Kirsten Gillibrand was in the midst of her second term in the U.S. House of Representatives, serving New York's 20th District, when Gov. David Paterson selected her to replace Hillary Clinton in the U.S. Senate. (Clinton, you'll recall, was chosen by Obama to serve as secretary of state.) Gillibrand will serve in the Senate at least until a special election in 2010 to serve out the remainder of Clinton's term, which ends in 2012. She's viewed as a strong favorite to win that election and, more generally, as a rising star in the Democratic Party.

As a member of both the Environment & Public Works Committee and the Agriculture Committee, Gillibrand will be heavily involved in the development of the Kerry-Boxer clean-energy bill. She is considered a likely "yes" vote, and her advocacy for the bill has had three notable features, each reflecting her state's interests:

We asked Sen. Gillibrand about these issues, and she was gracious enough to answer the questions via video (full transcript below):

Here's the full transcript:

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Hi, I'm Senator Kirsten Gillibrand from New York. I'm pleased to be here today to answer some questions from Grist.org on climate change legislation.

Question #1: The first question asks: Do other senators share your support for EPA Clean Air Act authority? Will it survive the coming negotiations?

Absolutely. Other senators do share my view on this issue, but for a number of the senators who don't serve on the [Environment & Public Works] Committee they haven't been as engaged yet on this discussion, which is why they need to hear from constituents like you so that they know how important it is that they preserve the Clean Air Act. These protections, as you know, are critical to New York 'cause we are the ones that suffer from a lot of the air pollution that comes across the country from coal-fired plants. We suffer from acid rain, we suffer particularly in the Adirondacks increasing contamination in all of our rivers and streams. In New York you can only eat one fish a month because of the high mercury content in our waters. And we also have a growing asthma rate throughout our state, so for me this is a critical issue that I will continue to fight for.

Question #2: Second question. How are you working to persuade your Senate colleagues to support the creation of a carbon market involving many financial instruments?

I'm very concerned that we make sure we have a robust financial market that will fuel investments in carbon reductions. I think it's very important that we have proper oversight and accountability, good regulations that provide transparency, and also capital requirements. I think this kind of regulation will be a derivative market that will be regulated through the [Commodity Futures Trading Commission], and I think it's critical that we regulate this alongside the other derivatives legislation that we are going to do. We want to make sure that capital is available for investing in clean energy generation like large-scale wind and solar projects, so we have to make sure that we have the kind of products that are necessary to do this. I've been advocating for both standardized products and customized products with oversight and accountability and capital requirements for both.

Question #3: Third, What type of measures would you like added to the climate change bill to serve the interests of farmers?

Well, I think farmers can play a very important part in this climate change bill. We want to make sure that the agriculture section can achieve the overall parts of the bill or the overall goals of the bill which is to make sure there is verifiable reductions in carbon emissions, but there are so many opportunities for our farmers whether they're going to be part of wind energy or solar energy or whether they're going to be part of anaerobic digesters and cellulosic ethanol, they have a lot of opportunity to be part of the climate change bill and do those offsets by the things they can create throughout agriculture. We also want to make sure that our farmers have the resources and technical assistance available for smaller projects and working with aggregators who can connect for example multiple dairy farms for large methane digestive projects or make the project not just achieve reductions but also be economically feasible for those farms who are participating. So there is a lot of opportunity out there and I just want to make sure our farmers have a voice in this climate change bill.

Question #4: Fourth question: Which Senate Republicans do you think will support climate change legislation?

Answer: Well, I really think this issue is not about Democrats or Republicans, I think climate change is not going to wait for anybody so we need to bring colleagues together to actually achieve results. I think Senator Graham, Senator McCain have both spoken out in favor of climate change in the past, and I'm hopeful that they will join us in our efforts. But the bottom line is, as Chairman Boxer said, that this is something we all have to care about. It's the future of our country, its our national security, its our economic strength, and it's the one thing that's going to turn around global climate change, so I think we will have a lot of allies in this and my goal is that for all Americans we need to support these kinds of efforts to achieve energy independence, grow green jobs in a clean economy, and stop all of the threats of global climate change.

I want to thank Grist.org for giving me the opportunity to discuss these very important issues. The Clean Energy Jobs and American Power Act will lead to long-term economic prosperity, energy security, and the protection of our environment for generations to come.

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Peter Dorman, a strong cap-and-trade supporter points out why Stavins' defense of giveways is wrong. The key paragraphs:

To arrive at his judgment, Stavins lumps together the bulk of the free allocations and says, “about 80 percent of the value of allowances [accrue] to consumers, small business, and public purposes.” Hmmmm. So free handouts to electrical utilities are actually benefits to users? So what gets people to reduce their consumption of electricity in order to meet the carbon caps -- brownouts? (Actually, it’s a non-problem because the caps will be illusory -- more in a moment.) And giveaways to small businesses aren’t giveaways? And giveaways to businesses in return for getting them to do things more in accord with “public purposes” aren’t giveaways? You could say they are good giveaways to very nice people, but Stavins doesn’t want to defend that position. I don’t blame him.

Still, Stavins admits that handing out carbon permits for free is not the best option. He would prefer using them as government revenue, allowing us to cut other taxes. Since he thinks the efficiency of our economy is hampered by “distortionary” taxes, this would be all to the good. Of course, carbon auction revenues constitute a sales tax, and bear the original sins of such taxes -- regressivity and volatility. And nothing more than libertarian ideology supports the view that progressive income taxes are economically harmful. A number of European countries tax at much higher rates than we do and somehow manage to maintain high levels of productivity and income, and even run trade surpluses against lower-taxed America.

Ultimately, if I thought this bill would really protect us against catastrophic climate change, I might overlook a few hundred billion dollars of special interest theft. You have to set priorities. But the loopholes elsewhere in the package, particularly the system for allowing carbon emitters to buy their way out with offsets, will guarantee that targets set for 2020 will not even come close to being realized. From a political standpoint as well, there is no way the bill can squeeze users of carbon fuels enough to get the job done, since almost nothing is allocated to protect household budgets. Imagine a program that deliberately pushes gas, oil, and coal prices much higher than they have ever been before and gives nothing back to most households. Imagine being a politician who has voted for this program and has to face the next election.

I want to extend Dorman's point on income taxes slightly. Many environmentalists support emissions taxes not only on environmental grounds, but on grounds that taxing "bads" in general is a good thing. Tax stuff we don't want or want to decrease rather than stuff we want to increase.  I hope people who take that view will consider that income inequality is a "bad" of this sort.  There are all sorts of side effects of extreme inequality. For example the whole issue of corruption and regulatory capture is made worse when a huge difference in income and wealth lets the rich buy access to politicians and media ordinary people can't match. There have been studies that extreme income inequality (as opposed to just absolute poverty) harms people's health.  Adam Smith recognized that extreme inequality was harmful to nascent capitalism. It is a shame that modern market fundamentalists have moved so far to the right of Adam Smith that they  have forgotten much of what he knew.

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Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) plan to introduce their climate bill tomorrow. Here are a few brief notes on what to watch for.

Just as a reminder, for the non-wonks, here's how the process works: 1) House passes bill, 2) Senate passes bill, 3) House and Senate bills reconciled via conference committee, 4) House and Senate both vote on resulting bill, and, finally, 5) president signs bill. Yes, it's a torturous, somewhat ridiculous process, with dozens of points at which it can go off the rails.

The thing to remember is that #2 -- which begins tomorrow -- is a very different process than #1. In the House, just one committee was involved: Energy & Commerce. That committee has a fairly diverse membership, so Sens. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.) had to contend with a broad array of interests, but ultimately Waxman's hand was on the tiller through the whole journey. The committee produced a bill and it went to the floor for a vote.

It's not so simple in the Senate. (Is anything simple in the Senate?) There, up to five committees may hold hearings and mark up legislation, which will ultimately have to be incorporated into one comprehensive bill by Majority Leader Harry Reid. Potentially weighing in: Environment & Public Works, Energy & Natural Resources, Finance, Agriculture, and Foreign Relations.

It's possible Foreign Relations (which Kerry chairs) will bow out. Ag, now chaired by the climate-hostile Blanche Lincoln (D-Agribiz), will likely want to extract its chunk of flesh on carbon market regulation and agricultural offsets. Finance, chaired by the dread Max Baucus (D-Mont.), will want to have a hand in allowance allocation, though Boxer (or Reid) may yet convince him to back off. Energy, under Jeff Bingaman (D-N.M.), has already passed its bit, the American Clean Energy Leadership Act, a comparatively weak energy title relative to what's in the House bill.

Boxer's committee, EPW, is one of the Senate's most progressive, and what Boxer and Kerry will introduce tomorrow is widely expected to mark the left edge of the debate -- everything that follows will push the bill in a weaker direction. They've said that they'll model their bill on the House-passed American Clean Energy & Security Act (ACES), which is somewhat unfortunate since ACES already represents the result of numerous compromises in the House. But such is the U.S. Senate.

Boxer and Kerry have signaled that they'll make a few improvements on ACES. For one thing, they're expected to bump the 2020 target from 17% (below 2005 levels) to 20%. They're also expected to restore the EPA's New Source Review authority over CO2, which could be quite contentious.

A few things worth keeping an eye on:

There's likely more I'm forgetting, but that's a start.

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December 19th

Prelude to COP15: Climate Justice actions sweep the US before Copenhagen talks

The New York State Senate and Assembly, too often a model of corruption and dysfunctionality, rose above petty politics last week to pass forward-thinking legislation on climate and energy, setting a precedent for bipartisanship and a sensible cap and trade system.  The State Senate passed the groundbreaking Green Job/Green New York Act, with strong support from Republicans, Democrats, and the Working Families Party, which spearheaded the legislation. The bill -- expected to be signed into law this week by Gov. David Patterson -- leverages $112m in revenue from the Northeasts's Regional Greenhouse Gas Initiative (RGGI) into $5 billion of private investment to finance home weatherization, energy efficiency projects, and green jobs creation.

We should all be paying closer attention for three reasons:

1) It is one of the first large-scale pieces of legislation that concreteley demonstrates why green jobs are a win-win-win. Homeowners win by reducing their energy costs. The private sector wins by gaining a safer investment with strong expected returns. And New Yorkers benefit through the creation of 16,000 new jobs and the increased economic activity and tax receipts the program will generate.  It's a blueprint that can work in other states and regions as well.

2) It's also a model for sensible national climate and energy policy. While the version of the American Clean Energy & Securities Act that passed in the House gives away a substantial portion of the pollution allowances to utilities, the RGGI program in the Northeast auctions off the credits creating the $112 million in revenue, which the state is leveraging 50x to create new jobs and save homeowners on their heating and electricity bills. 

3) Finally, the Green Job/Green New York Act highlights the power of bipartisan efforts to achieve common sense solutions. Republican support is what made the bill possible. Rather than fight any effort for sensible policy like the national Republican leadership, local leaders have proven to be in touch with the concerns of their constituents, helping to pass the bill 52-8 in the Senate and 147-0 in the Assembly. But putting politics aside and the needs of New Yorkers first, they showed the way for national cooperation on this issue.

To learn more about the bill and its passage, check out David Sasson's piece on SolveClimate.org.

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The Climate Post is a weekly roundup of climate news, produced by the The Nicholas Institute for Environmental Policy Solutions at Duke University.

 First Things First: Research continues apace to find definitions of “clean tech” and “green jobs” that sound more meaningful than campaign rhetoric. In a new report [pdf], the Pew Charitable Trusts pinned down its working description of “clean energy economy” and analyzed 10 years of jobs data, through the 50 states, looking for trends. Analysts found that clean-economy jobs grew at an annual rate of 9.1 percent, compared with 3.7 percent job growth economy-wide. Growth came in both the white- and blue-collar sectors, including professionals “from scientists and engineers to electricians, machinists and teachers.”

Major legislation, such as a climate bill or the current health care initiative, motivates groups who believe they have the most to gain or lose. Here, that means the extractive industries. About 3,500 people converged on a major Houston theater to rally against anticipated Senate climate change legislation. Many attendees work in the energy industry, and major energy firms and business groups backed the event. Similar rallies are expected in 19 states in the next few weeks. An NGO sneaked around the grounds, concluding the event was a large “company picnic.”

The conversation moves to Washington next month. A career-long interest in environmental issues and climate change, coupled with his mien as a senior statesman in the Senate, make Sen. John Kerry (D-Mass.) likely to play a consensus-building role in this fall’s climate debate. Bloomberg files an overview of the state of play, leading with former Sen. Tim Wirth’s (D-Colo.) objections to the recent House bill. A new National Academies report takes a close look at what the Capitol, literally, can do about its own internal energy policy.

