US companies, communities rely on federal climate science

Businesses rely on government for factual, unbiased information to help them make decisions about where and how to grow.

They need U.S. Census data to see how patterns of population growth could affect the demand for goods and services. They need energy supply and demand data from the U.S. Energy Information Administration to understand this critical input to productivity.

And they need climate data to help them identify the risks climate impacts pose to their facilities, operations, and supply and distribution chains.

The National Climate Assessment -- mandated by Congress -- is one of the tools that helps companies understand and prepare for climate risks – risks that more than 90 percent of major companies recognize. The latest version (still in draft form) is the product of researchers at 13 federal agencies and has undergone rigorous, independent peer-review by a 14-member committee at the National Academies.

But the administration is disbanding the federal advisory panel that helps policymakers and private-sector officials incorporate the National Climate Assessment into long-term planning. And researchers say they are worried the findings in the final release will be altered or suppressed by administration officials who oppose federal action on climate change.

That would be a mistake.

Government officials concerned about the health and competitiveness of U.S. businesses and the U.S. economy need to know that businesses rely on unbiased federal scientific data for decision making.

Sea-level rise projections let coastal property owners choose the right amount of flood protection for their needs. Accurate counts of frost-free days help farmers understand how growing seasons are changing so they can adjust their practices. City and state governments also need reliable data to ensure infrastructure is built to last and communities are prepared for more extreme heat waves, droughts, and downpours.

It is in the interest of the U.S. economy to see strong support for science continue at the federal level.

The National Climate Assessment is a valuable tool companies and communities use to plan for the impacts of climate change. It is by no means the only government report that gives evidence of the reality of climate change. Countless observations show us that the world of today is unlike the world of our parents. The annual State of the Climate report -- edited by National Oceanic and Atmospheric Administration (NOAA) scientists, peer-reviewed, and published in August in the scientific journal Bulletin of the American Meteorological Society --  assembles the latest observations, including:

  • 2016 was the hottest year globally on record (surpassing record-setting 2015 and 2014)
  • Global mean sea level in 2016 was the highest since satellites began making measurements
  • Arctic temperatures reached 3.5°C above 1900 levels, a new high.
  • Greenhouse gas concentrations topped 400 parts per million for the first time in at least 800,000 years

Every credible line of evidence tells us that the Earth’s climate will continue to change in mostly harmful ways. That means governments, communities, and companies need to reduce climate-altering emissions and strengthen resilience to climate change impacts we’re already experiencing and that will grow worse without emissions reduction.

To help planners and risk managers in the public and private sectors make use of existing government climate data, C2ES is hosting a webinar to discuss “Using Climate Data in the Real World.” Government scientists from NOAA and Argonne National Lab will describe the climate datasets available for public use and how climate model outputs can be “downscaled” to provide granular data relevant to resilience planners. Business representatives will share their experience using this data in real world decision-making.

The September 27 webinar is just one component of C2ES’ work to promote information-sharing and collaboration between scientists, businesses, and governments to assess climate vulnerabilities and develop resilience strategies. 

New research highlights flood risks from sea-level rise

Recent scientific studies on the impacts of sea-level rise can help cities and businesses in coastal areas strengthen their climate resilience planning.  

Coastal flooding is expected to be a particularly costly climate impact. As the seas rise, U.S. cities from Miami to Atlantic City, New Jersey, now routinely deal with tidal flooding, also called nuisance flooding or sunny day flooding. But higher sea levels can also magnify flooding from more rare major storms like hurricanes.

Researchers at Princeton and Rutgers recently took into account the fact that coastal cities face this combination of small (high-probability) and large (low-probability) flooding events. They took observations from the National Oceanic and Atmospheric Administration’s (NOAA) tide gauges and used statistical techniques to measure the occurrence of historically low- and high-probability events across coastal locations. They then used sea-level rise projections to understand how the frequency of low- and high-probability events would change at each location.

The key insight from this study is that sea-level rise will have a different impact on flooding patterns in different regions of the country. Charleston, South Carolina, will see a larger increase in moderate floods than in severe floods (though both types of floods will increase), while Seattle will see the opposite pattern.

