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3 Keys for the American Petroleum Institute’s New Climate Task Force

AdobeStock_56840116By Ben Ratner, Director, EDF's Corporate Partnerships Program

The climate change discussion is percolating even in surprising places. The latest sign: the American Petroleum Institute’s recent formation of an internal task force on climate change. Reportedly the new task force’s mandate is to revisit API’s approach to this crucial issue, going into an election year and with ever greater scrutiny on fossil fuels.

It is too soon to know whether the task force will rubber stamp a business-as-usual approach defined by glossing over climate concerns and attacking policy measures, or chart a new path instead.

But if the task force is serious about a fresh look at the issue, here are three keys for the task force to consider as it ponders the future of API on climate.

Face the Facts

The oil and gas industry must be responsive to growing pressures from its investors, corporate customers, and Americans affected by oil and gas operations – from local pollution to climate change.

The historic global climate agreement reached in Paris, supported by nearly 200 countries including powerhouses like the United States and China, was also supported by a wide cross-section of American businesses – including PG&E, which as a natural gas distribution company and power generator is a user of API members’ products and a face to climate-conscious consumers.

Last April, over 400 investors representing more than $24 trillion in assets under management urged stronger leadership and more ambitious policies to lessen risk to investment and retirement savings of millions of Americans. Since then, the 2016 investor shareholder resolution season yielded a record breaking number of resolutions – 94 – addressing climate change, many levied as challenges to large oil companies.

And American public concern on global warming is reaching an eight year high, with nearly two-thirds of adults saying they worry about global warming a “great deal” or “a fair amount”, according to Gallup.

Facing all the facts, not cherry-picking them, can ground the task force’s work in today’s dynamic environment and enable an effective response in a changing world.

Solve Methane

While understanding and concern on the methane challenge has snowballed, API’s response has severely lagged.

But it doesn’t have to.

The methane emissions from the U.S. oil and natural gas industry account for the climate damage over a 20-year timeframe equivalent to roughly 240 coal fired power plants. And yet, when the Environmental Protection Agency issued rules earlier this year requiring operators to implement basic safeguards to detect and prevent emissions, API’s public response was to decry new environmental rules as “unreasonable and burdensome”.

Months prior, API’s combative regulatory filing questioned the authority of EPA even to regulate methane emissions, resisted twice-a-year inspections for accidental leaks and urged inspection exemptions that ignore insights on leak unpredictability.

The next round of methane rules is around the corner, and better late than never for API to embrace the United States’ goal of a 45% reduction in methane emissions from the oil and gas sector and to support effective national methane rules grounded in science and economics. Supporting a level playing field to address the invisible but undeniable methane problem would increase investor confidence and keep more product in the pipelines working for the economy, not against the climate. And it just might help build public trust in an industry that according to Edelman lags only the pharmaceutical and financial services industries in that category.

Truth be told, new regulations and compliance are not cost-free, but neither are exploration and drilling. Investing in effective rules will provide climate and environmental safeguards – a needed advancement responsive to legitimate pressure that is only rising.

Support Carbon Pricing

Implementing a market based approach to reducing greenhouse gas emissions is widely thought to be the ultimate key to achieving U.S. climate goals including cutting emissions 80% by 2050. Geographies from northeastern states and California to South Africa and the EU have implemented various forms of carbon pricing. A number of mostly European API members have publicly supported pricing carbon, for example BP recognizing “that carbon pricing by governments is the most comprehensive and economically efficient policy to limit greenhouse gas emissions.”

And yet, some prominent API members have to date withheld support for carbon pricing, or provided lukewarm quasi-endorsements but not lobbying muscle.

The oil and gas industry has survived through evolving, and it’s time to evolve on carbon pricing. An economically rational policy can provide the investment clarity companies want, while delivering the greenhouse gas reductions that societies, supply chains, and ecosystems need.

API is a large organization with diverse views represented, and the climate task force’s job won’t be easy. But the time for change couldn’t be better.

This post first appeared on the EDF + Business Blog

Posted in Economics, Energy, Greenhouse Gas Emissions, Jobs| Read 1 Response

China's underestimated carbon emissions: What does it mean for climate action?

By Dan Dudek

The New York Times revealed in a Nov. 4 article that China has been burning as much as 17 percent more coal annually than previously thought, citing new Chinese government data.

It was sobering news to all of us who are working to reduce China’s dependency on fossil fuels, but not necessarily a verdict on the country’s – or the world’s – prospects going forward.