Negotiators left Bonn, where they held pre-COP-15 talks, without much progress toward a new global agreement. Says Anders Turesson, Sweden’s lead climate negotiator: “What we’re talking about is a profound change of industrial civilization. It would be surprising if there weren’t stumbling blocks.”

Seeking Non-Fox to Guard Henhouse: U.K. officials arrested nine people and charged them with conducting fraudulent international carbon-market trades to evade taxation.

Among the many issues that legislators must confront as they draw up climate policy is the carbon market itself, its rules and oversight. The Economist weighs in on this question, and how insubstantial “activist complaints” are steering the conversation awry. Debate is yielding to pre-legislation positioning. The U.S. Commodity Futures Trading Commission is a strong contender to oversee the carbon market and laid another preliminary stake to this claim by looking at activity in a voluntary carbon market, the Chicago Climate Exchange. (Nicholas Institute colleagues several months ago prepared a backgrounder [pdf] on the topic.)

Whatever course legislation and markets do or do not take, certain things are true: Meeting emissions targets are likely to become only more difficult as greenhouse gases accumulate. And what it might take to meet the challenge is rarely talked about, Silicon Valley entrepreneur and philanthropist Steve Kirsch writes. His back-of-the-envelope analysis is prompted by this Atlantic piece, in which CalTech’s Nathan Lewis suggests the world needs 13,000 gigawatts of clean energy to keep atmospheric carbon dioxide levels below 450 parts per million. That’s one gigawatt a day for the next 25 years, or "if we were to build a large nuclear plant every single day for the next 30 years, that would still not be enough to avert the 450ppm limit," Kirsch writes. CNET weighs in on how to finance a green tech transformation.

What Could Possibly Go Wrong: Scientists are carefully tracking the illness and death of some ocean ecosystems. Global warming’s “evil twin” is ocean acidification, a subject lately seeing a steady uptick both publicly and academically. Environmental Science and Technology demonstrates this resurgence with an anecdote from a quadrennial scientific conference about coral reefs. In 2004, acidification was ranked 38th out of 39 threats to reefs. In 2008, “Acidification was mentioned almost everywhere.”  DailyClimate.org reports that it’s becoming a problem more rapidly in the Arctic.

Ocean acidification’s “evil twin,” global warming, is sometimes called “global heating” to convey the potential seriousness of the matter. Climate Central analyzed model projections of heat waves under a “conservative warming scenario” and concluded that by 2050, Augusts could become much hotter, with three times the number of days above 95 degrees and double the number above 100 degrees in many U.S. cities. (For some background on modeling see this, this, or this pdf.)

Oliver Morton notes a report that sulfur pollution from shipping should decrease soon. The International Maritime Organization is reducing its cap on sulfur dioxide from 4.5 percent today, to 0.5 percent in 2020. If successful, the rule could reduce premature deaths from pollution from 87,000 to 46,000 a year, with a downside: Atmospheric sulfur dioxide scatters sunlight and helps “cool” the planet. Removing it has the unintended consequence of incrementally worsening global warming, which is why adding even more sulfur to the atmosphere is an idea taken increasingly seriously as a way to mitigate future warming.

When Unbiased Is Biased: Robert S. Boyd of McClatchy Newspapers turns in a surpassing example of how moneyed-interest groups, in this case the Heartland Institute, can earn much-sought-after column-inches by casting doubt on firm, but complicated science and, even more importantly, on climate risk analysis. The Heartland Institute poo-poos much of climate science and this summer even ran newspaper ads saying that “High levels of carbon dioxide actually benefit wildlife and human health.” (Presumably far below concentrations that cause suffocation.) The article looks at the question, confusing enough to lay people, of how we know the globe is warming if the hottest year to date was 1998.

The highest recorded global temperature average indeed occurred in 1998. The top 10 warmest years have all occurred since 1997. A recent National Oceanic and Atmospheric Administration report explains how it is possible to have a decade of sub-record breaking temperatures within a warming trend [see pp 23-24 here]. The Yale Forum on Climate Change and the Media takes a whack at the issue, too.

The McClatchy piece is not obtuse or even “biased” as far as misguided he-said, she-said reporting goes. But it does allow the Heartland Institute to create debate on grotesque and silly premises. The scientists interviewed by Boyd state the case well enough, but they speak technically and in a way that might lose readers. Which are you likelier to remember:

“It’s entirely possible to have a period as long as a decade or two of cooling superimposed on the long-term warming trend,” said David Easterling, chief of scientific services at NOAA’s National Climatic Data Center in Asheville, N.C.

Or:

[MIT's Richard Lindzen] calls the case for action against global warming “silly” and “grotesque.”

Climate change is ultimately a story of risk, and how we confront it or don’t. Demonstrating that a problem is occurring can never tell us what, if anything, we should do about it. But a newspaper (company) that won’t directly acknowledge that an entire discussion is false, is not helping a complex nation cope with a complex problem. The story’s headline, “Drop in world temperatures fuels global warming debate,” would be accurate if the word “debate” were changed to “confusion” or “disinformation.”

As the NYU media analyst Jay Rosen wrote in a Twitter post today, “When reality is the wedge issue, journalists have to take sides.”

Eric Roston is Senior Associate at the Nicholas Institute and author of The Carbon Age: How Life’s Core Element Has Become Civilization’s Greatest Threat. Prologue available at Grist.

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December 19th

Prelude to COP15: Climate Justice actions sweep the US before Copenhagen talks

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The Obama administration will defend the Clinton roadless rule that has been ping-ponging in the courts for nearly a decade, Secretary of Agriculture Tom Vilsack said in Seattle on Friday. If courts can’t resolve the forest-protection conflict, the administration will create its own roadless rule, he said.

Vilsack laid out a broad vision for the U.S. Forest Service, outlining for the first time his plan for the agency that manages national forests from within the Department of Agriculture. He promised strong conservation measures and an emphasis on restoring damaged forests, especially those left “overstocked and susceptible to catastrophic fire and disease” by a legacy of fire suppression.

He also spoke to the economic potential of forests in emerging carbon and bioenergy markets and their value as a water source as climate change brings increasingly severe droughts. He hinted at the value of new water markets for private land owners.

“The Forest Service must play a significant role in the development of new markets and ensuring their integrity,” he said, speaking near the old-growth forest at Seattle’s Seward Park. “Carbon and bioenergy aren’t the only new opportunity for landowners. Markets for water can also provide landowners with incentives to restore watersheds and manage forests for clean and abundant water supplies.”

Vilsack made an appeal, in a very Obama sort of way, to environmental leaders, asking them for help in moving past the “history of distrust” between conservationists, the Forest Service, and loggers. In short, he asked them to lay off the lawsuits against government plans.

“Certainly appeals and litigation have served as a useful backstop” against poor forest plans in the past, he said. “But given the scale of restoration that must occur, and the time in which we have to do it, a shared vision built on collaboration will help us move on from the timber wars of the past. Litigation and conflict should become less prevalent, because they will be less necessary.”

Patti Goldman, vice president for litigation at Earthjustice, said she was glad to see a clear departure from Bush administration land management.

“They’re moving into the future,” she said. “That’s a wise move.”

To be sure, the speech was more broad principles than specific plans; Vilsack said those would come in a new forest plan, a regulatory rule that won’t have to pass through Congress.

He also said the Forest Service must address the 80 percent of American forests that lie outside of national forests, under the control of states, tribal groups, businesses, and private landowners. 

“The threats facing our forests don’t recognize property boundaries,” he said. “So, in developing a shared vision around forests, we must also be willing to look across property boundaries. In other words, we must operate at a landscape scale by taking an ‘all-lands approach.’”

Vilsack didn’t mention specific measures, but Charlie Raines of the Sierra Club’s Cascade Chapter said ramping up funding for the Forest Legacy program would be an effective way to let forest owners make money off their land without developing it.

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Obama headed to Copenhagen, sets the bar for success

Enhancing cooperation on climate change and energy efficiency should be a major plank of U.S. Russia policy and should be discussed at the highest levels when President Obama meets with President Medvedev next week.This Center for American Progress post, by Senior Fellow Andrew Light, Senior Policy Analyst Julian L. Wong, and Fellow Samuel Charap, was first published here.

The summit between President Barack Obama and Russian President Dmitri Medvedev in Moscow on July 6-8 comes in the middle of a packed international schedule of bilateral and multilateral meetings for the United States. on climate change. In the run up to the critical U.N. climate talks in Copenhagen at the end of this year, when the extension or successor to the existing Kyoto Protocol must be agreed upon, it is crucial that the United States and Russia-both major emitters of greenhouse gases and potentially leaders on this crucial issue-explore ways of working together to ensure a positive outcome at these talks. Enhancing cooperation on climate change and energy efficiency should be a major plank of U.S. Russia policy and should be discussed at the highest levels when President Obama meets with President Medvedev next week.

Russia, like the United States, is a significant contributor to global warming. If the European Union is disaggregated Russia is the third-largest emitter of carbon dioxide behind the United States and China and still currently ahead of India. More importantly Russian per capita emissions are on the rise, and are projected at this point to approach America's top rank as per capita emitter by 2030. Russia is also the third-largest consumer of energy and one of the world's most energy-intensive economies. Making Russia a partner on these issues could be critical in order to advance a sound global climate change agenda.

The Center for American Progress report "After the ‘Reset': A Strategy and New Agenda for U.S. Russia Policy" will be released on July 2 and outlines three avenues of U.S.-Russia bilateral cooperation on climate and energy issues: cooperation on a new international climate change agreement, building Russia's capacity for carbon trading, and cooperating on energy efficiency. Here we expand on these proposals.

Our approach is based on the principle that the best way to engage Russia on global warming is to frame cooperation as a form of advancing economic modernization. We must convince the Russians that joining the community of nations on this issue is in their best economic interest.

The United States should directly engage Russia on reaching a new international climate change agreement.

The build up to the climate summit in Copenhagen is making it clear that broad-based involvement by all countries-but especially the developed countries and major emerging economies in the developing world-is needed to create a consensus on global climate change action. Most of the attention is focused on the United States, the European Union, China, and India as the major players necessary to forge a global deal, and there is insufficient thought given to the role Russia could play in a post-Kyoto agreement. There are however at least two reasons-besides the fact that Russia is a Kyoto signatory and a major emitter-to engage Russia directly in Copenhagen.

First, we should expect some resistance to a Russian embrace of an extension to or replacement of the Kyoto Protocol given the unique history of the relationship between the original assessment of their 2012 Kyoto targets and the transformation of their economy following collapse of the Soviet Union.

Our approach is based on the principle that the best way to engage Russia on global warming is to frame cooperation as a form of advancing economic modernization.

The agreed-to carbon reduction targets in the Kyoto Protocol were indexed to 1990 emission levels. Those countries signing the treaty were obliged to reduce their emissions to an agreed-upon level by 2012 relative to the baseline of their 1990 emissions. Russian emissions dropped considerably because of the economic contraction that followed the collapse of the Soviet Union. As a result, without any additional efforts Russian emissions will not return to their 1990 levels before at least 2020 and Moscow will not be required to curb its emissions by the end of the Kyoto commitment period in 2012.

This means the Russians are likely to oppose stronger caps on emissions, which will be a necessary part of the hoped-for Copenhagen treaty. Indeed, Russia was the last major economy to announce its proposed post-Kyoto targets of 10 to 15 percent below 1990 levels by 2020. Such a proposed range has left many observers underwhelmed because it will actually allow for absolute increases in emissions from Russia's current state, but the international community should view this as an opening bid rather than final offer by actively engaging with Russia in constructive dialogue.

If we cannot strengthen the treaty and move progressively toward gradual but greater emissions cuts then we will not reach the goal of halving global emissions by 2050, something the Intergovernmental Panel on Climate Change argues is necessary to avoid the worst consequences of climate change. Given the sheer quantities of Russian emissions-regardless of their dip below 1990 levels-the Obama administration should work with the Russians to demonstrate that abatement measures are in Moscow's long-term economic interest.

Improvements in energy efficiency and energy intensity, for example, further economic modernization-one of the Kremlin's oft-repeated goals-and they will promote more sustainable economic growth. But for the United States to make this argument we must take the lead and make steady progress in adopting strong domestic clean-energy and climate policy, such as the American Clean Energy and Security Act that passed in the U.S. House last week. We must also be prepared to listen to our Russian counterparts and not lecture, since a finger-wagging approach will only backfire in the Russian context.

