Overview of Carbon Markets and US Federal Proposals to Regulate GHGs American College of...
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Transcript of Overview of Carbon Markets and US Federal Proposals to Regulate GHGs American College of...
Overview of Carbon Markets and US Federal Proposals to Regulate GHGs
American College of Construction Lawyers and Princeton University Joint Symposium
November 6, 2009
Jean-Philippe BrissonClimate Action [email protected]
2
Carbon Market Drivers
EnergyEfficiency
ScientificData
“Green”Jobs
EnergySecurity
Risk- Adjusted
Cost
Governmental response in theform of new policies and regulations
Carbon markets created by the adoption of cap-and-trade programs
3
International, Regional and National Responses
. .
Australia Operational for 2010?
Canada 2007 Alberta program
EuropeEU ETS cap-and-trade program started in 2005
JapanJapanese industry has accepted to
meet voluntary targets
United States RGGI effective 2008, California AB-32
scheduled operation in 2012; multiplicity of proposals at federal level
International1992 UNFCCC and 1997 Kyoto Protocol
Global Carbon Market Trends
5
Global Carbon Market Trends
World Bank, State and Trends of the Carbon Market 2009 (May 2009)
2006 2007 2008
MT CO2eUS $
MillionMT CO2e
US $ million
MT CO2eUS $
million
Allowance 1,134 24,699 2,108 49,361 3,276 92,589
Offset 611 6,536 876 13,646 1,535 33,487
TOTAL 1,745 31,235 2,984 63,007 4,811 126,345
6
Four Key Developments in the US
• Massachusetts v. EPA (2007)– Carbon dioxide is a “pollutant” – EPA intends to finalize
• Finding that GHGs are pollutants that “endanger public health and welfare”
• GHG emission standards for new motor vehicles
– Implications of making GHGs “pollutants subject to regulation”
• PSD requirements for new or modified “major sources”
• Rise of state and regional programs• Emergence of tort lawsuits against emitters
– Connecticut v. AEP
– Native Village of Kivalina v. Exxon Mobil
– Comer v. Murphy
• Federal legislation
7
Federal Legislation
• 110th Congress– Ten proposals introduced
– Lieberman-Warner
• reported out of Senate EPW Committee December 5, 2007
• Considered by full Senate in June 2008
• 111th Congress– Waxman-Markey (American Clean Energy Security Act)
• Adopted by the House of Representatives June 26, 2009
– Kerry-Boxer (American Clean Energy Leadership Act)
• Reported out of Senate Committee November 5, 2009
8
Introduction to Cap-and-Trade
Emissions Cap
Entities within the cap can buy, sell, bank or borrow allowances to
cover their actual emissions
ALLOWANCES within the Cap
The “Right” or “Authorization” to Emit”
$ $ $
Offsets
Additional Reductions of Emissions Outside the Cap to Create Offsets
New York methane capture at landfill
Californiaredwood forest
Project
Brazil project under Kyoto?
Marginal abatement cost
is lower than allowance price
for same environmental
benefit
OFFSETS outside the Cap
Project-based Emissions Reductions
9
Federal Legislation – Key Design Elements
• “Economy-wide” cap-and-trade program– 20% below 2005 by 2020; 42% below 2005 by 2030; 83% below 2005 by 2050
• Use of domestic and international offsets permitted– Results in cost containment
• Allocation of allowances– Utilities, for ratepayers– Energy-intensive, trade-sensitive industry– Promotion of clean energy, energy efficiency– Promotion of carbon capture and sequestration (CCS)
• Border tax for energy-intensive imports from uncapped countries
• Allowance reserve for moderating volatile allowance prices
• Limited preemption of state and regional cap-and-trade programs
• Preclusion of EPA GHG regulation under the Clean Air Act (Waxman-Markey only)
US Carbon Market Relative to Existing Market
0
1000
2000
3000
4000
5000
6000
RGGI CaliforniaAB-32
Canada EU Kerry-Boxer
Me
tric
To
nn
es
CO
2e
(m
illio
ns)
Offsets Allowances
11
Potential Cost of Waxman-Markey
• Economic analysis ran by Environmental Protection Agency and Congressional Budget Office– Key differences in methodologies
Source: Pew Center on Global Climate Change, Climate Policy Memo #3: Cost of the American Clean Energy and Security Act of 2009 Found to Be Small According to Government Analyses (June 2009).
Source 2020 2030 2050
Allowance PriceEPACBO
$16$22
$26-27NA
$69-70NA
Annual Household Cost
EPACBO
$49-61$175
$99-312NA
$123-174NA
Annual Economy-Wide Cost billions $
EPACBO
$100$22
$100-200NA
$500-700NA
Future Gasoline Price Increase
EPA$0.13(2015)
$0.25 $0.69
12
Potential Impact on Large US Emitter
• Assumption– Annual GHG emissions of 100 million MTCO2e
Potential Annual Cost of Compliance
Number of free allowances given to emitter
Allowance Price
$10 $30
100 million $0 $0
50 million $500 million $1,500 million
25 million $750 million $2,250 million
Climate Action Reserve Statistics
$3.50
$4.00
$4.50
$5.00
$5.50
$6.00
$6.50
$7.00
20-F
eb
6-M
ar
20-M
ar
3-A
pr
17-A
pr
1-M
ay
15-M
ay
29-M
ay
12-J
un
26-J
un
10-J
ul
24-J
ul
7-A
ug
21-A
ug
4-S
ep
18-S
ep
2-O
ct
16-O
ct
30-O
ct
Day
Pric
e $U
S
• Account-holders: 150• Total projects listed and registered: 89• Climate Reserve Tonnes issued: 1.65 million
Chicago Climate Futures ExchangeClimate Reserve Tonne Futures – Dec 2009 Delivery
Offset Projects Listed with the Climate Action Reserve