The New Carbon Cycle

Some Northeastern Utiliites Switching to Natural Gas from Coal Reportedly May Receive Overallocation of Carbon Credits under RGGI

Point Carbon reports that many utilities in the northeastern Unites States have switched to natural gas from coal, in antcipation of coming climate change regulation, and have reduced their emissions to such an extent that under currently planned allocation schemes they may receive more carbon credits than they emit.  The utilities may actually be allocated more green house gas emission credits or carbon credits under the Regional Greenhouse Gas Initiative adopted in the northeastern states than the amount of carbon or CO2 that they emit.  This would raise interesting questions as to what baseline should be used.  The question of early reductions and the benefit companies may gain from such action will be an issue as well.  The other question the effect on the amount of credits received by the utilities depending on the allocation scheme used.  The more specific question is to what extent free credits will be allocated to utilities versus the amount, if any, utilities will be required to purchase at a carbon credit auction.  Stay-tuned to potentially interesting developments not only in the northeast but the western states greenhouse gas reduction program, and the developing legislation in Congress.

Oregon Governor Signs Climate Change Law

Today, August 7, 2007, the Governor of Oregon signed a bill that would reduce the state's greenhouse gas or carbon emissions 75 percent below 1990 levels by 2050 as part of an effort to curb global warming.  The Climate Change Integration Act (HB 3543), establishes the state goals for reductions in greenhouse gas emissions, creates a Global Warming Advisory Commission for the state, and funds $180,000 for the Climate Change Research Institute within the state’s university system.  The Global Warming Advisory Commission will consider a cap-and-trade system for the state’s electric utilities. The goals set in the law would reduce the growth of greenhouse gas emissions by 2010; reduce the emissions 10 percent below 1990 levels by 2020; and meet the 75 percent reduction below 1990 levels by 2050.

Advisory Committee Makes Recommendations for Establishing California Carbon Market

A California committee known as the Market Advisory Committee to the California Air Resources Board appointed by the Governor has submitted a 107-page report for establishing a carbon trading system in California and linking it to other international carbon markets. The 14-member Market Advisory Committee’s final report was submitted to the Air Resources Board, the agency responsible for implementing the Global Warming Solutions Act. The report is entitled Recommendations for Designing a Greenhouse Gas Cap-and-Trade System for California

The key recommendations of the report are as follows:

• Set a stringent cap on greenhouse gases requiring emission reductions to come from both mandatory regulations and a trading program. Gradually lower the cap over time.

• Create a trading market that encompasses as many sectors of the economy as possible. The more industries that are included, the less expensive it will be for companies to comply with a state cap. Start with a small program and expand it over time.

• Regulate carbon dioxide and, in certain cases, the industrial gases hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride.

• In establishing the market, sell and give away allowances to companies that will participate in the program. But sell the majority. Other trading programs that have given too many allowances away have led to windfall profits by companies that later charge customers for what would have been their compliance costs.

• Companies should get credit for so-called "offsets" that meet stringent standards. Such projects would allow companies to pay for tree-planting or energy-efficiency programs in California or elsewhere as a way to make up for their inability to meet their emission goals.

• Companies should submit quarterly electronic reports that detail emission output to the Air Resources Board. The data would be posted on board's Web site.

• Penalize companies that fail to meet their designated greenhouse gas emission target. Establish both criminal and civil penalties for intentional violations.

• Eventually link California's cap-and-trade program with other trading systems as a way to lower costs and achieve greater emission reductions over time.

Oregon Sets Goal of 25 Percent Renewable Energy by 2025

From Green Wire.

An essential part of Oregon Gov. Ted Kulongoski's (D) green future for the state, a bill mandating that renewable energy account for a quarter of Oregon's electric utilities' retail sales by 2025, passed the state Senate yesterday.

Calling the bill a "landmark effort," state senators passed SB 838, which would mandate that renewable power sources like wind, solar and geothermal account for 5 percent of the state's power sales in 2011, climbing gradually to 25 percent by 2025.

"This bill is one of the strongest actions this body can take to do our share to curb global warming and protect ... our increasingly fragile planet," said state Sen. Ben Westlund (D). "It helps brand us as the environmentally clean state that we are ... this has huge implications not only for today but for our future."

The bill is the centerpiece of Kulongoski's efforts for a more environmentally friendly Oregon. Other efforts include an increase in alternative energy tax credits and incentives for growing biodiesel and ethanol crops (Greenwire, Feb. 13).

The bill easily passed the state Senate thanks to the Democratic majority, but Democrats in the state House hold a slimmer majority. Republican opponents to the bill said forcing utilities to spend more on energy would mean higher costs for consumers.

The bill would allow utilities to recover the cost of their renewable energy investments through higher rates, but it includes a provision that could release them from the mandate if their costs increase by more than 4 percent of their revenue in one year (Aaron Clark, AP/Salem [Ore.] Statesman Journal).

