Towards a Resilient Gulf Coast A Utilitys Perspective on Risks, Challenges & Opportunities 2010 NCSL Coastal Policy Forum October 21, 2010 Jeff Williams Director, Climate Consulting

Agenda Climate Science Uncertainty Importance of investing in mitigation and adaptation Opportunities from investing in clean energy future Opportunities and challenges for building a resilient coast

Scientific Uncertainty is a reason for action not delay Its not a question of if mans activity will warm the planet (98% of scientists agree that it is) The uncertainty is over how much impact and when it will happen The risk is that we maybe approaching tipping points of no return Bold, urgent action is needed to avoid this risk

Meaningful action takes the worst outcomes off the table Meaningful action takes the worst outcomes off the table Warming is scalable to sea level rise, more intense storms, probability of crossing tipping points

In 2010 we reached 390 ppm CO 2 and are adding 2 ppm per year 1 ppm CO 2 = 2.1 billion tons CO 2 of emissions above what can be removed by land and ocean sinks

When the peak occurs and how steep the reduction trajectory is determines how much adaptation risk can be avoided Source IPCC Fourth Assessment Report In order to stabilize at 400 ppm CO 2, global emissions will need to peak within the next five years (by 2015) and then decline thereafter.

Mitigation Pathways to Limit Warming Expected temperature increase 3.0˚C 2.0˚C 1.8˚C Probability of temperature increase under 2˚C 15-30% 40-60% 70-85% Peak at 550 ppm, long-term stabilization 550 ppm Peak at 510 ppm, long-term stabilization 450 ppm Peak at 480 ppm, long-term stabilization 400 ppm Source:IPCC WG3 AR4; den Elzen, van Vuuren; Meinshausen; McKinsey Global GHG Abatement Cost Curve v2.0; Project Catalyst analysis Global GHG emissions and pathways for GHG stability, Gt CO 2 e,

With warming >2 0 C (3.6 o F) probability increases that well reach a point of no return for melting the Greenland ice sheet over the next few hundred years eventually adding 6m (20) of sea level rise

SOURCE: Stern Review; IPCC, 4TH Assessment Report, Climate Change 2007: Synthesis Report Climate change may increase those risks, creating huge challenges Temperature above preindustrial 4. Ecosystem 6. GDP 1. Weather 2. Water 3. Food 5. Social 1º C2º C3º C4º C5º C Scenario A1B IPCC AR4 worst case scenarios Changes in water availability, threatening up to a billion people Threat to local water supply as glaciers melt Major cities around the world threatened by sea-level rise Many more species face extinction Ecosystems extensively and irreversibly damaged More than a billion people may have to migrate – increasing the risk of conflicts Loss of up to 20% of global GDP Loss of GDP in developing countries Falling yields in many developed regions Falling crop yields in many developing regions More intense storms, forest fires, droughts, flooding, and heat waves

Coasts are already experiencing hazards related to climate and sea level rise (very high confidence) The Business Case As a company serving the Gulf Coast, Global Climate Change effects put at risk: Our customer base Welfare of our employees, their families and our communities Billions of dollars of investment Louisiana coast line loses 24 square miles a year.

Coasts will be exposed to increasing risks over coming decades due to many compounding climate change factors (very high confidence) Rise in sea level of 1.0 m by 2100; Rise in sea surface temperature 3 o C; Intensified storms Storm Surge (Cat 3 = 3-4m); Subsidence 1.0 m by 2100

This can be avoided – We have to be smart how we do it

We have three choices: mitigation, adaptation and suffering. Were going to do some of each. The question is what the mix is going to be? John Holdren, White House Science Advisor Real adaptation is substantially more expensive than mitigation Real adaptation without substantial mitigation is just a cruel euphemism Real adaptation by itself is so expensive (and endless) that it is essentially impossible to imagine how a real adaptation bill could pass Congress The goal should be to choose a mix that minimizes the sum of mitigation, adaptation and suffering costs Even with todays climate we need to invest in a more resilient coast

Creating a 5 o C warmer world by 2100 Irreversible commitment to sea level rise inundating low lying coastal areas Increased coastal flooding impacting up to 30 million people/year Increased damage from storms impacting up to 15 million people/year Global food shortages as adaptive capacity exceeded in low latitudes and yield decreases in higher latitudes Increased burden on health from malnutrition, cardio-respiratory and infectious diseases Water scarcity for up to 15 million people Catastrophic events What is the cost of doing nothing? Cost of Not Dealing With Climate Change Now: Illustrative Do Nothing Risk Management 5-20% GDP Loss 1-2 % GDP Loss Crisis: (6-12 Month Lag) GDP Loss % The Cost of Doing Nothing

How do we minimize the total cost of climate change? Invest in mitigation and resilience – –Suffering from climate change could be 5x cost of mitigation (5-20% of GDP); – –Mitigation through technology mandates are 2x the cost of mitigating using market mechanisms; – –Suffering that cant be avoided through mitigation can cost effectively be avoided through investments in resilience

By 2050 Emissions Need to Be Less than 1960 CO 2 Concentration

17 The electricity sector is responsible for roughly 35 percent of total U.S. GHG emissions. Coal accounts for over 80 percent of the electricity total Million Tons/Yr2373 Million Tons/Yr Source: EIA Annual Energy Outlook, 2006 and EPA Inventory of U.S. Greenhouse Gas Emissions Sources and Sinks, 1990 – 2004.

