U.S. States & Regions
States and regions across the country are adopting climate policies, including the development of regional greenhouse gas reduction markets, the creation of state and local climate action and adaptation plans, and increasing renewable energy generation. Read More
For the second year in a row, unprecedented numbers of extreme weather events have occurred across the globe. However, more of 2011’s impacts occurred in the United States. From the drought in Texas to the floods in the Midwest and Northeast, this past year underscored the huge economic costs associated with extreme weather. While specific weather events are not solely caused by climate change, the risks of droughts, floods, extreme precipitation events, and heat waves are already climbing as a result of climate change. This year reminded us of our vulnerability to those events.
C2ES's December 2011 features updates from the 17th annual Conference of the Parties (COP17) in Durban, South Africa, policy options for a clean energy standard, a blog post on the landmark new fuel economy standards, and more.
On December 13, 2011, the Colorado Oil and Gas Conservation Commission unanimously approved new hydraulic fracturing chemical disclosure rules that will go into effect April 1, 2012. The nine-member Commission worked with industry and environmental groups on crafting the rules. Colorado Governor John Hickenlooper credited all of the parties involved, saying, “These new rules give Colorado the fairest and most transparent set of fracking regulations in the country and will likely serve as a model for other states.” Both industry and environmentalists have praise for the rule:
· Tisha Schuller, President & CEO of the Colorado Oil & Gas Association -“[W]e have gained a model process to bring together industry, environmental advocates, and regulators to ensure energy development continues in keeping with protecting the environmental resources of our state.”
· Michael Freeman, a staff attorney with Earthjustice, which represented environmental groups in negotiations - “Overall, we are pleased with the strength of this rule…While all sides made compromises in the rulemaking, the requirement for disclosure of all chemicals and concentrations in fracking fluids makes Colorado a leader in state disclosure policy.”
Hydraulic fracturing, or “fracking,” injects pressurized fluid underground to fracture rock layers to enable the extraction of fossil fuels. Fracking raises environmental, health, and safety concerns, but Colorado’s rule will address these issues with a comprehensive and industry-supported approach. Whereas some states only require certain fracking chemicals to be reported, Colorado will require companies to report all chemicals used in fracking and their concentrations. The rule, however, will not require reporting of how fracking chemicals are combined in the extractive process. Companies must make their reports on an independent public website, www.FracFocus.org, within sixty days of completing fracking activity. Trade secrets will remain protected by federal and state laws, but regulators and health care professionals may request confidential information about fracking processes, and companies must file an affidavit that their confidential information meets legal definitions. Overall, the rule reflects an on-going collaboration of state regulators, industry, and environmental groups and sets an increased standard for transparency.
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 a comprehensive program reducing GHG emissions from virtually 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. AB 32 requires CARB to take a variety of actions aimed at reducing the state’s impact on the climate.
AB 32 authorizes CARB to use market mechanisms as part of its portfolio of carbon-cutting policies, and on December 17, 2010 CARB decided to pursue a cap-and-trade program. The Board formally adopted the proposed cap-and-trade rule on October 20, 2011. The program is scheduled to begin in 2012, though the compliance period does not begin until 2013. The program places a GHG limit that will decrease by two percent each year through 2015 and by three percent from 2015 through 2020. The cap-and-trade rules will first apply to some of the major emitters—utilities and large industrial plants. In 2015, the rules will apply to fuel distributors as well, eventually totaling 360 businesses throughout California. The market will begin with a distribution of free allowances to regulated businesses. The portion of emissions covered by these free allowances will vary by industry, but generally will account for approximately 90 percent of the business’s overall emissions and this percentage will decline over time. For any additional emissions, the business must purchase the necessary allowances at a quarterly auction or from an entity that has excess allowances. Offsets are also allowed for up to eight percent of a business’s compliance obligation. California’s cap and trade program is scheduled to link with programs in Ontario, British Columbia, Manitoba and Quebec through the Western Climate Initiative.
