Basic elements of Model Rule:

Basic elements of Model Rule:

1)applicability: applies to fossil fuel-fired electric generating units >25MW(covers 25% of regional GHG emissions)

2) size & structure of cap: a) states must stabilize power sector CO2 emissions at 2009

emissions during implementation (2009-2014)b) then reduce emissions by 2.5%/yr for 2015-2018(total reductions of 10% below 2009 levels by 2018)

3) permitting: each CO2 source must have approved CO2 budget emission monitoring plan (EMP); developed by state energy regulators4) allowance allocation: most CO2 allowances auctioned off (vs. ETS)

25% allowances to support consumer benefit programs5) temporal flexibility mechanisms:

facilities can “bank” or “rollover” CO2 allowancesearly reduction allowances granted for early demonstrated reductionsextended compliance period

6) price triggers: stage 1: if CO2 allowance cost >$7, CO2 offsets can increase stage 2: if CO2 allowance cost >$10, CO2 offsets increase more,

compliance period extended, international CO2 credits allowed

Basic elements of Model Rule: (cont)

7) emissions monitoring: CO2 unit must install and certify monitoring system, report quality-controlled data (borrows from EPA acid rain program)8) offsets: awards CO2 offset allowances to projects outside capped sector that sequester/reduce CO2 emissions (limited to 3.3% of unit’s total compliance obligation

- must prove “additionality”

Who stands to gain here?Who stands to lose?Or is it that simple?What would you do as a power company in a RGGI state?

What is leakage? and how does it impact RGGI?

LEAKAGE

There could be a shift of electricity generation from capped sources subject to RGGI to higher-emitting sources not subject to RGGI.

-impossible to predict ahead of time (market and political forces unknown)

-RGGI proposes to:1) track load vs. generation2) monitor C-intensive nature of non-RGGI power

policy options:1) reduce electricity demand (efficiency), so indirectly reduce leakage

2) limit the amount of CO2 (<xx lbs CO2/MWh) that could be “emitted” through long-term purchasing agreements between RGGI utilities and regional power plants

3) emissions portfolio standard

How did the states dole out allowances?

- different than ETS, most allowances auctioned off

How much money did they make?

Across three past CO2 allowance auctions, cost ~$3/ton

Where did all this money go?

How much did it cost the average customer?Distributing the CO2 allowance costs around the ratepayers in thoseStates, RGGI costs added $0.73/month to the average electric utility bill.

Has RGGI reduced emissions? [does it matter?]

National Energy/Climate Bills

• How does the legislative process work?

• What bills have been considered?

• What are the pros and cons of each? Who stands to win and who stands to lose?

The legislative process: how does a bill become law?

Step 1: Bill is introduced by sponsor (and co-sponsors)assigned a # (S.#### for Senate bills and H.R.#### for House bills), printed and posted on web http://www.govtrack.us

Step 2: Committee considerationreferred to one or more House or Senate committees; must receive a majority vote from committee members in order to move to the floor for a full vote

Step 3: Subcommittee considerationsome bills sent to special subcommittee for further study or public hearings;subcommittee may “mark up” bill by adding amendments and making changes;must receive a majority vote to send back to committee or it dies

Step 4: Bill “reported” by committee; published

Step 5: Floor action – legislative calendarbill scheduled for debate, or “floor action”; majority party decides order

Step 6: DebateHouse members typically limited to 1-5 minutes each, if at allSenators have unlimited speaking time opponents can filibuster until either

a) back-door agreement reachedb) 60 senators move to end debate and call a vote

Step 7: Votingeither electronic or verbal

Step 8: Bill referred to other chamber other chamber can approve, reject, amend, or ignore the bill

Step 9: Conference committee towards “reconciliation”members from House and Senate work to compromise on differencesin passed bills; changes must be approved by House and Senate, else bill dies

Step 10: Signature by Presidentif President vetoes bill, 66% of House and Senate members needed to override

