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Cities often lead the way on greenhouse gas reductions, even though they rarely control the operation of the power plants that supply their energy. So how can city initiatives work together with the federal Clean Power Plan to reduce carbon emissions from power plants?
One option is the Clean Energy Incentive Program (CEIP). The U.S. Environmental Protection Agency (EPA) included this early-action program as part of the Clean Power Plan and recently released program design details.
The program is voluntary. If a state chooses to participate, then certain renewable and energy efficiency projects can receive early action credits, including a federal match from EPA. These credits can be used for complying with the Clean Power Plan, so they provide additional financial incentives for clean energy projects.
While we can’t know the full value of the CEIP without knowing how many states participate and how power plants in those states comply with the Clean Power Plan, C2ES estimates the CEIP could drive up to $7.4 billion of private spending on clean energy projects across the country.
A key aspect of the CEIP is its support of project development in low-income communities. Solar and energy efficiency projects in these communities receive double credit, and a special reserve pool is created to make sure these projects can compete with large renewables for credits. This type of project development can support four key goals of city leaders:
1. Taking action to fight climate change;
2. Reducing energy bills for low-income residents;
3. Bringing jobs and investment to the community; and
4. Delivering co-benefits of renewable energy like cleaner air and water.
City leaders have the know-how to channel CEIP credits to their communities, but they will need to partner with their states and businesses to succeed.
Once states choose to participate, city leaders can help articulate the benefits of the CEIP. Cities can also provide data and support to project developers to streamline CEIP projects, especially low-income community projects that often face more hurdles. For example, they could help businesses locate communities that would host projects, work with utilities to identify potential projects, and build public-private partnerships to finance renewable energy.
How does it work?
Step 1: EPA creates a matching pool for each state. The amount of CEIP match available is limited, and EPA will divide the total pool among the states before the program gets started. If a state does not use its full share of the match, those credits will be retired. In other words, the CEIP is use it or lose it. Half of each state’s pool is reserved for low-income community projects and the other half for renewable projects like wind, solar, geothermal, or hydroelectricity.
Step 2: Interested states include the CEIP as part of their implementation approach. States must submit a plan to EPA that details how they will implement the Clean Power Plan. States that opt-in to the CEIP would have to declare that as part of their plan, and then they could receive the EPA match. If states opt out, then clean energy projects within their borders would not be eligible.
Step 3: New clean energy projects are developed in participating states. CEIP credits go only to new projects – renewable projects that start generating electricity on or after Jan. 1, 2020 or low-income energy-efficiency projects that start delivering energy savings on or after Sept. 6, 2016.
Step 4: New clean energy projects benefit the community. CEIP credits are awarded for electricity generated (renewables) or saved (energy efficiency) in 2020 and 2021. Starting in 2022, these projects are eligible for other financing opportunities under the Clean Power Plan.
Step 5: CEIP projects receive tradeable credits. States will verify how much clean energy a project is producing, then distribute the appropriate amount of CEIP credits (half from the state’s pool and half from EPA) to eligible projects. The project developers that receive the credits can sell them to power plants that need them to comply with the Clean Power Plan. CEIP projects don’t need the credits themselves because only fossil fuel-fired power plants are covered by the regulation. The value of CEIP credits will be determined by how power plants reduce their emissions.
The dates in the CEIP design details may change, depending upon the outcome of the legal challenge against the Clean Power Plan.
The CEIP will be open for public comment this summer. Once finalized, it will help promote new clean energy development in communities across the country. Its focus on low-income communities aligns it with other city priorities in addition to fighting climate change. The short timeframe of the program will make public-private collaboration a key to success in attracting CEIP projects.
C2ES, through our Alliance for a Sustainable Future with The U.S. Conference of Mayors, can be a valuable resource on climate policies like the CEIP. By communicating technical information in a meaningful way and facilitating the conversations between cities and businesses, we can advance clean and efficient energy.
