The Center for Climate and Energy Solutions seeks to inform the design and implementation of federal policies that will significantly reduce greenhouse gas emissions. Drawing from its extensive peer-reviewed published works, in-house policy analyses, and tracking of current legislative proposals, the Center provides research, analysis, and recommendations to policymakers in Congress and the Executive Branch. Read More
Statement of Eileen Claussen
President, Pew Center on Global Climate Change
November 5, 2008
President-elect Obama faces an array of urgent challenges when he assumes the Presidency on January 20, but I am confident that he will provide the leadership needed to enact a comprehensive climate policy that significantly reduces U.S. greenhouse gas emissions. I am equally optimistic that new leadership will provide the impetus we need to forge a strong green energy economy and restore America's standing in the world community, and I look forward with great anticipation to working with the Obama administration to achieve these critical goals.
Obama Signals Action: Eileen Claussen’s statement on President-elect Obama’s remarks to the Bi-Partisan Governors’ Global Climate Summit. (November 18, 2008)
Pew Perspective: The Obama administration should seek a greenhouse gas cap-and-trade law, argues a new Pew Center article. (November 2008)
Climate Policy & U.S. Election: In an article for the Transatlantic Climate Policy Group, Elliot Diringer discusses prospects for an international climate agreement under a new U.S. president. (October 2008)
This brief outlines the motivation for and key features of a tax designed to reduce emissions of greenhouse gases (GHGs). The two most commonly discussed market-based instruments for reducing GHG emissions are a cap-andtrade system and a GHG (carbon) tax. These mechanisms function in a similar way by establishing a price for GHG emissions. They both correct the market failure that exists when the value of environmental damages is not included in the market price of fossil fuels and other activities that release GHGs. A GHG tax and cap-and-trade approach are compared, with consideration given to how effective each policy instrument may be at meeting key objectives. These objectives include environmental integrity, cost-effectiveness, and distributional equity, and will inevitably involve political considerations. Fundamental design issues of a GHG tax policy are explored, including who would pay the tax and how to set an appropriate tax rate. There are a number of options for determining the appropriate level for a tax, including setting it to equal some estimate of the social cost of carbon or pursuing the long-run goal of stabilizing the concentration of GHGs in the atmosphere. A tax can be levied at various points throughout the energy supply chain, but most proposals call for an upstream tax on fuel suppliers in order to maximize the scope of coverage, which lowers costs, and for administrative simplicity. This brief also reviews existing GHG taxes in Europe and North America, along with several recent U.S. legislative carbon tax proposals. Finally, other pricing strategies to reduce GHG emissions in the transportation and electricity sectors are examined.
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This brief discusses public policy tools available to reduce greenhouse gas (GHG) emissions from the transportation sector. Reducing GHG emissions from transportation, which comprise one third of total U.S. CO2 emissions, will need to be a key part of any strategy to limit economy-wide emissions. Transportation energy use and emissions are determined by three elements: the fuels used to power the vehicles, characteristics of the vehicles themselves, and total miles traveled. Of the various transportation modes, passenger vehicles consume the most energy, followed by truck, rail and ship transport of freight, and then air travel. To reduce emissions, the sector can be included in a multi-sector cap-and-trade program or managed through sector-specific measures, or both. The critical issues for transportation policy are understanding market imperfections, where individuals are somewhat insensitive to changes in fuel price and tend to undervalue fuel economy. This makes it difficult to harness market forces (such as a cap-and-trade program) to drive investment in long-term transportation technology. To guarantee significant emission reductions from the transportation sector, especially in the short term, sector-specific policies can complement (or substitute for) the cap. These policies will need to focus on all three elements of the sector for major emission sources within the transportation sector. Policy tools include pricing policies (e.g., taxes, tolls, and congestion changes), standards (e.g., fuel economy standards), and funding for research, development, and deployment. Policies for the transportation sector will have to address several objectives at the same time: energy security and GHG reduction goals, a transition to low carbon fuels and alternative vehicle types, and an alignment of infrastructure and land use planning with GHG goals.
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Coal is a cheap and abundant resource, and carbon dioxide (CO2) from coal use is responsible for about 40 percent of global greenhouse gas (GHG) emissions from fossil fuel use. The United States and China are by far the largest emitters of CO2 from coal consumption, accounting for nearly 60 percent of global CO2 emissions from coal, with India a distant third. The United States currently relies on coal for roughly half of its electricity generation resulting in roughly one third of total U.S. emissions. China generates 80 percent of its electricity from coal, and in recent years, emissions from coal use have grown five times faster in China than in the United States. With enough coal reserves to meet current consumption levels for centuries, the United States and the rest of the world face the challenge of reconciling the realities of coal use with the dangers posed by climate change.
Carbon capture and storage (CCS) is a means to meet this challenge. If widely deployed, CCS could allow the world both to continue to exploit its cheap and abundant supply of coal and to adequately address the threat of climate change. CCS works by separating CO2 from other gases in the exhaust stream at power plants and industrial facilities, compressing the CO2 to pressures suitable for pipeline transport, and injecting the CO2 into deep geologic formations where it can be safely and indefinitely stored.
Although components of the CCS suite of technologies have been used in a variety of situations, the entire suite has not been deployed at a commercial scale at any coal-fueled power plant to date. Deployment has not proceeded for a number of reasons, primarily the high costs of installing and operating CCS technologies and the absence of government policies that place a financial cost on GHG emissions. In addition, uncertainties remain concerning actual cost and performance of CCS technologies at commercial scale. Finally, CCS deployment requires an appropriate regulatory system for CO2 storage, including long-term liability.
