Climate 411

Three Ways to Support Clean Energy Today

For the last few weeks, Senators and Congressmen have been back in their home states, listening to voters’ concerns and priorities. August is winding down, and they will soon head back to Washington to make laws.

This is your last chance to make sure they hear your voice. Here’s how:

  • Make a call.  The Environmental Defense Action Network just launched  a new tool that makes it easy to call your Senators. The Senate needs to hear from you, so call and ask your friends to do the same!
  • Check the calendar. Town hall meetings are winding down, but you might still have a chance to speak up for clean energy. Find a town hall meeting in your state (scroll to the bottom of the page).
  • Raise a ruckus online. Don’t let the small but loud opposition drown out the support for clean energy! Make your voice heard on the social networks.

And looking ahead to September, those of you in and near New York City can check out NYC’s Climate Week, a series of events planned to build momentum building up to the U.N. climate talks in Copenhagen.

Posted in Partners for Change / Comments are closed

Video: Fred Krupp on Global Warming and Leadership

Fred Krupp, EDF’s president, is the newest star of the Washington Post‘s power-broker video series “On Leadership.”

In it, Fred talks about what it will take to get a clean energy bill passed in Congress, the need for Presidential involvement, and “putting together the recipe that wins.” He says:

  • “What we’re working on is the biggest most awesome threat to the future of humanity, maybe save nuclear weapons, that I know of.”
  • “I think a lot of far-sighted business people …see a future where we’re going to have to do things in a new way.”
  • “The leaders who are resistant [to change] are usually the ones who don’t see it coming. They can’t see over the horizon.”
  • “If we work hard enough … we can get 60 votes for doing something that’s in everybody’s interest and is truly transformational.”

Posted in What Others are Saying / Read 1 Response

API Misses the Mark: Why Refineries Will Do Just Fine Under ACES

The American Petroleum Institute (API) recently took a break from hosting anti-cap-and-trade rallies for oil company employees, and used its spare time to put out a study claiming the American Clean Energy and Security Act (ACES) would be unfair to American oil refineries. Unfortunately their study uses some dubious assumptions – and makes some even more questionable claims.

API’s study (carried out by consulting firm Ensys Energy) outlines two major complaints.

  • First, API whines that the bill only sets aside 2.25 percent of emissions allowances for refiners, while the electricity sector gets 35 percent of the available allowances.
  • The second, related claim is that ACES would increase the cost of doing business so much that companies would turn to cheaper overseas refineries instead.

Before we even address those complaints, there’s one thing I have to point out — API is relying on bad modeling and cherry-picked results to create its case.

  • The results quoted in API’s news release come from running a scenario that severely restricts international offsets and allows no expansion of low-carbon technologies beyond what would happen without a clean energy bill. There’s no basis for those assumptions, but they do manage to skew the results to make refineries look more vulnerable.
  • However, if we consider the “basic case” (or, “most likely”) model outcome in Ensys’ report, it is clear that the activity of domestic refineries is expected to increase compared to their current levels.

But let’s ignore the study results for a minute, and just take a look at API’s two complaints.

First, API seems to think refineries are getting picked on because they aren’t getting as many free allowances as the electricity sector. But — they ignore the reasons why the two are not comparable.

  • The electricity sector allowances they’re talking about actually benefit American consumers. The allowances are first handed to local distribution companies, or LDC’s, but the value of the allowances doesn’t stay there. LDCs are required to use the value of those allowances to protect consumers from electricity price increases. Giving allowances to the LDC’s really means giving allowances to American ratepayers.
  • Oil refineries, in contrast, are private companies whose owners are free to pocket any money they get from their emissions allowances. So giving allowances to oil refiners really means — giving money to oil refiners. (API might like those two ideas equally, but no one else does.)

Of course, if the oil refiners were willing to accept the same regulations as utilities, and guarantee that their emissions allowances would be used to lower the price of a gallon of gasoline, that’s an idea worth discussing. API’s study doesn’t put that offer on the table, though.

Second, API says that America could become dangerously dependent on foreign refineries. (API President Jack Gerard says, “Climate legislation should not come at the expense of U.S. economic and energy security.”)

But – U.S. refineries have cornered 90 percent of the market for domestic gasoline. Homegrown refineries dominate the market because there are, inherently, strong cost advantages for domestic production, and little incentive to send business overseas.

  • Different states have different regulations governing oil refining, which favors local businesses and makes it difficult or impossible for foreign refineries to compete.  In fact, in other environmental scenarios, such as emissions standards for cars, industries claimed exactly that – no company could possibly create 50 slightly different products to sell under 50 different state rules, and only local businesses could thrive under those conditions.
  • It’s also significantly easier and cheaper to ship crude oil than refined gasoline. That makes it much more efficient to import crude oil and do the refining right here at home. That’s a physical difference that won’t go away if we pass a clean energy bill.

EDF did our own analysis of the impact of climate legislation on oil refineries.  Here’s what we found:

  • The expected added cost from a clean energy bill, per gallon of refined gasoline, is less than one cent per gallon.
  • Analysis also suggests that refiners can be expected to pass on the majority of any cost increase to their customers.
  • As a result, between 1.4 and 1.7 percent of total allowances would be enough to compensate domestic refineries – in full — for the added costs associated with reducing their process emissions.
  • Since ACES allocates 2.25 percent of allowances to oil refiners, EDF believes the allocations set out in ACES are more than generous.

Given all this, the bill should not affect the competitiveness of American refineries.

