Energy & Technology

Buildings Overview

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Buildings and Emissions: Making the Connection

Residential and commercial buildings account for almost 39 percent of total U.S. energy consumption and 38 percent of U.S. carbon dioxide (CO2) emissions.1 Nearly all of the greenhouse gas (GHG) emissions from the residential and commercial sectors can be attributed to energy use in buildings (see Climate TechBook: Residential and Commercial Sectors Overview).

Figure 1: Buildings Share of U.S. Primary Energy Consumption (2006)
Source: U.S. Department of Energy (DOE), 2008 Buildings Energy Data Book, Section 1.1.1, 2008. 

 

GHG emissions from energy use in buildings can be broken down into two types:  first, direct emissions from the on-site combustion of fuels for heating and cooking and, second, emissions from the end use of electricity used to heat, cool, and provide power to buildings. Emission reductions from buildings can be achieved by reducing emissions from the energy supply (see Climate TechBook: Electricity Sector Overview, as well as the individual Climate TechBook briefs on low- and zero-emission energy supply technologies) or by reducing energy consumption through improved building design, increased energy efficiency and conservation, and other mechanisms that reduce energy demand in buildings (see Climate TechBook: Building Envelope).

Factors Affecting Building-Related Emissions

Buildings come in a wide variety of shapes, sizes, and purposes, and they have been built at different times according to different standards. Consequently, addressing energy use in any given building requires a holistic approach to ensure the best results. In considering buildings generally, the following elements play important roles in shaping energy consumption and use. Whole-building design standards include most or all of these categories in order to maximize energy savings, but frequently any adjustments in these areas can be beneficial.

  • Embodied energy
    Embodied energy refers to the energy required to extract, manufacture, transport, install, and dispose of building materials. The GHG emissions associated with the embodied energy of a building are not attributed to “buildings” in above values, but efforts to reduce this energy use and associated emissions, for example through the substitution of bio-based products, can be made as part of a larger effort to reduce emissions from buildings. 
  • Building design
    Overall building design can help determine the amount of lighting, heating, and cooling a building will require. Architects and engineers have developed innovative new ways to improve overall building design in order to maximize light and heat efficiency.2 Another important determinant of energy consumption is size because larger buildings generally require more energy for heating, cooling, and lighting. The United States has seen a general trend of increased building size among residential buildings.
  • Building envelope
    The building envelope is the interface between the interior of a building and the outdoor environment. Minimizing heat transfer through the building envelope is crucial for reducing the need for space heating or cooling. Insulation, air sealing, and windows can each play an important role in minimizing heat transfer. For more information, see Climate TechBook: Building Envelope.
  • On-site or distributed generation
    The terms “on-site generation” or “distributed generation” refer to energy that is produced at the point of use and encompass many different options from both renewable and fossil fuel sources, as well as small energy storage systems. Many buildings can integrate distributed generation as either an alternative or supplement to grid-supplied electricity.
  • Energy end uses in buildings
    Utilizing efficient technologies can reduce GHG emissions by moderating energy use. In both residential and commercial buildings, energy consumption is dominated by space heating, cooling, and air conditioning (HVAC) and lighting (see Figure 2 and Figure 3). In addition to reducing energy use and associated GHG emissions, energy efficiency improvements also yield a variety of co-benefits, including lower monthly utility bills and greater energy security.3
Figure 2: Residential Buildings Total Energy End Use (2006)

Source: DOE, 2008 Buildings Energy Data Book, Section 2.1.5, 2008.
This pie chart includes an adjustment factor used by the EIA to reconcile two datasets.

 

Figure 3: Commercial Sector Buildings Energy End Use (2006) 
Source: DOE, 2008 Buildings Energy Data Book, Section 3.1.4, 2008.
Note: This pie chart uses an adjustment factor (*) used by the EIA to reconcile two datasets.

 

Space heating, cooling, and air conditioning (HVAC)
Opportunities for minimizing HVAC-related energy losses include making use of natural ventilation and natural sources of heat, minimizing unwanted heat and humidity gains from lights and appliances, minimizing energy losses in conventional systems by upgrading equipment or downsizing the scale of the equipment, and integrating new efficient technologies such as evaporative coolers and ductless systems. Adjustments to HVAC systems can occur and be most effective with modifications in other building elements. For example, increasing window performance and the insulating properties of the building envelope will reduce the demands upon the HVAC system and will allow HVAC equipment to be downsized, enabling efficiency improvements and cost savings.

Lighting
Energy use for lighting can be reduced in two ways: reducing the amount of artificial light required and using more efficient technology. Reducing light use can be achieved by behavioral changes—individual commitments to only keeping on the lights that are in use—or by using motion sensors, occupancy sensors, time sensors, and photosensors to automatically ensure that lights are only on when they are in use. Options for using more efficient technology include changing light bulbs and lighting fixtures from incandescent bulbs to fluorescents or solid-state lighting options.

Emission Reduction Potential of Climate-Friendly Buildings

Reductions in building-related GHG emissions can be achieved in many different ways: by increasing the amount of electricity generated from low- and zero-carbon technologies, by retrofitting existing buildings to reduce energy consumption and improve energy efficiency, and by constructing new buildings to be low- or zero-energy buildings. Many factors influence the level of emission reductions achieved. Significant improvements in energy efficiency are attainable and can reduce building-related emissions to very low levels or, when coupled with renewable energy sources, to zero.

Zero-energy buildings (ZEBs) are buildings designed to have markedly reduced energy needs achieved through design and efficiency measures; the remaining energy needs required by these buildings can be achieved through renewable technologies. ZEBs can be net energy producers through the use of on-site renewables. The Energy Independence and Security Act of 2007 (EISA 2007) directed the U.S. Department of Energy to form the Net-Zero Energy Commercial Building Initiative, a public-private collaboration, in order to “develop and disseminate technologies, practices, and policies” to promote and facilitate the transition to zero net energy commercial buildings. EISA 2007 calls for all new commercial buildings to be zero net energy consumers by 2030 and all U.S. commercial buildings to be zero net energy consumers by 2050.4 A recent analysis showed that by using existing technologies and practices, 22 percent of commercial buildings could be ZEBs by 2025; this number increases to 64 percent if technology improvements are included.5

A variety of other public and private efforts to reduce energy consumption and GHG emissions from commercial and residential buildings have emerged in recent years, including the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system, Architecture 2030’s 2030 Challenge, and the American Society of Heating, Refrigerating, and Air-Conditioning Engineers’ (AHSRAE) goal to improve commercial building codes by 30 percent by 2010.6

Obstacles to Climate-Friendly Buildings

Building-related GHGs can be reduced in many ways, and these different pathways to lower emissions can also face a number of challenges. In broad terms, these obstacles include:

  • Cost concerns
    Estimates vary as to the financial cost and emissions-reducing potential for green building and energy efficient building practices, particularly because of the range of ideas and products and the degree to which specific technologies and designs are utilized. In many cases, the integration of efficient practices can reduce energy use in multiple elements of the building; for example, insulation and solar heating can reduce HVAC equipment costs and electricity costs, and strategic design can reduce the need for artificial lighting as well as improve air circulation.