The study also demonstrates that flood frequencies will increase dramatically in many coastal areas by 2050. The blue and green dots in the maps below show the places where flood frequencies will increase by hundreds or even thousands of times from today (Alaska and Hawaii were also modeled in the study, but not shown in this map. The full dataset is here).


Source: Princeton University, 2017.

It’s no wonder, then, that cities and businesses across the country are taking steps to prepare for flooding and other climate change risks. We continue to urge them to work together to find the options that work best for the community overall. 

Good and bad options for changing California’s cap-and-trade program

California has been an environmental leader for decades, but still numerous cities in the state struggle with air quality. As state lawmakers debate the future of the cap-and-trade program to reduce greenhouse gas emissions, can they also find ways to reduce other air pollutants -- like ozone and particulate matter -- that make people sick?

The answer is yes. But some options are better than others.

Analysis of California’s climate policy shows that big cuts are needed to meet the state’s 2030 greenhouse gas reduction goal – and these cuts to carbon emissions will probably reduce other pollutants as well. By modifying the cap-and-trade program, California can improve the likelihood that criteria air pollutants get cut, too. Some of these options would reduce the flexibility businesses now have to comply with the program. This includes the ability to trade allowances, bank (save allowances for future years if you don’t need them now), and use offsets (verified reductions that happen at approved projects in California or elsewhere; the state sets strict rules on what counts as an offset).

The problem with eliminating these compliance options is that the program would lose elements that provide cost containment. In other words, it would likely get more expensive overall to achieve the same greenhouse gas reductions.

For example, eliminating the ability to bank allowances might backfire. Since the program is oversupplied right now (that is, there are more allowances available than emissions), banking is one of the main drivers of allowance demand and prices. If that option goes away, businesses will lose a big price signal to reduce greenhouse gas emissions, and emissions might increase in the near-term.

Another option is to add regulations on top of the cap-and-trade program. The state could regulate greenhouse gas emissions from refineries, which are also a large source of criteria air pollutants. The state could also enhance existing regulations for those other pollutants. It’s hard to predict how much pollution reduction either of these options would deliver compared to extending the cap-and-trade program as is, but they would at least increase certainty about criteria air pollution (though they might miss a big source of these emissions in the form of cars and trucks).

Cities and businesses can make more resilient communities by working together

The impacts of climate change are being felt today – including more frequent and intense storms, heat waves, droughts, and rising sea level. These impacts take a human and economic toll on cities and the businesses operating in them. Despite the common threat, little guidance exists for how the public and private sectors can work together to prepare.

To address that gap, C2ES, in partnership with Bank of America created a Guide to Public-Private Collaboration on City Climate Resilience Planning. The guide outlines 13 recommended actions for city planners to invite and promote collaboration with businesses on climate resilience.

Working together makes sense because both public and private stakeholders want to see economic growth in their communities. Extreme weather events have caused more than $1 trillion in damage to the U.S. economy since 1980, and the intensity of these events is expected to worsen because of manmade climate change.

Storms can be particularly devastating for small businesses. The Hartford found 52 percent of small businesses affected by Hurricane Sandy in 2012 lost sales or revenue, and 25 percent of these businesses had to slow down or stop hiring.

C2ES brought together local government and business officials in Kansas City, Mo.; Miami Beach, Fla.; Phoenix; and Providence, R.I., to assess each city’s climate preparedness and prioritize resilience needs. Despite differences in each city’s geography, size, climate threats, and economic make-up, we found common insights into how to best foster city-business collaboration.

  • Resilience planning should be an extension of existing programs and partnerships. It requires involvement of officials in multiple city departments.
  • If cities demonstrate to businesses that climate resilience planning is a key priority, it’s more likely businesses will devote the resources to collaboration.
  • Businesses respond to data. By working with partners to find localized data on climate threats and vulnerabilities, cities can help articulate the business case for climate resilience planning.
     