This brief describes the potential role of government in facilitating widespread and more rapid deployment of CCS through a number of means including: providing financial incentives for initial CCS projects through the use of bonus allowances under a cap-and-trade program, or a fund generated by charges on electricity or fossil-fuel based sources of electricity; setting GHG emission performance standards for coal generators or electricity providers; and establishing the required regulatory and liability frameworks for CO2 storage.
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This brief presents public policy tools available to provide support for research, development, demonstration, and deployment (RDD&D) of technologies that reduce greenhouse gas emissions. An emissions price induced by a cap-and-trade program can provide an incentive to “pull” new technology into the marketplace, while public funding for technology can provide a “push” with the two approaches more powerful in tandem than either alone. Economic theory provides the rationale for public expenditure on RDD&D, which can compensate for several market failures that would otherwise generate sub-optimal investments from the private sector. The appropriate policy tool depends on the stage of development for a particular technology and the scale of a project. Direct public expenditures, channeled through organizations such as the Department of Energy or the National Science Foundation, have a long history of funding earlier stages of research and development, and make up the bulk of current technology dollars. Some technologies to address climate change, such as next-generation nuclear power and carbon capture and storage, require a larger investment for early projects than private industry is likely to make, and could benefit from public funding of demonstration projects. The federal government can also provide inducements for private industry to invest in RDD&D with mechanisms such as investment tax credits. Indirect policies that can support technology deployment include standards that require a minimum performance or a market share requirement, and programs that identify and certify top efficiency performers in the marketplace. Funding sources for technology programs include appropriations from general revenues and dedicated revenues, perhaps from climate- or energy-related sources such as allowance auctions or dedicated energy taxes. Regardless of the source, funding must flow through and to multiple institutions that manage, select, and perform the actual RDD&D options. Each institutional option has strengths and weaknesses.
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By Elliot Diringer
This article was first published by the Heinrich Böll Stiftung Transatlantic Climate Policy Group.
After years of stalemate in the international climate negotiations, the inauguration of a new U.S. president presents an opportunity for a genuine breakthrough. Both John McCain and Barack Obama support mandatory limits on U.S. greenhouse gas emissions, and both favor renewed international engagement. But unrealistic expectations about how quickly the United States will move – and how far – could severely damage prospects for any sort of agreement next year in Copenhagen.
An effective post-2012 climate agreement is impossible without the United States, the world’s largest economy and largest historic emitter. Europe was able to persuade other developed countries to push ahead with initial commitments under the Kyoto Protocol despite the U.S. withdrawal. But there appears very little appetite among those countries to take on new, stronger commitments without the United States, and even less prospect of commitments by the major developing countries.
Fortunately, there is at long last real momentum for stronger efforts to reduce U.S. emissions. While skeptics remain, the political establishment has largely accepted the scientific consensus that human-induced warming is underway and must be addressed. Many states are taking mandatory steps to reduce emissions; 24 states have entered into regional initiatives to establish cap-and-trade systems. Many corporate leaders are calling for mandatory federal action, and Congress is seriously debating the establishment of an economy-wide cap-and-trade system more than twice the size of Europe’s Emissions Trading Scheme.
Statement of Eileen Claussen
President, Pew Center on Global Climate Change
October 7, 2008
I commend Chairmen Dingell and Boucher for their leadership in producing draft legislation that advances the climate change debate and demonstrates the commitment needed to pass national climate policy in the next Congress. I am strongly encouraged that, even in the midst of challenging economic times, Chairmen Dingell and Boucher remain focused on producing a thoughtful piece of legislation that would reduce U.S. greenhouse gas (GHG) emissions.
I'm especially encouraged by the Chairmen's approach to reducing GHGs through an economy-wide cap-and-trade system. Cap and trade is the most economically efficient way to meet our most urgent environmental imperative. The discussion draft also looks to control costs with sensible mechanisms and to encourage rapid deployment of efficient and low-carbon technologies.
As with any draft, there is room for improvement and refinement, and here I look forward to seeing the debate progress, especially in discussions about the near-term emissions target, trade measures, and appropriate regulatory authorities. I recommend that the final bill include tighter caps requiring that GHG emissions be reduced to 1990 levels by 2020. Also, trade measures should only be considered as a last resort, and not be implemented before 2020 to allow other efforts to protect energy-intensive industries enough time to succeed. Finally, I am concerned about some proposed options regarding the pre-emption of existing state and EPA authority under the Clean Air Act.
That said, I salute the Chairmen for their dedication to tackling this difficult challenge and am anxious to get started on the work ahead.
Visit the House Energy and Commerce website for other related materials
Click here to read more about climate legislation and cap and trade
Watch Nikki Roy discuss the draft bill and legislative outlook on E&E TV
Read the statement from the U.S. Climate Action Partnership (USCAP)
Speech by Eileen Claussen, President, Pew Center on Global Climate Change
American Gas Association Executive Conference
October 6, 2008
I am delighted to be here and to add my welcome to Washington.
