We recently released a report that describes the petroleum sector from production to consumption and examines options for including greenhouse gas (GHG) emissions from petroleum use under climate policy (e.g., GHG cap and trade). Currently, policymakers are considering multiple approaches for coverage of petroleum under comprehensive climate and energy legislation. In deciding how to address a sector of the economy or a particular fuel, policymakers must balance the goals of ensuring maximum coverage of emissions, minimizing administrative complexity and burden, avoiding creating perverse incentives or market distortions, and promoting emission reductions.
While the details of the Kerry-Graham-Lieberman climate and energy proposal in the Senate are yet to be released, press reports indicate that the trio is likely to adopt a new approach to covering transportation fuels—the so-called “linked fee.” Unlike other proposals in the House or Senate, the Kerry-Graham-Lieberman approach would reportedly levy a “carbon fee” on transportation fuels with the fee amount linked to the carbon price from a GHG cap-and-trade program covering at least electric utilities. The forthcoming details of how the “carbon fee” is linked to the cap-and-trade market will determine whether such an approach can lead to significant emissions reductions from transportation and whether such an approach can yield the economy-wide emissions reductions needed to protect the climate.
Our new report includes information relevant to the linked-fee approach. For example, the report calculates that about 80 percent of combustion emissions from petroleum use are attributable to transportation fuels that are already subject to federal fuel excise taxes. Untaxed transportation fuels and large and small stationary combustion sources account for the remainder of emissions from petroleum use. This means that a linked fee could be implemented at least in part by covering the same entities that currently pay the fuel tax.
Another Senate proposal, the Cantwell-Collins Carbon Limits and Energy for America's Renewal (CLEAR) Act, creates an economy-wide cap-and-trade program—in this case just covering CO2 emissions from fossil fuel use. The CLEAR Act adopts an entirely “upstream” point of regulation that would make “first sellers” (i.e., coal mine and natural gas and oil well owners) responsible for surrendering cap-and-trade allowances for end-use emissions from the fossil fuels they sell. As the new Pew Center report explains, there are about a half million oil wells in the United States. Of the nearly 14,000 domestic well operators tracked by the U.S. Energy Information Administration (EIA), the 10 largest (e.g., BP, Chevron) account for about half of total production, and the 670 largest account for about 90 percent of production.
The House-passed comprehensive climate and energy bill (H.R. 2454, the Waxman-Markey American Clean Energy and Security Act of 2009) also included an economy-wide GHG cap-and-trade program. Waxman-Markey, however, would require petroleum refiners and importers to surrender cap-and-trade allowances equal to the GHG emissions from the final end use of their products (e.g., tailpipe emissions from vehicles). This point of regulation for petroleum would achieve complete coverage of combustion emissions and regulate a small number of entities and facilities (about 150 refiners with 67 different owners and a larger number of importers and points of entry). Of note, Waxman-Markey adopted different points of regulation for different emission sources--including large sources (e.g., coal and natural gas power plants and industrial sources) and local natural gas distribution companies (residential, commercial, and small industrial natural gas users).
With different proposals in play, our new report can inform policymakers and others considering options for reducing GHG emissions from petroleum use and help advance approaches that balance the goals of emissions coverage, administrative ease, and cost-effective and significant emission reductions.
Steve Caldwell is a Technology and Policy Fellow
This post first appeared today in the National Journal Energy & Environment Experts blog.
As with many aspects of climate policy, there is some truth to the arguments on both sides of the debate over how federal legislation should treat state action and EPA Clean Air Act (CAA) authority. The answer is less about who is right or wrong and more about appropriately balancing the strengths and weaknesses brought to the table by states and the federal government. Both have important roles to play in a strong federal climate and clean energy program.
When the Congress returns from Easter Recess next week, 116 days will remain on the legislative calendar before Election Day on November 9. This relative dearth of time has led some proponents of climate action to worry whether there is enough political appetite for Congress to pass comprehensive climate and energy legislation while midterm elections loom. Certainly, the November elections are on the minds of legislators. However, elections have always factored into Congressional decision-making and action. Government accountability through elections is what our Republic is founded on, after all. Despite impending campaigns, nearly every major environmental law of the last 40 years has been passed during an election year.
In general, Congress has a history of making big policy decisions during election years. USA Today recently found that over the last 20 years, Congresses have actually passed 70% more laws in election years than in other years. What’s more is that these laws are not just limited to post office dedications and other less-than-essential topics. Comprehensive legislation has often passed in election years, including the 1994 crime bill, 1996 welfare reform, 2002 McCain-Feingold campaign finance reform, and even the health care reform bill this year.
Turning specifically to environmental laws, 22 major laws (listed below), beginning with the National Environmental Policy Act signed in 1970, were enacted in election years. For example, October 1986 – just weeks from Election Day – saw the passage of significant amendments to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund).