    New efficient buildings are estimated to have costs equal to or only slightly more than those for conventional buildings. For new buildings, it is estimated that the additional cost of state-of-the art, energy-efficient technology is less than 2 percent of the total building cost.7 For example, a 2006 study comparing the cost of LEED-certified buildings compared with the cost of non-certified buildings8 found that LEED-certification is not a strong indicator of cost. Academic buildings with and without LEED certification can incur a wide range of costs on a square footage basis (see Figure 4).

    Regardless of initial cost, efficient buildings can yield savings over the lifetime of the building through:
    • Reduced utility bills; average energy costs for high-performance buildings are 50 percent less than for comparable, conventionally designed buildings.9
    • Increased property value.10
Figure 4: Cost per Square Foot of Academic Buildings,
Including LEED- and Non-certified Buildings
Source: Langdon, D., The Cost of Green Revisited: Reexamining the Feasibility and Cost Impact of Sustainable Design in the Light of Increased Market Adoption, 2007.

 

  • Market barriers
    A variety of market barriers exist, including the “split incentive” barrier wherein there exists a disconnect between those that manage the building and those who must pay the utility bills. Thirty-two percent of households and 40 percent of commercial buildings are rented or leased; in these cases, tenants do not have much control over retrofits or building improvements, and landlords may not reap the benefits of more efficient technology.11 

    In addition, the prevailing fee structures for building design engineers cause first costs to be emphasized over life-cycle costs. Projects are often awarded in the first place to the team that designs the building that costs the least to construct; their fees are typically reduced if actual construction costs exceed the estimated costs.12 This practice tends to hinder energy efficiency because initial capital costs are typically higher for the installation of superior heating, ventilation, and air-conditioning systems that reduce subsequent operating costs. 
  • Public policy and planning barriers
    Policies and planning efforts that affect buildings are often implemented at the state or local level. Policies can be designed to encourage more climate-friendly buildings, but a variety of policies also exist that discourage making buildings more climate-friendly. For example, many utilities have incentives to generate and sell more electricity and little or no incentive to encourage energy efficiency, even if the energy efficiency options have lower costs. 
  • Customer barriers
    Lack of information about energy-saving opportunities and incentives, such as rebates and low-interest loans, can result in consumer underinvestment. In addition, lack of access to energy-efficient technologies (e.g., because a particular technology is not stocked in local stores) can limit the use of some technologies.  Understanding these barriers may improve the feasibility of efficient construction and planning. With increasing availability of efficient technology and the growing popularity of green building techniques, it is becoming more and more important to address these barriers to the implementation of efficient and effective building technology.

Policy Options to Promote Climate-Friendly Buildings

The mosaic of current policies affecting the building sector is complex and dynamic involving voluntary and mandatory programs implemented at all levels of government, from local to federal.  Government efforts to reduce the overall environmental impact of buildings have resulted in numerous innovative policies at the state and local levels.  Non-governmental organizations, utilities, and other private actors also play a role in shaping GHG emissions from buildings through third-party “green building” certification, energy efficiency programs, and other efforts.

Various taxonomies have been used to describe the policy instruments that govern buildings, typically distinguishing between regulations, financial incentives, information and education, management of government energy use, and subsidies for research and development (R&D). Each of these is broadly described below.

  • Standards and codes
    Regulatory policies include building and zoning codes, appliance energy efficiency standards, clean energy portfolio standards, and electricity interconnection standards for distributed generation equipment. Building codes can require a minimum level of energy efficiency for new buildings, thus mandating reductions at the construction stage, where there is the most opportunity to integrate efficiency measures. Zoning codes can provide incentives to developers to achieve higher performance. Because of regional differences in such factors as climatic conditions and building practices, and because building and zoning codes are implemented by states and localities, the codes vary considerably across the country. While substantial progress has been made over the past decade, opportunities to strengthen code requirements and compliance remain.

    Appliance and equipment standards require minimum efficiencies to be met by all regulated products sold; they thereby eliminate the least efficient products from the market. Federal standards exist for many residential and commercial appliances, and several states have implemented standards for appliances not covered by federal standards (see Appliance Efficiency Standards).
  • Financial incentives
    Financial incentives can best induce energy-efficient behavior where relatively few barriers limit information and decision-making opportunities (e.g., in owner-occupied buildings). Financial incentives include tax credits, rebates, low-interest loans, energy-efficient mortgages, and innovative financing, all of which address the barrier of first costs. Many utilities also offer individual incentive programs, because reducing demand, especially peak demand, can enhance the utility’s system-wide performance. 
  • Information and education
    While many businesses and homeowners express interest in making energy-efficiency improvements for their own buildings and homes, they often do not know which products or services to ask for, who supplies them in their areas, or whether the energy savings realized will live up to claims. Requiring providers to furnish good information to consumers on the performance of appliances, equipment and even entire buildings is a powerful tool for promoting energy efficiency by enabling intelligent consumer choices.
  • Lead-by-example programs
    A variety of mechanisms are available to ensure that government agencies lead by example in the effort to build and manage more energy-efficient buildings and reduce GHG emissions. For example, several cities and states, and federal agencies (including the General Services Administration), have mandated LEED or LEED-equivalent certification for public buildings, and the Energy Independence and Security Act of 2007 includes provisions for reduced energy use and energy efficiency improvements in federal buildings.
  • Research and development (R&D)
    In the long run, the opportunities for a low-greenhouse gas energy future depend critically on new and emerging technologies. Some technological improvements are incremental and have a high probability of commercial introduction over the next decade (such as low-cost compact fluorescents). Other technology advances will require considerable R&D before they can become commercially feasible (such as solid-state lighting). The fragmented and highly competitive market structure of the building sector and the small size of most building companies discourage private R&D, on both individual components and the interactive performance of components in whole buildings.
    • Building Technologies Center. The Oak Ridge National Laboratory’s Buildings Technology Center was established by the U.S. Department of Energy (DOE) and performs research into issues including heating and cooling equipment, thermal engineering, weatherization, building design and performance, envelope systems and materials, and power systems. 
    • Emerging Technologies. This U.S. DOE-sponsored program develops technology that would reduce energy use in residential and commercial buildings by 60-70 percent. Technologies are in fields including solid-state lighting, space conditioning and refrigeration, building envelopes, and analysis tools and design strategies that would facilitate the development of energy efficient buildings through software and computer-based building analysis.  

