Emerging Policy & Technical Solutions Andrew E. Huemmler University of Pennsylvania May 5, 2008 The Academy of Natural Sciences Partnership for the Delaware Estuary

January 16-18, 2008 Washington, DC Ronald Reagan Building and International Trade Center Ronald Reagan Building and International Trade Center More than 1200 attendees science, academic, policy

Outline Problem Statement Problem Statement Emerging Solutions Emerging Solutions Economic Economic –Cost Benefit analysis – How much will it cost? Policy Policy –Carbon tax –Cap & Trade  Lieberman-Warner Bill in U.S. Congress Technical Technical –Feasible solutions? – Stabilization Wedges

Problem Definition Global Warming Climate Change Dangerous Anthropogenic Interference in the Climate System Catastrophic Climate Disruption

Climate Change “Solutions” Mitigate –slow down climate change Adapt Suffer Reduce GHGs in atmosphere Reduce CO 2 e emissions

The Stern Review (2006)

Doniger (NRDC) to Bali, December 2007 current trend 450ppm stabilization Pass 450 ppm in ~ ppm today < 2o C< 2o C > 2- 5 o Celsius current trend 450 ppm stabilization Pre-industrial average: 280 ppm There is a narrow window of opportunity for action to contain the threat of impending severe warming US needs to cut emissions 30% by 2030, 80% by 2050 and negotiate a global post-2012 agreement

The Stern Review (Oct 2006) The Economics of Climate Change

Extreme weather could reduce global GDP by 1%. 2° - 3° C temp rise could reduce global economic output by 3%. If temperatures rise by 5° C, up to 10% of global output could be lost …with poor countries losing more. Worst case: Global consumption per head would fall 20%. Cost-Benefit of Stabilisation Stern Review (2006)

To stabilize at manageable levels…would cost… 1% of GDP at ppm CO2e

…certain principles that must guide its deliberations: This growth package must be big enough to make a difference in an economy as large and dynamic as ours -- which means it should be about 1 percent of GDP. President George W. Bush on the Economic Stimulus Act of 2008

Critiques of Stern Review The Economist; December 4, 2006 –Discount rates typically 3-5% per year. A typical discount rate would assign almost no current value to benefits accruing in 100 years. So why spend money today on something with no apparent value today? –Stern uses a discount rate of 0.1% per year How can we say that our great-great-great- grandchildren are worth less than we are worth ourselves? A stronger case for spending money now.

Creating a broadly similar carbon price signal around the world, and using carbon finance to accelerate action in developing countries, are urgent priorities for international co-operation Policy to reduce emissions should be based on three essential elements: 1. carbon pricing, 2. technology policy, 3. removal of barriers to behavioural change. Establishing a carbon price, through tax, trading or regulation, is an essential foundation for climate- change policy.

“Cap & Trade” or a Carbon Tax? Most economist prefer……?????? Uniform tax on all CO 2 e emissions Applied upstream to the few producers –Sellers of coal –Producers / importers / sellers of oil Tax (cost) impacts flow downstream to consumers Price of CO2e is known

Carbon Tax Certainty? Price ? Correct Price ? Emission Reductions ? Government Revenue I can emit CO 2 e if I’m willing to pay for it.

Cap & Trade U.S. invention Emission allowances for SO 2 Included in Clean Air Act Amendments 1990 Implemented in 1995 U.S. introduced “cap & trade” into text of Kyoto Protocol –against will of the European Union! Pew Charitable Trusts, 1990

19 Source: NRDC RGGI AB32

VanNess Feldman Issue Alert October 22, 2007 Lieberman – Warner Climate Change Cap-and-Trade Bill America’s Climate Security Act GHG emissions cap on: –Electric power, industrial, transportation –75% of total GHG emissions covered Facilities that emit 10,000 t CO 2 e annually –Transportation sector regulated upstream Fuel producers & importers, non-fuel chemicals –Higher efficiency standards for commercial and residential sources not covered

VanNess Feldman Issue Alert October 22, 2007 Targets and Timetables Cap at 2005 levels starting in 2012 Decline: – 15% by 2020 – 70% by % reduction per year

AB BAU 1000 tons CO2e % reduction MCA = $10 Firm spends $10/t internally to reduce 20% CO2e emissions MCA = $20 Firm purchases EAs from market for 10% of its production $20/t MCA Initial Market Price = $15 / ton Both firms seek to return to full production Price rises to <$20 / ton as Firm A sells to Firm B

Initial Emission Allowances Who Gets Them? Upstream vs. Downstream? Economy-Wide or Heavy-hitting Sectors? Allocation (Grandfathering) Auction

2/3 to ¾ of reductions expected from Electricity sector on economy-wide, least-cost basis.

