Climate 411

The Cost to Meet Clean Air and Environmental Standards Comes Down (Again)

By Mandy Warner / Published: June 11, 2013

It is almost getting old for us to write about this … but it needs to be repeated.

As power plant pollution control projects continue, we are seeing – yet again — that the cost of meeting clean air standards, like the Mercury and Air Toxics Standards for power plants (MATS), has fallen.

Unfortunately, that hasn’t stopped some major power companies and other opponents from trying to undermine clean air and environmental standards.

However, this past quarter American Electric Power (AEP), NRG, and FirstEnergy each told their investors that their anticipated costs for meeting environmental standards dropped.

As you can see on our chart, AEP has lowered its estimated costs of following environmental standards by half, from a high of $8 billion down to $4 to $5 billion.

AEP was the top emitter of mercury, carbon dioxide, nitrogen oxide, and sulfur dioxide in 2011 among the top 100 power producers in the U.S.

And … AEP is a leader in the lawsuit to halt the Mercury and Air Toxics Standards.

As our chart also shows, FirstEnergy has lowered their cost estimate for complying with the Mercury and Air Toxics Standards by nearly 70 percent.

FirstEnergy’s estimate dropped from a high of $3 billion down to $925 million (which is $50 million lower than they estimated last quarter).

FirstEnergy was the sixth highest emitter of mercury in 2011 among the top 100 power producers, and is also challenging the Mercury and Air Toxics Standards in court.

The third company on our chart, NRG, has lowered its costs for complying with environmental standards from $730 million to $530 million, a reduction of more than 25 percent.

NRG was the fourth highest emitter of mercury in 2011 among the top 100 power producers.

These three companies are just a few of the power companies that have decreased their cost estimates for complying MATS and other environmental standards in recent years.

The tens of billions of dollars in expected health benefits from the Mercury and Air Toxics Standards has not decreased, though.

The Mercury and Air Toxics Standards will provide crucial emission reductions of toxic pollutants including mercury, acid gases, sulfur dioxide, and chromium.

It will save thousands of lives every year, prevent heart attacks and asthma attacks, and help protect the hundreds of thousands of babies born in America every year who are exposed to unsafe levels of mercury in the womb. And that is priceless.

It’s important that we keep in mind these misguided “sky is falling” claims about environmental compliance costs as EPA carries out its responsibilities under the nation’s clean air laws to address carbon pollution from power plants.

The time tested history of the Clean Air Act is quite the opposite – the sky is clearing, and at far less than the costs predicted by industry.

Also posted in Clean Air Act, Health, News, Policy / Comments are closed

New IEA Report Sets a Road Map to a Cleaner Energy Future

By Nat Keohane / Published: June 10, 2013

Today, the International Energy Agency released a special report of its World Energy Outlook, entitled Redrawing the Energy-Climate Map. The report is notable not only for its substantive conclusions – but for what it signifies.

First, the substance:

The report starts by emphasizing that energy-related CO2 emissions are a crucial driver of global warming, that they are increasing rapidly, and that as a result the world is not on target to keep concentrations of greenhouse gases below the level that would provide even a fifty-percent probability of limiting the increase in average global temperatures to two degrees – a commonly cited benchmark to prevent the worst impacts of climate change.  Standard fare, perhaps – but noteworthy nonetheless coming from the world’s leading energy authority.

A road map toward a more secure future

The key finding of the report — what makes it required reading — is the analysis of what the IEA calls its “4-for-2˚C scenario.”

The IEA identifies a package of four policies that could keep the door open to 2 degrees through 2020 – at no net economic cost to any individual region or major country, and relying only on existing, widely available technologies:

  1. Specific energy efficiency measures in transport, buildings, and industry (1.5 GT savings in 2020/49% of the total package)
  2. Limiting construction and use of the least-efficient coal-fired power plants (640 MT/21%)
  3. Minimizing methane emissions from upstream oil and gas production (550 MTCO2e/18%)
  4. Accelerating the partial phaseout of fossil fuel subsidies (360 MT/12%)

The IEA estimates that these four measures would reduce energy-related GHG emissions by 3.1 GT CO2-eq in 2020, relative to IEA’s “New Policies” reference scenario – corresponding to 80% of the reduction required to be on a 2-degree path.