Related C2ES Resources

Building Solutions to Climate Change, 2006

Climate TechBook: Building Envelope, 2009

Climate TechBook: Residential and Commercial Sectors Overview, 2009

MAP: Commercial Building Energy Codes

MAP: Green Building Standards for State Buildings

MAP: Residential Building Energy Codes

Towards a Climate-Friendly Built Environment, 2005

Further Reading / Additional Resources

Building Industry Research Alliance

Commercial Buildings Initiative

ENERGY STAR®, Federal Tax Credits for Energy Efficiency, updated 24 April 2009

Home Energy Checklist: Reduce Your Energy Costs, Energy & Environment Building Association, accesed 11 May 2009

National Association of Home Builders (NAHB), NAHB Model Green Home Buildings Guidelines, 2006

The Potential Impact of Zero-Energy Homes, prepared for the National Renewable Energy Laboratory by the NAHB Research Center, Inc., 2006

U.S. Department of Energy (DOE), Office of Energy Efficiency and Renewable Energy

U.S. Green Building Council

 

 


1 U.S. Department of Energy (DOE), 2008 Buildings Energy Data BookPrepared for the DOE Office of Energy Efficiency and Renewable Energy by D&R International, 2008.
2 The DOE has developed the Building America Best Practice Series that includes five climate-specific sets of building best practices that focus on reducing energy use and improving housing durability and comfort.
3 U.S. Environmental Protection Agency (EPA) and U.S. Department of Energy (DOE), National Action Plan for Energy Efficiency. Washington, DC: EPA, 2006.
4  DOE, Net-Zero Energy Commercial Building Initiative. Updated 27 February 2009.
5 Griffith, B., P. Torcellini, and N. Long. Assessment of the Technical Potential for Achieving Zero-Energy Commercial Buildings. NREL/CP-550-39830, 2006.
6 See Related Efforts for a list and links to other programs that support the transition to zero net energy buildings.
7 For more information, see page 33 of Towards a Climate-Friendly Built Environment. Prepared for the Pew Center on Global Climate Change by M. Brown, F. Southworth, and T. Stovall, 2005.
8 The lack of certification in this study is because of building design; “not certified” buildings would qualify for some LEED points but not enough to achieve certification (see p.10). The data in this study does not contain green buildings that chose not to obtain official certification because of, for example, cost considerations. For more information, see Langdon, D., The Cost of Green Revisited: Reexamining the Feasibility and Cost Impact of Sustainable Design in the Light of Increased Market Adoption, 2007. 
9 DOE, Office of Energy Efficiency and Renewable Energy, "Whole Building Design for Commercial Buildings." Net-Zero Energy Commercial Buildings Initiative. Updated 27 February 2009. 
10 In a recent study, “green” commercial buildings were shown to have consistently higher market values than comparable “non-green” buildings. See Piet Eichholtz, Nils Kok, and John M. Quigley, "Doing Well by Doing Good? Green Office Buildings.” Berkeley Program on Housing and Urban Policy. Working Papers: Paper W08-001, April 2008. 
11 Brown, M., F. Southworth, and T. Stovall, Towards a Climate-Friendly Built Environment. Prepared for the Pew Center on Global Climate Change, 2005. p17.
12 Brown, M., et al. 2005;
Jones, D.B., D.J. Bjornstad, and L.A. Greer. Energy Efficiency, Building Productivity, and the Commercial Buildings Market. ORNL/TM-2002/107. Oak Ridge, TN: Oak Ridge National Laboratory, 2002.

An introduction to the factors that affect building-related greenhouse gas emissions.
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An introduction to the factors that affect building-related greenhouse gas emissions.

Ethanol

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Quick Facts

  • In 2008, 9.2 billion gallons of ethanol were consumed in the United States.
  • As of 2007, a total of 110 corn ethanol plants were operating in 21 states.
  • The Energy Independence and Security Act (EISA) of 2007 updated the federal Renewable Fuel Standard that requires the use of annually increasing amounts of corn ethanol. The updated mandate requires 11.1 billion gallons of corn ethanol in 2009 and increases yearly to 15 billion gallons in 2015.  The mandate also requires that ethanol facilities, built after passage of the Act, must achieve at least a 20 percent reduction in lifecycle greenhouse gas emissions per gallon of ethanol relative to gasoline.

Background

Ethanol is made by fermenting sugars or starch into alcohol and can be used as a liquid fuel in motor vehicles. Most of the ethanol sold in the United States is blended with gasoline. Gasoline with up to 10 percent ethanol (E10) can be used in most vehicles without modification. Special flexible fuel vehicles can use a gasoline-ethanol blend that has up to 85 percent ethanol (E85).

Description

Ethanol can be produced from a variety of feedstocks, including cereal crops, corn, sugarcane, sugar beets, potatoes, sorghum, and cassava. Currently, only simple sugars or starches can be converted into ethanol on a commercial-basis; corn and sugarcane are the two main feedstocks. Researchers are examining other potential feedstocks for ethanol production, such as cellulosic biomass and other plant materials.

  • Corn ethanol
    Corn-to-ethanol is currently the main commercial biomass-to-fuel pathway in the United States. To produce ethanol, starchy crops, like corn, first have to be converted to simple sugars before fermentation. This can be done through either wet or dry milling; currently, about 75 percent of corn ethanol in the United States is produced through dry milling and 25 percent through wet.
    • In the dry milling process:
      The corn kernel is first ground into a fine powder and mixed with water and enzymes to break the starch into sugar (glucose). The resulting mixture is heated to kill bacteria, cooled, and processed with other enzymes that break the glucose to dextrose. Yeast is then added to ferment the dextrose into ethanol and carbon dioxide (CO2).

      The resulting ethanol has a high concentration of water, which must be separated from the ethanol via distillation. This distillation requires a large amount of energy, usually in the form of natural gas, to power the process. Dry milling results in a single co-product – distiller’s dried grain with solubles (DDGS) – composed of protein and other nutrients and used as an animal feed.
    • In the wet milling process:
      The corn kernel is first soaked in a chemical solution and then separated into solid and liquid components. The starch is then is hydrolyzed, fermented, and distilled as in dry-milling.
      Wet milling requires more equipment to process the corn than dry milling, but it is more suitable for larger refineries and results in more co-products that can be sold to other sectors.
  • Sugarcane ethanol
    In Brazil, the primary feedstock for producing ethanol is sugarcane, with crop wastes (called bagasse) used for the conversion process energy. Sugarcane is about one-third simple sugar (sucrose) and two-thirds bagasse. To process the sugarcane, the sugar is pressed out of the cane and then fermented, a process similar to corn ethanol production. Bagasse provides energy for the processing and distillation, eliminating the use of fossil fuels from the manufacturing process.
  • Other feedstocks
    Other feedstocks for ethanol production are emerging. Cellulosic feedstocks, such as perennial grasses (e.g., switchgrass and Miscanthus) or short rotation woody crops, can potentially be converted to ethanol.

Environmental Benefit/Emission Reduction Potential

The greenhouse gas (GHG) reduction potential can vary significantly based on how the feedstock is produced and how it is processed (e.g., what type of energy is used in the conversion process).

