The Political Climate for Climate Change Action

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The Political Climate for Climate Change Action

• FMEA-FMPA 2009 Annual Conference
• July 15, 2009
• Robert L Kappelmann PE.
• RLK Associates
• kapprl_at_juno.com

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The Climate For Climate Action is Near Perfect
But Will It be Perfect Action?

• President Has Climate Change Legislation as High
  Priority
• Democratic Majorities in House and Senate
• The Liberal West Dominates Key Committees in
  House and Senate
• Also Speaker of House and Senate Majority Leader
• Ambitious Legislative Schedules that Leave Little
  Time to Evaluate the Effectiveness or Cost of
  Legislation
• Industry that is Focused on the Little Picture
  (Allowances) and an Unable to Generate a
  Coherent Message

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Overview

• What is Driving the Climate Change Debate?
• The National Solution Waxman-Markey HR 2454.
• Backup National Solution Green House Gases
  Regulated Under the Clean Air Act.
• The Florida Solution Executive Order 07-127
• The State of the International Solution Kyoto.
• What About the Science, Does It Matter?
• Questions?

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Climate Change Vs Global Warming Vs The
Greenhouse Effect

• The Greenhouse Effect
• The Earths Atmosphere Traps Energy From the Sun
• Greenhouse Gases Include H20, CO2, CH4 and N2O
• Adds About 60 Degrees to the Earths Temperature
• Without the Greenhouse Effect Earth Would be an
  Ice Planet

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The GHG Problem?

• Man made GHGs are Increasing the Greenhouse
  Effect and Upsetting a Delicate Natural Balance
• The Increased Greenhouse Effect is Causing Global
  Warming
• Global Warming is Changing the Climate.
• A Changing Climate will Lead to Environmental
  Armageddon.

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Man Has Upset the CO2 Balance It Must Be Restored

• The Hadley Climate Model and Others Indicate That
  80 of Annual Worldwide Manmade Emissions Must be
  Eliminated From 1990 Levels to Mitigate the Worst
  Impacts of Man Generated Global Warming.
  (Nature Can Handle the Remaining 20)
• This Reduction Must Occur before 2050
• Atmospheric CO2 Levels Cannot Rise Above 550
  PPM or is it 450 PPM or is it 350 PPM?

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The Real Drivers?

• 200 Billion Plus Carbon Trading Market.
• Financial Opportunities for a Variety of Players
• The Climate Objective is Lost is a Sea of Special
  Interest

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GHG Legislative Drivers

• Old Big Dirty Coal Generation
• Gas Dominated Generation
• Nuclear Generation Advocates
• Renewable Energy Advocates

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More Drivers

• Great Federal Revenue Source
• Great Fund Raiser For Environmental Organizations
  
• And of Course The Ultimate Consultant Bailout!

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The Current National Solution The Waxman-Markey
Bill HR. 2454

• Officially the American Clean Energy and Security
  Act of 2009 (Aces)
• Comprehensive, Extremely Complicated, and not
  Completely Read by any M of C prior to the final
  vote Including the Chairman! (1428 Pages as
  Adopted)
• Not Completely Read by Administration Including
  the Energy Coordinator, Carol Browner.
• Not Completely Read or Understood Prior to
  Endorsement By EEI

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Key Provisions of HR 2454

• Title I Clean Energy
• Establishes a Combined Efficiency and Renewable
  Electricity Standard
• Applies to Electric Utilities with Annual Sales
  Greater than 4,000,000 MWhs
• Starting at 6.0 in 2012, Increasing to 20.0 by
  2020
• Can be met by 25 Energy Efficiency Programs and
  75 Renewable Energy
• Alternative Compliance Payment of 25/MWh

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HR 2454 Key Provisions Cont

• Establishes Programs to Expedite Carbon Capture
  and Sequestration (CCS) Technology
• Establishes a Performance Standard for New
  Coal-Fired Electric Generating Units (EGUs)
  Requiring CCS Deployment (regardless of cost)
• Establishes a Clean Transportation Program that
  Incentivizes Vehicle Electrification
• Establishes Transmission Planning that Favors
  Renewable Energy.

