Climate Compass Blog

Conference and Report to Spotlight Leading Corporate Energy Efficiency Strategies

Dow Chemical has saved about $8.6 billion in energy costs since 1994. IBM overachieved on a 3.5 percent annual energy savings target, instead hitting 6.1 percent in 2008, saving millions of dollars in the process. And United Technologies Corporation met an original 25 percent energy efficiency target five years ahead of schedule, reset the target to 40 percent, and blew past it to achieve a 56 percent efficiency improvement by 2006.

How did these companies do it? What lessons can we draw from their extraordinary efforts? Can their successes be replicated across the broader economy?

These questions form the basis of our ongoing research project on corporate energy efficiency strategies. Findings from the study, titled “From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency,” will be released April 6, 2010, at the start of a two-day conference in Chicago. The conference offers an unprecedented opportunity to hear directly from dozens of business executives who have successfully guided their companies to world-class energy savings. Registration is open now; don’t miss the opportunity to sign up for the special early bird rate of $600 for the two-day conference. Keynote speakers and panelists will be announced in the coming weeks. Also check out the conference ad in the Nov. 12 edition of The New York Times.

Regional Initiatives March Forward

On Monday, members of the three North American regional greenhouse gas reduction programs met in Washington D.C. to discuss potential areas for collaboration, and to send a clear signal to Congress as it debates climate legislation: these regional initiatives – and state leadership in general – are not going away. Representatives from the various U.S. states and Canadian provinces participating in the northeastern Regional Greenhouse Gas Initiative, the Western Climate Initiative, and the Midwestern Greenhouse Gas Reduction Accord traded information with one another and with representatives from federal agencies on the status of their respective programs, and explored paths for working together on carbon offset design, complementary GHG reduction policies such as energy efficiency measures, and possible linkages among their existing and developing carbon markets. Members of the regional initiatives also took their message to Capitol Hill, where they briefed press and Congressional staff on their initiatives, their intention to continue developing these programs, and their strong preference for federal cap and trade policy.

It was clear from these discussions that the states are moving ahead regardless of what happens at the federal level. All of the states represented support a strong, rigorous federal cap-and-trade program to reduce greenhouse gases (GHGs), but should such a program fail to materialize, the states and the regional initiatives will continue to move ahead with the development and implementation of their own trading programs, and potentially move to link these programs. When 23 states – representing 48 percent of the U.S. population, over half of U.S. GDP, and 37 percent of U.S. GHG emissions – and their partners in Canada sit down to talk about uniting their efforts to reduce emissions, it is clear that the choice is no longer between having a federal climate program or not; it is between having comprehensive climate legislation designed and negotiated in Congress, or having a de facto national North American carbon market driven by these state efforts, working in concert with regulations issued by federal agencies. States strongly prefer a federal trading system, but as far as they’re concerned, the foundation for a national cap-and-trade program has already been laid.

The states and regions also made clear that as they move ahead, they want to form a strong partnership with the U.S. EPA and other federal agencies, regardless of what happens with federal legislation. EPA is already moving to regulate greenhouse gases (as evidenced by the recently announced endangerment finding, and the tailoring rule and vehicle standards released earlier this year) and the states will play a key role in the implementation and enforcement of these new regulations. Even with federal climate legislation, states will play a key role in its implementation.

In addition, the states made clear that any federal plan needs to allow them the flexibility to continue crafting effective greenhouse gas reduction policies that can complement cap and trade, such as energy efficiency and renewable energy standards. For many at Monday’s meeting, preserving states’ ability to achieve emissions reductions beyond what is mandated at the federal level is an imperative; it is not clear to them that pending federal legislation and the tools currently available to the U.S. EPA under the Clean Air Act can achieve the levels of GHG reductions required, and that it may fall upon the states to make up the difference through policy innovation.

One Piece of the Senate Puzzle

Yesterday morning, the Senate Environment and Public Works Committee passed S. 1733 – The Clean Energy Jobs and American Power Act.  The bill would create a strong cap-and-trade program with aggressive emission reductions targets through 2050. The bill now becomes one piece of a puzzle that will include the energy bill passed by the Senate Energy and Natural Resources Committee earlier this year, contributions from as many as four other major Senate committees, and contributions from Senators acting outside the committee process.

The importance of the latter is suggested by the announcement Wednesday by Senators Kerry, Graham, and Lieberman that they will be working together to craft a climate bill that incorporates provisions of the EPW bill with other provisions in line with Kerry and Graham’s New York Times op-ed.

Pulling these disparate pieces together into a coherent whole and garnering the 60 votes necessary for passage of a bill through the Senate will surely require strong leadership in the legislative process by the Obama administration.

Michael Tubman is the Congressional Affairs Fellow

One Regulatory Program Per Customer, Please

The menu of policy options for reducing greenhouse gas emissions and tackling climate change is pretty lengthy, and the portions offered are quite substantial. Congress now has to make the choice of which regulatory option to order, and as we saw in last week’s hearings at the Senate Environment and Public Works Committee, they are open to recommendations. One interaction on Thursday between Senator Arlen Specter (D-PA) and Fred Krupp, President of the Environmental Defense Fund, highlighted the need to pick a single, effective strategy to tackle climate change and not overstuff our economy with duplicative regulations. The exchange focused on whether the EPA should continue to proceed with regulations through the Clean Air Act’s New Source Review (NSR) program even if a comprehensive climate change program is enacted.