Grandfathering Allowances SO2 program granted allowances based upon historic emissions. What year to use for baseline? Increase emissions now to receive more allowances later? Major transfer of wealth to some electric utilities –Under some allocation schemes, some utilities would receive more value in Emission Allowances than existing enterprise value. Coal-fired fleets

Evolution Markets LLC Auctioning Emission Allowances RGGI going to 100% auction model Concerns that high carbon companies (e.g. coal plants) that spend money on EAs will be less able to invest in carbon- reducing technologies. Concerns that speculators will “complicate” markets in early stages

VanNess Fledman Issue Alert October 22, 2007 Proposed Allocation Administered by the EPA For billion allowances –76% allocated at no cost –24% auctioned By billion allowances –27% allocated at no cost –73% auctioned

VanNess Feldman Issue Alert October 22, 2007 Allocations, 2 Electric Power and Industrial Facilities –From 2012 to % of year’s allowances allocated free of charge to covered facilities, based upon historic emissions After 2016, declines by 1%/yr to zero in 2036 Load-Serving Entities (electric distribution companies) –10% of allowances allocated to LSE based upon electric sales –LSEs can sell allowances upstream to “dirty” providers –LSEs can purchase clean energy and sell allowances to market –Proceeds must be used to benefit ratepayers, specifically low- income protection and promoting end-use energy efficiency

VanNess Feldman Issue Alert October 22, 2007 Allocations, 3 Early Action –In 2012 EPA to award 5% of allowances to covered facilities for actions taken since 1994 to reduce GHG States –A minimum of 5% of each year’s allowances would be allocated to state governments…with an additional 1-4% depending upon various actions taken by state, e.g., “de-coupling.”

Safety Valve Avoid cooling the atmosphere…and melting down the economy. –Resources from future growth needed to address climate change. If t CO 2 e price rises above “safety valve” limit, more Emission Allowances issued –How many? –At safety valve price? –At auction? Borrowing from / Banking to Future Greater use of Offsets

Offsets Facilities could cover up to 15% of their obligation in any given year with allowances generated through domestic offset projects. Up to 15% can be covered by offsets purchased from the international market provided country of origin has a GHG cap. EPA must certify. Additionality –Would project have happened anyway? Verification –If an offset tree falls down in the forest… –Is it still an offset?

Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies Science August 13, 2004: Vol no. 5686, pp. 968 – 972 S. Pacala, Department of Ecology & Evolutionary Biology, Princeton R. Socolow, Dept. of Mechanical & Aerospace Engineering, Princeton Humanity can solve the carbon and climate problem in the first half of this century simply by scaling up what we already know how to do.

Princeton University Carbon Mitigation Initiative To get on track to avoiding dramatic climate change, the world must avoid: – emitting about 200 billion tons of carbon, or –eight 25 billion ton "wedges," over the next 50 years.

1.6 Interim Goal Billions of Tons Carbon Emitted per Year Current path = “ramp ” Historical emissions Flat path Stabilization Triangle The Stabilization Triangle

1.6 Billions of Tons Carbon Emitted per Year Current path = “ramp ” Historical emissions Flat path Stabilization Wedges 16 GtC/y Eight “wedges” Goal: In 50 years, same global emissions as today

What is a “Wedge”? A “wedge” is a strategy to reduce carbon emissions that grows in 50 years from zero to 1.0 GtC/yr. The strategy has already been commercialized at scale somewhere. 1 GtC/yr 50 years Total = 25 Gigatons carbon A “solution” to the CO 2 problem should provide at least one wedge.