  • On average, U.S. corn ethanol facilities, where natural gas is most commonly used for conversion energy, reduce life-cycle GHG emissions by about 20 percent per gallon of ethanol. With a coal-fired process, life-cycle GHG emissions for ethanol are 3 percent higher, relative to gasoline. If biomass power and carbon capture and disposal are used instead, ethanol can reduce emissions by more than 50 percent compared to gasoline.1 These estimates only include the direct lifecycle emissions, and do not take into account indirect land use impacts.
  • Brazilian sugarcane-based ethanol, which uses plant wastes for the conversion energy, reduces GHG emissions by 60 to 80 percent relative to petroleum, when considering direct lifecycle emissions.2
  • Studies that have attempted to take into account the effects of ethanol production on land use generally have been more pessimistic about emission reductions and have calculated that GHG benefits of ethanol decrease significantly when the indirect land use impacts are considered.3

Table 1. Life-cycle GHG Intensity for Ethanol, based on the California GREET Model4
(These estimates do not include the impact of indirect land use change on GHG emissions.)

FuelTechnology UsedCA GREET GHG
(g CO2e/MJ)
Corn Ethanol, U.S. Average85% Dry Mill and 15% Wet Mill68.6
Corn Ethanol, produced in MidwestDry Mill, Natural gas for power67.6
Corn Ethanol, produced in MidwestWet Mill, 60% Natural gas and 40% Coal74.3
Corn Ethanol, produced in CaliforniaDry Mill, Natural gas for power58.1
Sugarcane Ethanol 26.6
California Gasoline (including 10% ethanol) 95.9

 

Cost

As with all biofuels, the costs of ethanol production depend greatly on the cost of the feedstock.

  • For U.S. corn ethanol:
    In 2002, feedstock cost was about 57 percent of production cost for ethanol (EIA).

    When corn is available at $2.60 per bushel and natural gas at $5.70 per gigajoule, U.S. ethanol production costs are about $1.20 per gallon of ethanol, or $1.82 per gallon on a gasoline-equivalent basis (gge), a cost that includes a $0.40 per gallon credit from sale of co-products. Adding a 12-percent return on investment raises the cost to $1.33 per gallon of ethanol ($2.20 per gge).

    Every $1.00 per bushel rise in the price of corn increases the production cost of ethanol by $0.35 per gallon. Since 2006, the spot market price for corn has regularly exceeded $4.00 per bushel. At that price, ethanol production cost, including a return on investment, is about $2.77 per gge.

    In general, U.S. corn ethanol is competitive with gasoline (i.e., would not need a subsidy to compete in the market) when oil prices are in the $66 to $91 per barrel range compared to corn prices in the $2.60 to $4.00 per bushel range. Right now, U.S. corn ethanol receives a subsidy of  51 cents per gallon of ethanol that is blended with gasoline.
  • For Brazilian sugarcane ethanol:
    Brazil produces sugarcane-based ethanol at costs significantly below those of corn-based ethanol—and, indeed, at lower costs than any other biofuel worldwide.

    The estimated cost of the Brazilian biofuel is $0.85 to $1.40 per gge. This makes Brazil’s product at least 30 percent less expensive than U.S. ethanol from corn. In general, sugarcane ethanol is competitive with gasoline at oil prices in the $40 to $50 per barrel range.5

Current Status of Ethanol

With current technology, one bushel of corn yields approximately 2.8 gallons of ethanol,6 or in terms of acreage, one acre of corn generates approximately 330-424 gallons of ethanol.7 In comparison, sugarcane ethanol yields are more than 720 gallons per acre.8

Under requirements in the Energy Independence and Security Act of 2007, 9 billion gallons of ethanol were produced in 2008, which consumed about 30 percent of the U.S. corn crop. Studies suggest that devoting more than 25 percent of the crop to ethanol may result in substantial cost increase in corn prices.9

To produce more corn ethanol, producers have several options:

  • Increase the amount of cropland in production,
  • Increase the crop yields per acre, or
  • Use more efficient processing techniques that increases the ethanol output from one bushel of corn.

Producers can also replace or supplement corn with other feedstocks, such as cellulosic products.

Obstacles to Further Development or Deployment of Ethanol

When assessing GHG emission reductions from biofuels, it is important to examine the full life-cycle emissions of the fuel.  Land use changes, land management practices, biomass feedstock, conversion processes and type of energy used in conversion, and transportation of fuel to end users all affect the overall GHG profile of the fuel.

  • Land use for biofuel feedstocks
    One of the main concerns with the increased use of ethanol is the impact on land use. Land-use changes occur for a variety of reasons, including the need to meet rising demand for food due to rising populations and incomes. As the price of ethanol increases, this creates pressure to convert previously idle land to crop production.  Of particular concern is the conversion of forests, peatland, grasslands, or wetlands as a result of this process.  On the other hand, land conversions, such as conversion of degraded lands to biofuel production, can have beneficial effects by increasing the ability of the soil to sequester carbon.
  • Transportation and use of ethanol
    A number of key infrastructure issues will need to be addressed as ethanol production increases. Transporting ethanol to retailers requires an infrastructure separate from gasoline pipelines, because current pipelines are not designed to carry gasoline-ethanol mixes due to the propensity of ethanol to absorb contaminants and water. Transporting ethanol via truck increases both the cost and overall carbon footprint of the fuel. Furthermore, as ethanol production increases, higher level gasoline-ethanol blends (such as E85) are needed to absorb the additional ethanol.  Using these higher level blends, in turn, requires special gas station pumps to dispense the fuel and flexible-fuel vehicles, both of which are currently limited in supply.
  • Impacts on other agricultural commodities
    Producing ethanol from corn can also have an impact on food and feed prices. As ethanol consumption increases, corn is diverted from traditional food and feed markets to ethanol production. Although the exact nature of this increased demand for ethanol is uncertain, implications for agricultural markets will need to be considered as ethanol production increases.
  • Other environmental impacts
    In addition to impacts on GHG emissions, ethanol production can also have other environmental effects. The increased use of fertilizers and pesticides to grow more corn or sugar cane can result in higher amounts of nitrogen and phosphorous run-off, affecting soil, air, and water quality. Growing feedstocks for ethanol also requires water for irrigation and processing, which can put a strain on local water supplies.10 Converting land to ethanol production also impacts habitat and ecosystems in an area.

Moving forward, it will be important to take a critical look all available technologies and their GHG reduction potential to make sure corn ethanol can be produced cost-effectively and without harmful impacts on food prices and land use, and to transition to other feedstocks.

Policy Options to Help Promote Ethanol

Federal, state, county, and local governments currently support biofuels in a variety of ways. This support falls into two general categories: (1) policies that mandate levels of use for biofuels and (2) policies that offer subsidies or tax credits for biofuel production and/or use.

