Evolving Regulatory Scene for Carbon Management Catherine Izard Civil and Environmental Engineering Engineering and Public Policy Green Design Institute cizard@andrew.cmu.edu I’ll stop every few slides for questions, but you can raise your hand any time.

Summary Climate policies in existence European Union Regional initiatives US climate policy alternatives and likely outcomes Specifics for steel and energy intensive industries

Climate policies today: EU Leader with Kyoto Protocol in 1997 Committed as “bubble” to reductions of 8% below 1990 levels by 2012 Used emissions trading system (EU-ETS) Currently covers 40% of emissions, (energy, steel, nonmetallics, paper, and aviation) Phase Two: 2008-2012 $40B traded emissions in 2006

EU-ETS: Phase 3 Weaknesses in Phase 1, (hopefully fixed in Phase 2) Allocation done at country instead of EU level—led to gaming and C price collapse Drafts out for Phase 3, include: Renewable Energy goals by country Include transport (inc. aviation) and buildings Moving toward full auction of permits Bitter debate ongoing in EU parliament Allocation vs. auction, floor/ceiling price

U.S. Climate Policies: Regional & Voluntary schemes State level climate policies—12+ states Regional emissions trading: RGGI, WCI, MGGRA Increasingly investors, consumers, and retailers interested in knowing energy and GHG info associated with “carbon risk” More and more companies voluntarily reporting emissions (CDP, Climate Registry)  Momentum towards a national climate policy

U.S. Climate Policy: National ACTIVE area of interest from in Washington Many bills in past Congresses Waxman-Markey passed House, cap and trade bill under discussion in Senate For now has taken backseat to health reform Everyone has a proposal US Climate Action Partnership: 25 major companies and centrist NGOs Waxman-Markey closely followed USCAP Enviro NGOs

Climate policy: Debating points Free allocation vs. auction of allowances Obama in favor of 100% auction; USCAP “significant fraction” free. Waxman-Markey—slice for everyone 2012 2030 2012 and 2030 allowance allocation in Waxman Markey. Waxman-Markey Allocation Scheme

Debating Points: Competitiveness Steel: 5% average price increase Figure from carbon tariff paper that Glen and Chris wrote.

Likely ways to reduce competitiveness issues Waxman-Markey: carbon tariffs on trade-exposed energy intensive goods and rebates World Steel (and cement, aluminum): global sectoral agreements Each country has target of ton CO2/ton steel, depending on EAF/BOF mix, development World Steel: sectoral in place of cap and trade. Everyone: Free allocation Global carbon price fixes everything

Debating Points: General Use of offsets and to what to degree Price floor/ceiling (“safety valve”) and other cost control mechanisms Gases and sectors included (particularly agriculture and land use) Cumulative reduction to 2050 (from 1990 vs. 2005)

Summary Global debate headed toward global regulation US GHG regulation right around the corner Energy-intensive industry in unique position Trade exposed in many cases (as opposed to electricity, upstream-regulated fuels) Face large challenges to decarbonization Link with infrastructure Different regulation design will affect industry differently Many opportunities to take part in policy design and research to minimize risks