Cap and Trade: The Kyoto Protocol, Greenhouse Gas (GHG) Emissions, Carbon Tax, Emission Allowances,...

GOVERNMENT SERIES

Cap andTradeThe Kyoto Protocol, Greenhouse Gas(GHG) Emissions, Carbon Tax, EmissionAllowances, Acid Rain SO2 Program,Ozone Transport Commission, NOX,Carbon Markets, and Climate Change

Compiled by TheCapitol.Net

GOVERNMENT SERIES

Cap andTradeThe Kyoto Protocol, Greenhouse Gas (GHG)Emissions, Carbon Tax, Emission Allowances,Acid Rain SO2 Program, Ozone TransportCommission, NOX, Carbon Markets,and Climate ChangeCompiled by TheCapitol.NetAuthors: Jonathan L. Ramseur, Larry Parker, Peter Folger, Ross W. Gorte,Renee Johnson, Kelsi Bracmort, James E. McCarthy, Donald J. Marples,Sam Napolitano, David L. Sokol, Richard Newell, Robert Greenstein, SonnyPopowsky, Steven L. Kline, Michael Carey, A. Denny Ellerma, Gilbert E. Metcalf,Karen Palmer, Chad Stone, Ray Kopp, Ted Gayer, and Jonathan M. Banks

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Cap and Trade, softbound:ISBN: 158733-184-5ISBN 13: 978-1-58733-184-8

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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix

Chapter 1:“Cap and Trade: Essentials,” U.S. Environmental Protection Agency . . . . . . . . . . . . . . . . . 1

Chapter 2:“Cap and Trade: Multi-State NOx Programs,”U.S. Environmental Protection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Chapter 3:“Cap and Trade: Acid Rain Program Basics,”U.S. Environmental Protection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Chapter 4:“Annual Energy Outlook 2010 Early Release Overview December 2009,”Energy Information Administration, U.S. Department of Energy . . . . . . . . . . . . . . . . . . . . . . . 7

Chapter 5:“Annual Energy Outlook 2010 Reference Case,”Energy Information Administration, U.S. Department of Energy . . . . . . . . . . . . . . . . . . . . . . 19

Chapter 6:“The Role of Offsets in a Greenhouse Gas Emissions Cap-and-TradeProgram: Potential Benefits and Concerns,” by Jonathan L. Ramseur,CRS Report for Congress RL34436, May 18, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Chapter 7:“Potential Offset Supply in a Cap-and-TradeProgram,” by Jonathan L. Ramseur, CRS Reportfor Congress RL34705, October 14, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Chapter 8:“Allowance Markets Assessment: A Closer Look at the Two BiggestPrice Changes in the Federal SO2 and NOX Allowance Markets,”U.S. Environmental Protection Agency, April 23, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Chapter 9:“Carbon Tax and Greenhouse Gas Control: Options andConsiderations for Congress,” by Jonathan L. Ramseur andLarry Parker, CRS Report for Congress R40242, March 10, 2009 . . . . . . . . . . . . . . . . . . . 95

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Summary Table of Contents

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Chapter 10:“The Carbon Cycle: Implications for Climate Changeand Congress,” by Peter Folger, CRS Report forCongress RL34059, February 18, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

Chapter 11:“Measuring and Monitoring Carbon in the Agriculturaland Forestry Sectors,” by Ross W. Gorte and Renee Johnson,CRS Report for Congress RS22964, August 6, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

Chapter 12:“Climate Change: The Role of the U.S. AgricultureSector and Congressional Action,” by Renee Johnson,CRS Report for Congress RL33898, November 9, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

Chapter 13:“Forest Carbon Markets: Potential and Drawbacks,”by Ross W. Gorte and Jonathan L. Ramseur,CRS Report for Congress RL34560, July 3, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219

Chapter 14:“Methane Capture: Options for Greenhouse Gas Emission Reduction,”by Kelsi Bracmort, Jonathan L. Ramseur, James E. McCarthy,Peter Folger, and Donald J. Marples, CRS Report forCongress R40813, September 17, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239

Chapter 15:“Cars and Climate: What Can EPA Do to Control GreenhouseGases from Mobile Sources?” by James E. McCarthy,CRS Report for Congress R40506, December 9, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263

Chapter 16:“Aviation and Climate Change,” by James E. McCarthy,CRS Report for Congress R40090, August 4, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285

Chapter 17:“Cap and Trade Programs for Air Emissions,” by Sam Napolitano, Clean AirMarkets Division, Office of Air and Radiation, U.S. Environmental ProtectionAgency, Presentation for the Clean Air Conference, December 4, 2009 . . . . . . . . . . . 299

Chapter 18:“Climate Change and the EU Emissions TradingScheme (ETS): Kyoto and Beyond,” by Larry Parker,CRS Report for Congress RL34150, November 24, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 321

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Chapter 19:“Climate Change: Potential Regulation of StationaryGreenhouse Gas Sources Under the Clean Air Act,”by Larry Parker and James E. McCarthy, CRS Reportfor Congress R40585, December 10, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349

Chapter 20:Testimony of David L. Sokol, Chairman, MidAmerican EnergyHoldings Company Before the Subcommittee on Energyand Environment, Committee on Energy and Commerce,U.S. House of Representatives, June 9, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383

Chapter 21:Testimony of Dr. Richard Newell, Administrator, Energy InformationAdministration, U.S. Department of Energy before the Committeeon Energy and Natural Resources, U.S. Senate, October 14, 2009 . . . . . . . . . . . . . . . . 407

Chapter 22:Testimony of Robert Greenstein, Executive Director, Center on Budgetand Policy Priorities, House Committee on Energy and Commerce,Subcommittee on Energy and Environment, March 12, 2009 . . . . . . . . . . . . . . . . . . . . . . . 423

Chapter 23:Testimony of Sonny Popowsky, Consumer Advocate of PennsylvaniaBefore the House Committee on Energy and Commerce,Subcommittee on Energy and Environment, March 12, 2009 . . . . . . . . . . . . . . . . . . . . . . . 439

Chapter 24:Testimony of Steven L. Kline, Vice President, CorporateEnvironmental and Federal Affairs, PG&E CorporationBefore the Subcommittee on Energy and Environment of theHouse Energy and Commerce Committee, March 12, 2009 . . . . . . . . . . . . . . . . . . . . . . . . 451

Chapter 25:Testimony of Michael Carey, President, Ohio Coal AssociationBefore the Subcommittee on Energy and Environment ofthe House Energy and Commerce Committee, March 12, 2009 . . . . . . . . . . . . . . . . . . . . 461

Chapter 26:Testimony of A. Denny Ellerman, Center for Energy andEnvironmental Policy Research, Massachusetts Instituteof Technology, Before the Senate Committee on Energyand Natural Resources, October 21, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467

Chapter 27:Testimony of Gilbert E. Metcalf, Professor of Economics,Tufts University, Before the Senate Committee on Energyand Natural Resources, October 21, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483

Chapter 28:Testimony of Karen Palmer, Darius Gaskins Senior Fellow,Resources for the Future, Before the Senate Committeeon Energy and Natural Resources, October 21, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495

Chapter 29:Testimony of Chad Stone, Chief Economist,Center on Budget and Policy Priorities, Before the SenateCommittee on Energy and Natural Resources, October 21, 2009 . . . . . . . . . . . . . . . . . . 505

Chapter 30:Testimony of Ray Kopp, Senior Fellow and Director, ClimatePolicy Program, Resources for the Future, Before the SenateCommittee on Energy and Natural Resources, December 2, 2009 . . . . . . . . . . . . . . . . . 519

Chapter 31:Testimony of Ted Gayer, Brookings Institution,Before the Senate Committee on Energy andNatural Resources, December 2, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525

Chapter 32:Testimony of Jonathan M. Banks, Climate Policy Coordinator,Clean Air Task Force, Before the Senate Committee onEnergy and Natural Resources, December 2, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529

Chapter 33:Resources from TheCapitol.Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539

Chapter 34:Other Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541

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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix

Chapter 1:“Cap and Trade: Essentials,” U.S. Environmental Protection Agency . . . . . . . . . . . . . . . . . 1

Chapter 2:“Cap and Trade: Multi-State NOx Programs,”U.S. Environmental Protection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Chapter 3:“Cap and Trade: Acid Rain Program Basics,”U.S. Environmental Protection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Chapter 4:“Annual Energy Outlook 2010 Early Release Overview December 2009,”Energy Information Administration, U.S. Department of Energy . . . . . . . . . . . . . . . . . . . . . . . 7

Chapter 5:“Annual Energy Outlook 2010 Reference Case,”Energy Information Administration, U.S. Department of Energy . . . . . . . . . . . . . . . . . . . . . . 19

Chapter 6:“The Role of Offsets in a Greenhouse Gas Emissions Cap-and-TradeProgram: Potential Benefits and Concerns,” by Jonathan L. Ramseur,CRS Report for Congress RL34436, May 18, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Introduction

Offsets: An Overview

Offset Types and Examples

Biological Sequestration

Renewable Energy Projects

Energy Efficiency

Non-CO2 Emissions Reduction

Potential Benefits of Offsets

Cost-Effectiveness

Potential Co-Benefits

Potential Benefits to Developing Nations

Other Potential Domestic Benefits

Potential Concerns

Integrity Concerns

Additionality

Measurement

Double-Counting

Table of Contents

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Permanence

Leakage

Delay of Technology Development

Transaction Costs

Concerns in Developing Nations

Considerations for Congress

Figure 1. Emission Allowance Price at Three Offset Scenarios Under Framework of S. 2191

Figure 2. CERs Issued to Data by Project Type (as of May 1, 2009)

Figure 3. 2012 Projections for CERs by Project Type (as of May 1, 2009)

Table 1. Comparison of Offset Treatment in GHG Emission Control Proposalsin the 111th Congress

Table 2. Comparison of Offset Treatment in GHG Emission Control Proposalsfrom the 110th Congress

Table 3. Comparison of Offset Treatment in GHG Emissions Reduction Initiatives in the U.S. States

Table 4. Comparison of Offset Treatment in International Emissions Trading Programs

Chapter 7:“Potential Offset Supply in a Cap-and-TradeProgram,” by Jonathan L. Ramseur, CRS Reportfor Congress RL34705, October 14, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Introduction

Factors Affecting Offset Supply

Mitigation Potential

Elements of Uncertainty

Estimates from Agriculture and Forestry Activities

Estimates from Other Activities

Policy Choices

Design of the Cap-and-Trade Program

Actions in Other Nations or U.S. States

Other Policy Influences

Economic Factors

Emission Allowance Price

Other Factors

Offset Use in a Cap-and-Trade Program

Figure 1. Illustration of Inputs and Variables That Affect Potential Offset Supply

Figure 2. Estimated Offset Use Under S. 2191 If International andDomestic Offsets Limited to 15% of Allowance Submission

Figure 3. Estimated Offset Use Under S. 2191 If Domestic and International Offset Use Unlimited

Figure 4. Estimated Offset Use Under S. 2191 If Domestic Offset Use Unlimitedand International Offset Use Limited to 15%

Table 1. EPA and USDA Estimates of Mitigation Potential for Afforestationand Soil Sequestration (in 2025)

Table 2. EPA Estimates of Mitigation Potential for Other Agriculture and Forestry Activities (in 2025)

Table 3. EPA Estimates of Mitigation Potential from Other Activities (in 2010)

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Chapter 8:“Allowance Markets Assessment: A Closer Look at the Two BiggestPrice Changes in the Federal SO2 and NOX Allowance Markets,”U.S. Environmental Protection Agency, April 23, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Chapter 9:“Carbon Tax and Greenhouse Gas Control: Options andConsiderations for Congress,” by Jonathan L. Ramseur andLarry Parker, CRS Report for Congress R40242, March 10, 2009 . . . . . . . . . . . . . . . . . . . 95

Introduction

Cost or Quantity Control: An Overview

Economic Theory vs. Uncertainty

A Stark Choice or a Policy Continuum?

