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Jonathan Pershing jpershing@wri

Context Setting: United States IISD-WRI Workshop Exploring the Challenges and Opportunities for Establishing a North American Emissions Trading System November 14-15, 2007. Jonathan Pershing jpershing@wri.org Director, Climate, Energy and Pollution Program World Resources Institute

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Jonathan Pershing jpershing@wri

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  1. Context Setting: United StatesIISD-WRI WorkshopExploring the Challenges and Opportunities forEstablishing a North American Emissions Trading SystemNovember 14-15, 2007 Jonathan Pershing jpershing@wri.org Director, Climate, Energy and Pollution ProgramWorld Resources Institute http://www.wri.org

  2. Key Points • US Emissions • State Action • Regional Action • Federal Action • Business Action • Looking Forward

  3. US Emissions

  4. GHG Emissions Source: IPCC, AR4, 2007

  5. US GHG Emissions Source: WRI, Submission to US Senate, April 2006

  6. US Emissions by Gas Source: USEPA: April 2007, US GHG Inventory

  7. State GHG Emissions

  8. State Per Capita Emissions

  9. State Action

  10. States with Biofuel Mandates Ethanol Mandates Biodiesel Mandates Source: WRI, CAIT

  11. Renewable Energy Mandates Source: Pew Climate Center

  12. Stakeholder initiatives on climate change States with climate change advisory groups or commissions, by initiator 2006 Governor/Agency NGO Legislature

  13. Stakeholder initiatives on climate change are becoming the norm States with climate change advisory groups or commissions, by initiator 2007 Governor/Agency NGO Legislature

  14. Climate Action Plans Source: Pew Climate Center, July 2007

  15. States with GHG targets: 30% of US Emissions IL: 1990 levels by 2020; 60% below 1990 levels by 2050 CA: 2000 levels by 2010; 1990 levels by 2020; 80% below 1990 levels by 2050 NJ: 1990 levels by 2020; 80% below 2006 levels by 2050 FL: 2000 levels by 2017; 1990 levels by 2025; 80% below 1990 levels by 2050 HI: 1990 levels by 2020

  16. State action will reduce national emissions Business as Usual (99% above 1990 levels) U.S. emissions if all current state targets are met (56% above 1990 levels)

  17. Key states to watch: • Alaska • Observer to Western Climate Initiative (WCI) • Hard hit by climate change, big oil state • Florida • Considering joining Regional Greenhouse Gas Initiative (RGGI) • GHG targets on par with California • Illinois • Big coal, corn state • Governor strongly considering cap and trade • Utah • Big coal state • Participant in WCI, legislature not behind Governor

  18. Regional Action Linking State Programs

  19. The Climate Registry today: Uniform GHG reporting across 40 states

  20. State-based GHG trading is expanding States involved in emissions trading program/design Regional Greenhouse Gas Initiative (and observers) Western Climate Initiative (and observers)

  21. NE Regional Greenhouse Gas Initiative 10 States Power Plants Emissions source-based like EU ETS Stabilize emissions through 2014; 10% Reduction by 2018 13% Below 1990 Levels by 2019 Source: www.rggi.org

  22. RGGI Offsets • Quantitative Limit on Offsets: The RGGI “Offsets Valve” • Initial 3.3% limit on offset use • $7 trigger increases to 5.0% • $10 trigger increases to 10% • Offsets—5 Initial Types with Clear Requirements: • Natural Gas, Propane, Heating Oil Efficiency; • Land to Forest; • Landfill Gas Capture & Combustion; • Methane Capture from Animal Operations; & • SF6 Leak Prevention. • Add additional types over time as appropriate. • Geography: Initially inside the United States; but recognition of CDM Offset Credits above $10

  23. RGGI Allowance Distribution • Allocations • States agreed to propose minimum 25% “public benefit allocation” in MOU • Most states will auction 100%, including Connecticut, Maine, Massachusetts, New Jersey, New York, and Vermont • Delaware, Maryland, New Hampshire, & Rhode Island yet to decide • Auction Design in Progress

  24. Other RGGI Features • 3-year compliance period. • Emissions from combustion of sustainably harvested biomass or bio-fuel not subject to compliance requirement. • No cost-containment mechanism beyond offsets component • Linking with other mandatory caps desired

  25. RGGI Status • Legislation in 5 of 10 States • Rulemakings underway • Program Launches January 2009 • First Auction in 2nd Quarter 2008

  26. RGGI Update: Is the cap tight enough? RGGI region emissions by state 2000-2006 Source: PointCarbon Emissions drop 20 million tons below 2009 cap