Details of the Clean Energy Incentive Program
Under its final Clean Power Plan (CPP), the U.S. Environmental Protection Agency (EPA) established the Clean Energy Incentive Program (CEIP) to encourage early action in meeting CPP objectives. The CEIP is a voluntary program for states to incentivize renewable and energy efficiency projects by giving them assets that will be tradable in Clean Power Plan markets. On June 16, 2016, EPA proposed design details for the CEIP.
This fact sheet has been developed by C2ES in support of the Alliance for a Sustainable Future, in partnership with The United States Conference of Mayors. For more information about the Alliance, see: http://www.allianceforasustainablefuture.com
June 21, 2016
Alliance for a Sustainable Future Announced
The U.S. Conference of Mayors and C2ES will bring together city and business leaders to focus on reducing power sector emissions and spurring sustainable development
WASHINGTON -- The U.S. Conference of Mayors (USCM) and the Center for Climate and Energy Solutions (C2ES) today announced a new alliance to spur public-private cooperation on climate action and sustainable development in cities.
The USCM-C2ES Alliance for a Sustainable Future will create a framework for mayors and business leaders to develop concrete approaches to reduce carbon emissions, speed deployment of new technology, and implement sustainable development strategies as a part of implementing the Clean Power Plan and responding to the growing impacts of climate change.
City and business leaders will identify barriers to action and share research and analysis on climate and sustainable development solutions. By building crucial links between cities and companies, the alliance aims to spur innovative partnerships and increase participation in state and national climate efforts.
“Since 2005, USCM has been leaders on climate change and reducing greenhouse gas emissions. Mayors and businesses must work together to develop sustainable solutions,” said Baltimore Mayor Stephanie Rawlings-Blake, The U.S. Conference of Mayors President. “The Clean Power Plan is the cornerstone of the nation’s strategy to achieve these reductions, which are becoming more and more important as the effects of climate change are upon us.”
“This alliance brings together mayoral political leadership and the pragmatic policy expertise of C2ES to advance climate change action and sustainable development, including by working with states to implement the Clean Power Plan” said Tom Cochran, CEO and Executive Director of The U.S. Conference of Mayors. “It is time for more concerted action and cooperation to spur ingenuity and expedite solutions.”
“Separately, cities and businesses have already been demonstrating climate leadership,” said C2ES President Bob Perciasepe. “Together, we can put our foot on the accelerator and reach our emissions-cutting goals.”
Santa Fe Mayor Javier Gonzales has been appointed by Mayor Rawlings-Blake to lead the effort for The U.S. Conference of Mayors, which will be approaching business partners with C2ES following the mayors' 84th Annual Meeting, June 24-27 in Indianapolis.
“Cities are our nation’s economic powerhouses, making them a key proving ground for policies to increase energy efficiency, deploy clean energy, and foster clean transportation,” said Mayor Gonzales. “Cities and companies have an opportunity to develop best practices to reduce greenhouse gas emissions and deal with the consequences of climate impacts.”
About The U.S. Conference of Mayors: The U.S. Conference of Mayors is the official nonpartisan organization of cities with populations of 30,000 or more. There are nearly 1,400 such cities in the country today, and each city is represented in the Conference by its chief elected official, the mayor. Learn more at www.usmayors.org.
About the Center for Climate and Energy Solutions: C2ES is an independent, nonprofit, nonpartisan organization that brings policymakers, business, and other diverse interests together to forge practical solutions to the pressing challenge of global climate change. Learn more at www.c2es.org.
Policy Considerations for Emerging Carbon Programs
With climate action gaining momentum around the country, policymakers at the city, state, and federal level are all considering policy tools they can use to achieve their goals. Many market-based options exist that can deliver differing co-benefits. Discussions and collaboration with other jurisdictions and with affected businesses can also improve the policy outcome.
City-level Climate Leadership in Boulder: The Climate Action Plan Tax
Cities across the United States are using a range of policy options to achieve their climate mitigation goals. One example is Boulder, Colorado, which has a long history of taking climate action, and is using a market-based approach to both reduce emissions and fund mitigation programs. In 2006, the city passed Initiative 202, the Climate Action Plan (CAP) Tax Initiative, which became the nation’s first directly voter-approved carbon tax. The tax charges consumers based on their fossil fuel-based electricity consumption, and the revenue is used to fund energy efficiency and renewable energy programs.