HOUSE

H.R. 2454: American Clean Energy and Security Act Passed 6/25/09Waxman, D-CA; Markey, D-MA 219 to 212

SENATE

S. 1462: American Clean Energy Leadership Act Passed Comm.Bingaman, D-NM (chairman)

S. 1733: Clean Energy Jobs and American Power Act Passed Comm.Kerry, D-MA; Boxer, D-CA; Cardin, D-MD; Kirk, D-MA; 9/30/09

S. ????: Kerry, D-MA; Graham, R-SC; Lieberman, I-CT working to introduce comprehensive climate/energy bill that will muster 60 votes needed toblock predictable Republican filibuster

Bill Name Status

H.R. 2454: American Clean Energy and Security Act

Key Provisions:1)Clean Energy

-renewable electricity/efficiency standard, CCS, new rules for new coalplants, R&D for electric vehicles, $ for smart grid

2)Energy Efficiency- building, lighting, appliance, and vehicle efficiency programs

3)Cap and Trade Program

4)Transitioning to a Clean Energy Economy-preserve domestic competitiveness, support workers and consumers,support for domestic and international adaptation measures

5) Agriculture and Forestry-related offsets (tied to #3)

Waxman-Markey Cap & Trade

Covers 1) stationary sources emitting >25,000 tons of GHG/yr2) oil refineries3) importers of petroleum4) natural gas distributors5) “F-gas” producers (CFCs, HCFCs, HFCs etc) [separate cap]

Targets-3% of 2005 by 2012, -17% by 2020; -83% by 2050

Distribution of Allowances20% allowances auctioned at first, 70% by 2030; funds to go to

1) protecting consumer (esp. low income) from rising electricity and gas prices

2) fund technological advances

Where does the money from allowances go to?

electricityconsumers for price protection

consumers asenergy divident

low income consumers

E-intensive,trade-vulnerable industry

big coal

nat’l gas consumers

Waxman-Markey Cap & Trade (cont.)

Offsets- allows 2 billion tons of offsets system-wide (1 billion domestic;

1 billion international); President can recommend increase or decrease-creates “Offsets Integrity Advisory Board” to oversee and qualify offsets- involves domestic offset program using agriculture and forestry

Costs to Consumers- Congressional Budget Office cost of $175/yr/household on average

net benefit of $41/yr/household for low-income- EPA estimates cost of $80-111/yr/household

Carbon Market OversightFederal Energy Regulatory Commission; Commodity Futures Trading

Commission; no over-the-counter trading of derivatives

Interaction with State and Regional Cap-and-Trade ProgramsState programs put on hold 2012-2017Existing state CO2 allowances can be traded in for federal allowances

Waxman-Markey on Coal

Focuses on CCS (Carbon Capture and Storage)-creates Carbon Storage Research Corporation ($1 billion/yr for 10 years funded from small tax on electricity rates); oversee 5 large commercial CCS operations

-for 10 years, gives bonus allowances to companies that do CCS (equivalent to $100/ton of CO2); second 10 years bonus allowances are auctioned

ACES gives $250 billion in CCS incentives by 2050!

Waxman-Markey on Nuclear and low-C Energy

Creates sustained federal funding for low-C energy-creates Clean Energy Deployment Administration (initially funded by $7.5 billion in “green bonds” granted by US Treasury); 20yr charter; oversee distribution of allowances granted to clean energy projects

Removes regulatory and financing hurdles for nuclear-places sole responsibility for nuclear permitting and financing in the DOE; heavy oversight by Energy Secretary; $19 billion available in financing right now

Electricity generating capacity by 2050 in BAU and with ACES

Climate Change and Energy

• An EPA Priority– Reducing greenhouse gases (GHG) is a top

priority for Administrator Jackson

• Some key actions taken:– Endangerment Finding– Mandatory Reporting– Renewable Fuels Standard– Light-Duty Vehicle GHG Emissions

Standards and CAFE Standards – GHG permitting requirements on

large industrial facilities (Tailoring Rule)

