Climate 411

An insurance policy for cutting emissions: New research strengthens the case for climate backstops

Climate backstops are a critical part of a carbon fee that help ensure expected emissions reductions actually occur. More federal climate proposals are using them, including the new America’s Clean Future Fund Act from Senator Richard Durbin. New research on these innovative mechanisms can help advance our understanding of different design options and implications for environmental performance.

Protecting lives during the COVID-19 crisis, confronting systemic racism, and providing much-needed economic relief to workers and businesses should be the top priorities for federal policymakers right now. As attention turns to recovery and rebuilding, we must use the opportunity to act swiftly to tackle the climate crisis, another significant threat to our nation’s health that exacerbates racial and economic inequality.

The policies and programs designed to stimulate the economy must also dramatically cut climate and air pollution – a goal underscored by the new report from the House Select Committee on the Climate Crisis, which outlines a range of bold solutions to climate change. Within the suite of climate and air pollution solutions needed, it will be critical that lawmakers include an economy-wide mechanism that puts an enforceable limit on climate pollution. There are several options for such a mechanism – one is a carbon fee that covers the vast majority of emissions across the economy. Such a fee can and should be designed to distribute costs and benefits in a way that promotes equity. That includes protecting the communities most vulnerable to climate impacts, air pollution and the transition to a clean economy through the use of targeted revenue.

To be most effective and help ensure emissions reductions, a carbon fee should include climate backstops (or environmental integrity mechanisms (EIMs)) that tie the fee to specific and concrete pollution reduction goals and adjust the program as needed to keep the program on course for meeting those goals, thereby providing an insurance policy for the climate. This approach has been gaining traction, including in a newly introduced carbon pricing bill from Senator Durbin, America’s Clean Future Fund Act.  The Durbin bill is the latest of a number of carbon fee bills to include a specific type of climate backstop – one that triggers an adjustment of the fee automatically if emissions reduction targets are missed. While research on these types of mechanisms is still in early stages, a newly released EDF policy brief co-authored with experts at Resources for the Future (RFF) outlines key findings from their modeling that can help inform the design of one type of backstop measure.

Climate backstops: what they are and why they are important in a carbon fee

In order to address climate change, we need to cut pollution dramatically, ultimately reaching a 100% clean economy no later than 2050. A carbon fee sets a price per unit of pollution, which provides an incentive for businesses to reduce emissions – but on its own, it cannot provide assurance that we will reduce emissions enough because it is impossible to predict exactly how a complex economy will respond to any given price level. And because greenhouse gas pollution accumulates in the atmosphere over time, even being slightly off the desired path over several decades can produce significant consequences for cumulative emissions, and thus climate damages.

Climate backstops can help ensure that needed emissions reductions occur and targets will be met. Specifically, they help reduce the uncertainty in emissions outcomes by adjusting the program based on performance. In addition to the America’s Clean Future Fund Act, such measures have been included in several other federal carbon fee proposals, including the bipartisan MARKET CHOICE Act and Energy Innovation and Carbon Dividend Act, and more. Moreover, commentary published by EDF policy experts explains why we believe climate backstops can help address one of the political challenges of passing a carbon fee in the US, which relates to the inherent uncertainty about the magnitude of emissions reductions that any given fee will actually achieve. Providing assurances over emissions outcomes is critical for effective and durable climate policy – alongside predictability of the price path.

A Tax Adjustment Mechanism (TAM) is one type of climate backstop that is included in the bills above and increases the fee automatically if it has not been sufficient to drive emissions down to the specified reduction goals. TAMs allow the program to adjust quickly and in a predictable and transparent manner, helping keep the program on track to reach emissions goals. If these increases still do not produce the needed results, other types of backstops could be triggered, including direction to EPA to issue regulations to meet the emissions goals or directing excess revenue (which would be generated if emissions are higher than projected) towards driving additional reductions.

New modeling helps inform policy design

As the TAM concept gains traction, it is critical to evaluate how different designs of this climate backstop will affect emissions and economic outcomes. For example, how frequently should a tax adjustment be triggered? How large should the adjustment be? Understanding these dynamics will be crucial to leveraging TAMs in carbon fee legislation as effectively and efficiently as possible.

