Category Archives: Climate

This week the Air Resources Board (ARB) held a public workshop in Fresno, California, to gather public input on ways to invest proceeds from California’s cap-and-trade auction.  ARB heard from a wide variety of individuals and organizations with bright ideas on how to spend this money on projects that can lower greenhouse gases (GHG) and maximize the benefit to disadvantaged communities who are the most vulnerable to climate change and pollution impacts.

I represented EDF at the workshop, and an extended version of my public comments follows:

Good evening, my name is Jorge Madrid, and I am speaking as a representative from the Environmental Defense Fund (EDF) – I’m also speaking as a community member with roots in the Central Valley, where my family has lived for the past 11 years.

As I’m sure most of you already know, California’s Central Valley is home to four of the five most polluted cities in America, according to data from the American Lung Association.  And for those of you, like me, who have family members in the Valley who work outdoors every day, you know that the dual threat of dirty air and extreme heat is a recipe for poor health and costly medical bills.  We can’t afford not to act, and I am glad that the Air Resources Board is taking these bold steps to clean the air and fight climate change.

EDF is committed to working with the strong coalition of organizations from across the state, representing a wide array of interests and stakeholders, who are committed to seeing that proceeds from the cap-and-trade auction are directed to projects that will advance the goals of AB 32 in an effective and equitable manner.

We especially want to see projects that can deliver a “triple bottom line,” which benefit people, the planet, and the economy.  We know that all three of these things can grow together, and this is a fantastic opportunity to lead the rest of the country.

There are many examples of triple bottom line investments; here are a few that should rise to the top:

• The ARB should prioritize smart investment in energy efficiency and renewable energy.  These investments will reduce greenhouse gasses, while also providing savings on utility bills, and creating jobs in the construction sector – which is still experiencing disproportionately high unemployment levels in this region.  Further, 89% of the materials used in building retrofits are manufactured right here in the U.S. and 91% of the firms performing retrofits are small businesses.   There is no reason why we can’t grow these jobs and businesses in the Valley.

Schools and community colleges are a good target for investment in energy efficiency and renewable energy, because lowering a school’s utility bill frees up resources for other expenses like more teachers and computers. An upgraded “green” school uses 33 % less energy and 32% less water on average, saving $100,000 per year on operating costs – according to the US Green Building Council.

The Madera Golden Valley Unified School District is already taking action, utilizing renewable energy to help combat constrained budgets. It purchased a 1.1-megawatt solar photovoltaic (PV) system that supplies 80 percent of the district’s total annual electricity consumption – preventing 2.3 million pounds of carbon dioxide pollution each year, and is expected to achieve up to $250,000 in cumulative energy savings by 2017 and up to $9 million in cumulative energy savings after 25 years of operation.

• Cleaner transportation, both operations and equipment, should also be prioritized for investment. Nearly 40% of all GHG in the state are from the transportation sector, which is also the largest contributor to harmful smog and particulate pollution that aggravate asthma and other respiratory illnesses.

During the hot summer days with the highest levels of pollution, youth in the Valley are 69% more likely to be admitted to the emergency room for asthma, according the San Joaquin Valley Air Pollution Control District. Each of those ER visits costs an average of about $1,500, and hospitalizations can cost 10 times that.

Investing auction revenue in mass transit, cleaner fuels, and cleaner vehicles, can help get folks out of their cars and reduce harmful pollution, while also increasing mobility and equity for people who can't afford to drive.

• Of course the Central Valley’s biggest employer is agriculture, and no conversation would be complete without mentioning the potential for GHG reductions from this sector.  EDF is committed to working with scientists, policy makers, and farmers to evaluate the best ideas and practices.

One idea is to incentivize the preservation of agricultural lands which will reduce urban sprawl and the increased vehicle trips that come with it.  Another idea can include incentivizing better fertilizer practices, which will reduce the release of nitrous oxide into the atmosphere, a potent GHG, as well as reduce the release of nitrates and other toxins into the water supply.  These kinds of investments can benefit farmers who own the land, and promote cleaner air and water that helps the people, like my family and friends, who pick the food.

These are just a few examples of the “triple bottom line” we can create with smart investments.  We can improve our environment, improve our health, and grow our economy.