A Flexible Emissions Cap

A Flexible Carbon Tax

Limits of the Policy Continuum

Potential Advantages of a Carbon Tax

Economic Efficiency

Basis for the Argument

Underpinnings of the Argument

Modeled Efficiency Gains

Economic Efficiency Versus Precaution

Price Stability

Tax Revenue Applications

Potential Implementation Advantages

Transparency

Administrative Issues

Policy Modification

Potential Disadvantages

Uncertain Emissions

Political Feasibility

What’s in a Name?

Support from Industry?

Support from Environmental Groups?

Consideration of International Efforts and Cooperation

Coordination with Existing International Efforts

Maximizing Participation

International Implementation Concerns

Implementation of a Carbon Tax

Point of Taxation

Where to Impose a Carbon Tax?

CO2 Emissions or All GHG Emissions?

Which Emissions Sources to Control?

Level of Taxation

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Tax Based on Estimates of Costs and Benefits

Tax Based on Meeting an Emissions Target

Tax Revenue Distribution

Estimates of Tax Revenues

Uses of Tax Revenues

Policy Considerations of Different Revenue Applications

Distributional Impacts

Conclusions

Figure 1. Illustration of Price Versus Quantity

Figure 2. Bridging the Gap between Price and Quantity Control

Figure 3. Illustrative Scenario with a Relatively Flat Marginal Benefits Curve

Figure 4. Illustrative Scenario with a Relatively Steep Marginal Benefits Curve

Figure 5. Illustrative Scenario with Marginal Costs and Marginal BenefitsThat Are Higher Than Expected

Figure 6. “Phase 2” Emission Allowance Prices in the European Union’sEmission Trading System

Figure 7. Illustration of Options for Points of Taxation within the EnergyProduction-to-Consumption Chain

Figure 8. Emission Allowance Price Estimates under S. 2191

Figure 9. Relative Differences in Efficiency Costs between Different Applications of Tax(or Auction) Revenues and No-Cost Allowance Distribution in a Cap-and-TradeProgram

Figure A-1. Illustration of Relationship between the Stock of CO2 in Atmosphereand Annual CO2 Emissions

Table 1. CO2 Emissions Per Unit of Energy for Fossil Fuels

Table 2. Selected Sources of U.S. GHG Emissions and Potential Applicationsof a Carbon Tax

Table 3. Estimates of Potential Tax Revenues from Carbon Tax Proposalsfrom the 110th Congress (in 2005 dollars)

Table 4. Distributional Effects of Carbon Tax with Different Applicationsof Carbon Tax Revenues

Table A-1. Comparison of Estimated Carbon Tax-Related Price Impactsto Fossil Fuels and Motor Gasoline from Selected Carbon Tax Rates

Appendix. Additional Information

Chapter 10:“The Carbon Cycle: Implications for Climate Changeand Congress,” by Peter Folger, CRS Report forCongress RL34059, February 18, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

Introduction

Carbon Storage, Sources, and Sinks

Carbon Flux, or Exchange, with the Atmosphere

How Much Carbon Is Exchanged

How Fast Carbon Is Exchanged

Land Surface-Atmosphere Flux

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The “Missing Sink”

Ocean-Atmosphere Flux

Policy Implications

Figure 1. (a) Storage or Pools (GtC); and (b) Annual Flux or Exchange of Carbon(GtC per year)

Table 1. Carbon Stocks in the Atmosphere, Ocean, and Land Surface,and Annual Carbon Fluxes

Chapter 11:“Measuring and Monitoring Carbon in the Agriculturaland Forestry Sectors,” by Ross W. Gorte and Renee Johnson,CRS Report for Congress RS22964, August 6, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

Purpose of Measuring Forest and Agricultural Carbon

Decisions Needed in Setting Measurement Requirements

Scale and Baseline

Periodicity

Verification

Measurement Techniques

On-Site Measurement

Indirect Measurement with Off-Site Tools

Estimation Using Process Models or Inferences


Appendix. Forestry and Agricultural Activities for Carbon Sequestrationand/or Emission Reduction

Chapter 12:“Climate Change: The Role of the U.S. AgricultureSector and Congressional Action,” by Renee Johnson,CRS Report for Congress RL33898, November 9, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

Agricultural Emissions and Sinks

Source of National Estimates

Agricultural Emissions

Direct Emissions

Electricity-Related Emissions

Land Use and Forestry Emissions

Uncertainty Estimating Emissions

Potential for Additional Emission Reductions

Agricultural Carbon Sinks

Carbon Loss and Uptake

Agriculture-Based Sequestration

Other Land Use and Forestry Sequestration

Uncertainty Estimating Carbon Sinks

Potential for Additional Uptake

Enhancing Carbon Sinks

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Conservation Practices that Promote Mitigation

Federal Programs

Conservation Programs

Other Farm Programs

State Programs

Agriculture Conservation and Land Management Programs

State and Regional Climate Initiatives

Congressional Action

Energy and Climate Legislative Proposals

2008 Farm Bill Provisions


Figure 1. Agricultural GHG Emissions, Average 2003–2007

Figure 2. National Distribution of Anaerobic Digester Energy Production

Figure 3. Carbon Sequestration in Agricultural Soils

Figure 4. USDA Conservation Spending, FY2005

Table 1. Estimated Current GHG Emissions and Carbon Sequestration:U.S. Agricultural and Forestry Activities, Average 2003–2007

Table 2. Carbon Sequestration Potential in the U.S. Agriculture Sector,Alternative Scenarios and Payment Levels

Table 3. Conservation and Land Management Practices

Appendix. Primer on Agriculture’s Role in the Climate Change Debate

Chapter 13:“Forest Carbon Markets: Potential and Drawbacks,”by Ross W. Gorte and Jonathan L. Ramseur,CRS Report for Congress RL34560, July 3, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219

Forest Carbon Markets

Compliance Offset Markets

Kyoto Protocol

European Union’s Emission Trading Scheme

Regional Initiatives in the United States

Mandatory U.S. State Requirements

Proposals in the 110th Congress

Voluntary Offset Markets

Retail Offsets

Chicago Climate Exchange

Reporting and Registry Programs

1605(b) Reporting Program

California Registry

The Climate Registry

USDA Guidelines

Forestry Projects for Offsets

Afforestation and Reforestation

Long-Term Wood Products

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Forest Management

Avoided Deforestation

Potential Drawbacks of Forestry-Related Projects

Additionality

Verifiability

Measurement

Monitoring

Enforcement

Leakage

Emissions Leakage

Product Leakage

Permanence

Forward Crediting

Figure 1. Trading Volume and Market Value of the Clean Development Mechanism (2005–2007)

Figure 2. Estimated U.S. GHG Mitigation Totals by Activity: Annualized Averages, 2010–2110

Chapter 14:“Methane Capture: Options for Greenhouse Gas Emission Reduction,”by Kelsi Bracmort, Jonathan L. Ramseur, James E. McCarthy,Peter Folger, and Donald J. Marples, CRS Report forCongress R40813, September 17, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239

Introduction

Policy Options for Addressing Methane Capture

Market-Based Emission Control Programs

Carbon Offsets

Emission Performance Standards

Maintain Existing Programs/Incentives

Legislative Proposals Concerning Methane Capture

Methane: A Primer

Global Warming Potential

Sources of Methane

Domestic

International

Methane Use and Storage

Opportunities and Challenges for Methane Capture

Agriculture

Landfill Gas

Oil and Natural Gas

Coalbed Methane

Concerns Applicable to All Sources

Federal Support for Methane Capture

Methane-to-Markets Partnership

Voluntary Methane Programs

Federal Energy Management Program

Tax Incentives

DOE Methane Hydrate Research and Development

Figure 1. 2007 U.S. Sources of Anthropogenic Methane Emissions

Figure 2. U.S. Underground Natural Gas Storage Facilities, Close of 2007

Table 1. Selected Sources of U.S. Methane Emissions and Potential Numberof Entities Subject to Emission Control Program

Table 2. Selected Legislation Proposed in the 111th Congress Relevant to Methane

Table 3. Top Five Methane-Emitting Countries in 2005

Table 4. U.S. Methane Emissions by Source

Chapter 15:“Cars and Climate: What Can EPA Do to Control GreenhouseGases from Mobile Sources?” by James E. McCarthy,CRS Report for Congress R40506, December 9, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263

Introduction

Option 1: Cap-and-Trade

Option 2: A Carbon (or GHG) Tax

Option 3: Regulation Under Existing Authority

The Entry Point: Massachusetts vs. EPA

The ANPR

The Obama Administration’s Approach

Going After Mobile Sources: Title II Authorities

New Motor Vehicles

Ships

Other Nonroad Engines

Aircraft

Fuels

Summary of Mobile Source and Fuel GHG Emissions

Figure 1. Motor Vehicle Greenhouse Gas Emissions

Table 1. Petitions for Regulation of Greenhouse Gas Emissions Under the Clean Air Act

Table 2. Motor Vehicle GHG Emissions, 2007, by Source Category

Table 3. Nonroad Sector CO2 Emissions, 2007, by Source Category

Table 4. Categories of Sources Whose GHG Emissions Could BeRegulated Under Title II of the Clean Air Act

Chapter 16:“Aviation and Climate Change,” by James E. McCarthy,CRS Report for Congress R40090, August 4, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285

Introduction

Aircraft Emissions

Reducing Emissions: Non-Regulatory Factors

Fuel Cost

Air Traffic Control

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Regulating Aircraft Under the Clean Air Act

Proposed Legislation

International Developments

European Union

ICAO

Conclusion

Table 1. CO2 Emissions from U.S. Aviation, 1990–2007

Table 2. Greenhouse Gas Emissions from U.S. Transportation Sectors, 1990–2007

Chapter 17:“Cap and Trade Programs for Air Emissions,” by Sam Napolitano, Clean AirMarkets Division, Office of Air and Radiation, U.S. Environmental ProtectionAgency, Presentation for the Clean Air Conference, December 4, 2009 . . . . . . . . . . . 299

Chapter 18:“Climate Change and the EU Emissions TradingScheme (ETS): Kyoto and Beyond,” by Larry Parker,CRS Report for Congress RL34150, November 24, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 321