– Carbon Capture & Sequestration– A variety of voluntary and other initiatives

DRAFT PRESENTATION

Remaining slides from Dr. Ken Mitchell, EPA 2010

Endangerment Finding

• Endangerment Finding: Current and projected concentrations of the six key well-mixed GHGs in the atmosphere threaten the public health and welfare of current and future generations

• Cause or Contribute Finding: The combined emissions of these well-mixed GHGs

from new motor vehicles and new motor vehicle engines contribute to the greenhouse gas pollution which threatens public health and welfare

• Final Rule published in Federal Register December 15, 2009

Greenhouse Gases (GHGs)

• Carbon Dioxide (CO2)• Methane (CH4)• Nitrous Oxide (N2O)• Hydrofluorocarbons (HFC)• Perfluorocarbons (PFC)• Sulfur Hexafluoride (SF6)

GHG Reporting Rule

* We delayed inclusion of certain source categories as we consider comments and options

Upstream Sources

Suppliers of Coal-based Liquid Fuels Suppliers of Petroleum Products Suppliers of Natural Gas and Natural Gas Liquids Suppliers of Industrial GHGs Suppliers of Carbon Dioxide (CO2)

Downstream Sources

General Stationary Fuel Combustion Sources Electricity Generation Adipic Acid Production Aluminum Production Ammonia Manufacturing Cement Production Ferroalloy Production Glass Production HCFC-22 Production and HFC-23 Destruction Hydrogen Production Iron and Steel Production Lead Production

Mobile Sources

•Vehicles and engines outside of the light-duty sector (light-duty in NPRM to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Fuel Economy Standards)

Covered GHGs

• Carbon Dioxide (CO2)• Methane (CH4)• Nitrous Oxide (N2O)• Hydrofluorocarbons (HFC)• Perfluorocarbons (PFC)• Sulfur Hexafluoride (SF6)• Nitrogen Trifluoride (NF3)• Hydrofluorinated Ethers (HFE)

Expressed in metric tons of carbon dioxide equivalent (mtCO2e)

First report for CY10

Final Rule Published in Federal Register on October 30, 2009

Renewable Fuels Standard (RFS2)

• Revision to current RFS (RFS1) as required by the Energy Independence and Security Act (EISA)

• Significant increase in renewable fuels to displace petroleum consumption (36 billion gallons by 2022)

• CO2 Lifecycle analysis

• Final Rule Signed 2/3/2010

Lifecycle GHG Thresholds Specified in EISA

(percent reduction from 2005 baseline)

Renewable fuela  20%

Advanced biofuel 50%

Biomass-based diesel  50%

Cellulosic biofuel  60%

a The 20% criterion generally applies to renewable fuel from new facilities that commenced construction after December 19, 2007.

Mobile Source GHG/CAFE Proposed Rule

• First national GHG emissions standards under the Clean Air Act

• Satisfies requirements under both Federal programs and the standards of California and other states

• Applies to passenger cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 through 2016

• Meet an estimated combined average emissions level of 250 g CO2 per mile in model year 2016, equivalent to 35.5 mpg if the automotive industry were to meet this CO2 level all through fuel economy improvements

• Proposed in Federal Register September 28, 2009

Proposed Tailoring Rule

• Focused on large facilities emitting over 25,000 tons of CO2e/year

• Facilities required to obtain construction permits that would demonstrate they are using the best practices and technologies to minimize GHG emissions

• The rule proposes new thresholds for greenhouse gas emissions (GHG) that define when Clean Air Act (CAA) permits under the New Source Review (NSR) and title V operating permits programs would be required for new or existing industrial facilities.

• Would cover nearly 70 percent of the national GHG emissions that come from stationary sources, including those from the nation’s largest emitters—including power plants, refineries, and cement production facilities.

• Small farms, restaurants and many other types of small facilities would not be subject to these permitting programs

• Proposal in Federal Register on 10/27/09