EDF Talks Global Climate

Why it matters that California hit its 2020 emissions target four years early

sacramento california cityscape skyline on sunny day, water, wetland

Sacramento, Calif. cityscape. Photo credit: digidreamgrafix

This post was authored by Jonathan Camuzeaux and Maureen Lackner

California hit its 2020 greenhouse gas (GHG) emissions reduction target four years ahead of schedule, according to 2016 emissions data released yesterday by the state. At this rate, the state is well-positioned to formally meet its 2020 target assuming it keeps up the good work.

While the world’s emissions are once again on the rise and the Trump Administration is pulling the U.S. backward on climate progress at the federal level, states and regions continue pushing ahead, and California is at the front of the pack. California’s monumental achievement is worth celebrating – and it’s worth investigating how the state got here, and the challenges and opportunities ahead.

Latest emissions data

Here are some highlights from the annual California Greenhouse Gas Emission Inventory published yesterday:

  • California’s 2016 emissions fell to 429 MMt CO2e, beating the 2020 target of 431 MMt CO2e, the statewide greenhouse gas emissions level in 1990.
  • This was the fourth year in a row of emissions reductions in California, where emissions dropped by 3% (12 MMt CO2e) between 2015 and 2016. Emissions fell 13% (64 MMt CO2e in 2016) compared against 2004, when emissions in the state peaked.
  • Business is booming as emissions are falling. In the last year, California’s GDP grew 3% while the carbon intensity of the economy dropped 6%. From January 2013 to December 2016, California added over 1.3 million jobs, an 8% increase, outpacing U.S-wide job growth of 6% in the same period.

The report is an annual update of statewide GHG emissions based on state, regional, and federal data sources, as well as facility-specific information from California’s Mandatory GHG Reporting Program (MRR). The GHG Inventory includes both emissions covered by cap and trade and the remaining 20% of emissions outside the program. Although the GHG Inventory report does not distinguish between emissions within and outside cap and trade, the latest MRR report shows that both categories of emissions fell in 2016, suggesting that California’s multi-pronged approach to emissions reductions is working.

The earlier, the better

Global warming is caused by the cumulative emissions that are present in the atmosphere. Carbon dioxide can stay in the atmosphere for more than a century, so earlier emissions reductions mean there are fewer years for those tons of carbon to have a warming impact on our climate. So beating the 2020 target is important for the atmosphere, but also gets us off to a good start to meet the even more ambitious 2030 target.

Where California’s reductions are coming from

The electric power sector is responsible for about 16% of the state’s 2016 emissions, and accounts for over 85% of gross reductions. Relative to 2015, total sector emissions fell 18%, while emissions from in-state power generation fell 15% and imported electric power emissions dropped 22%. CARB analysis attributes these reductions to growth in utility-scale renewables, as well as rooftop solar generation.

Hydropower also generated larger amounts of electricity than usual due to heavy rainfall in 2016. Small reductions came from industry (a 2% sector-wide drop) and agriculture (1% sector-wide).
Although not enough to fully counteract power sector decreases, some sectors’ emissions increased in 2016. California’s 2016 transportation emissions—the largest source of GHGs in the state—increased by about 2%, continuing the sector’s trend of slowly rising emissions since 2014. Emissions from commercial and residential activities grew by 4%, but account for less than a tenth of total state emissions.

Looking ahead

Given current emissions reductions, the state can start to look forward to its more ambitious 2030 target of getting emissions 40% below 1990 levels. The state’s 2017 “Scoping Plan,” which EDF supported, lays out a comprehensive plan for how to approach this target. All the signs are positive right now and if additional measures are needed to meet state requirements for 2030, there is still plenty of time to pursue those.

California is clearly demonstrating that smart, market-based policy helps us meet targets faster and more cheaply than originally envisioned. California is growing its GDP and adding jobs faster than the national average, and cutting carbon even faster than we expected. This creates a strong foundation for the even more dramatic transition California needs to reach its next goal in 2030.
In the coming decades, the world must get on track for deep emissions reductions and a dramatic transformation to a cleaner economy. California is helping to blaze the trail to that future by demonstrating once again that meeting ambitious climate targets is possible while maintaining a thriving economy.

