USA – GHG Accounting

Washington State introduces Comprehensive Climate Change Initiatives

In December 2014, Washington State Governor Jay Inslee introduced an ambitious climate change policy agenda for 2015, including the establishment of an all-encompassing carbon pricing program. This policy follows the signing of Executive Order 14-04 (Washington Carbon Reduction and Clean Energy Action) by Governor Inslee on April 29, 2014, which set out a plan for state climate action.
If passed by state lawmakers, the program would raise an estimated $1 billion a year through a new levy on greenhouse gas emissions. In particular, the program would cap statewide pollution rates at levels that decline over time, with polluters allowed to trade state-sold pollution allowances among themselves. It would aim to address emissions covered other similar programs operating in the US, while avoiding pitfalls of other programs, such as giveaways for certain polluters. The technical aspects of Washington’s proposed program are considered best practices and as such, they have been lauded by outside observers such as the Environmental Defense Fund.
The program has been designed to help Washington get on track toward meeting its legislated goal of reducing emissions to 1990 levels by 2020, with a further 50% reduction by 2050. A November 2014 report by the Carbon Emissions Reduction Taskforce (which was established by Governor Inslee in April 2014 to provide recommendations on the design and implementation of a carbon emissions limits and market mechanisms program for Washington) concluded that Washington is not on target to comply with the 2008 law regarding required reductions in greenhouse gas pollution. It found that the requirement of reducing yearly pollution levels back to 1990 levels in 2020 would “likely” be met if a new cap and trade policy is implemented. Further steps would be needed to meet more ambitious reductions required by 2035 and 2050.
The proposed program would cover an estimated 85% of greenhouse gas emissions produced by Washington and it is anticipated that approximately 130 companies would be required to pay a levy, generating approximately $1 billion a year in revenue. Revenue generated under the cap-and-trade proposal would help to cover shortfalls in transportation and education spending, reduce taxes and fund household energy efficiency improvements for poorer residents, as well as help meeting the general costs of running the state.
Below is an overview of the legislative proposals aimed at reducing Washington’s greenhouse gas emissions:
• Carbon Pollution Accountability Act: The proposed Carbon Pollution Accountability Act (SB 5283 / HB 1314) would create a new market-based program that limits carbon emissions and requires regulated entities to pay for their emissions. The limit will decrease gradually over time, allowing emitters time to transition to cleaner technology and more efficient operations. The program will generate about $1 billion annually which will be used for transportation, education and disadvantaged communities. The draft Carbon Pollution Accountability Act can be found here.
• Clean Transportation: The Department of Transportation has three strategies to decrease transportation emissions: cleaner cars, cleaner fuels and moving people and goods more efficiently.
• Electric Vehicles (EVs): Legislation will extend tax incentives for EVs, create an EV infrastructure bank, and require urban cities and counties to adopt EV incentive programs. Draft legislation can be found below:
o Alternative Fuel Vehicle Sales Tax Exemption (SB 5445 / HB 1925): This bill extend a sales tax exemption on the first $60,000 on the purchase of alternative fuel vehicles.
o Electric Vehicle Infrastructure Carbon Pollution Accountability ActBank (SB 5444 / HB 1572): An EV bank would give financial assistance to install publicly accessible high-speed charging stations.
o Electric Vehicle Readiness in Buildings (SB 5446 / HB 1929): This bill would require urban cities and counties to adopt high speed EV charging station incentive programs.
• Zero Emission Vehicles (ZEVs): The Department of Ecology has requested legislation to allow Washington to adopt the Zero Emission Vehicle program.
• Clean Fuel Standard: The Department of Ecology is preparing a draft rule that outlines a clean fuel standard that would help the state to transition to cleaner fuels over time.
• Sustainable Transportation Planning: To reduce carbon pollution that comes from cars, trucks and other transportation-related sources, the Department of Transportation has developed a five-part action plan.

Public hearings on the proposed Carbon Pollution Accountability Act are continuing and have attracted great interest. Stay tuned for more details.

President Obama Announces Climate Action Plan

On June 25, 2013, President Obama made a long-awaited announcement for his administration’s Climate Action Plan. The plan outlines a range of actions the Obama administration will take using existing authorities to reduce carbon pollution, increase energy efficiency, expand renewable and other low-carbon energy sources, and strengthen resilience to extreme weather and other climate impacts. As part of the plan, the Environmental Protection Agency (EPA) has been directed to set standards by June 2015 to reduce carbon pollution from existing power plants.

