Climate Change Summary Newsletter and Commentary
January 18, 2010
By: Steven L. Hoch
California - FIRSTS
California Advisers Call for Sale of GHG Permits, Estimate $20 Billion in Revenue Annually
Nearly all of the GHG emissions permits issued under a California emissions cap-and-trade program should be sold, not given away, and their monetary value returned to households, a state-appointed advisory panel said Jan. 11. The reasoning is simple: Households will shoulder the brunt of the higher energy costs that will come from setting a price on carbon. If the price of carbon is $20 to $60 per ton, the state could raise $2.5 billion to $7.53 billion in 2012 and $7.3 billion to $21.9 billion in 2020. At least 75 percent of the value of the permits should be returned to households, either through lump-sum payments or tax cuts, the report recommended. The remaining 25 percent should go to public investments, such as infrastructure, and to programs to help businesses comply with climate policies, the report said. See:
http://www.climatechange.ca.gov/eaac/documents/eaac_reports/2010-01-10_EAAC_Allocation_Report_Draft.pdf The federal cap-and-trade programs under consideration are structured to provide free allocations to utilities to cushion the cost of changeover to green power and to protect the rate payers from the capital costs which would be incurred as a result as new systems are developed and brought online. California, on the other hand, is likely not going that way, seeking instead to use some of the revenue to assist households. The concern expressed by many is that CA can not avoid using the money to deal with its budget woes thus possibly leaving rate payers to bear all the costs. But the utilities are not happy because they are left to find funds on their own. In fact, the three major California utilities are publicly threatening legal action against CARB if this plan moves forward as is. What exactly will happen is not clear. But what is clear is that California will have a cap-and-trade system and many (or most) of its features will wind up in the federal system if there is one. Stay tuned.
California Adopts Guidelines for Analyzing GHG Impacts of New Projects
California Natural Resources Agency on Dec. 30 adopted guidance for analyzing and lessening greenhouse gas impacts linked to new policies and development projects. The rulemaking updates statewide guidelines for implementing the California Environmental Quality Act (CEQA). The act requires public agencies to review proposed policies and projects to determine if measures are needed to offset harmful environmental impacts. The amendments update 14 sections of the guidance document (Public Resources Code section 21000 et. seq.) and two appendices, one related to energy conservation and the other an environmental checklist form. The updated guidance advises public agencies to describe or estimate greenhouse gas emissions associated with a project and to determine a project’s impact on forests, the consumption of fuels or other energy sources, parking, and all modes of transportation including public transit, bicycle, and pedestrian facilities. While it offers guidance on determining the significance of greenhouse gas impacts, the document does not include specific significance thresholds. See:
http://ceres.ca.gov/ceqa/docs/Adopted_Text_of_SB97_CEQA_Guidelines_Amendments.pdf CEQA is different from NEPA, but there is already discussion on the federal level about changing NEPA to specifically deal with climate change. The changes in CEQA will no doubt influence that discussion. But here in California, CEQA has been effectively used by many NGOs to block or make more cumbersome the necessary approvals for climate change infrastructure. (See below) The language in the new guidance document is not a model of clarity and while many NGOs have stated that the guidance document is too weak, the same groups will certainly not shy away from using the document. The mantra from many NGOs has been we can do both, i.e., be green and take care of the environments other concerns. While that may be true in some instances, there may have to be a sea change in certain attitudes if and when the issue moves from sustainability to survivability, and many of these same NGOs state that this moment is on the very near horizon.