  • Mandates requiring biofuel use
    The Energy Independence and Security Act of 2007 established a Renewable Fuel Standard that required the use of 9 billion gallons of corn ethanol in 2008, with mandated use levels increasing annually until 2015 when the requirement reaches 15 billion gallons.
  • Taxes and subsidies
    Gasoline suppliers receive a 51-cent federal tax credit per gallon of ethanol blended with gasoline. After U.S. production and imports of ethanol exceeds 7.5 billion gallons, the credit decreases to 45-cents per gallon; this decrease is expected to happen in 2009.11 Small ethanol producers (i.e., those with a production capacity of less than 60 million gallons a year) are eligible for a tax credit of 10-cents per gallon of ethanol produced on up to 15 million gallons in a given year.12 Both of these tax credits will expire at the end of 2010 unless renewed by new legislation. On the other hand, imported ethanol incurs a 54-cent per gallon excise tax.

Future policy should take life-cycle emissions into consideration to ensure that corn ethanol production contributes effectively to greenhouse gas emission reductions. For more information on biofuel policies, see Climate TechBook: Biofuels Overview.

Related C2ES Resources

Agriculture's Role in Greenhouse Gas Mitigation, 2006

Climate Techbook: Biodiesel, 2009

Climate Techbook: Biofuels Overview, 2009

Biofuels for Transportation: A Climate Perspective, 2008

MAP: State Mandates and Incentives Promoting Biofuels

Further Reading/Additional Resources

U.S. Department of Energy (DOE), Office of Energy Efficiency and Renewable Energy

Renewable Fuels Association

Liska, Adam, et al. “Improvements in Life Cycle Energy Effciency and Greenhouse Gas Emissions of Corn-Ethanol.” Journal of Industrial Ecology 13(1): 58 – 74. 2008.

Searchinger, Timothy, et al. “Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land Use Change.” Science 319(5867): 1238 – 1240. 2008.


Wang, M., M. Wu, and H. Huo. “Life-cycle energy and greenhouse gas emission impacts of different corn
ethanol plant types.” Environmental Research Letters 2 024001. 22 May 2007.
International Energy Agency. 2007. “IEA Energy Technology Essentials: Biofuels Production.” January 2007.  Accessed 19 March 2009.
Searchinger, T., et al. “Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land Use Change.” Science 319.  29 February 2008.
These life-cycle GHG intensities were calculated for the purposes of the California Low-Carbon Fuel Standard program. For more information on the analysis, see California Air Resources Board, Stationary Source Division. Detailed California-Modified GREET Pathway for Brazilian Sugarcane Ethanol. 12 January 2009; California Air Resources Board, Stationary Source Division. Detailed California-Modified GREET Pathway for Corn Ethanol, Release Date: January 20, 2009; and California Air Resources Board. Fuel GHG Pathways Update, Presentation: January 30, 2009.
International Energy Agency. 2007. “IEA Energy Technology Essentials: Biofuels Production.” January 2007.  Accessed 19 March 2009.
Committee on Assessment of Resource Needs for Fuel Cell and Hydrogen Technologies, National Research Council. Transitions to Alternative Transportation Technologies: A Focus on Hydrogen. Washington, DC: National Academies Press, 2007.
Budny, Daniel, and Paulo Sotero. “Brazil Institute Special Report: The Global Dynamics of Biofuels.” Brazil Institute of the Woodrow Wilson Center. April 2007. Retrieved on 2008-05-03.
Ibid.
Committee on Assessment of Resource Needs for Fuel Cell and Hydrogen Technologies, National Research Council. 2008. Transitions to Alternative Transportation Technologies: A Focus on Hydrogen. Washington, DC: National Academies Press.
10  Chiu, Y., B. Walseth, and S. Suh. "Water Embodied in Bioethanol in the United States." Environmental Science and Technology 43. 10 March 2009.
11  Yacobucci, Brent. 2009. Biofuels Incentives: A Summary of Federal Programs. Washington, DC: Congressional Research Service.
12  Ibid.

Focus on ethanol from corn and sugarcane
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Focus on ethanol from corn and sugarcane

Biofuels Overview

What are Biofuels?

Biofuels encompass any fuel produced from plant- or animal-based feedstock (referred to as “biomass”). The two most common forms of biofuel today are ethanol and biodiesel.[1] Biofuels are used primarily to fuel vehicles, but can also fuel engines or be used in fuel cells to generate electricity.[2]

As countries seek to reduce greenhouse gas emissions from the transportation sector and lessen dependence on petroleum-based fuels, biofuels continue to attract attention as one possible solution. Biofuels offer a way to produce transportation fuels from renewable sources or waste materials and to reduce net carbon dioxide (CO2) emissions because the CO2 emitted during combustion of the fuel is captured during the growth of the feedstock.

Biofuels in the United States

Corn ethanol is the most widely used liquid biofuel in the United States. Most of this ethanol is blended into gasoline for use in passenger vehicles. Gasoline with up to 10 percent ethanol (E10) can be used in most vehicles without further modification, while special flexible fuel vehicles can use a gasoline-ethanol blend with up to 85 percent ethanol (E85). According to EPA, most vehicle models manufactured after 2001 can accept 15 percent ethanol (E15) without modifications. Some industry stakeholders have claimed that E15 may invalidate manufacturer warrantees, although vehicle warrantees vary and might not specifically prohibit a particular fuel.[3],[4] EPA intends to reduce the risk of any misfueling through careful fuel labeling. Biodiesel is the other commonly used biofuel in the United States, primarily produced from soybean oil. The most common blend of U. S. biodiesel is 20 percent biodiesel/80 percent petroleum diesel (B20). Biodiesel can be legally blended with petroleum diesel in any fraction, though vehicle system modifications may be required for percentages higher than B20.[5]  Figure 1 shows U.S. consumption of these biofuels over time.

Figure 1: United States Annual Biofuel Consumption, 2001 - 2011

 

Source: Energy Information Agency (2012) http://www.eia.gov/totalenergy/data/annual/index.cfm#renewable

U.S. non-petroleum liquid fuel production is projected to grow from 1.09 million barrels per day in 2011 to 1.97 million barrels per day in 2040.[6] In 2011, ethanol production was nearly 14 billion gallons (just over 10 percent of total gasoline consumption),  in compliance with the Renewable Fuel Standard (RFS) from the Energy Independence and Security Act of 2007.[7] This policy requires that a percentage of fuels come from biogenic sources, directly mandating certain volumes of biofuels. The EPA recently announced that the 2013 mandate for biodiesel will increase to 1.28 gallons from 1 billion gallons in 2012.[8] Mandated advanced biofuel production, meaning fuels with at least a 50 percent emissions reduction from gasoline, will increase from 2 billion gallons to 2.75 billion gallons in 2013 (See Table 1).[9] For more, see C2ES resource Renewable Fuel Standard.

Table 1: RFS Ethanol Equivalent Volume Requirements, 2011 – 2013 (billion gallons unless noted)

Fuel Type

2011

2012

2013 (proposed)

Cellulosic biofuel

6.6 million

10.45 million

14 million

Biodiesel

0.8

1

1.28

Advanced biofuel

1.35

2

2.75

Total Renewable fuel (Including Ethanol)

13.95

15.2

16.55

Note: Volumes are ethanol-equivalent, except for biodiesel which is actual volume,

Source: EPA (2013) http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm

Biofuels: Technology and Feedstocks

A wide variety of feedstocks are currently in use or under development to produce biofuels (see Figure 2). These feedstocks differ significantly in the types of lands on which they can be grown, yields per acre, and the fuels into which they are processed.