Pacific Power and Portland General Electric, which together account for 70 percent of the electricity sold in the state, said that while the target would be difficult to reach they still support the bill.

"We think we can get to 15 percent by 2015 and have it be cost-effective," said Scott Bolton, a Pacific Power lobbyist. "Twenty-five percent? That seems hard" (Gail Kinsey Hill, Portland Oregonian, April 11). -- EB

Australian Prime Minister Trumped by States on Carbon Cap-and-Trade and Losing in the Polls

The news story below indicates Australian states will move ahead and set up a national carbon cap-and-trade system despite Prime Minister Howard's opposition to the program.  This approach reflects similar steps by several western states and several northeastern states in the United States to set up a cap-and-trade system despite President Bush's opposition to such a system.  The Prime Minister and President Bush have agreed that reductions in green house gas emissions are appropriate, they simply do not want legal limits, only "voluntary" programs.  The failure to support a cap-and-trade program according to the story below has had serious political ramifications in Howard's re-election bid.

It will be interesting to see in the United States how the presidential candidates, especially those on the Republican side, address greenhouse gas emissions limits during the primaries and election campaign. 

Aussie states defy PM, commit to carbon cuts

April 13 2007 at 02:29PM

By James Grubel Canberra - Defying Prime Minister John Howard, Australia's states vowed to make significant cuts in greenhouse gas emissions on Friday and to set up a national system of carbon trading by 2010 to combat global warming. Howard, who faces a tough election battle later this year, refused to join the plan and said setting greenhouse targets would damage the economy and standing as the world's largest coal exporting country. "The states told me of their views in relation to an emissions trading system," Howard told a media conference after meeting the leaders of country's six states and two territories on Friday. "We were unwilling ... to commit to a particular target, because of the possible consequences of that to the economy, especially to jobs," Howard said. Climate change is emerging as an election issue and Howard's conservative leadership has refused to set binding limits on greenhouse gas emissions or to ratify the Kyoto Protocol. The leader of the centre-left opposition Labour Party, Kevin Rudd, has opened a strong lead over Howard in opinion polls, partly on promises to cut emissions. Rudd has also promised to ratify the Kyoto Protocol, which commits developed nations to binding limits on carbon emissions, blamed for global warming. The United States and Australia have both refused to ratify the pact. Australia's six states and two territories, all controlled by Labour Party leaders, stepped up pressure on Howard when they announced they would cut greenhouse gas emissions by 60 percent of 2000 levels by 2050. They also promised to set up their own national carbon trading system by 2010. Howard said he would wait for a report from his climate change task force, which is due to report next month on how to best price carbon pollution, before making any decisions on carbon trading. He has said he accepts there is a case for putting a price on carbon emissions, while remaining against setting targets for lowering emissions.

California Senators Offer New Bills to Fight Global Warming, But Are They Carbon Market Friendly?

Senate Democrats in California Announced a list of bills that are designed to reduce greenhouse gas emission in that state, these senators may not be friendly to carbon markets. 

Apparently not concerned about setting up efficient carbon trading markets, Senate President pro Tem Don Perata said, “Senate Democrats believe there is a simple, direct, cost-effective path we can take now to reduce greenhouse gases. The implementation of Assembly Bill 32 is getting bogged down in arcane discussions over intercontinental trading schemes, 'carbon markets' and free 'credits'. That may work for Wall Street traders and Enron economists, but it doesn't work for Californians."

The bills include requirements:

• That 50 percent of new passenger vehicles sold in California are certified to run on clean alternative fuels by 2020.

• Reducing the carbon content from transportation fuels refined and sold in California.

• More rapid requirements for bio-diesel fuel targets.

• More transportation planning and infill development to reduce consumption of fuel.

Senator Kehoe: “Last year's AB 32 made everyone aware of the need to aggressively reduce California's contributions to environmental damage caused by greenhouse gas emissions. With the transportation sector currently accounting for 41 percent of the state's greenhouse gas emissions, it is essential that we adopt a comprehensive package to both reduce these transportation related emissions while at the same time promoting the broader use of clean-burning alternative fuels. My bills are intended to accomplish both goals.”

Senator Simitian: “California can and should act sooner rather than later to increase the use of renewable energy. Renewable energy provides an immediate response to the threat of global warming, cuts air pollution, reduces our dependence on foreign energy, and helps to limit the threat of another energy crisis. We need to set ourselves a clear target

with a real deadline, and then make it as easy as possibly to bring renewable energy online.”

Senator Steinberg: “The Governor and Legislature have come together to make reducing global warming one of our highest priorities. We must now equip our state and regional transportation planners with the ability to measure California’s progress in reducing carbon emissions and give incentives to development that encourages reduction of greenhouse gasses.”

Senator Lowentha: “The voters of California have done their part by voting for Prop 1B and providing over $1 billion for air quality improvements related to goods movement. In order to move goods quickly and efficiently, it is imperative that those businesses that benefit from this public money also contribute to finding solutions to our air quality woes.”