Friday, October 26, 2012

U.S. Can Nearly Meet Copenhagen 17% GHG Reduction Pledge

Oct 25: Resources for the Future (RFF) released a new discussion paper entitled, US Status on Climate Change Mitigation. The abstract of the report indicates that in 2009, President Obama pledged that, by 2020, the United States would achieve reductions in greenhouse gas emissions of 17 percent from 2005 levels. With the failure of Congress to adopt comprehensive climate legislation in 2010, the feasibility of the pledge was put in doubt. However, RFF finds that the United States is near to reaching this goal; currently, the country is on course to achieve reductions of 16.3 percent from 2005 levels in 2020. Three factors contribute to the outcome: (1) greenhouse gas regulations under the Clean Air Act; (2) secular trends including changes in relative fuel prices and energy efficiency; and (3) subnational efforts. Perhaps even more surprising, domestic emissions are probably less than would have occurred if the Waxman–Markey cap-and-trade proposal had become law in 2010. However, at this point the United States is expected to fail to meet its financing commitments under the Copenhagen Accord for 2020.
    On the issue of the U.S. financial commitments, RFF indicates that the United States joined other developed countries in committing to support emissions mitigation and adaptation in developing countries through financing that would grow to $100 billion per year from public and private sources by 2020 [See WIMS 10/18/12]. However, the United States has not put a plan in place to achieve its share of this commitment. The public contribution to the financing goals in future years appears to be insufficient. The contribution of private capital, including payments for international offsets, was expected to fulfill the lion's share of the US financing commitment but international offsets play no role in meeting regulations under the Clean Air Act. Private investment capital in energy resource development already substantially exceeds the $100 billion target, but this cannot be seen as an additional source of funding, as implied by the Copenhagen Accord.
    On the subject of U.S. EPA regulations and in particular those that have not yet been fully implemented the paper indicates EPA has already finalized fuel efficiency standards for mobile sources and rules for preconstruction permitting under the Act. The most important regulation from EPA will be the expected operating performance standards for new and existing stationary sources, and the design and stringency of these standards is the most important source of uncertainty in the RFF estimate.
    RFF indicates that the first proposed standards, issued in April 2012 for new fossil-steam power plants, require these plants to achieve a carbon dioxide (CO2) emissions rate of 1,000 pounds per megawatt-hour; this is based on the performance of a new natural gas combined-cycle plant. A new coal-fired plant would be required to install carbon capture and sequestration (CCS) to achieve this emissions rate. However, the standard includes a provision that allows a coal plant to operate for up to 10 years without CCS if it then installs CCS so that it achieves a 30-year average emissions rate that meets the standard of 1,000 pounds per megawatt-hour. Similar new source performance standards for other source categories -- including refineries, pulp and paper, iron and steel, and other emitting sources -- are expected to roll out over time.
    RFF says, "Regulations governing the operation of stationary sources are in development, although at a slow pace. Taken together, these initiatives are expected to achieve emissions reductions of 10.5 percent by 2020 compared to a 2005 baseline. It is uncertain whether these reductions will be fully realized, but the legal and institutional dominoes are in place for this to occur."
    Regarding the secular trends and subnational policies, RFF indicates that secular trends in the economy, including changing relative fuel prices and the expanded influence of energy efficiency, will lead to additional reductions in the electricity sector that measure to be 3.3 percent, compared to 2005 levels. The subnational policies are increasingly important. California's goal, embedded in State law; cap and trade in the Northeast (RGGI); and state renewable electricity and energy efficiency programs should contribute additional emissions reductions. These subnational policies alone, without the effects of secular trends in the electricity sector or any new regulations under the Clean Air Act, put the United States on target to have emissions 2.5 percent below 2005 levels. The RFF paper concludes:
"In sum, we estimate that the United States is on track to achieve emissions reductions of 16.3 percent by 2020 relative to 2005 levels.

"Important uncertainties are associated with the current path of US emissions reduction efforts that would have been lessened with the passage of comprehensive climate legislation. To forecast what will happen next in the United States, one must consider two key touchstones. One is the California program. If the first planned auction happens in November 2012, then the program will almost certainly begin in January 2013, with big implications for the nation. It is likely to face various legal challenges, but for the most part it is expected to survive intact.

"Second is the finalization of the new source performance standard for electric steam boilers, which is expected early next year, and EPA's posture in the development of existing source standards. The existing source standards may be more stringent than the technical documents have identified. That is because it is a state-driven process in which states develop implementation plans for EPA's approval. Many states view this as an opportunity to strengthen and broaden the regional trading programs. The uncertainty about the issuance of these standards is a concern, but the legal requirements of the Clean Air Act are clear. A new administration could -- slow walk -- the regulatory development and delay it for years, but is unlikely to stop it altogether.

"Another possibility is the reversal of the Clean Air Act, or at least the removal of authority for enforcing the GHG rules. This seems far-fetched because it would require an unbalanced legislature and administration. However, a less extreme outcome could be for a new legislature and administration to defund the activities of EPA in developing these rules. This would delay the rules indefinitely.

"If the eventualities play out as they currently are aligned, we find that not only is President Obama's pledge in Copenhagen within reach, but emissions reductions within the domestic economy could actually be greater than would have occurred under comprehensive climate policy with cap and trade, as proposed by Waxman–Markey. The reason is that a large portion of the emissions reductions that were expected under cap and trade would have been offsets, whereas many of the factors driving emissions reductions under the current Clean Air Act regime would have been effectively or explicitly preempted under cap and trade. . .

"In the short run, to the surprise of many, the United States appears able to meet its mitigation obligations under the Copenhagen agreement. In contrast, however, the United States seems off-course with respect to meeting its financing obligations under the agreement. Cap and trade provided a vehicle and incentive to direct private capital toward investment in developing countries through the purchase of emissions offsets. It also provided a source of funds for the federal government that could have supported the public fund contribution to the financing obligation. In contrast, under a regulatory approach, these avenues are not available. In particular, international offsets appear to be unavailable as a legal compliance instrument by which to meet GHG reduction standards under the Clean Air Act. The subnational cap-and-trade policies allow for international offsets, but their supply in those programs is limited. Private financing of energy development internationally is already extensive but generally could not be seen as an additional contribution to the outcome of US climate policy. In the absence of cap-and-trade policies in general, and an active offset market in particular, the United States is likely to have difficulty meeting its commitment to finance international investments."

    Access the complete 23-page RFF discussion paper (click here). Access links to several media articles based on the RFF paper  (click here). [#Climate, #Air]

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