Traffic Safety Administration (NHSTA) to set new federal fuel economy standards. The Bush administration had proposed weak standards last year, but left them for its successor to finish. All signs are that the new president now will strengthen them.
And very soon, the new EPA administrator, Lisa Jackson, is expected to make the long-delayed official pronouncement that CO2 and other heat-trapping pollutants are bad for our climate, our health, and our environment - called an "endangerment" determination. Two years ago, in a historic case called Massachusetts v. EPA, the Supreme Court ordered the Bush administration to face up to the science, but EPA did nothing. Obama's EPA will then follow up with federal standards for global warming emissions from cars (as well as power plants and other industries).

The new administration understands that higher pollution and mileage standards will help curb global warming, cut our dangerous dependence on oil, save consumers billions at the pump, and help the domestic auto industry recover.

As I said in a recent New York Times story: "If carmakers are going to survive in a world of volatile oil prices and global warming, they have to be making more efficient vehicles. When the economy comes back and people start buying cars again, they're going to expect that gas prices are going to go up, and they're not going to want the gas hogs that they used to want. Consumers' tastes have changed in terms of what's cool."

Some outside the auto industry still cry doom and gloom. In the same article one pundit claimed the California standards "would basically kill the industry."

But Dave McCurdy, head of the industry's Alliance of Automobile Manufacturers, struck a more moderate note:

The Alliance supports a nationwide program that bridges state and federal concerns and moves all stakeholders forward, and we are ready to work with the Administration on developing a national approach. . . . Automakers seek a federal-state solution that provides us with compliance clarity and one national standard.

The automakers seem to have realized that they cannot wish California and the Clean Air Act away and go back to the days when NHTSA was on the industry's leash. But there may be a way to provide the higher standards we need and also meet the auto industry's desire for planning certainty and practical uniformity. What we need is a formula that:

Maintains California's historical leadership. California needs to continue to play the pioneering role it has had for more than 40 years, setting emission standards that pull forward new technologies.
Takes California's progress nationwide. We also need federal greenhouse gas and mileage standards that apply all across the country and deliver emission reductions at least equal to California's standards.

Will the auto industry agree to these goals? If so, we should be able to find a pathway forward that works for everyone.