Recognizing this need, economists at RFF in collaboration with EDF developed a new model designed to evaluate the effectiveness of different TAM designs. This modeling evaluates how policy design elements – including frequency, type, size of price adjustment, and more – may affect a TAM’s performance.

The results from the modeling reveal four key takeaways for TAMs:

  1. TAMs can significantly reduce uncertainty in emissions outcomes, including the probability of meeting a specific emissions target. Plus, they can do so in cost-effective ways.
  2. Design details ultimately determine a TAM’s performance. For example, smaller, more frequent adjustments are more cost-effective in hitting emissions goals than less frequent, larger adjustments (e.g. a two-year adjustment period vs. a five-year adjustment period).
  3. The initial price path of the carbon fee is primarily what determines emission reduction ambition. The primary role of a TAM is to keep emissions on track for meeting goals, so it’s more likely to be successful if the initial price path already has a relatively high probability of meeting an emissions target.
  4. TAMs can reduce, but not fully eliminate uncertainty in emissions outcomes. With this in mind, policymakers should consider layering other types of climate backstops along with a TAM in legislation.

This analysis provides valuable insights into how TAMs can improve a carbon fee’s overall performance; however, it also underscores the need for further research into other design elements, especially as they continue to be embraced by policymakers in legislation.

As the climate problem grows increasingly urgent, it is more critical than ever that policies are effective, enforceable, and contain measures like climate backstops that provide strong assurances that pollution reductions will occur at the pace and scale needed.

These policies must also be designed to improve public health and quality of life for all communities. In the context of a carbon fee, revenue can and should be used to fully shield low income households from changes in energy costs or in fact, go further to help these households come out ahead; to support workers affected by the transition; and to invest in measures that protect vulnerable communities from the impacts of climate change and conventional pollutants. Alongside other policies and programs, a well-designed carbon fee with climate backstops can play a central role in driving the dramatic emissions reductions needed to reach a 100% clean economy in a way that achieves a cleaner and fairer economy.

Read the full policy brief on Tax Adjustment Mechanisms here.

 

Also posted in Greenhouse Gas Emissions / Leave a comment

More confirmation that the Trump administration has been disregarding the true costs of climate pollution

A new report highlights the Trump administration’s dangerous efforts to obscure the real costs of climate change, while a major court decision firmly rejects the administration’s approach.

Costly flooding in a Houston area neighborhood in the aftermath of Hurricane Harvey.

A new report from the Government Accountability Office (GAO), an independent agency tasked with providing objective nonpartisan information to policymakers, confirms what we’ve known for years: that the Trump administration has been ignoring the enormous costs of climate change. By ignoring these damages, the administration is turning its back on communities across the nation who are footing the bill for those impacts today.

In addition, a federal court recently issued a clear-cut rejection of the administration’s deceptive math on the cost of methane pollution, another greenhouse gas that is 84 times more potent than carbon dioxide over a 20 year time period. This ruling reinforces the fact that the administration has been blatantly disregarding widely accepted science and economics when it comes to the costs of climate change.

All of this comes amid a raging and widespread pandemic that underscores the absolute necessity of relying on experts and scientific data when crafting policy. With unchecked climate change fueling more devastating storms, droughts, and other public health impacts — all of which hit vulnerable communities the hardest — incorporating accurate costs of climate change in policy decision-making matters now more than ever.

Here is what this new report and court decision reveal about the administration’s backwards and harmful approach to decisions on climate change — and how experts and the courts are wholly rejecting it.

Why undervaluing the cost of climate change is dangerous

To justify its own political agenda, the Trump administration has manipulated the calculations behind the estimated impact of emissions to allow for more climate pollution from major sources like power plants and cars. The new GAO report outlines the steps the administration has taken to drastically underestimate the “Social Cost of Carbon” — a measure of the economic harm from climate impacts that is used to inform policy and government decision-making. These impacts include extreme weather events like flooding and deadly storms, the spread of disease, and sea level rise, increased food insecurity, and more.

After a 2008 court decision requiring the federal government to account for the economic effects of climate change in regulatory benefit-cost analysis, an Interagency Working Group (IWG) comprised of experts across a dozen federal agencies began in 2009 to develop robust estimates of the social costs of carbon that could be used consistently by agencies across the government. These estimates were developed through a transparent and rigorous process based on peer-reviewed science and economics that included input from the National Academy of Sciences and the public — and were periodically updated over time to account for the latest science. More recently, the NAS conducted a thorough assessment to provide guidance on updating the social cost of carbon estimates and suggestions for continuing to build on and strengthen it.