Also posted in California / 1 Response

“Fiji-on-the-Rhine”: Four things to expect from the COP 23 UN climate talks

By Alex Hanafi, Senior Manager, Multilateral Climate Strategy and Senior Attorney, and Soren Dudley, Program Assistant, Global Climate

A confluence of factors sets the stage for what to expect from this year’s climate meetings, the first since the U.S. announced its plans to withdraw from the Paris Agreement. Above: The Bula Zone at the UNFCCC headquarters in Bonn. Photo: UNFCCC/ Flickr.

The first UN climate talks since the United States announced its plans to withdraw from the Paris Agreement start this week in Bonn, Germany. Chaired by the island nation of Fiji, the meetings are the second-to-last Conference of the Parties (COP) before the Paris Agreement’s implementation “rulebook” is scheduled to be finalized in Poland next year.

This confluence of factors – Fiji’s presidency of the COP, President Trump’s announcement (and the ensuing groundswell of domestic and global support for the Paris Agreement), and the need to advance progress on the technical details of the Paris Agreement’s infrastructure – sets the stage for what to expect from this year’s climate meetings.

1. Islands’ COP, islands’ issues

As the President of the 23rd meeting of the COP, Fiji will aim to highlight both the needs of vulnerable parties as well as island nations’ climate action leadership. This year’s COP presents an opportunity to spotlight necessary adaptation to a changing climate, as well as the loss and damage experienced by islands due to the impacts of climate change. These concerns are especially important to low-lying island nations because their very existence is threatened by the rising sea levels triggered by climate change.

Many island nations, Fiji among them, have made ambitious renewable energy pledges central to their participation in the Paris Agreement. Leadership by small island developing states will shine an even brighter spotlight on the Trump Administration’s retreat from climate action.

2. Trump’s intention to withdraw the U.S. from the Paris Agreement isolates the U.S…. and triggers a groundswell of support for the Paris Agreement

President Trump’s June 1 announcement that the US intends to pull out of the Paris Agreement left the U.S. isolated. This isolation became even starker with the recent news that Nicaragua will join the Paris Agreement, leaving the U.S. and Syria the only two nations in the world refusing to join.

Although the Trump Administration has been working to roll back existing federal climate policies and will continue to do so, its initial efforts have encountered delays and legal setbacks.  The Administration has yet to successfully suspend, weaken, or repeal a major climate protection

While the U.S. government attempts to backtrack on common-sense efforts to reduce U.S. climate pollution, nations around the world are already taking concrete steps to meet their Paris pledges. Perhaps most notably, China plans to roll out a national carbon market in the coming weeks, demonstrating China’s continuing commitment to climate action. China is now increasingly seen as filling the leadership void left by the U.S. With news of recent trilateral climate meetings between China, the EU, and Canada, COP 23 offers the first chance for a this potentially powerful alliance to prove itself as a force for accelerating the transition to the clean-energy, low-carbon economies of the future.

3. U.S. subnational actors show commitment on the global stage

In direct contrast to Trump’s announced pull-out, U.S. subnational actors are eager to communicate to the global community that they are still committed to moving ahead despite federal backsliding. American businesses and state-level officials plan to use COP 23 to showcase concrete examples of their continued climate leadership. Notably, several U.S. governors, including those from California, Virginia, Washington, and New York, will attend to demonstrate the depth and breadth of U.S. state-level action.

4. Negotiations and progress on the Paris Agreement Rulebook

This COP will be important for keeping the ship sailing in the right direction on implementing the Paris Agreement. Countries decided last year that they will finalize the nuts and bolts of the Paris Agreement’s implementing infrastructure (its “rulebook”) by COP 24 in Poland in December 2018. Parties have a long list of tasks to complete, and negotiations on key tools Parties can use to cooperate in driving down climate pollution, like carbon markets, are moving slowly.

While agreement among all Parties on these carbon market standards is not necessary before “bottom up” cooperation on carbon markets may begin, up-front clarity on key issues (like how Parties can avoid “double counting” of emissions reductions) can reduce uncertainty and help catalyze additional investment in high-integrity emissions reductions around the globe.

This will be an important COP to watch for signs of how much work will remain for next year, and how likely it is that countries will stick to their tight timeline for delivering an effective roadmap to guide Parties in achieving the goals of the Paris Agreement.

This post was updated Nov. 5 with more detail in #2.

Also posted in Fiji (COP 23 in Bonn), News, UN negotiations / Leave a comment

California carbon auction sells out after auctions upheld by appeals court, allowances sell above the floor

Tower Bridge in Sacramento. Photo: public domain via pixabay.