It’s important to note, first of all, that China’s revised coal consumption numbers have not changed scientists’ estimates of global carbon dioxide levels in the air. Unlike national emissions data, which is based on fuel consumption statistics, global levels are measured directly.

So what do we make of the news that China, the world’s largest greenhouse gas emitter, has been underestimating coal use since 2000?

China needs good data, and knows it

Significantly higher emissions in any country increase the urgency and difficulty of avoiding the worst impacts of climate change – and this is especially true for an economy the size of China’s. However, it is significant that this story was prompted by the Chinese government reporting its own data corrections, and not by an external watchdog.

China has acknowledged the challenges it faces trying to develop robust emissions estimates, and the new numbers, though troubling, are a sign that the country is making progress in this regard.

This is important not just for the international climate negotiations that kick off in Paris later this month, but also for China’s long-term strategy.

China has made it a priority to upgrade its baseline inventory emissions data, especially for sources that might be included in its national emissions trading system. Good baseline data is a prerequisite to the effective carbon trading and reduction program Environmental Defense Fund has been working toward for 25 years.

Needed now: Deeper emissions cuts 

It’s also important to note that while the emission data was revised, China’s growth in coal consumption has actually been declining, a trend that remains unchanged and will likely continue.

The government has recently targeted 6.5 percent economic growth as the official target for the next five years, down from the recent 7- percent rate. Slower growth, air quality concerns, new requirements to invest in renewables and energy efficiency, and the international commitments to peak emissions and introduce a carbon market will all put continued downward pressure on coal.

China’s data correction does not change our basic understanding of what it will take to reach the crucial turning point where global emissions finally level off and begin to decline.

We have long known that much deeper reductions will be required to get us there. The Paris commitments are shaping up to be a major milestone on that road, but won’t by themselves get us where we need to go.

For China, the solution remains a national carbon market that creates the incentives to  lower emissions as efficiently as possible. China remains committed to launching the market  in 2017.

For all of us who understand the urgency of global climate change, The New York Times story is a reminder that there is still a great deal of work still to be done – in China and beyond.

Image source: Flickr/Nicolò Lazzati 

This post originally appeared on our EDF Voices blog.

Posted in Energy, Greenhouse Gas Emissions, International| Read 1 Response

The Rev. Sally Bingham: Pope Francis' climate message speaks to all faiths

By Rev. Sally G. Bingham,  president and founder of Interfaith Power & Light. Rev. Bingham has served on EDF’s board of trustees since 1986.

Source: Wikimedia

It’s unfortunate that discussions about climate change, which should focus on solutions and our responsibility to act, often become political arguments. That’s why it’s so refreshing and important that Pope Francis, who will address Congress this month, is bringing us all back to what really matters.

The climate change debate should be about what kind of world we want to leave our children, and how we treat the most vulnerable among us.

I’m an Episcopal priest and have been working at the crossroads of religion and climate change for 15 years. I deeply respect Pope Francis’ powerful, moral voice.

All of us, Catholic or not, Christian or not, must recognize our responsibility and obligation to act in the face of human-induced climate change.

Pope Francis has reminded us that everyone has a moral responsibility to be a caretaker of God’s creation. At the very least, he says, we must not leave a damaged and unhealthy world to future generations.

We don’t want our children to ask, “You knew and you continued to pollute?”

We don’t want to leave the poor of the world – who will be hardest hit by extreme weather, instability, disease and other impacts of climate change – to suffer for our failure to act. We all have a responsibility to care for one another, but people of faith have an obligation to do so.

Do unto others…

Most religions have a version of the Golden Rule: Do unto others as you would have them do unto you. That’s the message we should convey to everyone, everywhere.

Right now we are leaving a great burden to our children and grandchildren, even with overwhelming evidence of the consequences. Would we want that done to us?

As a person of faith, I cannot say I love God and love my neighbor (two of the Bible’s Ten Commandments) without doing all that I can to preserve creation – to act out of love for what God loves.

We must look after our garden, Planet Earth

As Pope Francis says, God put us here with the purpose of looking after “the garden” and each other. We have a particular responsibility for vulnerable communities that are hurt first and worst by a changing climate.

In the end, it is about this fragile Earth, our island home, and all who live on it.

Environmental Defense Fund, on whose board I serve, is working with people across the political spectrum and both parties to find answers to this challenge.

Our scientists and economists are focused on finding practical pathways to a cooler planet. But nothing brings people together like a moral call from someone who’s above politics, which makes the pope’s message so profoundly important.

