Climate 411

North Carolina needs to build a clean and equitable power sector. Here’s how RGGI could be a tool for the job.

This blog was co-authored with William Barber III, Founder and CEO at Rural Beacon Initiative.

solar panels in field

Photo credit: Pexels.

With the recent passage of the Inflation Reduction Act elevating the importance of state implementation of climate action, North Carolina is well-positioned to make critical progress to reduce climate-warming pollution from the electric power sector. Last year, the state took two steps to move towards a cleaner energy future. In July 2021, North Carolina initiated a rulemaking process to join the Regional Greenhouse Gas Initiative (RGGI) — a regional market that caps emissions from the electricity sector across 11 participating states, reinvesting revenues from the sale of allowances into programs that reduce electricity costs and boost the amount of energy generated from clean sources like solar and wind. Then, in October 2021, Governor Roy Cooper signed House Bill 951 (HB 951) into law, calling for a 70% reduction in carbon emissions from the electricity sector by 2030 and carbon neutrality by 2050.

Reaching these important goals demands that North Carolina move further and faster with new programs and intentional policies to drive energy sector transformation and catalyze investment in clean technologies necessary to cut emissions. It also demands that policies better prioritize benefits for environmental justice communities, ensuring that disparate pollutant burden is reduced and that RGGI revenues help advance energy justice by investing in historically disadvantaged communities. Executive Order 246, signed by Governor Cooper earlier this year, acknowledges that “responsible solutions to climate change must equitably reduce GHG emissions, increase community resilience, advance sustainable economic recovery and infrastructure investment efforts, promote public health and health equity, and ensure fair treatment and meaningful engagement in decision-making and implementation.” RGGI, with proper protections, offers a way to do this.

In July, EDF and Rural Beacon Initiative (RBI) released a report evaluating the interplay between the two policies: RGGI and HB 951. The analysis showed that by joining RGGI, paired with a robust rulemaking process that directly prioritizes equitable benefit and adoption of a strong Carbon Plan as required by HB 951, North Carolina can reap the benefits of a multi-pronged approach to decarbonizing the electric sector while ensuring climate benefits are maximized in the near-term, when they are most impactful. 

HB 951 lays the regulatory framework to make this combination of beneficial policies a reality, and RGGI is an important tool that can be leveraged to achieve emissions reductions in a way that is durable, cost-effective and environmentally just.

Here are three key takeaways from the report:

Read More »

Posted in Cities and states, Greenhouse Gas Emissions / Leave a comment

The ambition-raising opportunity of reducing methane emissions

This blog was authored by Alice Alpert, Senior Climate Scientist at EDF.

Evening silhouette of oilfield pipeline. Source: Getty Images

Meaningful methane emission reductions are not only possible—such efforts can potentially have a massive impact on warming.

Readily available methods to reduce methane can deliver a whopping 0.25°C of avoided temperature rise by 2050. This year the Intergovernmental Panel on Climate Change (IPCC) stated that reductions of methane emissions would also lower peak warming and reduce the likelihood of overshooting the warming levels described in the Paris Agreement. In pathways limiting warming to 1.5°C, methane is reduced by around 33% in 2030 and 50% in 2050. But not all countries define methane targets or even include methane in their Nationally Determined Commitments (NDCs).

The Global Stocktake process, also called the Paris Agreement’s ambition “ratchet,” allows countries to assess collective progress toward the Paris Agreement’s long-term goals on mitigation, adaptation, and finance. A successful stocktake will help countries implement their existing climate commitments and provide the impetus and information necessary for them to raise the ambition of their next NDCs. EDF is collaborating on an extensive project with C2ES to help shape the Global Stocktake process by highlighting opportunities to scale up climate ambition.

As work in the Global Stocktake continues toward its conclusion at next year’s COP28, it’s important for all NDCs to include methane-specific targets, and policies and strategies to achieve those targets. Read More »

Posted in Climate Change Legislation, Energy, International, Policy, Science, United Nations / Leave a comment

Widespread support for the SEC’s proposed climate risk disclosure standards

Photo by Jose Saenz

(This post was co-authored by EDF’s Director of Investor Influence Andrew Howell)

A proposal from the Securities and Exchange Commission (SEC) that would standardize public companies’ disclosures of climate risk information is getting strong support from the general public, investors, companies of various sizes across a wide range of sectors, law and business scholars, public officials, climate scientists, and environmental advocates – including EDF.

