Energy & Technology
By: Eileen Claussen and Jim Rogers
March 31, 2009
This article originally appeared in the National Journal's Energy & Environment Experts Blog.
Let’s get one thing straight: Though not perfect, we like the way President Obama and his team are addressing the potential catastrophe of climate change.
The Administration unequivocally accepts the underlying science. They realize that the cost of not acting will be far greater than the cost of taking responsible action – and that the longer we wait, the greater the costs will be for American consumers. Their emissions goals are ambitious but achievable, as is the timetable to meet them. And we agree that cap and trade is the right way to go. It’s based on common sense capitalism: it puts a price on carbon and rewards facilities that can reduce carbon dioxide and other greenhouse gases at the lowest cost, even as it provides incentives for others to find more economic ways to reduce their own emissions.
Where we temporarily part ways is when it comes to the Administration’s proposal calling for a full auction of emission allowances. How these allowances are distributed doesn’t change the overall environmental goal set by the cap. We believe it is critical that a number of them be used to reduce price impacts on households and businesses – in the early years of the program. Just this week Chairmen Waxman and Markey released a discussion draft of energy and climate legislation that leaves open how we can best address this critically important issue.
In all states, electricity is distributed by local companies regulated by public service commissions whose fundamental purpose is to protect consumers and keep electricity rates low. We recommend protecting households and businesses that purchase electricity from utilities by providing allowances to the regulated distribution companies during a transition period.
There is little question that an auction, in which allowances to emit specified amounts of carbon are sold to the highest bidders, will result in a price spike for electricity in some regions. That price spike will hit households and businesses the hardest, and for some, it will be very tough to manage.
We believe we need a climate change plan that protects against price spikes in electricity bills. Our plan would effectively curb carbon, limit the risk of price volatility, target relief to those who need it most, and take advantage of the distribution companies’ and public service commissions’ ability to deliver energy efficiency.
During the transition period from granting allowances to a full auction, there would be no windfall for utility companies or their investors. The legislation itself and actions by public service commissions would guarantee it. On the flipside, there would not be huge price increases for electricity in coal-fueled states and a much smoother transition to a cleaner economy. If this approach is not taken, the whole argument for climate change legislation could be moot – senators and representatives from those states might effectively kill legislation mandating cap and trade.
Overall, we think a cap-and-trade system that shifts from granting allowances to a full auction over time will provide the most reasonable transition to the low-carbon and thriving economy we all desire. To help ensure a smooth transition, granting allowances and auction revenues should be used to help cushion workers, households, and vulnerable industries from volatile prices. It should also support the development of critical low-carbon technologies like carbon capture and storage, and assist in efforts to better adapt to the climate change we are already beginning to experience.
With a price on carbon, energy companies will more rapidly invest in clean technologies, as long as they can be certain that future regulations neither bankrupt them nor mandate that they bet on specific untried technologies. It will also help them look deeper into renewable sources of energy, be they solar, wind, hydropower, or even agricultural waste. They will rethink nuclear power which, despite its scary image, is actually a safe, clean way to generate electricity.
We know that some of those technologies still need the kinks worked out, and that others remain prohibitively expensive. But this is where the government could use some of the revenues that it gets from auctioning allowances to other emitters now, and to utilities and competitively challenged manufacturers down the road.
We’re not ostriches, and we’re not Pollyannas. We know there is a cost to addressing climate change, and that this cost will filter down to big business, to small business, and to households. Utilities that buy carbon allowances or shift to lower-carbon generating options will have to increase their rates, but energy efficiency can lower customer bills even in the face of rate increases. And there will be far less economic upheaval if higher prices come gradually, which our transition program would ensure.
CARBON CAPTURE & SEQUESTRATION PUBLIC WORKSHOPS
New York City: March 5, 2009
Bloomberg National Headquarters
731 Lexington Avenue, 7th Floor Auditorium
Click for Agenda.
Washington D.C.: March 6, 2009
Rayburn House Office Building, Room 2322
Click for Agenda.
The Pew Center co-sponsored two East Coast workshops exploring issues related to Carbon Capture and Storage (CCS). The events, organized by the Natural Resources Defense Council and Environmental Defense Fund, contributed to the public understanding of and dialogue regarding the important role of CCS in lowering greenhouse gas (GHG) emissions.
CCS is a key technology in the portfolio of low-carbon technologies necessary to achieve significant reductions in global GHG emissions. The process of CCS entails capturing carbon dioxide (CO2) from large stationary sources, such as power plants and refineries, and injecting the captured CO2 into deep underground formations for permanent retention, thereby keeping it out of the atmosphere.