Overview

National Allocation Plans and the ETS

Need for Further Emissions Reductions

Need to Adjust ETS Allocations

Issues Arising in Phase 2 NAPs for the ETS

Supplementarity

Auction Policy

New Entrant Reserves

Closure Policy

Benchmarking

Allocation and Energy Policy

Looking to Phase III

Eliminating NAPs

Expanding Coverage

Auctions

Summary and Considerations for U.S. Cap-and-Trade Proposals

Emission Inventories and Target Setting

Coverage

Allocation Schemes

Flexibility and Price Volatility

Figure 1. ECX CFI Futures Contracts: Price and Volume

Figure 2. EU-15 Greenhouse Gas Emissions and Projections for the Kyoto Period: 2008–2012

Table 1. ETS Annual Allocations for Phase 2: 2008–2012

Table 2. JI/CDM Limits for Phase 2: 2008–2012

Table 3. Value of Annual Allocation for New NGCC Powerplant

Table 4. Annual ETS Cap Figures for Proposed Phase 3

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Chapter 19:“Climate Change: Potential Regulation of StationaryGreenhouse Gas Sources Under the Clean Air Act,”by Larry Parker and James E. McCarthy, CRS Reportfor Congress R40585, December 10, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349

Introduction

The Entry Point: Massachusetts vs. EPA

The Advance Notice of Proposed Rulemaking (ANPR)

Potential Implications for Stationary Sources

Potential Paths for GHG Stationary Source Control

Path 1: Regulating GHG through National Ambient Air Quality Standards (NAAQS

Importance of NAAQS

NAAQS and Controlling GHGs

Path 2: Regulating GHGs through Section 112 as Hazardous Air Pollutants

Importance of Section 112

Section 112 and Controlling GHGs

Path 3: Regulating GHGs through Sections 111 as Designated Air Pollutants

Importance of Section 111

Controlling GHG through Section 111

Going Off the Beaten Path: Regulating under Section 115 or Title VI

Section 115: International Pollution

Title VI: Stratospheric Ozone Protection

Potential Control Approaches for Stationary Sources

Forcing Commercialization of Technology Through a Regulatory Requirement:An Example from the SO2 New Source Performance Standards

Potential for Cap-and-Trade

Potential Under Section 111

Potential Under Other Sections

Implementation Issues

New Source Review

Issue of Case-by-Case BACT Determinations

Title V and the Size Threshold

Section 304: Citizen Suits

Conclusion

Figure 1. Number of FGD Units and Cumulative Gigawatt(GW) Capacity of FGD Units: 1973–1996

Table 1. Selected U.S. Stationary Sources of Greenhouse Gases

Table 2. Simplified Requirements under Title I for Most Stationary Sources

Chapter 20:Testimony of David L. Sokol, Chairman, MidAmerican EnergyHoldings Company Before the Subcommittee on Energyand Environment, Committee on Energy and Commerce,U.S. House of Representatives, June 9, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383

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Copyright ©2010 by TheCapitol.Net. All Rights Reserved. 703-739-3790 www.thecapitol.net xvii

Chapter 21:Testimony of Dr. Richard Newell, Administrator, Energy InformationAdministration, U.S. Department of Energy before the Committeeon Energy and Natural Resources, U.S. Senate, October 14, 2009 . . . . . . . . . . . . . . . . 407

Chapter 22:Testimony of Robert Greenstein, Executive Director, Center on Budgetand Policy Priorities, House Committee on Energy and Commerce,Subcommittee on Energy and Environment, March 12, 2009 . . . . . . . . . . . . . . . . . . . . . . . 423

Chapter 23:Testimony of Sonny Popowsky, Consumer Advocate of PennsylvaniaBefore the House Committee on Energy and Commerce,Subcommittee on Energy and Environment, March 12, 2009 . . . . . . . . . . . . . . . . . . . . . . . 439

Chapter 24:Testimony of Steven L. Kline, Vice President, CorporateEnvironmental and Federal Affairs, PG&E CorporationBefore the Subcommittee on Energy and Environment of theHouse Energy and Commerce Committee, March 12, 2009 . . . . . . . . . . . . . . . . . . . . . . . . 451

Chapter 25:Testimony of Michael Carey, President, Ohio Coal AssociationBefore the Subcommittee on Energy and Environment ofthe House Energy and Commerce Committee, March 12, 2009 . . . . . . . . . . . . . . . . . . . . 461

Chapter 26:Testimony of A. Denny Ellerman, Center for Energy andEnvironmental Policy Research, Massachusetts Instituteof Technology, Before the Senate Committee on Energyand Natural Resources, October 21, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467

Chapter 27:Testimony of Gilbert E. Metcalf, Professor of Economics,Tufts University, Before the Senate Committee on Energyand Natural Resources, October 21, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483

Chapter 28:Testimony of Karen Palmer, Darius Gaskins Senior Fellow,Resources for the Future, Before the Senate Committeeon Energy and Natural Resources, October 21, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495

Chapter 29:Testimony of Chad Stone, Chief Economist,Center on Budget and Policy Priorities, Before the SenateCommittee on Energy and Natural Resources, October 21, 2009 . . . . . . . . . . . . . . . . . . 505

xviii Copyright ©2010 by TheCapitol.Net. All Rights Reserved. 703-739-3790 www.thecapitol.net

Chapter 30:Testimony of Ray Kopp, Senior Fellow and Director, ClimatePolicy Program, Resources for the Future, Before the SenateCommittee on Energy and Natural Resources, December 2, 2009 . . . . . . . . . . . . . . . . . 519

Chapter 31:Testimony of Ted Gayer, Brookings Institution,Before the Senate Committee on Energy andNatural Resources, December 2, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525

Chapter 32:Testimony of Jonathan M. Banks, Climate Policy Coordinator,Clean Air Task Force, Before the Senate Committee onEnergy and Natural Resources, December 2, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529

Chapter 33:Resources from TheCapitol.Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539

Capitol Learning Audio CoursesTM

Live Training

Chapter 34:Other Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541

Internet Resources

Think Tanks

Books

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IntroductionCap and Trade

The Kyoto Protocol, Greenhouse Gas (GHG) Emissions, Carbon Tax,Emission Allowances, Acid Rain SO2 Program, Ozone Transport

Commission, NOX, Carbon Markets, and Climate Change

The Kyoto Protocol, set to expire in 2012, established binding reductions of greenhouse gas(GHG) emissions for thirty-six countries. The United States was not a party to the treaty. ReducingGHG emissions through cap-and-trade programs is generating widespread discussion, includingconsideration by the U.S. Congress. Debate is ongoing as to cap and trade’s effectiveness, costs,inequities, and questionable reductions in pollution, to name a few.

Cap and trade is a policy approach for controlling large amounts of emissions from a group ofsources. The approach sets an overall cap, or maximum amount of emissions per complianceperiod, for all sources under the program. The cap is chosen in order to achieve a desiredenvironmental effect.

Authorizations to emit in the form of emission allowances are then allocated to affected sources,and the total number of allowances cannot exceed the cap. Individual control requirements arenot specified for sources; instead, sources report all emissions and then surrender the equivalentnumber of allowances at the end of the compliance period.

Allowance trading enables sources to design their own compliance strategy based on theirindividual circumstances while still achieving the overall emissions reductions required by the cap.

A compliance option in a cap and trade program is an offset. An offset is a measurable reduction,avoidance, or sequestration of GHG emissions from a source not covered by an emission reductionprogram. If allowed, offset projects could generate "emission credits" which could be used by aregulated entity to comply with its reduction requirement.

Examples of cap-and-trade programs in the United States include the Acid Rain SO2 Programand the Ozone Transport Commission NOX SIP call, while in Europe the European Union TradingSystem spreads across the bloc’s twenty-seven member nations.

Cap and Trade:

EssentialsCap and trade is an environmental policy tool thatdelivers results with a mandatory cap on emissionswhile providing emission sources flexibility in how theycomply. Successful cap and trade programs provide strictenvironmental accountability without inhibitingeconomic growth, and reward innovation, efficiency,and early action.

What Is Cap and Trade? Cap and trade is a policy approach for controlling largeamounts of emissions from a group of sources. Theapproach first sets an overall cap, or maximum amount ofemissions per compliance period, for all sources under theprogram. The cap is chosen in order to achieve a desiredenvironmental effect. Authorizations to emit in the form ofemission allowances are then allocated to affected sources,and the total number of allowances cannot exceed thecap. Individual controlrequirements are not specifiedfor sources; instead, sourcesreport all emissions and thensurrender the equivalentnumber of allowances at theend of the compliance period.Allowance trading enablessources to design their owncompliance strategy based ontheir individual circumstanceswhile still achieving theoverall emissions reductionsrequired by the cap. Affectedunits can tailor their compliance plans to each source.Compliance strategies in well-designed cap and tradeprograms require no prior approval, allowing sources torespond quickly to market conditions and governmentregulators to remain focused on results. Sources must

also accurately measure and report all emissions in a timelymanner to guarantee that the overall cap is achieved.

When Is Cap and Trade Effective?In EPA’s experience, cap and trade programs have provenhighly successful in the context for which they are bestsuited: reducing emissions on a regional or larger scalefrom multiple sources that exhibit a range of controlcosts. While achieving significant reductions on aregional scale, cap and trade programs can deliversubstantial air quality improvements. As effective as theseprograms are, however, they may not be the solution toevery problem. For example, eliminating localizedconcentrations of pollution is not their primary purpose.The cap and trade approach is best used when:

• the environmental and/or public health concernoccurs over a relatively large area;

• a significant number ofsources are responsible forthe problem;

• the cost of controls variesfrom source to source; and

• emissions can be consistently andaccurately measured.

Under the right circumstances,cap and trade programs haveproven extremely effective,

providing substantial emission reductions, completeaccountability and unprecedented data quality andaccess. Existing cap and trade programs – the Acid RainProgram and the NOx Budget Program – have the forceof federal and state standards behind them, includingnational health-based air quality standards. This ensuresthat local public health needs are met in conjunction withachievement of regional or national emission reductions.

Guiding Principles for Program DesignThree features critical to designing and implementingenvironmentally effective and economically efficient tradingprograms are 1) the cap on emissions, 2) accountability,and 3) simplicity of design and operation.

Cap on Emissions. The cap on emissions is the centralelement of an effective and efficient cap and tradeprogram. A mandatory cap on emissions is critical toprotect public health and the environment and to sustainthat protection into the future. The cap also serves toprovide stability and predictability to the allowancetrading market.

The remarkable efficiency

and reduced costs of a cap and trade

program should not overshadow the

purpose of the cap – that is,

to yield public health and

environmental results.