Pope Francis is helping us live up to our responsibility and to finally do something about this catastrophic threat to our common home.

This post originally appeared on our EDF Voices blog.

Posted in Greenhouse Gas Emissions, Health, Policy| Comments are closed

Accelerating the Shift to More Efficient Trucks

By Tom Murray, Vice President, Corporate Partnerships, Environmental Defense Fund

Freight transportation is the work horse of the global economy, ensuring that the products consumers want get on the shelves where and when they want them. With 70 percent of U.S. goods being moved by truck, freight is a key source of U.S. fuel consumption and corporate greenhouse gas (GHG) emissions. Today, freight also offers companies a key opportunity to drive us toward a lower carbon future.

pepsico-logoIn a Wall Street Journal op-ed with EDF President Fred Krupp, Pepsico Chairman and CEO Indra Nooyi voiced the company’s strong support of the new fuel efficiency and GHG standards for medium and heavy duty trucks released today by the U.S. Environment Protection Agency and Department of Transportation. Over the life of the program, these robust standards will cut fuel consumption in new trucks by 1.8 billion barrels of oil and reduce carbon emissions by one billion metric tons.

Leading companies like General Mills, Walmart and Anheuser-Busch have made reducing fuel use and emissions from freight a priority in setting their internal supply chain performance goals. But Pepsico’s willingness to step forward with this op-ed is a prime example of how companies can extend their leadership by aligning their public policy stances on with their sustainability goals – what EDF has been referring to as the business-policy nexus.

Freight affects all of us, but business is in the driver's seat

EDF - Building better trucksFreight transportation exists to serve companies that make or sell physical goods, from brands and manufacturers using trucks to bring in supplies and ship out final products, to technology companies needing trucks to deliver the hardware that powers their online services. While medium- and heavy-duty trucks only make up 7 percent of all vehicles on the road, they consume 25 percent of the fuel used by all U.S. vehicles.

Inefficient movement of goods wastes fuel, raises costs and increases environmental impacts. For firms like Pepsico, who maintain their own fleets, as well as those that contract out for freight moves, fuel is the single largest cost of owning and operating medium- and heavy-duty trucks. Truck fuel prices have increased 58 percent since 2009, a strong incentive for increasing the efficiency of trucks that move freight. Consumers are counting on businesses to solve this problem, as those costs are passed on to consumers. Through everyday purchases, the average U.S. household spends $1,100 a year to fuel big trucks. Strong standards can cut this expense by $150 on average a year by 2030.

Supporting strong truck standards is good business

PrintStrong standards will help companies meaningfully reduce their supply chain costs and carbon footprint. In an update of analysis originally produced last year, EDF and CERES found that under strong heavy truck fuel efficiency standards, companies could see freight rates fall nearly 7% as owners of tractor-trailer units see their costs fall by over 20 cents per mile. A big consumer goods company, for example, could save annually as much as 3 billion gallons of fuel and $11.5 million in freight costs per year in 2030 by using newer trucks produced under strong truck standards.

Supporting strong truck efficiency standards is also an important way for companies to proactively mitigate risk. In a world with higher oil prices, we could see freight costs double; however, even in a scenario where oil prices remain low, savings would still be significant.

Standing against or keeping quiet about the proposed rule is essentially committing to higher long-term costs, more greenhouse gas emissions and greater fuel use than would be the case under stronger efficiency standards.

Strong truck standards are achievable now

Manufacturers continue to prove that strong standards are feasible now. Leading fleets are already achieving more than 10 MPG through a combination of driver techniques and leveraging current technology, and component manufacturers continue to bring efficiency solutions to the market each year.

Who will speak up next?

In addition to speaking out in the Wall Street Journal, in a press release issued on June 19th, Pepsico joined companies like Cummins Inc., Eaton Corporation, FedEx, Waste Management and IKEA in voicing their support for the standards to both the White House and the EPA.

Because freight touches many points along the corporate supply chain, companies have a responsibility to push for strong standards that minimize the environmental impacts of moving goods in the U.S. This is smart business, and it’s another piece of the climate puzzle we’re racing to solve. Every company voicing support will help us all move down the road towards a cleaner future.

To learn more about the heavy truck fuel efficiency and GHG standards, join EDF's Jason Mathers July 21st for our latest Business-Policy Nexus webinar, which will review the proposed standards and why companies should support these common-sense standards, which will not only protect our air quality and the climate overall, but save companies transportation costs. Register now for this informative webinar

This post originally appeared on our EDF + Business Blog.