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HR 2454 Continued

• Title II Energy Efficiency Establishes a 30
  Improvement in the 2006 Building Codes by 2012
  and 50 by 2014, with 5 Additional Reductions
  every Three Years Thereafter.
• Establishes New Efficiency Standards for
  Industrial Process and Nearly All Energy Using
  Products

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HR 2454 Continued

• Title III Reducing Global Warming Pollution
• Caps GHG Emissions at 3 Below 2005 Levels by
  2012
• 17 Below 2005 Levels by 2020
• 42 Below 2005 Levels by 2030
• 83 Below 2005 Levels by 2050
• Initially Covers 85 of GHG Emissions but can be
  Expanded By EPA without additional Congressional
  Action

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HR 2454 Electric Utility Provisions

• Free Allowances Provided to Distribution
  Utilities, But Point of Regulation is the
  Generating Utility.
• Allowances are Awarded 50 Based on CO2 Emissions
  and 50 Based on Retail Sales
• On Average, In 2012 Electric Utilities get 82 of
  Allowance Needs based on 2007 CO2 Emissions,
  While FMEA Members Cumulatively get About 60
• The Free Allowances Decrease Annually to 0 by
  2030.

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However, HR 2454 Drafters Claim For Only the
Cost of a Postage Stamp a Day per Person, We can
Save The Planet!
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What About the Postage Stamp?

• Some Provisions of HR 2454 do Create Green Jobs
  and Reduce Some Consumer Costs.
• However, this comes a Net Job loss and Net
  Increase in Total Cost.
• To date No Government Agency has Modeled the
  Entire Bill, Only Selected Provisions
• Note Key Assumptions were provided by the Bill
  Drafters to EPA, EIA and CBO Economic Modelers.
• Best Estimate The Postage Stamp will Cost
  1.55 to 4.65/person/day in 2012 in 2008.

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HR 2454 Assumptions Drive Economic Model Results

• Assume Nuclear Renaissances Compared to BAU (Cost
  Reduced 30)
• Assume CCS Commercial by 2015 and In Wide Use
  Before 2040 (Cost Reduced 80)
• Assume International Offsets are Cheap and
  Plentiful (Cost Reduced 96)
• Both EPA and CRA Estimate CO2 Allowance Costs
  will Triple if these Assumptions are Wrong.

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So What Does HR 2454 Do For the Climate?(So
What Do You Get For the Money?)

• Based on EPA Estimates, By 2100 Full Compliance
  by the US with HR 2454 will reduce Atmospheric
  CO2 Levels from 718 ppm to 693 ppm or 25 ppm.
• If the Developing World Follows US Leadership
  and Participates in an Aggressive Mandatory
  Reduction Program, Atmospheric CO2 Concentrations
  could be reduced to 491 ppm by 2100.
• HR 2454 is intended to reduce levels to 450 ppm
  by 2100 but the current level is 380 ppm.
• US unilateral action under HR 2454 is projected
  to reduce temperatures in 2100 by 0.1 degree F.
• Note That EPA estimates that Senator Bingamans
  S. 1766 would achieve the same CO2 levels for
  about one half the cost of HR 2454.

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HR 2454 Outlook

• Senator Boxer has indicated that the Senate
  Energy and Climate Vehicle could be the Energy
  and Commerce Committee Version of HR 2454.
• President states that he will sign the bill that
  is brought to him.
• Expect Opponents to be better prepared for the
  Senate Fight
• Regional Differences in cost Impacts will come
  into play!
• The Balance of the Senate will be more deliberate
  and cost savvy, but there is a strong desire to
  vote for something!
• Big Question Will the Electric Utility Industry
  Continue to Focus on the Allowance Food Fight?

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The Clean Air Act (CAA) National Back-up Plan

• The Administration and Congressional Leaders
  employed the threat of Regulating CO2 Under CAA
  to Encourage Rapid Passage of HR 2454
• EPA has set the Stage by Publishing an Advance
  Notice of Proposed Rulemaking (ANPR) on July 30,
  2008
• And a Proposed Endangerment Finding that
  Anthropogenic GHGs Emissions Endanger Human
  Health and Welfare on April 24 , 2009
• An Endangerment Finding must be made prior to
  regulating an Air Pollutant

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GHG Control Under HR 2454 or the CAA. Which is
the Worst?

