Climate 411

COP 25: The mess in Madrid – and how international carbon markets can still drive ambition despite it

By / Bio / Published: December 16, 2019

Midnight COP 25 plenary on Dec. 14 in Madrid. UNclimatechange via Flickr.

At just before 2:00 pm Sunday afternoon in Madrid, at a sprawling conference center on the outskirts of the city, a new record was set — and not an enviable one. That’s when the gavel finally fell on COP 25 — the 25th meeting of the Conference of the Parties to the UN Framework Convention on Climate Change — making it the longest COP in history, as it extended nearly 44 hours past its scheduled end.

Even with all that extra time, however, negotiators from 197 Parties were unable to reach agreement on virtually anything of real consequence, including one of the issues that topped the conference agenda: guidance for promoting the integrity of international carbon markets, in particular by ensuring consistent and robust accounting of emissions reductions transferred among countries.

While that failure is widely recognized, the outcome also offers three key implications for how markets can move forward.

  • First, negotiators came surprisingly close to a good deal. That provides a foundation for negotiators to build on next year – although it’s not at all clear that having failed two years in a row, the third time will be the charm.
  • Second, countries that are serious about markets don’t need to wait for the UN to provide guidance: they can and should move ahead to set their own rules.
  • Third, the failure to reach agreement puts the Kyoto Protocol’s offset program (known as the Clean Development Mechanism) on shaky legal ground – something that decision makers at the UN’s aviation agency, ICAO, should heed.

How markets can help drive ambition

Markets may seem like a surprising headline topic for an international climate negotiation. But they are a central, if underappreciated, tool to make faster, deeper cuts in climate pollution — which is desperately needed, given the growing gap between the world’s current emissions trajectory and where we must go to meet the Paris Agreement’s objective of limiting warming to well below 2 degrees Celsius.

The Paris Agreement expressly recognizes, in its Article 6, that carbon markets provide a critical tool to enhance ambition. Market-based international cooperation enables countries to do more together than they could on their own. Economic analysis by EDF shows that carbon markets could achieve nearly double the emissions reductions relative to current Paris Agreement commitments, at no extra cost. The current nationally determined commitments (NDCs) are nowhere near ambitious enough to meet the objectives of the Paris Agreement, and we need all the tools in the box to avoid climate catastrophe.

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Posted in Carbon Markets, COP 25, Paris Agreement, United Nations / Comments are closed

COP 25: Carbon markets in the spotlight

By / Published: December 3, 2019

Staff and volunteers welcomed at COP 25 in Madrid.
UNclimatechange via Flickr

International cooperation on carbon markets, covered in Article 6 of the Paris Agreement, is at the top of the agenda for the COP 25 climate talks in Madrid this week. Since leaving the Article 6 section of the Paris Agreement without agreement at COP 24, negotiators have continued to work over the past year to garner support for a deal, before countries shift focus to preparing their critical next round of NDC pledges, due next year.

They will do this against a backdrop of political disruption, but continued determination to finalize the Paris Agreement’s operating instructions, known in the UN as the “rulebook”.

Civil unrest in Chile led that country’s president to take the unprecedented step of canceling the climate conference only five weeks before its scheduled start. Spain quickly stepped in the next day to offer to organize the negotiations, known as COP 25, in Madrid. The United States earlier this month officially began the process to withdraw from the Paris Agreement. All this is happening while the increasing impacts of climate change are being felt around the world; fires have ravaged Australia and California, while historic flooding is drowning Venice and dangerous pollution is choking Indian cities. And a new World Meteorological Organization report confirms that the atmospheric concentration of three key greenhouse gases – methane, CO2, and nitrous oxide – continues to rise.

Although the ultimate success of the Paris Agreement will be judged many years from now, how the rules on international carbon markets are decided in Madrid could make or break the ambition of the Paris Agreement.