Main C2ES California Cap-and-Tade Page
California Cap-and-Trade Program Summary Table (pdf)
California Cap-and-Trade Home
California Cap-and-Trade Rule
Summary of California Cap-and-Trade Rule
Western Climate Initiative
C2ES Regional Initiatives Page
Association of Irritated Residents, et al. v. California Air Resources Board
In December 2010, a number of environmental justice associations, including the Association of Irritated Residents (AIR), challenged the California Air Resources Board’s (CARB) selection of a cap-and-trade program as a major element in reaching AB 32’s emission target . AIR’s lawsuit alleged that CARB violated key requirements of AB 32 and the California Environmental Quality Act (CEQA). In March 2011, a Superior Court of California judge ruled that CARB had not sufficiently considered alternatives to a cap-and-trade program and had approved and implemented its plan before completing the necessary environmental impact review (EIR) in violation of CEQA. CARB was ordered to revise its analysis of cap-and-trade alternatives, but was found not be in violation of AB 32. In June 2011, a California Court of Appeal granted CARB a stay to continue implementation of its cap-and-trade program. After the March decision CARB further analyzed alternatives to cap-and-trade, and in December 2011 this revised analysis was accepted as sufficient to fulfill the trial court’s March order. This leaves CARB in the clear to continue implementation. However, AIR has pledged to appeal the March decision that cap-and-trade does not violate AB 32, claiming it does not provide the maximum feasible and cost-effective greenhouse gas reductions.
Other AB 32 Elements
Prepare a Scoping Plan
- CARB was required to prepare a scoping plan to achieve the “maximum technologically feasible and cost-effective” reductions in greenhouse gas emissions.
- In December 2008, the Air Resources Board approved a scoping plan that will achieve emission reductions through regulations, market mechanisms, and other actions geared toward the emissions of several economic sectors.
- AB 32 required CARB to determine 1990 greenhouse gas emissions levels to serve as the 2020 emissions reduction target.
- In December 2007, 427 million metric tons of carbon dioxide equivalent (MMTCO2e) was established as the 1990 emissions level and 2020 reduction limit.
- California emitted 474 MMTCO2e in 2008 and would be projected to emit 507 MMTCO2e in the absence of AB 32.
- AB 32 mandated the reporting of greenhouse gas emissions throughout the state.
- In December 2007, the California Air Resources board adopted regulations requiring the state’s largest industrial sources to report and verify their emissions.
CARB Mandatory Greenhouse Gas Reporting Home Page
Early Action Measures
- AB 32 authorized the California Air Resources Board to identify discrete early action areas that could be enforced by 2010.
- In 2007, CARB identified nine early action areas and proposed regulations for motor vehicle fuels (through the low carbon fuel standard – see below), landfill methane capture, mobile air conditioning, semiconductors, the fuel efficiency of heavy-duty tractors, tire pressure, and high global warming potential (GWP) gases in consumer products.
CARB Early Action Items Home Page
Low Carbon Fuel Standard
- With the transportation sector accounting for 40 percent of the state’s greenhouse gas emissions and with petroleum-based fuels meeting 96 percent of transportation needs, Governor Schwarzenegger issued Executive Order S-01-07 on January 18, 2007, authorizing a Low Carbon Fuel Standard (LCFS).
- The LCFS calls for at least a 10 percent reduction in the carbon intensity of California’s transportation fuels by 2020.
- The LCFS was challenged in court and was blocked on December 29, 2011. CARB appealed the decision and is allowed to enforce the LCFS while the appeal is pending.
- Ensure voluntary early reductions receive appropriate credit.
- Establish an Environmental Justice Advisory Committee (EJAC) to advise CARB on implementing AB 32.
- Establish an Economic and Technology Advancement Advisory Committee (ETAAC) to make scientific and technical recommendations on greenhouse gas reduction measures.
The Regional Greenhouse Gas Initiative (RGGI) has produced a total of $1.6 billion in economic value to the ten RGGI member states between 2009 and 2011, according to an Analysis Group report. By implementing a cap-and-trade program for electricity sector greenhouse gas emissions, RGGI reduced fossil fuel use for electricity and heating, keeping an extra $765 million in fuel expenditures within the region and creating 16,000 new “job years” in RGGI member states. "RGGI generates greater economic growth in every one of the 10 states that participate in RGGI than would occur without a carbon price," said Susan Tierney, a managing principal of the Analysis Group and a report co-author (ClimateWire story – November 15, 2011).