  • ‘Business’ is not a monolith, and city climate resilience planners will need to tailor their approach. Small businesses, in particular, have unique needs.
     
  • Innovative financing can help promote collaboration. While not all climate resilience strategies will require additional funds, some will. The private sector is more likely to collaborate when they see that the city is committed to exploring all options for financing the steps in the climate resilience plan.

As the diagram below shows, business collaboration can be a part of every step of existing climate resilience planning frameworks.

 

Our recommendations supplement existing climate resilience planning frameworks.

 

City-business collaboration in times of disaster isn’t new. When Hurricane Sandy knocked out electricity to millions, American Water, the largest publicly traded U.S. water company, had more than 400 generators ready to keep providing clean water to its customers. The only problem was, the company didn’t have any place to store the fuel to run them. Local towns had fuel storage tanks, but no fuel. So, they worked together to move and store fuel to run not only the water pumps but also fire and police vehicles.

What’s needed is more collaboration before the fact, in light of new and increased threats. Providence, Rhode Island, faces increased flooding with sea level projected to rise as much as 2 feet by 2050. At our workshop, state officials, city departments, local businesses, universities, hospitals, utilities, and others started examining the risks and ways to respond. As Mayor Jorge Elorza put it, “We simply can’t afford to kick the can down the road.”

We hope this report will be a first step toward a climate resilience planning paradigm where cities and businesses work together to find the best ways to protect their communities from climate change impacts. We believe these important partners can achieve better results by working together.

Addressing California cap and trade concerns

California’s cap-and-trade program received court affirmation this month that the state has authority to auction allowances. But questions remain about the program’s future.

California lawmakers are evaluating ways to achieve the state’s 2030 greenhouse gas reduction goal. One option, championed by Governor Brown, is to extend its cap-and-trade program. But some lawmakers are concerned the program isn’t delivering the expected revenues for state clean energy programs. Others worry it doesn’t do enough to provide equitable environmental co-benefits.

Could the single step of extending the program address these concerns? To some extent, yes.

The debate in Sacramento

Under California’s cap-and-trade program, operating since 2013, emissions are down and economic productivity is up.

But there are some areas of concern. Auction revenues are down. As I’ve noted before, low carbon prices don’t mean a cap-and-trade program isn’t working. They just mean the required emissions reductions are cheap. But California legislators want to use auction revenue to fund other projects like planting trees in urban areas and putting rooftop solar panels in disadvantaged communities. More importantly, a recent analysis shows emitters are more likely to be near disadvantaged communities, raising concern Californians won’t enjoy the co-benefits, like cleaner air, equally.

Legislators have proposed extending the cap-and-trade program through 2030, although they are debating restricting how it operates. Discussion continues about replacing cap-and-trade with a carbon tax approach. This tax proposal would seek to address the first concern, that allowance prices are too low to fund desired programs. Other debate centers around restrictions to force more emissions reductions to occur inside the state. Current rules allow for reductions at sources of electricity outside California, or at limited offset project sites in the U.S. and Canada.

Economic theory tells us that limiting emissions through a cap-and-trade program will achieve the environmental objective at the least cost, through business innovation. Could lowering the cap address other key concerns as well?

Tighter cap = higher revenues

The California Air Resources Board’s (CARB) 2017 Climate Change Scoping Plan Update (Scoping Plan) evaluates policy options to achieve the 2030 goal. The regulator’s preferred approach is to keep existing programs (like the state’s aggressive 50 percent Renewable Portfolio Standard), extend the cap-and-trade program, and require extra emissions reductions at in-state refineries. Its analysis concludes this would meet the 2030 goal, using market-based approaches to minimize costs while prioritizing in-state reductions.

Using the information in the Scoping Plan, let’s examine how CARB’s preferred policy approach would address concerns about revenue and equity.

First, compare actual auction revenue in 2016 with projections of how revenue might change if the cap-and-trade program were extended (see Table 1). Making some conservative assumptions, revenues could double by 2020, from $2 billion without an extended cap to $4 billion with an extended cap. The increase comes mostly from increased allowance demand that would be expected if the business community receives a long-term policy signal in favor of cap-and-trade. Auction revenue could reach $5 billion in 2025, even as the cap (and the number of allowances sold) declines.