0

5

10

15

20

25

30

1980

1984

1988

1992

1996

2000

2004

2008

Mill

ions

ofTo

ns

WithoutAcid RainProgram

ActualEmissions

AllowableEmissions

Power Generation SO2 EmissionsWith and Without the

Acid Rain Program

SO2 emissions have been reduced dramatically under the AcidRain Program. Early reductions under the first phase of theprogram were banked to provide a gradual transition into themore stringent second phase.Source: www.epa.gov/airmarkets

Copyright ©2010 by TheCapitol.Net. All Rights Reserved. 703-739-3790 www.thecapitol.net 1

Chapter 1: Cap and Trade: Essentials

Goverment Series: Cap and Trade

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Accountability. The accurate measurement and reporting of emissionsis essential, along with the rigorous and consistent enforcement ofpenalties for fraud or noncompliance. Also critical is transparency,such as public access to source-level emissions and allowance data.The coupling of stringent monitoring and reporting requirementsand the power of the Internet makes it possible for EPA to provideaccess to complete, unrestricted data ontrading, emissions, and compliance. This promotes public confidence in theenvironmental integrity of the programand business confidence in the financialintegrity of the allowance market. It alsoprovides an additional level of scrutiny to verify enforcement and encouragecompliance. Finally, accountability requiresongoing evaluation of the cap and tradeprogram to ensure that it is makingprogress toward achievement of itsenvironmental goal.

Simplicity. Rules should be clear and easily enforced. Marketsfunction better and transaction costs are lower when rules aresimple and easily understood by all participants. Moreover, theenvironment is more likely to be protected when rules are clear andconsistently enforced. To the greatest extent possible, simplicity shouldbe applied to all elements of the program, including applicabilitythresholds (determining which sources are affected), trading rules,reporting requirements and penalty assessments. Program operationfor both emission sources and regulating authorities is more certain,more effective, and less costly and time-consuming if the rules arenot overly complex and burdensome.

A well-designed cap and trade program delivers:

• Greater environmental protection at lower cost

• Broad regional reductions, facilitating state efforts to address local impacts

• Early reductions, a result of allowance banking and market incentives

• Environmental integrity and transparent operations and results

• Fewer administrative costs to government and industry

• Efficiency and innovation incentives

• Incentives for doing better and consequences for doing worse

• Accounting for all emissions

• Partnership with existing requirements to ensure protection of the local population and environment.

Continued AccountabilityAs the cap and trade mechanism is applied to new environmentalproblems, EPA is very cognizant of the importance of ongoingassessment to ensure that environmental and public health goals are met. The remarkable efficiency and reduced costs of a cap and tradeprogram should not overshadow the purpose of the cap – that is, to

yield public health and environmentalresults. Whether the cap has been set ata level adequate to achieve the desiredpublic health and environmental protec-tions is an issue that warrants study andevaluation. The Acid Rain Program andthe NOx Budget programs have beenhighly effective in reducing emissions.Though long-term environmentalmonitoring has affirmed the programs’effectiveness, studies have shown thatfurther reductions in emissions beyondthe current caps are necessary to protectpublic health and the environment.

EPA continues to closely monitor and publish results, and ispursuing additional analyses of localized impacts under cap andtrade programs in order to help inform ongoing evaluation andpolicy making.

For more information, see “Tools of the Trade: A Guide to Designingand Operating a Cap and Trade Program for Pollution Control”http://www.epa.gov/airmarkets/international/tools.pdf

Allowance trading enables sources

to design their own compliance

strategy based on their individual

circumstances while still achieving

the overall emissions reductions

required by the cap.



Energy Trends to 2035

In preparing the Annual Energy Outlook 2010 (AEO-

2010), the Energy Information Administration (EIA)

evaluated a wide range of trends and issues that could

have major implications for U.S. energy markets.

This overview focuses primarily on one case, the

AEO2010 reference case, which is presented and com-

pared with the updated Annual Energy Outlook 2009

(updated AEO2009) reference case released in April

20091 (see Table 1). Because of the uncertainties in-

herent in any energy market projection, particularly

in periods of high price volatility, rapid market trans-

formation, or active changes in legislation, the refer-

ence case results should not be viewed in isolation.

Readers are encouraged to review the alternative

cases when the complete AEO2010 publication is re-

leased in order to gain perspective on how variations

in key assumptions can lead to different outlooks for

energy markets.

To provide a basis against which alternative cases and

policies can be compared, the AEO2010 reference

case generally assumes that current laws and regula-

tions affecting the energy sector remain unchanged

throughout the projection (including the implication

that laws which include sunset dates do, in fact, be-

come ineffective at the time of those sunset dates).

EIA considers this practice to be a prudent approach

to addressing the impact of legislation and regula-

tions. Currently, there are many pieces of legislation

and regulation that appear to have a high probability

of being enacted in the not-too-distant future, and

some laws include sunset provisions that may be ex-

tended; however, it is difficult to discern the exact

forms that the final provisions of pending legislation

or regulations will take, and sunset provisions may or

may not be extended. Even in situations where exist-

ing legislation contains provisions to allow revision of

implementing regulations, those provisions are not

exercised consistently.

As in past AEO editions, the complete AEO2010 will

include many additional cases. The standard set of

cases in the complete AEO will be expanded to include

additional cases that reflect the impact of extending a

variety of current energy programs beyond their cur-

rent expiration or the permanent retention of a broad

set of current programs that are currently subject

to sunset provisions, among others. In addition to

the alternative cases prepared for AEO2010, EIA has

examined many proposed policies at the request of

Congress in 2009, and reports describing the results

of those analyses are available on EIA’s web site.2

Key updates in the AEO2010 reference case include:

•This year, for the first time, a projection period

that extends through 2035

•Revised handling of corporate average fuel econ-

omy (CAFE) standards to reflect the standards

proposed jointly by the U.S. Environmental Pro-

tection Agency (EPA) and the U.S. Department of

Transportation’s National Highway Traffic

Safety Administration (NHTSA) for light-duty ve-

hicles (LDVs) in model years 2012 through 2016

•Updated projections of investment costs for many

categories of capital-intensive energy projects

•Recognition of changes in environmental rules at

both the Federal and State levels

•Implementation of a new lower 48 onshore oil and

natural gas supply submodule that improves

EIA’s ability to address issues related to changes

and improvements in technology, access to land

for exploration and production, and legislative

policies

•Updated characterization of natural gas shale

plays, reflecting the continued evolution of “shale

gas” resources and extraction technologies.

Economic Growth

•Real gross domestic product (GDP) grows by 2.5

percent per year from 2008 to 2030 in the AEO-

2010 reference case (similar to the GDP growth

rate in the updated AEO2009 reference case) and

by 2.4 percent per year from 2008 to 2035. The

Nation’s population, labor force, and productivity

grow at annual rates of 0.9 percent, 0.6 percent,

and 2.0 percent, respectively, from 2008 to 2035.

•Beyond 2011, the economic assumptions under-

lying the AEO2010 reference case reflect trend

projections that do not include short-term fluctu-

ations. The near-term scenario for economic

growth is consistent with that in EIA’s September

2009 Short-Term Energy Outlook.

2 Energy Information Administration / Annual Energy Outlook 2010

AEO2010 Early Release Overview

1The AEO2009 reference case, originally released in December 2008, was updated to reflect the provisions of the AmericanRecovery and Reinvestment Act (ARRA), enacted in mid-February 2009.2See “Responses to Congressional and Other Requests,” at www.eia.doe.gov/oiaf/service_rpts.htm.

Chapter 4: Annual Energy Outlook 2010 Early Release Overview, December 2009


Energy Prices

Crude Oil

•World oil prices declined sharply from their

mid-2008 peak in the latter half of 2008 but have

generally risen throughout 2009. Prices continue

to rise gradually in the reference case (Figure 1),

as the world economy rebounds and global de-

mand grows more rapidly than liquids supplies

from producers outside of the Organization of the

Petroleum Exporting Countries (OPEC). In 2035,

the average real price of crude oil in the reference

case is $133 per barrel in 2008 dollars, or about

$224 per barrel in nominal dollars. Alternative

cases in the complete AEO2010 will address the

impacts that higher and lower world crude oil

prices have on U.S. energy markets.

•The AEO2010 reference case assumes that limita-

tions on access to energy resources restrain the

growth of non-OPEC conventional liquids pro-

duction between 2008 and 2035 and that OPEC

targets a relatively constant market share of

41 percent of total world liquids production.

•Contributing to world oil price uncertainty is the

degree to which non-OPEC countries and coun-

tries outside the Organization for Economic Coop-

eration and Development (OECD), such as Russia

and Brazil, restrict economic access to potentially

productive resources. Other factors causing un-

certainty include OPEC investment decisions,

which will affect future world oil prices and the

economic viability of unconventional liquids.

•The AEO2010 reference case also includes sig-

nificant long-term potential for supply from non-

OPEC producers. In several resource-rich regions

(including Brazil, Russia, and Kazakhstan), high

oil prices, expanded infrastructure, and further

investment in exploration and drilling contribute

to additional non-OPEC oil production (Figure 2).

Also, with the economic viability of Canada’s oil

sands enhanced by higher world oil prices and ad-

vances in production technology, production from

oil sands reaches 4.5 million barrels per day in

2035.

Liquid Products

•Real prices (in 2008 dollars) for motor gasoline

and diesel in the AEO2010 reference case are

$3.68 per gallon and $3.83 per gallon in 2030,

lower than in the updated AEO2009 reference

case, largely due to the lower crude oil prices in

the AEO2010 reference case. In 2035, real gaso-

line and diesel prices reach $3.91 per gallon and

$4.11 per gallon. Diesel prices are higher than gas-

oline prices throughout the projection because of

stronger growth in demand for diesel than for mo-

tor gasoline.

•Retail prices for E85 (a blend of 70 to 85 percent

ethanol and 30 to 15 percent gasoline by volume)

are projected to shift from a volumetric basis to an

energy-equivalent basis relative to motor gaso-

line, in order to meet the renewable fuels standard

(RFS) legislated in Public Law 110-140, the

Energy Independence and Security Act of 2007

(EISA2007). In 2022, the retail price of gasoline is

$3.41 per gallon while the price of E85 is $2.63 per

gallon, reflecting the higher energy content of gas-

oline versus E85 and delivering a similar cost for

the two fuels per mile traveled.