We joined the Institute for Policy Integrity at NYU School of Law to submit letters supporting the proposed standards. Our letters focus on three reasons why the SEC is on strong legal footing:

Adoption of the proposed rule would replace today’s inconsistent, vague reporting of climate risk exposure with comparable, specific information to strengthen investor and corporate climate risk management.

Here’s what other experts and stakeholders are saying about why they support the standards:

Investors say the standards would provide crucial information for their decision-making 

Teachers Insurance and Annuity Association of America (TIAA) – “Over our century-long history, TIAA’s mission has always been to aid and strengthen the institutions, retirement plan participants, and retail customers we serve and to provide financial products that meet their needs. … We believe that climate risk is an investment risk that we must manage over time to maximize our risk-adjusted portfolio returns … By proposing formal climate disclosure requirements for public operating companies, the SEC is taking a significant step toward ensuring that all investors can make better, more informed investment decisions that appropriately factor in the significant risks and opportunities posed by climate change.”

Vanguard – “As a steward of lifetime savings for more than 30 million clients, Vanguard recognizes the value of meaningful disclosure to investors’ ability to evaluate risk and make informed investment decisions … We consider climate risks to be material and fundamental risks for investors and the management of those risks is important for price discovery and long-term shareholder returns … We appreciate that the Proposal would ensure public companies provide clear, consistent, and comparable foundational climate-related information, including uniform reporting of Scope 1 and Scope 2 greenhouse gas (GHG) emissions. This information will help investors better understand a company’s exposure to, and management of, climate risk without imposing undue burden on companies.”

Wellington Management – “Accurate and comparable information about climate risk is critical to Wellington Management’s ability to make informed investment decisions on behalf of our clients. Because climate change will continue to profoundly impact society, economies and markets, investors need more information to better price these risks and fully assess the value of an issuer’s securities. Currently, our evaluation of the positive and negative impacts of climate change on issuers is limited by inadequate information and the absence of a standardized framework for disclosure. The Commission’s Proposal represents a strong step towards providing investors with the information they need to make informed investment decisions.”

Legal & General Investment Management America – “We believe that this proposed rule represents a significant step forward in harmonizing the existing set of disparate disclosure practices in the marketplace and supports greater comparability by improving global alignment. It represents a unique opportunity to propel the US to a stronger and more competitive global position by providing investors with actionable data and enabling a more efficient marketplace.”

California Public Employees’ Retirement System (CalPERS) – “The Proposed Rules directly align with the enhanced disclosures we have been seeking in order to make more informed investment decisions … We believe that companies should disclose consistent, comparable, and reliable information in regulatory reports so that shareowners can more easily identify, assess, and manage climate risk and opportunity.”

Companies say the standards would generally be feasible and beneficial for them to implement

UPS – “We support the Commission’s goal of providing consistent, comparable and reliable information regarding climate-related risks and metrics that are important to investors and the capital markets … Accordingly, we support increased climate-related disclosures through rulemaking that is appropriately designed to achieve the Commission’s objectives of increased transparency and comparability. We believe that to be effective such requirements must provide investors with comprehensive reporting of the entirety of a company’s GHG emissions, regardless of source.”

United Airlines – “We applaud and support the Commission for its action on climate-related disclosures and generally support the policy goals of the Proposed Rules, including the disclosure of Scope 3 GHG emissions … We believe that our employees, customers and other stakeholders should know the actions that we are taking to reduce our environmental impact and mitigate our exposure to climate risks in the air, on the ground and at our facilities.”

Alphabet (Google), Autodesk, Dropbox, eBay, Hewlett Packard Enterprise, HP Inc., Intel, Meta (Facebook), PayPal, and Workday – “[W]e are supportive of the SEC’s efforts to establish required climate-related disclosures. Investors need consistent, comparable, and reliable information on the material risks and impacts of climate-related events and transition activities on a registrant’s consolidated financial position.”