Auction results from the May California-Quebec carbon auction showed increased demand after a California Court of Appeal upheld the legality of California’s auction design last month.

These auction results should send a clear message to legislators that California has a strong carbon market design that can weather legal challenges and the inevitable bumps of the political process.

They also indicate it’s high time to extend, adapt, and strengthen the cap-and-trade program as the backbone of California’s effort to meet its ambitious 2030 target – something the California legislature has an opportunity to do by June 15 in concert with the governor’s budget.

Results from the May 16 auction

  • The auction offered more than 75 million current vintage allowances (available for 2017 or later compliance) and all of them sold at a price of $13.80, 23 cents above the minimum floor price. This is the first time the auction has cleared above the floor since November of 2015.
  • Allowances held by the utilities, Quebec, and ARB sold with over $500 million expected for California’s Greenhouse Gas Reduction Fund (GGRF).
  • Almost 10 million future allowances were offered that will not be available for use until 2020 or later; a little over 2 million of those allowances sold. This is significantly higher than the 600,000 that sold in February but future allowances tend to have the most variability in demand.

Demand increased significantly from February, but why?

1. The market has clearly reacted positively by increasing demand in the wake of the Court of Appeals ruling. The appeal to the California Supreme Court and uncertainty about cap-and-trade’s future after 2020 may still be impacting market behavior, however.

2. Regulated businesses need a certain number of allowances to cover their emissions. Demand for allowances is in part driven by this simple reality, and since businesses have been laying low the last few auctions, it makes sense they would need to buy allowances this quarter. Economist Chris Busch describes why these “market fundamentals” led him to predict that at least 50-65 million allowances would be sold in this auction.

3. The stabilizing forces built into California’s program prevent big price swings when the market reacts to new developments. We can see this through California’s private secondary market, which shows daily allowance prices, and acts as a kind of barometer for how and whether the market is reacting to particular events. For example, after the California Court of Appeal on April 6 upheld the legality of California’s auction design, prices on the secondary market went up by 54 cents. When the California state senate on May 1 introduced SB 775, which would have overhauled the current cap-and-trade program and eliminated the auction allowances after 2020, the market dipped by roughly 20 cents – but recovered May 10 after the bill did not come up for a vote as anticipated. This means price shifts have been very small – mostly less than one dollar.

What will happen in the auctions if the legislature extends the cap-and-trade program?

An extension of the cap-and-trade program would lead to more robust demand for allowances — leading to a rising allowance price that better reflects the cost of a ton of carbon pollution reductions, taking into account the 2030 target that was put into law last year. With the price likely rising above the floor, we would expect to see future auctions being fully subscribed — translating into significantly more revenue for the GGRF to invest in projects that reduce carbon pollution.

Some observers have painted a dire picture of allowance prices spiking overnight. But that’s not how we’ve seen carbon markets behave in the past — and there’s no reason to think it will happen now. Instead, we’d expect a gradual strengthening of the allowance price over time, as compliance entities weighed the current price of allowances against the anticipated cost of reducing emissions in the future as the cap becomes more ambitious.

What’s more, the system already has a number of design features in place to protect against such a surge in prices, including offsets, the ability to draw on allowances “banked” from previous years, and a reserve pool of allowances (the “allowance price containment reserve”) that would be released into the market if prices rise high enough.

The governor is pushing hard for a deal on cap and trade by the budget deadline of June 15, so I’m hopeful the next auction will give us much to celebrate.

Also posted in California, Emissions trading & markets / Leave a comment

What to expect from Ontario’s first carbon auction

This post originally appeared on ipolitics.ca.

Air pollution in Toronto. Photo credit: Flickr/ United Nations Photo

On Apr. 3, the Ontario government will announce the results of its first ever auction of pollution permits under its new cap-and-trade program aimed at cutting the emissions that contribute to global warming. As historic and newsworthy as the event may be, it would be wrong to read too much into the results as a measure of the success of the overall environmental program.

Ontario’s cap-and-trade program, launched on Jan. 1, requires emitters such as power plants to surrender a “carbon allowance” for every ton of pollution they produce. The ‘cap’, or limit on emissions, will be reduced over time, ensuring continuing reductions of emissions. The ‘trade’ — allowing emitters to sell excess allowances on the market — provides emitters with a flexible, cost-effective path to going green.

