China, Chile, Costa Rica, and Mexico will present their plans
for the deployment of market-based programs to reduce greenhouse gas
emissions at a March 11-13 World Bank program. The World Bank will consider these plans for funding assistance under the Partnership for Market
Readiness. This program provides grants and technical assistance to support the
development of market-based approaches for reducting greenhouse gas emissions. As the number of carbon trading programs develop in numerous countries, it will be interesting to observe the efficacy of these programs and the degree to which trading across or among jurisdictions, as well as the similarities and differences between the regulations forming the emissions markets.
The Texas electricity market within the Electric Reliabibilty Council of Texas or ERCOT, which covers 80 percent of Texas, is suffering from a deficit of peak power. Concerns are rising that the state will be short on power during the summer months. The Brattle Group was engaged to prepare a report for ERCOT on how to manage or address the power shortage issue. The Brattle Group also prepared a report entitled, The Impact on Solar PV on Electricity Markets in Texas, which discusses electricity cost savings Texas could produce if it built more solar farms--the price of solar power would be less than peak power plant prices.
The irony is that many believe that solar power is always more expensive than traditional power plants like natural gas plants. But electricity markets are complicated. Base load power is very inexpensive in Texas because of abundant natural gas that has arisen through the technology of horizontal drilling and hydraulic fracturing in the gas shales--which has unleashed a tremendous resource of cleaner burning fossil fuel.
However, peak power prices can be very expensive. In Texas, ERCOT raised the cap price from $3000 per MW to $4500 per MW, and the cap is going to rise to $9000. The hope is this will encourage more natural gas power plants to be built.
Solar can be one of the answers. With rapidly declining prices for solar PV panels and the short time to build solar farms, 90 or 120 days in some instances, solar is much less than $3000 per MW. A natural gas plant can take a couple of years to permit, finance, and build. We still need these plants, but solar can be a contributing factor to managing peak power--the sun shines most when peak power is needed to cool homes and businesses in the hot summers in Texas.
Solar PV can contribute to energy savings, if applied in the right way, in the right market, and at the right price. The Brattle Report shows how solar could contribute to enhancing the Texas electricity market. Unfortunately, the politics in the Texas legislature is likely to prevent any renewable bills from passing.
While Texas has the largest installed wind power base, it is unfortunate that we could not work to be the leader in solar, so that Texas is the all-of-the-above leader--wind, solar, and oil and gas. It would appear to all be good for the economy and good for the environment. Creative and empirical thinking is at a disadvantage if politics gets in the way--Democrats and Republicans both need to realize that we need at this time fossil fuels and alternative energy. Each has their own necessary role in today's economy and with today's technology.
The Regional Greenhouse Gas Inititiave (RGGI) has proposed a new model rule for the nine northestern states that participate in the program to substantially reduce the greenhouse gas emissions in these states. The proposed rule includes the following:
• A reduction of the 2014 regional CO2 budget, “RGGI cap”, from 165 million to 91 million tons – a reduction of 45 percent. The cap would decline 2.5 percent each year from 2015 to 2020. • Additional adjustments to the RGGI cap from 2014-2020. This will account for the private bank of allowances held by market participants before the new cap is implemented in 2014. From 2014-2020 compliance with the applicable cap will be achieved by use of “new” auctioned allowances and “old” allowances from the private bank. • Cost containment reserve (CCR) of allowances that creates a fixed additional supply of allowances that are only available for sale if CO2 allowance prices exceed certain price levels ($4 in 2014, $6 in 2015, $8 in 2016, and $10 in 2017, rising by 2.5 percent, to account for inflation, each year thereafter.) • Updates to the RGGI offsets program, including a new forestry protocol. • Not reoffering unsold 2012 and 2013 CO2 allowances. • Requiring regulated entities to acquire and hold allowances equal to at least 50 percent of their emissions in each of the first 2 years of the 3 year compliance period, in addition to demonstrating full compliance at the end of each 3 year compliance period. • Commitment to identifying and evaluating potential tracking tools for emissions associated with electricity imported into the RGGI region, leading to a workable, practicable, and legal mechanism to address such emissions.