Figure 2: Current and Emerging Biofuel Pathways

figure2.jpg

Source: Pena, N., Biofuels for Transportation: A Climate Perspective, 2008. http://www.c2es.org/publications/biofuels-transportation-climate-perspective .

Today’s commercial processes convert simple sugars, starches, or oils to produce biofuels—the fermentation of cornstarch (from the corn kernel), sugar beets, or sugarcane produces ethanol, and the transesterification[10] of oils (e.g., soybean or palm oil) produces biodiesel. Of the feedstocks in use today, sugar beets, sugarcane, and palm oil yield the highest amount of fuel per acre on a gasoline gallon-equivalent basis.[11]

However, the vast majority of available plant material for biofuels is in the form of cellulose, hemicellulose, and lignin. This biomass is not currently used in most biofuel production processes.[12] Because of the high availability of these materials, processes capable of converting cellulose to biofuels represent one pathway to significantly lowering the resources needed to grow biofuel feedstocks. Furthermore, once the cellulose is extracted from the plant to produce the biofuel, the remaining lignin can be used as a fuel to power the biofuel conversion process. Lignin yields energy when burned and further limits the fossil fuel inputs required to produce the biofuel. Researchers are also looking at different sources for oils that can be converted into biodiesel.

Examples of emerging feedstocks include:

  • Cellulosic feedstocks, such as perennial grasses (e.g., switchgrass and Miscanthus) or short rotation woody crops, which can be converted to ethanol or other biofuels.
  • Industrial waste, includes agricultural wastes such as manure and other processing wastes that are high in protein and fats; these can be converted to oils and then to biodiesel. Other waste biomass includes wood residues from the forest industry and agricultural residues from corn farming; the cellulose in these materials can be converted into ethanol.
  • Algae, which can produce oil that can be converted to a number of different biofuels. Additional opportunities are in microalgae (microscopic algae) that can create biomass even more efficiently than terrestrial plants.
  • Jatropha, a species able to grow on barren, marginal land, especially in many parts of Asia. Jatropha oil is extracted from the seeds of the plant and can be used to produce biodiesel.

Biochemical Conversion Process

  • Biomass must be converted to sugar or other feedstock through
    • Pretreatment, a process that removes the protective sheath of lignin and hemicellulose to allow for further enzyme hydrolysis of the cellulose biomass to glucose.
    • Conditioning and enzymatic hydrolysis, a process that lowers the acidity of the material so that enzymes and organisms can thrive. The pH is adjusted and the toxicity of the material is lowered.
  • The feedstock must then be fermented using:
    • Microorganisms developed through metabolic engineering techniques, researchers are developing microorganisms that can more effectively ferment all the sugars in biomass – improving ethanol and expanding feedstock options.

These feedstocks have the ability to reduce greenhouse gas emissions significantly relative to conventional gasoline and diesel fuel. Because they are not food-based and are often processing wastes from other industries, they also have the added benefit of limited competition with agricultural food crops.

Biofuels and Greenhouse Gas Emission Reductions

When calculating the greenhouse gas emission reductions from biofuel use, it is important to examine the full lifecycle of emissions from the fuel. Potential greenhouse gas emission reductions vary widely, depending on many factors including feedstock selection, fuel production through feedstock conversion, and final fuel use. Fossil fuels are often used in growing and processing feedstocks, which can increase the lifecycle emissions for the biofuel. Changes in land use and land management practices to grow biofuel feedstocks also affect the greenhouse gas profile of a fuel. As biofuel production increases, concerns are growing about the actual greenhouse gas reductions achieved by these fuels as well as competing objectives for water and land resources.

If grown in a sustainable manner, biomass is considered a carbon-neutral energy source – meaning that the greenhouse gas emissions, namely CO2, released from converting biomass to energy are equivalent to the amount of CO2 absorbed by the plants during their growing cycles. Sustainable biomass sources refer to those that limit land use change (LUC), avoid pollution, prioritize waste materials, and regrow quickly. Without actions to ensure sustainability, an increase in dedicated crops could result in undesirable impacts in natural settings, such as LUC and pesticide use. Additionally, fossil fuel use in biomass harvesting, transporting, and processing has an effect on total emissions. 

Developing greenhouse gas profiles over the lifecycle of a fuel is not an easy task. It is challenging to design scientifically-based, equitable methodologies for estimating lifecycle greenhouse gas emissions for both petroleum- and bio-based fuels, as well as other potential energy-source options. In practice, not all greenhouse gas emissions can be included in a fuel’s greenhouse gas footprint; choices must be made as to which emissions to include. In the case of biofuels, for example, emissions from the manufacturing and use of fertilizers to produce the feedstock are usually included but emissions from building the fertilizer plant itself are not. Some emissions are measurable, including tailpipe CO2, while others must be estimated, such as indirect land use change occurring because of displaced food crops from increased biomass crops.

Figure 3: Diagram of Lifecycle Emissions Pathway, Corn Ethanol

Source: Delucchi, M. “Appendix X: Pathways Diagrams.” In A Lifecycle Emissions Model (LEM): Lifecycle Emissions from Transportation Fuels, Motor Vehicles, Transportation Modes, Electricity Use, Heating and Cooking Fuels, and Materials, http://www.its.ucdavis.edu/publications/2003/UCD-ITS-RR-03-17X.pdf

In order to appropriately use these fuels, governments, scientists, environmental groups, and others recognize the need for improved methods to account for greenhouse gas emissions and other environmental impacts caused by using plant material to produce transportation fuels. Importantly, an International Energy Agency lifecycle emissions scenario shows that biofuels could contribute significantly to reducing emissions if increased from today’s 2 percent of total transport energy to 27 percent by 2050.[13]

Policy Options to Promote Biofuels

The right set of public policy tools could spur innovation and promote the use of low-carbon biofuels from renewable sources. These include renewable fuel policies, financial incentives, low carbon fuel standards (LCFS), research and development (R&D), and vehicle fleet programs.

  • Renewable Fuels Standards

Volumetric mandates based on feedstock can push advanced biofuels (e.g., algae-derived biodiesel) into the market by giving suppliers a more predictable level of sales per year.

A volumetric requirement for biofuels requires that fuel providers sell a certain quantity of the specified fuels over an identified time period. Such mandates have the advantage of offering suppliers a guaranteed market for their products, thus accelerating the penetration of new technologies. Current renewable fuel mandates are based on the feedstock that the fuel is produced from (e.g., corn ethanol). The potential downside to a purely volumetric approach is that producers must sell certain amounts of the fuel, without regard to its lifecycle carbon emissions, so the greenhouse gas mitigation benefit from using these fuels may be uncertain.

