IISD- WRI linking Workshop Nov 07

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Context Setting United StatesIISD-WRI
WorkshopExploring the Challenges and
Opportunities forEstablishing a North American
Emissions Trading SystemNovember 14-15, 2007
Jonathan Pershing jpershing_at_wri.org Director,
Climate, Energy and Pollution ProgramWorld
Resources Institute http//www.wri.org
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Key Points

• US Emissions
• State Action
• Regional Action
• Federal Action
• Business Action
• Looking Forward

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US Emissions
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GHG Emissions
Source IPCC, AR4, 2007
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US GHG Emissions
Source WRI, Submission to US Senate, April 2006
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US Emissions by Gas
Source USEPA April 2007, US GHG Inventory
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State GHG Emissions
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State Per Capita Emissions
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State Action
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States with Biofuel Mandates
Ethanol Mandates
Biodiesel Mandates
Source WRI, CAIT
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Renewable Energy Mandates
Source Pew Climate Center
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Stakeholder initiatives on climate change
States with climate change advisory groups or
commissions, by initiator
2006
Governor/Agency
NGO
Legislature
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Stakeholder initiatives on climate change are
becoming the norm
States with climate change advisory groups or
commissions, by initiator
2007
Governor/Agency
NGO
Legislature
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Climate Action Plans
Source Pew Climate Center, July 2007
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States with GHG targets 30 of US Emissions
IL 1990 levels by 2020 60 below 1990 levels by
2050
CA 2000 levels by 2010 1990 levels by 2020 80
below 1990 levels by 2050
NJ 1990 levels by 2020 80 below 2006 levels
by 2050
FL 2000 levels by 2017 1990 levels by 2025
80 below 1990 levels by 2050
HI 1990 levels by 2020
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State action will reduce national emissions
Business as Usual (99 above 1990 levels)
U.S. emissions if all current state targets are
met (56 above 1990 levels)
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Key states to watch

• Alaska
• Observer to Western Climate Initiative (WCI)
• Hard hit by climate change, big oil state
• Florida
• Considering joining Regional Greenhouse Gas
  Initiative (RGGI)
• GHG targets on par with California
• Illinois
• Big coal, corn state
• Governor strongly considering cap and trade
• Utah
• Big coal state
• Participant in WCI, legislature not behind
  Governor

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Regional Action Linking State Programs
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The Climate Registry today Uniform GHG
reporting across 40 states
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State-based GHG trading is expanding
States involved in emissions trading
program/design
Regional Greenhouse Gas Initiative (and observers)
Western Climate Initiative (and observers)
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NE Regional Greenhouse Gas Initiative

• 10 States
• Power Plants
• Emissions source-based like EU ETS
• Stabilize emissions through 2014 10 Reduction
  by 2018
• 13 Below 1990 Levels by 2019

Source www.rggi.org
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RGGI Offsets

• Quantitative Limit on Offsets The RGGI Offsets
  Valve
• Initial 3.3 limit on offset use
• 7 trigger increases to 5.0
• 10 trigger increases to 10
• Offsets5 Initial Types with Clear Requirements
• Natural Gas, Propane, Heating Oil Efficiency
• Land to Forest
• Landfill Gas Capture Combustion
• Methane Capture from Animal Operations
• SF6 Leak Prevention.
• Add additional types over time as appropriate.
• Geography Initially inside the United States
  but recognition of CDM Offset Credits above 10

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RGGI Allowance Distribution

• Allocations
• States agreed to propose minimum 25 public
  benefit allocation in MOU
• Most states will auction 100, including
  Connecticut, Maine, Massachusetts, New Jersey,
  New York, and Vermont
• Delaware, Maryland, New Hampshire, Rhode Island
  yet to decide
• Auction Design in Progress

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Other RGGI Features

• 3-year compliance period.
• Emissions from combustion of sustainably
  harvested biomass or bio-fuel not subject to
  compliance requirement.
• No cost-containment mechanism beyond offsets
  component
• Linking with other mandatory caps desired

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RGGI Status

• Legislation in 5 of 10 States
• Rulemakings underway
• Program Launches January 2009
• First Auction in 2nd Quarter 2008

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RGGI Update Is the cap tight enough?
RGGI region emissions by state 2000-2006
Source PointCarbon
Emissions drop 20 million tons below 2009 cap
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Emissions drop largely due to high oil prices
Annual emissions variability in the RGGI Region
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Western Climate Initiative

• 6 U.S. States 2 Canadian Provinces--AZ, CA,
  NM, OR, WA, UT, BC MB
• Observers include Colorado, Idaho, Kansas,
  Nevada, Wyoming, Ontario, Quebec Saskatchewan
  Sonora, Wyoming
• August 2007 regional reduction goal
• August 2008 design of a regional market-based,
  multi-sector mechanism

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WCI member requirements and goals

• Requirements
• Economy-wide GHG reduction goal
• Multi-sector action plan to meet goal
• Climate Registry membership
• Adoption of CA vehicle standards
• Goals
• Set regional GHG reduction target
• By 2008, establish a multi-sector cap and trade
  program to help meet the goal

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Aug. 07 WCI set regional target15 below 2005
levels by 2020
33 below BAU
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Key Considerations for WCI

• Multi-sector Cap-and-Trade--will sectors be
  phased in?
• Electricity sector--will WCI take an
  emissions-source approach, a load-based approach,
  or a hybrid approach?
• How will offsets be incorporated into the program
  design?