Use market forces intelligently to find the most efficient solutions

EPRI Prism 09 If the U.S. is to substantially reduce ghg emissions over the next two decades while continuing to meet demands of the economy, new low-carbon electricity generation and supporting infrastructure will need to be designed built, and operated

Prisim 09 – Technology Targets

Geologic Sequestration for Enhanced Oil Recovery – 17.7 billion bbls in Gulf Coast could be produced with EOR if there were an affordable supply of CO 2 EOR provides a opportunity for Gulf Coast region Can provide lower cost long term secure geologic storage CO 2 captured from vent gas and injected into geologic formations for enhanced oil recovery. Added revenue stream for CO 2 Helps energy security Adds jobs, royalties and tax revenues Leverages extensive subsurface knowledge base and jump starts geologic sequestration market Gulf Coast has capacity to store all CO 2 emissions from power generation for 100 years

23 Twin Challenges (Opportunities?) Facing the Electric Power Sector – –Near-Term Retirements 30 to 40 percent, or roughly 150,000 of the 400,000 workers employed in the electric power sector are eligible for retirement or will leave the sector in the next 5 years. – –Long-Term Transition to a Low-Carbon Economy De-carbonizing the electric power sector will require roughly 150,000 workers to design, construct, and operate the next generation of electric sector infrastructure. Combined, these challenges represent replacement of 80% of the current electric power sector work force--300,000 jobs.

How Many Jobs?

Jobs to operate & maintain new clean plants needed 4-5 indirect jobs for each direct nuclear or CCS job created

Electric Sector Workforce Pipeline

Recommendations –1) Evaluate regional training needs and facilitate multi- stakeholder energy sector training programs across the country – 2) Improve energy sector data collection and performance measurement metrics and tools – 3) Identify training standards and best practices for energy sector jobs –4) Provide funding support for individuals seeking energy sector-related training and education –5) Aggressively focus on revitalizing the math and science skills, education, and career counseling of individuals who have the interest and skills to work in the energy sector

Effectively addressing climate risk through adaptation First comprehensive analysis of climate risks and adaptation economics along the U.S. Gulf Coast –Granular, bottom-up analysis using a risk framework: Modeled 23 asset classes across residential, commercial, infrastructure, oil, gas and utility Modeled 800 zip codes across 77 counties Simulated ~10,000 hurricane years across multiple climate scenarios Modeled over 50 adaptation measures –First time broad range of Gulf Coast stakeholders and experts engaged Discussed with over 100 global, regional academics, government officials, industry experts and NGOs Illustration of hurricane paths/ intensities Gulf Coast Adaptation Study

Three climate hazards were evaluated along the Gulf Coast

Quick Facts on Context of Climate Risks in the Gulf Coast

31 New Orleans skyline Going forward, the risk we face is just going to increase, given economic growth, subsidence and climate change 1 Represents cumulative of average expected losses between 2010 and Asset value (replacement cost) for New Orleans buildings are $60 bn SOURCE: Swiss Re; Moodys; FEMA; MMS; EIA; OGJ; Wood Mackenzie; Energy Velocity; team analysis; others To place this in context, ~$370 bn could be used to reconstruct New Orleans buildings six times over – 2030 cumulative losses Extremechange Averagechange Todays climate 345 Cumulative annual expected losses $ Billions; 2010 dollars

Climate change is expected to increase losses over time

However, regardless of climate change, the Gulf Coast faces increase in risks from natural hazards

In the near-term, potentially attractive measures can address almost all the increase in loss and keep the risk profile of the region constant

35 A large range in cost-benefit assessments exists for the potential portfolio of measures Note: Costs and benefits refer to net present values Build all new residential buildings with 110-mph rated shingles, applied with adhesive strips Build all new residential buildings with 110-mph rated shingles, applied with adhesive strips Improved roof cover, new builds C/B ratio: ~0.3 Cost: $340 M Benefit: $990 M Homes affected: 1.7 M Increase vegetation management cycle frequency and remove hazard trees Increase vegetation management cycle frequency and remove hazard trees Vegetation management, distribution C/B ratio: ~1.0 Cost: $470 MM Benefit: $480 MM Miles affected: 51,000 All existing residential homes in the most flood-risk counties are elevated 10 ft All existing residential homes in the most flood-risk counties are elevated 10 ft Home elevation, retrofits C/B ratio: ~5.5 Cost: $6.3 Bn Benefit: $1.2 Bn Homes affected: 123,000

36 Residential/ commercial 1 Building codes Oil and gas 6 Floating production systems 7 Replacing semi-subs with drill ships 8 Levees for refineries, petrochemical plants Infra- structure/ Environ- mental 3 Wetlands restoration 1 2 Beach nourishment 4 Levee systems 1 Electric utility 9 Resilience of electric utility systems Loss averted, 2030 $ Billions And there are some key near term actions to protect our region – that are cost effective, and will help our economy and our environment 1 Included despite high C/B ratios due to strong co-benefits, risk aversion 2 Total capital investment, non-discounted, across 20 years 5 Improved standards offshore platforms Total C/B ratio x CapEx required 2 $ Billions Public funding Private funding

Potentially attractive measures can address the increase in annual loss between today and 2030 and keep the risk profile of the region constant

Conclusions Climate science uncertainty drives the need for risk management initiatives for our region Overall costs will minimized by bold investments in coastal mitigation and adaptation There is an urgent need act now to address these challenges that is not being reflected in our political processes Meeting these challenges will provide opportunity both today and for future generations

Questions ?