Natural Gas

•The price of natural gas at the wellhead is lower

in the AEO2010 reference case than in the up-

dated AEO2009 reference case due to a more rapid

Energy Information Administration / Annual Energy Outlook 2010 3


1980 1990 2000 2008 2015 2025 20350

5

10

15

20

25

30

35

Coal

Natural gas

Electricity

Crude oil

History Projections

Figure 1. Energy prices, 1980-2035 (2008 dollars per

million Btu)

0 2,500 5,000 7,500 10,000 12,500

2008 2035

20082035

Russia

United StatesBrazil

Kazakhstan

China

Mexico

Norway

Canada

United Kingdom

Figure 2. Change in conventional liquids

production by top non-OPEC producers, 2008-2035

(thousand barrels per day)



12 Energy Information Administration / Annual Energy Outlook 2010


Table 1. Comparison of projections in the AEO2010 and Updated AEO2009 reference cases, 2008-2035

Energy and economic factors 2008

2020 2030 2035

AEO2010 AEO2009 AEO2010 AEO2009 AEO2010

Primary energy production (quadrillion Btu)

Petroleum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.08 15.51 15.01 15.68 18.00 15.87

Dry natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.14 20.54 20.13 23.00 23.67 23.92

Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.86 23.71 24.56 24.68 25.42 25.19

Nuclear power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.46 9.26 9.14 9.29 9.29 9.41

Hydropower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.46 2.96 2.95 2.98 2.96 2.99

Biomass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.97 5.63 6.19 7.93 8.58 9.27

Other renewable energy. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.17 3.01 2.97 3.17 3.08 3.36

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.10 0.89 0.93 0.92 1.01 0.81

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74.23 81.51 81.88 87.63 92.02 90.83

Net imports (quadrillion Btu)

Petroleum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.06 20.83 20.35 21.23 17.90 21.30

Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04 2.66 1.92 1.91 0.42 1.53

Coal/other (- indicates export) . . . . . . . . . . . . . . . . . . . . . . -1.11 -0.37 0.11 0.08 0.47 0.53

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.99 23.11 22.37 23.22 18.78 23.36

Consumption (quadrillion Btu)

Liquid fuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.35 39.36 38.67 41.08 40.30 42.02

Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.91 23.27 22.13 25.01 24.15 25.56

Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.41 23.01 24.36 24.25 25.42 25.11

Nuclear power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.46 9.26 9.14 9.29 9.29 9.41

Hydropower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.46 2.96 2.95 2.98 2.96 2.99

Biomass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10 3.93 4.28 5.19 5.60 5.83

Other renewable energy. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.17 3.01 2.97 3.17 3.08 3.36

Net electricity imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.24 0.20 0.18 0.20 0.16 0.22

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.09 105.00 104.67 111.18 110.96 114.51

Liquid fuels (million barrels per day)

Domestic crude oil production . . . . . . . . . . . . . . . . . . . . . . 4.96 6.13 5.79 6.20 7.14 6.27

Other domestic production . . . . . . . . . . . . . . . . . . . . . . . . . 3.38 4.58 4.58 5.26 5.35 5.73

Net imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.19 9.72 9.51 9.91 8.38 10.00

Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.53 20.56 20.05 21.48 20.92 22.06

Natural gas (trillion cubic feet)

Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.62 20.04 19.65 22.44 23.09 23.34

Net imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.95 2.57 1.85 1.84 0.38 1.46

Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.25 22.63 21.53 24.33 23.50 24.86

Coal (million short tons)

Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,172 1,183 1,223 1,260 1,272 1,285

Net imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49 -15 7 2 22 20

Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,122 1,183 1,240 1,276 1,305 1,319

Prices (2008 dollars)

Imported low-sulfur, light crude oil (dollars per barrel) . . . . 99.57 108.28 119.36 123.50 133.80 133.22

Imported crude oil (dollars per barrel) . . . . . . . . . . . . . . . . 92.61 98.14 117.02 111.49 127.09 121.37

Domestic natural gas at wellhead(dollars per thousand cubic feet) . . . . . . . . . . . . . . . . . . . . 8.07 6.03 6.94 7.31 8.19 8.06

Domestic coal at minemouth (dollars per short ton). . . . . . 31.26 30.01 27.99 27.43 28.48 28.10

Average electricity price (cents per kilowatthour). . . . . . . . 9.8 9.0 9.5 9.7 10.3 10.2

Economic indicators

Real gross domestic product (billion 2000 dollars). . . . . . . 11,652 15,416 15,398 19,883 19,875 22,362

GDP chain-type price index (2000=1.000) . . . . . . . . . . . . . 1.225 1.497 1.521 1.849 1.896 2.059

Real disposable personal income (billion 2000 dollars) . . . 8,753 11,967 11,903 16,069 16,014 18,168

Value of manufacturing shipments (billion 2000 dollars) . . 4,014 5,006 5,019 5,680 5,631 6,010

Primary energy intensity(thousand Btu per 2000 dollar of GDP) . . . . . . . . . . . . . . 8.59 6.81 6.80 5.59 5.58 5.12

Energy-related carbon dioxide emissions(million metric tons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,814 5,852 5,905 6,176 6,207 6,320

Notes: Quantities reported in quadrillion Btu are derived from historical volumes and assumed thermal conversion factors. Other productionincludes liquid hydrogen, methanol, and some inputs to refineries. Net imports of petroleum include crude oil, petroleum products, unfinished oils,alcohols, ethers, and blending components. Other net imports include coal coke and electricity. Coal consumption includes waste coal consumedin the electric power and industrial sectors, which is not included in coal production.

Sources: AEO2010 National Energy Modeling System, run AEO2010R.D111809A; and AEO2009 National Energy Modeling System, runSTIMULUS.D041409A.

Chapter 5: Annual Energy Outlook 2010 Reference Case


Richard Newell, SAIS, December 14, 2009 17

0

5

10

15

20

25

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Shale gas and Alaska production offset declines in supply to meet consumption growth and lower import needs

trillion cubic feet

Alaska

Non-associated offshore

ProjectionsHistory

Associated with oil

Coalbed methane

Net imports

Non-associated onshore

Shale gas

Source: Annual Energy Outlook 2010


-2

0

2

4

6

8

10

12

14

1950 1960 1970 1980 1990 2000 2010 2020 2030

Growth in electricity use continues to slow

3-year rolling average percent growth

Projections

HistoryPeriod Annual Growth1950s 9.81960s 7.31970s 4.71980s 2.91990s 2.42000-2008 0.92008-2035 1.0

Structural Change in Economy - Higher prices - Standards - Improved efficiency





Natural gas and renewables account for the majority of capacity additions from 2008 to 2035

Coal312 (31%)

Natural gas338 (33%)

Hydropower*99 (10%)

Nuclear101 (10%)

Otherrenewables

40 (4%)

Other119 (12%)

* Includes pumped storage

Coal31 (12%)

Natural gas116 (46%)

Hydropower*1 (0.4%)

Nuclear8 (3%)

Otherrenewables92 (37%)

Other2 (1%)

2008 capacity Capacity additions 2008 to 2035

1,008gigawatts

250gigawatts



Renewables gain electricity market share; coal share declines

0

1,000

2,000

3,000

4,000

5,000

6,000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

billion kilowatthours and percent shares

Natural gas

Renewable

ProjectionsHistory

Nuclear

Oil and other

Coal48.5 43.8

21.4

20.8

19.6 17.1

9.1

17.0

1.41.5


Chapter 5: Annual Energy Outlook 2010 Reference Case



0

100

200

300

400

500

600

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Nonhydropower renewable sources meet 41% of total electricity generation growth from 2008 to 2035

billion kilowatthours

Wind

ProjectionsHistory

Solar

Biomass

Geothermal

Waste



0.3% per year8.7% growth

Assuming no new policies, growth in energy-related CO2 isdriven by electricity and transportation fuel use

Transportation1,925 (33%)

Buildings and Industrial

1,530 (26%)

Electric Power2,359 (41%)

2008

5,814million metric

tons

2035

6,320million metric

tons

Transportation2,115 (33%)

Buildings and Industrial

1,571 (25%)Electric Power2,634 (42%)


Chapter 6: The Role of Offsets in a Greenhouse Gas Emissions Cap-and-Trade Program


Chapter 7: Potential Offset Supply in a Cap-and-Trade Program


Chapter 9: Carbon Tax and Greenhouse Gas Control


CRS Report for CongressPrepared for Members and Committees of Congress

Carbon Tax and Greenhouse Gas Control: Options and Considerations for Congress

Jonathan L. Ramseur Analyst in Environmental Policy

Larry Parker Specialist in Energy and Environmental Policy

March 10, 2009

Congressional Research Service

7-5700 www.crs.gov

R40242





Summary Market-based mechanisms that limit greenhouse gas (GHG) emissions can be divided into two types: quantity control (e.g., cap-and-trade) and price control (e.g., carbon tax or fee). To some extent, a carbon tax and a cap-and-trade program would produce similar effects: Both are estimated to increase the price of fossil fuels, which would ultimately be borne by consumers, particularly households. Although there are multiple tools available to policymakers that could control GHG emissions—including existing statutory authorities—this report focuses on a carbon tax approach and how it compares to its more frequently discussed counterpart: cap-and-trade.

If policymakers had perfect information regarding the market, either a price (carbon tax) or quantity control (cap-and-trade system) instrument could be designed to achieve the same outcome. Because this market ideal does not exist, preference for a carbon tax or a cap-and-trade program ultimately depends on which variable one wants to control—emissions or costs. Although there are several design mechanisms that could blur the distinction, the gap between price control and quantity control can never be completely overcome.

A carbon tax has several potential advantages. With a fixed price ceiling on emissions (or their inputs—e.g., fossil fuels), a tax approach would not cause additional volatility in energy prices. A set price would provide industry with better information to guide investment decisions: e.g., efficiency improvements, equipment upgrades. Economists often highlight a relative economic efficiency advantage of a carbon tax, but this potential advantage rests on assumptions—about the expected costs and benefits of climate change mitigation—that are uncertain and controversial. Some contend that a carbon tax may provide implementation advantages: greater transparency, reduced administrative burden, and relative ease of modification.

The primary disadvantage of a carbon tax is that it would yield uncertain emission control. Some argue that the potential for irreversible climate change impacts necessitates the emissions certainty that is only available with a quantity-based instrument (e.g., cap-and-trade). Although it may present implementation challenges, policymakers could devise a tax program that allows some short-term emission fluctuations, while progressing toward a long-term emission reduction objective. Proponents argue that short-term emission fluctuations would be preferable to the price volatility that might be expected with a cap-and-trade system.

Although a carbon tax could possibly face more political obstacles than a cap-and-trade program, some of these obstacles may be based on misunderstandings of the differences between the two approaches or on assumptions that the tax would be set too low to be effective. Carbon tax proponents could possibly address these issues to some degree, but there remains considerable political momentum for a cap-and-trade program.