California Adopts First Statewide Green Building Code
The California Building Standards Commission approved the first statewide green building code. Taking effect January 2011, the nation’s first mandatory green building code – dubbed “CalGreen” – lays out specific constraints for newly constructed buildings. It requires builders to install plumbing that cuts indoor water use by as much as 20 percent, to divert 50 percent of construction waste from landfills to recycling, and to use low-pollutant paints, carpets, and floors. It also mandates inspection of energy systems to ensure that heaters, air conditioners, and other mechanical equipment are working efficiently. And for non-residential buildings, it requires the installation of water meters for different uses. The code also allows local jurisdictions to retain stricter green building standards, if they already exist, or to adopt stricter versions of the state code if they choose. Critics say the rules fall short of rigorous standards adopted by Los Angeles, San Francisco and more than 50 California jurisdictions in league with the U.S. Green Building Council, a national non-profit group of architects, engineers and construction companies. See:
http://www.csmonitor.com/USA/2010/0115/California-adopts-first-statewide-green-building-code andhttp://www.bsc.ca.gov/default.htm
Percentage of Renewable Energy from California Utilities Decreases; Red Tape Blamed
Barring a rapid construction boom, California’s privately owned utilities are unlikely to meet a state mandate that directs them to generate at least 20 percent of their power from renewable sources of energy by the end of this year. Gregg Morris, director of the Green Power Institute, told a gathering of biomass executives in Sacramento that the 2010 target, which passed into law in 2002, has produced plenty of market activity and speculation but few new power plants. “We’ve done a great job of signing contracts,” Morris said. “We’ve done a very poor job of actually bringing power online.” In fact, according to Morris, the utilities subject to the renewable portfolio standard - Pacific Gas & Electric Co., Southern California Edison and San Diego Gas & Electric Co. - have lost renewable energy as a total percentage of generation since the program was first implemented. According to the California Public Utilities Commission, which tracks RPS projects, Morris’ skepticism is on the mark. In 2008, the IOUs served 13 percent of their retail electricity sales with renewable power, with SoCal Edison in the lead (at 15.5 percent), compared to 11.9 percent for PG&E and 6.1 percent for SDG&E. What’s the problem? A CPUC analysis says that more than 7,000 megawatts of IOU contracts have been signed for “RPS eligible” energy. But while it appears the procurement side is working, actual project development has been snagged behind a maze of regulations, a transmission shortfall and overlapping agencies with jurisdiction. See:
In a recent speech before the UCLA School of Public Policy, I spoke about the fact that we can build all the green power we want but we can’t get the transmission lines in place to handle it and that there did not seem to be enough emphasis on that critical issue. These delays are being encountered not only because of the issues that Mr. Morris notes above, but also because the issue of transmission lines routes are often held up by local land use rules and need to proceed through a lengthy, and increasingly contentious, CEQA process. Our laws and processes where not made to handle what some call a crisis, nor where they drafted with the idea that there would be a need for a demonstrative change in the basic backbone of our energy infrastructure. Unless there is some follow on legislation or regulations that removes these impediments, shortens the process or creates some alternative pathways to resolve the issues being faced, there is an unlikelihood of a successful transition to a major supply of green energy in California.
California Cap-and-Trade Revolt
A ballot initiative that would repeal the Golden State’s version of a cap-and-trade carbon tax is working its way to a vote by the California voters. In an Op-ed piece in the Wall Street Journal, the paper suggests that no matter what one thinks of climate science, it makes little sense for an individual state to unilaterally impose major new tax and regulatory costs on its own industries. “The law all but encourages outsourcing to Nevada, Texas, China and India. The stakes here are huge, and not merely for California. This is the first serious effort to roll back the environmental extremism that has dominated state capitals in recent years and is now ascendant on Capitol Hill. The green lobbies and businesses that have a monetary stake in cap and trade—including big utilities that want subsidies and Silicon Valley political capitalists investing in solar and ethanol—are sure to spend heavily to stop it. They know that an electoral defeat in the greenest of states could end their national and global hopes for cap and trade. For Californians the issue is simpler: Whether they want to continue to impose burdens that encourage employers to locate anywhere, except their once prosperous state.” See:
http://online.wsj.com/article/SB10001424052748703580904574638153342723572.html?mod=WSJ_Opinion_AboveLEFTTop It is doubtful that the California voters will vote affirmatively on removing cap-and-trade and other parts of AB 32. As noted above, the California cap-and-trade program is geared to promise money to households to pay for the increased cost of green energy. This is highly appealing to the average voter. Further, cap-and-trade will be described as a key feature of making the green economy grow and prosper. But what the WSJ op-ed piece does demonstrate is that there is a growing volume of attack on various parts of AB32, not particularly on the issue of science, but on the issue of waste of time, money and effort. It is also a growing national trend. This bolsters the point I have raised before, that much of the climate change initiatives will be placed in the context of job creation to over come some of this push back.