Second, Russia could be one of the unacknowledged keys to success at Copenhagen given the likely structure of the treaty. According to the architecture of the first U.N. climate treaty the Kyoto Protocol could not have been enacted unless at least 55 countries signed and ratified it representing at least 55 percent of global carbon emissions. When the first round of commitments were announced enough countries were willing to ratify the treaty but their emissions did not add up to the required amount for implementation. So if Russia had not ratified the treaty in November 2004 it would have not gone into effect. Russian participation could again be critical this time because we can expect a similar proviso in the post-Kyoto treaty.

We need to bring the Russians on board for an ambitious agenda before Copenhagen sooner rather than later to avoid a deadlock in the international climate negotiations. Immediate bilateral cooperation and engagement is key in making Russia a partner in addressing climate change-it is not in the U.S. interest for Russia to be a spoiler.

But this cooperation faces significant challenges. There are many in the Russian political establishment who believe that the effects of climate change will be positive for their country. What's more, policymakers tend to view climate agreements in exclusively economic and not environmental terms. Russian policymakers, like their Chinese counterparts, emphasize that any emissions caps should not threaten Russia's economic development. However, Russia has recently released a draft climate doctrine that acknowledges the threat posed by climate change-a positive sign.

The United States should help Russia capitalize on the substantial amounts of emission credits it now possesses with the goal of ultimately reducing its emissions.

Russia currently sits on a veritable treasure of tradable carbon credits-by some estimates 1.5 billion euros. Russia is not linked to any existing emissions trading system, such as the European Trading Scheme, and it lacks the institutional capacity to do so. The United States is in a good position to provide capacity building expertise to Russia in establishing an emissions trading market because of our experience in establishing emissions trading markets, most notably the highly successful sulfur dioxide trading scheme in the 1990s and more recently regional (Western Climate Imitative, Regional Greenhouse Gas Initiative, and Midwestern Initiative) and voluntary (Chicago Climate Exchange) carbon emissions trading initiatives.

We need to bring the Russians on board for an ambitious agenda before Copenhagen sooner rather than later to avoid a deadlock in the international climate negotiations.

The administration should also create incentives for these U.S. trading centers to collaborate with the Russians to launch a pilot emissions trading scheme in one or more of Russia's heavy industry sectors. Such efforts can include guidance on how to set up inventory systems for tracking greenhouse gas sources and sinks and to establish the architecture and infrastructure for the actual trading of emission credits, with the long-term goal of linking Russia (or specific sectors) into broader trading systems.

Developing Russia's capacity in emissions trading will help it to be in a better position to join a large trading scheme as a full participant if and when it agrees to begin stemming its current emissions. This proposal is likely to be met with support from major Russian enterprises, including the state-controlled oil major Rosneft, which has already demonstrated interest in related emissions trading projects. The larger objective of such cooperation should be clear: demonstrating to the Russian government that joining international efforts to solve global warming can be profitable to them by providing a way of joining the international carbon market. The revenues from carbon credit trading will offset the cost of taking on additional cuts at home.

The United States should also propose a series of cooperative agreements on increasing Russia's energy efficiency.

One of the most striking features of Russia's energy profile is its energy intensity-the amount of energy consumed per unit of gross domestic product-which is higher than any of the world's 10-largest energy-consuming countries, 3.1 times greater than the European Union, and more than twice that of the United States. This massive potential for improvement makes working with the Russians to increase their energy efficiency the most effective short-term way to help them reduce emissions and points toward the clearest path for demonstrating the economic advantages of taking on climate change.

It is important for the United States to adopt this stance to take advantage of the opportunity that has recently opened up in Russia. For the first time the Russian government has demonstrated an interest in increasing efficiency. President Medvedev signed a decree in June 2008 that includes measures aimed at reducing Russia's energy intensity by at least 40 percent by 2020 compared with 2007 levels. And Prime Minister Vladimir Putin issued a government order earlier this year that calls for a significant increase in the energy efficiency of the Russian electric power sector. Medvedev has on several occasions publicly acknowledged the economic benefits of energy efficiency for Russia's economy. As such energy efficiency represents an enormous opportunity for collaboration between our two countries.

Fortunately the United States has a ready and successful model for such collaboration in its experience in working with China on industrial energy efficiency. The Lawrence Berkeley National Laboratory, a research institution supported by the U.S. Department of Energy, has worked with Chinese scientists and the Chinese government to establish an industrial energy efficiency program that benchmarks China's top 1,000 energy-consuming industries to global best practices.

We recommend that the Obama administration propose a similar type of program that targets Russia's industrial sectors given the potential for substantial financial savings through energy efficiency in Russia's industrial sector and the Russian government's interest. Funding for such a project would come from both the U.S. and Russian governments, working through public-private partnerships, and that any potentially new energy-saving technologies that could emerge from this collaboration be fully shared. We should also frame this project as an opportunity for U.S. and Russian scientists to collaborate on contributing to Russia's innovation agenda and produce technologies that benefit both countries because of the sensitivity of U.S. involvement in the Russian economy.

Further, the United States can play a role in increasing Russian efficiencies by offering expertise to improve energy conservation at Russia's end-user level. The United States has had considerable success with a domestic energy efficiency program called Energy Star, which is administered jointly by the Environmental Protection Agency and the Department of Energy. Energy Star adopts the public-private partnership model-a concept gaining traction in Russia-by pairing up with businesses to develop energy efficiency compliance codes for a full range of products and practices, which now cover buildings and facilities and over 60 product categories, such as home appliances, office equipment, lighting, home electronics, and more.

In over 17 years of operation Energy Star has engendered collaboration among 15,000 private- and public-sector organizations, and led to estimated energy savings that translate to $19 billion in 2008 alone. It will be further strengthened by the aforementioned American Clean Energy Security Act should a companion bill in the Senate also pass. We recommend that the United States and Russia use the American experience with Energy Star to develop long-term Russian institutional capacity for establishing best practices, setting energy performance standards, and monitoring energy consumption across a wide range of end uses in Russia.

Russia and the United States were incapable of discussing important issues in the final months of the Bush presidency. The Obama administration now has the opportunity to build a relationship of trust and cooperation to fight a common threat. Working together on advancing energy efficiency in Russia and demonstrating the economic advantages of attending to climate change offers both countries an ideal platform for a new era of constructive diplomacy and joint action. Climate and energy efficiency can also expand the U.S.-Russia relationship beyond the traditional areas of arms control and nonproliferation. President Obama should capitalize on this opportunity starting next week in Moscow when he meets with Medvedev. Confronting this neglected challenge may very well wind up being a key to solving the climate crisis.

Related Links:

December 19th

Prelude to COP15: Climate Justice actions sweep the US before Copenhagen talks

Treat energy efficiency like a utility

"Deregulation shifts the major burden of consumer protection to the competitive market, and therefore, in important measure, to the enforcement of antitrust laws." - Alfred E. Kahn, Lessons for Deregulation: Telecommunications and Airlines after the Crunch.

I've always found the above to be one of the wiser quotes about deregulation. (Kahn, for those who don't know him, was at the helm of the Civil Aviation Board when airlines were deregulated, and has since written some of the more insightful pieces on deregulatory processes in multiple industries.)

What does this have to do with commodities and Senator Feinstein? Recently, she announced a proposed amendment to the Senate climate bill, one that would commence federal oversight of CO2 markets "to prevent Enron-like fraud, manipulation and excessive speculation in the new federal, state and regional carbon markets that will be established by [a cap and trade] system."

That sounds perfectly noble, part and parcel of the broader political backlash against commodity market speculators. Recall a few years back, when speculators were being blamed for driving the price of oil and gas to artificial highs. Economists argued that such trading had no effect, but was a part of a healthy market that allowed informed people to make bets and hedge risks. Populists argued that energy is too important a commodity to be exposed to such volatility, especially for folks living paycheck to paycheck. Both points are valid, and with the political turnover in DC, the general mood is shifting from one favoring laissez-faire, let-'em-speculate approaches to one favoring market regulations and speculator constrainment. (See here for the NYT's recent take.)

Speculation pros and cons

Discussions of regulation, populism, and economic theory inevitably take a political turn, so let's state a few obvious, apolitical truths:

To argue that energy price volatility and/or perpetually high energy costs are categorically good or bad is false, and unnecessarily polemical, even if it does make for a good political soundbite. As we now start to contemplate the creation of entirely new markets for entirely new commodities (namely, CO2 emissions rights), it's not at all surprising to hear the battle joined on familiar sides. Nor is it surprising to hear the e-word word (Enron!) thrown around, which calls for a brief digression.

What Enron did and didn't do

Enron undoubtedly engaged in a host of amoral transactions, not to mention lots of illegal transactions. But not everything that was amoral was also illegal. This latter point is particularly true with respect to California electricity markets, and it's worth reviewing some history -- especially when Enron-as-metaphor comes to have a meaning so distinct from Enron-in-reality.

When the California Power Exchange, or CalPX, was first created in 1998, it was essentially the first time that electricity could be bought and sold external to a regulated transaction. After a cautious year learning the rules, the gloves came off once electric generators, buyers, and speculators came to appreciate the magnitude of potential market swings (and how much money could be made therein). Enron's Star Wars-inspired ploys were the most famous example, making them the poster child for rapacious speculation. So far, so fair.

The awkward wrinkle to this story is that some of those transactions weren't technically illegal. If you're an avocado farmer and you can get $2 an avocado at Kroger and $2.50 at Safeway, no one calls you amoral for selling to Safeway. And if that then causes Kroger to raise their avocado prices to draw you back into their supply chain, no one is likely to take out their ire on the greedy avocado broker.

But watch what happens if you replace the word "avocado" with electricity. If your power plant will earn more money tomorrow (given the hot weather forecast) than it will today, and you therefore curtail production today to horde your fuel, are you breaking the law? If you then notice that the price today starts to rise when you curtail, such that you can independently affect price, are you amoral for using that knowledge to your economic advantage?

To be clear, I don't in any way mean to suggest that Enron wasn't amoral, nor that society's access to electricity is no more important than society's access to avocados. However, when the regulatory rules are set up such that the electricity broker's regulatory constraints are broadly similar to those of an avocado broker, a fair portion of the blame for whatever next ensues is rightly laid at the foot of the regulator. Every time we simplify the California power crisis to "Enron-type manipulation," we give the regulator an undeserved free pass.

Why Kahn matters

In a regulated enterprise, the role of the regulator is essentially to set price. That's how consumers get protected. In an unregulated enterprise, the role of the regulator is to make sure that the market sets the price, but that no individual actor (or collection of actors, acting in concert) can affect that price. That's why he says that the regulatory function shifts from price setting to anti-trust enforcement. The fact that Enron was allowed to exist in California is all the evidence that you need that antitrust enforcement was absent.

Which brings us back to Senator Feinstein's efforts to regulate emerging CO2 markets. Should we be leery of amoral market speculators? Yes. Should we guard against market dominance that can affect the price and supply of CO2 credits? Yes. But should we define success by a stable, not-too-high price for CO2 emissions credits? Absolutely not. A healthy market is incompatible with price controls. What's more, a regulator focused on price controls is often blind to precisely those antitrust-busting games that smart, amoral speculators like to play.

For now, I'm cautiously encouraged by Feinstein's efforts. Encouraged, that is, to the extent that her invocation of Enron meant that we need to adopt greater regulatory discipline to ensure we don't repeat our prior regulatory mistakes. But cautious, also, because too often, that invocation turns a blind eye to the culpability of regulatory agencies whenever we have a regulatory failure.

Related Links:

Making buildings more efficient: It helps to understand human behavior

Making buildings more efficient: rationalizing retrofit markets

Is there a tradeoff between economics and the environment?

International climate negotiations often seem like some sort of cosmic science fair project -- an aquarium full of hamsters connected to rudimentary motors. There's a lot of frantic running, a lot of sweat and heat, but in the end, very little light.

Faith in the UN climate process has dimmed. Joe Romm calls it a "dead man walking." The Copenhagen talks in December are generally discussed with the same dissonant mixture of urgency ("You have to do it in Copenhagen," says UNFCCC chair Yvo de Boer) and fatalism ("There is no movement," says German environment minister Sigmar Gabriel) as the last dozen rounds of international talks.

The Obama administration knows the danger of sclerosis and is working on several fronts to regain a sense of momentum. A good bit of that work will happen during this busy week, which will take the president to Russia to meet with President Dmitri Medvedev and Prime Minister Vladimir Putin; he'll deliver a major speech on U.S.-Russia relations today. On Wednesday, he heads to Italy for the latest meeting of the G8 countries (US, France, UK, Russia, Germany, Japan, Italy, Canada). On Thursday, on the sidelines of the G8, Obama will convene a meeting of the Major Economies Forum (the G8 plus Australia, Brazil, China, India, Indonesia, Korea, Mexico, Russia, South Africa). On Friday he'll head to Ghana and on Saturday he'll deliver a major speech on development and democracy.