We support an ongoing discussion of the best use of auction proceeds, and feel confident that good ideas will rise to the top. We want to help make sure the investments, and the process for choosing them, are sound and include the best thinking and analysis possible, as well as the largest array of voices and stakeholders as possible.

(Originally posted last week on EDF's Market Forces blog)

As the second auction in California’s landmark cap and trade program approaches, a coalition of states on the opposite side of the country – that have been cost-effectively reducing their carbon pollution while saving their consumers money – announced plans to strengthen their emission reduction goals.  Last week, the Regional Greenhouse Gas Initiative (RGGI) – the nation’s first cap and trade program which sets a cap on carbon dioxide pollution from the electric power sector in 9 Northeastern states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont) – released an updated Model Rulecontaining a number of improvements to the program, primarily a significantly lower (by 45%) overall cap, realigning it with current emissions levels.

Since the program took effect in 2009, emission reductions in the RGGI region have occurred faster and at lower cost than originally expected.  This has primarily been the result of increased electric generation from natural gas and renewables which have displaced more carbon-intensive sources like coal and oil, as well as investments in energy efficiency that lower overall electricity demand.  These reductions have been accompanied by lower electricity prices in the region (down 10% since the program began) and significant economic benefits:  a study from the Analysis Group estimated that electric consumers would save $1.1 billion on their bills over 10 years from the energy efficiency improvements funded by allowance revenue, and further, that these savings would generate over $1.6 billion in economic benefits for the region.

The new lower cap allows RGGI to secure the reductions already achieved, and push forward towards more ambitious pollution reduction goals.  The changes to the program are the result of a transparent and comprehensive program review process set in motion through RGGI’s original Memorandum of Understanding – a mechanism that is successfully fulfilling its original intention by allowing the states to evaluate results and make critical improvements.

While the changes will go a long way to fortify the program, there is room in the future for the RGGI states to look to California’s strong program design for additional enhancements.  For example, RGGI’s updated Model Rule creates a Cost Containment Reserve (CCR) – a fixed quantity of allowances which are made available for sale if allowance prices exceed predefined “trigger prices”.  A CCR is a smart design feature which provides additional flexibility and cost containment – however, RGGI’s CCR allowances are designed to be additional to the cap, rather than carved out from underneath it as in CA’s program (ensuring the overall emission reduction goals will be met).  California’s program has displayed enormous success already, with a strong showing in their first auction.

In the meantime, the RGGI states should be commended for their success thus far, and for their renewed leadership as they take important steps to strengthen the program.  These states have achieved significant reductions in emissions of heat-trapping pollutants at lower costs than originally projected, all while saving their citizens money and stimulating their economies, transitioning their power sector towards cleaner, safer generation sources, and laying a strong foundation for compliance with the Carbon Pollution Standards for power plants being developed under the Clean Air Act.  Such impressive achievements provide a powerful, concrete example of how to tackle harmful carbon pollution and capture the important co-benefits of doing so.

The bottom line is that cap and trade is alive and well on both coasts as the states continue to lead the charge on tackling climate change in the U.S. while delivering clear economic benefits.

While those in Washington continue to discuss climate change, California and other states are taking action.  Case in point, the Regional Greenhouse Gas Initiative (RGGI) – a group of nine Northeast and Mid-Atlantic states - recently lowered its cap 45% to push towards more ambitious pollution reduction goals from the region's power plants. In California, a recent emissions report showed that major polluters in the state are reducing their greenhouse gas emissions, and continues to roll on with its cap-and-trade program, holding California’s second carbon allowance auction today – February 19^th, 2013.

We've written before about the mechanics of the auction and the top four things to know about it. The first auction held back in November of 2012 was a success, selling all of the 2013 allowances and about 14% of the 2015 advanced allowances.  So what do we have to look forward to today?

Breakdown of today's auction

Today's auction is one of four that will take place this year. The state has an auction notice that explains it in more detail, but the main items to note are that two types of allowances will be available for sale – 2013 or "current vintage"  allowances and 2016 or "advanced vintage" allowances. There will be about 13 million of the 2013 vintage and 9.5 million of the 2016 vintage available for sale. The minimum price per allowance is $10.71, up 7% from last year's minimum of $10. As set forth in the regulations, the price floor will be "increased annually by 5 percent plus the rate of inflation as measured by the Consumer Price Index."