The GAO report underscores the importance of implementing those recommendations, while pointing to the fact that the federal government has done absolutely nothing to follow through. In fact, in 2017 the Trump administration recklessly disbanded the IWG — the very federal entity that already had the mandate to take on this task.

Since then, federal agencies like the EPA have been relying on an “interim cost” to inform important regulatory decisions that is seven times lower than the IWG’s estimate — a move that dramatically underestimates the profound impacts climate change has on families, businesses, taxpayers and local governments. To make matters worse, the administration is dramatically reducing the IWG figure even though it is widely recognized to be an underestimate of the true costs. There is wide consensus that the true costs are much likely significantly higher.

The Trump administration substantially reduces estimates through two key flaws in its calculations, both of which fly in the face of established science and economic principles. First, the reduced estimates ignore that carbon emissions are a global pollutant, omitting important categories of climate change impacts on the United States. Second, they undervalue the harm to our children and future generations by significantly over-discounting future climate impacts.

By vastly undervaluing the costs of climate change — and thus, the benefits of acting on climate — the administration has been able to justify rolling back critical protections such as the landmark federal Clean Car Standards. These important rules offer critical public health benefits and fuel savings for consumers.

A court ruling refutes the administration’s deceptive math on pollution costs

In encouraging news, a recent court decision outright rejected the administration’s deceptive math on a similar metric, the ‘Social Cost of Methane,’ used to estimate the impacts of methane pollution. The Bureau of Land Management, under former Department of Interior Secretary Ryan Zinke, has been using an interim social cost of methane that is more than 25 times less than the estimate from the IWG. The U.S. District Court for the Northern District of California recently overturned the BLM’s attempt to ease protections from dangerous methane leaking, venting and discharging from oil and gas activities on public and tribal lands, where it used a distorted social cost of methane as justification. EDF joined the states of California and New Mexico and a broad coalition of health, environmental, tribal citizen and Western groups to challenge in court the rescission of these vital safeguards.

In the opinion, the judge ruled that the BLM’s decision to rely on a lower interim estimate for the social cost of methane was “arbitrary” and “capricious,” and therefore, “failed to quantify accurately the forgone methane emissions and the resulting environmental impacts.” In addition, the court underscored that “the President did not alter by fiat what constitutes the best available science” on the social cost of greenhouse gas emissions. This is a major win for not only the broad coalition involved in the case, but for the basic principle of science-based decision-making on climate change. The court’s meticulous critique of the flaws in the interim social cost of methane — and the process used to develop it — could be influential in future cases involving the social cost of greenhouse gas emissions. Such a critical ruling like this opens the possibility that the Trump administration and future administrations could be required to properly account for the costs of climate change.

The Trump administration’s unwavering, politically motivated attempts at twisting facts and discrediting experts is putting Americans’ lives, health and financial well-being at risk. Unfortunately, its effort to skew the costs of climate change is far more than a political game. It is already causing real harm to communities across the country suffering from climate impacts — and it will only add to the mounting costs our children and grandchildren will pay. That is why ongoing efforts to uncover and overturn unjust climate decisions are all the more essential.

Also posted in Greenhouse Gas Emissions, Policy / Comments are closed

By the numbers: Colorado Zero Emission Vehicle Program will cut climate pollution and save Coloradans money

(This post was written by EDF  Attorney Laura Shields) 

The numbers are in for Colorado’s proposed Zero Emission Vehicle (ZEV) program – it will cut climate pollution and save Coloradans millions of dollars.

This week, the Colorado Air Quality Control Commission is formally considering adoption of the ZEV program for model year 2023 through 2025 vehicles. (Colorado already adopted state Low Emission Vehicle standards last year).

What’s at stake for Coloradans?

This important clean air program means that, while no Coloradan has any obligation to buy or choose a zero-polluting vehicle, ALL Coloradans will have more models of zero-emitting vehicles to choose from if they want a cleaner car.