At all these events the issue of climate change will play a role. All will reveal something about the Obama administration's approach to international climate negotiations.

The Grand Plan

International climate negotiations have primarily been channeled through the United Nations Framework Convention on Climate Change, but many in the international community are losing faith in that process, or at least in its monopoly on negotiations. Getting 192 countries to sign on to a meaningful treaty is nigh impossible; the lowest common denominator among 192 wildly diverse countries turns out to be pretty damn low.

Oddly, it was the Bush administration that first saw a way around the thicket. In May 2007 it announced a series of Major Economies Meetings on climate and energy security. The idea was that the largest greenhouse gas emitters could more easily find areas of agreement working directly with one another, and that what consensus they could find would help break the logjam in the UNFCCC process.

The sincerity of Bush's effort was widely doubted -- he (in)famously advocated for purely voluntary measures -- but the basic wisdom of the strategy is apparent to, among others, the Obama administration. In fact Obama seems to be taking it even farther, working not only with smaller groups like the Major Economies Forum (MEF) and the G8, but bilaterally with other large emitters. What shape these smaller deals take could vary, from shared targets to technology R&D agreements, but again, the idea is to show that big emitters are finally acting, taking real steps. This will, it is hoped, cut through the Gordian you-go-first knot sure to bedevil the Copenhagen climate talks.

The strategy began with Todd Stern's initial efforts in China, but "you can definitely say we are looking for other partners," an administration official said.

Russia

Most members of the international community had written Russia off when it comes to climate change. It grudgingly ratified Kyoto back in 2004, serving as the crucial final signatory needed to put the treaty into effect. But since then it's focused on nothing but often dirty and inefficient means of expanding its economy. Just last month, in what many interpreted as a thumb in the eye of the UN process, it announced a "climate plan" that would increase its greenhouse gas emissions 30 percent by 2020.

The reason Russia, a Kyoto signatory, can grow its emissions so heedlessly is that emission baselines for the UN process were set at 1990 levels. Of course in 1992 Russia's economy cratered, and with it the country's emissions. The damage was so great that the economy would need to grow substantially to meet a target of 10-15% below 1990 levels by 2020 -- and that's what it plans to do.

Most observers expected Obama to focus exclusively on arms control and the financial crisis when he goes to Russia, since progress on climate seems so hopeless. But as The Guardian reports, the administration fully intends to forge a deal on joint climate action. It's been pulling its ideas from a new report from the Center on American Progress.

The goal is to coax Russia into accepting strong sticks (mandatory targets at the Copenhagen talks) by offering it carrots. One is help entering carbon trading markets. The country is thought to be sitting on some 1.9 billion euros worth of carbon credits -- one of the main reasons it signed Kyoto -- but the government does not have the capacity or infrastructure to monitor emissions and approve projects. The U.S. could help with that, since it has considerable experience with such markets.

The other carrot is efficiency. Russia's energy intensity -- energy use per unit of GDP -- is twice America's, and the highest among the world's high energy consuming countries. Targeted exchange of efficiency technology and know-how could not only bend Russia's emissions curve but make its economy more productive. It's a win-win, but again, the government needs help. (Interestingly, Russia just announced that it will ban some incandescent lights by 2011.)

No big U.S.-Russia agreements on climate are expected this week, but Monday saw the introduction of a working group on energy, formed as part of a high-level bilateral commission created out of the summit. Steven Chu will chair the group on the US side.

G8 + MEF

The MEF is a smaller group of countries than the full UNFCCC, but it's still large and diverse, and there are enormous challenges in the way of getting a substantive agreement this week. Here are a few:

China + India

The overwhelming short-term priorities for developing countries are poverty reduction and economic development, driven in part by coal-based power. That's why China and India have both recently signaled that they will not commit to any binding GHG reduction targets. No, seriously, they won't. Says Indian environment minister Jairam Ramesh, “India will not accept any emissions targets -- period. It is the bottom line; a non-negotiable stand. This is not something that India is going to budge on, under any circumstances." OK then!

Both countries (India; China) have also recently expressed ostentatious outrage about the possibility that the United States will impose "carbon tariffs" on imported goods. (A border adjustment provision was inserted in the Waxman-Markey bill before it passed the House.) Developing countries warn of an incipient trade war. Of course, as John Kemp points out, the provisions in the bill are not actually carbon tariffs but "carefully structured as import permits specifically to ensure they are consistent with World Trade Organisation rules." And sure enough, the WTO has signaled that the import permits are legal. China and India fear them.

Obama has spoken publicly against the border adjustments, but as Brad Plumer notes, it's helpful to have that stick in hand to make the carrots look better. (Todd Stern didn't have it when he went to China early last month.)

Of course China is hardly sitting on its hands. It's green stimulus package was both larger and greener than America's. Just this month it boosted its renewable energy targets to 15% by 2020. It looks set to swamp the U.S. in both wind and solar investment this year; between now and 2020, it's expected to spend more on renewables and nuclear than on oil and coal.

The central government has established the State Council's Expert Panel on Climate Change Policy to work on energy development plans that will involve trillions in investment. "Roughly, we need to spend an extra 1 trillion yuan every year to raise energy efficiency," said panel member Bai Quan. Just as importantly, maybe more so, it announced that regional government officials will be judged by reductions in carbon intensity instead of purely by economic growth. Getting career bureaucrats on board is essential to making sure the central planners' schemes become reality. The green shift is dispersing into rural areas as well.

Energy Secretary Steven Chu and Commerce Secretary Gary Locke will head to China later this month to talk turkey. Says Chu, "It's in our interest and China's to explore ways to cooperate for our mutual benefit--by promoting renewable energy, encouraging energy efficiency and cutting pollution." Chu's assistant secretary David Sandalow is hosting a high-level discussion on engaging China on CCS this Thursday in D.C.; a second, focused on finance and political barriers, will happen soon thereafter.

You can imagine Chu announcing a splashy post-combustion CCS development project, or an investment in solar thermal projects, in exchange for back-channel agreements on a timeline for the country to accept hard emission reductions targets (and back off on border adjustment fussing).

What's next

Japan and Brazil are among the other countries with which Obama may pursue bilateral deals, possibly before Copenhagen. The big sticking point with Brazil is avoided deforestation. They don't want it paid for via carbon credits, through the Reduced Emissions through Deforestation and Degradation (REDD) program -- they want it paid for with cold hard cash (so old-fashioned!). So far, no one except Norway is biting.

If all goes well -- an enormous if, of course -- the U.S. negotiating team arrive at Copenhagen with a web of bi- and multi-lateral side deals on clean energy technology sharing, adaptation research, development assistance, trade deals, and more. The world's biggest polluters will arrive with agreements in hand. Developing countries will see signs of real movement on the part of developed nations and soften their rigid opposition to targets.

And out of it all will come a stronger, more robust climate treaty, scaffolded by the self-interest of the many countries invested in side deals premised on continued international action.

That's the hope anyway. Needless to say: domestic achievements notwithstanding, if Obama can pull it off he'll be assured of a place in history.

Related Links:

EU pushes China further after pledge to slow carbon intensity

Making buildings more efficient: It helps to understand human behavior

Copenhagen climate summit (part 1): the expectations

"The world is not going to turn its back on coal."
U.S. Department of Energy Secretary Steven Chu

The Waxman-Markey American Clean Energy Security Act (ACES) won't cut emissions. It won't serve as a platform we can improve later anymore than the Help America Vote Act (HAVA) served as a foot in the door to improve our democracy when it promoted voter purges and Diebold electronic voting machines. But one last argument is left to supporters: we need to support ACES in order to improve America's negotiating position in Copenhagen.

This bill would improve the U.S. negotiating position, since our international  friends and allies tend to grade us on a special needs curve.  The problem is that our government would use this increased leverage to weaken rather than strengthen any climate deal.  The current U.S. position is to support more coal, and oppose  strong emissions reductions in the next ten years.  The U.S. helped weaken the last climate change treaty by pushing  to include carbon trading and offsets in Kyoto. Does it really make sense for environmentalists to support a bill that won't reduce emissions, that does not provide an infrastructure for future emissions reduction in order to let our government do the same thing a second time?

References

Gar Lipow; "Waxman-Markey bill would do more for climate without cap-and-trade provision - Should be called Jekyll-Hyde";; Grist Magazine; 21-May-2009; <http://tinyurl.com/AcesNoC-T>

Gar Lipow; "Offsets are still counterfeit carbon credits - Clapping louder"; Grist Magazine; 1-Jun-2009; <http://tinyurl.com/OffFalse>

Gar Lipow; "Pissing the earth away"; Grist Magazine; 9-Jun-2009; <http://tinyurl.com/GristPiss>

Gar Lipow; "American Climate Energy Security bill still makes things worse. ACES is not playing with a full deck."; Grist Magazine; 3-Jul-2009; <http://tinyurl.com/AcesNoDeck>

George Monbiot; "Why do we allow the US to act like a failed state on climate change? The Waxman-Markey climate bill is the best we will get from America until the corruption of public life is addressed."; The Guardian - Environment - George Monbiot's Blog; 26-Jun-2009; <http://tinyurl.com/GradeCurve>

West Coast Climate Equity;"Steven Chu Backpedals on Coal-fired Power"; West Coast Climate Equity Global Climate Change Information; 14-Jan-2009;  <http://tinyurl.com/ChuCoal>

Siobhan Hughes; "Energy Secretary Backs Clean-Coal Investment";  Wall Street Journal;  7-Apr-2009; <http://tinyurl.com/wsjChuCoal>

Jeff Biggers;"Coalfield residents respond to Obama’s announcement on mountaintop removal - Kinder, Gentler Blasting, Leveling of Mountains, Filling of Streams"; Grist Magazine; 11-Jun-2009;  <http://tinyurl.com/kindMTR>

Mark Stevenson;"US nixes 40 percent cuts at climate change talks"; The Associated Press; 23-Jun-2009; <http://tinyurl.com/NoGHGcuts>

Related Links:

December 19th

Prelude to COP15: Climate Justice actions sweep the US before Copenhagen talks

Washington Times: “Obama digs in on global warming”

"The girl's not playing with a full deck, Giles. She has almost no deck. She has a three."
Buffy the Vampire Slayer - Faith, Hope and Trick.

The American Clean Energy and Security Act (ACES) repeals the recently won authority the EPA has to regulate greenhouse gases, and replaces that authority with a loophole ridden cap-and-trade system. Those loopholes include offsets which legally counterfeit carbon credits with the help of clever consultants. They include weakening regulations on ethanol, which compares to oil in greenhouse gas intensity.  They include subsidies for coal. They encourage incinerators. Incinerators can be extremely greenhouse gas intensive compared to reduction, reuse and recycling of wastes - especially when they produce black carbon (soot and smoke).

If we want to stop global warming we need to reduce emissions. A bill that provides no reductions, or even smaller reductions than we currently have authority to enforce is a net loss. It would be one thing to support a weak law, that we might build on. It is quite another to support to a counterproductive law that makes things worse. Half a loaf may be better than none. Letting the fat boys grab our last slice of bread is not.

A good comparison might be the misleadingly named Help America Vote Act (HAVA) which required electronic voting machines and more voter purges after the scandal ridden 5-4 victory of George Bush over Al Gore in the 2000 election.  A combination of flawed machines, flawed procedures at the state and local levels, and purges of eligible voters made the U.S. voting system worse rather than better. The Waxman-Markey ACES bill will do for the climate what HAVA did for American democracy. Supporting it as "better than nothing" is not a pragmatic choice.

Related Links:

Washington Times: “Obama digs in on global warming”

Where is all the damn climate data?

Science historian Weart on global warming

Rep. Peter DeFazio (D-Ore.) made one thing clear on Friday: he's just not that into the cap-and-trade legislation under debate in the House.

Peter DeFazio was first elected to the House in 1986. He represents Oregon's 4th district in the southwestern part of the state.Courtesy Rep. DeFazioIn a speech in Portland, DeFazio decried the focus on creating a market-based system for trading pollution-credits and permitting a substantial use of carbon offsets.

"There’s an unholy alliance of big business, some environmental groups and Wall Street" backing cap-and-trade, said DeFazio, comparing the scheme to the deregulation of the electricity markets that ultimately led to soaring rates in some states. "Wall Street is excited about another thinly regulated market."