The workshops featured speakers who are leading experts on CCS from academia, industry, finance, government, and the environmental policy field. The speakers provided a comprehensive overview of CCS, including:
- An explanation of what CCS is and how it works
- The potential for CCS to provide significant, cost-effective GHG emission reductions
- The technology behind CCS, real-world experience with this technology, and the scientific/engineering challenges that remain
- The regulatory framework and economic incentives necessary to facilitate CCS deployment
Coal Initiative Series: Positioning the Indian Coal-Power Sector for Carbon Mitigation: Key Policy Options
Coal Initiative Series
Positioning the Indian Coal-Power Sector for Carbon Mitigation: Key Policy Options
Prepared for the Pew Center on Global Climate Change
Ananth P. Chikkatur and Ambuj D. Sagar, Kennedy School of Government, Harvard University
Positioning the Indian Coal-Power Sector for Carbon Mitigation: Key Policy Options continues the series of Pew Center papers that explore strategies for addressing CO2 emissions from using coal to provide electricity.
The domestic and international steps outlined in this paper could greatly advance the development and
implementation of a GHG-mitigation strategy in the Indian coal-power sector, while allowing the sector to
contribute suitably to the country’s energy needs. The key to success will be adopting a deliberate approach,
with short- and long-term perspectives in mind, that allows for the development of an integrated energy and
To inform the climate change dialogue, the Center for Climate and Energy Solutions has produced a series of brief reports entitled Climate Change 101: Understanding and Responding to Global Climate Change, Updated January 2011.
These reports provide a reliable and understandable introduction to climate change. They cover climate science and impacts, climate adaptation, technological solutions, business solutions, international action, federal action, recent action in the U.S. states, and action taken by local governments. The overview serves as a summary and introduction to the series.
For more information, be sure to listen to our Climate Change 101 podcast series
The complete set of six reports plus the overview in one volume.
This overview summarizes the key points from each of the Climate Change 101 reports.
This report provides an overview of the most up-to-date scientific evidence and also explains the causes and projected impacts of climate change.
This report details how adaptation planning at the local, state and national levels can limit the damage caused by climate change.
This piece discusses the technological solutions both for mitigating its effects and reducing greenhouse gas emissions now and into the future.
This report discusses how corporate leaders are helping to shape solutions.
This report discusses what will be needed for an effective global effort, one calling for commitments from all the world's major economies.
This report discusses federal policy options that can put the country on the path toward a lower-carbon future.
This report highlights states' efforts as they respond to the challenges of implementing solutions to climate change.
This report describes the actions taken by cities and towns.
This report explains the details of cap and trade.
Coverage of Natural Gas Emissions & Flows Under a GHG Cap-and-Trade Program
Prepared for the Pew Center on Global Climate Change
Senior Vice President, ICF International
This paper provides an overview of the different point-of-regulation options for covering greenhouse gas emissions
from natural gas under a cap-and-trade program. The paper assesses the percentage of emissions covered under the different options and the type and number of entities and facilities regulated.
Greenhouse gas (GHG) emissions associated with natural gas make up nearly 18 percent of total U.S. GHG emissions.1 Regulation of GHG emissions from the natural gas sector under a cap-and-trade program presents challenges different from those associated with coal or petroleum for several reasons:
- End users of natural gas number in the millions and include not only large industrial facilities and electricity generators, but also a wide variety of smaller users in the commercial and residential sectors.
- Although the principal GHG concern for the sector is carbon dioxide (CO2) emissions from natural gas combustion, the sector also generates non-energy CO2emissions and fugitive emissions of methane (CH4), which are difficult to measure and monitor.2
- There are a number of different types of entities in the natural gas supply chain from production to end use making it difficult to apply the standard upstream vs. downstream dichotomy traditionally used to think about the point of regulation for petroleum and coal under cap-and-trade programs.
- Both physical possession and, in many cases, ownership of the natural gas commodity change multiple times within the value chain as natural gas moves from producers to end-use consumers.
These factors have made the treatment of natural gas a challenging issue in the design of a federal economy-wide GHG cap-and-trade program.3 Bills introduced in Congress have reflected a range of different approaches.4 Even different versions of the Lieberman-Warner bill (S. 2191) incorporated different approaches.
