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Transcript of © Trexler Climate + Energy Services, Inc. Trexler climateservices.com Trexler CLIMATE + ENERGY...
© Trexler Climate + Energy Services, Inc.
TrexlerTrexlerCLIMATE + ENERGY SERVICES,INC..
climateservices.comclimateservices.com
The Materiality of Climate Policy
for the PNW
Prepared For:
Northwest Power Conservation Council
© Trexler Climate + Energy Services, Inc.
Setting the Stage - Materiality
Many Ways to Look at Climate Change IssueFor Power Planning Purposes, We’d Like to
Know: What Will CO2 Cost in the Future?
Without a Crystal Ball, No Clear AnswerWhat We Can Assess: Is Climate Policy Likely
to be Material for PNW Stakeholders?If Material, Makes Sense For States to be
Positioned For Those Impacts
© Trexler Climate + Energy Services, Inc.
Presentation Overview
Setting the StageCurrent Policy TrendsShould We Extrapolate?Assessing the Likelihood of MaterialityConclusions
© Trexler Climate + Energy Services, Inc.
Climate change is the most pressing future issue facing the business community.
-- World Economic ForumDavos, Switzerland
January 2000
© Trexler Climate + Energy Services, Inc.
Climate Change Policy Trends
© Trexler Climate + Energy Services, Inc.
Policy - A Fast Moving Issue’88: IPCC Formed’92: Framework Convention Signed’94: Conventions Entered Into Force’95: IPCC’s “Human Fingerprint” Report’96: Oregon’s CO2 Standard’97: Kyoto Protocol Signed’01: IPCC’s Third Assessment Report’05: EU Emissions Trading System
© Trexler Climate + Energy Services, Inc.
Policy – The Several Levels International
The Kyoto Protocol EU and other trading systems
National President’s 18% intensity target Voluntary industry programs
Regional, State, and Local Oregon and other CO2 siting standards California’s technology forcing legislation Multiple regional initiatives
© Trexler Climate + Energy Services, Inc.
Policy Trends – International UN Framework Convention in Force
Commits Parties to avoiding dangerous human interference
Kyoto Protocol Signed in 1997 Covers CO2, CH4, N2O, HFCs, PFCs,
SF6
OECD and EIT Countries: 5.2% reduction from 1990 levels
Major focus on flexibility mechanisms Ratification Still Uncertain
© Trexler Climate + Energy Services, Inc.
Policy Trends – Canada
New PM Martin Supports KyotoCanada Grappling With 200 MMT ShortfallLarge Emitters Facing 55 MMT commitmentIndustry’s Liability Potentially Limited
15% intensity reduction, $15 liability cap
Domestic Emissions Trading in 2008?Strong Public Support for Kyoto Protocol
© Trexler Climate + Energy Services, Inc.
Policy Trends – JapanCommitted to Kyoto ProtocolTrying to Find a Scenario That Works
Nukes, renewables, emissions tradingExploring Range of Voluntary MeasuresPreparing Industry for Aggressive Measures
Coal tax: Y230 in 2003 to Y700 in 2007Japan Is In a Tough Situation
Limited domestic options, economic stagnation
© Trexler Climate + Energy Services, Inc.
Policy Trends – EuropeStrongly Supports KyotoNow Strongly Supports Market MechanismsEmissions Trading System – Similar to SO2
Cap and Trade System Will Launch Jan-2005 Covering 12,000 installations, ~ 50% emissions Expanding in coverage over time
Estimates of Future Allowance Prices Vary From 5 Euros to 40 Euros
© Trexler Climate + Energy Services, Inc.
Policy Trends – United States
At National Level, Policy is StuckContinued Antagonism Toward the ScienceSkepticism Toward International Cooperation Exclusive Focus on Domestic Costs
Can issue pass a zero cost test?
Bottom Line: Current 18% Intensity Reduction Target Not a Material Threat to Power Sector
© Trexler Climate + Energy Services, Inc.