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The Midwest is a big emitter
GHG Emissions 1.8 billion tonnes CO2e

• 27 of U.S. GHG emissions
• 5 of global GHG emissions
• 24 votes in the Senate
• 100 votes in the House of Representatives

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Midwest Governors Association is poised to
jumpstart regional action

• Midwest Governors Association Energy Summit
  November in Milwaukee
• Focus on regional initiatives for biofuels,
  energy efficiency, renewables and CCS
• Regional agreement to set GHG targets and
  construct a Midwest cap and trade program is on
  the table

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Midwest states played a key role in Climate
Registry development
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Midwest could link state efforts, increase
pressure on Washington
Potential linking of state emissions trading
programs
Midwest Governors Initiative (and observers)
Regional Greenhouse Gas Initiative (and observers)
Western Climate Initiative (and observers)
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Midwest action could double state GHG reductions
Business as Usual (99 above 1990 levels)
U.S. emissions if all current state targets are
met (56 above 1990 levels)
U.S. emissions with Midwest action (13 above
1990 levels)
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Federal Action
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Popular Opinion Is Shifting
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110th Congress Climate Bill Comparison
Lieberman-Warner
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Lieberman Warner The Bill to watch
Potential emission reductions under S. 2191
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Allocation distribution under S. 2191
2036 and beyond
2012
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Auction allocation distribution(percent of total
allocations)
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State allocation distribution (percent of total
allocations)
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Winning and Losing StatesPer capita allocations
power plants and covered industry sources only
State per capita allocation is higher than
national average
State per capita allocation is lower than
national average
Per Capita TCO2e
U.S. National Average 7.39
CA
NY
CT
NJ
Source Clean Air Watch analysis
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Business Action
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• USCAP Proposal
• Call for a cap and trade program
• Establishment of a national GHG inventory and
  registry
• Credit for early action
• Aggressive technology research and development
• Policies to discourage new investments in
  high-emitting facilities
• Policies to accelerate deployment of zero and
  low-emitting technologies and energy efficiency

US CAP Members Market Capitalization 2
trillion
Natural Resources Defense Council The Nature
Conservancy NRG Energy, Inc. PepsiCo Pew
Center on Global Climate Change PGE Corporation
PNM Resources Shell Siemens Corporation World
Resources Institute Xerox Corporation
Alcan Inc. Alcoa American International Group,
Inc. (AIG) Boston Scientific Corporation BP
America Inc. Caterpillar Inc. Chrysler LLC
ConocoPhillips Deere Company The Dow
Chemical Company Duke Energy
DuPont Environmental Defense Exelon Corporation
Ford Motor Company FPL Group, Inc. General
Electric General Motors Corp. Johnson Johnson
Marsh, Inc. National Wildlife Federation
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USCAP Recommended Reductions
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Looking Forward
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The Democratic Presidential Candidates

• Obama
• 80 reduction by 2050
• 100 auction
• Co-sponsor of Sanders-Boxer
• Co-sponsor of Lieberman-
• McCain in 2007

• Clinton
• 80 reduction by 2050
• 100 auction
• Co-sponsor of Sanders-Boxer
• Co-sponsor of Lieberman -
• McCain in 2007

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The Republican Presidential Candidates

• McCain
• Authored bill to reduce emissions 65 by 2050
• First high-profile Republican to address climate
  change (2003 bill with Lieberman re-introduced
  in 2005 and 2007)
• Has made climate change among top three campaign
  issues

• Romney
• Willing to consider a cap only if enacted
  globally
• Introduced climate plan as Gov of MA to reach a
  goal of 1990 levels by 2010 (largely voluntary)
• Withdrew MA from RGGI in 2005 due to cost
  concerns

• Giuliani
• Has not ruled out cap and trade but prefers
  voluntary measures
• Has said he believes the earth is warming, but
  has not said definitively that humans are causing
  it

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Issues to Watch

• Additional state policies
• Multi-state national climate registry--The
  Climate Registry
• Midwest Regional Potential
• WCI design
• How do state efforts inform the federal debate in
  Washington, DC?
• Preemption?
• Derogations?
• International processes, including ICAP, EU- ETS
  and UNFCCC

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Jonathan Pershing jpershing_at_wri.org World
Resources Institute http//www.wri.org