Of course, I am here to talk about global warming, but I can't stay away from politics, and I think it is interesting that, even in the middle of our economic troubles, the presidential and vice-presidential candidates are talking about this issue too. Governor Palin, for one, has publicly acknowledged that her state is suffering from the effects of higher temperatures. Polar bears are disappearing, coastal erosion is a problem, her poll numbers are melting … it’s a real mess. She also said rising sea level is uprooting coastal communities so they have to move inland. And you know what that means: it’s getting harder to see Russia. So there goes all that foreign policy experience.
But Governor Palin still isn’t sure of her position on the causes of climate change. When asked if man had anything to do with it, she said it was a sexist question and women should get some credit too.
The Obama campaign, for its part, already has shown it has the capacity to keep a lid on dangerous emissions. Joe Biden was on live TV for 90 minutes last week and he kept the verbose answers to a minimum and did not "emit" a single gaffe. That’s quite an achievement.
There was one awkward moment – when the moderator asked what he thought about CAP and TRADE, Biden thought she was talking about Governor Palin's children.
In all seriousness, Charlie Cook has given you a true insider’s perspective on the 2008 elections and how things are shaping up. What I want to do today is talk about what all of this means for climate policy – or, more specifically, what we can expect to see in the next year or two as Washington finally comes to grips with climate and energy issues in a serious way.
We all know that climate legislation has been making the rounds, and the Senate actually considered a major cap-and-trade bill this summer. But as I reflect on what is likely to happen in 2009 and 2010, I am reminded of the old Monty Python line … “And now for something completely different.”
I predict that we will see real legislation, a real debate, and real action on the climate issue in the next Congress . And what happens on this issue will obviously have important implications for the natural gas industry – which I will discuss in some detail later in my remarks.
But first I want to offer some perspective on the state of play in Washington right now – and where we stand today in the effort to forge a response to one of the most urgent global problems of our time.
The reality of course, is that at the moment, all of Washington has been caught up in trying to rescue the U.S. economy, and so the question becomes – again – will the immediate crisis trump the need for climate policy? Many seem to think so, but I have a different view.
Certainly the new Administration and the new Congress will have a very full plate, but I do not believe that climate policy will fall off the agenda – and there are 4 reasons why I say that. First, there are very high global expectations (unrealistic expectations, actually ) for what the next administration will do on the climate issue. Foreign countries are anxious and frustrated with the lack of action by the U.S.; they are hoping for quick and dramatic changes from the new Administration. If the next President wants to get off on the right foot with the global community, something that will serve us well on a variety of critically important foreign policy issues, it is imperative that we craft and pass reasonable national policy, and that we engage constructively with the rest of the world on a global framework for action.
Second, there is momentum and pressure from corporate America and from the states. In the midst of this economic meltdown, the Western Climate Initiative unveiled their design recommendations for their regional cap-and-trade program – the most aggressive design to date in the U.S. - and RGGI, the consortium of northeastern states, held their first auction on Thursday Sept. 25– ringing the opening bell on Wall Street no less! In total - 24 states are currently involved in regional cap and trade programs. And corporate America is ready for the certainty that a well-designed national policy will afford them.
Third, the Supreme Court decision in Massachusetts v. EPA paves the way for a more traditional “command and control” regulatory approach to addressing greenhouse gases. Continued inaction is not an option. If federal legislation doesn’t move, an approach based on existing Clean Air Act authorities is more likely – and yet less cost-effective – than a greenhouse gas cap-and-trade program. And as this summer’s DC Circuit decision vacating the CAIR rule illustrates, it’s not clear that EPA can choose a more flexible and cost-effective approach such as emissions trading – or determine an allocation under a cap – in the absence of specific authorizing legislation. So traditional standards (at least under some parts of the Clean Air Act) are the more likely outcome, a scary thought for many in industry and in the Congress.
And finally, and most important of all, we cannot have a growing, competitive economy without both a comprehensive energy policy and a sound climate policy. A good climate policy will drive private and public investment in new, cleaner technologies, create jobs, and help us to transform our dependence on foreign energy supplies. Conservation and efficiency will help stabilize the climate, and make us more energy secure. Moving forward with alternative, renewable technologies will decrease our carbon footprint and harness our innovation agenda. Doing whatever we can to make use of existing cleaner, greener technologies, whether expanding our use of nuclear energy, or mounting a crash effort to demonstrate carbon capture and sequestration, or expanding our supplies of natural gas, have to be a part of our energy and climate policy. Because without a major effort in all of these areas, I do not believe our economy will rebound, I do not see us being globally competitive, and I see us spending far more of our tax dollars in responding to the serious effects of a changing climate than we would spend preventing them.
And, happily, since this economic crisis erupted – both Senator Obama and Senator McCain have reaffirmed their commitment to addressing climate and energy policy, including working for passage of a greenhouse gas cap-and-trade bill.
So – while I believe some will try to use the current economic situation to obfuscate and delay – I do not think they will succeed. Certainly, it will be a challenge getting people to pay attention to climate change. But the bottom line is we have to. We don’t have any other choice. And to the extent that we can make the connection between protecting the climate, decreasing our dependence on foreign energy supplies, and advancing the economy, I believe we will be successful.
Now back to the state of play. I am sure that all of you followed what happened in the Senate this summer on the Lieberman-Warner bill. Whether you agreed with the specifics of that measure or not – and believe me: we had our share of concerns about the bill, as I am sure many of you did … But the specifics aside, this was truly an historic moment: the first time ever that comprehensive climate legislation came to the Senate floor out of a committee.