The Ontario government will auction many of these carbon allowances, as they did this month, and the new climate law requires all proceeds to be reinvested in public transit, green technologies and other environmental endeavors that reduce carbon pollution.

The actual auction was held Mar. 22, and offered for sale a total of 28 million allowances at about $17 each. Theoretically, that means the final result announced in April could be hundreds of millions of dollars raised by the province for investments in green projects.

History suggests the actual sum could be considerably less.

Results from recent California and Quebec auctions, which could influence Ontario’s results, have varied widely; those auctions sold 88 per cent and then 18 per cent of available allowances in the two most recent auctions.

There’s a number of reasons why cap-and-trade programs can get off to a relatively slow start.

[pullquote]Relatively soft auction results in the early stages of a cap-and-trade program may simply indicate that the system is working exactly as it was designed.[/pullquote]

In the initial stages, for instance, many polluters can find relatively simple ways to cut their emissions enough to meet their cap for the year and thereby avoid having to buy allowances. Or, since they have a few years before they are required to turn in the required allowances, they could simply wait to purchase them.

Many allowances also will be provided to businesses for free — especially those energy-intensive businesses that have competitors in other jurisdictions not subject to similar climate regulations.

Relatively soft auction results in the early stages of a cap-and-trade program may simply indicate that the system is working exactly as it was designed — by allowing industries to make a gradual transition to lower emissions without causing undue economic upheaval or job losses.

Cap-and-trade programs already are showing that economic prosperity and ambitious climate action can go hand in hand. Ontario’s system is modeled after the joint program between Quebec and California, which have both seen carbon pollution decline even as their economies thrived in their first four years of cap-and-trade. In fact, in the first four years of California’s program, emissions under the cap declined while jobs were added faster than the national average — and California’s GDP grew to make the state the fifth largest economy in the world.

The Ontario scheme is designed to achieve similar environmental and economic results by easing consumers, businesses and industries gradually into the new cap-and-trade regime which will put the province on track to a low-carbon economy.

Ontario was able to develop and implement a rigorous but flexible emission-reduction program in less than half the time it took California and Quebec, an example of how climate giants can spur faster and more ambitious action by working together.

A significant feature of Ontario’s plan is that it includes a proposed linkage with Quebec and California’s market. That would mean carbon allowances could be used interchangeably in all three locations, and that Ontario would begin auctioning allowances at the same time as California and Quebec, who held their last auction in February.

Ontario has a rich history of environmental innovation, and its cap-and-trade program is poised to be a key component of its larger climate policy.

As tempting as it may be to judge the Ontario cap-and-trade program by the revenues it will generate, by far the more important measure of success is what it will do for the environment.

Also posted in Canada / Leave a comment

Mexico’s international climate leadership and collaboration is more critical than ever

love-earth

Photo credit: Sweetie187/Flickr

The stark realities of the environmental policy challenges we are likely to face, in the United States and internationally, have not faded in the month since the U.S. election.

During his campaign, I and many others were deeply troubled by the statements President-elect Trump made about Latinos, African-Americans, women, people with disabilities, immigrants and other religious groups, as well as our critical relationship with Mexico. He called climate change a “hoax”; vowed to “cancel” the Paris climate agreement; and pledged to undo the Clean Power Plan, the regulation that would put the first-ever limits on carbon pollution from power plants in the United States. Just last week, he selected a climate denier, and sworn opponent of bedrock protections for clean air and clean water, as his pick to head the U.S. Environmental Protection Agency.

But in the days following the election, I have been heartened by messages of empathy and solidarity from my friends and colleagues from around the world. These messages remind me that as a community we have strength – and that we can and will keep pushing forward, together. Our resolve is greater than ever, and there are many reasons for hope.

First, no one country can solve climate change alone – and thus no one election, in any country, can put the solution out of reach. A single president cannot reverse the hard-won progress of the world’s countries, who came together in 2015 to craft the historic Paris climate agreement, and met again last month in Marrakesh to continue putting that plan into action.

Mexico has taken on global leadership on the issue of climate change – pledging ambitious reductions to its national emissions, and forging collaborations in North America with the state of California, and the provinces of Quebec and Ontario, among other international partnerships. Mexico’s leadership and international collaboration now play an even more critical and influential role in the global effort on climate change, and particularly in North America. And Mexico will not be alone in moving forward to develop a low carbon economy – emissions giants including China have pledged they will continue to move forward with their plans to reduce emissions, and use market-based mechanisms to get there.