A particularly important design issue is whether to directly regulate GHG emitters or to regulate firms for the embedded emissions of the fossil fuels that they produce, process, transport, or distribute.5 For fossil fuels like natural gas, embedded emissions are the GHG emissions that will ultimately be emitted once the fuel is combusted (see box below for a discussion of the direct vs. embedded emissions and upstream vs. downstream points of regulation). A point of regulation for natural gas coverage under cap and trade that regulates embedded emissions would cover emissions by end users indirectly through the regulation of entities/facilities that produce, process, transport, or distribute natural gas.6 Under a cap-and-trade program, these entities/ facilities would be required to acquire and retire emission allowances equal to their embedded emissions—i.e. the CO2emissions from combustion of the natural gas that these entities/facilities produce, process, transport, or distribute. In theory, entities regulated for their embedded emissions would pass the cost of allowances on to consumers of natural gas thus providing the same economic incentive for emission reductions on the part of emitters as would a cap-and-trade program that regulated direct emissions.7
The reason for interest in regulating embedded emissions is that it may be possible to, in effect, cover the direct emissions of many diverse emission sources by regulating the embedded emissions of relatively few entities that produce, process, transport, or deliver fossil fuels. For example, GHG emissions from many millions of motor vehicles could be covered under cap and trade via regulation of the embedded emissions of approximately 150 U.S. oil refiners plus some importers of fuel. That said, there is concern as to whether in practice the price signal established by regulating embedded emissions is an efficient or effective way to ensure GHG reductions from end users.
In considering the point-of-regulation options, one must consider what percentage of GHG emissions from the natural gas sector each option would cover and how many and what kinds of entities/facilities would need to be regulated. The latter question is important from the perspective of allowing for the accurate measurement of direct emissions by regulated entities/facilities or embedded emissions from natural gas produced, processed, transported, or distributed by regulated entitities/facilities. Moreover, all else equal, a cap-and-trade program that limits the number of entities/facilities that must be monitored for compliance limits the associated administrative costs borne by government and industry. One should also consider the efficiency with which different point-of-regulation options achieve emission reductions because of differences in compliance options and responsiveness to price signals among entities at different points along the natural gas value chain. This last question is the subject of a forthcoming paper.
The following sections of this paper review the emissions profile of the natural gas sector, identify the key entities and associated facilities in the natural gas supply chain, provide an estimate of the emissions coverage and number of entities and facilities regulated under various point-of-regulation options, and provide a summary of the analysis.
About the Author
Joel Bluestein is Senior Vice President of ICF International and is a nationally recognized expert on the impacts of environmental and energy regulation with over 30 years of experience in the energy and environmental arenas. Prior to 2007, he was President of Energy and Environmental Analysis, Inc., now an ICF International company, which was nationally known for its analysis of natural gas supply, transportation, and market issues and provided strategic planning and regulatory support to all segments of the natural gas industry.
Mr. Bluestein has been directly involved in the development of emission trading programs and participates in the national debate on new environmental policies and their energy implications. He has testified before the Senate Environment and Public Works Committee on natural gas supply issues and their implications for multi-pollutant regulation of the electric generating sector. His work has included technology and market assessments, R&D planning, energy conservation project analysis, and long-term energy demand forecasting. He holds a degree in Mechanical Engineering from the Massachusetts Institute of Technology and is a registered Professional Engineer.
Coal Initiative Series White Paper:
A Resource and Technology Assessment of Coal Utilization in India
Prepared for the Pew Center on Global Climate Change
Ananth P. Chikkatur, Kennedy School of Government, Harvard University
A Resource and Technology Assessment of Coal Utilization in India continues the series of Pew Center papers that explore strategies for addressing CO2 emissions from using coal to provide electricity.
Electricity production in India is projected to expand dramatically in the near term to energize new industrial development, while also easing the energy shortages throughout the country. Much of the new growth in electricity production will be fueled by domestic coal resources; however, there is worldwide concern about increased coal use, as greater carbon dioxide (CO2) emissions from coal combustion will exacerbate climate change. At the same time, there are now a number of different existing and emerging technological options for coal conversion and greenhouse gas (GHG) reduction worldwide that could potentially be useful for the Indian coal-power sector. This paper reviews coal utilization in India and examines current and emerging coal power technologies with near- and long-term potential for reducing greenhouse gas emissions from coal power generation.
Speech by Eileen Claussen, President, Pew Center on Global Climate Change
American Gas Association Executive Conference
October 6, 2008
I am delighted to be here and to add my welcome to Washington.
Of course, I am here to talk about global warming, but I can't stay away from politics, and I think it is interesting that, even in the middle of our economic troubles, the presidential and vice-presidential candidates are talking about this issue too. Governor Palin, for one, has publicly acknowledged that her state is suffering from the effects of higher temperatures. Polar bears are disappearing, coastal erosion is a problem, her poll numbers are melting … it’s a real mess. She also said rising sea level is uprooting coastal communities so they have to move inland. And you know what that means: it’s getting harder to see Russia. So there goes all that foreign policy experience.
But Governor Palin still isn’t sure of her position on the causes of climate change. When asked if man had anything to do with it, she said it was a sexist question and women should get some credit too.