Take a look at this chart, from IEA’s report, that summarizes the policies:

(Source: World Energy Outlook Special Report, 2013)

Here’s a second chart, also from IEA’s report. This one makes the key point about no net economic costs:

(Source: World Energy Outlook Special Report, 2013)

Four policies, using widely available technologies, imposing no net economic cost on any individual region or major country, that put the world in the position to make the turn to climate safety.

That’s the headline.

The cost of delay

IEA’s report also discusses the vulnerability of the energy sector to climate change, and emphasizes that delaying climate action will drive up the costs of meeting a 2 degree target later.  The report estimates that putting off action until 2020 would trim near-term investment by $1.5 trillion in the short run – but at the cost of requiring an additional $5 trillion to be spent in subsequent years.  In present-value terms, using a 5% discount rate, delay doubles the cost of action: from $1.2 trillion to $2.3 trillion.

This is an argument that we at EDF — and others — have been making for some time. But it is a crucial one nonetheless – and the IEA analysis gives some added analytical weight to the argument.

Not an oil shock, but a climate shock

These findings are especially welcome coming from IEA, a world-respected authority on energy markets and policy that was founded to facilitate international coordination among oil-consuming countries.  Indeed, the messenger may be nearly as important as the message.  What launched the IEA was the 1973-4 oil crisis.  Now, nearly forty years later, the IEA report makes clear that the real energy-related threat to economic prosperity is not an oil shock, but a climate shock.

Back to the big picture

To be sure, the four policies analyzed in this report won’t fully suffice to address climate change in the long run: indeed, much more ambition will be needed.

Under the “4-for-2˚C” scenario, the IEA estimates that world energy-related emissions will peak and start to decline before 2020 – but we’ll still need concerted action on a global scale to get greenhouse gas emissions onto a steepening downward trajectory.

Take a look at one more chart from IEA’s report:

(Source: World Energy Outlook Special Report, 2013)

Acknowledging this point, IEA’s report underscores the importance of continued innovation in low-carbon technologies in transport and power generation (including carbon capture and storage), and highlights the vital importance of a long-term carbon price.

Beyond the scope of the report, there’s much to be done outside the energy sector – in particular by curbing tropical deforestation, and promoting the spread of agricultural practices that can achieve the “triple win” of greater productivity, greater resilience to climate, and lower environmental impacts (including GHG emissions).  And all of these efforts must be carried out in tandem with the overarching challenge of promoting broad-based economic prosperity around the globe, as President Jim Yong Kim of the World Bank has repeatedly emphasized.

But the bottom line is that one of the most hopeful publications on climate change you’ll read this year has come from the International Energy Agency, of all places.  Here is a road map toward a cleaner, more secure future.  Now it’s up to us to take it.

Also posted in Energy, Greenhouse Gas Emissions, News, Policy / Read 1 Response

The Boring Side of Climate is More Tangible to Most

By Keith Gaby / Published: May 8, 2013

(Originally posted yesterday on EDF Voices)

A college professor friend of mine once decided to write the least sexy book possible. Lots of academics were trying to be as edgy or trendy and, in keeping with his contrarian personality, he chose to write about insurance in American literature. Those of us working to communicate the impacts of climate change might do well to follow his example.

Environmental groups, including EDF, often focus on the drama of climate change. We do it because we’re already seeing some scary changes in the weather – from severe drought to stronger storms – and because it’s important to give the public a vivid picture of what’s happening. But there are limits to that approach. For example, people who are resistant to a message about global warming, or just not interested, will tune out such information, no matter how dramatic the presentation.

Many people don’t feel an urgency about climate change because it is such a big and remote issue. Something that is “global” necessarily feels distant. Problems that play out over decades and centuries, that involve predictions about the year 2100, are just not relevant to most people. But the truth is that climate change is starting to touch those everyday, boring things that people do care about – like insurance rates and taxes and property values.