A larger problem might be the unfortunate effect of API’s study on the average American consumer. Outside the industry, a lot of people don’t draw a distinction between “oil” and “gasoline.” A quick read of news articles about the study could imply that ACES will increase America’s dependence on foreign oil – when one of the most valuable aspects of the bill is that it will do just the opposite. Under ACES, the EIA predicts that the U.S. would reduce its consumption of oil by 344 million barrels in the year 2030 alone. That’s a vital benefit to our national security as well as our environment.

A whopping amount of our own oil and the imported oil would still be refined into gasoline here, in spite of API’s fears. After all, even their own biased study predicts increasing U.S. refinery activity.  All in all, clean energy legislation is still good for all Americans – including oil refineries.

Posted in Climate Change Legislation, Economics, Setting the Facts Straight / Read 2 Responses

Cap and Trade: Economic Efficiency and Reduced Emissions

This is a guest post by Charles F. Wurster, Ph.D. He is Professor Emeritus of Environmental Sciences at the State University of New York at Stony Brook, and is a founding trustee of Environmental Defense Fund.

Global warming and climate change will severely affect life on Earth during this century. It is primarily caused by burning oil and coal, along with deforestation.  Numerous effects are already occurring around the globe. Yet the American Clean Energy and Security Act (ACES), intended to reduce climate change, passed the U.S. House of Representatives by a tiny 219-212 majority.  Why wasn’t it unanimous?

Some thought the bill too strong.  Others considered it too weak.  Some believed it would cost too much.  Others don’t take climate change seriously.   Only half of Americans think human activities are the cause.

Opponents of the bill have intentionally disseminated disinformation and confusion about climate change. Many companies also oppose the bill because they suspect it would reduce their profits.  There’s a vast amount of wealth and political power amassed in the status quo.  Why should they change?

Despite the many compromises needed to gain the votes for passage, Congress must pass ACES if we are to diminish climate change, the greatest issue of our time.  The basic structure of the bill is a cap-and-trade system, which is misunderstood by many Americans, including congressmen.   That hampers passage.

Cap and trade was pioneered in the 1980s by Dr. Dan Dudek, an economist with Environmental Defense Fund, to combat acid rain.  EDF convinced the first President Bush to include it in the Clean Air Act of 1990, and by 2000 emissions of sulfur dioxide, the cause of acid rain, were cut in half at a small fraction of the original cost estimates by the industry.  Compliance was 99% because its mandate was unavoidable.  Cap and trade became the most effective anti-pollution device in recent memory.

Now cap and trade is being applied to carbon dioxide (CO2) emissions, the main pollutant causing climate change.  Cap and trade was adopted internationally under the Kyoto Protocol, which was rejected by the second Bush Administration but ratified by 184 other countries.

To be clear about how cap and trade works, consider a simple example:

  • A company we will call “Easy Inc” is able to reduce CO2 emissions easily and cheaply, but has not done so for lack of an incentive.
  • Another company called “Difficult Inc” would find it difficult and costly to reduce its emissions.

Under cap and trade, next year they will only receive 90% of their present emissions allowances (the “cap”), so they must reduce emissions 10% next year. Here is what they do:

  • Easy, Inc., has no problem reducing emissions by 10%, but Easy can sell on the carbon exchange (the “trade”) any extra allowances if it abates more than its required 10%.  So Easy abates 20%.
  • Difficult, Inc.,  does not abate at all.  Instead, Difficult buys Easy’s extra 10% of allowances.

Under the C&T system, Easy has reduced emissions for both Easy and Difficult, and the average CO2 abatement of 10% has met the system requirement.  Easy has profited by selling its extra allowances to Difficult, and Difficult has abated through Easy at a lower cost than if it had done so itself.

Difficult also has an incentive to seek ways to reduce future emissions so that it doesn’t have to buy more allowances.  Everyone knows that available allowances, the cap, will continue to decline by law in the future.  The government does not tell polluters how to meet the requirements, thereby stimulating innovation, emissions are carefully monitored, there is no incentive to cheat, and compliance rates will be high.

The ultimate goal is an international treaty with a carefully structured and regulated cap and trade system that includes all nations, along with a marketplace for buying and selling CO2 allowances.  Abatement will therefore proceed by the cheapest and best technologies — economists call it economic efficiency — and investments are thereby channeled into clean, efficient, low-carbon energy systems throughout the world.  It will no longer pay to pollute; instead it will pay to abate pollution.

Cap and trade will set off a stampede toward energy efficiency because efficiency improvements are the cheapest, often most profitable, and quickest route to emissions abatement.  Countries with extensive rain forests, such as Brazil or Indonesia, can sell allowances to keep their forests intact, putting a value on standing forests with their vast carbon storage, instead of gaining short-term profits by cutting them down.  Preserved biodiversity is an additional huge benefit.

The ball is in our court and the time is now!  The rest of the world, already functioning under the limited Kyoto Protocol, waits to see whether the USA will act.  The climate bill containing the basic cap and trade structure, however much compromised to pass Congress, must become law for the world to build on that structure to limit climate change.

Posted in Climate Change Legislation / Read 2 Responses

Video: More on Those Forged Letters

People are using the word “astroturfing” a lot lately, but this video makes it clear that the people working for the lobbyists trying to block cap and trade legislation stooped to a level even lower than that.

httpv://www.youtube.com/watch?v=1tjsnlETBf0

Angry? Share the video with your friends!

Posted in Climate Change Legislation, What Others are Saying / Comments are closed

Full Analysis of National Manufacturers Association’s Flawed Study

I promised earlier today in my quick review of the flawed study from the National Association of Manufacturers that a full analysis was on the way. Here it is [PDF].

The analyis concludes, as I said this morning that “assumptions matter — and unrealistic assumptions make for outlandish results.”

Posted in Climate Change Legislation, Economics / Comments are closed