And how did the Senate greet this historic opportunity, this unique chance to engage in a civil and substantive debate about how best to get this nation on track toward reducing its contribution to climate change?
The answer is they engaged in a knock-down, drag-out partisan fight over Senate procedures. Because of an unrelated dispute over judicial nominations, opponents of the bill dispensed with Senate courtesy and forced the reading of the entire 492-page bill into the Senate record. It took nine hours.
Now, if you are going to take up nine hours of the public’s time reading aloud on the Senate floor, the least you could do would be to read from the classics, or Harry Potter, or perhaps Chicken Soup for the Soul of an Aggrieved Public. The Climate Security Act of 2008 was, sad to say, not a page-turner. And the wasted opportunity, and the wasted time that these shenanigans entailed, are even more galling when you consider that Congress wasted no time this summer passing bills recognizing National Corvette Day and the National Day of the American Cowboy.
But still … but still there was the fact that bipartisan climate legislation had been voted out of committee and reached the full Senate. And it was an important reminder of how far we have come on this issue in the last ten years.
When we started the Pew Center in 1998, many people in the United States still viewed climate change as unimportant, unproven and undeserving of a lot of public debate. Now, ten years later, Washington is moving ever-closer to developing a national plan for reducing U.S. greenhouse gas emissions, many U.S. states and cities have adopted innovative climate strategies of their own, and we have two major-party presidential candidates who both are committed to taking serious action on this issue. For all their differences, John McCain and Barack Obama agree on the salient facts about climate change. They agree that this is a real and an urgent problem, that it is caused in large part by human activity, and that the United States must focus on solutions. And they even agree, albeit with some differences, on the broad outlines of a solution: a strong domestic cap-and-trade law coupled with U.S. support for a global climate change agreement. Where there is a real difference is when you contrast the McCain and Obama positions to what’s happened in the last eight years.
So we have come a long way indeed. And one of the main reasons we’ve come this far, as I see it, is because of people like you. All across this country, there is an ever-expanding contingent of business leaders who are saying they trust the science on this issue and it’s time to act.
Today, the Pew Center’s Business Environmental Leadership Council includes 42 companies representing roughly $2.8 trillion in market capitalization and more than 3.8 million employees. It is the largest U.S.-based association of companies committed to climate change policy and business solutions. Members come from a range of sectors, including oil, high technology, diversified manufacturing, transportation, aluminum, electric and gas utilities, chemicals, healthcare, insurance, financial services -- and, of course, natural gas. Our members include Exelon, PG&E and other natural gas industry leaders.
These companies share our belief that climate change is an urgent problem that will affect our economy and our communities in profound ways in the years and decades to come. And they believe, and I quote: “The United States should significantly reduce its GHG emissions through economy-wide, mandatory approaches,” including a “flexible, market-based cap-and-trade program.”
Last year, many of these same companies took their advocacy on this issue to a new level when they joined with the Pew Center and others to form the U.S. Climate Action Partnership. The USCAP group has issued a cap-and-trade proposal with specific targets and timetables—a real plan of action to slow, stop and reverse U.S. emissions. In addition to cap and trade, the group has embraced an array of other policies aimed at building a low-carbon energy economy.
So we have seen enormous progress, in large part because of business leadership on this issue. But, of course, we still have an enormous amount of ground to cover. And now people are looking ahead to what will happen – or, more precisely, what must happen – in 2009 and 2010.
And so here’s my prediction: The Pew Center anticipates that the next President, whether it is John McCain or Barack Obama, will propose a framework for achieving substantial reductions in U.S. greenhouse gas emissions, including a cap-and-trade program, during the first half of 2009. We expect Congress to begin debate on comprehensive climate legislation in the same timeframe, and we believe it is likely that a cap-and-trade bill will be signed by the President during the 111th Congress.
As of January 20, 2009, the date of the next president’s inauguration, the question driving the U.S. debate on this issue will not be whether we need comprehensive, mandatory action, but how to do it right. And the major challenge facing the next Administration and Congress as they seek to answer this question will be to resolve the cost and spending issues associated with comprehensive climate action.
How can we minimize and contain the overall costs of a mandatory program? How can we provide relief for those who will be most affected – including energy-intensive industries that will face higher fuel prices, regions of the country that rely on less climate-friendly sources of energy, and consumers who will face higher prices for electricity? How can we reduce administrative costs and bureaucracy? And, last but not least, how should we spend and invest the estimated trillions of dollars in future allowance value that could flow to the government, the private sector and consumers under a cap-and-trade regime?
Answering these questions will not be easy, which is why the next President and Congress should get to work right away. And, of course, the questions I have asked are only the beginning. Of great interest to all of you will be how our leaders here in Washington address specific questions having to do with natural gas. And that’s where I want to focus in the remainder of my remarks.
The Pew Center soon will be publishing a paper on the coverage of natural gas emissions under a cap-and-trade regime. According to this paper, combustion-related GHG emissions from natural gas are 16 percent of total U.S. GHG emissions. The largest source of emissions from the burning of gas is industry, accounting for 5.3 percent of total U.S. GHG emissions, followed by the power sector, at 4.4 percent.
Clearly, regulating and reducing GHG emissions related to the use of natural gas has to be part of any solution to climate change. But the question, again, is how to do this effectively and fairly … how to do it right.
