Climate Change Summary Newsletter and Commentary

Climate Change Summary Newsletter and Commentary

February 8, 2010

By: Steven L. Hoch
Brownstein Hyatt Farber Schreck, LLP

California

California Sets Up Statewide Network to Monitor Global-Warming Gases

California is preparing to introduce the first statewide system of monitoring devices to detect global-warming emissions, installing them on towers throughout the state. The monitoring network, which is expected to grow, will initially focus on pinpointing the sources and concentrations of methane, a potent contributor to climate change but will ultimately assist to verify the state’s overall compliance with AB32. By this summer, the analyzers will be deployed on towers in the San Joaquin and Sacramento Valleys, home to large agricultural operations and oil fields, and on Mount Wilson, outside Los Angeles. Each device costs approximately $50,000. See:

http://www.nytimes.com/2010/02/03/business/energy-environment/03emit.html

Most methane is created by dairy and cattle farming activities and oil field operation where it is a gas that often exists in the same geological formations in an oil rich area. So there is some question as to why put them where you know methane is bound to be found. Those areas will be controlled under many of the AB32 regulations already in draft and even under the CAA ambient air standards that exist, independent of climate change. Cynically, one could opine that this positioning is meant to be able to pinpoint which actor is worst so some action can be taken against them. Less cynically, in developing the system and proving the concept works, putting it where you know methane will be found has merit. It would be much easier to how the device works or what may need to change before you grow the system. For now, lets be less cynical as there is more benefit to the data that could come from such a system then there is possible detriment. California is first again; expect to see these devices employed elsewhere in the near future.

Refiners and Truckers Sue Over Low-Carbon Fuel Standard

Oil refiners and truckers filed suit against California to overturn its low-carbon fuel standard (LCFS). The suit, filed in the U.S. District Court for the Eastern District of California was filed by the National Petrochemical and Refiners Association: the American Trucking Associations, the Center for North American Energy Security and the Consumer Energy Alliance. According to CARB, starting in 2011, fuel suppliers will have to meet annual carbon intensity targets with their chosen blend of fuels. The overall goal is to reduce fuel emissions 10 percent by 2020, or about 15 million metric tons. The suit cites the commerce clause as well as the supremacy clause, which establishes the dominance of federal laws over state laws. The federal renewable fuels standard, the Energy Independence and Security Act of 2007 and the Energy Policy Act of 2005 all prevent California from embarking on its own fuel standard, the groups said. Since California signed the standards into law, 11 states have indicated plans to follow suit. Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont have signed a Memorandum of Understanding to work toward adopting a regional Low Carbon Fuel Standard modeled after California’s standard. See:

http://blogs.edmunds.com/greencaradvisor/2010/02/truckers-oil-refiners-sue-calif-to-overturn-states-low-carbon-fuel-standard.html and http://www.environmentalleader.com/2010/02/03/truckers-oil-refiners-file-suit-against-ca-low-carbon-fuel-standard/

The regulation means that providers, refiners, importers and blenders must prove that their California fuels meet an average declining standard of “carbon intensity,” a figure related to the sum of GHG emissions associated with the production, transportation and consumption of a fuel. Some that oppose the regulation indicate the regulation considers the indirect effects of biofuels production — the fuel needed to grow and harvest vegetation for biofuels. For instance, California’s corn ethanol producers have said the regulations unfairly targets their industry to account for “indirect land use change,” including the notion that crop-based biofuels inflate grain prices, leading farmers elsewhere to convert carbon-sinks like forests into crop fields, which produce carbon. What seems to be missed by everyone is that if there is enough biofuel, and the equipment that now produces the carbon to take care of the land and crops will be using the biofuel and thus will be reestablish a balance. There must be equilibrium somewhere in this equation both mathematically and strategically. That is, we free ourselves from ties to Middle East oil, which has been a foreign policy and economic problem for decades.

Firm Pursuing Idea on Cutting Diesel Emissions

Extengine Transport Systems of Long Beach a five-employee business, is hoping to cash in by making older off-road and on-road diesel engines run a lot cleaner. Extengine manufactures and sells state-of-the-art diesel engine exhaust-after-treatment and diesel engine upgrade kits. They claim that they are the first and only company that has a CARB verified SCR-based (Selected Catalytic Reduction) diesel retrofit system that reduces NOx 80-90% and can reduce particulate matter by 95%. See:
http://articles.latimes.com/2010/feb/01/business/la-fi-engine-dirt1-2010feb01 and

http://www.extengine.com/home.php?osCsid=38df25a81f43c4815dd4467adbe084e4

Assuming that the company’s claims are valid, this is a matter of considerable significance. Heavy duty diesel equipment is both expensive and long lasting. It is not unusual to have on road engines last beyond 400,000 miles and off road equipment last many thousands of hours. Replacing this fleet to a cleaner burning fleet, particularly in hard economic times such as we now face, is likely not to occur in less than several decades. An add-on equipment package that can perform as the Extengine equipment allows a much lower cost option to permit continued operation of already paid for equipment in a manner that will reduce the negative impact such equipment may have on the environment.