A system that caps emissions and allows companies to trade pollution permits would enable financial gamesmanship but do little for the environment, according to DeFazio, who penned an op-ed making similar allegations back in January. Instead, he just wants there to be a cap on carbon, and polluters should be forced to stay under that limit. If they exceed the limit, they should be fined aggressively, he said.

It remains an open question whether DeFazio plans to vote against the American Clean Energy and Security Act, which is expected to come up for floor debate in the House very soon. Much has been made about opposition to the bill from Republicans and agriculture-state Democrats, but DeFazio is one of the most vocal opponents among more liberal Democrats. He'll be an interesting player to watch, and we hope to have more on his views soon.

In the meantime, here's a message posted on his website back in April highlighting his thoughts on the subject:

Related Links:

Never-give-up fighting spirit: lessons from a grandchild

Approaching Copenhagen with a Portfolio of Domestic Commitments

What to make of the new climate poll

More than 2 and half years ago I wrote:

"Mommy, where do carbon offsets come from?"

"Well, you see sweetheart, when a major polluter and a consultant love money very, very much, they express that love in a special way. Nine months later, the consultant produces an extremely large paper packet."

Offsets, the idea that big corporations can pay someone else to cut emissions on their behalf still fails as badly today as when that was written. Polluters still pay money to an offset project. In turn the offset project pays a share of polluter money to a consultant who constructs a really convincing narrative explaining why that project emits fewer greenhouse gases than if the money had not been paid. The difference between the consultant's story and actual emissions is the emissions reduction available for sale. The polluter buys this instead of actually reducing pollution. It is a difference between reality and what unprovably might have been.

The Friends of the Earth new report Offsetting: a Dangerous Distraction [PDF] documents that this continues to be true. Scientific American agrees. The Economist reports on a scandal in Papua New Guinea, which many offset opponents think is a good example of what we can expect should large scale forestry offsets be included in a trading scheme.

Offset supporters have new arguments:

One is that we need to support offsets as part of the total Waxman-Markey package, because Waxman-Markey is our last chance for a U.S. climate bill. But there is no reason to believe that this IS our last chance. McCain-Lieberman was beaten back, and this new bill is on the table around a year later.

Further, the current bill gives away one of the great levers to get a climate bill passed - the current regulatory authority of the EPA. While that authority is not structured optimally for greenhouse gas regulation, it is strong enough to allow regulations that will produce larger cuts sooner than this awful bill can net. If the EPA chose, these new rules could be a major inconvenience to the same forces who have extracted all sorts of concession in the current bill to win their support. That would put pressure on some of the utilities and industries to support a decent climate bill as an alternative. Giving up that leverage in return for a bill that may actually increase emissions is a really foolish and un-pragmatic choice. At least it is if emission reductions are the point.

Another claim is that we can count on the EPA, under the tougher offset standards Waxman-Markey requires, to only approve valid offsets. It seems unlikely, simply because the EPA does not have the resources to set up anything but a consultant based system. Under such systems the EPA only validates a project after most of the work of justifying it or not is done by consultants. And that same lack of resources will make the EPA no match for clever consultant narratives. Joe Romm gives an example of CH4 and N2O reductions in wastewater plants as difficult offsets to fake. However, states, counties, municipalities and special districts tend to regulate CH4 because methane stinks, and N2O because it increases eutrophication. It will be very tempting for regulators to let wastewater facilities informally know they face such requirements, but then hold off on formal rulemaking (or order-giving in the case of publicly owned facilities) to let the plants "voluntarily" set up reduction projects partially financed by selling offsets.

Recent domestic offsets convert Joe Romm has faith that offset use won't be widespread in the U.S. because the Waxman-Markey climate bill sets standards so low industry won't bother to buy offsets. They will just make cheap and easy cuts instead. This is not the most ringing endorsement of a climate bill I've ever encountered, but it also makes me wonder: why does Romm think even the cheapest real opportunity can be cheaper than the paper reductions counterfeit offsets represent? As my counterexample to Romm's own chosen example above shows, there is no real way to guarantee this type of offset will be real. Also, why does he not remember the experiences he has described many times over the years about how difficult it can be to persuade companies to adapt money saving technology? Doesn't it seem likely that the same irrationality that leads companies to miss money-saving opportunities now will also lead them in many cases to buy new cheap counterfeit offsets over technology purchases that cost more upfront, even if those real reductions save money in the long run? Romm is right that many cheap ways to comply with a tougher bill exist, let alone this one. But the same market failures that lead companies to overlook profitable energy saving opportunities now will lead them choose offsets over real reductions.

A last argument: the extreme right makes some of the same criticisms. The problem with this is that the really far right is opposed to doing anything about climate change. If mainstream environmentalists decide to require that everyone to drink their own unfiltered urine as part of the fight against global warming, both the loony right, and non-insane environmentalists will oppose this. Sensible environmentalists will be against this, because drinking unprocessed urine is a bad idea. Loony rightists will oppose this because it is not their idea. (If Rush Limbaugh advocates urine drinking, much of the far right will respond "mmm mmm good".) But the loony right and sensible environmentalists are not forming a block. It just happens that the mainstream has decided to do something so nuts that people from very different parts of the political spectrum notice that it makes no sense. And if the Daily Mail opposes forcing people to drink their own unfiltered urine, it does not automatically become a good idea. I know that many who argue for offsets are deadly serious. But sometimes I can't help but wonder if offset support is not some elaborate hoax, and offset supporters are just taking the piss.

References

Carbon trading: a carbon tax, blindfolded and handcuffed, with its shoelaces tied together. Grist, December 11, 2006 By Gar Lipow

Offsets are still counterfeit carbon credits: Clapping louder; Zcom; Gar Lipow, June 1, 2009.

Simon Bullock, Mike Childs, Tom Picken; A dangerous distraction:Why offsetting is failing the climate and people: the evidence. Friends of the Earth (England, Wales and Northern Ireland) June-2-2009

Madhusree Mukerjee; Is a Popular Carbon-Offset Method Just a Lot of Hot Air? A popular carbon-offset scheme may do little to cut emissions; Scientific American; June 2009.

Papua New Guinea and carbon trading: Money grows on trees. Irregular carbon credits cause upheaval in the government of Papua New Guinea. The Economist (economist.com), Jun 6th 2009.

Joe Romm; How I learned to stop worrying and love Waxman-Markey, Part 2: In praise of domestic offsets; Climate Progress. May 12, 2009.

Nadene Ghouri; The great carbon credit con: Why are we paying the Third World to poison its environment?; The Daily Mail; June 1 2009

Related Links:

Washington Times: “Obama digs in on global warming”

Where is all the damn climate data?

Science historian Weart on global warming

Last month I went home to Barcelona to attend Carbon Expo, one of the major annual gatherings for professionals involved in the global carbon market. There were many interesting conversations and panel discussions over the course of the three-day conference, but one in particular focused on sectoral mechanisms as a way of sourcing international offsets from emerging economies.

In my last post, I argued that a sectoral mechanism can be a powerful instrument to deliver cost-effective offsets -- provided it is able to clearly link investment and subsequent returns from a private sector perspective. In relation to this, one of the panelists from the International Energy Agency (IEA) presented the conclusions from a recent study on sectoral mechanisms and carbon markets (PDF). The slide below, taken from this paper, schematically represents how a sectoral ex-post crediting mechanism may work.

With this approach there are two major problems from a private sector perspective:

1. The credits are sold to the carbon market at a country level (i.e. the government), removing direct access for a private entity to enter the market, which has been one of the most successful features of the Clean Development Mechanism (CDM).

2. A good performance from a private entity does not guarantee carbon credits in return, since it depends on other companies also operating under a country's baseline. This is completely outside the control of an investor and therefore it introduces an incalculable risk into that investment.

IEA paper via Sonia Medina / EcoSecurities

The IEA study made the same point:

Furthermore, under the terms of the current Kyoto Protocol, we already have evidence that government-run schemes have not been as successful as the CDM, which has a more clearly defined private sector approach. Joint Implementation and the International Emissions Trading system have failed tremendously to deliver the trading and financial flows that were initially expected of them. It may be argued that this failure to deliver has been caused by the lack of a clear incentive between private sector investment and a transparent carbon reward, since both schemes are heavily dependent on government action.

Another worrying aspect of a sectoral mechanism as described above relates to timing and transition issues. It is clear that a sectoral mechanism will mean a lot more work upfront by host countries in setting up the rules, developing baselines and monitoring procedures. This raises questions as to what would happen to CDM projects that get caught in the middle of this transition. Further still, it raises questions as to how quickly countries can start delivering a flow of credible, high-quality sectoral credits that can be used for compliance commitments. If the supply is not there, the United States and other demand-side countries will see their cost of compliance increase.

One final point regarding sectoral mechanisms, that from my point of view makes them difficult to be a source of reliable compliance-grade offsets, relates to the fungibility of credits across different sectoral crediting schemes. It is not clear if all sectoral mechanisms will be governed by a single entity like the World Trade Organization or the current UN Framework Convention on Climate Change (UNFCCC), or will rely exclusively on host countries.

Worryingly, this may mean that the market could perceive the credits coming from different countries or sectors to be of differing quality, and therefore, it may create fungibility issues. Understandably, the U.S. Environmental Protection Agency may decide at that point to subject those credits to extra checks in order to accept them into a US scheme. If we thought that dealing with the UN was difficult, we can only imagine what it may be like dealing with two governments that have conflicting priorities.

I remain convinced that sectoral mechanisms can be quite powerful if applied correctly, but from what I have seen in the United States and Europe, further debate is required. It is tremendously important we get this right, otherwise it could be a missed opportunity for businesses and governments to tackle climate change cost-effectively, while unleashing large amounts of private capital to develop a new green economy.

It is also of special relevance in the United States because the Waxman-Markey bill clearly relies on offsets as a cost-containment strategy, having established a theoretical limit of 2 billion offsets per year. Domestically, it is already clear that the potential supply will be well below 1 billion, especially if the EPA ends up regulating landfills and coal mine-methane.

Therefore, international offsets need to play a crucial role in controlling costs of compliance in the United States. If sectoral mechanisms fail to deliver, as I think they will, then U.S. businesses will face a tremendous shortage of offsets and will suffer from an unexpected increase in compliance costs.

Related Links:

Fair, Ambitious & Binding: Essentials for a Successful Climate Deal

Capturing the massive social benefits of fuel efficiency requires regulation

City preps and countries posture ahead of Copenhagen talks

You keep hearing about the Waxman-Markey climate and energy bill -- aka the American Clean Energy and Security Act, ACES, H.R. 2454 -- but what's actually in it? We combed through the 946-page beast so you don't have to.

Here are the highlights of the bill, which is sponsored by Reps. Henry Waxman (D-Calif) and Ed Markey (D-Mass.) and was passed by the House Energy and Commerce Committee on May 21.

The bill creates a renewable electricity standard (RES) that would require large utilities in each state to produce an increasing percentage of their electricity from renewable sources. Qualifying renewable sources are wind, solar, geothermal, biomass, marine and hydrokinetic energy, biogas and biofuels derived exclusively from eligible biomass, landfill gas, wastewater-treatment gas, coal-mine methane, hydropower projects built after 1992, and some waste-to-energy projects.

The RES:

The bill would put a cap on emissions of planet-warming greenhouse gases, and would require high-emitting industries to reduce their output to specific targets between now and the middle of the century. (This is the "cap" part of the "cap-and-trade" program.) The bill covers 85 percent of the overall economy, including electricity producers, oil refineries, natural gas suppliers, and energy-intensive industries like iron, steel, cement, and paper manufacturers.

Track the debate and take action >>>

The goals for U.S. emission reductions, below 2005 levels:

Regulated industries would need to acquire permits for their emissions. (Emission permits are also referred to as "carbon credits," "pollution allowances," and various combinations of these words.)

If a company cuts its emissions so much that it has more permits than it needs, it can sell excess permits to other companies or bank them for future use. If a company doesn't have enough permits, it can buy more or borrow its future credits and pay interest on them. Non-regulated entities (banks, nonprofits, people like you) can also buy and sell permits. (This is the "trade" part of the "cap-and-trade" program.) If a company's emissions exceed its permits, it would be fined two times the fair market value of the permits it should have purchased.