This is a question that has spurred a very intense and very impassioned debate – well, as impassioned as you can get, I suppose, when throwing around terms like “points of regulation” and “allowance allocation provisions.”
Seriously, the debate has been intense because these are important decisions with wide-ranging implications for your industry and for our economy as a whole. And one of the biggest decisions that lawmakers will have to make has to do with the point-of-regulation issue. The issue, as you know, is this: Should we regulate natural gas-related emissions on the upstream side – at the point where gas is produced and processed and distributed to consumers? Or should it happen downstream – where gas is actually used?
Well, to adapt the classic round, “Row Row Row Your Boat,” I say the chorus right now should be “thoughtfully down the stream.” The Pew Center supports downstream regulation as the short-term answer to the point-of-regulation question. And I say “thoughtfully down the stream” because we need to think carefully about how to do downstream regulation right. More specifically, I agree with the AGA that it is impractical to include small-volume consumers of natural gas as part of any emissions cap. Rather, we believe that any cap-and-trade measure that becomes law should cover downstream emissions from large users in the industrial and power sectors.
Over time, we believe local natural gas utilities should become responsible for meeting a cap on emissions related to the service they provide to residential and commercial customers. This will make them “covered entities,” to use the legislative lingo. (As an aside, I think it’s interesting that the only other statutes using the term “covered entities” are those governing indecent exposure.)
How many facilities would this kind of downstream approach cover? Well, let’s do the math …
Our forthcoming paper estimates that fully 54 percent of the natural gas consumed for combustion in the United States is consumed at facilities producing more than 10,000 metric tons of greenhouse gases each year. If we set that volume of emissions as the threshold for new regulations governing large users of natural gas, our paper says it would cover about 7,000 manufacturing facilities, plus 500 gas-only power plants and 750 or so compressor stations. That adds up to about 8,250 facilities that would be regulated for their downstream CO2 emissions from natural gas consumption.
Accounting for co-ownership of these facilities and other factors, the paper comes up with a final estimate of 5,382 entities to be regulated under this approach. Add the largest 150 LDCs, which account for 95 percent of gas throughput, and you get 5,532 covered entities – a number that could clearly be accommodated within a larger cap-and-trade program. At the Pew Center, we believe the best choice is to include these large LDCs right now, but we recognize there are differing opinions. The AGA has said that LDCs should not necessarily be included as covered entities now, and I hope that in the spirit of compromise we can agree that LDCs should at least be phased in. Whether we phase them in or not, the largest LDCs are certainly an appropriate point to regulate the gas industry over time if we are looking at downstream emissions.
But at the same time that we are discussing “points of regulation” and all these other technicalities, we also need to consider something else – and that is how to better support natural gas as a bridge fuel to a more climate-friendly energy supply.
This is a real opportunity for your industry – this is not a “bridge to nowhere” that we are talking about. Natural gas provides a bridge to the future. To the extent that you can deliver gas at a reasonable cost, you can be part of the solution to climate change.
But here’s the problem: this industry cannot come close to fulfilling its role in protecting the climate without a strong policy push from Washington. If natural gas is to play a role in helping us reduce greenhouse gas emissions, we need to keep it affordable, and we need policies to help make this happen – policies to help expand our natural gas infrastructure, policies to keep costs down, and policies to increase natural gas supply.
And we also need policies to help make natural gas even more efficient as a fuel source. This industry is doing great things to promote increased energy efficiency. And America’s natural gas companies are funding programs that help their residential and commercial customers reduce their natural gas use by 9.5 trillion BTUs per year. The resulting reduction in CO2 emissions: 500,000 metric tons every year.
From home energy audits and cash rebates to low-interest financing for high-efficiency natural gas appliances, your industry offers consumers an array of tools to help them get a better handle on how much energy they use, and reduce it. Today, according to AGA’s own data, the average American home uses one-third less natural gas than in 1980. This has happened even as demand for energy has risen, and it can be explained in part because consumers are installing energy-saving windows and insulation, buying more efficient appliances, and taking other steps they might not have taken in the absence of incentives and active encouragement from America’s natural gas utilities.
Take PG&E, which I already mentioned is a member of the Pew Center’s Business Environmental Leadership Council. PG&E offers its gas customers a rebate of up to $300 toward the purchase of an energy-efficient natural gas furnace, up to $400 toward the cost of sealing leaky ductwork, and up to $150 per 1,000 square feet for insulation. That is real money, and a real incentive for PG&E’s gas customers to do their part to save energy and protect the climate.
This is important and commendable work. But we can do more, with tightened product and equipment efficiency standards, stronger building codes, and more. We also need to make sure that natural gas utilities have the right economic incentives to promote efficiency. The bottom line is this: Utility profits should not take a hit when customers use less natural gas. The government needs to step up its support for innovative utility rate designs that encourage increased energy efficiency.
And this is why industry partnerships are so important. The Pew Center has been proud to stand beside our business partners in the U.S. Climate Action Partnership and advocate for sensible solutions to climate change. And we feel there is much more room for additional partnerships on this issue – between NGOs and business, and among business and NGOs and government. With active industry involvement, I strongly believe that we can develop not just the right technological solutions but also the right policy solutions – solutions that make sense given the issues that all of you face in your businesses each day.