President Obama’s Climate Action Plan focuses on the following key areas:

· Regulating Greenhouse Gas Emissions – In lieu of any action by US Congress on setting an economy-wide price on carbon, President Obama is using his powers under the Clean Air Act to curb emissions from power plants, by far the largest unregulated source of US carbon emissions. Companies are seeking regulatory certainty so many of them are prepared to work with the Obama administration on pragmatic approaches to cut GHG emissions and mitigate climate risks. The Supreme Court ruled in 2007 that EPA has authority under the Clean Air Act to regulate greenhouse gases. Carbon pollution standards for new power plants proposed by EPA in March 2012 have not yet been finalized. In his June 25 speech, President Obama announced a Presidential Memorandum directing the EPA “to work expeditiously to complete carbon pollution standards for both new and existing power plants.”

· Energy Efficiency – The Department of Energy has been directed to build on efficiency standards for dishwashers, refrigerators, and other products that were set during President Obama’s first term. President Obama set a goal of cumulatively reducing carbon dioxide emissions by 3 billion metric tons by 2030 through efficiency measures adopted in his first and second terms. The president also committed to build on heavy-duty vehicle fuel efficiency standards set during his first term with new standards past the 2018 model year.

· Renewable Energy – In 2012, renewable energy was responsible for 12.7% of net U.S. electricity generation with hydroelectric generation contributing 7.9% and wind generation 2.9%. As the fastest growing energy source in the US, President Obama reiterated his support to make renewable energy production on federal lands a top priority. In particular, the President announced a series of executive decisions (i) directing the Department of the Interior to permit enough renewable projects on public lands by 2020 to power more than 6 million homes; (ii) to designate the first-ever hydropower project for priority permitting; and (iii) to set a new goal to install 100 megawatts of renewables on federally assisted housing by 2020. The President will also maintain a commitment to deploy renewables on military installations and will make up to $8 billion in loan guarantees available for a wide array of advanced fossil energy and efficiency projects to support investments in innovative technologies.

· Natural Gas – New drilling technologies such as hydraulic fracturing have significantly increased the amount of recoverable natural gas in the US. These advances are expected to keep the price of natural gas near historically low levels, thus altering energy economics and trends, and opening new opportunities to reduce greenhouse gas (GHG) emissions. To better leverage natural gas to reduce GHG emissions, the administration will develop an inter-agency methane strategy to further reduce emissions of this potent GHG.

· Leading by Example – In his first term, President Obama set a goal to reduce federal GHG emissions by 24% by 2020. He also required agencies to enter into at least US $2 billion in performance-based contracts by the end of 2013 to finance energy projects with no upfront costs. In his climate plan, the President established a new goal for the federal government to consume 20% of its electricity from renewable energy sources by 2020 which is more than double its current goal of 7.5%.

· Climate Resilience – The President wants federal agencies to support local investments in climate resilience and convene a task force of state, local, and tribal officials to advise on key actions the federal government can take to help strengthen communities. President Obama also wants to use recovery strategies from Hurricane Sandy to strengthen communities against future extreme weather and other climate impacts and update flood-risk reduction standards for all federally funded projects.

· International Climate Change Leadership – President Obama promised to expand new and existing international initiatives with China, India and other major emitting countries. He also called for an end to US government support for public financing of new coal-fired powers plants overseas, except for the most efficient coal technology available in the world’s poorest countries, or facilities deploying carbon capture and sequestration technologies. A noteworthy initiative introduced by the President was a direction given to his administration to launch negotiations toward global free trade in environmental goods and services, including clean energy technology “to help more countries skip past the dirty phase of development and join a global low-carbon economy”.

Eileen Claussen, President of the Center for Climate and Energy Solutions, commented that President Obama is laying out a credible and comprehensive strategy to strengthen the US response to climate change. In particular, President Obama’s plan recognizes that the costs of climate change are real and rising; to minimize them, the US must both cut its carbon output and strengthen its climate resilience. These policy initiatives are an important first step, but it will require continued leadership to translate the plan’s good intentions into concrete policy.

Update on China: China Steps into Leadership Role as it takes Action on Climate Change

In his first comments as China’s prime minister, Li Keqiang recently laid out a vision of a more equitable society in which environmental protection trumps unbridled growth and government officials put the people’s welfare before their own financial interests. While the Prime Minister was short on specifics, his comments represent an encouraging acknowledgment of some of the pressing issues facing China.