What if you held a sale and customers bought hardly any of your product? You might conclude that your product wasn’t very popular. If your product happened to be carbon allowances, essentially permission slips to emit carbon pollution, that lack of popularity sounds like a good thing for the climate.
This is essentially what happened last week when California and Quebec, who have joined their carbon markets, announced the results of their most recent auction of allowances. Companies who must buy allowances decided they didn’t need the full amount being offered, presumably because their emissions are declining.
California and Québec began their carbon markets in 2013, and the partners have held joint auctions of allowances every three months since November 2014. Each jurisdiction sets a limit on nearly all fossil fuel combustion at an amount that declines each year (the cap). Businesses responsible for that fossil fuel combustion have to buy allowances at auction to cover their emissions.
Historically, businesses have bought more than 90 percent of the allowances offered. But at the most recent auction, only about 10 percent of the allowances were sold.
This is great news. It means that carbon emissions are going down, and at a faster rate than the policy requires. If emissions were going up, prices at auction would be high. If emissions were going down at the same rate as the cap, then prices might be low but the auction would still sell out.
Market forces, like declining costs of renewable power, are part of the reason why emissions are declining. Businesses can use cost-effective alternatives to fossil fuels in their operations.
Also factoring into the results are the numerous other policies California and Québec have in place to drive down emissions, including ones aimed at increasing energy efficiency. That means businesses use less energy overall.
Is there any reason this might be considered bad news? Well, if you were counting on the money from the sale, it’s a problem.
California has anticipated generating billions in revenue through 2020 from the allowance auctions. But with few allowances sold, that state revenue source drops dramatically. California’s auction revenue is directed to various clean energy programs across the state, which means those programs could be in jeopardy if auction sales remain low.
So, is this an example of cap-and-trade working or not working? I would argue this is how cap-and-trade is supposed to work. The government sets a cap based upon its climate goals, the cap creates a price in the market, and companies incorporate the carbon price into their business decisions. If emissions are low (more accurately, if they are lower than the cap), then businesses don’t buy carbon allowances, pure and simple. Both California and Québec agreed upon rules for handling unsold allowances before their programs started, so businesses know what to expect.
A larger and more difficult question is whether this is an example of carbon pricing working. In both jurisdictions, the cap-and-trade program is only one of many policies aimed at reducing emissions. It’s unclear at the moment to what extent the carbon price is driving down emissions (and allowance demand) versus other policies. A sophisticated statistical analysis is required to answer that question, and as the cap-and-trade program continues there will be observations to enable just such an analysis.
There is often a heated debate around implementing new policies, and it is not unusual to hear predictions that regulating carbon emissions will cause economic doom. But time and again, experience has shown that businesses adapt quickly to new conditions and keep doing what they’re good at – giving us the products and services we want to buy. That they’re doing this while keeping their carbon emissions below a set level is something to celebrate.
After witnessing the historic signing of the Paris Agreement by 175 nations, we now need to turn our attention to fulfilling its promise.
As its nationally determined contribution to the agreement, the United States set a goal of reducing net greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025. In a new paper, C2ES outlines how expected and in-place policies could get us close to the goal line -- reducing emissions by as much as 22 percent. Getting the rest of the way can likely be achieved through a mix of additional policies, city and business action, and technological innovation.
First, let’s look at how we can get to a 22 percent reduction.
U.S. net emissions are already down more than 9 percent from 2005 levels due to market- and policy-related factors, including a shift in electricity generation from coal to natural gas, growth in renewable energy, level electricity demand, and improved vehicle efficiency.
The C2ES business-as-usual forecast, drawn from a number of analyses, projects an additional 5.6 percent reduction in net emissions through such policies as greenhouse gas standards for vehicles and the Clean Power Plan.