In just one month, the election will be over and a new President-elect and Congress will begin the work of preparing to take their seats at either end of Pennsylvania Avenue, just blocks away from where we sit today. They will have a lot on their plates – a lot of people coming after them to do their bidding on issues from the economy and health care to energy and climate change. And my challenge to you is this: as an industry, natural gas needs to do everything in its power to make absolutely certain that the climate issue receives the attention it deserves.
We will not have another chance like this … and the longer we wait to act, the harder and more expensive this problem will be to solve. Indeed, some say we have a window of just a few years. We are going to need to use all of the persuasive power we have – all of the contacts, all of the political savvy – to make the case for workable solutions to the climate problem – solutions that combine all of the tools we have at our disposal to reduce greenhouse gas emissions. Natural gas is one of those tools – and a crucial one. We just have to help our leaders figure out how to use it right.
Thank you very much.
Over the past decade, individuals, NGOs, trade associations, communities and even whole nations are increasingly using the federal courts as a venue to address climate change. While some claimants bring suit to enforce or clarify existing laws and regulations, others seek relief from the detrimental effects of increased carbon dioxide emissions. Still others challenge the very legitimacy of climate change law and regulation. How the courts handle these cases can and will continue to fundamentally impact industry, government, law, policy, and the environment.
The following exemplifies the most relevant case law impacting climate change activities of the last decade. Taken together, they illustrate the main challenges plaintiffs have used to bring suit, the core legal defenses that opponents have presented, and the ways in which the federal judiciary is approaching climate change litigation
Click on the links below to view case summaries within each respective area of litigation.
In 2007, the Supreme Court ruled in Massachusetts v. EPA that Greenhouse Gases (GHGs) are air pollutants covered by the Clean Air Act. The Court made clear that the Environmental Protection Agency could regulate Greenhouse Gases under the Clean Air Act, if the Administrator made a determination that greenhouse gas emissions were a danger to human health. In 2009, EPA did just that, and found that greenhouse gases (along with six other air pollutants) threatened the health and welfare of present and future generations. Prior to these findings, parties brought legal challenges questioning whether the Clean Air Act applied to greenhouse gas emissions at all. More recently, challengers questioned whether actions taken by EPA to regulate emissions were outside of their legal authority. Still others have challenged whether federal action (via EPA and the Clean Air Act) preempts states from regulating greenhouse gas emissions. The following cases illustrate these arguments and the associated court holding.
Perhaps the most difficult challenge confronting plaintiffs in climate change litigation is the problem of demonstrating that the emission of GHGs to the atmosphere by a particular activity or facility will give rise to specific impacts on a local area or population. Proving causation, a causal link between the defendants activities and the plaintiffs harm, seems to be a daunting challenge. In the last decade, parties have used a tort (a civil wrong) called nuisance (a legal inconvenience resulting in damage) to challenge defendant corporations whose activities result in large amounts of GHGs being released into the atmosphere, which allegedly lead to global warming events that result in damages. The following cases illustrate how plaintiffs have you used the federal common law nuisance and how the courts have responded.
The National Environmental Policy Act (NEPA) established a U.S. national policy promoting environmental improvementt. Of significance, NEPA set up procedural requirements for all federal government agencies to prepare Environmental Assessments (EAs) and Environmental Impact Statements (EISs) whenever environmental effects of a federal project cross a certain threshold. EAs and EISs contain statements of the environmental effects of proposed federal agency actions. The following cases illustrate challenges against government agencies who have allegedly failed to sufficiently analyze or disclose information about the implications of their projects and programs as they relate to climate change.
Oceans readily absorb carbon dioxide (CO2) emissions from power plants and other human activities. In turn, the CO2 causes seawater to become more acidic, lowering its pH level. This process, known as ocean acidification, impairs the ability of marine animals to build the protective shells and skeletons they need to survive. Certain provisions of the Clean Water Act require EPA to protect waters from pollution, such as ocean acidification. In the following cases, challengers have alleged that the Environmental Protection Agency, in failing to recognize the impacts of ocean acidification on waters, have violated the Clean Water Act.
EPA's 2012 Renewable fuels standards require gasoline producers and importers to displace a certain percentage of their total gasoline production with the purchase of cellulosic biofuels.The following case is a challenge brought against the EPA for its 2012 Renewable Fuels Standard (RFS) volume mandate. Specifically, it challenges the reasonableness of EPA's decision to require refiners to blend domestic fuel with cellulosic ethanol or pay a penalty.
The Public Trust Doctrine imposes a legal duty on the U.S. Government to hold vital natural resources in 'trust' for present and future generations, including protecting the trust asset from damage or loss. In the following cases, plaintiffs claimed that the atmosphere, including the air, is one of the crucial assets protected by the Public Trust Doctrine, and that defendant federal agencies have allowed, facilitated, and contributed to the waste of trust assets, including the atmosphere, by allowing it to become polluted with high levels of human-caused CO2.
Endangered Species Act
The Endangered Species Act (ESA) aims to protect species and the ecosystems upon which they depend. It is administered by the U.S. Fish and Wildlife Service and the Commerce Department's National Marine Fisheries Service (NMFS). Under the ESA, species may be listed as either endangered or threatened. "Endangered" means a species is in danger of extinction throughout all or a significant portion of its range. "Threatened" means a species is likely to become endangered within the foreseeable future.