Table 1. Relationship between allowance supply and state revenue.
2016 values are calculated from CARB data. Projections for 2020 are based on CARB’s projected auction volumes and our conservative price estimates. Projections for 2025 are estimated assuming a linear cap decline and no significant changes to program allocation rules. Current program rules set a minimum auction price of $15.40 in 2020. The minimum price would be $19.70 in 2025 under the current escalation rate.

Illustrative scenario

Annual allowance sales at auction (tons, all vintages*)

Annual average auction clearing price ($/ton)

Annual state revenue ($)

2016 actual values

168,076,078

$12.73

$2,139,608,473

2020 projection, BAU policy**

133,632,293

$15.40

$2,057,937,311

2020 projection, extended cap-and-trade policy***

259,197,485

$16.00

$4,147,159,760

2025 projection, extended cap-and-trade policy***

211,618,003

$25.00

$5,290,450,075

*The vintage is the first year in which the allowance is eligible for compliance. California currently auctions a small number of allowances three years in advance (“future vintages”), to promote price discovery and liquidity in the market.
**Assumes auctions are subscribed at same level as 2016, but no future vintages offered.
***Assumes current and future vintage auctions are fully subscribed
Source: CARB data and C2ES calculations.

These calculations are based on the observation that allowance demand (and prices) increase when businesses receive policy signals that buying allowances will be a good long-term investment. Experience in both Europe and the U.S. Northeast’s Regional Greenhouse Gas Initiative has borne this out. Each of those markets has had periods of low prices. When rulemakers responded by tightening the cap, allowance prices increased.

A key point from those experiences is that the market didn’t wait to respond after the agreed cuts took place – prices increased as soon as the legislation was passed. Legislators can boost state revenue for greenhouse gas reduction programs today by committing to the market through 2030.

Tighter cap = greater co-benefits

But what about concerns that the trading provision doesn’t allow disadvantaged communities to enjoy equal co-benefits, like fewer criteria air pollutants (SO2, NOx, PM 2.5), from the regulation?

It is worth noting that the cap-and-trade program is not the state’s sole policy measure aimed at reducing greenhouse gases. Figure 1 shows the reductions each measure in CARB’s preferred plan is expected to produce. The total reductions needed to meet the 2030 target are estimated at 680 million tons (Mt). CARB expects other policies will reduce at least 339 Mt and potentially 489 Mt (the figure shows the high value). The cap-and-trade program is expected to make up the difference, or 28-50 percent of the required reductions.

While a detailed analysis is required to estimate cap-and-trade compliance pathways, it is reasonable to assume that improved energy efficiency and substituting cleaner fuels would play a major role. These actions also reduce criteria air pollutants as a co-benefit. A potential 50 percent cut in these pollutants would make a big difference in the air quality near covered sources.

Figure 1. Projected emissions reductions from the policies included in the Scoping Plan analysis. 

Solid black dashes show historic statewide emissions. The dotted line shows a trajectory to meet California’s 2020 and 2030 targets. The colored areas show the reductions from each policy measure, including the potential new refinery reduction measure. The blue dashed area shows the reductions that the cap-and-trade program would need to achieve to meet the 2030 goal.
Source: California Air Resources Board

While cap-and-trade is not a perfect policy tool, it provides emissions certainty while minimizing costs to society. Economic theory and experience show that extending (and lowering) the cap can cause near- and long-term market impacts. These include increased auction revenue and reduced criteria air pollutant emissions, and help address concerns about revenue and equity through the existing cap-and-trade program alone. Other policy options are available – such as modifying the trading rules or creating additional location-specific reduction targets. But legislators may have a simpler option that takes advantage of the flexibility of market mechanisms: Cut the cap, and let businesses respond.

(Ashley Lawson is a Senior Solutions Fellow at C2ES. Next on the Climate Compass blog: How carbon capture could play a greater role in the ARB Scoping Plan.)