Steel Manufacturers Association Environment

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Steel Manufacturers AssociationEnvironment
Energy -- Climate Change Update US Climate
Action Partnership (USCAP)May 19, 2009
Tom Dower, Vice President Lighthouse Consulting
Group USCAP Political Outreach Coordinators
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Diverse Voices Represented
Member Organizations
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About our Coalition

• Launched in January 2007 with the Call for Action
• Consensus-based, with 25 corporations and five
  environmental groups
• Created to articulate the need for prompt
  enactment of strong federal climate legislation
• A more detailed Blueprint for Legislative Action
  released in January 2009
• Advocating enactment of legislation consistent
  with Blueprint and Call for Action

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The Scientific Case for Action

• Science is sufficiently clear to justify prompt
  enactment of legislation
• Each year we delay action increases the risk of
  unavoidable and potentially costlier consequences

Warming of the climate system is unequivocal, as
is now evident from observations of increases in
global average air and ocean temperatures,
widespread melting of snow and ice and rising
global average sea level. Intergovernmental
Panel on Climate Change, Climate Change 2007
Synthesis Report
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The Economic Case for Action

• Unchecked GHG emissions will limit economic
  growth, strain public budgets
• Legislation to harness market forces to reduce
  GHG emissions can reduce the economic cost of
  achieving desired reductions and spur investment
  in 21st century technologies which in turn can
  generate jobs, economic growth
• U.S. needs to be positioned to succeed in the new
  low-carbon, global economy

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Why Do We Need Legislation?

• Well-crafted federal legislation can
• Create an enforceable mechanism to slow, stop and
  reverse greenhouse gas emissions
• Enable the marketplace to identify opportunities
  for increased investment and provide the
  foundation for a low-carbon economy
• Reduce the economic cost of uncertainty
• Avoid/minimize use of command and control
  approach
• Spur innovations in new technologies
• Enhance energy security

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A BLUEPRINT FOR LEGISLATIVE ACTION
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What is the Blueprint?

• Detailed framework for a possible path forward on
  climate legislation
• An approach to achieve aggressive environmental
  goals in a responsible and economically
  sustainable manner
• A consensus of diverse organizations

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USCAPs Climate Approach

• Economy-wide cap-and-trade program
• Clear linkages with emissions offsets, cost
  containment measures
• Allocation of allowance value to transform
  economy, modernize energy infrastructure, smooth
  transition for consumers and adapt to the impacts
  of global warming
• Complementary measures to spur transformation to
  low-carbon economy
• U.S. leadership on international stage

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Core Blueprint Components
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Core Blueprint Components
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Core Blueprint Components
Coal Technology
Credit for Early Action
Technology Transformation
Transportation
Buildings/Energy Efficiency
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Cap-and-Trade Program

• Federal cap-and-trade program coupled with cost
  containment measures and complementary policies
  ensures environmental integrity, economic
  stability
• Declining, economy-wide emission reduction
  targets
• Provides incentives to transition to new
  technologies while ensuring GHG emissions
  reductions

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Targets and Timetable

• Aggressive emission reduction targets for capped
  sectors as well as total U.S. emissions
• 97 - 102 of 2005 levels by 2012
• 80 - 86 of 2005 levels by 2020
• 58 of 2005 levels by 2030
• 20 of 2005 levels by 2050
• USCAP recommends program to provide credit for
  early action

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Scope of Coverage

• Goal to cover as much of economy as politically
  and administratively possible within a
  cap-and-trade program
• Point of regulation
• Large stationary sources regulated at point of
  emission
• Transportation fuels regulated at refinery gate
  or point of importation
• Natural gas use could be covered by regulation of
  local distribution companies (LDCs)

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OFFSETS AND COST CONTAINMENT MEASURES
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Adequate Offsets Critical

• Offsets reduce greenhouse gas emissions not
  otherwise included in cap
• Offsets must be
• Environmentally additional
• Verifiable
• Permanent
• Measureable
• Enforceable