[pullquote]The transformation underway toward clean energy and low-carbon economies is unstoppable.[/pullquote]Second, the transformation underway toward clean energy and low-carbon economies is unstoppable. In 2014, the U.S. clean energy market, which includes wind turbines, solar panels, home energy storage and energy efficiency, grew by 14 percent – at nearly five times the rate of the overall economy – to nearly $200 billion. And hundreds of major businesses just called on the new Administration to meet US carbon pollution reduction targets, invest in clean energy, and implement the Paris climate pact.

Even beyond the Paris Agreement, the world is beginning to shift. The reform and modernization of Mexico’s power sector, as one example, has the potential to transform its economic and energy future in way that is both more profitable and more sustainable.

California has been leading the way on climate change and energy innovation in the United States – and working in active partnership with Mexico on climate change since 2014. California’s also forged a collaboration among more than 130 subnational governments representing more than half of the world’s GDP through the Under 2 MOU.

And let us not overlook that two-thirds of Americans want reducing carbon pollution to be a priority and over 80% of Americans support boosting clean energy sources such as wind and solar.

Our work in Mexico has all the key ingredients we need to succeed. Our partners in Mexico, from government to civil society, are committed – as are we – to working in partnership to put our collective knowledge, expertise, creativity, and will to the task of fighting climate change – together.

I know that I will, and my organization will, continue to face and fight the battles ahead for protecting our health, the climate, and clean air, healthy ecosystems, and clean water – and there will, no doubt, be many.

I am extremely proud of my work and I am fortunate to come to work every day and be a part of the global effort to solve one of the most formidable environmental challenges of our time, and to work in partnership with dedicated leaders and committed citizens of Mexico.

Also posted in Mexico / Leave a comment

With joint action plan, US and Mexico walk the walk on energy and climate

Lea aqui la version en Español.

When President Obama joined Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto in Ottawa last month at the North American Leaders’ Summit to announce ambitious goals on climate and clean energy, EDF President Fred Krupp said that “implementing them will be the true measure of success.”

Today, the United States and Mexico took important next steps towards successful implementation, announcing new details on how the two countries will work together to:

  • curb emissions of methane, a potent greenhouse gas responsible for a quarter of today’s warming, by reducing emissions from the oil and gas sector by 40-45% by 2025;
  • expand clean energy to meet the goal of 50% electricity generation from zero-carbon sources by 2025;
  • promote residential, commercial, and industrial energy efficiency; and
  • align methodologies for estimating the social cost of carbon, a key input into understanding the benefits of reducing carbon pollution.

If the June announcements were the poetry, today’s announcements were the prose — but they are no less important for it. The work plans, workshops, technical dialogues, and regulatory processes laid out in today’s announcement are the nuts and bolts of effective governing. Just as important, the concreteness and specificity of these plans give a clear signal of the countries’ strong commitment to getting these things done.

The two countries also reaffirmed their commitment to work together in the International Civil Aviation Organization (ICAO) for the adoption of a robust market-based measure to limit emissions from international aviation, and to join the Paris Agreement and support its entry into force this year.

Today’s announcement provides yet another illustration of the growing importance of North American leadership on climate and clean energy — one of many recent bright spots in climate action.

[pullquote]The concreteness and specificity of these plans give a clear signal of the countries’ strong commitment to getting these things done.[/pullquote]

And it’s not hard to see why. Canada and Mexico are two of the U.S.’s top three trading partners. By advancing together, the three countries can reap the full economic and environmental benefits of a clean energy economy, creating opportunities for clean energy entrepreneurs, low-carbon investment, and sustainable economic development across the continent.

Today’s announcement is a particularly strong signal from Mexico, which — with a well-earned reputation for climate leadership on the international stage — must still demonstrate how domestic policy will match those ambitious targets. Indeed, Mexico itself has much to gain from following through. With a historically oil-dependent economy, the country is already feeling the fiscal pinch of rock-bottom global oil prices. Combine that with the enormous untapped potential and newly opened market for renewable energy generation, and pathway is clear to major opportunities for economic growth through low carbon energy and efficient production.

The path to shared global prosperity is a low-carbon path. By moving from the bold type of headline announcements to the finer print of detailed workplans, the U.S. and Mexico just took a meaningful step in that direction.

Also posted in Mexico, News / Leave a comment