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Steel Manufacturers Association
Environment & Energy -- Climate Change Update:
US Climate Action Partnership (USCAP)
May 19, 2009
Tom Dower, Vice President
Lighthouse Consulting Group
USCAP Political Outreach Coordinators
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Diverse Voices Represented
Member Organizations:
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About our Coalition
• Launched in January 2007 with the Call for Action
• Consensus-based, with 25 corporations and five
environmental groups
• Created to articulate the need for prompt
enactment of strong federal climate legislation
• A more detailed Blueprint for Legislative Action
released in January 2009
• Advocating enactment of legislation consistent
with Blueprint and Call for Action
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The Scientific Case for Action
• Science is sufficiently clear to justify
prompt enactment of legislation
• Each year we delay action increases the
risk of unavoidable and potentially costlier
consequences
“Warming of the climate system is unequivocal, as is now evident from
observations of increases in global average air and ocean temperatures,
widespread melting of snow and ice and rising global average sea level.”
Intergovernmental Panel on Climate Change, Climate Change 2007:
Synthesis Report
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The Economic Case for Action
• Unchecked GHG emissions will limit
economic growth, strain public budgets
• Legislation to harness market forces to
reduce GHG emissions can reduce the
economic cost of achieving desired
reductions and spur investment in 21st
century technologies which in turn can
generate jobs, economic growth
• U.S. needs to be positioned to succeed in
the new low-carbon, global economy
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Why Do We Need Legislation?
• Well-crafted federal legislation can:
 Create an enforceable mechanism to slow, stop and reverse
greenhouse gas emissions
 Enable the marketplace to identify opportunities for increased
investment and provide the foundation for a low-carbon
economy
 Reduce the economic cost of uncertainty
 Avoid/minimize use of command and control approach
 Spur innovations in new technologies
 Enhance energy security
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A BLUEPRINT FOR
LEGISLATIVE ACTION
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What is the Blueprint?
•
•
•
Detailed framework for a
possible path forward on
climate legislation
An approach to achieve
aggressive
environmental goals in a
responsible and
economically
sustainable manner
A consensus of diverse
organizations
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USCAP’s Climate Approach
• Economy-wide cap-and-trade program
• Clear linkages with emissions offsets, cost
containment measures
• Allocation of allowance value to transform
economy, modernize energy infrastructure,
smooth transition for consumers and adapt to the
impacts of global warming
• Complementary measures to spur transformation
to low-carbon economy
• U.S. leadership on international stage
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Core Blueprint Components
Targets &
Timetables
Climate
Protection
80% GHG
Reduction
by 2050
Scope of
Coverage
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Core Blueprint Components
Cost
Containment
Targets &
Timetables
Economic
Protection
Climate
Protection
80% GHG
Reduction
by 2050
Allocation
of Allowance
Value
Offsets
Scope of
Coverage
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Core Blueprint Components
Cost
Containment
Targets &
Timetables
Economic
Protection
Climate
Protection
80% GHG
Reduction
by 2050
Allocation
of Allowance
Value
Offsets
Scope of
Coverage
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Cap-and-Trade Program
• Federal cap-and-trade program coupled
with cost containment measures and
complementary policies ensures
environmental integrity, economic stability
• Declining, economy-wide emission
reduction targets
• Provides incentives to transition to new
technologies while ensuring GHG
emissions reductions
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Targets and Timetable
• Aggressive emission reduction targets for
capped sectors as well as total U.S.
emissions:




97% - 102% of 2005 levels by 2012
80% - 86% of 2005 levels by 2020
58% of 2005 levels by 2030
20% of 2005 levels by 2050
• USCAP recommends program to provide
credit for early action
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Scope of Coverage
• Goal to cover as much of economy as
politically and administratively possible
within a cap-and-trade program
• Point of regulation:
 Large stationary sources regulated at point of
emission
 Transportation fuels regulated at refinery gate or
point of importation
 Natural gas use could be covered by regulation of
local distribution companies (LDCs)
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OFFSETS AND COST
CONTAINMENT MEASURES
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Adequate Offsets Critical
• Offsets reduce greenhouse gas emissions
not otherwise included in cap
• Offsets must be:





Environmentally additional
Verifiable
Permanent
Measureable
Enforceable
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Offset Administration
• Congress to establish Carbon Market
Board that sets overall annual upper limit
for offsets within a range
 Upper limit starts at 2 billion metric tons
 Authority to increase to 3 billion metric tons
 Domestic and international offsets each limited to
no more than 1.5 billion metric tons in given year
• Additional offsets contained in strategic
offset and allowance reserve pool
• No “firm-level borrowing”
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Strategic Offset and Allowance
Reserve Pool
• Mechanism to limit extreme volatility and spike in
allowance prices, especially in the early years of
program
• Includes program-based and other
governmentally certified offsets and, as a last
resort, allowances borrowed from future
compliance period at system level
• Carbon Market Board charged with releasing
offsets and/or allowances from the Strategic
Reserve Pool at a CMB-specified threshold price
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DISTRIBUTION OF
ALLOWANCE VALUE
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Our Approach to Distribution
• “Allowance value” is either the value of a freelydistributed allowance or revenue generated by a
government auction of allowances
• Distribution of allowance value should facilitate
transition to low-carbon economy
• A significant portion should be initially distributed
free to capped sectors, including economic
sectors particularly disadvantaged by secondary
price effects of a cap, to help protect consumers
• Free distribution of allowances to be phased out
over time
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Allowance Value Over Time
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Fair and Equitable Distribution
• Blueprint identifies principles to guide fair and
equitable allocation of allowance value to:
 End-use consumers of electricity, natural gas, transportation
fuels
 Energy intensive industries facing international competition
 Trade-exposed commodity products
 Competitive power generators and other non-utility large
stationary sources
 Low-income consumers and workers in transition
 Programs to achieve technology transformation
 Adaptation needs of vulnerable people and ecosystems at
home and abroad
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COMPLEMENTARY
MEASURES
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Complementary Measures and
Policies
• Intended to spur rapid technology
transformation and to support the
transition to a market based approach to
reducing GHG emissions
• May be mandatory or incentive-based
• When applied to sectors under the cap,
intended to overcome market barriers
imperfections that may prevent price
signal from achieving actual reductions in
emissions in those sectors
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Technology Transformation
• Robust program to produce substantial
investment in new technologies
• Federal support for pre-commercial and
higher-risk phases of technology research,
as well as early demonstration and
deployment of new technologies
• Funding should be transparent,
predictable, and accountable; not subject
to annual appropriations; and leverage
private investment
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Coal Technology
• Incentives to facilitate and accelerate early
deployment of carbon capture and storage
(CCS) technology
• Address financial and regulatory barriers
• Coupled with these provisions, USCAP
recommends new standards:
 CO2 emissions standards for coal plants initially
permitted after January 1, 2015
 Retrofit requirements for coal plants permitted after
January 1, 2009, and prior to January 1, 2015
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Transportation
• Economy-wide emission reduction targets require
systematic approach involving:




Fuel providers
Vehicle and equipment manufacturers
Consumers and other end users
Public transportation, infrastructure and land use officials
• Recommendations include improving vehicle
efficiency, reducing fuel carbon content and
increasing the efficiency of transportation system
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Buildings/Energy Efficiency
• Policies and measures that improve
energy efficiency are an immediate step
Congress can take
• Emissions reduction programs include:
 State- or utility-sponsored conservation programs
 Tightened building codes and standards
 Appliance efficiency standards
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The Need for Action
“The scale of the undertaking to address
climate change is enormous, and should
not be underestimated. For this issue to be
successfully addressed – and failure is not
an option – the way we produce and use
energy must fundamentally change, both
nationally and globally.”
– USCAP Call for Action, January 2007
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LIGHTHOUSE CONSULTING GROUP, LLC
1150 Connecticut Ave., NW, Suite 717
Washington, DC 20036
Phone: 202-822-2000 Fax: 202-822-2156
[email protected]
http://www.lighthouseconsultinggrp.com/
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