Western Cap & Trade Program May Launch in 2012 with Just One State – California

The Western Climate Initiative (WCI) regional GHG cap-and-trade program may launch in 2012 with only California and three Canadian provinces participating. Some WCI and CARB officials maintain that a powerful regional cap-and-trade program can still be carried out with California and the three Canadian provinc, based on the fact that they make up almost 1 billion of the total 1.5 billion tons of GHG emissions that WCI would ultimately cover—a “pretty sizeable market,” as one WCI official put it last year. See:
http://carboncontrolnews.com/index.php/ccn/show/western_cap_trade_program_may_launch_in_2012_with_just_one_state/

This is the first public admission by state officials involved in WCI that more than half the members will not be ready to participate in the trading program. It underscores the political difficulty other states are experiencing in convincing lawmakers to approve GHG regulations, especially considering the troubled economy. It is likely the others involved will take a wait and see posture until the WCI is actually operational and develops and track record. Also of course is the pending federal legislation that may postpone such regional initiatives for up to five years. California will proceed with its cap-and-trade program which will be designed to fit into the WCI system, so WCI is very likely to be a reality, albeit smaller. In turn, it creates an interesting foreign policy issue for the federal government to consider if it will seek to alter the operation or even existence of such multi-nation cooperative efforts.

Will AB 32 be Postponed?

Republican politicians and conservative activists are launching a ballot campaign to suspend California’s landmark global-warming law, in what they hope will serve as a showcase for a national backlash against climate regulations. Supporters say they have “solid commitments” of nearly $600,000 to pay signature gatherers for a November initiative aimed at delaying curbs on the GHG emissions of power plants and factories until the state's unemployment rate drops. The measure would halt proposed regulations until the state’s jobless rate dips to 5.5% or below for a year. That’s a level that California has not seen since 2007. California has one of the nation’s highest unemployment rates: 12.4%. In somewhat of a twist of fate, common in California politics, the official wording of the initiative, however, lies in the hands of Atty. Gen. Jerry Brown, an outspoken advocate of AB32 and a presumptive Democratic candidate for governor. On Wednesday, his office discarded the “jobs initiative” title in favor of the unwieldy: “Suspends Air Pollution Control Laws Requiring Major Polluters to Report and Reduce Greenhouse Gas Emissions That Cause Global Warming Until Unemployment Drops Below Specified Level for Full Year.” See:http://www.latimes.com/news/local/la-me-ballot-warming6-2010feb06,0,5959308.story

Given the heavy democratic leaning in this state and the presumptive approach of support for AB32 by AG Brown, the chance of this initiative’s passage seem problematic. However, the pivitol issue will be whether or not by next November there is improvement of the state’s unemployment statistics and to a lesser extent what occurs in Congress. The unknown is whether or not the average person is going to view AB32 as a savior or a series of meddlesome interference by government to their way of life.

Jobs

Wind Power Incentives Haven't Yet Translated into New “Green Jobs”

Federal stimulus money created 2,000 wind energy installation and maintenance jobs in 2009, roughly the same number of manufacturing jobs that were lost, according to the American Wind Energy Association. Federal officials said last month that 52,000 clean-energy jobs have been created or saved by the stimulus to date. Though existing tax breaks have boosted the wind industry, they also create uncertainty, industry leaders say. Elizabeth Salerno, director of data and analysis at the wind industry group, said manufacturers won’t be willing to step up production unless the government takes steps such as mandating renewable power usage, upgrading the electric grid and putting a price on greenhouse gas emissions. The DOE says it intends to put wind power on an even footing with other technologies, unlike China, which has a booming wind energy industry due in large part to government incentives. See:

http://www.latimes.com/news/science/environment/la-fi-green-jobs2-2010feb02,0,3585090.story

The DOE actually claims that they are not in a position to back a specific renewable energy system and that they want to create competition among various approaches in the marketplace. But they miss the point. There has to be a strong policy that supports renewable energy and clears the path to simplified delivery of the energy. The market place will take it from there. But the key driver, policy and law that will trigger and make possible the change, is needed. Any current market analysis (see below) of green power technology shows that the level of uncertainty is high and that effects capital investment.

Survey Finds U.S. Renewable Energy Standard (RES) Would Create Hundreds of Thousands of Jobs

A new study sponsored by renewable power companies and advocacy groups found significant job growth in the southeastern United States: All the states, except South Carolina and Mississippi, would gain at least 5,000 jobs versus the no-RES case. The larger states, Florida and Texas, would net at least 15,000. The report also said half of these jobs would come from manufacturing—not just direct fabrication of solar panels, heat pumps and the like, but also the materials needed to build the equipment. Without a national RES, the study found, the renewable energy industry would plateau or even shrink in most states. This is because the lack of a long-term goal would discourage suppliers from beefing up the supply chain for renewables, it said. See: http://www.res-alliance.org/res-jobs-study

Whether the numbers are correct or not can not be commented on. But as noted above in regard to wind energy, the study supports the need for a strong policy (or standards) the market can not respond and whatever jobs could be created will go wanting and of course, the net benefit to the environment will be negative.