A clear precedent for climate change legislation passing in 2010 is the Clean Air Act amendments that passed in late 1990. Just as President Obama campaigned on passing climate legislation, President George H.W. Bush campaigned to enact new air pollution laws. Bush worked with a group of bipartisan legislators to have a revolutionary package of amendments introduced in the House by Rep. Dingell (D-MI) and in the Senate by Sen. Chafee (R-RI). This package included a cap-and-trade program for power plant emissions of acid rain-causing NOx and SO2. After the bipartisan bills easily passed both chambers by mid-year, the conference committee, led by Sen. Baucus (D-MT), agreed to a compromise bill that passed 401-25 in the House and 89-10 in the Senate. Passage occurred by these wide, bipartisan margins on October 26 and 27 – not bad for two weeks before an election.
Comprehensive climate and energy legislation should be the next in the series of major environmental laws passed in a midterm election year. Like the Clean Air Act amendments of 1990, other environmental laws have required bipartisan compromise. Democrats and Republicans have had to reach agreement on environmental policy before and they can do so again, even in an election year. Making good public policy is the best politics, and a strong bipartisan effort on the serious challenge of climate change is something that both parties should be accountable for in November.
- National Environmental Policy Act (1970)
- Clean Air Act Amendments (1970)
- Occupational Safety and Health Act (1970)
- Marine Mammal Protection Act (1972)
- Coastal Zone Management Act (1972)
- Clean Water Act (1972)
- Safe Drinking Water Act (1974)
- Fisheries Conservation and Management Act (1976)
- Toxic Substances Control Act (1976)
- Resource Conservation and Recovery Act (1976)
- Federal Land Policy and Management Act (1976)
- Comprehensive Environmental Response, Compensation and Liability Act (1980)
- Nuclear Waste Policy Act (1982)
- Superfund Amendments and Reauthorization Act (1986)
- Emergency Planning and Community Right-to-Know Act (1986)
- Ocean Dumping Act (1988)
- Shore Protection Act (1988)
- Oil Pollution Act (1990)
- Clean Air Act Amendments (1990)
- Pollution Prevention Act (1990)
- Food Quality Protection Act (1996)
- Safe Drinking Water Act Amendments (1996)
Environmental laws passed in non-election years include:
- Endangered Species Act (1973)
- Clean Air Act Amendments (1977)
Michael Tubman is the Congressional Affairs Fellow
The federal government took the opportunity on April Fool’s Day to show the world the United States is not joking about its commitment to reducing greenhouse gas (GHG) emissions. The U.S. EPA and U.S. DOT have jointly produced a standard that will reduce CO2 emissions by 1 billion metric tons over the lifetime of vehicles covered and on average save consumers around $3,000 in fuel costs over the life of each vehicle purchased in 2016. The new rule requires the corporate average fuel economy (CAFE) for new passenger cars and light-duty trucks to be 35.5 miles per gallon by 2016. It will also limit carbon dioxide emitted from those vehicles to 250 grams per mile on average. The vehicle emissions rule shows how one policy can achieve multiple goals – reduce our dependence on foreign oil and reduce our nation’s GHG emissions.
The implementation of this regulation is a nod to complementary policies that combat climate change. As an organization that has long pushed for a comprehensive market-based mechanism, we are acutely aware of the importance of pricing carbon. However, putting a modest price on carbon, by itself, would not significantly reduce greenhouse gas emissions from this sector. For example, EPA’s analysis of the House-passed climate and energy bill found that the bill would cause the price of a gallon of gasoline to only rise by $0.13 in 2015, $0.25 in 2030, and $0.69 in 2050. The rule finalized Thursday addresses this problem directly by setting an increasingly more stringent standard for reducing GHG emissions but allowing vehicle manufacturers the flexibility to find the most cost-effective technologies to achieve those standards.
In evaluating regulations like these, one important factor to consider is coverage. The new vehicle rule covers over 60 percent of greenhouse gas emissions from the transportation sector. Other sources of emissions in transportation such as aviation, ships, and heavy-duty trucks will require additional actions (see our paper on aviation and marine transportation). EPA has announced its intent to propose GHG standards for heavy duty trucks in June of this year.
Another important factor to consider when evaluating regulations is cost. In order to meet the new standards, vehicle manufacturers will have to make fuel efficiency (as opposed to increased engine horsepower) one of their primary areas of focus for research and development. In doing so, future vehicles will cost more than they would without this rule. However, fuel savings over time will more than make up for that additional upfront cost.
The program is estimated to conserve 1.8 billion barrels of oil over the lifetime of vehicles covered under the rule. Reducing our overall oil consumption can reduce our reliance on foreign oil, which can translate into cost savings. A study by the U.S. EPA and the Oak Ridge National Laboratory estimated that a reduction of U.S. imported oil results in a total energy security benefit of $12.38 per barrel of oil, in part by reducing defense spending. Co-benefits like these are an important part of determining the worthiness of a policy. In the case of the new vehicle rule, the U.S. has taken a big step towards reducing its oil dependency and increasing its energy security.
Nick Nigro is a Solutions Fellow
The Obama Administration made some important announcements about offshore drilling last week. And in the near and medium term, we believe increasing U.S. oil production is compatible with successful efforts to significantly reduce U.S. greenhouse gas (GHG) emissions.
Offshore drilling has been much talked about lately. Expanding offshore drilling in the federal outer continental shelf (OCS) areas and increasing oil and gas revenue sharing for nearby coastal states is part of the package of climate and energy policies being negotiated by Senators Kerry, Graham, and Lieberman.