Posted in Cars and Pollution, Greenhouse Gas Emissions, Jobs| Comments are closed

Déjà vu: Pushback to U.S. Clean Power Plan Reminiscent of 2011 Mercury Rule

By Susan Tierney,  Managing Principal, Analysis Group, Inc.

This post originally appeared on World Resources Institute's Insights blog.

Did you notice the massive blackout on April 16th, 2015?Reversed-GoldBackground

Actually, I didn’t either. That’s because the electric system didn’t falter. The fact that April 16th came and went without a reliability glitch was both nothing unusual and also a really big deal. Because history has a habit of repeating itself, it’s worth understanding why April 16th was a remarkable (and remarkably dull) milestone in electric-industry history.

The Origins of the Mercury and Air Toxics Standard (MATS)

Back in 2010, just under a third of all U.S. power-plant capacity burned coal to produce electricity. Many of those plants were emitting unhealthy levels of toxic air pollution, which forthcoming regulations from the Environmental Protection Agency (EPA) would limit. Critics of EPA’s rule doubted that manufacturers and installers could get enough pollution-control equipment into the market and on to power plants fast enough to meet the deadline under the new Mercury and Air Toxics Standard (MATS) – and that taking so much of the nation’s generating capacity off line all at once would inevitably lead to an unreliable electric system.

Before the EPA finalized its MATS rule at the end of 2011, countless groups published estimates of how many coal plants would retire due to the EPA regulations. The North American Electric Reliability Corporation (NERC) warned that “with [the mercury rules] as the primary driver, the industry faces considerable operational challenges to complete, coordinate and schedule the necessary environmental retrofits.” Others, including opponents of the rule, argued that, in the name of reliability, the rule would need to be delayed.

In December 2011, EPA issued the final MATS rule, which gave owners of affected power plants until April 16, 2015, to either bring their plants into compliance with the new requirements or cease their operations.

That date passed two weeks ago without incident. The lights didn’t dim.

Why not? First, the EPA stood by its commitment (made in November 2011 by then-Assistant EPA Administrator Gina McCarthy in testimony to the Federal Energy Regulatory Commission, the agency with responsibility for electric system reliability) that “In the 40-year history of the Clean Air Act, EPA rules have never caused the lights to go out, and the lights will not go out in the future as a result of EPA rules.”

Part of the reason for that is that the EPA is nowhere near as rigid or anti-business as many observers like to portray it. The final EPA rule gave power-plant owners the ability to request an additional year of time to comply, and allowed yet another year in unusual cases where continued operation of a plant would be needed for reliability. According to the National Association of Clean Air Agencies, as of March 2015, owners of 38 percent of the 460 coal-fired power plants affected by the MATS rule had requested additional time to comply and, of those, the EPA granted an extension to 95 percent.

Kentucky power plant. Photo by Cindy Cornett Seigle/Flickr

Second, the electric industry is already transitioning to rely less on coal, even without the MATS rule. Between 2011 and the end of 2014, 21.5 gigawatts (GW) of coal-fired power plants retired. The fact that these retirements occurred before the MATS deadline indicates that something other than EPA's regulations is driving the least-efficient and oldest coal plants into retirement.

Coal's ardent supporters may prefer to point the finger at EPA, but the truth is that market conditions are responsible: relatively flat electricity demand, increased supply from power plants using other domestic energy sources (natural gas, wind and solar), and price competition between natural gas and coal. Another 14.6 GW of power plants have retired or will retire in 2015. This total amount of coal-plant retirements (36.1 GW) falls at the mid-point of estimates made during the 2010-2011 period.

Third, the electric industry is dynamic. The market has responded to signals that additional electric resources are needed to replace old ones. Many projects have come forward: new power plants, upgraded transmission facilities, rooftop solar panels, energy-efficiency measures and energy-management systems. These varied responses are the norm, collectively maintaining reliability and modernizing the power system along the way.

That’s why there were no blackouts on April 16th, despite all the dire warnings.

History Repeats Itself

The reliability theme is re-emerging once again, as the states and the electric industry face the prospect of EPA finalizing its “Clean Power Plan” to control carbon pollution from the nation’s power plants. In anticipation of the final rules coming out this summer and of power plant owners having to comply with them by 2020, many observers are saying that the electric system's reliability will be jeopardized if the EPA goes forward as planned. The latest warning came last month with a new assessment published by NERC, calling for more time to allow the industry and the states to respond to the forthcoming carbon-pollution rules.

Such warnings are common whenever there is major change in the industry, and they're not without value: They play an important role in focusing the attention of the industry on taking the steps necessary to ensure reliable electric service.