The market players will determine this auction's settlement price but there are plenty of folks speculating. Last November, the price settled just above the floor at $10.09 and market observers have predicted that today's may settle at upwards of $13 per allowance.  We aren't making any predictions, but will give our analysis when auction results are released on Friday, February 22nd.

Investing the proceeds

The price begs the questions of how much will the state generate from holding these auctions and where will the proceeds go? We did a quick analysis (see figure below) and from the sale of state-owned allowances in 2012-2013 there could be about $225 million in proceeds by the end of this year. That assumes all vintage 2013 state owned allowances sell this year at the floor price of $10.71 and that 14% of the vintage 2016 sell at $10.71. This is money that can be used for a variety of purposes to meet the goals of California's global warming solutions law

On the question of where the proceeds will go, the state is rolling forward on deciding the details. Today, the California Air Resource Board (CARB) is holding the first of three public workshops to solicit feedback on how to invest the auction proceeds. A concept paper lays out preliminary priorities for investing the auction proceeds in programs and projects that help achieve the state's greenhouse gas reduction goals. EDF is committed to seeing that proceeds from the auctions are directed to projects that advance the goals of AB 32 in an effective and equitable manner.

Today is yet another milestone to celebrate California's leadership in action when it comes to addressing climate change. While others continue to talk, the state has successfully put a price on carbon, reduced emissions, and invested in a clean economy. To adapt a line from Woody Guthrie, “Roll on, California, Roll On.”

NOAA just announced that 2012 was officially the warmest year on record for the United States.  With news like this coming out every day, the urgent need to take action on climate change could not be more clear and present.  Fortunately, California is leading the way through innovative solutions that will keep the Golden State at the forefront of new clean energy technologies.

Progress towards meeting the State's goal of protecting public health and reducing greenhouse gas emissions to 1990 levels by 2020 can be seen all over the Golden State.  Polls show that the people of California overwhelmingly support the law (AB 32) that sets these pollution reduction goals and in 2010 they voted decisively to prevent out-of-state oil companies from delaying this vital progress.   California has made significant progress towards meeting its renewable energy goals having recently reached a 1000 megawatts solar power milestone, and leading power companies are developing a more intelligent and resilient electricity system that will deliver a steady flow of cost-effective clean power to Californians.

California has a long tradition of clean air innovation and leadership.   California spent years litigating during the 2000s, battling major automakers that went to court to block California's landmark clean cars standards, the first binding limits of climate pollution in our nation.  Now even stronger vehicle standards have swept the nation with leadership from President Obama, the United Auto Workers, numerous states, consumers and — U.S. automakers.  And after this litigious history, the automakers recently stepped-in to defend the new standards in court!  We can begin to see why when we look at the wealth of innovation and car sales that these new, stronger standards have generated.   One of the State’s greatest strengths is that Californians – and thousands of California businesses – recognize that the State’s and the Nation’s economic future lies in a rapid transition to clean, renewable energy that provides good new jobs and sustains public health and natural resources.

The California  Chamber recently showed that they would rather litigate than innovate when they filed a lawsuit challenging California's cap-and-trade program less than 24 hours before the first California auction for carbon allowances.  The lawsuit shows the California Chamber of Commerce just doesn't get what so many California business people do understand.  The California Chamber should end the litigation, now, and instead help strengthen California's vibrant clean energy economy.    We need to cut these harmful pollutants and protect our public health, our communities, our water — and our economy and that’s why EDF and NRDC have applied to the Sacramento Superior Court to join California in defending these protections against the legal attack brought by the California Chamber.

The California Chamber’s members include big businesses and big emitters like: The national meat Association, Vaquero Energy, the California Independent Petroleum Association and the Royal Petroleum Company.

We urge the California Chamber and its members to join those businesses across the Golden State that are investing in engineers, new technologies, and new ideas — not lawyers and obstructionism.  The time to lead, and reap the environmental and economic benefits of clean energy progress, is now.