• Conventional Wisdom is that GHG Regulation Under
  the CAA Would Give EPA Total Control of the US
  Economy. (So does HR 2454)
• Under CAA, Any GHG Source of Emitting More than
  100 Tons/Year Could(Must) Be Regulated.
• Note Al Gores House is Responsible for 200
  Metric Tons of CO2 Annually from Electricity Use.

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However The CAA has Cost Safeguards Missing From
HR 2454

• Clean Air Act

• HR 2454

• CAA Specifies that EPA cannot Impose Emission
  Control Systems that are not both Commercially
  Available and Cost Effective. (This would include
  CCS for coal and gas-fired EGUs)
• Under the CAA, EPA can be cued for over stepping
  its Authority Under the CAA

• Mandates CCS for New Coal-fired EGUs by 2020
  Regardless of Cost or Availability
• Industry has limited legal recourse to address
  unreasonable Provisions of HR 2454.

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The Electric Utility Industry May Be Better Off
Under the CAA for GHG Regulation

• It is Not That The CAA is a Good Way to Regulate
  GHGs from the Electric Utility Industry.
• HR 2454 Is Just That Bad!

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CAA Outlook

• Proposed CAA GHG Regulations Could Be Proposed
  Later This Year!
• Look For EPA to Be Criticize for Bias Climate
  Science Used In Their Endangerment Finding.
• Also EPA Could Be Accused of withholding an
  Internal Report Questioning the Conclusions of
  their Endangerment Finding
• Lawsuits on Endangerment Findings by US Business
  Community possible

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The Florida Solution EO 07-127

• Adopt the California Climate Plan
• Florida GHG Emissions
• Reduced to 2000 Levels by 2017
• Reduced to 1990 Levels by 2025
• Reduced to 20 of 1990 Levels by 2050
• Adopt California Vehicle Emissions Standards
• Increase Required Efficiency of Building Code by
  15
• Increase Conservation Standards by 15
• 20 Renewable Electricity Standard
• Note State Legislative Action Required for Full
  Implementation

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Florida Plan Vs. HR 2454

• Florida Plan

• HR 2454

• 5.1 Reduction of GHGs from 2005 by 2017
• 30.5 Reduction of GHGs from 2005 by 2025
• 86.1 Reduction of GHGs from 2005 by 2050
• (Electric Utilities Only)
• 20 RES by ?
• 15 Efficiency Improvement in Building Code by ?

• Caps GHG Emissions at 3 Below 2005 Levels by
  2012
• 17 Below 2005 Levels by 2020
• 42 Below 2005 Levels by 2030
• 83 Below 2005 Levels by 2050
• 20 RES by 2020
• 50 Efficiency Improvement in Building Code by
  2014

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Florida Solution Outlook

• California Vehicle Standards Adopted
• Renewable Energy Rule Completed by PSC
• Building Code Efficiency Rule Completed by DCA?
• Electric Utility Cap and Trade Rule Under
  Development and Should be Ready for 2010
  Legislature
• Approval by Legislature is Uncertain

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What is Happening with Kyoto

• If America Will Lead, The World Will Follow

• The First Compliance Period of 2008 to 2012
  involved 37 countries of the 180 plus signatories
• Will Any Developing Country Make Binding
  Reduction Commitments?
• If America takes the Lead, Who will follow?
• China and India are Key Players, but Not likely
  that they will play the Kyoto game for real.
• India has definitely said NO! to cap and trade.
• Are any Kyoto Players having second thoughts
  about Compliance Period 2?

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So What About the Science?

• Hard Climate Science Has Been Irrelevant in the
  Process that led to the Adoption of HR 2454
• Political Science and Special Interests have
  driven the Legislative Process
• Any Climate Science that offered an alternative
  view to Human Caused Climate Change Dogma was
  label as Heretical.

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Hope For a Quality Climate Science Review in EPA
Endangerment Finding

• EPA historically has done very complete science
  reviews prior to issuing an Endangerment Finding.
• However, for the GHG Endangerment Finding EPA
  relied only on IPPC and CCSP Summary Reports that
  were based only human cause Climate Change
• EPA also sequestered an internal report by Dr.
  Alan Carlin that outlined alternate climate
  change mechanisms

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Some Things EPA Did Not Want You to Know
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More EPA Sequestered Climate Data
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QUESTIONS?