The Energy Independence and Security Act of 2007 (EISA 2007) updated the federal Renewable Fuel Standard (RFS), originally enacted under the Energy Policy Act of 2005. EISA 2007 increased the previous volumetric targets for biofuels, mandating that 36 billion gallons of renewable fuel must be used annually by 2022.[14] Of this, a certain percentage of the renewable fuel blended into transportation fuels must be cellulosic biofuel, biomass-based diesel, and advanced biofuel (fuels from bio-sources with lifecycle emissions reductions of at least 50 percent below gasoline).[15]  See Table 1 for specific RFS figures.The policy requires that EPA set annual standards based on gasoline and diesel projections from the Energy Information Administration. The EPA conducts an analysis of qualifying fuel sources that be made available and has discretion over volume requirements in order to respond to market conditions.[16]

Several U.S. states have also implemented policies to promote biofuel use (See C2ES Resource Biofuels: Incentives and Mandates Map). As of July 2012, 42 states provide incentives promoting biofuel production and use. Additionally, ten states have enacted their own renewable fuels standards.[17]

  • Financial Incentives

Incentives take the form of tax credits and exemptions, reduced tax rates, and the provision of grants and guaranteed loans.[18] State and local level examples include production grants and incentives, fleet grants for public school systems, ethanol infrastructure grants, alternative fuel tax credits, and registration exemptions.[19] Federal examples include the United States Department of Agriculture (USDA) programs of Advanced Biofuel Production Grants and Loan Guarantees, the Ethanol Infrastructure Grants and Loan Guarantees, and the Enhanced Biofuel Payment Program.[20] Other examples, administered through the Internal Revenue Service, include the recently extended Biodiesel and Renewable Diesel Tax Credit, the Alternative Fuel Infrastructure Tax Credit, and the Credit for Production of Cellulosic Biofuel.[21]

  • Low Carbon Fuel Standard

A performance standard (e.g., a low carbon fuel standard, or LCFS) sets targets for reductions in greenhouse gas intensity for the entire transportation fuel pool, not only biofuels. Under an LCFS, a standard would specify the average carbon intensity for transportation fuels, typically for a given year, expressed as a percent reduction from a baseline (e.g., GHG intensity in 2015 must be 5 percent lower than 2005 levels) (see C2ES resource Low Carbon Fuel Standard Map).

The greenhouse gas intensity for a fuel is calculated on a lifecycle basis, which includes the emissions from production or extraction, processing, and combustion of the fuel. This policy allows manufacturers to produce and retailers to purchase the mix of fuels that most cost-effectively meets the standard. If based on lifecycle emissions accounting, an LCFS is intended to provide a level playing field for all transportation energy sources that may be used in the future, including biofuels, electricity, or hydrogen.

To address some of the concerns with biofuel mandates, California implemented an LCFS through Executive Order S-1-07 (issued on January 18, 2007), which set a goal of reducing the carbon intensity of passenger fuels statewide by a minimum of 10 percent by 2020. In 2012, Oregon began implementing a similar fuel standard by launching Phase I of the Clean Fuels Program, which requires fuel importers and suppliers in the State of Oregon to monitor and report fuel volumes and carbon intensity (the amount of carbon emissions per unit of energy). Upon further approval by the Oregon Environmental Quality Commission, Phase II would require fuel suppliers to gradually lower fuel carbon intensity until it is ten percent below 2010 levels, with achievement anticipated by 2025.[23]

  • Research and Development (R&D)

R&D can play an important role in increasing knowledge, proving feasibility, and advancing technology for biofuel production and consumption. [24] The Environmental Protection Agency Bioenergy Program for Advanced Biofuels Funding, authorized under the 2009 Farm Bill, Section 9005, provides payments to eligible producers that expand production of advanced biofuels from sources other than corn starch. Incentives are intended to diversify the source of biofuel production as well as increase the overall output.[25] Additionally under the Department of Energy and the Department of Agriculture, the Biomass Research and Development Initiative provides grant funds to increase development and demonstration of biofuels. The Department of Transportation also carries out biofuel research in its Bio-based Transportation Research Program in an effort to promote innovation in transportation infrastructure.[26]

  • Vehicle Fleet Programs

Some cities and states require that jurisdictions remove aging fleets and incorporate alternatives fuels. An example is the Texas Clean Fleet Program, which provides incentives for entities that operate large fleets to replace diesel engines with alternative fuel vehicles.[27] At the federal level, the Vehicle Acquisition and Fuel Use Requirements for Federal Fleets, under the Energy Policy Act of 1992, requires 75 percent of light-duty vehicles of certain federal fleets be alternative fuel vehicles (AFVs).[28]

Related Business Environmental Leadership Council (BELC) Company Activities

BP

DuPont

Royal Dutch/Shell

Weyerhaeuser

Related C2ES Resources

Climate TechBook: Ethanol

Climate TechBook: Biodiesel

Climate TechBook: Advanced Biohydrocarbons

Climate TechBook: Cellulosic Ethanol

Climate TechBook: Agriculture Overview

C2ES Map: State Mandates and Incentives Promoting Biofuels

Further Reading / Additional Resources

Biomass Research and Development Board

International Energy Agency (IEA)

United States Department of Agriculture

National Renewable Energy Laboratory

SCOPE: International Biofuels Project, Biofuels: Environmental Consequences and Interactions with Changing Land Use, (2009)

U.S. Department of Energy (DOE)

Endnotes


[1] National Renewable Energy Laboratory (NREL), Biofuels Basics (2012), http://www.nrel.gov/learning/re_biofuels.html.

[2] Department of Energy (DOE) Energy Efficiency and Renewable Energy (EERE), Biomass Data Energy Book (2011), http://cta.ornl.gov/bedb.

[3] Wald, M, “A New Skirmish in the Ethanol Wars” (2012), http://green.blogs.nytimes.com/2012/05/16/a-new-skirmish-in-the-ethanol-wars.

[4] EPA, Regulation to Mitigate the Misfueling of Vehicles and Engines with Gasoline Containing Greater Than Ten Volume Percent Ethanol and Modifications to the Reformulated and Conventional Gasoline Programs, (June 2011), http://www.epa.gov/otaq/regs/fuels/additive/e15/420r11006.pdf

[5] National Renewable Energy Laboratory, Biodiesel Handling and Use Guide (2009), http://www.nrel.gov/vehiclesandfuels/pdfs/43672.pdf.

[6] Energy Information Administration (EIA), Liquid Fuels Supply and Disposition, Annual Energy Outlook Early Releaser (2013) http://www.eia.gov/oiaf/aeo/tablebrowser/#release=AEO2013ER&subject=2-AEO2013ER&table=11-AEO2013ER&region=0-0&cases=early2013-d102312a.

[7] In 2011, the United States consumed about 134 billion gallons (or 3.19 billion barrels) of gasoline, a daily average of about 367.08 million gallons (8.74 million barrels), EIA, http://www.eia.gov/tools/faqs/faq.cfm?id=23&t=10.