That’s because international carbon market cooperation underpinned by strong accounting and transparency rules can help drive emissions down significantly: research shows that well-designed carbon markets could nearly double the ambition of current national climate pledges, at no extra cost.

However, weak rules for carbon trading between countries could fundamentally undermine the Paris Agreement. By allowing countries and the private sector to “count” carbon credits that don’t represent real emissions reductions, a bad set of rules on Article 6 could negate the climate ambition of current climate pledges.

What is a good Article 6 agreement?

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Posted in Carbon Markets, COP 25, Paris Agreement, United Nations / Comments are closed

What You Need to Know About Article 6 of the Paris Agreement

By / Bio / Published: December 2, 2019

This post was coauthored by Kelley Kizzier from EDF, Kelly Levin from World Resources Institute, and Mandy Rambharos, Article 6 negotiator, South Africa. It originally appeared on WRI’s blog. 

As delegates arrive in Madrid for the UN Climate Change Conference (COP25) this week, one issue is top-of-mind: finalizing the rules on how countries can reduce their emissions using international carbon markets, covered under Article 6 of the Paris Agreement on climate change.

Article 6 is one of the least accessible and complex concepts of the global accord. This complexity was a major reason that Article 6 was not agreed to until the last morning of the Paris negotiations in 2015 and was left unresolved at the Katowice climate talks last year. Getting these rules right is critical for fighting climate change: depending on how they are structured, Article 6 could help the world avoid dangerous levels of global warming or let countries off the hook from making meaningful emissions cuts. The integrity of the Paris Agreement and countries’ climate commitments hang in the balance.

Here’s what you should know:

How do international carbon markets work?
International carbon markets work like this: Countries that struggle to meet their emissions-reduction targets under their national climate plans (known as “nationally determined contributions,” or NDCs), or want to pursue less expensive emissions cuts, can purchase emissions reductions from other nations that have already cut their emissions more than the amount they had pledged, such as by transitioning to renewable energy. If the rules are structured appropriately, the result can be a win-win for everyone involved — both countries meet their climate commitments, the overachiever is financially rewarded for going above and beyond, finance is provided to the country generating the emissions reductions, and the world gets a step closer to avoiding catastrophic climate change.

What does the Paris Agreement say about carbon markets?
Article 6 has three operative paragraphs, two of which relate to carbon markets:

  • Article 6.2 provides an accounting framework for international cooperation, such as linking the emissions-trading schemes of two or more countries (for example, linking the European Union cap-and-trade program with emissions-reduction transfers from Switzerland). It also allows for the international transfer of carbon credits between countries.
  • Article 6.4 establishes a central UN mechanism to trade credits from emissions reductions generated through specific projects. For example, country A could pay for country B to build a wind farm instead of a coal plant. Emissions are reduced, country B benefits from the clean energy and country A gets credit for the reductions.
  • Article 6.8 establishes a work program for non-market approaches, such as applying taxes to discourage emissions. For this explainer, we will focus on the carbon markets elements of Article 6.

While Article 6 established these concepts in broad strokes and countries achieved some progress on defining the rules over the years, their final shape remains yet to be agreed. Finalizing these rules is a key agenda item for COP25.

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Posted in Carbon Markets, COP 25, Paris Agreement, United Nations / Read 1 Response

California climate program remains solid as transportation emissions fall

By / Bio / Published: November 26, 2019

Bixby Bridge, California. Photo by Dave Lastovskiy on Unsplash

Today’s solid results from the latest Western Climate Initiative cap-and-trade auction demonstrate once again the resilience of the market. Yet this is not the only interesting news out of the California market this quarter as the state released the preliminary 2018 emissions inventory, which showed that transportation emissions fell for the first time since 2012.