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Offset Administration

• Congress to establish Carbon Market Board that
  sets overall annual upper limit for offsets
  within a range
• Upper limit starts at 2 billion metric tons
• Authority to increase to 3 billion metric tons
• Domestic and international offsets each limited
  to no more than 1.5 billion metric tons in given
  year
• Additional offsets contained in strategic offset
  and allowance reserve pool
• No firm-level borrowing

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Strategic Offset and Allowance Reserve Pool

• Mechanism to limit extreme volatility and spike
  in allowance prices, especially in the early
  years of program
• Includes program-based and other governmentally
  certified offsets and, as a last resort,
  allowances borrowed from future compliance period
  at system level
• Carbon Market Board charged with releasing
  offsets and/or allowances from the Strategic
  Reserve Pool at a CMB-specified threshold price

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DISTRIBUTION OF ALLOWANCE VALUE
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Our Approach to Distribution

• Allowance value is either the value of a
  freely-distributed allowance or revenue generated
  by a government auction of allowances
• Distribution of allowance value should facilitate
  transition to low-carbon economy
• A significant portion should be initially
  distributed free to capped sectors, including
  economic sectors particularly disadvantaged by
  secondary price effects of a cap, to help protect
  consumers
• Free distribution of allowances to be phased out
  over time

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Allowance Value Over Time
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Fair and Equitable Distribution

• Blueprint identifies principles to guide fair
  andequitable allocation of allowance value to
• End-use consumers of electricity, natural gas,
  transportation fuels
• Energy intensive industries facing international
  competition
• Trade-exposed commodity products
• Competitive power generators and other
  non-utility large stationary sources
• Low-income consumers and workers in transition
• Programs to achieve technology transformation
• Adaptation needs of vulnerable people and
  ecosystems at home and abroad

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COMPLEMENTARY MEASURES
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Complementary Measures and Policies

• Intended to spur rapid technology transformation
  and to support the transition to a market based
  approach to reducing GHG emissions
• May be mandatory or incentive-based
• When applied to sectors under the cap, intended
  to overcome market barriers imperfections that
  may prevent price signal from achieving actual
  reductions in emissions in those sectors

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Technology Transformation

• Robust program to produce substantial investment
  in new technologies
• Federal support for pre-commercial and
  higher-risk phases of technology research, as
  well as early demonstration and deployment of new
  technologies
• Funding should be transparent, predictable, and
  accountable not subject to annual
  appropriations and leverage private investment

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Coal Technology

• Incentives to facilitate and accelerate early
  deployment of carbon capture and storage (CCS)
  technology
• Address financial and regulatory barriers
• Coupled with these provisions, USCAP recommends
  new standards
• CO2 emissions standards for coal plants initially
  permitted after January 1, 2015
• Retrofit requirements for coal plants permitted
  after January 1, 2009, and prior to January 1,
  2015

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Transportation

• Economy-wide emission reduction targets require
  systematic approach involving
• Fuel providers
• Vehicle and equipment manufacturers
• Consumers and other end users
• Public transportation, infrastructure and land
  use officials
• Recommendations include improving vehicle
  efficiency, reducing fuel carbon content and
  increasing the efficiency of transportation system

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Buildings/Energy Efficiency

• Policies and measures that improve energy
  efficiency are an immediate step Congress can
  take
• Emissions reduction programs include
• State- or utility-sponsored conservation programs
• Tightened building codes and standards
• Appliance efficiency standards

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The Need for Action

• The scale of the undertaking to address climate
  change is enormous, and should not be
  underestimated. For this issue to be successfully
  addressed and failure is not an option the
  way we produce and use energy must fundamentally
  change, both nationally and globally.
• USCAP Call for Action, January 2007

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• LIGHTHOUSE CONSULTING GROUP, LLC
• 1150 Connecticut Ave., NW, Suite 717
• Washington, DC 20036
• Phone [phone] Fax [phone]
• tdower_at_lighthouseconsultinggrp.com
• http//www.lighthouseconsultinggrp.com/

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