The rest of the anticipated emissions reductions is expected to come from new, higher estimates of future carbon sequestration and additional measures under development, including steps to strengthen fuel economy standards for medium- and heavy-duty trucks, reduce methane emissions in the oil and gas sector, and reduce hydrofluorocarbons (HFCs).
Now, how will we address the remaining gap of at least 270 million metric tons carbon dioxide equivalent?
Additional federal policies would help. For example, greenhouse gas standards could be set for major industrial sectors under section 111(d) of the Clean Air Act, the same section that underlies the Clean Power Plan.
Technological advances that lower the cost of emissions reduction will also undoubtedly play an important role. Over the next five to 10 years, battery storage technologies are expected to improve by a factor of 10, which would support the integration of more renewable generation. A promising design for a natural gas power plant with nearly 100 percent carbon capture will enter the demonstration phase next year and could be commercialized soon after. And agricultural advances are leading to more sustainable crops able to sequester more carbon dioxide in their root systems.
Stronger efforts by cities will also be critical to filling the gap. A growing number of cities are working to improve the energy efficiency of residential and commercial buildings, which account for for 41 percent of total U.S. energy consumption. Greater adoption of Property Assessed Clean Energy (PACE) programs, which help finance energy efficiency and renewable energy projects, could significantly reduce city energy demand. Similarly, city programs to build out infrastructure to increase the adoption rate of electric vehicles will, in-time, appreciably lower transportation-related emissions.
Companies, too, will play a key role. Twelve leading companies signed the C2ES statement calling on governments to quickly join the Paris climate pact and pledging to work with countries toward the domestic measures needed to achieve their national emissions-cutting contributions. More than 150 U.S. companies with a combined market capitalization in excess of $7 trillion joined the American Business Act on Climate Pledge – committing to reduce emissions, increase renewable power, or finance climate efforts. And the White House is calling on more companies to join the initiative.
The United States has significantly reduced its greenhouse gas emissions over the past decade. Cutting emissions 26 to 28 percent below 2005 levels by 2025 is a challenging goal. But many options remain untapped, and concerted efforts across multiple fronts can get us across the goal line.
Secondary Carbon Markets
Many state regulators are considering carbon trading as a compliance option with the Clean Power Plan. An important part of carbon trading is the secondary carbon market—the market among private sector buyers and sellers that arises to provide more efficient price discovery, price-hedging opportunities, and satisfy compliance demand. This fact sheet provides a brief overview of the role of different types of secondary market participants and key policy choices that need to be made to allow secondary markets under the Clean Power Plan.
Approaches to Structuring a High Ambient Temperature Exemption
By Steve Seidel, Jennifer Huang, and Stephen O. Andersen
As parties to the Montreal Protocol consider an amendment to phase down hydrofluorocarbons (HFCs), one critical concern is whether suitable alternatives for air-conditioning applications are available and adequately demonstrated for cooling capacity and energy efficiency under conditions of high ambient temperatures. Given the critical importance of these applications, one option being considered by parties is to provide a time-limited exemption for those uses in countries that could be adversely impacted by high ambient temperatures. This paper looks at a number of options for how such an exemption might be structured.
|Source: International Energy Agency|
For the second year in a row, the global economy grew and global carbon dioxide emissions did not.
Preliminary data from the International Energy Agency (IEA) indicate that energy-related carbon dioxide (CO2) emissions (from burning fossil fuels for electricity, transportation, industry, space heating and so on) remained unchanged from the previous two years at around 32.1 billion metric tons. Meanwhile, economic growth increased by more than 3 percent for the second consecutive year.
A couple years of data doesn’t necessarily translate into a trend. And continued ambition in the decades ahead - like we saw with the landmark Paris Agreement in December 2015 - will be required before we can announce that we have truly turned the corner on reducing CO2 emissions.
But the IEA noted that 90 percent of new electric generation in 2015 came from renewables. Yes, 90 percent. And this apparent decoupling – after decades of energy-related CO2 emissions moving in lockstep with economic growth -- is a positive sign that low-carbon policies may finally be gaining traction in many parts of the world.
The change is due to policies and market forces affecting two factors – energy intensity and fuel mix – both in China and in the developed economies.