1. Policy Options
Cap and Trade: A market based system where the right to pollute is either sold or given away to industry by government and then those rights can be traded in a free market.
Cap and Dividend: A cap is placed on emissions and polluters pay a fee to the government for the right to pollute that is then redistributed to the public through federal programs
Carbon Tax: Those that mine or develop carbon sources and release carbon into the atmosphere pay a tax to the government on their production or release in proportion to the amount of carbon produced or released.

2. Politics Taxes are VERY unpopular
Free market mechanisms have bi-partisan support
Appeal to conservatives
Promise reductions
Create a new industry: carbon traders
Therefore, cap and trade has dominated the discussion

3. Upstream vs. Downstream
Bill
Van Holland
2009
Waxman-Markey
Cantwell-Collins 2010
Obama Admin.
Upstream or Downstream
Upstream and downstream- Mining companies and fossil fuel production companies
Partial upstream and full Downstream- Refiners and manufacturers covered in addition to utilities
Upstream
Unknown

5. Allocation Options Bill Van Hollen 2009 Waxman-Markey 2009
Cantwell-Collins 2009
Obama Admin.
Allocation
100% auction
Mixed
100% Auction
100% auctioned-revenue to federal govt- $646 billion revenue rebated to consumers

7. ACESA Allocation scheme

8. Banking
Banking allows emitters to carry over unused allowances into the next cap period
Emitters can either reduce emissions below the cap and hold the allowances that they generate if there is free allocation OR
Emitters can buy extra allowances gambling that the price is lower now than it will be next period- this reduces the allowances available on the market for others

9. Banking Proposals Bills Van Hollen 2009 Cantwell-Snowe 2010
Markey-Waxman 2009
Banking
Allowed-unlimited
Allowed -10 years

10. Borrowing
Borrowing is allowing emitters to borrow from future years to satisfy current allowance needs
Allows higher emissions now, with the presumption that emissions will be reduced in the year borrowed from
Likely that there will be appeals for relief in years borrowed from- delays compliance

11. Borrowing Bill Van Hollen 2009 Cantwell- Collins 2009
Waxman-Markey 2009
Borrowing Provisions
Auction price goes up 100%+ triggers sale of additional allowances that are borrowed from and cap reduced accordingly in those years (8% of cap limit)
No borrowing
15% borrowing 5 year limit-8% interest

12. Safety Valve Places a cap on the price of allowances=price controls
Converts from cap and trade to a flat tax in reality
Reduces the internalizing of emission costs and allows less cost efficient emitters to persist

13. Safety Valve Provisions
Bill
Van Hollen
Waxman-Markey 2009
Cantwell-Collins
2009
Safety valve provision
See borrowing provision
Reserve price of $28 in 2012
Reserve price of $7-21

14. Offsets
Allows substitution of credits for reducing emissions in uncovered sectors
Issue is verifying that the reductions would not have happened without the investment and that the reductions do indeed occur

15. Offset Provisions Bill Van Hollen 2009 Cantwell-Collins 2009
Waxman –Markey 2009
Offset provisions
Carbon capture credit (1 for 1)
No direct offsets-separate funding for mitigation projects
ceiling of 2 billion credits, 1 billion domestic and 1 billion international, though international can substitute for domestic up to 1.5 total international credits.

16. Two Sessions Ago Bills

17. Last Session American Clean Energy and Security Act
Waxman and Markey developed
Cap and trade system:
Regulates electric utilities, oil companies, large industrial sources that emit 25,000+ tons of CO2 equivalent (85% of GHG emissions)
3% below 2005 by 2012, 17% below 2005 by 2020 and 80% below 2005 in 2050
Allows banking and borrowing
Offsetting allowed( 5 tons offset/4 tons credit)

18. ACESA continued
Energy Efficiency: incentives, harmonization and rebates
Utility energy efficiency: companies must demonstrate customer savings (1% by 2012 to 15% by 2015 for electricity)
Clean Energy
Renewable Energy: retail energy suppliers must have 6% renewable in % in 2025
Carbon Capture: demonstration program, incentives and performance standards for new coal plants 1,100 tons per megawatt limit on GHG, then 800 tons
Clean Fuels and Vehicles: low carbon fuel standard
And more! Adaptation, consumer assistance, green jobs/training, rebates for additional costs over other countries

19. What Happened In Senate
Total Fail!

20. Into the Legislative Vacuum..
Massachusetts v. EPA- US Supreme Court rules GHG air subject to CAA regulation
EPA makes “endangerment finding” necessary to trigger regulatory authority under CAA
EPA begins to promulgate rules under the Clean Air Act

21. Cross-State Air Pollution Rule
The rule requires significant reductions in sulfur dioxide (SO2) and nitrogen oxide (NOX) emissions that cross state lines
Applies in eastern US

22. CAA Utility Regulation
Cross-State Air Pollution Rule
Mercury/Toxics Rule
GHG tailoring rule
GHG New Source Performance Stds

23. Cross-State Air Pollution Rule
Deals with SO2 and NOx under provision of CAA called the “good neighbor” provision
Air pollution in another state contributing to non-attainment for
ozone or PM
Currently invalidated
by court order

24. Cross-State (cont’d)
Emission reductions starting January 1, for SO2 and annual NOX reductions, and May 1, 2012 for ozone season NOX reductions
By 2014 the Cross-State Air Pollution Rule would reduce:
power plant SO2 emissions by 73 percent
NOX emissions by 54 percent from levels in the CSAPR region.