The Obama Administration has repeatedly stated that the ESA is not an adequate or proper legal mechanism to regulate GHGs. However, the effects of climate change are far reaching. On March 1, 2013, the D.C. Circuit upheld the U.S. Fish and Wildlife Service's (FWS) decision to list polar bears as a threatened species under the ESA after the agency determined that climate change threatens the bear's habitat and range. In particular the polar bear's primary habitat, sea ice, is rapidly decreasing as a result of climate change.
Alec L. v. Jackson (United States District Court for the District of Columbia, May 31, 2012).
Five children, along with the groups Kids vs. Global Warming and WildEarth Guardians, sued the heads of several federal agencies for failing to adequately address global warming. The plaintiffs proceeded on the theory that the atmosphere is a commonly shared public resource that defendants, as agency heads, have a duty to protect under the public trust doctrine. As relief, plaintiffs asked for an injunction directing the named federal agencies to “take all necessary actions to enable carbon dioxide emissions to peak by 2012 and decline by at least six percent per year beginning in 2013.” Defendants and intervenors argued in a motion to dismiss that plaintiffs failed to state a valid claim for relief. The district court agreed and dismissed the suit. Relying on the recent Supreme Court decision PPL Montana, LLC v. Montana (2012), the court held that the public trust doctrine is a matter of state, not federal, law. It further held that even if the public trust doctrine were a federal common law claim, such a claim has been displaced in this case by the Clean Air Act (as was similarly held in the 2011 Supreme Court case American Electric Power Co. v. Connecticut).
Loorz v. Jackson (United States District Court for the District of Columbia, April 2, 2012).
A federal district court in Washington D.C. allowed business groups to intervene in a lawsuit that seeks to require the federal government to establish a plan for an immediate cap on GHG emissions and start lowering these emissions by six percent a year beginning in 2013. Several advocacy groups, including Our Children’s Trust, filed the federal lawsuit in May 2011 along with similar actions in many states. The lawsuit alleges that the federal government has a duty under the public trust doctrine to reduce GHG emissions in the atmosphere. So far, no state challenges have been successful.
Association of Irradiated Residents, et al. v. California Air Resources Board (Superior Court of California for the County of San Francisco, October 20, 2011)
Background: On September 27, 2006, then Governor of California Arnold Schwarzenegger signed into law the Global Warming Solutions Act of 2006, or AB 32. The law seeks to fight climate change through comprehensive program reducing GHG emissions from all sources statewide. The act requires the California Air Resources Board (CARB) to develop regulations and market mechanisms that will cut the state’s GHG emissions to 1990 levels by 2020—a 25% reduction statewide.
On December 17, 2010 CARB selected a cap-and-trade program as the market mechanism to cut the state’s GHG emissions. CARB scheduled the program to take effect in 2012, placing a limit that would decrease by two percent each year through 2015. From 2015 through 2020, the proposed limit would decrease by three percent annually. AB 32’s rules would first apply to some of the major emitters—utilities and large industrial plants. In 2015, the rules would apply to fuel distributors as well, eventually totaling 360 businesses throughout California. The market would begin with a distribution of free allowances to businesses accounting for approximately 90 percent of the business’s overall emissions; however, for any additional emissions, the business must purchase the necessary allowances.
Case Discussion and Holding: On December 19, 2010, two days after CARB’s selection of a cap-and-trade program, a number of associations—among them the Association of Irritated Residents (AIR)—filed suit against CARB. The complaint alleged that CARB failed to meet the requirements of AB 32 as well as those for the California Environmental Quality Act (CEQA). AIR asked the court to require CARB to correct the deficiencies under both AB 32 and the CEQA before allowing implementation to proceed.
AIR alleged that CARB violated the requirements of AB 32 in three ways. First, AIR claimed CARB excluded sectors of the economy from emissions controls. Thus, selecting a cap-and-trade program could not allow for a determination of whether potential reduction measures achieved maximum technologically feasible and cost effective reductions. Second, CARB did not adequately consider the total costs and benefits to the environment, economy and public health before selection of its plan. Finally, CARB did not consider—as instructed to do in AB 32—information regarding GHG emission programs throughout the United States and the world.
The Court determined that the implementation and interpretation of AB 32 was delegated to CARB; thus, on review, the Court largely deferred to CARB’s findings and interpretations under an “arbitrary and capricious” standard of review. This standard affords CARB a “wide latitude” for interpretation and implementation, and challenging a determination under this standard is an extraordinarily difficult task. In this case, AIR was unable to overcome this burden, and the Court held that CARB’s findings satisfied the requirements of AB 32.
AIR also claimed that CARB violated the requirements under the CEQA in three ways. AIR’s first claim was that CARB did not “adequately analyze the impacts of the measures described” in the plan. Second, AIR claimed that CARB did not sufficiently consider alternatives to their chosen plan. Finally, in light of the first two allegations, AIR claimed that CARB approved and implemented its plan before completing the necessary environmental impact review (EIR).
In reviewing CARB’s compliance with the CEQA, the Court used a lesser standard—abuse of discretion. Under this standard, CARB’s findings would be upheld unless there was “no substantial evidence” supporting its decision or CARB did not proceed in a manner required by law. On the first claim, the Court found that CARB did not need to provide a comprehensive analysis of the various details of the plan that would be implemented at a later date. However, on AIR’s second and third claims, the Court found CARB in violation of the CEQA. With regard to CARB’s failure to analyze alternatives, the Court noted that CARB provided five alternatives to the selected plan. The first alternative, “no project,” received 10 pages worth of discussion in the documentation supporting CARB’s plan. However, the total discussion for the other four alternatives yielded only three pages in the same document. The Court was unsatisfied that the other four alternatives received sufficient analysis, and held that CARB violated the CEQA stating that CARB’s “analysis provides no evidence to support its chosen approach.” The Court also decided the third claim against CARB. On this issue, the Court treated a resolution adopted by CARB at a hearing in December 2008 as initiating the approval of CARB’s plan. However, the finalization of CARB’s CEQA review was not finalized until May 2009. In light of CARB’s “jumping the gun,” the Court held that CARB had not complied with CEQA’s requirements.