Traditionally, China has been used as a carbon scapegoat and excuse for inaction by countries such as Canada and the U.S., whose per capita emissions are much higher. However the tables are turning with China beginning to take a leadership role in addressing climate change. China’s emergence as a climate leader means that Canada and other countries can no longer point their fingers at China as an excuse for not taking action to reduce their own greenhouse gas emissions.

China to roll out Cap & Trade in 2013

As the world’s largest emitter of carbon dioxide, China is preparing to gradually roll out cap-and-trade pilot programs in seven major cities and provinces starting in 2013. This initiative is part of a larger goal to reduce carbon intensity – or the amount of carbon dioxide emitted per unit of economic output – by 40% to 45% below 2005 levels by 2020.

In November 2011, the Chinese government decided to implement cap-and-trade pilots in two provinces and five cities (including Shanghai, Beijing and Shenzhen) beginning in 2013 with the final goal of implementing a nationwide exchange program by 2016. In less than two years, officials have designed and started to implement seven trading trials that cover around one-third of China’s gross domestic product and one-fifth of its energy use. If successful, the schemes could demonstrate that an emissions trading system will be an effective way for China to manage its greenhouse gas emissions. In addition, China’s activities may spur policy makers in other countries such as the US to act.

Bloomberg New Energy Finance previously estimated that the regional pilots would cumulatively cover 800 million to 1 billion tonnes of emissions in China by 2015, meaning that the market would become the world’s second largest after the European Union. It has been reported that at the beginning, regional and city-wide markets will remain separate with unique rules and criteria. For example, some of the markets will cover factories and industrial operations exclusively, while others will focus on power generation or non-industrial sectors.

The first trades took place in September 2012 in Guangdong province, when four cement-manufacturing companies invested several million dollars to acquire carbon pollution permits (allowances). The Guangdong scheme is expected to cover more than 800 companies that each emit more than 20,000 tonnes of carbon dioxide a year across nine industries, including the energy-intensive steel and power sectors. These firms account for more than 40% of the power used in the province. The Guangdong carbon market alone will regulate some 277 million tonnes of CO2 emissions by 2015.

China plans to open six further regional emissions-trading schemes in 2013, in the province of Hubei and in the municipalities of Beijing, Tianjin, Shanghai, Chongqing and Shenzhen. It plans to expand and link them until they form a nationwide scheme by the end of the decade. A nationwide scheme could then link to international markets.

Until now, China’s experience with carbon trading has been limited to the Clean Development Mechanism under the Kyoto Protocol. While China’s political system could let a carbon market grow faster than anywhere else because changes can be implemented quickly, the carbon market faces challenges in China. In particular, China needs to develop and enforce proper legislation and regulations to measure, report and verify carbon emissions from industrial sites. It also needs to build an effective framework to oversee the reporting and trading of carbon credits.

At this stage, the most urgent issue that needs to be addressed is how China collects and analyzes data on carbon emissions. The credibility of China’s statistics on energy use and carbon emissions has been questioned partly because of the large discrepancies between numbers calculated using top-down data and numbers calculated using bottom-up data. Without accurate numbers, the first transaction of the Guangdong trading scheme was based on expected future carbon emissions, rather than historical data. Improved statistical methodology and political action will be required to boost the reliability of carbon emissions data in China. China will also need specific laws to ensure transparent reporting and strong enforcement to prevent fraudulent or misleading claims about carbon emissions.

Chinese Carbon Tax on the Horizon

On the climate front, the Chinese government appears to be on the verge of taking a critical step which has been demonized by politicians in Canada and the USA – that is, implementing a carbon tax. Although the carbon tax is expected to be modest, China plans to also increase coal taxes.

According to Jia Chen, head of the tax policy division of China’s Ministry of Finance (MOF), China will proactively introduce a set of new taxation policies designed to preserve the environment, including a tax on carbon emissions. In an article published on the MOF web site in February 2013, Jia wrote that the government will collect an environmental protection tax instead of pollutant discharge fees, as well as levy a tax on carbon emissions. The local taxation authority will collect the taxes, rather than the environmental protection department. The article did not specify the level of carbon tax or when the new measures will be implemented. In 2010, MOF experts suggested levying a carbon tax in 2012 at 10 yuan per tonne of carbon dioxide, as well as recommended increasing the tax to 50 yuan per tonne by 2020. These prices are far below the 500 yuan (US $80) per tonne that some experts have suggested would be needed to achieve climate stability.