Contents Introduction ................................................................................................................................1

Cost or Quantity Control: An Overview.......................................................................................3Economic Theory vs. Uncertainty .........................................................................................3A Stark Choice or a Policy Continuum?.................................................................................5

A Flexible Emissions Cap ...............................................................................................5A Flexible Carbon Tax ....................................................................................................6Limits of the Policy Continuum.......................................................................................6

Potential Advantages of a Carbon Tax .........................................................................................7Economic Efficiency.............................................................................................................7

Basis for the Argument....................................................................................................7Underpinnings of the Argument..................................................................................... 10Modeled Efficiency Gains ............................................................................................. 13Economic Efficiency Versus Precaution......................................................................... 14

Price Stability ..................................................................................................................... 14Tax Revenue Applications ................................................................................................... 15Potential Implementation Advantages.................................................................................. 16

Transparency ................................................................................................................ 16Administrative Issues .................................................................................................... 17Policy Modification ...................................................................................................... 18

Potential Disadvantages ............................................................................................................ 18Uncertain Emissions ........................................................................................................... 18Political Feasibility ............................................................................................................. 19

What’s in a Name? ........................................................................................................ 20Support from Industry? ................................................................................................. 21Support from Environmental Groups? ........................................................................... 22

Consideration of International Efforts and Cooperation ....................................................... 22Coordination with Existing International Efforts............................................................ 22Maximizing Participation .............................................................................................. 23International Implementation Concerns ......................................................................... 24

Implementation of a Carbon Tax ............................................................................................... 24Point of Taxation................................................................................................................. 24

Where to Impose a Carbon Tax? ................................................................................... 25CO2 Emissions or All GHG Emissions?......................................................................... 27Which Emissions Sources to Control?........................................................................... 28

Level of Taxation ................................................................................................................ 32Tax Based on Estimates of Costs and Benefits............................................................... 33Tax Based on Meeting an Emissions Target ................................................................... 35

Tax Revenue Distribution.................................................................................................... 37Estimates of Tax Revenues............................................................................................ 37Uses of Tax Revenues ................................................................................................... 38Policy Considerations of Different Revenue Applications .............................................. 40Distributional Impacts................................................................................................... 41

Conclusions .............................................................................................................................. 44





Figures Figure 1. Illustration of Price Versus Quantity .............................................................................4

Figure 2. Bridging the Gap between Price and Quantity Control ..................................................6

Figure 3. Illustrative Scenario with a Relatively Flat Marginal Benefits Curve.............................9

Figure 4. Illustrative Scenario with a Relatively Steep Marginal Benefits Curve ........................ 10

Figure 5. Illustrative Scenario with Marginal Costs and Marginal Benefits That Are Higher Than Expected............................................................................................................ 13

Figure 6. “Phase 2” Emission Allowance Prices in the European Union’s Emission Trading System...................................................................................................................... 15

Figure 7. Illustration of Options for Points of Taxation within the Energy Production-to-Consumption Chain ............................................................................................................... 25

Figure 8. Emission Allowance Price Estimates under S. 2191 .................................................... 36

Figure 9. Relative Differences in Efficiency Costs between Different Applications of Tax (or Auction) Revenues and No-Cost Allowance Distribution in a Cap-and-Trade Program................................................................................................................................. 41

Figure A-1. Illustration of Relationship between the Stock of CO2 in Atmosphere and Annual CO2 Emissions........................................................................................................... 46

Tables Table 1. CO2 Emissions Per Unit of Energy for Fossil Fuels ...................................................... 27

Table 2. Selected Sources of U.S. GHG Emissions and Potential Applications of a Carbon Tax ............................................................................................................................ 31

Table 3. Estimates of Potential Tax Revenues from Carbon Tax Proposals from the 110th

Congress (in 2005 dollars)...................................................................................................... 38

Table 4. Distributional Effects of Carbon Tax with Different Applications of Carbon Tax Revenues ............................................................................................................................... 42

Table A-1. Comparison of Estimated Carbon Tax-Related Price Impacts to Fossil Fuels and Motor Gasoline from Selected Carbon Tax Rates ............................................................. 47

Appendixes Appendix. Additional Information............................................................................................. 46

Contacts Author Contact Information ...................................................................................................... 47




Congressional Research Service 1

Introduction

A variety of efforts that seek to reduce greenhouse gas emissions (GHG)1 are currently under way or being developed on the international, national, and sub-national level (e.g., individual state actions or regional partnerships). One option (of many, see text box below—“Other Policy Options for Addressing GHG Emissions”) for controlling GHG emissions is to apply a tax or fee on GHG emissions or the inputs that create them. This type of approach is commonly called (and referred to in this report as) a carbon tax,2 whether it would apply to CO2 emissions alone or to multiple GHGs, including some that may have no molecular carbon.3 This report does not provide a comprehensive comparison and analysis of the multiple policy tools available to Congress that would address climate change. Instead, this report focuses on the policy considerations of using a carbon tax to control GHG emissions.

Governments may impose taxes for a variety of purposes. The primary reason that governments impose taxes is to raise revenue to fund various objectives or services: e.g., national defense, public education, social security, etc. Generally, governments raise these revenue streams by placing a tax on activities that are recognized as desirable (“economic goods”) such as income, employment, and investment. While this tax placement ensures a relatively steady flow of revenue (often the primary objective of the tax), economists generally describe such taxes as distortionary, because the taxes discourage the “good” activity. For example, many economists have argued that payroll and income taxes discourage employment and investment.4 If these taxes were reduced, the incentives to increase labor and investment would be greater.

Economists maintain that levying a charge on pollution (sometimes referred to as a Pigouvian tax)5 would be an efficient way to correct an inherent failure in a particular market. A basic economics principle is that market prices may not reflect the social cost of resource use (e.g., fossil fuel combustion) when economic activities result in pollution (e.g., CO2 emissions). If social costs are not included, the market price of the resources will not reflect their true costs. For example, in terms of climate change policy, the price of using fossil fuels, particularly coal, does not reflect the costs—i.e., climate change-related damages—associated with CO2 emissions.

1 The major GHGs discussed include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), hydrofluorocarbons (HFC), and perfluorocarbons (PFC). Recent GHG reduction proposals have also included nitrogen trifluoride (NF3). 2 As discussed in this report, terminology is a key issue. Some proponents of the “carbon tax” approach describe the policy instrument as a user fee or user charge. There are multiple reasons that proponents may seek to change the nomenclature. Perhaps the primary concern is the political stigma associated with the word “tax.” Regardless, the term “carbon tax” is the one that is most commonly associated with the GHG control policy instrument discussed in this report. 3 Non-carbon GHGs could still be subject to the tax based on their contribution to global warming in relation to CO2.Global warming potential (GWP) is an index of how much a GHG may contribute to global warming over a period of time, typically 100 years. GWPs are used to compare gases to carbon dioxide, which has a GWP of 1. For example, methane’s GWP is 25, and is thus 25 times more potent a GHG than CO2. The GWPs listed in this report are from: Intergovernmental Panel on Climate Change, Climate Change 2007: The Physical Science Basis (2007), p. 212. 4 See e.g., Gilbert Metcalf, A Green Employment Tax Swap: Using a Carbon Tax to Finance Payroll Tax Relief (2007); Nathaniel Keohane and Sheila Olmstead, Markets and the Environment (2007), Island Press; Ian Parry “Fiscal Interactions and the Case for Carbon Taxes over Grandfathered Carbon Permits,” in Climate Change Policy (Dieter Helm, editor), Oxford University Press (2005). 5 Named after A. Cecil Pigou, author of a landmark economic work, Economics of Welfare (1920).





In economics parlance, the social cost not reflected in the market price is called an “externality.” A pollution tax would internalize the external costs by making the party who profits from the polluting activity include the external costs in the price of the good or service. Policymakers could place a pollution tax on GHG emissions or the inputs that create them. By attaching a price to GHG emissions, a carbon tax would stimulate GHG emission reduction. If the tax were placed on emissions, entities directly subject to the tax, such as power plants, would have an incentive to take actions—e.g., energy efficiency improvements or equipment upgrades—to lower tax payments. If the tax were placed on emission inputs—e.g., fossil fuels—the price of carbon-intensive energy sources, primarily coal, would increase relative to low-carbon fuels (Table A-1of this report—located in the Appendix—includes estimates of price increases to fossil fuels and motor gasoline based on different carbon tax rates). Energy consumers—e.g., power plants, industry, households, etc.—would be encouraged to (1) switch to less carbon-intensive fuels; (2) use less energy or use energy more efficiently; and (3) prefer products or services that are lower-priced by virtue of incorporating less emission tax. Each of these activities would reduce GHG emissions compared to a business-as-usual track.

These expected behavioral changes mirror the activities that are forecast for a potential cap-and-trade program. Both a carbon tax and a cap-and-trade system would place a price on carbon. Both a carbon tax and cap-and-trade system are intended (and expected) to increase the price of coal, oil, and natural gas. Under either program, these price increases would ultimately be borne by energy consumers, both businesses and households. These price increases are integral to a market-based approach to GHG emission reduction, because they send more accurate information to purchasers about the full cost of their choices.

This report begins with an overview of the fundamental choices involved between a cost (tax) and a quantity (cap) control instrument. This includes a discussion of policy tools that could be employed to bridge the gap between a carbon tax and a cap-and-trade program. Following this overview, the report analyzes the potential advantages and disadvantages of a carbon tax. In many cases, carbon tax attributes are compared with those of a cap-and-trade program. The next section discusses implementation issues for a carbon tax, including where to apply the tax, at what level to set the tax, and options for distributing tax revenues. The final section provides conclusions.

Other Policy Options for Addressing GHG Emissions For policymakers considering actions to address climate change, a variety of policy instruments is available. Although current attention has largely focused on market-based mechanisms, primarily cap-and-trade systems, non-market policy tools may be the most practical option to address some emission sources. Moreover, Congress may consider complementary approaches to market mechanisms to improve their effectiveness. In particular, many experts maintain that the GHG emission targets specified in recent legislation would require development and deployment of improved (low-carbon) technologies. To further this effort, some argue that Congress should address technology stimulation directly or as a supplement to the primary climate change mitigation policy. In addition, Congress has already addressed some specific sectors (cars and light trucks, and government buildings) through performance standards. These standards may be further strengthened, independent of climate change legislation.

Efforts are under way to address GHG emissions using the existing Clean Air Act (CAA) statute. The Environmental Protection Agency (EPA) has received at least eight petitions asking it to use its CAA authority to regulate GHG emissions from multiple categories of mobile sources. The agency faces lawsuits seeking GHG regulations (per CAA authority) from power plants, refineries, and other stationary sources. In 2007, the Supreme Court found (Massachusetts v. EPA) that GHG emissions are air pollutants under the CAA, and that EPA has the authority to promulgate GHG emission controls.

For more information, see CRS Report R40145, Clean Air Issues in the 111th Congress, by James E. McCarthy; and CRS Report RL34513, Climate Change: Current Issues and Policy Tools, by Jane A. Leggett.





Cost or Quantity Control: An Overview

If policymakers choose to establish a market-based mechanism to control GHG emissions, a fundamental decision would be whether to use a price instrument, such as a carbon tax, or a quantity instrument, such as an emissions cap.6

Economic Theory vs. Uncertainty In an economically efficient market with perfect information, either a price (carbon tax) or quantity control instrument (cap-and-trade system) could be designed to achieve the same outcome.7 Figure 1 illustrates this basic economic principle. The intersection of marginal costs8

and marginal benefits9 would provide the point (of economic efficiency) at which to set the price or quantity limit. At this point in the figure, the abatement costs10 equal benefits received from abatement. Per economic theory, emission abatement above or below this point would not be economically efficient.11 The dashed lines indicate the efficient price (tax) and quantity (cap) limits. This figure illustrates that (with perfect information) if either a tax or cap is selected, both the emission abatement level and cost of abatement would be identical. For instance, if a cap were chosen, covered sources (e.g., power plants) would abate emissions until they reach the cap of Q*, at which point the marginal cost of abatement would equal P*. If a tax were chosen, sources would abate emissions until the marginal cost of abatement reached the tax level (P*), at which point the emission abatement level equals Q*. In either case, total abatement is Q*, and the total cost of the program is the shaded area under the marginal abatement cost curve.