Some of the permits would be given away to industries regulated under this bill:

Some of the permits would be given to entities that are not covered under the bill, which would sell them and use the proceeds for specific purposes:

About 15 percent of the pollution permits would be sold by the federal government in the initial years of the program. Here's how the revenue would be spent (shown as a percentage of the value of all permits):

By 2025, the bill would direct an estimated total of $190 billion to energy technologies and efficiency measures:

The bill also creates a Clean Energy Deployment Administration within the federal government that would provide loans and loan guarantees to spur more private investment in energy technology.

Regulated companies would be allowed to purchase carbon offsets to meet a portion of their required emission reductions -- meaning they could fund clean-energy projects elsewhere instead of cutting their own emissions. This could lower the cost of complying with the new law.

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Soil carbon—a blind spot in the debate on carbon

The arguments in favor of counterfeit carbon credits still fail no matter how often they are repeated  

Common talking points(TP)  and replies(R)

TP) Cap-and-trade will be too expensive if we don't do offsets. And then we need a higher cap!

R) Counterfeit carbon credits are just a back door way to raise the cap. It is prioritizing the number printed in the law over actual emission reductions.

TP) Offsets aren't counterfeit credits. Offsets rock!

R) Offsets are inherently counterfeit. An offset compares the results of a project against what a consultant guesses would have happened if it had not occurred. The higher the guess (the "business as usual scenario" or BAU), the higher the profit an offset project makes.  Because offsets substitute for government issued credits, they serve as permits to emit.  To the extent the BAU scenario is too high, (to the extent the consultant overestimates what emissions would have been without the offset), the offset is counterfeit an increases emissions compared to doing the project. International rivers has documents how most existing offsets (both approved and in the pipeline) under Kyoto are doubtful. For example, credits are granted for hydro power world wide, in spite of the fact that hydro power is something likely to be built anyway.  Hydro power is valuable. It can be used for baseload, peaking or load following. Depending on turbine design, in some cases it can be combined with super-capacitors to provide spinning reserve.

TP) Waxman-Markey offsets are different. WM offsets must be existing, additional and permanent!

R) Saying it does not make it happen.  Additionality is still based on a guess. What is worse, that guess is still made by consultant hired by the offset project. Regulators only review the consultants estimate, just as they do in CDM.

TP) We shouldn't worry about offsets. There won't be that many of them anyway.

R) Waxman-Markey offers lots of ways to create new offset. The argument that there won't be many new offsets depends on the assumption that a consultant based system won't find ways to get bogus ones past reviewers.

TP) We need offsets for forestry and agriculture.

R) If we could measure agriculture and forestry precisely and accurately enough to serve as more or less exact counter-balances to lumps of coal, we could include them in cap-and-trade (or levy a carbon tax on land use emissions).  Living ecosystems constantly breathe and absorb carbon. So even with precise, accurate continuous measurement that would limit the precision and accuracy with which we could measure change. Because we would have to use some sort of estimate to decide how to average data and over what period to create a baseline, and over what period and by what formula to average multiple increases and decreases to measure changes.  But measurement is NOT that precise or accurate. We can use satellite data, which is indicative, but not at all precise or accurate on a per forested or farmed area basis. We can use direct soil measurements such as Laser-Induced Breakdown Spectroscopy (LIBS). Note that even with such advanced technology, the samples themselves measure carbon within an area at a particular point in time with between 3% and 14% accuracy, depending on various factors including how many samples are taken from a given area. But since they are not taken continuously, they are applied as corrections to remote sensing. If we are lucky we end up with total accuracy over the course of the year for the area measured as a whole of 10% to 25%. Note that actual changes in soil carbon may vary by less than the 3% which is the bottom range of accuracy for a one-day result. Given the greater inaccuracy over the course of a year, it seems likely that on a year-to-year basis it is possible for carbon measurement to get the sign wrong, let along the quantity change.

TP) Sob, you don't care about the rainforests and the topsoil, sob. Sniffle, without offset credits what oh what is left?

R) Note the hidden assumption here, that solving global warming equals cap-and-trade (or if you are a DFH a carbon tax). If it is priceless, it is hopeless. But of course measuring soil and biomass carbon even with a 25% accuracy is quite good if you move beyond cap-and-trade to actually worrying about emissions. We know how to preserve soil and biomass carbon.  Build rather than destroy soil. Disturb soil (and especially roots) as little as possible - consistent with other good soil management practices. Practice biodiversity rather than planting just one or a few crops.  Use water efficiently. Minimize runoff. Use organic or ultra-low input agriculture. And as reinforcement, to make sure all this is working, 25% accurate measure will be quite useful. Establish a rough baseline over the course of years. Take measurements four times a year, year after year. The results won't give you good enough numbers to trade for lumps of coal, but they will be good enough to tell you every few years or so whether your soil conservation practices are working. And they will be good enough to tell you whether they are working (or failing) by a lot or a little.  You can build standard based regulations on that level of measurement. For that matter you can take some of the money used for current agricultural subsidies, and use it to provide positive incentives based on that type of measurement. Its good enough for a lot approaches, just not good enough for carbon trading.

TP) Are you saying offsets can never ever do any good?

R) Oh no, they can accomplish quite a lot. They make profits for large corporations and revenue for governments and consultants. They provide employment for public and private jugglers of red tape. They let politicians make weak climate bills look stronger than they really are.  They help build self-esteem among mainstream environmentalists.  They just don't lower greenhouse gas emissions or help solve the climate crisis. 

References

Glen Hurowitz, Understanding Offsets, Grist, 31-May-2009

International Rivers, Rip-Offsets: The Failure of The Kyoto Protocol's Clean Development Mechanism,  November 2008

David A. Cremers, Michael H. Ebinger, David D. Breshears, Pat J. Unkefer, Susan A. Kammerdiener, Monty J. Ferris, Kathryn M. Catlett and Joel R. Brown; Measuring Total Soil Carbon with Laser-Induced Breakdown Spectroscopy (LIBS) ;Journal of Environmental Quality; pp 2202-2206;Vol 30; Nov-Dec 2001.

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Where is all the damn climate data?

Science historian Weart on global warming

One of the least discussed flaws in the Waxman-Markey bill's attempt to tackle the climate crisis also illustrates the fundamental problem with cap-and-trade. The bill strips the EPA[1] of much of its existing authority to regulate greenhouse gases, in return for the new, weaker authority granted under Waxman-Markey. The existence of this authority is one of the strongest levers that can be used to push through new climate legislation, and it should not be given up in return for something this weak. Under recent Supreme Court rulings, existing EPA is authority is quite strong, albeit required to be implemented in less than optimum ways.  The offset provisions, along with reduced targets during the first ten years, guarantee this bill will produce few or no emission reductions if passed.  In the name of not letting the perfect become the enemy of the good, Waxman-Markey lets the perfect become the enemy of the good. It trades actual emissions reductions for acceptance that cap-and-trade is the right means of reducing emissions.    

And ultimately filling up political space is what cap-and-trade does. When a cap-and-trade bill is on the table most of the conversation and political activism around climate change is concentrated on cap-and-trade.  Should we accept this version of cap-and-trade or fight for a stronger one? Or do some heretics want to question cap-and-trade? (When a cap-and-trade bill is off the table, most political effort is aimed at getting one on the table.)

The "trade" part of cap-and-trade is a way to put a price on carbon emissions. Such pricing is not the most important part of solving the climate crisis.  As Jeffery Sachs says (in the course of a note to Kevin Drum supporting the Waxman-Markey bill) : "... putting a market price on carbon emissions (through either a tax or permit system) is just one modest part of a truly comprehensive and effective carbon mitigation strategy, that must involve standards, R&D, demonstration projects, and many other kinds of incentives and public policies".  When environmentalists and environmental groups put most of their climate efforts into winning an emissions price that is a tremendous misplacing of priorities.

But it is even worse when the mainstream chooses to support counterproductive means. Emission trading has historically  proven less effective than alternatives on a small scale, and failed  when used on a large scale [2].  Sulfur, considered the great triumph of emission trading, demonstrably reduced U.S. acid rain more slowly, by less than rule-based regulations did in France and Germany.  The much vaunted cost savings of sulfur trading compared to initial estimates overlook that most pollution reduction schemes, whether trading or standards-based cost less than initially estimated[3].   When trading was extended to multiple pollutants in the RECLAIM scheme in Southern California, this failed miserably, and had to be restarted - this time with the trading scheme reinforced by the type of regulation typically slandered as "command & control".

So how did we get to the point where trading is seen as THE solution to the climate crisis, with everything else as mere reinforcement or an inadequate and unrealistic substitute? Long before the Kyoto treaty, most of the world knew emissions would have to be reduced. It was taken for granted that treaties would lead to national regulations, national public spending, probably reinforced by some sort of carbon tax.  But all this was happening during the ideological triumph of Reaganism and Thatcherism, long after the actual time in government of Reagan and Thatcher had passed.  Regulation? Taxing? Public spending? These were all seen as old fashioned failed policies. We needed something new and exciting, something that could be labeled as government free. And out there was the Sulfur trading story. Sulfur trading may not have worked as well as the U.S. as old fashioned standards based rules had in the EU. But it had not failed completely. Even though trading ultimately required the government to create a new property right, it looked as though the government was not involved, if you squinted, and closed one eye, and rubbed something in the remaining eye to blur its vision.

So when Kyoto came along, there was shock and awe from hundreds lobbyists from the EDF and the World Bank, and other environmental groups who thought themselves beyond left and right [4]. Complementary to this, Al Gore argued from the U.S. perspective for carbon trading[5].  Fight global warming the same way the U.S. fought acid rain[6].   

And how did this work out?  During the three year period where we have verified emissions, emission among traded entities rose by 1.8%[7]. (During that same period emissions for the EU as a whole fell[8].) According to preliminary figures emissions fell by 3.06% for 2008.  It is widely agreed that much of this was due to economic recession, and warmer weather, and widely argued that a substantial minority was due to the trading system.  However just as EU emissions fell a bit while ETS emissions rose, I suspect that once the data is out we will find EU emissions dropped much more steeply that the comparatively small drop in greenhouse gases from traded entities. The overwhelming evidence is that the European Trading Scheme is retarding rather that driving emission drops.   

Why has trading held on to shut a strong mindshare in the environmental community? Part of it is ideology: supporting trading is a way to be pro-environment and not be a Dirty F__ Hippie (DFH). Part of it is that a whole lot people make money from carbon trading, and a lot more want to.  So trading supporters get more money and resources, which lets them do a better job of presenting their views.  Part of it is tribalism: a lot of the people beloved by a certain type of centrist liberal support trading. So if Al Gore and Waxman and Markey think highly of trading, who the hell are Hansen or Greenpeace, or anyone not part of the magic circle to question their wisdom.   Part of it is a wish to rejoin the world again, to be part of a joyous reunion in Copenhagen where the U.S. is welcomed back in the circle of nations. The U.S (helped by elites in other nations) persuaded the world back in 1997 that emission trading was the right path. We sold that lemon; now it is our turn to suck it!

References

 [1.] http://snipurl.com/j5mal

John Larsen, Alexia Kelley and Robert Heilmayr; Brief Summary of the Waxman-Markey Draft; April 20 2009; World Resources Institute

# Prohibits EPA from:

    * Classifying GHGs as criteria pollutants on the basis of their climate impacts (Sec. 831, pg. 490)

    * Designating any GHG as a hazardous air pollutant on the basis of its climate impacts (Sec. 832, pg. 490)

    * Setting New Source Review standards for GHGs on the basis of their climate impacts (Sec. 833, pg. 490)

    * Considering the climate impacts of GHG emissions when issuing operating permits under Title V of the CAA (Sec. 834, pg. 490)

[2.] http://tinyurl.com/tradingfail

Gar Lipow, Emissions trading: A mixed record, with plenty of failure. Grist Magazine, Feb 19, 2007.

[3.] http://tinyurl.com/RegsCostLess

Hart Hodges, Falling Prices: Cost of Complying With Environmental Regulations

Almost Always Less Than Advertised - EPI briefing paper, Economic Policy Institute, 01-November-1997

[4.] http://snipurl.com/j5mmk

Carbon Trading: A critical conversation on climate change, privatization and power.

development dialogue  no. 48 september  2006

Larry Lohman (Ed.).  Chapter 2 ‘Made in the USA' pp 31 - 69

[5.] http://climatelab.org/Kyoto_Protocol

Kyoto Protocol - Climate Lab.

" The United States played an important role in the international negotiations leading up to the drafting of the 1997 Kyoto Protocol. Vice President Al Gore was a main participant in putting together the text of the Protocol, and President Clinton said it was environmentally strong and economically sound."