25. GHG Tailoring Rule Two phases
Uses Prevention of Significant Deterioration authority under CAA (PSD)

26. Tailoring Rule GHGs
The final rule addresses emissions of a group of six GHGs:
1. Carbon dioxide (CO2)
2. Methane (CH4)
3. Nitrous oxide (N2O)
4. Hydrofluorocarbons (HFCs)
5. Perfluorocarbons (PFCs)
6. Sulfur hexafluoride (SF6)

27. Tailoring Phase 1
o Only sources currently subject to the PSD permitting program (i.e., those that are newly-constructed or modified in a way that significantly increases emissions of a pollutant other than GHGs) o For these projects, only GHG increases of 75,000 tpy or more of total GHG, on a CO2e basis, would need to determine the Best Available Control Technology (BACT) o Similarly for the operating permit program, only sources currently subject to theprogram (i.e., newly constructed or existing major sources for a pollutant other thanGHGs) would be subject to title V requirements for GHG.

28. Tailoring Phase 2
PSD permitting requirements will cover for the first time new construction projects that emit GHG emissions of at least 100,000 tpy even if they do not exceed the permitting thresholds for any other pollutant. Modifications at existing facilities that increase GHG emissions by at least 75,000 tpy will be subject to permitting requirements, even if they do not significantly increase emissions of any other pollutant. In Step 2, operating permit requirements will, for the first time, apply to sources based on their GHG emissions even if they would not apply based on emissions of any other pollutant. Facilities that emit at least 100,000 tpy CO2e will be subject to title V permitting requirements.

29. Mercury Rule
50% US mercury emissions from power plants (coal fired and oil fired)
.html
Puts pressure on to upgrade or retire old, inefficient powerplants
Business has sued to block rule
Romney opposes the rule

30. GHG NSPS
“As a result of legal petitions filed by a number of states and environmental groups challenging the USEPA’s failure to establish greenhouse gas new source performance standards for fossil fuel power plants, the agency entered into a settlement agreement in December 2010”
“Under the modified settlement agreement, the USEPA was to propose greenhouse gas new source performance standards for fossil fuel power plants by September 30, 2011, and a final rule no later than May 26, The agency missed the September 30 proposal deadline.”
From:

31. EPA Announces NSPS Rule
Carbon Pollution standard for New Power Plants
Applies to NEW EGU plants > 25 MW that burn fossil fuels
These plants <=1000 lbs of CO2/MWh
Natural Gas Combined Cycle plants can meet this target
Coal or petroleum coke need tech such as CCS

32. From: http://greenecon

33. Costs of Pollution Control Technology
ilowatt-Hour

34. EPA Announces NSPS Rule
Carbon Pollution standard for New Power Plants
Applies to NEW EGU plants > 25 MW that burn fossil fuels
These plants <=1000 lbs of CO2/MWh
Natural Gas Combined Cycle plants can meet this target
Coal or petroleum coke need tech such as CCS

35. Results http://www.startribune.com/business/134647533.html
closing-6-coal-fired-power-plants
cloud-future-of-up-power-plant-5c340j html
0.stm

36. Analysis of EGU Closures
64 plant closures announced in 2011
Represents 223 million tons of CO2 emissions
Represents about 3.2% of total US emissions CO2eq in 2010
Sources:
CARMA 2007 CO2 figures
Plant closure listing
EPA emisssions estimate entoryreport.html

37. Public Attitudes
Constituent perceptions drive political decisions- need to be re-elected
Special interest group lobbying does as well, but without public support there is risk to politicians

39. Now I'd like to ask you about some specific energy proposals being considered by Congress. For each, please tell me whether you favor or oppose including this in an energy bill "
Favor % Oppose% Unsure% Requirements that utilities produce more energy from wind, solar or other renewable sources July June

40. Limits on carbon dioxide and other greenhouse gas emissions
Now I'd like to ask you about some specific energy proposals being considered by Congress. For each, please tell me whether you favor or oppose including this in an energy bill "
Favor % Oppose% Unsure%
Limits on carbon dioxide and other greenhouse gas emissions
July
June

41. Favor % Oppose% Unsure%
Now I'd like to ask you about some specific energy proposals being considered by Congress. For each, please tell me whether you favor or oppose including this in an energy bill "
Favor % Oppose% Unsure%
Expanded exploration for coal, oil and gas in the US
July
June

44. Are We Trying too Hard? Failing to agree on long-term goals
Politics and diplomacy more geared to short term
Should we refocus on short term goals with less dire consequences attached- i.e. peaking emissions?