These clean vehicles will save Coloradans hard-earned money at the gas pump and will reduce dangerous climate pollution. They will also help reduce smog-forming pollution in all communities across Colorado, clean up Denver’s brown cloud, and lift the veil of haze pollution in our world-class national parks and wilderness areas.

In short, Colorado’s proposed ZEV program will mean healthier air, fuel cost savings, more vehicle choice and a safer climate for all Coloradans.

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Also posted in Cars and Pollution, Cities and states, Greenhouse Gas Emissions, News, Partners for Change, Policy / Read 2 Responses

The Status Quo is not an Option for Oregon or the Planet

Authored by Erica Morehouse, Senior Attorney, U.S. Climate Policy and Analysis

Oregon is the current bellwether for climate action in the United States thanks to its effort to place an ambitious, firm limit on all major sources of climate pollution in the state.  HB 2020, Oregon’s “Cap and Invest” bill has passed three major legislative hurdles this year and has the final and most challenging – passage in the state Senate – left to clear before the end of session on June 30.  We are expecting a vote today.

The status quo is not an option

Oregon is already seeing the devastating effects of climate change; the question is only how much worse it is going to get before we transition to the clean economy we need. It’s time to be honest with ourselves, the status quo is not an option.  HB 2020 lays out a solution to address climate pollution while providing a smooth transition for Oregonians directly impacted by this bold initiative. These features include assistance for low-income Oregonians, investments in worker transition programs, compliance cost reductions for many manufacturers designed to protect jobs, and a novel investment set aside for tribes.

The two most critical components of Oregon’s policy

In the final weeks of Oregon’s legislative session, opponents tried and failed to make amendments to the bill that would have gutted the core of what makes Oregon’s effort so ambitious and critical—and a true model for other states to follow: the interim 2035 target and Day 1 coverage of the transportation sector.

  • The 2035 interim target ensures reductions over the next decade on the timescale that science demands. The IPCC report tells us we have just over a decade to significantly reduce climate pollution and avoid the most catastrophic effects of climate change. Setting ambitious targets for the 2030s is essential for getting reductions on track now, and achieving the critical early emission reductions people and the planet need. Also, having an ambitious target in the 2030s is almost certainly a non-negotiable prerequisite for linking with the California-Quebec WCI market – a stated priority for the architects of Oregon’s policy. Moreover, this level of ambition is consistent with Colorado’s recently passed statutory requirement to reduce statewide greenhouse gas emissions 50% below 2005 levels by 2030.
  • Coverage of the transportation sector means the largest source of Oregon’s pollution is included. Exempting the rising emissions of this sector means smaller industries would have to do even more to reduce emissions to meet Oregon’s goals, while giving the biggest polluters a free pass. Without the transportation sector in the program from day one, Cap and Invest will not have the power or reach to drive the transformational change that we literally cannot live without.

Climate action under attack

After failing to push their disastrous amendments, opponents are now set on undermining this bill altogether and are asking legislators to vote “no”.  Leading the charge against HB 2020 are Boeing and AAA.  AAA claims to be the travelers “most trusted advocate”, but it is unlikely that their members across Oregon who rely on them for towing services and roadside assistance understand that they are working actively in Salem to undermine an effort to get cleaner cars on the road and to diversify transportation options for Oregonians. Boeing’s opposition is also particularly hard to understand.  Final amendments to the bill put Boeing in the enviable position of being guaranteed valuable free allowances for their facility in Gresham that will significantly, if not completely, reduce costs the company might have seen from the program while creating a critical market-based incentive to improve efficiency and reduce emissions associated with their production practices while protecting incentives to increase output.  Yet, the company is lobbying against climate policy that is in line with corporate sustainability commitments they have already made.  Many companies have taken on ambitious voluntary, climate commitments and vocally supported climate action including in Oregon. Companies that are stuck in the past and insist on obfuscating, misleading, and outright obstructing to derail climate action should be held accountable.

