Cap-and-Trade Tapping Out? EPA Moving In; Not if Congress Can Help It.

U.S. climate legislation moved to the middle burner this week with discussions of cap-and-trade alternatives and EPA regulation. Advocates of cap-and-trade, such as Senators Graham and Lieberman, acknowledge that cap-and-trade may be “dead.” The latest alternative is targeted industry-specific emissions control measures on power companies, the transportation sector and heavy manufacturing. Meanwhile, the EPA attempted to raise the specter and likelihood of un-legislated carbon regulation by finalizing its endangerment finding, granting California’s waiver for stricter automobile emissions standards, issuing final GHG reporting requirements and proposing the mechanism by which it will impose permitting requirements on stationary sources releasing CO₂. Not to be superseded by the EPA, a group of Senators, spanning party lines and with carbon-reliant constituencies, introduced a bill to freeze the EPA’s ability to regulate GHG emissions for 2 years. Ironically, corporate America is still imploring and pleading for policy clarity and certainty.

Interesting Article(s):

· Environmental group and regulators look to strong-arm insurance industry for climate action. This is a topic I worked on at my former employer. To learn whether this article is 100% on-track, you’ll have to email or ask me.

Bali UNEP Conference Hopes to Restart Climate Talks; De Boer Resigns

Over one hundred countries were represented at this past week’s UN Environmental Protective event in Bali with the hope of rebuilding confidence in global climate negotiations. Even though many nations submitted emissions reduction pledges under the Copenhagen Accord, most observers consider the pledges insufficient to stem warming to the extent necessary and many countries are aggrieved because the UN framework for inclusive negotiations was undermined by the US and the BASIC nations. The usually pragmatic optimist, Yvo de Boer, the UN Climate Chief, warned that a climate deal was now unlikely this year at the Mexico meetings, rather an agreement in South Africa in 2011 was more likely. De Boer delivered this prediction in the same week he announced his intended resignation from the UN post; the retiring chief suggested his replacement come from a developing nation.

· UN targets Rio in 2012 for Summit on Sustainable Development for completion of “political document”, which will finalize economic and technical transfer agreements to ignite global green economy.

· Countries discuss creation of WTO-like World Environmental Organization (WEO).

· Emissions by heavy industry in the EU dropped by an estimated 11% in 2009.

· Kerry and Senators moving rapidly to present revised US climate bill in 2010.

A Look at Climate Activity in Europe - EU, UK and Germany

Shifting the climate focus across the Atlantic, Members of European Parliament (MEPs) passed a resolution calling on major countries, especially the US, China and EU members, to resume discussions to achieve the intentions of Copenhagen accord. This seems to be an instance of minimal influence without authority. Meanwhile, the UK is debating several energy policy options, including the centralization of energy planning, a radical change of direction from the country’s history of privatization. While a “market-light” strategy is unlikely to prevail, the US could take lesson from a debate of multiple alternatives as US lawmakers are mired in energy policy gridlock. On the continent, Germany is moving toward a delay in cuts to its solar incentives regime. While continued solar support in Germany seems unwarranted, solar job levels will be buffeted by the delay and Germany’s centrality to the solar PV industry could be prolonged.

Articles of Note

· US, India and China at stand-off regarding “association” designation within Copenhagen Accord.

· Southern Company to break ground on first US nuclear power plant in 30 years with backing of DOE loan guarantee.

· US government to create “Climate Service” organization under Commerce Department and through reorganization of NOAA.

· Opponents of California Climate Law AB 32 struggle to gather signatures required for appearing as ballot proposition to delay aggressive climate targets and actions.

Jan 31 Come and Gone ... With a Whimper

As the emissions reduction pledges under the Copenhagen Accord have trickled in prior to and since January 31st, the tally stands at 92 countries accounting for 83% of global emissions. The general malaise regarding the progress made in and since Copenhagen has continued. UN Climate Chief de Boer is trying to emphasize that the Accord was just a launching pad for for formal consensus-building negotiations incorporating the entirety of the UN community. Any accord-related news was overshadowed by the credibility crisis in the IPCC, the UN sponsored scientific research body on climate change, and its chief, Indian's R K Pachauri. Calls for Pachauri's resignation have come from several groups, including Greenpeace, after a controversy over reports regarding the rate of decay of Himalayan glaciers. Despite vocal support from de Boer and India's PM, India announced it will convene its own scientific body to analyze the risks of climate change.