The Obama campaign, for its part, already has shown it has the capacity to keep a lid on dangerous emissions. Joe Biden was on live TV for 90 minutes last week and he kept the verbose answers to a minimum and did not "emit" a single gaffe. That’s quite an achievement.
There was one awkward moment – when the moderator asked what he thought about CAP and TRADE, Biden thought she was talking about Governor Palin's children.
In all seriousness, Charlie Cook has given you a true insider’s perspective on the 2008 elections and how things are shaping up. What I want to do today is talk about what all of this means for climate policy – or, more specifically, what we can expect to see in the next year or two as Washington finally comes to grips with climate and energy issues in a serious way.
We all know that climate legislation has been making the rounds, and the Senate actually considered a major cap-and-trade bill this summer. But as I reflect on what is likely to happen in 2009 and 2010, I am reminded of the old Monty Python line … “And now for something completely different.”
I predict that we will see real legislation, a real debate, and real action on the climate issue in the next Congress . And what happens on this issue will obviously have important implications for the natural gas industry – which I will discuss in some detail later in my remarks.
But first I want to offer some perspective on the state of play in Washington right now – and where we stand today in the effort to forge a response to one of the most urgent global problems of our time.
The reality of course, is that at the moment, all of Washington has been caught up in trying to rescue the U.S. economy, and so the question becomes – again – will the immediate crisis trump the need for climate policy? Many seem to think so, but I have a different view.
Certainly the new Administration and the new Congress will have a very full plate, but I do not believe that climate policy will fall off the agenda – and there are 4 reasons why I say that. First, there are very high global expectations (unrealistic expectations, actually ) for what the next administration will do on the climate issue. Foreign countries are anxious and frustrated with the lack of action by the U.S.; they are hoping for quick and dramatic changes from the new Administration. If the next President wants to get off on the right foot with the global community, something that will serve us well on a variety of critically important foreign policy issues, it is imperative that we craft and pass reasonable national policy, and that we engage constructively with the rest of the world on a global framework for action.
Second, there is momentum and pressure from corporate America and from the states. In the midst of this economic meltdown, the Western Climate Initiative unveiled their design recommendations for their regional cap-and-trade program – the most aggressive design to date in the U.S. - and RGGI, the consortium of northeastern states, held their first auction on Thursday Sept. 25– ringing the opening bell on Wall Street no less! In total - 24 states are currently involved in regional cap and trade programs. And corporate America is ready for the certainty that a well-designed national policy will afford them.
Third, the Supreme Court decision in Massachusetts v. EPA paves the way for a more traditional “command and control” regulatory approach to addressing greenhouse gases. Continued inaction is not an option. If federal legislation doesn’t move, an approach based on existing Clean Air Act authorities is more likely – and yet less cost-effective – than a greenhouse gas cap-and-trade program. And as this summer’s DC Circuit decision vacating the CAIR rule illustrates, it’s not clear that EPA can choose a more flexible and cost-effective approach such as emissions trading – or determine an allocation under a cap – in the absence of specific authorizing legislation. So traditional standards (at least under some parts of the Clean Air Act) are the more likely outcome, a scary thought for many in industry and in the Congress.
And finally, and most important of all, we cannot have a growing, competitive economy without both a comprehensive energy policy and a sound climate policy. A good climate policy will drive private and public investment in new, cleaner technologies, create jobs, and help us to transform our dependence on foreign energy supplies. Conservation and efficiency will help stabilize the climate, and make us more energy secure. Moving forward with alternative, renewable technologies will decrease our carbon footprint and harness our innovation agenda. Doing whatever we can to make use of existing cleaner, greener technologies, whether expanding our use of nuclear energy, or mounting a crash effort to demonstrate carbon capture and sequestration, or expanding our supplies of natural gas, have to be a part of our energy and climate policy. Because without a major effort in all of these areas, I do not believe our economy will rebound, I do not see us being globally competitive, and I see us spending far more of our tax dollars in responding to the serious effects of a changing climate than we would spend preventing them.
And, happily, since this economic crisis erupted – both Senator Obama and Senator McCain have reaffirmed their commitment to addressing climate and energy policy, including working for passage of a greenhouse gas cap-and-trade bill.
So – while I believe some will try to use the current economic situation to obfuscate and delay – I do not think they will succeed. Certainly, it will be a challenge getting people to pay attention to climate change. But the bottom line is we have to. We don’t have any other choice. And to the extent that we can make the connection between protecting the climate, decreasing our dependence on foreign energy supplies, and advancing the economy, I believe we will be successful.
Now back to the state of play. I am sure that all of you followed what happened in the Senate this summer on the Lieberman-Warner bill. Whether you agreed with the specifics of that measure or not – and believe me: we had our share of concerns about the bill, as I am sure many of you did … But the specifics aside, this was truly an historic moment: the first time ever that comprehensive climate legislation came to the Senate floor out of a committee.