A diverse coalition of stakeholders reflects a fine-tuned policy

As demoralizing as myopic opposition can be, Oregon has a winning coalition that can provide lessons on how to win on climate in the U.S. and around the world:

  • Legislative leaders and Governor Kate Brown have provided their full throated support for Cap and Invest for well over a year and have been diligently putting the pieces in place to pass a policy that can deliver the environmental outcomes the climate needs while ensuring the provisions are carefully tailored for Oregon communities.
  • Local environmental, environmental justice, and health leaders have been working hard for the better part of a decade to pass companion legislation and lay the groundwork for such an overarching policy like HB2020 that will provide the certainty around pollution outcomes and harness the power of the market to drive investment and innovation in clean technologies.
  • Over 100 forward-looking businesses, including major companies like Nike and Uber, have been supporting the policy through several legislative iterations.
  • Major electric and gas utilities—those that power and heat Oregon’s homes and businesses—are supporting the legislation, including Portland General Electric, Pacific Power, and Northwest Natural, citing key consumer-protection provisions.
  • Oregon’s Native American tribes have played a critical role in developing and advocating for the policy and have secured a novel set aside from carbon revenue that will directly benefit tribes.
  • Key labor unions such as the building trades also support Cap and Invest, after securing the inclusion of prevailing wage provisions.

Time for the Senate To Act

Oregon has all of the ingredients for success, but the political fight is still a bitter one. HB2020 will create tangible benefits for Oregonians and the state’s economy—while laying out a clear policy template for other states who are now committing to strong reduction targets but don’t yet have the regulations or policies in place to actually achieve the reductions in climate pollution that we know are necessary. It’s imperative that Oregon shows the way toward a real solution that can drive action now— and such a framework will not only chart a path for other states, but provide a real roadmap for future federal action.

Also posted in Carbon Markets, Climate Change Legislation, News / Comments are closed

Wheeler’s Clean Power Plan rollback misses a huge opportunity for cost-effective pollution reduction

Co-authored by Laura Supple and Rama Zakaria

The Trump administration is expected to soon finalize a rule that will throw out the Clean Power Plan – the first and only nation-wide limit on carbon pollution from existing power plants – and replace it with a “do-nothing” rule. Unlike the common-sense, market-based approach of the Clean Power Plan, the final rule is expected to mirror Wheeler’s proposed replacement–which contains no binding limits on carbon pollution, leaving it to the states to establish standards based on only a narrow and ineffective menu of operational efficiency tweaks for coal-fired power plants.

EPA’s own analysis has shown that this proposed replacement would increase climate pollution and dangerous soot and smog pollution, causing thousands of additional deaths and childhood asthma attacks every year compared to the Clean Power Plan, and may even increase pollution in several states compared to having no policy at all. In addition to disregarding the health and wellbeing of Americans, the proposed rule represents a tragic lost opportunity to achieve the deep, cost-effective reductions in pollution that are needed to address the urgent threat of climate change – and move the U.S. forward into a clean energy economy.

Here are four reasons why:

Power companies are making bold commitments to cut pollution, investing in cleaner technologies that deliver high-quality power at low cost to consumers

Power companies are setting ambitious goals to reduce pollution and increase the share of renewable technologies in their energy mix. Some of the largest power providers in the country have recognized the long-term economic value of renewable power and cleaner energy, setting their own targets to reduce pollution well below what the Clean Power Plan requires.

Xcel Energy, a utility serving 3.6 million customers across 8 Midwestern states, has already reduced carbon pollution by about 38% below 2005 levels while keeping costs low for its consumers. According to Xcel, its residential customer electric bill has decreased 3% in the past five years and is on average $28 lower per month than the national average. Xcel also recently ramped up its own ambitions, committing to cut carbon pollution 80% below 2005 levels by 2030, and achieve 100% clean power by 2050.

Other companies are also joining the trend towards decarbonizing their electricity mix, including Idaho Power, which has committed to 100% carbon-free electricity by 2045, and Platte River Power Authority, which aims to provide 100% renewable energy by 2030.

States and cities across the country are also setting bold targets to reduce pollution and expand the use of renewable energy. Seven states, 11 counties, and 125 U.S. cities have committed to 100% renewable energy, and at least 27 states have long-term policies establishing quantitative energy savings targets. These initiatives are making energy supplies more robust, reliable, and affordable, demonstrating that ambitious pollution reduction strategies can be good for the environment, good for business, and good for consumers.

Power sector trends have made deeper reductions achievable and cost-effective

Thanks in part to the ongoing market shift towards a cleaner electricity resource mix, the power sector is decarbonizing faster than was predicted just a few years ago.