Energy Efficiency & Conservation (4) CO 2 Capture & Storage (3) Stabilization Triangle Renewable Fuels & Electricity (4) Forest and Soil Storage (2) Fuel Switching (1) 15 Wedge Strategies in 4 Categories Nuclear Fission (1) GtC/y 16 GtC/y Triangle Stabilization

Double the fuel efficiency of the world’s cars or halve miles traveled Produce today’s electric capacity with double today’s efficiency Use best efficiency practices in all residential and commercial buildings Replacing all the world’s incandescent bulbs with CFL’s would provide 1/4 of one wedge Efficiency There are about 600 million cars today, with 2 billion projected for 2055 Average coal plant efficiency is 32% today E, T, H / $ Photos courtesy of Ford Motor Co., DOE, EPA Sector s affected: E = Electricity, T =Transport, H = Heat Cost based on scale of $ to $$$

AEH Top Ten Energy Projects #1

Biofuels Photo courtesy of NREL Using current practices, one wedge requires planting an area the size of India with biofuels crops Scale up current global ethanol production by 30 times T, H / $$

Natural Sinks Photos courtesy of NREL, SUNY Stonybrook, United Nations FAO Eliminate tropical deforestation OR Plant new forests over an area the size of the continental U.S. OR Use conservation tillage on all cropland (1600 Mha) B / $ Conservation tillage is currently practiced on less than 10% of global cropland

Solar Electricity Photos courtesy of DOE Photovoltaics Program Install 20,000 square kilometers for dedicated use by 2054 A wedge of solar electricity would mean increasing current capacity 700 times E / $$$

Stone Harbor, New Jersey

Wind Electricity Install 1 million 2 MW windmills to replace coal- based electricity, OR Use 2 million windmills to produce hydrogen fuel Photo courtesy of DOE A wedge worth of wind electricity will require increasing current capacity by a factor of 30 E, T, H / $-$$

Substitute 1400 natural gas electric plants for an equal number of coal-fired facilities A wedge requires an amount of natural gas equal to that used for all purposes today. Fuel Switching Photo by J.C. Willett (U.S. Geological Survey). E, H / $

Implement CCS at 800 GW coal electric plants or 1600 GW natural gas electric plants or 180 coal synfuels plants or 10 times today’s capacity of hydrogen plants Graphic courtesy of Alberta Geological Survey Carbon Capture & Storage There are currently three storage projects that each inject 1 million tons of CO 2 per year – by 2055 need E, T, H / $$

Triple the world’s nuclear electricity capacity by Nuclear Electricity Graphic courtesy of NRC The rate of installation required for a wedge from electricity is equal to the global rate of nuclear expansion from E/ $$

Take Home Messages  In order to avoid a doubling of atmospheric CO 2, we need to rapidly deploy low-carbon energy technologies and/or enhance natural sinks.  We already have an adequate portfolio of technologies to make large cuts in emissions  No one technology can do the whole job – a variety of strategies will need to be used to stay on a path that avoids a CO 2 doubling.  Every “wedge” has associated impacts and costs.

Electric Generating Sector GHG footprint

Nuclear – Industry Structure Management Scale: 104 plants, 25 operators

The Yucca Mountain Repository for Nuclear Waste April 23, 2007 Edward F. Sproat III Director Office of Civilian Radioactive Waste Management U.S. Department of Energy Presented to: MIT Student Chapter- ANS

Hard Choices White Mountains, New Hampshire

Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost? McKinsey & Company December, 2007

Behavioral Changes Standards Cap & Trade Pricing Long – Term R&D

NRDC: 80% reductions within the U.S. by 2050 Source:

Be Prepared What’s your carbon footprint? What’s your marginal cost of abatement? –Do the cheapest things first –Start planning to do the hard things…soon When is soon? –2009a new presidentlegislation passed –2010EPA rulemaking – implementation What else happens soon? –Electricity will become more expensive –Peak electricity will become much more expensive Think about Offset Projects Things may start to happen very quickly

Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies Science 13 August 2004 : Vol no. 5686, pp. 968 – 972 S. Pacala, Department of Ecology & Evolutionary Biology, Princeton R. Socolow, Dept. of Mechanical & Aerospace Engineering, Princeton Humanity can solve the carbon and climate problem in the first half of this century simply by scaling up what we already know how to do.

On My Starbucks Coffee Cup Dec 2007  So-called "global warming" is just a secret plot by wacko tree huggers to make America energy independent, clean our air and water, improve the fuel efficiency of our vehicles, kick- start 21st-century industries, and make our cities safer and more livable. Don't let them get away with it! Chip Giller, Grist