Salesforce – “The Proposal by the SEC will help to increase the transparency, quality and accessibility of climate related disclosures and information. Leveraging existing frameworks and standards such as the TCFD and Greenhouse Gas Protocol (GHG Protocol) is the most effective way for registrants to provide consistent, comparable, and relevant information to investors … We agree that disclosure of Scope 1, 2 and 3 GHG emissions is necessary to understand the short and long-term risks associated with climate change.”

PSEG – “Transparent, consistent, comparable and reliable climate-related disclosures will serve both investors and the capital markets, and as a result PSEG broadly supports the requirements of the Proposed Rules. Without formal climate-related disclosure requirements applicable to all registrants, investors will continue to be unable to accurately and effectively compare and determine how effectively registrants are managing the risks and opportunities relating to climate change.”

TotalEnergies – “We support the Commission’s approach to create consistent and substantive regulation that we consider will promote transparency in the financial markets and provide investors with useful and comparable information regarding companies’ exposures to climate-related risks and methods for addressing transition-related elements. We will encourage other jurisdictions to consider the Commission’s approach as they undertake climate-related regulation or further refine their approaches to existing disclosure regulations.”

Danone – “This proposed rule presents an opportunity for the United States to establish leading practices for this important financial reporting … The disclosures which would be required under this proposed rule will help both companies and investors to measure, understand, and manage climate risks and opportunities – which will be essential to the future health and stability of the financial system.”

Ralph Lauren Corporation – “While we recognize there are inherent challenges to accurately measuring scope 3 emissions, our value chain’s contribution to our GHG footprint is too important to ignore … We believe increasing disclosures, collaborating with industry peers and partnering with suppliers as they develop their own climate strategy are some of the actions that can lead to improvements and harmonization in data collection and carbon accounting methodologies over time.”

Expert scholars, including former SEC officials from both sides of the political aisle, say the standards are legally and economically sound

Luis Aguilar et al., Working Group on Securities Disclosure Authority, 32 Bipartisan Former SEC Officials and Other Securities Experts – “[W]e write to express our unanimous view the SEC has clear statutory authority to mandate additional climate-related disclosures for publicly traded companies … We conclude that there is no legal basis to doubt the Commission’s authority to mandate public-company disclosures related to climate.”

Jill E. Fisch, George S. Georgiev, Donna M. Nagy, Cynthia A. Williams, et al., 30 Securities Law Scholars – “The Commission’s Proposal contemplates disclosure requirements that are consistent with close to nine decades of regulatory practice at the federal level and with statutory authority dating back to 1933 that has been repeatedly reaffirmed by Congress and the courts. Accordingly, we are unanimous in our conclusion that the Commission has the statutory authority to promulgate climate-related disclosure rules of the kind currently under consideration.”

John C. Coates, Professor of Law and Economics at Harvard Law School and Former SEC General Counsel: “The proposal is well within the Commission’s authority to adopt … The Commission’s authority is plain in its organic statutes, legislative history, in long-standing precedent, in both court decisions and its own rules, and repeatedly accepted by Congress through amendments of the statutory bases for those rules.”

Ramya Krishnan et al., 12 First Amendment Scholars, Knight First Amendment Institute at Columbia University – “The proposed rules seek to protect investors by providing them with information about climate-related financial risks and metrics associated with securities that are sold to the public. Disclosure requirements of this kind do not ordinarily raise First Amendment concerns. To the contrary, they have long been understood to be an integral part of the regulation of securities.”

Shivaram Rajgopal, Professor of Auditing and Accounting, Columbia Business School – “I firmly believe that the disclosures required by the proposed rule will (or, at least, can reasonably be expected to) increase stock market efficiency by enabling investors to more accurately assess the climate-related financial risk faced by a firm and, in turn, more accurately price that firm’s securities. Even a very modest reduction in estimation risk can decrease cost of capital by more than enough to pay for the already modest compliance costs outlined.”