Climate affects your 401K and other boring things

Now, boring is not generally a useful attribute in communications. But there are exceptions. You probably take a great interest in such dry and tedious matters as your 401(k) statement,  your property tax bill, or changes to the escrow on your mortgage payment. Why? Because they affect your bank account. And it may be that the best way to reach some people is to let them know that climate change, too, is doing just that.

For example, many New York area residents whose homes were severely damaged by Superstorm Sandy have already seen a 25% premium increase from the National Flood Insurance Program. The New Orleans Times-Picayune reports that thousands of residents there will face a choice of relocating or seeing increases in their insurance bill of $15,000 to $25,000.  And the business group CERES questions whether the insurance industry as a whole is prepared for the financial impacts of climate change.

This is an issue that re-insurance giant Munich Re has been studying for some time.  (If there’s something more boring than insurance, it’s re-insurance.  These are the companies that, essentially, insure the insurance companies against their risks and payouts.)  The company sees that warming oceans and higher sea levels are causing stronger storms and bigger surges of water around the globe – which, in turn, causes greater destruction of property and bigger insurance claims. So Munich Re has reasonably concluded that climate change will affect its bottom line. Which means that it will affect your bottom line, as well.

The non-environmentalist would rather save on their grocery bill than save polar bears

Of course, the effects of climate change are not limited to insurance rates. Municipal budgets have to absorb the cost of infrastructure changes, and recovery costs, associated with extreme weather.  Food prices are affected by crop losses due to record droughts.  And all of these costs get spread through the economy as the federal government pays for storm damage and recovery, and insurance and food costs are passed along to every one of us. These are issues that hit home to all those voters who don’t spend ten seconds a year thinking about the fate of polar bears.

It’s our job in the environmental community to open up a line of communication with these people.  We need to lay out the boring facts and make the boring case.  Let’s show those Americans not yet interested in climate change it is going to hit them in the wallet – whether or not they’re interested in the issue.  And by acting together, now, we can all save a lot of money…and, as a bonus, our grandchildren will get a healthier and safer world.

Also posted in Policy / Comments are closed

Capping Pollution from Coast to Coast

By Susanne Brooks / Published: February 15, 2013

(Originally posted earlier today on EDF’s Market Forces blog)

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

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

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

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

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

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

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

EDF’s Business-Friendly Suggestions for Fighting Climate Change

By Sharyn Stein / Published: November 12, 2012

We’ve been hearing the same question a lot lately – what should President Obama do in his second term to fight climate change?  

In today’s online Harvard Business Review, EDF’s Eric Pooley has some thoughts on that subject. He’s laid out a five-point plan to help us address climate change.

Those points range:

[F]rom no-brainer ideas almost everyone can agree on to ambitious items that would require Congressional action

And they all have one thing in common – they are business friendly.

As Eric puts it: 

It is worth remembering that strong business support helped secure passage of the House climate bill in 2009, and though that effort failed in the Senate, no serious legislation can move without the backing of men and women in the engine room of the American economy. To be politically viable, climate solutions must be economically sustainable.

Here’s the (very) short version of Eric’s plan:

  • Feed the conversation
  • Reduce climate accelerants
  • Start a clean energy race
  • Use the Clean Air Act
  • Put a price on carbon

If you’d like to read the whole plan, you can find it here: A Business-Friendly Climate Agenda for Obama’s Second Term

Also posted in Climate Change Legislation, Extreme Weather, Greenhouse Gas Emissions, News, Policy / Comments are closed

Geoengineering: Ignore Economics and Governance at Your Peril

By Gernot Wagner / Published: October 31, 2012

How serious is global warming? Here’s one indication: the first rogue entrepreneurs have begun testing the waters on geoengineering, as Naomi Klein laments in her must-read New York Times op-ed.

Sadly, Klein misses two important points.

