Transcript Slide 1

Policy Matters Ohio
Climate Legislation and Jobs:
An Overview of Issues and Options
February 23, 2010
www.policymattersohio.org
The Science
Explaining the Greenhouse Effect
Figure: www.myclimatechange.net
Warming is unequivocal:
clear and unambiguous.
Source: IPCC, AR4, WG1, Chap 6, Fig. 10
One fifth of our CO2 emissions today
will remain in the air in 3009
Atmos. Chem. Phys. 7, 2287-2312, 2007
Stabilization of CO2 concentration, temperature, and
sea level takes centuries after emissions are reduced
IPCC TAR SYN SPM Fig 5-2
Opportunities of the Low
Carbon Economy
• Why has China announced it will reduce
emissions by 40% below 2005 levels by
2020?
• Transition to a low energy economy by
mature and developing nations offers the
largest export market in the 21st century.
The 21st century is about exports
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Demand grows as nations develop.
40% of European GDP is export driven.
40% of Chinese GDP is export driven.
36% of Canadian GDP is export driven.
11% of US GDP is export driven.
America must claim a place in the
economy of the 21st century!
• The low carbon economy will be the
largest market.
The Dilemma
(Ohio’s Opportunity/Danger)
• Over 18% of Ohio’s GSP comes from
manufacturing, 50% more than the nation’s
share….
• Ohio is the third largest exporter of goods
among the states…
• Ohio ranks 5th in the nation for our total energy
use
• Ohio ranks second in the nation for the level of
pollution emitted by our electric power industry.
LABOR plays a BIG ROLE
- Refrigeration/HVAC, Water Conservation – UA, Sheet
Metal Workers
- Lighting, solar energy, public utilities - IBEW
- Weatherization, skylights- Glaziers Union
- Roofing & energy efficient materials- Roofers
- Insulation, energy efficient framing-International
Association of Heat and Frost Insulators and Allied
Workers
- General Labor & Construction, emissions control,
hazardous waste, demolition and recycling- LIUNA, IUOE
- Green Building- Ironworkers
- Greening the Ports- ILWU, Teamsters
- Mass transit- Transit Employees
- Cleaner manufacturing – USW, IAMAW, UAW, CWA-IUE,
- Public health – AFSCME, SEIU, CNA
- Education and career-tech – education unions
Legislative options on the table
• American Clean Energy and Security Act
of 2009 …aka
– “ACES” or
– Waxman Markey or
– Cap & Invest
• American Clean Energy Leadership Act of
2009 … aka “energy legislation”
• Clean Energy Jobs and American Power
Act of 2009 …aka
– Senate version of Waxman Markey
More legislative options
• Carbon Limits for Energy and America’s
Renewal Act…aka
– CLEAR Act of 2010
– Cantwell Collins or
– Cap & Dividend
• Kerry-Lieberman-Graham
• Voinovich-Lugar
Policy Matters Ohio
The American Clean Energy
and Security Act of 2009:
To create clean
energy jobs,
achieve energy
independence,
reduce global
warming
pollution and
transition to a
clean energy
economy.”
September 21,2009
www.policymattersohio.org
ACES – Five Titles
• Clean Energy (Renewables, Coal
Sequestration, transportation, smart grid,
nuclear, State SEED funds, etc.)
• Energy efficiency (built environment,
appliances, transportation, neighborhoods,
housing, State REEP funds.)
• Global Warming (Cap & Trade)
• Transition (energy intensive industries,
consumer protection, climate workers
adjustment assistance).
• Agricultural and forestry offsets
Cap-and-Trade Systems Under Development
Western Climate Initiative (WCI)
EU
Emissions
Trading
System
(EU ETS)
Participant
Observer
Regional Greenhouse Gas Initiative
(RGGI, “Reggie”)
Cap-and-Trade Climate Policy
• “Cap-and-trade” means a government authority establishes a cap that
limits the total amount of pollution allowed,
and then distributes allowances for “permission to pollute” the global
atmosphere, which can be traded as private property.
• The amount of greenhouse gas emissions permitted declines each year,
creating demand for a new commodity: carbon permits.
• When offered enough money (or faced with high enough costs),
polluters who own permits (or need permits) will reduce their emissions.