Public officials say the standards are needed to protect their constituents’ savings

Rep. Kathy Castor, Rep. Sean Casten, et al., 133 Members of Congress – “As the Securities and Exchange Commission works to update its regulations to improve disclosure of a range of risks, we welcome the proposed rule on climate-related financial disclosures. The rule is squarely within your authority and mission to protect investors; maintain fair, orderly, and efficient markets; and facilitate formation of capital. We urge you to finalize the rule to ensure that investors have timely and accessible information regarding registrants’ climate-related risks that are reasonably likely to have a material impact on a company’s business, operations, or financial condition.”

Rob Bonta et al., 20 State Attorneys General – “We write in support of the Proposed Rule not only for the protection of our state residents who invest their retirement savings, college funds, and life savings, but also for the benefit of states as investors that safeguard the pensions under their control. With the Proposed Rule, the SEC has offered a solution to the long-standing and critical problem of registered companies facing material climate-related impacts to their business operations that are not transparent to investors.”

Scientists say the climate risk information that the standards ask companies to disclose is accessible and reliable

Michela Biasutti et al., 15 Climate Scientists/Experts, Sabin Center for Climate Change Law, Columbia Law School – “As the IPCC has recognized, it is ‘unequivocal’ that human activities are warming the planet, leading to ‘widespread and rapid changes’ that pose significant economic and other risks. Using the methods described [in this letter], companies can assess, and ultimately disclose, their exposure to physical risks of climate change. As the case studies demonstrate, private companies and others are already successfully employing available climate tools and data to generate critical information that can and is informing their own decision-making and that of investors.”

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As Washington state sets the rules for its ambitious climate program, regulators shouldn’t overlook this policy tool

This post was co-authored by Natalie Hurd, Western states climate policy intern at EDF.

Landscape of Washington state

Photo Credit: George Dodd for Getty Images

Washington state is on the cusp of finalizing the rules to launch its ambitious new climate policy. This comes at an important moment of opportunity for states to lean into their climate commitments and increase their ambition. The passage of the Inflation Reduction Act will drive an unprecedented level of investment in fighting climate change and building a clean energy future, making it even easier for states like Washington to meet their climate goals. By enacting ambitious cap-and-invest legislation last year, Washington has taken an important step forward — but now it’s up to regulators to deliver the strongest possible cap-and-invest program.

The Climate Commitment Act (CCA) pairs carbon emission reductions with new tools to tackle local air quality disparities — all in the same policy framework. One of the valuable tools included in the cap-and-invest legislation is an emissions containment reserve (ECR) — a mechanism that guards against long-term uncertainty by ensuring that the program will be made more ambitious if prices for the program become lower than expected. Right now, Washington’s Department of Ecology is making decisions about the details of how to implement the program, including whether or not to include a functional ECR, and EDF has made it clear that Washington should include a well-designed, effective ECR in the state’s cap-and-invest program. Regulators once again have the opportunity to lead the way on the West Coast by including a functioning ECR in Washington’s program design.

What is an emissions containment reserve?

An ECR is a design feature for cap-and-invest programs that was first implemented by the Regional Greenhouse Gas Initiative (RGGI), a multi-state climate program on the East Coast. The primary role of an ECR is to ensure that, when demand for emissions allowances decreases, the overall supply of allowances is reduced. By reducing the supply, the ECR reduces the overall amount of climate pollution allowed under the program. In other words, allowances are reserved from the market and unable to be purchased, to make sure that the overall allowance budget is adjusted so that emissions are further contained. The amount of allowances that can be removed from the supply and placed in the ECR is relatively small ー for example, in RGGI, the size of the ECR is up to 10% of the allowance budget of participating states.

A figure describing how an ECR functions

Figure 1: Overview of an ECR (Adapted from Resources for the Future)

An ECR is activated when the allowance price hits a “trigger price”, which is a set price that would reflect lower-than-expected demand for allowances. In an auction, if demand for allowances is relatively low, the price of allowances at auction will decrease. If the price of allowances decreases enough to reach the ECR’s trigger price, then a predetermined number of allowances will be removed from the overall allowance supply available at the auction. By reducing the supply of allowances when the trigger price is reached, an ECR translates lower demand and lower prices into greater climate ambition.