Since 2009, power plant owners have bought allowances at auction to cover their carbon dioxide (CO2) emissions. The proceeds of the sales have cumulatively equaled approximately $912 million, and RGGI states have invested this money into their local economies. The Analysis Group report lists energy efficiency measures, community-based renewable power projects, assistance to low-income customers, education and job training programs, and contributions to state general funds as the various recipients of the $912 million in revenue.
The report states that consumers will experience electricity bill increases in the short term. Over time, however, households, businesses, government users, and others will enjoy a net gain of $1.1 billion between 2009 and 2021 due to investments in energy efficiency programs that reduce overall electricity consumption. Power plant owners are expected to lose $1.6 billion in revenue on a net present value basis between 2009 and 2021, and RGGI will afford a competitive advantage to power plants with lower emissions.
New Jersey, which in May 2011 announced its intention to leave RGGI by the end of the year, received approximately $118 million (around 13 percent) in proceeds from allowance sales and benefited from $151 million in economic value added between 2009 and 2011. Approximately $75 million was placed into the state’s general fund, while around $27 million was devoted to renewable energy investment.
Western Climate Initiative Establishes Non-Profit Corporation to Support Greenhouse Gas Emissions Trading Programs
The Western Climate Initiative recently announced the creation of Western Climate Initiative, Inc. (WCI, Inc.), a new non-profit corporation formed to provide administrative and technical services to support the implementation of state and provincial greenhouse gas emissions trading programs. The initial Board of Directors for WCI, Inc. includes officials from the provinces of Quebec and British Columbia, and the State of California.
WCI, Inc. will:
- Develop a compliance tracking system that tracks both allowances and offsets certificates;
- Administer allowance auctions; and
- Conduct market monitoring of allowance auctions and allowance and offset certificate trading.
Coordinating the acquisition and delivery of services through WCI, Inc. will ensure efficient technical and administrative support for the jurisdictions' emissions trading programs. By forming WCI, Inc. the participating jurisdictions are furthering their commitment to linking their respective greenhouse gas emissions trading programs. The services provided by WCI, Inc. can be expanded to support jurisdictions that join in the future.
British Columbia, California, Ontario, Quebec and Manitoba are continuing to work together through the Western Climate Initiative to develop and harmonize their emissions trading program policies. They are also continuing to work with Western, Midwestern, and Northeast states on a range of other climate and clean energy strategies through the North America 2050 Initiative. North America 2050 is a forum for states, provinces and stakeholders to identify leadership opportunities in climate and clean energy policy.
For more information, visit the WCI, Inc. website.
November 16, 2011
On E&E TV's OnPoint, Eileen Claussen discusses goals of the newly-launched Center for Climate and Energy Solutions (C2ES) and assesses the current state of energy policy talks in Washington. Claussen also gives her views on the Obama administration's handling of energy policy. Click here to watch the interview.
Click here for additional details on C2ES.
November 17, 2011
Contact: Tom Steinfeldt, 703-516-4146
NEW PAPER DETAILS OPTIONS FOR CLEAN ENERGY STANDARDS
Center for Climate and Energy Solutions and the Regulatory Assistance Project
Explore State & Federal Policy Alternatives
WASHINGTON, D.C. – A well-designed clean energy standard (CES) can create new industries, diversify U.S. electricity supplies, and reduce air pollution, according to a new paper released today by the Center for Climate and Energy Solutions (C2ES) and the Regulatory Assistance Project (RAP).
The paper, Clean Energy Standards: State and Federal Policy Options and Implications, examines issues and options in designing a clean energy standard – a policy that requires electric utilities to deliver a certain amount of electricity from clean energy sources. The paper’s aim is to help policymakers, utility regulators, and other stakeholders better understand how a CES works, its potential benefits, and the implications of different national- and state-level policy options.