It is not anticipated that China’s plan will have a significant impact on global climate change, although the tax may have some beneficial impact within China itself, where air pollution is a serious problem. A paper from the Chinese Academy for Environmental Planning suggests that a small tax could still raise revenue and provide an incentive to reduce emissions, thus bolstering China’s renewable energy industry.

To conserve natural resources, the government will push forward resource tax reforms by taxing coal based on prices instead of sales volume, as well as raising coal taxes. A resource tax will also be levied on water. In addition, the government is also looking into the possibility of taxing energy intensive products such as batteries, as well as luxury goods such as aircraft which are not used for public transportation.

U.S. Consumers are taking into account companies’ actions on climate change when purchasing

According to a recent report from the Yale Project on Climate Change Communication and the George Mason University Center for Climate Change Communication, since 2008, approximately 25% percent of U.S. consumers have either rewarded or punished companies for those companies’ actions related to climate change. The report, “Americans’ Actions to Limit Global Warming in September 2012” (available online), indicates that a significant portion of the consumer market continues to care about the position of companies on climate change. The report also concludes that individuals who have not used purchasing power to either reward or punish companies in the past year plan to increase personal acts of consumer activism in the next year.

The report indicates that in the 12 months leading up to the September 2012 survey, about one in three adults rewarded a company that took steps to reduce emissions. In addition to rewarding companies for taking actions to reduce climate change impacts, 24% of those surveyed in September 2012 indicated that they had at some point in the past year chosen not to purchase products by companies that oppose steps to reduce climate change.

When asked to contemplate future behavior, 52% of individuals surveyed expressed the intent to either reward or punish companies sometime in the next year for the companies’ action or inaction to reduce climate change. Since researchers from Yale and George Mason began collecting data four years ago, slightly more than half of Americans have consistently reported plans to use purchasing power to either reward or punish companies. In November 2008, consumers indicated the greatest willingness (58%) to either buy or not buy based on a company’s actions on climate change. In the economic recession of 2010, willingness to utilize purchasing power to support global warming action fell to 51%. Since then, consumer support for utilizing purchasing power has remained at just over half of the surveyed American adults.

The Yale and George Mason researchers also studied three other prongs of climate actions by citizens: (1) saving energy, (2) citizen behavior, and (3) communication behavior. Even though a majority of American adults report that they always or often set their thermostats below 68 degrees and take other actions like replacing traditional light bulbs with compact fluorescent light bulbs, the researchers noted a decline in Americans’ belief that certain energy-saving actions can reduce climate change. Americans are less confident today than four years ago that their individual actions will reduce their contribution to climate change. While Americans may be less optimistic about their individual impact on global warming, the report’s authors observed that a growing number of Americans say they contacted a government official in the past year to support mitigation of climate change. In the next year, the report indicates that more Americans intend to urge government officials to take action on climate change.

Overall, the Yale and George Mason polling data indicate that Americans continue to be concerned about global warming and are willing to use political and consumer activism to push for action on global warming.

ICLEI seeks public input on draft Community-Scale GHG Emissions Accounting and Reporting Protocol

In response to the needs of its member local governments, ICLEI-Local Governments for Sustainability USA (ICLEI was originally established as the International Council for Local Environmental Initiatives) has released a draft Community-Scale GHG Emissions Accounting and Reporting Protocol for public comment.

Rationale for the Community Protocol

Local governments are increasingly looking to create policies that will reduce emissions from the activities of their residents, businesses, and visitors. The emissions reduction process begins with identifying primary sources of emissions and quantifying the scale of emissions from these sources. By establishing standards for community-scale inventories, communities can ensure the consistency and quality of their inventories. In addition, such standards will allow for accurate monitoring of progress against emissions targets, and provide standard guidance as local governments pursue environmental review, inventory certification and other relevant processes in their day-to-day operations. A national standard will form the foundation of future climate actions, thereby enabling communities to address the challenges of climate change more effectively.

The Community Protocol will complement the Local Government Operations Protocol and serve as a U.S. Supplement to the International Emissions Analysis Protocol. The draft framework is available for review online.