  27. Emissions drop largely due to high oil prices Annual emissions variability in the RGGI Region

  28. Western Climate Initiative • 6 U.S. States + 2 Canadian Provinces--AZ, CA, NM, OR, WA, UT, BC & MB • Observers include: Colorado, Idaho, Kansas, Nevada, Wyoming, Ontario, Quebec; Saskatchewan; Sonora, Wyoming • August 2007: regional reduction goal • August 2008: design of a “regional market-based, multi-sector mechanism”

  29. WCI member requirements and goals • Requirements • Economy-wide GHG reduction goal • Multi-sector action plan to meet goal • Climate Registry membership • Adoption of CA vehicle standards • Goals • Set regional GHG reduction target • By 2008, establish a multi-sector cap and trade program to help meet the goal

  30. 15% below 2005 levels Aug. 07: WCI set regional target15% below 2005 levels by 2020 33% below BAU

  31. Key Considerations for WCI • “Multi-sector” Cap-and-Trade--will sectors be phased in? • Electricity sector--will WCI take an emissions-source approach, a load-based approach, or a hybrid approach? • How will offsets be incorporated into the program design?

  32. Midwest India The Midwest is a big emitter GHG Emissions = 1.8 billion tonnes CO2e • 27% of U.S. GHG emissions • 5% of global GHG emissions • 24 votes in the Senate • 100 votes in the House of Representatives

  33. Gov. Tim Pawlenty (R-MN) MGA Former Chair Gov. Jim Doyle (D-WI) MGA Chair Midwest Governor’s Association is poised to jumpstart regional action • Midwest Governor’s Association Energy Summit: November in Milwaukee • Focus on regional initiatives for biofuels, energy efficiency, renewables and CCS • Regional agreement to set GHG targets and construct a Midwest cap and trade program is on the table

  34. WRAP ECR LADCO CCAR Midwest states played a key role in Climate Registry development

  35. Midwest could link state efforts, increase pressure on Washington Potential linking of state emissions trading programs Midwest Governor’s Initiative (and observers) Regional Greenhouse Gas Initiative (and observers) Western Climate Initiative (and observers)

  36. Midwest action could double state GHG reductions Business as Usual (99% above 1990 levels) U.S. emissions if all current state targets are met (56% above 1990 levels) U.S. emissions with Midwest action (13% above 1990 levels)

  37. Federal Action

  38. Popular Opinion Is Shifting

  39. 110th Congress: Climate Bill Comparison Lieberman-Warner

  40. Lieberman Warner: The Bill to watch Potential emission reductions under S. 2191

  41. Allocation distribution under S. 2191 2036 and beyond 2012

  42. Auction allocation distribution(percent of total allocations)

  43. State allocation distribution (percent of total allocations)

  44. Winning and Losing StatesPer capita allocations: power plants and & covered industry sources only State per capita allocation is higher than national average State per capita allocation is lower than national average Per Capita TCO2e U.S. National Average = 7.39 CA NJ NY CT Source: Clean Air Watch analysis

  45. Business Action

  46. USCAP Proposal • Call for a cap and trade program • Establishment of a national GHG inventory and registry • Credit for early action • Aggressive technology research and development • Policies to discourage new investments in high-emitting facilities • Policies to accelerate deployment of zero and low-emitting technologies and energy efficiency US CAP Members’ Market Capitalization: ~$2 trillion Natural Resources Defense Council The Nature Conservancy NRG Energy, Inc. PepsiCo Pew Center on Global Climate Change PG&E Corporation PNM Resources Shell Siemens Corporation World Resources Institute Xerox Corporation Alcan Inc. Alcoa American International Group, Inc. (AIG) Boston Scientific Corporation BP America Inc. Caterpillar Inc. Chrysler LLC ConocoPhillips Deere & Company The Dow Chemical Company Duke Energy DuPont Environmental Defense Exelon Corporation Ford Motor Company FPL Group, Inc. General Electric General Motors Corp. Johnson & Johnson Marsh, Inc. National Wildlife Federation

  47. USCAP Recommended Reductions

  48. Looking Forward

  49. Obama 80% reduction by 2050 100 % auction Co-sponsor of Sanders-Boxer Co-sponsor of Lieberman- McCain in 2007 Clinton 80% reduction by 2050 100% auction Co-sponsor of Sanders-Boxer Co-sponsor of Lieberman - McCain in 2007 The Democratic Presidential Candidates

  50. McCain Authored bill to reduce emissions 65% by 2050 First high-profile Republican to address climate change (2003 bill with Lieberman; re-introduced in 2005 and 2007) Has made climate change among top three campaign issues Giuliani Has not ruled out cap and trade but prefers voluntary measures Has said he believes the earth is warming, but has not said definitively that humans are causing it The Republican Presidential Candidates Romney • Willing to consider a cap only if enacted globally • Introduced climate plan as Gov of MA to reach a goal of 1990 levels by 2010 (largely voluntary) • Withdrew MA from RGGI in 2005 due to cost concerns

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