“We stand at a crossroads in America’s energy landscape,” said Eileen Claussen, President of the Center for Climate and Energy Solutions. “Transitioning to a cleaner, more diverse energy supply is necessary to grow new energy industries at home, limit our exposure to fuel-price volatility and regulatory risk, and reduce the greenhouse gases contributing to global climate change. A well-designed clean energy standard can help drive a major shift toward innovative U.S. energy solutions.”
Thirty-one states now have some form of renewable or alternative energy portfolio standard. Yet in the absence of significant new policies, according to the paper, the share of U.S. electricity coming from clean energy sources is unlikely to increase more than a few percentage points in the next 25 years. At the national level, Republican-sponsored CES bills were introduced in the last Congress and President Obama called for a federal CES in his 2011 State of the Union address.
“The CES idea is relatively new, and this paper will facilitate a broader and better-informed discussion of a CES at the state and federal levels,” said Richard Sedano, Director of U.S. Programs for the Regulatory Assistance Project. “Cleaning up the electric power sector is a challenge of monumental proportions, but we’ve already seen the power of renewable portfolio standards and CES policies in many states and feel certain that even more progress can be made.”
Among the key issues for policymakers is defining “clean energy.” Options include renewables; highly efficient natural gas combined cycle generation; fossil fuel generation with carbon capture and storage (CCS); nuclear power; and electricity savings from efficiency and conservation. By allowing utilities flexibility to choose among energy sources, the paper notes, a CES can minimize cost impacts on electricity consumers. A CES can also limit utilities’ and consumers’ exposure to fuel-price volatility by diversifying electricity supplies, and spur growth and jobs in clean energy industries.
For more information about the climate and energy challenge and the activities of the C2ES, visit www.C2ES.org.
The Center for Climate and Energy Solutions (C2ES) is an independent non-profit, non-partisan organization promoting strong policy and action to address the twin challenges of energy and climate change. Launched in November 2011, C2ES is the successor to the Pew Center on Global Climate Change, long recognized in the United States and abroad as an influential and pragmatic voice on climate issues. C2ES is led by Eileen Claussen, who previously led the Pew Center and is the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.
About the Regulatory Assistance Project
The Regulatory Assistance Project (RAP) is a global, non-profit team of experts focused on the long-term economic and environmental sustainability of the power and natural gas sectors. We provide technical and policy assistance on regulatory and market policies that promote economic efficiency, environmental protection, system reliability and the fair allocation of system benefits among consumers. We have worked extensively in the US since 1992 and in China since 1999. We added programs and offices in the European Union in 2009 and plan to offer similar services in India in the near future.
Written in conjunction with the Regulatory Assistance Project, this discussion paper examines the policy options and implications for a clean energy standard (CES).
A transition from conventional fossil fueled electricity generation to clean energy offers several benefits—particularly the growth of new clean energy industries and associated jobs, diversification of energy supply, and reductions in the public health and environmental damages (especially from air pollution) associated with conventional electricity generation.
The current status of clean energy generation depends on how one defines clean energy. While there is no universally agreed upon definition of clean energy in the power sector, various stakeholders endorse some or all of the following as at least partially clean energy options: highly efficient natural gas combined cycle generation; fossil fuel use coupled with carbon capture and storage (CCS); nuclear power; renewables; and electricity savings from energy efficiency and conservation. These generation sources provide about half of U.S. electricity today. While market dynamics and current state and federal policies have led to recent growth in clean energy generation—such as the growth in renewable generation driven in part by state renewable electricity portfolio standards—projections for the power sector indicate that, absent significant new policies to promote clean energy, the status quo in terms of power generation will continue largely unchanged for at least the next quarter century.
Given the benefits of clean energy and the dependence of substantial growth in clean energy generation on new policies, policymakers have lately turned their attention to the idea of a clean energy standard (CES). A CES is a type of electricity portfolio standard that would set aggregate targets for the level of clean energy that electric utilities would need to sell while giving electric utilities flexibility by: (1) defining clean energy more broadly than just renewables, and (2) allowing for market-based credit trading to facilitate lower-cost compliance. As a concept, a CES builds on the successful experience of the majority of states that have implemented renewable and alternative energy portfolio standards and draws on a history of federal policy deliberation regarding national electricity portfolio standards.