First up, auction results:

  • All 67,435,661 current allowances sold, clearing at $17.00, $1.38 above the floor price of $15.62. This is $.16 lower than the August 2019 clearing price of $17.16.
  • All of the 9,038,000 future vintage allowances offered also sold at $16.80, $1.18 above the $15.62 floor price. These allowances are not available for use until 2022.
  • The auction raised approximately $739 million for the Greenhouse Gas Reduction Fund, which California uses for activities that further decrease greenhouse gas emissions, improve local air quality, and support the state’s most vulnerable communities.
  • Quebec raised over approximately $245 million CAD (approximately $185 million USD) to fund their own climate priorities.

These results are generally consistent with the past several auctions, but there are a couple of points worth noting:

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Posted in California, Carbon Markets / Comments are closed

Two new analyses: significant benefits for Pennsylvania from historic move to limit carbon pollution

By / Bio / Published: November 21, 2019

(This post was co-written by Mandy Warner)

Two new analyses show significant opportunities for Pennsylvania under environmental protections that are compatible with the Regional Greenhouse Gas Initiative – commonly known as RGGI.

RGGI is a collaboration of nine northeast states that is designed to lower carbon pollution from the power sector. Pennsylvania Governor Tom Wolf signed an historic executive order last month directing the state’s Department of Environmental Protection to develop a regulation that is compatible with RGGI. That order followed Wolf’s commitment to reducing Pennsylvania’s climate pollution by 26 percent by 2025 and 80 percent by mid-century, compared to 2005 levels.

Pennsylvania has the fifth dirtiest power sector in the nation, and the power plants operating in Pennsylvania emit more carbon pollution than all the other power plants in the nine northeastern states in RGGI combined. A binding, declining limit on carbon pollution is a necessary element of any strategy to address this problem.

Two studies underscore the value of Pennsylvania’s actions:

  • EDF and M. J. Bradley & Associates released a new analysis that found there could be significant economic and emissions reduction benefits for Pennsylvania from setting a binding, declining limit on power sector carbon pollution, and creating a flexible, market-based mechanism to achieve that limit. The analysis was based on policy specifications, inputs, and assumptions developed by M.J. Bradley & Associates at the direction and on behalf of EDF, with feedback from participating stakeholder companies.
  • A recent report by Resources for the Future had similar findings.

Here are five key takeaways from both of these analyses.

  1. Pennsylvania has a significant opportunity for cost-effective pollution abatement by limiting carbon pollution and linking with RGGI

While carbon pollution from Pennsylvania’s power sector has declined in recent years, driven primarily by market trends including cheap natural gas prices, it is projected to start increasing again. By mid-2020, under business-as-usual forecasts with no carbon limits, both analyses found Pennsylvania’s power sector carbon pollution would be more than 30 percent higher than current levels.

By setting a binding, declining limit on power sector carbon pollution and creating a flexible, market-based mechanism to achieve that limit, Pennsylvania can significantly reduce its carbon pollution at low cost.

The EDF and M.J. Bradley & Associates analysis found that linking with RGGI and designing the program in a way that ensures all electric power used in Pennsylvania is covered under the cap could lower carbon pollution by more than 35 percent and produce roughly $200 million in net savings for Pennsylvania in 2030. That’s compared to business-as-usual scenarios with no carbon limit.

The lower costs are due to reduced need for capital expenditures like building new power plants, and to declining fossil fuel costs – both driven by more of the existing nuclear fleet remaining in operation.

Resources for the Future’s analysis similarly found that linking with RGGI could lead to significant carbon pollution reductions in Pennsylvania with no observable increases in electricity prices.

Earlier studies have also demonstrated the benefits of RGGI. By driving investments in energy efficiency, RGGI has already reduced consumer energy bills, generated net economic benefits for participating states, and has  produced enormous public health benefits. RGGI has helped save hundreds of lives, prevented thousands of asthma attacks, and saved billions of dollars in health-related economic costs.

According to electricity bill modeling by the Analysis Group, the average residential electricity bill in RGGI states will be 35 percent lower in 2031 than it is today, due to investments in energy efficiency.