In 2015, when the Clean Power Plan was finalized, the Energy Information Administration (EIA) projected baseline power sector carbon dioxide pollution would drop 10% from 2005 levels by 2030. Based on recent trends and technological developments, however, EIA’s most recent projections estimate that power sector carbon pollution would be at 34% below 2005 levels by 2030 – surpassing Clean Power Plan targets – even without federal climate regulation.

To be clear, we need the long-term regulatory signal established by meaningful federal regulation to ensure these trends continue and secure pollution reductions. Now more than ever, it is imperative that EPA use this momentum to set even greater climate protection targets in order to achieve the rapid reductions in carbon pollution that scientists say are necessary to avoid the worst impacts of climate change.

Plummeting costs of clean energy technologies are making pollution reduction more affordable and economical than ever

Targets for the Clean Power Plan relied on the National Renewable Energy Laboratory’s (NREL) 2015 Annual Technology Baseline projections of renewable energy costs. In its latest 2018 report, NREL predicted that the costs of onshore wind in 2030 would be 28% lower than 2015 projections, and utility-scale solar PV costs could be up to 68% lower.

These projections match trends we see on the ground. Recent filings from Xcel Energy to the Colorado Public Utilities Commission include proposals for wind power between $11 to $18/MWh – cheaper than the operating cost of all existing coal plants in Colorado – and solar-plus-storage bids not much higher than standalone solar. Last year, NV Energy reported even lower bids, setting record-low prices in its solar and solar-plus-storage request for proposals.

Overall, electricity from renewables is already cheaper than electricity from fossil fuels in many parts of the country. PacifiCorp, a majority-coal power provider, recently found it could save money by retiring 60% of its coal fleet by 2022 and replacing those units with renewables. In a 2019 analysis, Energy Innovation reported that the U.S. has officially entered the “coal cost crossover,” finding that local (within 35 miles) wind and solar generation could replace 74% of U.S. coal plants at an immediate cost savings to customers. By 2025, 86% of coal power plants could be replaced with local renewable generation.

Recent modeling shows far more ambitious and cost-effective pollution reductions can be achieved

Several studies demonstrate just how ambitious climate targets could be – with the right set of regulatory and market-based strategies. A range of analyses show that far greater reductions in carbon pollution can be achieved at low cost.

In 2015, EPA estimated the cost of achieving the Clean Power Plan targets to be in the range of $24 to $37 per ton of carbon over the 2022 to 2030 compliance period. Recent updated analysis using the same power sector model, however, found that much more ambitious carbon pollution reductions of more than 50% below 2005 levels are possible at similar costs to the Clean Power Plan.

EIA also found that even greater reductions of 68% below 2005 levels could be achieved by 2030 at modest cost. A 2016 study by the Union of Concerned Scientists showed that in a “Mid-Cost Case”, power sector carbon pollution limits of 76% below 2005 levels by 2030 could be cost-effectively achieved. Modeling by Columbia University Center and Rhodium Group also suggest that similar strategies could cut power sector carbon pollution by 72 to 76% below 2005 levels by 2030.

At a time when the threats of climate change have never been more apparent, EPA must move forward on climate action with emission reduction targets that surpass the ambition of the Clean Power Plan and protect human health and the environment from dangerous pollution. Instead, Wheeler’s proposed replacement misses a tremendous opportunity to secure deep reductions in carbon pollution and propel the U.S. into a clean energy future.

Also posted in Clean Power Plan, Energy, Health, News / Comments are closed

Pennsylvania has cost-effective opportunities to reduce carbon pollution – new report

Six states could see significant opportunity and low costs if they put in place protections against carbon pollution from the electricity sector, according to a new report.

The report, by Resources for the Future, looked at Pennsylvania, North Carolina, Minnesota, Wisconsin, Illinois, and Michigan.

It found that taking two steps – setting a binding, declining limit on power sector carbon pollution, and creating a flexible, market-based mechanism to achieve that limit – could reduce cumulative carbon pollution by 25 percent in the next decade at low cost. The findings also suggest that even greater ambition is feasible for the six states.

Thirteen states not covered by the report already have – or are about to have – regulations that limit carbon pollution from their electricity sector. Other states, including Pennsylvania, are actively seeking opportunities to reduce emissions and deploy clean energy.

The new report has three key takeaways for Pennsylvania:

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