 [6] http://snipurl.com/j5mmk

Finding the Ratchet: The Political Economy of Carbon Trading Donald MacKenzie

"At the insistence of the US, Kyoto gave its signatories sulphur-like flexibility in how to meet their commitments. A country with a Kyoto commitment can meet it by controlling emissions domestically. Alternatively, it can pay for reductions made via projects in developing countries without Kyoto targets (that Kyoto provision is the‘Clean Development Mechanism') or via projects in other industrialised countries(such ‘Joint Implementation' projects are mainly to be found in the former Sovietbloc). Indeed, a nation-state signatory can simply pay another signatory forreductions the latter has made beyond its commitments."

[7.] http://tinyurl.com/GhgRose

Emissions trading: 2007 verified emissions from EU ETS businesses, EUROPA,23-May-2008.

[8.] http://tinyurl.com/GHGfell3yrs

EC welcomes fall in 2007 greenhouse gas emissions for third consecutive year

May 29, 2009

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Waxman-Markey is a big split personality of a bill. Its efficiency and renewable requirements would make a dent in greenhouse gas emissions, even if not a very big one. But the cap-and-trade at the heart of the legislation is another story.

Why do we need cap-and-trade or a carbon tax or something similar? If we could just flip a switch and turn off emissions quickly, there would be no need to discuss complex schemes. In that case, the best approach would just be to notify everyone they were required to stop polluting a year or three from now. Because greenhouse gas emissions are so interwoven into our infrastructure, we have to phase out this type of pollution slowly, over decades.

Waxman-Markey's approach to this is to issue permits each year for a total amount of pollution we will allow. Polluters must obtain permits for every bit of smoke they belch. The idea is to allow pollution very close to the current level the first year, then issue fewer permits every year, so the amount of pollution allowed gradually falls. The total number of permits is the cap. As that total drops the cap is said to tighten. Sale of those permits is the "trade."

Now, it is easy to argue over whether this type of system can be implemented properly, but whatever your stand on the theoretical issue, it is pretty obvious that Waxman-Markey's implementation is a series of disasters.

Downstream Permitting

Waxman-Markey issues a large percent of permits to the final emitter of pollution, rather than those who first extract or import oil or gas or coal. This is referred to as downstream permitting, and Peter Dorman at Econospeak explains why downstream permitting is a disaster.

The single biggest flaw, one which is fundamentally not fixable, is the decision to issue permits on an industry-by-industry basis -- to cap the uses of carbon fuels rather than their sources. This is an invitation to never-ending bickering over who is allowed to emit how much. Every little tweak of the system -- whether to include freight transportation or agriculture (which crops!) -- has to be hammered out separately. Reductions are calculated from a baseline, but there are acres of wriggle room about how to measure who emitted how much in the base year and therefore how much should be reduced tomorrow. Enforcement is complex, expensive and full of loopholes. Only lawyers (and politicians with extortionary campaign finance strategies) could love this

In a comment he explains further:

1. You have to measure all this combustion. Enforcement is complex and expensive, and lots of small emitters will slip through the cracks.

2. The issue of coverage, which sectors need permits and which don't, is always on the table. And it's not just either/or; there are lots of fine-print details to be haggled over. Check out any of the existing systems that use this approach, like the ETS or the Western Climate Initiative.

3. All of the above is an open invitation to perpetual rent-seeking.

4. In the end, all the carbon in fossil fuels either goes into the atmosphere or some other component of the "fast" carbon cycle, or it is returned to the lithosphere. No long-term sequestering currently happens, so at the moment you can regulate emissions by regulating extraction and importation of these fuels. In the future, if technologies emerge that can sequester carbon on a geological time scale, you can give people extra extraction/importation permits in the amount of their sequestration.

Offsets

The bill's use of offsets is another disaster. Dan Welch defines an offset as "an imaginary commodity created by deducting what you hope happens from what you guess would have happened." The Kyoto Clean Development Mechanism (CDM) generates offsets. For example, Chinese hydropower plants want to issue and sell carbon credits for power generated. They hire expensive consultants that claim the dams would never have been built if the builder had not hoped to sell carbon credits, in spite of the fact China is building new electrical generation as quickly as possible. (In fact, almost all hydro projects submitted under CDM were already approved for construction by the time they begin the application process.)

Since credits generated by CDM are used as permissions to burn coal inside the EU, credit granted for a project that would have happened anyway increases net emissions. Credits for such projects are called "non-additional" and are to a cap-and-trade system what counterfeit money is to a banking system. International Rivers has documented (PDF) the predominance of such counterfeiting within the CDM system.

Waxman-Markey allows three kinds of offsets.

One type of offset is basically CDM with a few additional criteria. (In fact, existing CDM credits with an added review process may well qualify.) These criteria sound good. The credits must be additional, existing, and permanent. But fundamentally this kind of offset will still depend on how a good a story a consultant can come up with. We still are measuring against a guess about what might have been.

A second is emissions reductions via agriculture and forestry. Land use (including animal husbandry, row crops, tree harvests, and forest fires) is second only to fossil fuels as an emission source. However, the same problem that prevented land use from being included in cap-and-trade in the first place makes it a poor source of credits -- difficulty in measuring emissions precisely. Farms, grasslands, and forests store carbon in the parts of the plant visible above ground, in the roots and surrounding soil, and in the ecology of fungi and other micro-organisms established in the roots and surrounding soil. Carbon is tough to measure below the ground. Even combining satellite pictures with expensive extensive in-soil equipment measures ecosystem carbon within plus or minus 5%.

This is only feasible on a small scale. If large-scale changes are to be made in the forestry and agricultural sectors as a whole, measurement will be mainly via satellite and other types of remote sensing, with modest amounts of local measurement used to correct and improve modeling. That equipment limitation means the best feasible large scale measurement of carbon content will be plus or minus 10-25%. Since biological sequestration of this type can only take place at rate of 2% to 3% annually, the precision is too low to provide meaningful numbers for credit generation on a year to year basis.

In addition, biological sequestration isn't really sequestration. Carbon removed from the air by plants, unlike fossil fuels left in the ground, is still part of the living carbon cycle. Plants absorb carbon they way we breathe oxygen. Carbon embedded in plant ecologies varies constantly, from day to day, month to month, season to season and year to year. This brings up a real problem of additionality. (And no, netting it out on a short time scale does not solve the problem. We are trying to provide incentives to change human behavior. Giving someone a dollar every time the sun goes up, and taking it away again every time the sun goes down is source of confusion, not a reasonable incentive for behavior changes.)

Offsets under Waxman-Markey are supposed to be permanent, but permanence in a dynamic system like a farm or forest is really hard to measure -- especially with possibilities of fires, floods, storms, and pest damage. Because biological sequestration is a long-term process not subject to precise measurement it is unsuitable for inclusion in either trading or emissions taxing systems. Control has to be based on the sign and rough scale of long term changes.

The last type of offset WM promotes is something called sectorial offsets. The idea is to guess the future emissions of a sector in a nation with no cap. Consultants construct a Business As Usual (BAU) scenario for, say, a sector within Indonesia. This sector can then generate carbon credits to the extent it lowers emissions below that baseline.

The problem here is the same as with individual CDM projects. Both developing nations that would generate credits and potential buyers of those credits have enormous incentives to make high projections and thus create counterfeit carbon credits. Large corporations would put the pressure on to approve such scenarios because the credits generated would be a cheap alternative to investing in real emissions reductions, or purchase of limited non-counterfeit credits. The State Department would probably add to this pressure as a cheap pay-off for support in whatever the latest ill-advised U.S. military or economic venture was. How likely to do you think decision makers would be to make a stand and defy such forces over an issue as wonky and obscure as the slope of a BAU scenario? Can you say "regulatory capture"? I knew you could.

Lastly, WM tries to address offset flaws by deflating offset value 20%. Unfortunately there is no reason to believe offset inflation is anywhere near that low.

Giveaways

Another flaw is that 80% of the permits are given away rather than auctioned. (The number 85% is bandied around a great deal, but seems to ignore the "unallocated" permits whose preferred use is deficit reduction.) This is an obvious justice issue, since it means the creation of a new property right which is then turned over to the very rich. (If the remaining 80% were auctioned, the revenue could be returned to the public in various ways, instead of being a windfall for wealthy utilities.)

However, I'm fairly confident that the climate justice issues with giving away permits will be written about. So I want to concentrate on how giveaways undermine effectiveness.

• Giving away a large number of permits increases volatility. This results in higher highs and lower lows in permit prices. This would not happen if 100% of permits given away were then sold. Markets won't care whether some government agency or large corporations sell these pollution permits. But inevitably, some of the permits will be kept by those gifted with them. The whole reason for a gradual phaseout is that emissions cannot be eliminated overnight. It would very strange therefore if electric utilities did not have to keep a fair percent of the permits they are given, especially in the early phases.

Similarly, energy intensive industries will probably continue to use significant amounts of fossil fuel and keep many of their permits. And so on.

With 80% of permits given away it is not unreasonable to assume that 25% of all permits (less than one third of those given out free) will be kept on a continuing basis, that the percent kept won't fall below that during the early stages. That portion of free permits that are steadily used would otherwise have to be steadily bought. In short, by giving away almost all permits for free, we are removing a significant portion of steady, predictable demand from the permit market. That increases volatility of the price for those permits that remain on the market. High prices will be higher, low prices lower.

So how does volatility affect emissions? Well remember that proclaiming a cap, and selling permits does not magically lower emissions. People have to comply and not emit greenhouse gases they have no permit for. Like most laws, enforcement of carbon rules depends on widespread compliance, so that enforcement is only needed against rare exceptions. Volatile permit pricing discourages capital investment for future reductions. When the cap tightens, we end up with a situation such as happened with the RECLAIM system in Southern California. Power plants and manufacturers were supposed clean up their SOx and NOx pollution. But too many permits were issued, and 100% of permits were given away. Almost no capital investments required to implement the second phase were made. Firms assumed cheap permits would continue to be available for the second phase. Implicitly, everybody counted upon everybody else to cut emissions.

As a result, when the cap actually did tighten the ability to comply just was not there. Equipment changes that would have reduced production of pollution, and filtered out much of what remained had not been made. Compliance with the second phase was delayed by several years. Volatility undermined compliance.

• Giving away permits also adds to the pressure for issuing too many credits. Increasing the number of permits always lowers the price to polluters. But issuing more permits when most are given away also increases the number of permits polluters have to sell, often by much more than the total percent increase. As an extreme example, consider a company that will use 90% of their free permits for their own pollution and sell 10% to others. A 10% increase in the number of permits issued will double their excess credits, double the number of permits they can sell. That 10% increase in free permits doubles their cash flow from carbon trading.

It is really difficult to give away permits without the kind of downstream distribution Dorman criticizes. The point of giving away permits is to buy potential opponents in a way that is not obvious. For example, instead of giving away 80% of permits, Waxman-Markey could auction 100% of permits, and then distribute the resulting money to the same people the permits are going to in the same ratio. Why wasn't this considered? Because it would be more obvious that what was going was a buy-off.

This is the same reason that nobody ever considered requiring permits upstream (mostly fossil fuel production and import), while giving them away to downstream users like power plants who could then sell them to fossil fuel companies. Giving permits to people who keep some of them looks more "costless" than giving them to people who sell 100% of them.

In short, while one can model giveaways combined with upstream permit requirements, the politics of giveaways meld them pretty inseparably with downstream sectorial caps. This, in turn, makes enforcement and tightening of caps more difficult.

Politics

The usual argument for Waxman-Markey is that, though imperfect, it is better than doing nothing. The cap-and-trade portion is worse than doing nothing. Because of the flaws I've mentioned, it essentially requires no emission reduction in practice for at least a decade. Any short term benefits come from non cap-and-trade provisions, such as the Renewable Energy Standard.

The long-term effects are even worse. The point of supporting a weak bill in area like this would be to build political infrastructure. Even if the standards were low, we could fight to plug better numbers into existing regulations. But with Waxman-Markey, we not only have to fight to change the numbers. We have to replace most of the architecture -- downstream caps with upstream ones, offsets with requirements for real reductions, giveaways with auctioning. If we pass Waxman-Markey, we still end up with a whole climate bill to pass. And that climate bill will need to be fought for under worse conditions than starting from scratch. We will have to win auctions when powerful political actors are accustomed to free permits. We will have to repeal offsets against the opposition of the entire corporate and foreign policy establishment. We will have to fight to move downstream caps upstream over the objections of a large establishment who will have made huge investments in gaming the complicated loophole-ridden structure.