And how did the Senate greet this historic opportunity, this unique chance to engage in a civil and substantive debate about how best to get this nation on track toward reducing its contribution to climate change?
The answer is they engaged in a knock-down, drag-out partisan fight over Senate procedures. Because of an unrelated dispute over judicial nominations, opponents of the bill dispensed with Senate courtesy and forced the reading of the entire 492-page bill into the Senate record. It took nine hours.
Now, if you are going to take up nine hours of the public’s time reading aloud on the Senate floor, the least you could do would be to read from the classics, or Harry Potter, or perhaps Chicken Soup for the Soul of an Aggrieved Public. The Climate Security Act of 2008 was, sad to say, not a page-turner. And the wasted opportunity, and the wasted time that these shenanigans entailed, are even more galling when you consider that Congress wasted no time this summer passing bills recognizing National Corvette Day and the National Day of the American Cowboy.
But still … but still there was the fact that bipartisan climate legislation had been voted out of committee and reached the full Senate. And it was an important reminder of how far we have come on this issue in the last ten years.
When we started the Pew Center in 1998, many people in the United States still viewed climate change as unimportant, unproven and undeserving of a lot of public debate. Now, ten years later, Washington is moving ever-closer to developing a national plan for reducing U.S. greenhouse gas emissions, many U.S. states and cities have adopted innovative climate strategies of their own, and we have two major-party presidential candidates who both are committed to taking serious action on this issue. For all their differences, John McCain and Barack Obama agree on the salient facts about climate change. They agree that this is a real and an urgent problem, that it is caused in large part by human activity, and that the United States must focus on solutions. And they even agree, albeit with some differences, on the broad outlines of a solution: a strong domestic cap-and-trade law coupled with U.S. support for a global climate change agreement. Where there is a real difference is when you contrast the McCain and Obama positions to what’s happened in the last eight years.
So we have come a long way indeed. And one of the main reasons we’ve come this far, as I see it, is because of people like you. All across this country, there is an ever-expanding contingent of business leaders who are saying they trust the science on this issue and it’s time to act.
Today, the Pew Center’s Business Environmental Leadership Council includes 42 companies representing roughly $2.8 trillion in market capitalization and more than 3.8 million employees. It is the largest U.S.-based association of companies committed to climate change policy and business solutions. Members come from a range of sectors, including oil, high technology, diversified manufacturing, transportation, aluminum, electric and gas utilities, chemicals, healthcare, insurance, financial services -- and, of course, natural gas. Our members include Exelon, PG&E and other natural gas industry leaders.
These companies share our belief that climate change is an urgent problem that will affect our economy and our communities in profound ways in the years and decades to come. And they believe, and I quote: “The United States should significantly reduce its GHG emissions through economy-wide, mandatory approaches,” including a “flexible, market-based cap-and-trade program.”
Last year, many of these same companies took their advocacy on this issue to a new level when they joined with the Pew Center and others to form the U.S. Climate Action Partnership. The USCAP group has issued a cap-and-trade proposal with specific targets and timetables—a real plan of action to slow, stop and reverse U.S. emissions. In addition to cap and trade, the group has embraced an array of other policies aimed at building a low-carbon energy economy.
So we have seen enormous progress, in large part because of business leadership on this issue. But, of course, we still have an enormous amount of ground to cover. And now people are looking ahead to what will happen – or, more precisely, what must happen – in 2009 and 2010.
And so here’s my prediction: The Pew Center anticipates that the next President, whether it is John McCain or Barack Obama, will propose a framework for achieving substantial reductions in U.S. greenhouse gas emissions, including a cap-and-trade program, during the first half of 2009. We expect Congress to begin debate on comprehensive climate legislation in the same timeframe, and we believe it is likely that a cap-and-trade bill will be signed by the President during the 111th Congress.
As of January 20, 2009, the date of the next president’s inauguration, the question driving the U.S. debate on this issue will not be whether we need comprehensive, mandatory action, but how to do it right. And the major challenge facing the next Administration and Congress as they seek to answer this question will be to resolve the cost and spending issues associated with comprehensive climate action.
How can we minimize and contain the overall costs of a mandatory program? How can we provide relief for those who will be most affected – including energy-intensive industries that will face higher fuel prices, regions of the country that rely on less climate-friendly sources of energy, and consumers who will face higher prices for electricity? How can we reduce administrative costs and bureaucracy? And, last but not least, how should we spend and invest the estimated trillions of dollars in future allowance value that could flow to the government, the private sector and consumers under a cap-and-trade regime?
