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

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

3. 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:
$40B traded emissions in 2006

4. 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

5. 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

6. 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

7. 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

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

9. 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

10. 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)

11. 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