States could pursue new CES policies singly or jointly to create multi-state programs. State CES programs could complement existing state renewable portfolio standards, and a CES may be a promising option in states where more narrowly defined renewable electricity policies have had less appeal. A handful of states have already enacted electricity portfolio standards that have many of the attributes of a CES.
The federal government could also enact a national CES. A federal CES has recently received bipartisan support, with several Republican Senators sponsoring federal CES proposals in the last Congress and President Obama endorsing a federal CES in his 2011 State of the Union address. While the prospects for near-term enactment of a federal CES are uncertain, a federal CES has received substantial attention and warrants close consideration by stakeholders.
This paper introduces stakeholders to the concept of a CES, explains how a CES works, describes the benefits that a CES can deliver, and explores federal and subnational options for CES policies. This paper also explores some of the nuances of CES policy design and the implications of different design choices. This discussion can help both state and federal policymakers, utility regulators, and other stakeholders decide whether a CES is an appealing option and to help state stakeholders understand the potential impacts of a federal CES on their states so that they might formulate and communicate federal CES policy design preferences.
Several of the paper’s key points are summarized below.
- Absent significant new policies to promote clean energy, the share of total U.S. electricity generation obtained from clean energy sources will likely not increase by more than a few percentage points over the next 25 years.
- Substantial increases in clean energy generation can offer important benefits, including:
- Growth of new clean energy industries and associated jobs—e.g., wind turbine manufacturing, solar panel installation, and nuclear power plant construction;
- Diversification of energy supply to limit electric utilities’ and ratepayers’ exposure to fuel price volatility and regulatory risk associated with particular energy sources;
- Mitigation of environmental and public health impacts from electricity generation—including criteria and hazardous air pollutants, greenhouse gases emissions that contribute to climate change, and other impacts.
- A CES is a promising policy for spurring a transition to clean energy in the power sector.
- As a type of electricity portfolio standard, a CES sets requirements for the percentage of electricity sales that must be supplied from qualified clean energy sources and allows electric utilities to demonstrate compliance via tradable credits that they earn themselves for their own generation or buy from other electric utilities or clean energy generators.
- As a market-based policy, a CES can effectively increase clean energy generation and achieve associated benefits while offering substantial compliance flexibility for electric utilities thus minimizing impacts on electricity consumers.
- By broadly defining clean energy, a CES provides opportunities for utilities, states, and regions to exploit their unique mix of clean energy options.
- A CES program can build upon the success of existing electricity portfolio standards that a majority of states have already implemented, provided that the percentage targets are increased in proportion to the potential of newly eligible resources. If additional clean energy resources are allowed to qualify for an existing portfolio standard without increasing the targets, the mix of resources used to meet the standard and the resulting compliance costs may change, but the total amount of clean energy generation will not increase and the goals of the policy may not be furthered.
- At the state and federal levels, CES policies have attracted bipartisan support, including CES proposals from President Obama and Republicans in Congress.
- CES programs enacted by the federal government or by states singly or in coordination could spur incremental clean energy generation and deliver associated benefits.
- Federal CES proposals have attracted bipartisan support in previous years, but it is not clear if or when legislation to create a federal CES will move forward.
- States have already proven themselves to be policy innovators with respect to renewable electricity portfolio standards, and states may seek to reap the benefits of clean energy for themselves by implementing new CES policies—either singly or as part of multi-state programs.
- At least four states (Michigan, Ohio, Pennsylvania, and West Virginia) already have electricity portfolio standards that credit cleaner, non-renewable energy sources, and Indiana has a similar but voluntary program. These states offer several lessons for future state or federal CES programs, including:
- Utilities tend to comply with electricity portfolio standards by deploying the lowest-cost qualified resources, so policymakers may need to include special provisions in a CES if they hope to provide a meaningful incentive for less commercially mature and higher-cost technologies.
- Policymakers can design CES programs that have very modest impacts on electricity rates.