6 See also, CRS Report RL33799, Climate Change: Design Approaches for a Greenhouse Gas Reduction Program, byLarry Parker; CRS Report RL34513, Climate Change: Current Issues and Policy Tools, by Jane A. Leggett. 7 See e.g., William Pizer, Prices vs. Quantities Revisited: The Case of Climate Change (1997), Resources for the Future Discussion Paper 98-02. 8 The marginal cost curve indicates the cost of an additional unit (e.g., one ton of GHG emissions) of emission abatement at different emission levels. A rising marginal cost curve (as depicted in Figure 1) signals that as each incremental unit of GHG emission abatement is made, the cost of abatement (per unit) increases. 9 The marginal benefit curve indicates the benefit of an additional unit (e.g., one ton of GHG emissions) of emission abatement at different emission levels. A declining benefit slope (as depicted in Figure 1) illustrates that with each incremental unit of abatement, the per unit benefit decreases. 10 Abatement may include emission reductions, emissions avoided, and sequestration activities. 11 In other words, for abatement above this level, it would cost more than the value of the benefits received. Society would be paying too much; money would be better spent for other purposes.



Climate Change: The Role of the U.S. Agriculture Sector


anaerobic digesters and methane projects; wind, solar, or other renewable energy use; and forest restoration. Similar programs also have been initiated in Illinois (Illinois Conservation and Climate Initiative), Indiana (Environmental Credit Corporation), and the Northwest (Upper Columbia Resource Conservation and Development Council). Another, Terrapass, has among its projects two large-scale dairy farms that use anaerobic digesters and methane capture for energy production.

69

These programs “aggregate” carbon credits across many farmers and landowners. These credits may later be sold on the Chicago Climate Exchange.70 Farmer participation in such programs may help offset farm costs to install emissions controls and/or practices that sequester carbon by providing a means for them to earn and sell carbon credits.

Congressional Action

Energy and Climate Legislative Proposals Congress is currently considering a range of energy and climate policy options. In general, the current climate proposals would not require GHG emission reductions in the agriculture and forestry sectors. However, if enacted, provisions in these bills could potentially raise farm input costs for fossil fuels, fertilizers, energy, and other production inputs. These higher costs could potentially be offset by possible farm revenue increases should farmers participate in carbon offset and renewable energy provisions that are part of this legislation. For example, within cap-and-trade proposals being debated in Congress are provisions that could provide tradeable allowances to certain agricultural industries, and provisions that could establish a carbon offset program for domestic farm- and land-based carbon storage activities. In addition, the renewable energy provisions contained in these bills could potentially expand the market for farm-based biofuels, biomass residues, and dedicated energy crops. These and related bills and issues are currently being debated in Congress. More detailed information on these bills is provided in other CRS Reports.

2008 Farm Bill Provisions The omnibus 2008 farm bill (Food, Conservation, and Energy Act of 2008, P.L. 110-246) included a new ecosystem services market provision that expanded the scope of existing farm and forestry conservation programs in ways that could more broadly encompass certain aspects of these climate change initiatives. The 2008 farm bill’s so-called environmental services market provision seeks to facilitate the participation of farmers and landowners in environmental services markets, focusing first on carbon storage .71 This provision was also intended to help address

69 For more information, see North Dakota Farmers Union at http://www.ndfu.org, Illinois Conservation and Climate Initiative at http://www.illinoisclimate.org, Environmental Credit Corporation at http://www.envcc.com; and Terrapass at http://www.terrapass.com/projects. 70 The Exchange is a voluntary, self-regulated, rules-based exchange. Its emission offset program constitutes a small part of its overall program, which includes methane destruction, carbon sequestration, and renewable energy. See http://www.chicagoclimatex.com/. 71 P.L. 110-246, Section 2709, included new language amending Section 1245(f) of the Food Security Act of 1985. Ecosystem services refers to the environmental goods and services and other benefits that the society obtains from the environment and ecosystems, both natural and managed. Examples include water filtration, flood control, provision of (continued...)

Chapter 14: Methane Capture: Options for Greenhouse Gas Emission Reduction


Methane Capture: Options for Greenhouse Gas Emission Reduction


Appendix. World Methane Emissions by Sector in 2005

Source: Climate Analysis Indicators Tool (CAIT) Version 6.0 (Washington, DC: World Resources Institute, 2009).

Chapter 17: Cap and Trade Programs for Air Emissions


32

2010 Coal Controls for SO2 and NOX

Source: Updated NEEDS and Data & Maps, EPA, 2009

Virtually all coal-fired units have electrostatic precipitators, baghouses, or other advanced controls for high levels of particulate removal.

33

Installed and Planned Scrubbers since 1990

Source: EPA

Coal Steam FGD Capacity, by Installation Year

0

5

10

15

20

25

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GW



34

0

200

400

600

800

1000

1200

1400

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Mill

ion

Shor

tTon

s

Sub bituminous Coal

Coal Production by Type 1970-2007

Lignite Coal

Anthracite Coal

Bituminous Coal

Source: Energy Information Administration/Annual Energy Review 2008

35

Allowance Distribution

• Considerations: Equity, incentives, certainty, efficiency, revenue impacts, price effects, profitability

– Allowance allocation should balance the need for certainty and changing circumstances

• Experience: Generally allocation does not change the environmental outcome. (The emission caps and option for “banking” of allowances over time drive the environmental performance). Allowance allocation can substantially influence compliance expenses by individual firms and the total distributional effects of a program.

• Approach: Many options, none are perfect– Direct allocation to sources based on historical and/or current emissions,

energy use (input), or production (output, e.g. electric generation), with the option of set-asides within the cap for certain sources and/or actions (new sources, renewables, demand side efficiency)

– Auction– Hybrid – Auction phase-in following allocation

Chapter 20: Testimony of David L. Sokol


Testimony of David L. Sokol

Chairman, MidAmerican Energy Holdings Company

Subcommittee on Energy and Environment, Committee on Energy and Commerce

U.S. House of Representatives

June 9, 2009

Thank you, Mr. Chairman. I am David Sokol, Chairman of MidAmerican Energy

Holdings Company, which has $41 billion in energy assets in 20 states and around the world

serving 7 million end-use customers. Our two domestic utilities serve retail electric and natural

gas customers in ten states, and our generation capacity mix consists of about 22% renewables

(of which about half is wind), 48% coal, 24% natural gas, and the rest nuclear and other assets.

I. Caps, Not Trading

I want to be absolutely clear at the outset: Cap-and-trade is two concepts. The electricity

sector can meet the Waxman-Markey interim and ultimate caps of reducing greenhouse gas

emissions to 80% below 2005 levels by 2050, but the bill’s trading mechanism will impose a

huge and unacceptable double cost on customers: first to pay for emission allowances, which

will not reduce greenhouse gas emissions by one ounce, and then for the construction of new

low- and zero-carbon power plants and other actions that will actually do the job of reducing

these emissions. This bill will cost hundreds of billions of dollars, and we think it is wrong to

saddle customers with these unnecessary and duplicative costs that provide them with absolutely

no benefits. We should work instead on an alternative mechanism that empowers state regulators

to work with their utilities to comply with the emission caps but without the trading.

Chapter 20: Testimony of David L. Sokol


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Chapter 22: Testimony of Robert Greenstein


820 First Street NE, Suite 510 Washington, DC 20002

Tel: 202-408-1080 Fax: 202-408-1056

[email protected] www.cbpp.org

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Thank you for the opportunity to testify today. The main message of my testimony is that climate change legislation can fight global warming effectively while protecting consumers if it is designed appropriately. Here is the issue in a nutshell.

Fighting global warming requires policies that significantly restrict greenhouse gas emissions. The

most cost-effective ways to do that are to tax emissions directly or to put in place a “cap-and-trade” system. Either one will significantly raise the price of fossil-fuel energy products — from home energy and gasoline to food and other goods and services with significant energy inputs. Those higher prices create incentives for energy efficiency and the development and increased use of clean energy sources. But they will also put a squeeze on consumers’ budgets, and low- and moderate-income consumers will feel the squeeze most acutely.

Fortunately, climate change policies can be designed in a way that preserves the incentives from

higher prices to change the way that we produce and consume energy, while also offsetting the effect on consumer budgets of those higher prices. Well-designed climate policies will generate substantial revenue that can be used to offset the impact of higher prices on the budgets of the most vulnerable households, to cushion the impact substantially for many other households, and to meet other legitimate needs such as expanded research on alternative energy sources.

To capture this revenue in a cap-and-trade system, it is essential that most or all of the allowances

or permits used to limit emissions be auctioned for public purposes rather than given away free to emitters. Giving away, or “grandfathering,” allowances is sometimes portrayed as a way to keep down costs for consumers, but that argument does not stand up to scrutiny. Rather, if allowances are given away free to firms that are responsible for emissions, the firms and their shareholders will reap unwarranted benefits. As CBO has explained, these firms would receive “windfall profits:” they would be able to charge higher prices for their products due to the effects of the emissions cap but would not have to pay for their emissions allowances. Ordinary consumers would get no help in dealing with the strain that the higher prices put on their budgets. Greg Mankiw, former chair of the Council of Economic Advisers for President George W. Bush, has written in a similar vein that consumer prices will rise regardless of whether allowances are given free to emitters and that grandfathering the allowances would constitute “corporate welfare.” There is little disagreement among economists about this effect.

Chapter 23: Testimony of Sonny Popowsky


BEFORE THE UNITED STATES HOUSE OF REPRESENTATIVES

COMMITTEE ON ENERGY AND COMMERCE SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

Testimony of

SONNY POPOWSKY CONSUMER ADVOCATE

OF PENNSYLVANIA

Regarding

Consumer Protection Policies for Climate Legislation

Washington, DC March 12, 2009

PA Office of Consumer Advocate National Association of State 555 Walnut Street Utility Consumer Advocates Forum Place, 5th Floor 8380 Colesville Road, Suite 101Harrisburg, PA 17101-1923 Silver Spring, MD 20910(717) 783-5048 – Office (301) 589-6313 - Office(717) 783-7152 – Fax (301) 589-6380 - Fax E-mail: [email protected] E-mail: [email protected]

109826



i

SUMMARY OF TESTIMONY

The National Association of State Utility Consumer Advocates (NASUCA) supports the enactment of federal legislation to reduce greenhouse gases on an economy-wide basis. It is NASUCA’s position, however, that any greenhouse gas emission reduction program for the electric industry “should provide appropriate emission reductions while minimizing the cost to consumers, and must not produce windfall gains for electric generators at the expense of electric consumers.”

The primary focus of the Congressional debate has been on the development of a cap and trade program for carbon dioxide emissions. This focus is understandable, given the great success of the cap and trade program for sulfur dioxide emissions under the Clean Air Act of 1990. Congress must recognize, however, that the electric industry of 2009 is far different from the electric industry of 1990, particularly in those states that have restructured, or deregulated, the generation function of our electric utilities.

Under the 1990 Clean Air Act, allowances were initially allocated free of charge to utility generators, and the benefits of those free allowances were effectively passed through to customers through their cost-based rates in states across the Nation. The same result will notoccur today, particularly in “restructured” states where electric generation rates are no longer based on the actual cost of service, but rather are based on unregulated wholesale market prices. If allowances are given for free to carbon-emitting generators in deregulated markets, those generators will nevertheless include the market value (or opportunity cost) of the allowances in the prices that they bid into the market, and consumers will pay the market value of these allowances in generation prices, even though they cost the generator nothing. Moreover, under the “single market clearing price” method that is used to establish generation prices in restructured markets, if the market clearing price reflects the cost (or market value) of an emission allowance, this price will be paid to all generators that are operating in that hour, including nuclear units that do not need to purchase allowances and do not incur any carbon compliance costs. As a result of these factors, consumers could pay many billions of dollars in increased generation prices with only modest reductions in actual carbon dioxide emissions.