Linking Pennsylvania with RGGI could offer further benefits – including allowing for emissions trading, which can lower total costs and make Pennsylvania’s program resilient to unexpected changes in weather or other events that could affect electricity markets while still preserving state autonomy and programs.

  1. Limiting carbon pollution and linking with RGGI provides support for existing and new zero-emission generation

Placing a binding, declining limit on carbon pollution – and then letting the carbon pollution limit drive a price in the energy market – provides Pennsylvania with a technology-neutral approach that ensures the most cost-effective deployment of zero-emission resources to meet the state’s climate goals.

The EDF and M.J. Bradley & Associates analysis found that under business-as-usual scenarios using EDF’s reference natural gas price assumptions, all nuclear capacity in Pennsylvania retires by 2030.

According to the analysis, linking with RGGI and designing the program in a way that ensures all electric power used in Pennsylvania is covered under the cap can help support the state’s existing nuclear fleet – retaining roughly 50 percent of the fleet in 2030.

Resources for the Future similarly found that limiting carbon pollution and linking with RGGI would forestall expected nuclear retirements, increasing Pennsylvania’s nuclear generation by up to 280 percent in 2026 relative to business-as-usual scenarios.

The natural gas prices used by Resources for the Future for their analysis are higher than currently observed, which would allow nuclear capacity to remain profitable with greater ease than may be possible with lower natural gas prices. But the preservation of existing nuclear capacity is a robust result under all scenarios that limit carbon pollution across both analyses, providing valuable insight into the role a limit on carbon pollution can play in preserving assets that are zero-emitting.

The EDF and M.J. Bradley & Associates analysis also found that linking with RGGI can increase wind and solar generation in Pennsylvania by almost 75 percent in 2030 compared to current levels. Resources for the Future found that limiting carbon pollution and linking with RGGI could generate up to 25 percent more wind and solar generation in Pennsylvania by 2026 compared to business-as-usual scenarios.

  1. Pennsylvania can reduce carbon pollution while increasing net exports from the state

The EDF and M.J. Bradley & Associates analysis shows that limiting carbon pollution and linking with RGGI would enable Pennsylvania to achieve its environmental objectives at low cost while at the same time increasing net exports from the state at least nine percent in 2030 compared to current levels.

Pennsylvania can also design its program to shift allowance value to producers with updating output-based allocation, which can increase gas and nuclear generation and energy exports in the state. According to Resources for the Future, the production incentive from output-based allowance allocation can increase exports from Pennsylvania above business-as-usual levels by 2026. Most of these exports are to other RGGI states so the overall pollution in the region is unaffected.

Resources for the Future also finds that using an output-based allowance allocation to non-emitting producers can provide incentives to shift generation in Pennsylvania from fossil fuel to zero-emitting sources, further decreasing carbon pollution in Pennsylvania and nationally.

  1. Smart policy design can amplify these benefits and further lower overall pollution

When a state or group of states puts a limit on carbon pollution, particularly in states that are served by a multi-state wholesale electricity market, emissions leakage to emitting sources that are not covered under the program is always a concern.

While both analyses demonstrate clearly that such leakage will not even come close to dwarfing the significant climate benefits of Pennsylvania’s program, it may partially erode the potential for greater pollution reductions. Linking programs can help reduce leakage but is not sufficient to fully mitigate it.

The EDF and M.J. Bradley & Associates analysis finds that an effective leakage mitigation mechanism, such as putting emissions associated with imported power under the cap, can lower overall carbon pollution – driving 75 percent more reduction in pollution in the Eastern Interconnect in 2030. The analysis also shows that leakage mitigation can help provide more support for Pennsylvania’s existing nuclear fleet and lower overall system costs, more than doubling nuclear generation in the state and lowering system costs by roughly $330 million in 2030 compared to no leakage mitigation.

Pennsylvania has options available today to mitigate leakage concerns and ensure that the state is not disadvantaged in the broader marketplace relative to other states that choose not to control carbon pollution. Resources for the Future has shown that an output-based allowance allocation to producers has the potential to result in negative leakage.