One reason why demand for emissions allowances and allowance prices might drop, thus requiring the intervention of an ECR, is if regulated entities are able to cut emissions more quickly than expected.. For example, if a policy like a Clean Fuels Standard reduced emissions more swiftly than anticipated, then the entities impacted by that policy would have lower emissions and therefore require fewer emissions allowances than expected. An ECR helps create a supply for emissions allowances that is responsive to how demand for emissions allowances changes over time.

What does Washington’s program currently do?

Despite the added stability and climate ambition that an ECR would bring to Washington’s cap-and-invest program, as imagined in the Climate Commitment Act, the current proposed design for Washington’s program is missing a critical ingredient: an ECR trigger price. Without a trigger price, there is no way for the ECR to be activated, meaning that Washington’s proposed program does not include a functional ECR.

Why should Washington include a functional ECR in their program?

Economic modeling has shown that including an ECR in an emissions market improves performance by making the market more efficient and securing additional emissions reductions. On top of these benefits, an ECR would help ensure that a program like Washington’s will keep running smoothly long-term. For one, the inclusion of a functional ECR can reduce price volatility in the long run, which decreases uncertainty for market participants. Stable market expectations are important to the durability of the program. Cap-and-invest in the state is more likely to be successful going forward if market participants can better anticipate market behavior year-to-year and plan accordingly. In addition, an ECR provides a predictable, rule-based approach for supply adjustments, helping to avoid the need for other less predictable adjustments to supply by the Department of Ecology to keep Washington on track to meet its climate goals.

Finally, an ECR can increase the environmental ambition of the program by reducing the overall supply of allowances if demand for allowances falls, thereby reducing the total climate pollution that can be emitted by regulated entities. This is critical because Washington’s cap-and-invest program serves as a backstop, working alongside a suite of programs and investments that will help drive emissions reductions. As these programs and investments interact, it’s essential that the cap-and-invest program’s overall limit on emissions remains ambitious enough to incentivize continued efforts to address climate change, and an ECR can help do this by reducing the supply of allowances when demand for allowances is low.

Implications for linking with other carbon markets

In addition to enhanced environmental integrity and economic stability, a functional ECR with a trigger price may be an important factor in potential future program linkage between Washington and other carbon markets. Program linkage — or connecting carbon pricing systems across borders — can facilitate quicker reductions in emissions regionally. By establishing an ECR, Washington would set an important precedent for other states, as well as provide a strong example of climate policy. The ECR program design has already spread from its initial inception in RGGI, and Washington now has an opportunity to be a leader for states on the West Coast.

Market-based mechanisms to reduce climate emissions are not the only policies that need to be implemented to address the climate crisis, but they are a critical part of a suite of climate solutions, including sectoral strategies to deliver near-term reductions in climate pollution. In addition to maintaining the strength of its cap-and-invest system, it’s crucial that policymakers in Washington and elsewhere work meaningfully with communities to ensure that these policies are designed and rolled out in an equitable and just way, explicitly addressing the disproportionate burden of pollution that is primarily borne by low-income communities and communities of color. While cap-and-invest programs are only part of the solution, making them as strong and as stable as possible — such as with the implementation of an effective ECR with a trigger price — will help facilitate more ambitious and broad climate action for decades to come.

During the comment period for Ecology’s latest CCA rulemaking, EDF made it clear that Ecology should include a functional ECR with a trigger price in the final rules. Including a trigger price would help the program’s ECR function properly while driving greater reductions in climate pollution when prices are low. By building a strong ECR into its cap-and-invest program, Washington can continue to lead the way with effective, ambitious climate action that’s a model for other carbon markets.

Posted in Carbon Markets, Cities and states, Climate Change Legislation, Economics, Energy, News / Comments are closed

EDF’s new calculator shows the dire impact of methane pollution

It’s been a brutal summer here in Texas. Parts of the state suffered through weeks of temperatures topping 100 degrees, and rarely dipping below 80 at night. It’s a strain on our power grid, agriculture and – most of all – people.