But warnings lose their value when they are read as more than what they are. Notably, the reliability concerns currently being raised by some observers about EPA’s Clean Power Plan presume inflexible implementation, are based on worst-case scenarios, and assume that policy makers, regulators and market participants will stand on the sidelines until it is too late to act.

There is no historical basis for these assumptions. Reliability issues will be worked out by the dynamic interplay of actions by regulators, entities responsible for reliability, and market participants, all proceeding in parallel to find solutions.

EPA’s proposed carbon-pollution rule provides states and power plant owners with the means to prevent reliability problems by giving them a wide range of compliance options and plenty of operational discretion (including various market-based approaches, other means to allow emissions trading among power plants, and flexibility on deadlines to meet interim targets). And EPA Administrator McCarthy has stated repeatedly that her agency will write a final rule that reflects the importance of a reliable grid and provides the appropriate flexibility.

One of the best ways to assure electric reliability will be for states to actively avail themselves of the Clean Power Plan’s flexibility, rather than “just say no.” States that do not take advantage of this flexibility and then suggest that EPA’s regulations led to unreliable and uneconomic outcomes may be courting a self-fulfilling prophecy. The more states sit in the driver seat and figure out how to arrive at the emissions-reduction destination in a manner consistent with their goals and preferences, the more likely it is that they’ll accomplish them.

Posted in Clean Power Plan, Energy, Greenhouse Gas Emissions, Health| Comments are closed

Three Climate Leadership Openings Corporate America Can't Afford to Miss

By Ben Ratner, Senior Manager, Corporate Partnerships Program

Too much ink has been spilled on the anti-climate furor of the Koch brothers. If we lose on climate, it won’t be because of the Koch brothers or those like them.

It will be because too many potential climate champions from the business community stood quietly on the sidelines at a time when America has attractive policy opportunities to drive down economy-endangering greenhouse gas emissions.

Corporate executives have the savvy to understand the climate change problem and opportunity. They have the incentive to tackle it through smart policy, and the clout to influence politicians and policy makers. Perhaps most importantly, they can inspire each other.

And today, they have a chance to do what they do best: lead. Corporate climate leadership has nothing to do with partisanship – it’s ultimately about business acumen.

For starters, here are three immediate opportunities smart companies won’t want to miss.

1. Clean Power Plan: Will spur new jobs and investments.

The Obama administration’s plan will cut emissions from coal plants by 30 percent by 2030. This is expected to trigger a wave of clean energy investment and job creation. It will also seize energy efficiency opportunities and take advantage of America’s abundant and economic supply of natural gas.

Every company with an energy-related greenhouse gas footprint has something to gain from a cleaner power mix. Each one of those companies therefore has a stake in theClean Power Plan.

Google and Starbucks – two large and profitable American companies by any standard – are among more than 200 businesses that have already stepped up to voice their support.

Who will follow them?

2. First-ever methane rules: Will make industry more efficient.

The U.S. Environmental Protection Agency’s upcoming methane emission rules are another opportunity for business leaders to weigh in.

The rules are part of a White House plan that seeks to reducemethane emissions – a major contributor to global warming and resource waste – by almost half in the oil and gas industry.

Globally, an estimated 3.6 billion cubic feet of natural gas leaks from the sector each year. This wasted resource would be worth about $30 billion in new revenue if sold on the energy market.

Some oil and gas companies that have already taken positive steps include Anadarko, Noble and Encana, which helped develop the nation’s first sensible methane rules in Colorado.

Engaging to support strong and sensible national standards isa good next step for companies in this space. And for others with a stake in cleaning up natural gas, such as chemical companies, and manufacturers and users of natural gas vehicles.

3. New truck standards: Can help companies cut expenses and emissions.

New clean truck standards are scheduled for release this summer. Consumer goods companies and other manufacturers stand to see significant dollar and emissionsavings as they move their goods to market.

Cummins, Wabash, Fed Ex, Con-Way, Eaton and Waste Management are among those that applauded the decision to move forward with new standards.

Putting capitalism to work

American business leadership is still the global standard and will remain so if it adds climate policy to its to-do list. While it will take time to build the bi-partisan momentum for comprehensive national climate legislation, there are immediate opportunities to move the needle.

Which companies will take the field?

Image source: Flickr/Don McCullough

This post originally appeared on our EDF Voices blog.

Posted in Clean Power Plan, Economics, Energy, Greenhouse Gas Emissions| Comments are closed
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