Major Emitters Submit Pledges Prior to Jan 31 Deadline

It was an interesting week on the carbon front. Earlier in the week, unsubstantiated rumors on the web emerged that India and China had reconsidered their positions and would not submit their official emission reduction pledges under the Copenhagen Accord. Both countries (China and India) met the Jan 31th deadline as did the USA, which reiterated its modest 17 percent cut from 2005 by 2020. The BASIC countries this week emphasized that these pledges were non-binding and a small part of the "two-track negotiation process," from which industrialized nations will fulfill their "differentiated" responsibility of leading the absolute reduction in global carbon emissions. Meanwhile, President Obama attempted to further his clean-energy, climate legislation agenda during his State of the Union, but did not utter the words "cap-and-trade." The senators leading the climate legislation have been quick to impress that negotiations are not dead and new/different carbon reduction and pricing structures are welcome in the discussion.

BASICs Won't Leave Their Climate Destiny in the Hands of US Senate

This week's Massachusetts midterm election was called by many as a referendum on the Obama administration's key legislative objectives, especially healthcare reform. Energy policy and carbon mitigation, including cap-and-trade or alternative mechanisms, may have also been dealt a crushing blow by Scott Brown's win in MA. One emerging potential risk is that the BASIC countries (Brazil, South Africa, India, China) will be disgruntled by the USA's lack of leadership and scale back their emissions pledges. On the contrary, the BASICs seem inclined to form a stronger climate coalition to address uniform emission reductions metrics and adaptation funding. The BASICs are more and more becoming the masters of their own climate destiny as the USA retreats to infighting.

Relevant News Articles:

• The UN Copenhagen Accord's January 31st deadline for submissions emissions targets "softened" due to poor response rates, and 2010 treaty considered anything but certain by UNFCC chief de Boer.
• Legislated US carbon regulation may be least offensive of evils (EPA regulation, unchecked litigation environment) for resistant congressmen.
• France becomes first major economy to adopt carbon tax of 17 euros per tonne, with certain exceptions.
• Australia parliament attempting to push through 2 year carbon tax to restart global progress on emissions reductions.

2 Days Until Copenhagen

The Obama Administration recently issued its statement of a good faith commitment to reduce US carbon emissions "in the range of 17%" by 2020 as compared to 2005 levels. The pessimistic can say this is far below the IPCC suggested necessary cuts of 25% - 40% cuts by 2020 for developed countries. The optimist can say that a ~17% reduction is all but to be ratified by Congress and additional cuts may still be negotiated. The statement also included expected 2025, 2030 and 2050 milestones (30%, 42% and 83%), the list of the "host of Cabinet secretaries and other top officials" now planning to attend Copenhagen and the litany of current and future US climate initiatives.

Denmark recently floated a climate treaty framework in these last days before Copenhagen, which called for 50% reductions in CO2 emissions by 2050 with 80% reductions to be achieved by developed countries. The Danish proposal was met with immediate opposition by China and India given the implications on their emissions and economic development as well as the proposal's lack of short-term binding reduction targets for developed countries.

Climate Financial Aid - today contributions are in hot debate, but for tomorrow this "blogger" asks are these funds for proven emissions mitigation and/or climate change adaptation projects or global/in-country technological innovation (venture = risky) investment. The climate slush fund will be a boon for many, but who? In-country employment, in-country contractors, multinationals, global technology licensors? Once cash is allocated to a country, will money be allowed to flow back out to international private industry or will protectionism prevail?

Relevant Articles

• India envoy on climate change voices his complaints and fears about current direction of climate negotiations in an op-ed.
• China's climate investment tab and potential carbon tax.
• India mirrors China with carbon intensity reduction target of 20% - 25% by 2020.