[8] EPA, EPA Proposes 2013 Renewable Fuel Standards (2013), http://www.epa.gov/otaq/fuels/renewablefuels/documents/420f13007.pdf.

[9] EPA, EPA Proposes 2013 Renewable Fuel Standards (2013), http://www.epa.gov/otaq/fuels/renewablefuels/documents/420f13007.pdf.

[10] Transesterification is a process that modifies the oils in the feedstocks by replacing glycerin in fatty acid chains of vegetable oils with methanol.

[11] It is necessary convert biofuels to their gasoline-equivalents because the different fuels have different energy content. For example, ethanol contains only 66 percent as much energy per gallon as a gallon of gasoline.

[12] Cellulose is complex carbohydrate and the main structural component of plants. Hemicellulose is similar to cellulose and found in plant cell walls. Cellulose and hemicelluloses account for 25 to 50 percent of plant material. Lignin is a polymer that provides rigidity to plants cell walls and is second largest component of plant biomass.

[13] IEA, Technology Roadmap Biofuels for Transport ( 2011), http://www.iea.org/publications/freepublications/publication/biofuels_roadmap.pdf.

[14] DOE EERE, Alternation Fuels Data Center, http://www.afdc.energy.gov/laws/laws/US/tech/3252.

[15] Congressional Research Service, Renewable Fuel Standard (RFS): Overview and Issues (2012), http://www.fas.org/sgp/crs/misc/R40155.pdf.

[16] EPA, Renewable Fuels: Regulations and Standards, http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm.

[17] C2ES, State Mandates and Incentives Promoting Biofuels, http://www.c2es.org/us-states-regions/policy-maps/biofuels.

[18] Ibid.

[19] Ibid.

[20] DOE EERE, Alternation Fuels Data Center, http://www.afdc.energy.gov/laws/laws/US/tech/3252.

[21] Yacobucci, B., Biofuels Incentives: A Summary of Federal Programs, http://www.fas.org/sgp/crs/misc/R40110.pdf.

[22] C2ES, Oregon Approves Phase I of Low Carbon Fuel Program (2012), http://www.c2es.org/us-states-regions/news/2009/oregon-governor-signs-legislation-low-carbon-fuel-standard.

[23] Oregon Department of Environmental Quality, Oregon Clean Fuels Program, http://www.deq.state.or.us/aq/cleanFuel/qa.htm; Proposed Rulemaking Announcement (2011) http://www.deq.state.or.us/aq/Rulemaking/CleanFuelsNoticeofProposedRulemaking.pdf

[24] Biomass Research and Development, http://www.usbiomassboard.gov/related_information/related_information.html .

[25] EPA, Program for Advanced Biofuels, http://www.epa.gov/agstar/tools/funding/incentive/USbioenergyprogramforadvancedbiofuels.html.

[26] DOE, Federal Laws and Incentives for Biodiesel, http://www.afdc.energy.gov/laws/laws/US/tech/3251.

[27] Texas Commissions on Environmental Quality, Texas Clean Fleet Program, http://www.tceq.texas.gov/airquality/terp/tcf.html.

[28] DOE, Federal Laws and Incentives for Ethanol, http://www.afdc.energy.gov/laws/laws/US/tech/3252

Introduction to biofuel use, technology, feedstocks, and policy options
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Teaser: 

Introduction to biofuel use, technology, feedstocks, and policy options

Op-Ed: Goals Can Be Met Without Auctioning Emission Allowances

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.

Appeared in the National Journal Energy & Environment Expert Blog— by Eileen Claussen and Jim Rogers

CCS Public Workshops

Promoted in Energy Efficiency section: 
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The Pew Center co-sponsored two East Coast workshops exploring issues related to Carbon Capture and Storage (CCS).

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

Click here for event presentations.

Coal Initiative Series: Positioning the Indian Coal-Power Sector for Carbon Mitigation: Key Policy Options

 

IndiaCoalPower

Coal Initiative Series
Positioning the Indian Coal-Power Sector for Carbon Mitigation: Key Policy Options

Download the full white paper (pdf)

Prepared for the Pew Center on Global Climate Change
January 2009

By:
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
climate policy.

Ananth P. Chikkatur
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Climate Change 101 series

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.

Read the entire series or jump to a single report:
OverviewScience and ImpactsAdaptationTechnologyBusiness International FederalStateLocal • Cap and Trade

For more information, be sure to listen to our Climate Change 101 podcast series

 

Complete101Climate Change 101: Understanding and Responding to Global Climate Change

The complete set of six reports plus the overview in one volume.

 

 

 

OverviewClimate Change 101: Overview

This overview summarizes the key points from each of the Climate Change 101 reports.

 

 

 

Climate Change 101 The Science and ImpactsClimate Change 101: Science and Impacts

This report provides an overview of the most up-to-date scientific evidence and also explains the causes and projected impacts of climate change.

 

 

 

Adaptation 101 Climate Change 101: Adaptation

This report details how adaptation planning at the local, state and national levels can limit the damage caused by climate change.

 

 

 

TechnologyClimate Change 101: Technological Solutions

This piece discusses the technological solutions both for mitigating its effects and reducing greenhouse gas emissions now and into the future.

 

 

 

Business SolutionsClimate Change 101: Business Solutions

This report discusses how corporate leaders are helping to shape solutions.

 

 

 

InternationalClimate Change 101: International Action

This report discusses what will be needed for an effective global effort, one calling for commitments from all the world's major economies.

 

 

 

Federal ActionClimate Change 101: Federal Action

This report discusses federal policy options that can put the country on the path toward a lower-carbon future.

 

 

 

State ActionClimate Change 101: State Action

This report highlights states' efforts as they respond to the challenges of implementing solutions to climate change.

 

 


Local Action Climate Change 101: Local Action

This report describes the actions taken by cities and towns.

 

 

 

Cap and trade 101Climate Change 101: Cap and Trade

This report explains the details of cap and trade.

 

Coverage of Natural Gas Emissions & Flows Under a GHG Cap-and-Trade Program

Coverage of Natural Gas Emissions & Flows Under a GHG Cap-and-Trade Program

Prepared for the Pew Center on Global Climate Change
December 2008 

By:
Joel Bluestein
Senior Vice President, ICF International

Download entire white paper (pdf)

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.

 

Overview

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.

Joel Bluestein
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Coal Initiative Series: A Resource and Technology Assessment of Coal Utilization in India

 

India Coal Technology Paper

Coal Initiative Series White Paper:

A Resource and Technology Assessment of Coal Utilization in India

Download the full white paper (pdf)

Prepared for the Pew Center on Global Climate Change
October 2008

By:
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.

Ananth P. Chikkatur
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Climate Policy and Natural Gas: A Bridge to a Lower-GHG Future

Speech by Eileen Claussen, President, Pew Center on Global Climate Change

American Gas Association Executive Conference
WASHINGTON, DC

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.

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