Answering these questions will not be easy, which is why the next President and Congress should get to work right away. And, of course, the questions I have asked are only the beginning. Of great interest to all of you will be how our leaders here in Washington address specific questions having to do with natural gas. And that’s where I want to focus in the remainder of my remarks.
The Pew Center soon will be publishing a paper on the coverage of natural gas emissions under a cap-and-trade regime. According to this paper, combustion-related GHG emissions from natural gas are 16 percent of total U.S. GHG emissions. The largest source of emissions from the burning of gas is industry, accounting for 5.3 percent of total U.S. GHG emissions, followed by the power sector, at 4.4 percent.
Clearly, regulating and reducing GHG emissions related to the use of natural gas has to be part of any solution to climate change. But the question, again, is how to do this effectively and fairly … how to do it right.
This is a question that has spurred a very intense and very impassioned debate – well, as impassioned as you can get, I suppose, when throwing around terms like “points of regulation” and “allowance allocation provisions.”
Seriously, the debate has been intense because these are important decisions with wide-ranging implications for your industry and for our economy as a whole. And one of the biggest decisions that lawmakers will have to make has to do with the point-of-regulation issue. The issue, as you know, is this: Should we regulate natural gas-related emissions on the upstream side – at the point where gas is produced and processed and distributed to consumers? Or should it happen downstream – where gas is actually used?
Well, to adapt the classic round, “Row Row Row Your Boat,” I say the chorus right now should be “thoughtfully down the stream.” The Pew Center supports downstream regulation as the short-term answer to the point-of-regulation question. And I say “thoughtfully down the stream” because we need to think carefully about how to do downstream regulation right. More specifically, I agree with the AGA that it is impractical to include small-volume consumers of natural gas as part of any emissions cap. Rather, we believe that any cap-and-trade measure that becomes law should cover downstream emissions from large users in the industrial and power sectors.
Over time, we believe local natural gas utilities should become responsible for meeting a cap on emissions related to the service they provide to residential and commercial customers. This will make them “covered entities,” to use the legislative lingo. (As an aside, I think it’s interesting that the only other statutes using the term “covered entities” are those governing indecent exposure.)
How many facilities would this kind of downstream approach cover? Well, let’s do the math …
Our forthcoming paper estimates that fully 54 percent of the natural gas consumed for combustion in the United States is consumed at facilities producing more than 10,000 metric tons of greenhouse gases each year. If we set that volume of emissions as the threshold for new regulations governing large users of natural gas, our paper says it would cover about 7,000 manufacturing facilities, plus 500 gas-only power plants and 750 or so compressor stations. That adds up to about 8,250 facilities that would be regulated for their downstream CO2 emissions from natural gas consumption.
Accounting for co-ownership of these facilities and other factors, the paper comes up with a final estimate of 5,382 entities to be regulated under this approach. Add the largest 150 LDCs, which account for 95 percent of gas throughput, and you get 5,532 covered entities – a number that could clearly be accommodated within a larger cap-and-trade program. At the Pew Center, we believe the best choice is to include these large LDCs right now, but we recognize there are differing opinions. The AGA has said that LDCs should not necessarily be included as covered entities now, and I hope that in the spirit of compromise we can agree that LDCs should at least be phased in. Whether we phase them in or not, the largest LDCs are certainly an appropriate point to regulate the gas industry over time if we are looking at downstream emissions.
But at the same time that we are discussing “points of regulation” and all these other technicalities, we also need to consider something else – and that is how to better support natural gas as a bridge fuel to a more climate-friendly energy supply.
This is a real opportunity for your industry – this is not a “bridge to nowhere” that we are talking about. Natural gas provides a bridge to the future. To the extent that you can deliver gas at a reasonable cost, you can be part of the solution to climate change.
But here’s the problem: this industry cannot come close to fulfilling its role in protecting the climate without a strong policy push from Washington. If natural gas is to play a role in helping us reduce greenhouse gas emissions, we need to keep it affordable, and we need policies to help make this happen – policies to help expand our natural gas infrastructure, policies to keep costs down, and policies to increase natural gas supply.
And we also need policies to help make natural gas even more efficient as a fuel source. This industry is doing great things to promote increased energy efficiency. And America’s natural gas companies are funding programs that help their residential and commercial customers reduce their natural gas use by 9.5 trillion BTUs per year. The resulting reduction in CO2 emissions: 500,000 metric tons every year.
From home energy audits and cash rebates to low-interest financing for high-efficiency natural gas appliances, your industry offers consumers an array of tools to help them get a better handle on how much energy they use, and reduce it. Today, according to AGA’s own data, the average American home uses one-third less natural gas than in 1980. This has happened even as demand for energy has risen, and it can be explained in part because consumers are installing energy-saving windows and insulation, buying more efficient appliances, and taking other steps they might not have taken in the absence of incentives and active encouragement from America’s natural gas utilities.