• These trades establish a market price for greenhouse gas pollution.
Got it?
A familiar game can help illustrate the concepts…
Musical Chairs
A Helpful Analogy for Managed Scarcity
Each chair represents the “permission to pollute”:
one metric ton of carbon dioxide (1 mtCO2)
or an equivalent amount of any other greenhouse gas
If you have an “allowance”, you can have a chair.
Players: Polluters at Points of Regulation
Power
Plants
Oil
Refineries
Aluminum
smelters
Natural Gas
companies
Chemical
companies
Cap-and-Trade
Declining Cap
Covered Entities
Polluters Compete for Scarce Permits
Carbon Price Established by Market Activity
So, is it more
profitable to:
buy a permit, OR
reduce my own
emissions?
Profit opportunities are a main
driver for innovation and investment,
and the climate challenge needs both.
Carbon Price Established by Market Activity
$40
Would anyone accept
$40 for your permit?
Moving to Clean Energy
2020
2030
2040
2050
2010
Players seek better options as costs rise.
Cap-and-trade lets players choose at what price they leave the game
– and how they want to make that change.
Rail Transport
Hybrid vehicle
Nuclear power
Solar power
Green buildings
Wind power
$100
$50
$20
$150
$200
$30
Carbon Cap vs. Carbon Tax
Price
On
Carbon
Carbon
Cap
Demand
P
Demand
Carbon
Tax
P
Q
Should we set the quantity
and let markets determine
the price for a scarce resource?
Q
Quantity
of Emissions
Should we set the price
and let markets determine
the quantity of pollution?
Emission Allocations: Free
versus Auctioned Over Time
American Clean Energy and
Security Act of 2009
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Cap and Trade
National Renewable Energy Standard
85% in Free Allowances
15% to cushion lowest income
CBO estimates annual impact of $175 per
household
• Most studies find a somewhat progressive
impact
• Includes substantial investment provisions
Key Job Provisions
• 15% for energy intensive industries
• 44% for utilities (Regional equity)
• IMPACT - $30BB to help firms with
fewer than 500 employees become
energy efficient and retool for new
markets
• Production based rebates and border
adjustments
• CWAA
Cantwell Collins (CLEAR* Act)
• Cap and Dividend
• Trade occurs only in the private sector
• 75% goes directly to consumers in a flat
rebate to households
• 25% goes to investment
*”Carbon Limits for Energy and America’s
Renewal”
Cantwell- Collins, continued
• Cap is on fossil fuels, not on emitters.
• 99% of firms are not subject to the cap;
only sellers of fossil fuel
• 81% of economy covered.
• Border adjustments
Kerry-Lieberman-Graham
• Specific support for expanded oil and gas
drilling
• Specific support for expanded nuclear
capacity
• Significant focus on coal sequestration
• Renewables and energy efficiency remain
focus
Voinovich Lugar Proposal???
Proposal would deal solely with emissions from
electric utilities; would address Nox, SO2, CO2
and Mercury.
• limit GHG emissions from power plants;
• new financial incentives for nuclear power;
• carbon capture and sequestration;
• energy efficiency mandates for buildings and
• stronger corporate fuel economy standards
The American Clean Energy Leadership Act
• Senate Energy and Natural Resources
Committee in June.
• Establishes a Renewable Energy Standard (15
percent)
• allows more oil and natural gas leases in the
eastern Gulf of Mexico,
• overhauls federal financing for clean energy
projects,
• boosts energy efficiency programs and
• Includes new federal authority to site major
electric transmission lines.
Clean Energy Jobs and
American Power Act of 2009
• Looks like ACES but
– lacks investment,
– Renewable Energy and
– emissions allocations.
• Support for nuclear and natural gas as bridge
fuels
Key Issues for Ohio
• How to minimize the downside
– Border adjustments
– Production based rebates
– Regional equity - Protecting household
budget Protecting employers from energy
spikes
• How to maximize opportunity
– Building a national market
– Ensuring domestic content
– Access to capital for domestic manufacturers
Key initiatives to watch
• Senator Brown’s tax credits for domestic
advanced energy manufacturing
• IMPACT legislation
• Regional Borrowing Authority
• Regional equity
• Transition assistance – unemployment
and training
• Prevailing wage