First, it’s not a question of if but when humanity will be compelled to use geoengineering, unless we change course on our climate policies (or lack thereof). Second, all of this calls for more research and a clear, comprehensive governance effort on the part of governments and serious scientists – not a ban of geoengineering that we cannot and will not adhere to. (See point number one.)

Saying that we ought not to tinker with the planet on a grand scale – by attempting to create an artificial sun shield, for example – won’t make it so. Humanity got into this mess thanks to what economists call the “free rider” effect. All seven billion of us are free riders on the planet, contributing to global warming in various ways but paying nothing toward the damage it causes. No wonder it’s so hard to pass a sensible cap or tax on carbon pollution. Who wants to pay for something that they’re used to doing for free – never mind that it comes at great cost to those around them?

It gets worse: Turns out the same economic forces pushing us to do too little on the pollution front are pushing us toward a quick, cheap fix – a plan B.

Enter the Strangelovian world of geoengineering – tinkering with the whole planet. It comes in two distinct flavors:

  • Sucking carbon out of the atmosphere;
  • Creating an artificial sun shield for the planet.

The first involves reversing some of the same processes that cause global warming in the first place. Instead of taking fossil fuels out of the ground and burning them, we would now take carbon dioxide out of the atmosphere and bury it under ground. That sounds expensive, and it is. Estimates range from $40 to $200 and more per ton of carbon dioxide – trillions of dollars to solve the problem.

That brings us to the second scary flavor — which David Keith, a leading thinker on geoengineering, calls “chemotherapy” for the planet. The direct price tag to create an artificial sun shield: pennies per ton of carbon dioxide. It’s the kind of intervention an island nation, or a billionaire greenfinger, could pay for.

You can see where economics enters the picture. The first form of geoengineering won’t happen unless we place a serious price on carbon pollution. The second may be too cheap to resist.

In a recent Foreign Policy essay, Harvard’s Martin Weitzman and I called the forces pushing us toward quick and dirty climate modification “free driving.” Crude attempts to, say, inject sulfur particles into the atmosphere to counter the carbon dioxide that’s already there would be so cheap it might as well be free. We are talking tens or hundreds of millions of dollars a year. That’s orders of magnitude cheaper than tackling the root cause of the problem.

Given the climate path we are on, it’s only a matter of time before this “free driver” effect takes hold. Imagine a country badly hit by adverse climate changes: India’s crops are wilting; China’s rivers are drying up. Millions of people are suffering. What government, under such circumstances, would not feel justified in taking drastic action, even in defiance of world opinion?

Once we reach that tipping point, there won’t be time to reverse warming by pursuing collective strategies to move the world onto a more sustainable growth path. Instead, speed will be of the essence, which will mean trying untested and largely hypothetical techniques like mimicking volcanoes and putting sulfur particles in the stratosphere to create an artificial shield from the sun.

That artificial sunscreen may well cool the earth. But what else might it do? Floods somewhere, droughts in other places, and a host of unknown and largely unknowable effects in between. That’s the scary prospect. And we’d be experimenting on a planetary scale, in warp speed.

That all leads to the second key point: we ought to do research in geoengineering, and do so guided by sensible governance principles adhered to be all. We cannot let research get ahead of public opinion and government oversight. The geoengineering governance initiative convened by the British Royal Society, the Academy of Sciences for the Developing World, and the Environmental Defense Fund is a necessary first step in the right direction.

Is there any hope in this doomsday scenario? Absolutely. Country after country is following the trend set by the European Union to institute a cap or price on carbon pollution. Australia, New Zealand, South Korea, and also California are already – or will soon be – limiting their carbon pollution. India has a dollar-a-ton coal tax. China is experimenting with seven regional cap-and-trade systems.

None of these is sufficient by itself. But let’s hope this trend expands –fast – to include the really big emitters like the whole of China and the U.S., Brazil, Indonesia, and others. Remember, the question is not if the “free driver” effect will kick in as the world warms. It’s when.

Also posted in Geoengineering, Science / Tagged , | Read 1 Response