Regional transmission organization PJM Interconnection is also looking into ways to enhance technical capabilities to support state policy choices such as carbon limits. As part of its Carbon Pricing Senior Task Force, PJM is actively exploring with its stakeholders what data needs and frameworks can best support state carbon outcomes in the context of a regional market. They are also considering ways to ensure that states that are controlling carbon are seeing those policy choices accurately reflected.

This PJM stakeholder process provides an important opportunity for Pennsylvania to engage to ensure the state has the information it needs to deploy the policy frameworks that can effectively mitigate leakage.

  1. More ambitious carbon pollution limits can provide even further benefits

The EDF and M.J. Bradley & Associates analysis also finds that more ambitious carbon pollution limits (in line with deep decarbonization trajectories) with leakage mitigation can accelerate pollution reductions, retain all of the state’s existing nuclear fleet, and incent new clean energy resource builds – all at lower system costs compared to business as usual scenarios with no carbon limit.

According to the analysis, more ambitious carbon pollution limits can increase solar capacity in Pennsylvania by more than 10 times, leading to an increase in renewable generation of more than 130 percent in 2030 compared to business-as-usual scenarios.

Public support for concrete climate policy is sky-high in Pennsylvania

There is strong support in Pennsylvania for moving forward to reduce carbon pollution.

A poll conducted by EDF Action earlier this year found that 79 percent of Pennsylvania voters support regulations to reduce carbon pollution. That includes 66 percent of state Republicans polled.

Major Pennsylvania power companies, including Exelon and FirstEnergy, applauded Governor Wolf’s executive order. The Pennsylvania Chamber of Commerce noted that “climate change is real” and that the business community needs to be “at the table to discuss solutions.”

The time for action is now

It is becoming increasingly urgent to address climate change. That means it is critical for Pennsylvania to move forward without delay, and put in place an ambitious program to secure carbon pollution reductions and lock in public health benefits at the lowest cost.

The good news is that Pennsylvania can build on planning it has already completed as part of previous compliance work. Governor Wolf’s executive order sets a deadline of July 31, 2020 for a proposed rule to cut carbon emissions to be presented to the Environmental Quality Board. But there’s no reason not to move forward more quickly.

We urge Governor Wolf to develop a proposed rule to submit to the Air Quality Technical Advisory Committee at its February meeting. That would help create certainty about the state’s emissions trajectory on a short-term time horizon, including creating regulatory certainty for affected industries.

Posted in Cities and states, Energy, Greenhouse Gas Emissions, Policy / Comments are closed

Public records confirm EPA’s “censored science” proposal was an end-run around Congress

By / Published: November 12, 2019

Earth as seen from a NOAA weather satellite. Photo: NASA

The Trump administration is reportedly expanding its dangerous plan — originally proposed by former Administrator Scott Pruitt — to limit the scientific evidence that the agency can consider when establishing public health protections.

According to a story in the New York Times today, the new proposal will be even more damaging than Pruitt’s version – which was flatly illegal and would have left Americans more exposed to dangerous contaminants in the air we breathe, the water we drink, and the products we use.

The original proposal was based on failed congressional legislation whose sponsor “pitch[ed]” the idea to former EPA Administrator Scott Pruitt. But newly released public documents show that the origins of the “censored science” proposal are more cynical than we knew.

EDF sued to obtain the public records after EPA violated the Freedom of Information Act (FOIA) by not releasing them, with Earthjustice representing us in the litigation.

The new public records reveal just how explicitly Trump’s EPA is attempting to defy Congress by implementing its “censored science” policy through administrative rulemaking. It turns out that – from the beginning – EPA’s overt goal was to implement the same damaging ideas that the Senate refused to pass. Read More »

Posted in Greenhouse Gas Emissions, Health, News, Policy, Pruitt, Science, Setting the Facts Straight / Comments are closed