Policy Trends – Regional to Local 50% of States Have or Developing Climate Strategies Several Have Specific GHG Rules and Regulations
NH: 4P Legislation – CO2 to 1990 by 2010 MA: Largest 6 plants must reduce by 10% CA: Maximum feasible reductions in vehicle emissions OR and WA: CO2 standards for new power plants New England Governors and Eastern Canadian Premiers -
1990 by 2010, 10% below by 2020. NE Governors – Regional cap and trade by 2005? Alberta: 50% mitigation requirement for new coal plant
© Trexler Climate + Energy Services, Inc.
Extrapolating From Current
Trends
© Trexler Climate + Energy Services, Inc.
What’s “Success”?
Avoiding Dangerous Human InterferenceAt Some Point Requires Stabilization of
Atmospheric Concentrations of CO2
To Stabilize Today, Would Require a 70% Reduction in Global Emissions Kyoto actually doesn’t even stop emissions growth
“Success” Therefore a Huge Challenge Would revolutionize world’s energy system
© Trexler Climate + Energy Services, Inc.
Trend Scenario 1 – Policy Collapse
A Fact That Serious Climate Change Policy Faces Huge Political and Economic Challenges
Could These Challenges Lead to Collapse of International and Domestic Policy Momentum? Absent a scientific reversal, hard to see Broad public support for action on this issue
The Odds: LowNote: Scenario Subject to Sudden Reversal!
© Trexler Climate + Energy Services, Inc.
Trend Scenario 2 – Stay the CourseClimate Policy Unable to Overcome
Challenges, and Will Likely Not “Succeed.” But Issue is Here to Stay
Numerous policies and measures will be pursuedCould Affect Power Sector in Material Ways
Range of Cost Estimates: $5-30/ton CO2
The Odds: HighNote: Scenario Subject to Sudden Reversal!
© Trexler Climate + Energy Services, Inc.
Trend Scenario 3 – Deal With It
Combination of Factors Generates Political Will to Seriously Tackle Climate Change Through aggressive emissions reduction measures Through aggressive technology development Through aggressive reliance on GHG markets
Would Affect Power Sector in Material Ways Stanford Modeling Forum: $75-100/ton CO2
The Odds: Modest (But Better Than Collapse?)
© Trexler Climate + Energy Services, Inc.
Potential “Scenario Tippers” Continued Scientific Findings International Cooperation Takes Hold Again
U.S. historically at forefront of environmental cooperation Fear of Sudden Climate Change Takes Hold
Recent Pentagon study a good case example, in which climate change assessed a major national security threat as early as 2020
Weather, Hydro, Other Impacts Become Clear Public Sees Link, Wants Action Against Emitters Insurance, Financial Industries Revolt
© Trexler Climate + Energy Services, Inc.
Conclusions: The Likelihood of
Materiality For the PNW
© Trexler Climate + Energy Services, Inc.
Assessing Materiality: Scenario 1
Under Policy Collapse Scenario, Policy Impacts Unlikely to be Material Fundamental scientific reversals? Political inability to grapple with the problem?
Note: Doesn’t Mean Climate Change Itself Not Material to PNW!
The Odds: Low (simply not politically viable)Warning: Subject to Disruptive Change
© Trexler Climate + Energy Services, Inc.
Assessing Materiality: Scenario 2
Policy Could Easily be Material for PNW Energy Under a “Stay the Course” Scenario Facility siting rules Technology incentives Renewables standards Offset requirements on operating plants
The Odds: High (action, but not success)Warning: Subject to Disruptive Change
© Trexler Climate + Energy Services, Inc.
Assessing Materiality: Scenario 3
The Full Speed Ahead Scenario Very Material Restrictions on facility siting, operations Radical change in new plant economics vs.
alternatives Rising gas prices create problems for gas base Intensive R&D approach to energy sector
Would Ultimately Revolutionize Energy SectorThe Odds: Modest (big political barriers)
© Trexler Climate + Energy Services, Inc.
PNW Decision MakingA Significant Issue Simply For Hydro PlanningMaterial Impacts Over Time Very Likely
Assessing specific PNW materiality requires analysis
Policy Impacts Could Occur DisruptivelyRatepayer Impacts Potentially SignificantStates Can’t Stop Climate Change or Force
International Cooperation, But Can Position Stakeholders