This new approach if adopted by the RGGI states would increase the price of allowances dramatically. The prices for RGGI allowances has been around $1 to $2 per short ton of CO2.
On March 23, 2012, the Department of Interior released the U.S. Fish and Wildlife Service Land-Based Wind Energy Guidelines for wind energy projects and to guide state and federal regulators with respect to impacts on birds and wildlife from proposed wind projects. The guidance replaces older, interim guidance published in 2003. Wind developers and financing entities should understand the guidance and the relevant statutes and regulations at the state and federal level when evaluating wind project development or finance.
Ernst & Young has conducted a study on the issue of reducing taxes through environmental and sustainability programs--cutting carbon can lead to lower taxes in some instances. The study results were published in an article in Environmental Finance, which asked company represenataives if they were aware of incentives for "green" investment.
Federal, state, and local tax credits, deductions, and grants may be available for energy efficiency and other investmetns. For example, Section 179D of the US Tax Code provides for up to $1.80 per square foot for energy efficiency installations in existing or new buildings. Tax credits are available for some renewable and alternative energy installations at company properties.
Utilitity incentives may also be available.
Don't forget to check on these incentives when engaging in or planning sustainability programs for your company.
Under the approach announced by EPA on February 27, 2012, that it would not be lowering the thresholds for greenhouse gas (GHG) permitting. The agency stated that new facilities with GHG emissions of at least 100,000 tons per year (tpy) carbon dioxide equivalent (CO2e) continue to be required to obtain PSD permits. Existing facilities that emit 100,000 tpy of CO2e and make changes increasing the GHG emissions by at least 75,000 tpy CO2e, must also obtain PSD permits. Facilities that must obtain a PSD permit, to include other regulated pollutants, must also address GHG emission increases of 75,000 tpy or more of CO2e. New and existing sources with GHG emissions above 100,000 tpy CO2e must also obtain operating permits.
EPA had previously discussed lowering the level at which GHG emissions would cause facilities to be regulated.
Point Carbon reports that California carbon allowance prices jumed $2 or 15 percent as larger buyers have started buying allowances in anticipation of the January 1, 2013 start date for the California cap and trade program to control greenhouse gas emissions. The California Air Resources Board is implementing regulations passed under the California Global Warming Solutions Act. Prices moved to $15 per tonne of carbon dioxide equivalent.
Having just returned from London where I spoke at the Climate Finance 2011 conference on the developments in North America, particularly the approval by the California cap and trade program, a rather glum audience listened to speakers discuss the oversupply of carbon offsets in the market going forward over the next several years.
The long market was specifically discussed by Trevor Sikorski,Head of Environmental Market Research,Barclays Capital. He presented a market of low prices for the present and next few years as a result of lower emissions becasue of a week economy and oversupply of allowances and offse
Point Carbon reported that UBS analysts predict carbon prices could go as low as 3 euros as the EU faces a predicted weak economy and the market remains oversupplied with permits until 2025.
As the EU considers lowering the carbon cap from 20 percent to 30 percent, it may be able to reach such a cap at low prices with offsets in such significant supply.
The International Forest Carbon Association (IFCA), a new business association devoted to private project development of projects that protect or regrow forests using private capital, has launced its website. www.ifca.cc.
Membership is now open and major partners will be announcd soon.
IFCA is currently developing working groups to address key issues for forest carbon and to carry out the work of the association.
Ecoystem Markeplace and Bloomberg New Energy Finance reported that the voluntary carbon market had a 34% increase in sales volume to a record 131 million tons of carbon dioxide equivalent (MtCO2e).
The estiamted worth of these sales in 2010 was $424 million. These numbers were reported in "Back to the Future: State and Trends of the Voluntary Carbon Markets 2010."
“The healthy volumes reflect the growing emphasis of corporate social responsibility spending on climate change,” says Katherine Hamilton, Managing Director of Ecosystem Marketplace. “The marketplace showed itself to be incredibly resilient – bouncing back from failed US legislation expectations, expanding its reach in developing countries and returning to its CSR roots.”