Take PG&E, which I already mentioned is a member of the Pew Center’s Business Environmental Leadership Council. PG&E offers its gas customers a rebate of up to $300 toward the purchase of an energy-efficient natural gas furnace, up to $400 toward the cost of sealing leaky ductwork, and up to $150 per 1,000 square feet for insulation. That is real money, and a real incentive for PG&E’s gas customers to do their part to save energy and protect the climate.
This is important and commendable work. But we can do more, with tightened product and equipment efficiency standards, stronger building codes, and more. We also need to make sure that natural gas utilities have the right economic incentives to promote efficiency. The bottom line is this: Utility profits should not take a hit when customers use less natural gas. The government needs to step up its support for innovative utility rate designs that encourage increased energy efficiency.
And this is why industry partnerships are so important. The Pew Center has been proud to stand beside our business partners in the U.S. Climate Action Partnership and advocate for sensible solutions to climate change. And we feel there is much more room for additional partnerships on this issue – between NGOs and business, and among business and NGOs and government. With active industry involvement, I strongly believe that we can develop not just the right technological solutions but also the right policy solutions – solutions that make sense given the issues that all of you face in your businesses each day.
In just one month, the election will be over and a new President-elect and Congress will begin the work of preparing to take their seats at either end of Pennsylvania Avenue, just blocks away from where we sit today. They will have a lot on their plates – a lot of people coming after them to do their bidding on issues from the economy and health care to energy and climate change. And my challenge to you is this: as an industry, natural gas needs to do everything in its power to make absolutely certain that the climate issue receives the attention it deserves.
We will not have another chance like this … and the longer we wait to act, the harder and more expensive this problem will be to solve. Indeed, some say we have a window of just a few years. We are going to need to use all of the persuasive power we have – all of the contacts, all of the political savvy – to make the case for workable solutions to the climate problem – solutions that combine all of the tools we have at our disposal to reduce greenhouse gas emissions. Natural gas is one of those tools – and a crucial one. We just have to help our leaders figure out how to use it right.
Thank you very much.
Development of a Policy Framework for CO2 Carbon Capture and Storage in the States
Prepared for the Pew Center on Global Climate Change by Stephen Melzer, Melzer Consulting
This paper presents the background and policy issues surrounding development of a commercial market for captured carbon dioxide (CO2), and seeks to foster among policymakers a deeper understanding of 1) both the generation and carbon capture and storage (CCS) technologies involved, as well as their costs; 2) the technical and regulatory barriers to deployment of those technologies, and 3) the opportunities CCS may offer for increased employment and income. Enhanced oil recovery (EOR) offers one potential pathway to large-scale, widespread use of captured CO2, and Ohio seems particularly well-positioned to take advantage of these emerging opportunities.
There are a number of state-specific actions that Ohio and other states might initiate to facilitate the deployment of next-generation coal technologies. States can compensate for, or even remove, many of the barriers facing first movers by recognizing CCS, and CO2 stored through EOR, as clean energy options. States can provide various incentives for CO2 capture, transportation, and storage, and, since public acceptance of storage of CO2 in deep saline formations (DSFs) may be years away, adoption of CO2 EOR as a recognized CCS activity could facilitate new projects today and set the stage for deeper, more permanent injection and storage in the future.
Federal policies to move the United States to a low-carbon energy future are almost certain to be enacted within the next two to four years. To be at the forefront of states in a favorable position under future federal legislation, Ohio, and other states, should encourage first movers and address policies to remove current impediments to the implementation of projects that could create a source of CO2 for CCS field demonstrations and solutions.