In response to CARB’s failures under the CEQA, the Court issued an injunction preventing any further implementation of the measures contained in the selected plan until CARB has satisfied the requirements of the CEQA.
Center for Biological Diversity v. NHTSA (Ninth Circuit, 2007)
Eleven states, the District of Columbia, the City of New York, and four public interest organizations challenged a rule promulgated by the National Highway Traffic Safety Administration (NHTSA). The rule was entitled “Average Fuel Economy Standards for Light Trucks, Model Years 2008-2011” and set corporate average fuel economy (CAFE) standards pursuant to the Energy Policy and Conservation Act (EPCA) – prior to the passage of the new energy bill (EISA). The rule was significant in three ways. The rule set CAFE standards for light trucks, including SUVs, minivans, and pickup trucks, for the model years 2008-2001. The rule set new CAFE standards using its traditional method, fleet-wide average, for model years 2008-2010. The rule also created a new CAFÉ structure that sets “varying fuel economy targets depending on vehicle size and requires manufacturers to meet different fuel economy levels depending on their vehicle fleet mix.” The rule was challenged by the petitioners under the EPCA and the National Environmental Policy Act (NEPA).
The petitioners’ complaint argued that the NHTSA is “arbitrary, capricious, and contrary to the EPCA because (a) the agency’s cost-benefit analysis does not set the CAFE standard at the ‘maximum feasible’ level and fails to give due consideration to the need of the nation to conserve energy; (b) its calculation of the costs and benefits of alternative fuel economy standards assigns zero value to the benefit of carbon dioxide (CO2) emissions reduction; (c) its calculation of costs and benefits of alternative fuel economy standards fails to evaluate properly the benefit of vehicle weight reduction; (d) Reformed CAFE standards will depend on manufacturer fleet mix and not guarantee a minimum average fuel economy or ‘backstop’; (e) the transition period during which manufacturers may choose to comply with either Unreformed or Reformed CAFE is contrary to the ‘maximum feasible’ requirement and unnecessary; (f) it perpetuates the ‘SUV loophole,’ which allows SUVs, minivans, and pickup trucks to satisfy a lower fuel economy standard than cars; and (g) it excludes most vehicles rated between 8,500 and 10,000 pounds gross vehicle weight (comprised mostly of large pickup trucks) from any fuel economy regulation, even though these vehicles satisfy the statutory criteria for regulation.”
The petitioners also argued that NHTSA’s Environmental Assessment (EA) under NEPA was inadequate because it fails to sufficiently examine greenhouse gas implications. Petitioners also claimed the EA failed to analyze a reasonable range of alternatives or examine the rule’s cumulative impact. Additionally, petitioners argued that NEPA requires that an Environmental Impact Statement be prepared as opposed to the less exhaustive EA, because a properly performed EA would have shown “significant impacts” which would then trigger the requirement of an Environmental Impact Statement.
The court found in an unanimous decision that “the Final Rule is arbitrary and capricious, contrary to the EPCA in its failure to monetize the value of carbon emissions, failure to set a backstop, failure to close the SUV loophole, and failure to set fuel economy standards for all vehicles in the 8,500 to 10,000 gross vehicle weight rating (GVWR) class.” The court first rejected the rule because the cost-benefit analysis did not include the cost of climate change caused by carbon dioxide. The court also discredited contrary precedent by stating more is now known about climate change, and Mass. v EPA is more relevant than past cases where climate change science was allowed to be ignored. The rule was then criticized for not having a “backstop” that would prevent companies from simply building bigger vehicles, which would then be allowed to produce higher emissions under the rule’s system. The court rejected NHTSA’s arguments that this was done to account for consumer preferences stating that consumer demand cannot be the sole factor dictating the necessity of a “backstop.” The court then challenged the “SUV loophole,” which allows SUV’s and minivans to be characterized as “light trucks” instead of “passenger automobiles” despite being predominantly used for the transportation of passengers. The court ordered NHTSA to reexamine the classifications and provide new definitions or sufficient reasons for the SUV and minivan classification.
The court also found “the Environmental Assessment was inadequate and that Petitioners have raised a substantial question as to whether the Final Rule may have a significant impact on the environment” because the “impact of greenhouse gas emissions on climate change is precisely the kind of cumulative impact analysis that NEPA requires agencies to conduct.” The court found that climate change’s global nature and influence of actions outside of NHTSA’s control did not allow the agency to avoid considering the effects of the rules impact. Additionally, the court rejected NHTSA’s argument that an EA was adequate because the CAFE standards were reducing carbon. The court countered that the standards merely decrease the rate of carbon contribution from new cars and that NHTSA does not offer sufficient analysis to support its finding of no significant impact. The court then remanded the case to “NHTSA to promulgate new standards as expeditiously as possible and to prepare a full Environmental Impact Statement.”
View the case document here