Given the weakening of non cap-and-trade provisions (such as Renewable Energy Standards) as the price of including cap-and-trade, Waxman-Markey in its present form is a net loss for the climate. The renewable and efficiency standards without the cap-and-trade provisions would provide a small net gain for the environment. But the addition of this particular cap-and-trade turns this bill into a large net loss. If cap-and-trade is the heart of Waxman-Markey, then this is a piece of legislation that would be improved by having its heart torn out.

I'll let Peter Dorman have the last word:

Mainstream environmental groups are ... soooooo happy that climate deniers are not in command of politics any more. They are fighting yesterday's battle, to get general agreement on the principle that climate change is caused by people, and people need to do something about it. They like the nice feeling that comes from all of us raising our hands and pledging, scout's honor, to achieve sustainability by 2050. But they are losing today's battle to put into place a viable means to get from here to there, and judging from their public statements they don't even know it.

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References

Tom Athanasiou, Patrick McCully and Carl Middleton; Bad Deal for the Planet: Why Carbon Offsets Aren't Working and How to Create a Fair Climate Accord (PDF), 2008,

Peter Dorman, Why Environmentalists Should Oppose the Waxman-Markey Bill, May 14, 2009

Gar Lipow, Cap-and-trade permit giveaway hurt Waxman-Markey effectiveness: Permit giveaway lowers carbon price, increases volatility, reduces capital investment, May 15, 2009

Gar Lipow, Emissions trading: A mixed record, with plenty of failures -- Regulations work better. February 19th, 2007,

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Approaching Copenhagen with a Portfolio of Domestic Commitments

House leaders have reportedly reached a tentative deal on a climate and energy bill -- and in the absence of details, speculation is rampant about how the bill has been weakened or otherwise changed.

Energy and Commerce Committee Chair Henry Waxman (D-Calif.) and Ed Markey (D-Mass.), the bill's coauthors, had wanted to start markup of the legislation two weeks ago, with the aim of passing it out of committee by Memorial Day. But it's taken longer than expected to reach agreement with moderate Democrats, who requested a lot of changes to the bill.

Democrats on the Energy and Commerce Committee are scheduled to meet Tuesday night to hammer out the final details; then text of the revised bill is expected to be unveiled on Wednesday, and debate is to begin on Thursday.

While the bill's authors have been mum about the negotiations, their moderate counterparts have made a number of claims about what will be in the bill.

Rep. Mike Doyle (D-Pa.) told Reuters late last week that the bill would give away the majority of carbon permits for "the first 10 to 15 years," rather than requiring emitters to pay for the right to pollute. Doyle and others have indicated that local electricity distribution companies would be given 35 to 40 percent of the permits, while roughly 15 percent would go to trade-exposed, energy-intensive industries like steel, paper, and cement, and up to 5 percent would go to refineries.

Informed sources on the Hill tell Grist that Doyle may be jumping the gun in claiming those decisions are final. But there is a lot of pressure from utilities, energy-intensive industries, and their sympathetic representatives to hand out a majority of the permits free of charge in the early years of the program. Waxman has acknowledged that to get the bill passed, some free permit allocations may be necessary, and would be reduced over time.

The near-term target for cutting emissions may be lowered in the new version of the bill, to 14 percent below 2005 levels by 2020. The original proposal called for a 20 percent cut, but some were lobbying to go as low as 6 percent. Waxman balked at the 6 percent suggestion: "I think it is very low," he told reporters several weeks ago.

The 14 percent cut is at the low end of what the U.S. Climate Action Partnership proposed in its blueprint, which served as a model for the Waxman-Markey bill.

The target for cutting emissions by 2050 is likely to remain as it was in the original draft: 83 percent below 2005 levels.

The bill's renewable electricity standard is another component that may be weakened. The draft called for 25 percent of each state's electricity to come from renewable sources by 2025. Southeastern Democrats were unhappy with that, so committee leaders are reportedly considering lowering the mandate to 17.5 percent, and could allow a portion of that to be met by efficiency measures.

Drill, maybe, drill?

Another bargaining chip with moderate Democrats might be offshore oil and gas drilling.

The Democratic-controlled Congress let the moratorium on offshore drilling expire last October, responding to public outrage over $4-a-gallon gasoline and the Republicans' "drill, baby, drill" chant. (Never mind that experts agree that more domestic drilling wouldn't do anything to lower oil costs in the near term.) Obama changed his tune on the issue while campaigning last year, saying he'd be open to more offshore drilling if it were part of a comprehensive energy plan.

Now the White House is floating the possibility of a "grand bargain" that would lump some expanded domestic oil and gas drilling in with broader climate and energy policy. A senior White House official told The New Yorker that the administration was exploring a deal that would include a cap-and-trade system and "serious" and "short-term" increases in domestic oil production in places like the California coastal region. House Democrats who met with Obama in the White House last week said the subject came up.

It's a plan that many enviros -- and many Californians -- wouldn't be too fond of, but it could bring moderate Democrats on board. It would also defuse the Republican talking point that Democrats are opposed to all drilling.

Such a deal could also help put in place new protections for the coasts. Now, in the absence of an offshore-drilling moratorium, the federal government could technically offer drilling leases for areas as near as three miles to shore. Interior Secretary Ken Salazar scrapped the Bush administration's lease plan in January, but said the Obama administration is open to drilling in some areas and would work with Congress to craft "a plan that makes sense."

The offshore-drilling issue would be handled by the House Natural Resources Committee, however, not the Energy and Commerce Committee, which is working on the climate bill, so additional deal-making would be needed to get everything into a single package.

Through all this, Waxman is sticking to his self-imposed deadline for passing the climate and energy bill out of committee before Congress leaves for its Memorial Day recess, but that's looking less and less likely as the holiday approaches.

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Approaching Copenhagen with a Portfolio of Domestic Commitments

The authors of the House climate and energy bill will be courting undecideds over the next couple of weeks as they try to get their legislation passed by the House Energy and Environment Subcommittee.

Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) want to make these potential swing voters happy while preserving the integrity of their bill. Meanwhile, industry is pushing the undecideds to help severely weaken or even kill the bill.

Of the 35 members of the House Energy and Environment Subcommittee, a dozen -- 11 Democrats and one Republican -- have expressed support for climate legislation, but have concerns about the Waxman-Markey bill in its current form. These swing votes are the prime targets of advertising campaigns by both industry groups and progressive organizations.

A complete version of the Waxman-Markey bill is expected over the next few days, with debate on amendments to begin sometime the week of May 4. After passing out of subcommittee, the bill will go on to the full Energy and Commerce Committee, where Democratic leaders hope to get it passed by Memorial Day.

Here's a rundown on the wild-card members of the subcommittee, what they've said about the bill, and how they want to change it.

Rick Boucher (D-Va.)

Boucher, a coal-state moderate who last year introduced his own draft climate bill with Rep. John Dingell (D-Mich.), has been leading the cadre of subcommittee members looking to make the bill more business-friendly. He and his allies have circulated a list of changes they'd like to see.

While the bill currently mandates a 20 percent reduction in greenhouse-gas emissions by 2020, Boucher is pushing to lower that goal to 6 percent.

He wants to give out many emission permits free to energy-intensive industries and to the local distribution companies (LDCs) that funnel electricity to users, rather than auctioning the permits off, and he wants permit giveaways to the industrial sector to continue throughout the whole length of the cap-and-trade program, rather than be phased out. He wants to increase the amount of emissions reductions that can be met through offsets, and make the use of offsets more flexible. And he's asking for the banking, borrowing, and strategic-reserve provisions -- all mechanisms to help contain costs for businesses -- to be made more flexible.

As a way to make the bill easier on the coal industry, Boucher is also pushing to ease performance standards for new coal-fired power plants, and grant "bonus allowances" to the first companies that install carbon-capture-and-sequestration technology.

"And at the end of the process, I hope I'll be able to support the bill," Boucher said last week. "In its current form, I cannot."

Electric utilities have been the top campaign contributors to Boucher, giving him $753,960 over the past 20 years. He's also received $264,106 from mining interests, $262,467 from oil and gas, and $203,696 from chemical and related manufacturing industries.

John Dingell (D-Mich.)

Dingell, who chaired the Energy and Commerce Committee before Waxman unseated him in a November coup, has also been a vocal critic of some of the bill's provisions. His concerns largely mirror Boucher's, though he's been more public with his opinions.

"Nobody in this country realizes that cap-and-trade is a tax, and a great big one," Dingell said during hearings on the bill last week, essentially repeating the Republican talking point that the bill amounts to a massive tax.

Also at the hearings, Dingell expressed concern about the "aggressive nature" of the bill's renewable energy standard (RES). "I worry that 25 percent [renewable energy] in 15 years might be more than states can handle." He has suggested allowing nuclear power to count toward a state's baseline renewable levels.

In a nod to his home state's major industry, Dingell has advocated for more funding within the bill for advanced automotive technologies. He's also called for more funds for wildlife adaptation.

Dingell has received $1,183,547 over his career from electric utilities, making them his biggest contributor. He's also received $953,465 from the automotive sector, and $409,091 from oil and gas interests.

G.K. Butterfield (D-N.C.)

Butterfield has questioned whether the bill has enough votes to make it out of committee -- and his own vote is likely to be one of the deciding factors.

He's particularly concerned about rising energy costs for average Americans and how that might affect the economy as a whole. He has called for 35 percent of revenue from the auctioning of pollution permits to go toward tax rebates to Americans in the lowest income brackets.

"For a low-income family, it's absolutely impossible for them to absorb the costs," Butterfield said last week.

He's also criticized the RES in the bill: "We cannot achieve a 25 percent mandate by 2025. Not only is it impractical, but it is impossible." He has suggested including nuclear, biomass, and efficiency in the options that states would have to meet their renewable-power requirements. He argues that Southern states, which are heavily coal-dependent and have been slower to adopt renewable power, will have particular trouble with an RES, so he's requesting "special consideration for my state and several other states in the Southeast in our situation." (Recent reports have found that the South has big potential for renewable-energy development and could in fact meet an ambitious RES.)

Electric utilities have been Butterfield's fifth-largest donor, at $50,000 over his career so far.

Gene Green (D-Texas)

Green has requested that 5 percent of carbon allowances be given free of cost to the refinery industry, which is obviously large in his state.

"I can't vote for a bill unless my refineries [are protected]; because of the nature of my district, it's a job base and a tax base," Green told Dow Jones. "Frankly, it's a national-security issue. I don't want to transfer production offshore for refined products, relying on imports from the Middle East and Venezuela."

But Green is also worried about what would happen if regulation is left to the Environmental Protection Agency. "If Congress does not act, greenhouse gases could be regulated without the input of legislators who represent the diverse interests of this country," he said.

The oil and gas sector is among Green's biggest donors, at $330,613 over his career, as are electric utilities, at $271,800.

Mike Doyle (D-Pa.)

Doyle, who with Jay Inslee (D-Wash.) co-authored the portion of the Waxman-Markey bill that aims to help energy-intensive industries transition under carbon regulations, is another moderate leading negotiations with the bill's authors.

As Pennsylvania is an industrial state, he's concerned about the amount of pollution permits that will be given to industrial sectors like steel, aluminum, iron, paper, cement, glass, and chemicals and paper. He has also asked the bill's authors to shave the RES from 25 percent renewables by 2025 down to 15 percent.

Doyle's biggest donors have been industrial unions, which have contributed $359,450 to his campaigns. Electric utilities are also among his top donors, giving $257,427 over his career.

Charlie Gonzalez (D-Texas)

Gonzalez wants to make sure that the bill protects citizens from high energy costs. "It’s all about the consumer," he told reporters last week. "Any increase in the price in energy looms large."

Gonzalez is also worried about how the bill will impact oil refineries. His district houses the headquarters of Valero, one of the largest refiners in the country.

Industrial unions, the oil and gas sector, and electric utilities have all been among Gonzalez's biggest contributors over the years.

Mary Bono Mack (R-Calif.)

Perhaps the lone swing Republican on the subcommittee, Bono Mack has said repeatedly that she is concerned about climate change, but also about the price tag of a climate bill. "I have big concerns about the costs and what it will do to our constituents," she said during last week's hearings.

But unlike the rest of her Republican colleagues, she's said she is willing to work on a climate bill rather than try to torpedo it. As for whether she can support this bill in particular, she said, "Truly, I am in the undecided category ... I'd love to see us do all we can on renewables. I'd love to see us move forward on energy independence."

Other key swing votes on the panel include John Barrow (D-Ga.), Baron Hill (D-Ind.), Jim Matheson (D-Utah), Charlie Melancon (D-La.), and Mike Ross (D-Ark.).

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Vinod Khosla Nonesense