The Role of CO2 Enhanced Oil Recovery in Ohio's Economy and Energy Future
Prepared for the Pew Center on Global Climate Change by Kleinhenz & Associates of Cleveland, Ohio
Read the companion study "Creating Power, Technology, and Products: The Role of Coal Gasification in Ohio’s Economy and Energy Future"
This report analyzes the Ohio-based industries and employment that might play a role in an Ohio market for exhaust-stream CO2 due to their participation in:
a) development and construction of CO2 pipelines and/or
b) injection of CO2 into producing oil wells or into underground geologic formations
A conceptual Ohio CO2 pipeline was developed and mapped to reflect planned CO2 sources and depleted oil fields that could be viable for EOR. This analysis shows that a 450-mile-long CO2 pipeline network had a construction cost estimate of $280 million. Operating and Maintenance costs were estimated to be $2.3 million per year. This conceptual pipeline system would run through 20 counties, linking four major oil field sinks with fifteen ethanol, synfuel and power plants as sources of CO2. Furthermore, CO2 pipeline and EOR activity in the state of Ohio would positively impact 13,000 establishments and 136,000 employees. This represents 2.5 percent of all Ohio workers. Cuyahoga, Franklin, and Hamilton counties would realize the most impact given the concentration of supply chain establishments within their borders
Implications of the results found in this study are two-fold. First, CO2 pipeline and EOR activity in the state of Ohio would have a widespread economic impact. Secondly, while the CO2 pipeline network displayed in this report is conceptual in nature, it is based upon linking formations suitable for EOR with likely sources of CO2. The network could be phased in and constructed in conjunction with CO2 sources. There are three advantages to constructing a CO2 pipeline network in Ohio. First, EOR activity is feasible under current federal regulations and there are likely opportunities for positive cash flow to pay for pipeline construction. Secondly, a built-out Ohio CO2 pipeline network can serve to link Ohio CO2 production to deep saline formation sinks in Ohio as well as EOR and sequestration sinks elsewhere in the nation. Finally, as Ohio’s CO2 EOR rules are developed and the value of sequestered CO2 becomes known, Ohio producers of CO2 can begin to integrate various pipeline networks.
News Release: For Immediate Release — July 28, 2008
Alexia Kelly, The Climate Trust, 541-514-3633
Tom Steinfeldt, Pew Center on Global Climate Change, 703-516-4146
NONPROFIT COALITION ISSUES RECOMMENDATIONS FOR
DESIGN OF GHG OFFSET PROGRAMS IN CAP-AND-TRADE SYSTEMS
Group Receives Major Grant from the Energy Foundation
PORTLAND and WASHINGTON, D.C. — The Offset Quality Initiative (OQI) will release a white paper today in San Diego at a briefing to be held before the opening of the Western Climate Initiative stakeholder meeting. Titled “Ensuring Offset Quality: Integrating High Quality Greenhouse Gas Offsets Into Cap-and-Trade Policy,” the document offers policymakers practical recommendations regarding the integration of greenhouse gas offsets into emerging regulatory systems at the state, regional and federal levels. OQI, a coalition of six leading non-profit organizations—The Climate Trust, Pew Center on Global Climate Change, California Climate Action Registry, Environmental Resources Trust, Greenhouse Gas Management Institute, and The Climate Group—was founded in November 2007 to provide leadership on GHG offset policy and best practices.
“The availability of high-quality offsets is key to containing the cost of climate policy while delivering real greenhouse gas emission reductions,” said Eileen Claussen, President of the Pew Center on Global Climate Change. “A rigorous and adaptable offset program design can ensure that offsets play a valuable role in an effective cap-and-trade system. OQI’s work will assist policymakers seeking to develop core components of a credible offsets program.”
In addition to regulatory design guidelines, the white paper addresses the key criteria for offset quality and discusses offset project types most appropriate for inclusion in emerging regulatory systems. OQI member organizations will discuss their recommendations with policymakers and other stakeholders over the next several weeks, beginning with today’s briefing in San Diego.
“Establishing confidence in the environmental integrity of offsets is critical for the successful launch and acceptance of future cap and trade regulatory systems. The goal of our paper is to provide policymakers with well-conceived and comprehensive recommendations for offset program design based on the collective knowledge and experience of the OQI members. Each nonprofit member of the coalition is a well-respected and established organization in climate change and brings valuable experience and knowledge to the group,” said Gary Gero, President of the California Climate Action Registry.
OQI recently received a one-year grant of $235,000 from the Energy Foundation to support its work. “We were excited and honored to receive the grant,” said Mike Burnett, Executive Director of The Climate Trust, which was awarded the grant on behalf of OQI. “This generous support from the Energy Foundation highlights the need for the unique work and perspective of OQI. We will use the funds to continue to advance sound greenhouse gas offset policy.”
For a copy of the white paper or for more information on the briefing, please visit www.offsetqualityinitiative.org.
About the Offset Quality Initiative
The Offset Quality Initiative (OQI) was founded in November 2007 to provide leadership on greenhouse gas offset policy and best practices. OQI is a collaborative, consensus-based effort that brings together the collective expertise of its six nonprofit member organizations: The Climate Trust, Pew Center on Global Climate Change, California Climate Action Registry, the Environmental Resources Trust, Greenhouse Gas Management Institute, and The Climate Group.
The four primary objectives of the Offset Quality Initiative are:
- To provide leadership, education, and expert analysis on the issues and challenges related to the design and use of offsets in climate change policy.
- To identify, articulate, and promote key principles that ensure the quality of greenhouse gas emission offsets.
- To advance the integration of those principles in emerging climate change policies at the state, regional, and federal levels.
- To serve as a source of credible information on greenhouse gas offsets, leveraging the diverse collective knowledge and experience of OQI members.