© 2009 Lane Powell PC International, Federal and Regional Developments in Carbon Policy David Van’t Hof Lane Powell PC Portland, Oregon October 8, 2010

© 2009 Lane Powell PC International Climate Efforts ● Refresher  Kyoto Protocol  Emissions Trading (EU ETS) – Commenced in 2005, now in Phase II (Jan 2008 to Dec 2012) – 90% of allowances still freely allocated and not auctioned but Phase Three will ramp up auctions to 70% by 2020; industries can buy and sell allowances (carbon credits) – For Phase II, estimates are the program will achieve a 2.4% emission reduction by 2010 as compared to business as usual – Average price was 21 Euro/tCO2 in 2008 and 13 Euro/tCO2 in 2009; analyst predict 30 Euro range for Phase III and 21% below 2005 levels by 2020 Clean Development Mechanism – Projects in developing countries to achieve Certified Emissions Reduction (CERs) – Over 2100 projects to date with CO2e reductions of 220 million tons per year (As of March 2010) – Most projects initially were HFC and now renewables and energy efficiency  Joint Implementation – Projects within Kyoto participating host jurisdiction and partnership of two or more Kyoto investing jurisdictions to achieve emission reduction units (ERUs) – 2/3rds of emission reductions expected in Russia with estimates of 300 million tons per year in 2012.

© 2009 Lane Powell PC International Climate Efforts ● EU ETS Working?  Phase I was over allocated and did not achieve significant reductions (trial run)  Phase II will achieve reductions but not much as countries still have over-allocated; reductions have occurred through CDM and JI  Phase III will have to be much more stringent and with proposed increased auctions and centralized allocation determinations it is expected to be

© 2009 Lane Powell PC International Climate Efforts ● Kyoto to Copenhagen and Beyond  Kyoto expires in 2012  Copenhagen expected to establish next phase on international action but was of limited success  No binding obligations; Developed nations pledged to:  Provide mitigation targets by end of January 2010 (55 countries have complied)  Provide $30 billion by 2012 to developing nations for adaptation with goal of $100 billion by 2020

© 2009 Lane Powell PC International Climate Efforts ● Kyoto to Copenhagen and Beyond  Bonn – May 2010  No significant progress on new treaty  Mexico City – December 2010

© 2009 Lane Powell PC Federal Climate Efforts ● Latest Big White House Announcement – Solar panels to be put back on White House (after 25 year exodus!). ● Likelihood of Any Climate Legislation (Cap and Trade, Carbon Tax, other price on carbon?) Zero. ● National Renewable Energy Standard (RES)? Unlikely.  Though D Sen. Bingaman introduced a new version – Renewable Electricity Promotion Act on Sept 22 with R Sen. Brownback that would require 15% renewables by 2021 (but also credits energy efficiency) ● Continuation of some key incentives (ITC grant and bonding money). Maybe.

© 2009 Lane Powell PC Federal Climate Efforts ● Only Real Action at EPA  Reporting Requirement  Regulation of Utilities and Stationary Sources  Will Congress take away any authority Republicans tried unsuccessfully in Senate this year but with significant Democratic supporters and will likely pick up seats if not control of one or both chambers in election

© 2009 Lane Powell PC Regional Climate Efforts ● Regional Greenhouse Gas Initiative (RGGI)  Cap and trade in effect since 2008  10 East Coast States  Applies only to utility emissions generated inside RGGI jurisdictions  Achieve 10% emission reductions by 2018  Offsets allowed to account for small portion of reductions (less than 10%)

© 2009 Lane Powell PC Regional Climate Efforts ● RGGI Cont.  25% of allowances must be auctioned by each jurisdiction and some have chosen to auction 100%  Nine auctions completed; $729 million raised and primarily invested in energy efficiency and renewable energy programs or projects (70%) or low income assistance (10%)  Looked at by some (including Maine Sen. Collins) as possible federal model

© 2009 Lane Powell PC Regional Climate Efforts ● Western Climate Initiative (WCI)  Cap and trade to go into effect in 2012  7 states and 4 provinces as members, though only CA, NM and Provinces in position to participate in 2012  Applies to utility, industrial and transportation emissions (over 90% of emissions)  Achieve 15% below 2005 levels by 2020

© 2009 Lane Powell PC Regional Climate Efforts ● WCI Cont.  Offsets allowed up to 49% of reductions  Mix of auctions and free allocations (left to each jurisdiction to decide)  Intent to link to other programs such as RGGI  Complementary Policies Committee seeking regional strategies to achieve reductions in addition to cap and trade

© 2009 Lane Powell PC Regional Climate Efforts ● Midwestern Greenhouse Gas Reduction Accord (MGGRA)  6 states and 1 province  Final Model Rule and Recommendations  20% below 2005 levels by 2020  Comprehensive program like WCI  Becomes effective at least one year after first MOU among participating jurisdictions

© 2009 Lane Powell PC Summary ● What’s next?  Not a lot expected at the international and federal levels on comprehensive cap and trade programs – will EU continue on its own?  EPA likely will drive greenhouse gas emission reductions at federal policy level – will it lose existing authorities and will action be delayed significantly by litigation?  Regional efforts will continue to unfold, with possibility of linking east and west coasts and some Canadian provinces – or RGGI will go alone

© 2009 Lane Powell PC SeattlePortland OlympiaAnchorage TacomaLondon