- A combination of factors—including the policy’s target and the types of energy sources that qualify—determine how much incremental clean energy generation a CES program will deliver beyond “business as usual,” and policymakers should consider the interaction of such factors in developing a CES to ensure the program can meet their goals for additional clean energy generation.
- The net effects of a CES policy are a function of interrelated policy design decisions. Policymakers and stakeholders should understand CES policy design options and their interactions and implications. Policymakers and stakeholders might usefully evaluate a CES in terms of key criteria and think about implications of different policy design decisions in light of these criteria.
- Effectiveness – What is the magnitude of the policy’s desired impacts?
- CES targets set the requirements for overall clean energy generation.
- The degree to which a CES delivers the benefits associated with clean energy depends on how policymakers define qualified clean energy under the program.
- Certain policy design options (e.g., exemptions for certain utilities and alternative compliance payments) can have the effect of reducing a CES program’s effective target for incremental clean energy deployment.
- Policymakers may include provisions in a CES to provide particular incentives to certain technologies—e.g., less commercially mature or higher cost ones—in order to reap particular clean energy-related benefits.
- Cost-effectiveness – how efficiently does the policy achieve its intended aims?
- As a market-oriented policy, a CES is an inherently cost-effective program.
- Policymakers have several options for providing electric utilities with compliance flexibility under a CES (e.g., banking and borrowing of credits).
- In general, the more flexibility that utilities have for meeting clean energy targets (e.g., the more broadly clean energy is defined), the more cost-effective a CES program will be.
- Fairness – does the policy lead to any undue burdens or unearned windfalls for particular utilities, power generators, or regions and customers?
- Owing to a variety of factors, different electric utilities supply their customers with electricity from widely varying existing generation mixes. In addition, utilities, states, and regions have different cost-effective options for increasing clean energy generation (e.g., because of different renewable resource endowments).
- How policymakers set CES targets, treat new vs. existing clean energy generators, and define qualified clean energy sources determine how the effects of a CES program vary among different utilities, power generators, or customers.
- Effectiveness – What is the magnitude of the policy’s desired impacts?
On October 20, 2011, the California Air Resources Board (CARB) adopted final regulations for a cap-and-trade program that will help the state reduce greenhouse gas emissions to 1990 levels by 2020. Beginning in 2013, cap-and-trade regulations will apply to all major industrial sources and electric utilities, and will expand in 2015 to cover the distributors of transportation fuels, natural gas, and other fuels. An overall emission cap applies; individual companies are not required to reduce emissions to a certain level, but they must hold allowances to cover their emissions. CARB will freely distribute the majority of initial allowances to industrial sources to prevent emissions leakage. Electric utilities will also receive free allowances, some of which must be sold at auction to benefit ratepayers. Additional allowances can be purchased at quarterly auctions or from a trading market. The amount of allowances available will decline by about 3 percent each year as emissions are reduced. In addition to allowances, offsets from CARB-certified projects in forestry management, urban forestry, dairy methane digesters, and the destruction of ozone-depleting substances may be used to cover 8 percent of a company’s emissions. CARB expects the regulations to cover the sources of 85 percent of the state’s emissions from about 360 businesses and 600 facilities. Overall, the cap-and-trade program will be one of the main tools used to meet the emissions reductions targets established by California’s climate change legislation, AB 32.
California’s cap-and-trade regulations are designed to link with similar programs in U.S. states and Canadian provinces that are members of the Western Climate Initiative. The regulations were set to be implemented in January 2012, but concerns about implementation preparedness delayed the program for a year. CARB developed the regulations over three years and received input from various stakeholders through comments and public meetings and workshops. Several companies representing several economic sectors voiced concerns at the CARB’s October hearing about the economic cost of compliance with the cap-and-trade program. In an attempt to address these concerns, CARB also passed an adaptive management plan to alleviate implementation challenges. Despite the apprehension of some industries over cap-and-trade, AB 32 enjoys broad public support in California. Voters rejected a November 2010 ballot proposition to suspend AB 32 by a nearly 24 point margin. Overall, CARB believes that its cap-and-trade regulations will help California attract significant investment in clean technology and complement the state’s existing initiatives to reduce pollution and increase energy efficiency.