Business

Big Companies Push More Suppliers to Track Emissions

The number of corporations pushing greenhouse gas emissions reporting and reduction strategies onto their suppliers is quickly growing and will likely triple in the next five years, according to a new survey by a U.K.-based nonprofit Carbon Disclosure Project. Of the 1,402 suppliers asked to provide information, just 710 companies, or 51 percent, passed on data and answered questions for the project’s second annual report on emissions reductions plans and attitudes in the manufacturing supply chain. Only 27 percent of suppliers responded to last year’s survey. Eighty-nine percent of project members say they have plans to follow the likes of Wal-Mart, Dell and others in requiring suppliers to calculate their carbon footprints and spell out strategies for reducing them. But despite their stated intentions to get tougher on suppliers, today only 20 percent of the 2,200 companies disclosing their emissions levels say that they have the ability to accurately measure or estimate their suppliers’ output of greenhouse gas pollution. Fifty-six percent of members tell the project that they are even prepared to go so far as dropping companies from their list of suppliers in the future, though just 6 percent said they would take those harsh steps today. Among the suppliers that did provide information for the study, just 38 percent say they have plans to calculate and reduce the emissions from their operations, versus 82 percent of project member companies that do. See:
https://www.cdproject.net/en-US/WhatWeDo/CDPNewsArticlePages/carbon-management-key-part-of-corporate-supply-chain-strategy.aspx

This is demonstrable evidence that the market is adapting to the climate change issue. How successful such market driven adaptations will be in the long run will depend not only in response to government policies, but also consumer expectations. A good example of this adaptation is the auto industry and the issue of safety. There was some demand for safer vehicles in the 70’s leading to government standards, which in turn focused the population on the safety issue. That focus caused the industry to respond with safer vehicles and also allowed government to respond to the public demand with additional safety requirements. Without the populations support, the more costly safety construction and devices increased costs may not have been tolerated. Where there missteps – a lot, such as higher power air bags that suffocated children, automatic lap belts that were so annoying people chose not to use them at all, and others. But know safety sells. The question is will “green” really sell. In many public opinion polls the clarity of the publics focus on green is not really all that clear. In concept people want the environment to be clean, but the politics of climate change, the lack of policy and the fear of increase cost of goods and services creates much ambiguity and ambivalence.

FTC Moves May Signal Start of “Greenwashing” Crackdown

The Federal Trade Commission is expected to crack down on “greenwashing" when it updates its environmental marketing guidelines for the first time since 1998. The agency’s Guides for the Use of Environmental Marketing Claims, or Green Guides, define terms such as “recyclable” and “biodegradable” and explain how businesses should back up environmental assertions. Though FTC cannot force businesses to adopt greener practices, Section 5 of the FTC Act authorizes the agency to intervene when businesses are misrepresenting their practices to clients—in other words, turning greenwashing into fraud. David Vladeck, director of FTC’s Bureau of Consumer Protection, told the Senate Subcommittee on Consumer Protection last summer that tougher enforcement and environmental guidelines are a major part of the commission’s agenda. Environmental groups are excited that FTC is examining the issue of greenwashing, though they are not sure what to expect. See: http://www.nytimes.com/gwire/2010/02/03/03greenwire-ftc-moves-may-signal-start-of-greenwashing-cra-90834.html

The term greenwashing stems from the term whitewashing, i.e. anything, as deceptive words or actions, used to cover up or gloss over faults, errors, or wrongdoings, or absolve a wrongdoer from blame. In the green context it could mean anything from the products carbon footprint, to claims made about a buildings energy savings. As long as there appears to be a sales edge to such products, claims will be made, some of which obviously will be untrue. This is just the start of a new form of enforcement and litigation.

Nuclear Power

The Administration Puts Its Own Stamp on a Possible Nuclear Revival

The Obama administration’s 2011 budget proposal indicates it will triple the size of the Energy Department’s loan guarantee program to $54 billion, which could support the construction of seven to ten new reactors if their designs are approved and the developers raise their share of the capital. Apparently, the first two conditional loan guarantee awards should be made soon and are meant to judge if the new reactors can be built on time and on budget. The 2011 budget also denies funding for the proposed Yucca Mountain nuclear waste repository in Nevada, and the administration will withdraw the facility’s license application at the Nuclear Regulatory Commission over the next month. The Yucca Mountain decision formalizes the position that President Obama took in the 2008 presidential campaign for Nevada’s primary. It means that a growing volume of used reactor fuel assemblies will have to be stored for decades at some 60 reactor sites, as they are now, until new nuclear fuel cycle technologies and policies are developed that can win Congress’ support. Nuclear power currently provides 20 percent of the nation’s electricity, constituting by far the largest source of power without GHG emissions. See:
http://www.nytimes.com/cwire/2010/02/02/02climatewire-the-administration-puts-its-own-stamp-on-a-p-76078.html

There are of course a host of issues relating to nuclear power, including the substantively thorny problem of storage and reprocessing. But it is clear that nuclear power is a very solid non-pouting source of electric power. France derives over 75% of its electricity from nuclear energy and it has brought them significant energy security. They are also the world's largest net exporter of electricity due to very low cost of generation. They have succeeded, so one must ask, why can’t we?