It’s not just Texas of course. Excessive heat and severe flooding has claimed thousands of lives across Europe, Asia, and Africa. The increasingly destructive heat, fires, hurricanes and droughts are all connected to climate pollution, including methane emissions.

But how much warming, exactly, is methane contributing? It is tricky to quantify because this potent gas has a short lifetime. The EPA has a good tool to calculate the climate impact of various greenhouse gases, including methane, but it only shows the impact over a long-term timeframe — 100 years — and that can downplay methane’s near-term warming power.

The Biden administration’s move to reinstate and strengthen methane emission rules, coupled with the Global Methane Pledge from COP26, put methane in the spotlight. But many remain unaware of its potency, and the potential benefits we could achieve by cutting methane emissions. If we don’t recognize the extent of the methane problem, we could miss a crucial opportunity to avert the worst heat waves and other climate disasters in the future.

That’s why EDF has developed a new calculator that converts abstract greenhouse gas emission numbers into equivalent activities from our daily lives to make the data more meaningful.

Translating methane leaks into everyday activities

Our calculator shows how different species of greenhouse gases warm the planet, because those individual impacts could vary dramatically over time. While we know that all greenhouse gases behave differently, scientists have historically measured them with the same rubric —comparing them to long-lived carbon dioxide over a 100-year timeframe. This metric — while simple to apply — obscures the much more powerful, but shorter-lasting, effects of some other greenhouse gases like methane.

Our new tool translates emissions into everyday activities, like driving cars, consuming beef, or charging smart phones. It also allows users to see the impacts of these emissions from the year they are released to 100 years in the future.

 

A look at our new calculator. Click the image to input your own data.

 

Our calculator shows how short-lived greenhouse gases like methane generate a lot of warming in the near-term, but their impact relative to carbon dioxide decreases as the decades wear on. This provides a fuller picture that reflects the nuances of short-lived gases. It also means that cutting emissions of short-lived gases can quickly slow down warming. Research shows that cutting methane from oil and gas operations, agriculture and other sources as much and as fast as possible could slow the rate of warming by a whopping 30% in the next two decades.

Taking action can have immediate impacts

Understanding the critical differences between short and long-lived gases can help us develop policies that will have profound impacts – both in the long-run and more immediately. This insight has led the U.S., Europe and countries around the world to focus on methane emissions

We have a variety of solutions at the ready. Limiting methane leakage from oil and gas development, for example, will both minimize pollution and save product. It’s affordable and immediately impactful.

According to the Intergovernmental Panel on Climate Change (IPCC), anywhere from 50 to 80% of methane emissions from oil and gas could be eliminated at a relatively low cost with technologies and practices that already exist.

We’re already experiencing dramatic impacts from warming in the form of stronger storms, more intense heat waves, and larger, more destructive wildfires. If we really want to see improvement, both today and for future generations, we need to act now on gases like methane.

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With one week to act, California needs to pass these policies to drive climate progress and protect communities

This post was co-authored by Caroline Jones, Analyst for U.S. Climate

photo of a wind farm in a western landscape

Photo Credit: Pixabay

The heat is on in Sacramento.

With less than a week left in the California State Legislature’s session (which ends on August 31), a set of potentially game-changing climate policies are on the table. Earlier this month, Governor Newsom released a series of proposals for the legislature, including a more ambitious goal for cutting climate pollution by 2030, codifying a carbon neutrality goal, interim clean electricity targets, safeguards from the health impacts caused by oil and gas drilling and providing direction on the use of carbon capture and sequestration — all of which are now being negotiated in Sacramento.

This push arrives amid a grueling year for climate change-fueled impacts across the state, with wildfires, heat waves and the worst megadrought the West has seen in over 1,000 years all underscoring the urgency for bold action. And with the new, massive down payment on climate and clean energy through the Inflation Reduction Act, California will have even more tools and investments available to drive down climate pollution further and faster.

Here are the key policies that can drive meaningful climate progress and protect communities — and need to pass the finish line by the end of the session.

Read More »

Posted in California, Cities and states, News, Policy / Read 1 Response