Given existing requirements, regulation of greenhouse gases under any provisions of the Clean Air Act will trigger NSR. Under NSR rules, the construction of new stationary sources and major modifications of existing ones must be permitted to ensure that they will not contribute to significant deterioration of air quality. While NSR has long been used to regulate traditional air pollutants, when it comes to feeding an appetite for climate change regulation, NSR doesn’t really hit the spot.  NSR is rather inflexible, costly to implement, and results in relatively limited emission reductions. Given the difficulty in developing standards for the large number of sources that emit greenhouse gases and the need to provide incentives for technological change in order to achieve deep reductions over time, new source review simply isn't the right recipe for our current needs. 

This chef’s recommendation: a well-designed cap-and-trade program that is aggressive enough to yield needed reductions in greenhouse gas emissions while spurring the technological innovations we need to make those reductions and grow our economy. Enactment of a cap-and-trade program means we can send back duplicative programs like NSR and still be satisfied.

Sure, we’ll need complementary policies that work in a coordinated fashion with a cap-and-trade program. These side dishes of the cap-and-trade meal are targeted programs that are designed to enhance cap-and-trade’s impacts without getting in the way of the functioning of the primary program. A comprehensive climate bill can work just fine without NSR.

 

Michael Tubman is the Congressional Affairs Fellow

Will the U.S. Bring Numbers to Copenhagen?

BARCELONA -- Will the U.S. bring numbers to Copenhagen?

That is the question most on the minds of negotiators here in Barcelona as they struggle to chart a path toward success at the upcoming climate summit in Copenhagen.  And with good reason – what can be achieved next month in the Danish capital will depend in large measure on what the United States brings to the table.

Every developed country except the U.S. already has formally adopted or proposed emission targets for 2020.  (According to a compilation by the U.N. climate secretariat, these numbers amount to a collective reduction of 16 to 23 percent below 1990 levels.)  U.S. negotiators are being very coy about whether they will be able to add theirs by the time of Copenhagen.

While a host of other issues bedevil these talks, there is no question that the lack of U.S. numbers severely constrains the range of possible outcomes.  Indeed, it’s difficult to imagine even a solid political deal coming together in Copenhagen if the U.S. is unwilling to, at least provisionally, lay out its intentions on the emissions front.

At the same time, it’s understandable why the U.S. might hold back.  It would be pointless, and potentially disastrous, for the administration to put forward numbers that Congress would not in the end support.  And while the House of Representatives has passed a comprehensive climate bill, the Senate process is just now beginning and won’t conclude before Copenhagen.  So it’s hard to say just where Congress will come out.

Under these circumstances, venturing forward with numbers carries certain risks.  First, there are risks to the domestic climate process:  If too many on Capitol Hill feel the President is getting out ahead of Congress, that could make it harder to build the bipartisan support needed to get legislation done.  Second, there are risks to the international process:  If the U.S. dangles numbers it can’t ultimately sign on to, any interim deal in Copenhagen will unravel, and the negotiations could wind up back at square one.  Finally, if the U.S. puts forward numbers yet no agreement is reached, both the domestic and the international processes could suffer.

Beyond these questions of risk, there are some serious substantive issues:

  • What numbers?  Clearly, any numbers would have to reflect those now under discussion in Washington.  The most obvious are the proposed cap-and-trade targets, ranging from President Obama’s initial proposal (14 percent below 2005; or 1990 levels), to the House-passed bill (17 percent below 2005; 4 percent below 1990), to the Kerry-Boxer bill proposed in the Senate (20 percent below 2005; 6 percent below 1990).  The House bill and Senate proposal contain provisions that would deliver additional reductions, but there is no saying now how they will ultimately fare.
  • In what form?  As we have argued before, and as prominent voices now concur, any likely outcome in Copenhagen would be a political, not a binding, deal – as a basis for then negotiating a legal instrument with binding commitments.  In that event, any numbers agreed in Copenhagen would be provisional.  And without final U.S. legislation, presenting a range would be far wiser than presenting a single number (though the aim in a final legal agreement should certainly be a specific target).
  • What’s the framework?  There are significant differences between the U.S. and other parties on the nature of a future international framework – for instance, would developed country targets be verified according to national or international accounting rules?  If it’s not possible to bridge those differences by Copenhagen, there will be some ambiguity around any targets on the table there.


What’s more, the prospects for a Copenhagen deal hinge as well on a second set of numbers: financial contributions to support developing country efforts.  At this point, there are huge estimates of need but no firm offers from any developed countries.  A deal presumably would require clear numbers from all, including the United States.

Whether the U.S. comes to Copenhagen with numbers is a political judgment that can be made only by President Obama.  In our view, he should send numbers only if he is confident that he will be in a position to convert them into a binding commitment (pending ratification) within the timeframe agreed in Copenhagen for reaching a final legal agreement.  His ability to deliver on that will depend on when Congress completes its job; that, in turn, depends at least in part on how vigorously the President chooses to engage in the legislative process.  (His engagement is a necessary condition for – but by no means a guarantee of – legislative success.)

So in the end, the President’s call on numbers for Copenhagen will rest on his judgment of where Congress is, where other parties are, and whether his active engagement can get the job done in 2010.