Smart Meter Scare
Security Fears Threaten Smart Meter PlanIn UK, a public backlash has started concerning the use of smart meters for electricity. Fears that data on energy consumption could be misused by criminals, police or insurance companies have already curtailed the compulsory introduction of the meters in the Netherlands. Dutch consumer and privacy organizations were concerned that information relayed as frequently as every 15 minutes could allow employees of utility companies to see when properties were empty or when householders had bought expensive new gadgets. Because the UK is moving to install these devices to curtail energy usage, the utilities and government has come to the conclusion that many people do not like the idea of utility companies having a permanent window on their private life. Energy UK, which represents the six main gas and electricity suppliers, said: “The industry has been working flat out to develop the smart metering program since 2006 and continues to take on board lessons from other programs around the world.” The European Union said in 2006 that smart meters should be made mandatory, but voters in the Netherlands have vigorously opposed a compulsory rollout and succeeded in persuading politicians to vote against it. See:
http://business.timesonline.co.uk/tol/business/industry_sectors/utilities/article6987070.ece One of the issues I have commented on in various presentations is that the average person has not yet felt the individual changes that may be required under any climate change regulatory scheme. It is one thing to be fully supportive of things that do not affect you directly (but will cost you something in the future) such as greening our power supply, but when it becomes personal, it’s a different matter. As the Dutch found out and the British are grappling with, climate change takes second place to personal freedoms and choice. Some further thought is needed. As an example, smart meters need not show when there is no or little energy use as a whole, but should aide the individual homeowner/user know where they are in a particular band of power consumption and offer warnings or actually restrict power to provide notice. Or, if there is truly a need to know when a homeowner/user is not home, consideration of methods to alleviate such legitimate concerns should be planned ahead of time and offered with necessary education.
Litigation Based on Uncertainty
Potential Lawsuit Highlights Interstate Tensions Absent Federal Climate Rules
A brewing legal showdown between North Dakota and Minnesota over the constitutionality of a requirement that utilities factor expected future carbon costs into their plans highlights lingering disagreement over how states will regulate GHG emissions in the absence of a national climate program. Such actions may spur calls from industry for the federal government to provide regulatory certainty. North Dakota Attorney General, Wayne Stenehjem, said late last month that he “very likely” would file a lawsuit in an effort to stop Minnesota’s requirement that utilities planning to sell electricity in the state—including those located beyond its borders—include in the proposals a $9-to-$34-per-ton carbon price that would begin in 2012. The Minnesota proposal is not a straightforward carbon “tax” or “tariff,” despite it’s portrayal as such in several press reports, according to state officials, industry sources and environmentalists. No fee is assessed on electricity sales, rather the estimates are used to compare different power generation options being proposed. Nonetheless, sources say the requirement disadvantages coal-based utilities in North Dakota by increasing their projected costs, and it is contributing to a shift towards renewable energy, especially wind, which is abundant in the two states. The potential Minnesota-North Dakota legal showdown is one of several state-level disputes that are playing out in the absence of a federal climate policy, and further highlights the desire among utilities for a single set of rules to play by as they plan for facilities expected to be in operation for 30 to 50 years or more. “There’s no question about the need for regulatory certainty,” another utility source says. See:
This potential litigation raises two issues. The first is as noted, there really needs to be a federal law that could provide for a reasonably high degree of certainty of what the rules are so the players can plan and execute various plans. As it stands right now, that certainty does not exist. But more importantly from a legal standpoint are various constitutional concerns involving what one state can do to enforce its own climate change rules on another. And of course there are lots of political issues! Ultimately, many such issues will wind up before the Supreme Court of the United States.
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