To the extent that allowances are to be given at no cost to any segment of the utility industry, those allowances must not be given to unregulated generators, but to regulated local distribution companies, which should include state-regulated investor-owned utilities as well as rural cooperatives, and municipal and other publicly owned companies. The benefits of those free allowances must be flowed back to consumers through such means as customer rebates, energy efficiency programs, and low-income energy assistance. A similar result can be achieved if allowances are distributed to the states, as in the Regional Greenhouse Gas Initiative, and the states then auction the allowances to generators with the proceeds of those auctions utilized for the benefit of that state’s consumers. Alternatively, the allowances can be auctioned directly to generators by the federal government, but it is important that proceeds from such an

Chapter 25: Testimony of Michael Carey


Chapter 28: Testimony of Karen Palmer


Hearing on

Costs and Benefits for Consumers and Energy Price Effects Associated with the Allocation of Greenhouse Gas Emissions

Allowances

WRITTEN TESTIMONY OF KAREN PALMER

Darius Gaskins Senior Fellow, Resources for the Future, Washington, DC

Prepared for the U.S. Senate Committee on Energy and Natural Resources October 21, 2009

Summary of Testimony

This testimony focuses on the effects of different methods of allocating carbon dioxide (CO2)allowances on the price of electricity paid by consumers and the cost of a cap-and-trade program. The traditional approach of allocating emissions allowances to electricity generators will result in regional disparities in the electricity price effects of a climate policy, in part because of different regulatory frameworks across states. In those states where prices are set by regulators, the price of electricity will not reflect the value of emissions allowances that the utility obtained free of charge. However, in regions with deregulated generation markets, the value of emissions allowances used to produce electricity will be reflected in the electricity price even if they were received for free. Two ways to reduce this disparity are to auction a greater share of allowances or to allocate allowances to local distribution companies instead of to generators. As regulated entities, local distribution companies are expected to pass the value of the free allocation on to their customers, thus reducing the impact of a cap-and-trade policy on electricity consumers. However, this approach is likely to result in higher allowance prices and thus could ultimately leave households worse off than they would be if more allowances were auctioned. Greater reliance on a cap-and-dividend approach, under which a portion of the value of emission allowances is distributed to households on a per capita basis, could improve the delivery of compensation to households and lower the overall cost of the policy.



2

Hearing on

Costs and Benefits for Consumers and Energy Price Effects Associated with the Allocation of Greenhouse Gas Emission

Allowances

WRITTEN TESTIMONY OF KAREN PALMER

Mr. Chairman, thank you for the opportunity to testify before the Senate Committee on Energy and Natural Resources. My name is Karen Palmer, and I am a senior fellow at Resources for the Future (RFF), a 57-year-old research institution based in Washington, DC, that focuses on energy, environmental, and natural resource issues. RFF is independent and nonpartisan, and shares the results of its economic and policy analyses with environmental and business advocates, academics, government agencies and legislative staff, members of the press, and interested citizens. RFF neither lobbies nor takes positions on specific legislative or regulatory proposals. I emphasize that the views I present today are my own.

From both scholarly and practical perspectives, I have studied the performance of emissions cap-and-trade programs, including evaluation of the sulfur dioxide (SO2) emissions allowance trading program created by the 1990 Clean Air Act Amendments. I have conducted analysis and modeling to support both state and regional efforts to design trading programs, including the Regional Greenhouse Gas Initiative in the Northeast and the California carbon dioxide (CO2)cap-and-trade program under AB32. Currently I serve on the New York State RGGI Advisory Committee, advising the New York State Energy Research and Development Authority on how to use the RGGI allowance auction revenue, and on the New York State Independent System Operator Environmental Advisory Council. Additionally, I serve on the EPA Science Advisory Board’s Environmental Economics Advisory Council. Recently, with colleagues at RFF, I have conducted economic analysis of mechanisms to contain the costs and the variability of costs of implementing climate policy.

* * * * * * * * * * * * * *

Today I will focus on the effects of different methods of allocating CO2 allowances on the price of electricity paid by consumers and the cost of a cap-and-trade program. The electricity sector is responsible for 40 percent of U.S. CO2 emissions, but, according to the recent EIA analysis of the Waxman Markey cap-and-trade bill, it will be responsible for over 80 percent of total domestic CO2 emissions reductions from energy use during the early years of the program.

I want to highlight four main points about cap and trade and allowance allocation within the electricity sector:

� The traditional approach of allocating emissions allowances to electricity generators will result in regional disparities in the electricity price effects of a climate policy, in part because of different regulatory frameworks across the states.



10

Figure 6. From CATF modeling of sectoral policies and EIA modeling of HR 2454

What modeling does not show is the complexity (both political and technological) of creating and enacting any climate policy, including a sectoral-based approach. For sectoral, some of this complexity could be managed by passing multiple pieces of legislation or sectoral titles. This would allow for fine-tuning of the program, and could provide a more adaptable policy framework over the long haul. This would also narrow the number of key stakeholders to a more manageable set of groups that need to come to the table on each piece of the policy.

Currently many in the power and industrial sector have publicly stated that they do not want a sectoral climate policy. What exactly drives this, we do not know with certainty. It could be the fear of potentially being the only industry regulated. It may also be simply that economy wide policy is the devil we know. It has been the subject of the legislative process for the last 8 years. Industry and members of Congress have engaged and have staked out positions and voiced their concerns. Of course, the launch pad for the lasteight years was actually a sectoral approach known as the Clean Smokestacks Act.

What you and your colleagues have to decide is whether the concerns expressed regarding the current proposals in the Senate are best dealt with through further refinement of the overall economy wide proposal, or in the end whether it will be necessary to look to policy alternatives. Regardless of the answer to that question, the imperative to take the first step forward on climate remains. I would be happy to answerany questions you might have.

For more information and additional charts, please visit our website:www.catf.us/advocacy/legal/

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Chapter 33: Resources from TheCapitol.Net


Resources from TheCapitol.Net

Capitol Learning Audio Courses™<www.CapitolLearning.com>

• The Appropriations Process in a Nutshell

ISBN: 1587330431

• Authorizations and Appropriations in a Nutshell

ISBN: 1587330296

Live Training<www.CapitolHillTraining.com>

• Understanding Congressional Budgeting and Appropriations

<www.CongressionalBudgeting.com>

• Advanced Federal Budget Process

<www.BudgetProcess.com>

• The President's Budget

<www.PresidentsBudget.com>

• Capitol Hill Workshop

<www.CapitolHillWorkshop.com>

• The Defense Budget

<www.TheDefenseBudget.com>

Chapter 34: Other Resources


Other ResourcesInternet Resources

• U.S. EPA, Cap and Trade<www.epa.gov/captrade/>

• Cap and Trade101<www.epa.gov/captrade/captrade-101.html>

• Cap and Trade Markets<www.epa.gov/capandtrade/allowance-trading.html>

• EPA Clean Air Markets<www.epa.gov/airmarkets/>

• Allowance Trading Basics<www.epa.gov/airmarkets/trading/basics.html>

• Buying Allowances<www.epa.gov/airmarkets/trading/buying.html>

• What Is the System for Keeping Track of Allowances?<www.epa.gov/airmarkets/trading/factsheet.html#whatis>

• Allocations<www.epa.gov/airmarkets/trading/allocations.html>

• Annual Auction<www.epa.gov/airmarkets/trading/auction.html>

• Types of Trading (pdf)<www.epa.gov/capandtrade/documents/tradingtypes.pdf>

• NOx Trading Programs<www.epa.gov/airmarkets/progsregs/nox/index.html>

• Environmental Defense Fund, “The Cap and Trade Success Story”<www.edf.org/page.cfm?tagID=1085>

• Council on Foreign Relations, Interview, Chandler: More FlexibilityNeeded for Effective Emissions Cap-and-Trade Policy, Sept. 20, 2007<http://www.cfr.org/publication/14203/>

• Council on Foreign Relations, Backgrounder, “The Debate overGreenhouse Gas Cap-and-Trade, by Toni Johnson, July 7, 2009<http://www.cfr.org/publication/14231/debate_over_greenhouse_gas_capandtrade.html>

• Carbon Trade Watch, “Carbon Trading – How it Works and Why It Fails”, November 24, 2009<http://www.carbontradewatch.org/>

• Democracy Now!, “Cap & Trade: A Critical Look at Carbon Trading,” December 15, 2009<http://www.democracynow.org/2009/12/15/cap_trade_a_critical_look_at>



• Carbon Trade Watch, Fact Sheet 1, “Cap and Trade” December 2009 (pdf)<http://www.thecornerhouse.org.uk/pdf/document/fact1captrade.pdf>

• Carbon Trade Watch, Fact Sheet 2, “Carbon Offsets” December 2009 (pdf)<http://www.thecornerhouse.org.uk/pdf/document/fact2offsets.pdf>

• Carbon Trading: A Critical Conversation on Climate Change, Privatisation and Power byLarry Lohmann (editor) published by Dag Hammarskjold Foundation, Durban Group forClimate Justice and The Corner House first published September 2006 ISSN 0345-2328 (pdf)<http://www.dhf.uu.se/pdffiler/DD2006_48_carbon_trading/carbon_trading_web.pdf>

• SinksWatch, “Carbon Trading 101”<http://www.sinkswatch.org/>

• “Carbon Trading: How it works and why it fails,” Dag Hammarskjold Foundation OccasionalPaper Series, no. 7 November 2009, Tamra Gilbertson and Oscar Reyes ISSN 1654-4250 (pdf)<http://www.dhf.uu.se/pdffiler/cc7/cc7_web.pdf>

• Annie Leonard presents The Story of Cap & Trade<http://www.storyofstuff.com/>

• Cap and Trade www.taxfoundation.org<http://www.youtube.com/watch?v=Si-htSSHxsE>

• Cap and Trade 101: A Climate Policy Primer,July 2009 Federal Policy Edition, Sightline Institute<http://www.sightline.org/research/energy/res_pubs/>

• The Cap and Trade Success Story, Environmental Defense Fund<http://www.edf.org/page.cfm?tagID=1085>

• We Need a Well-Designed Cap-and-Trade program to Fight Global Warming,Rachel Cleetus, UCS climate economist, Union of Concerned Scientists<http://www.ucsusa.org/global_warming/solutions/big_picture_solutions/cap-andtrade.html>

• Household Cap-and-Trade Burden Calculator, Tax Foundation<http://www.taxfoundation.org/capandtrade>

Think Tanks

• “Discounting and Climate Change Economics: Estimating the Cost of Cap and Trade,”by David Kreutzer, Ph.D., The Heritage Foundation<http://www.heritage.org/Research/EnergyandEnvironment/wm2705.cfm>

• “The “Kyoto II” Climate Change Treaty: Implications for American Sovereignty,”by Steven Groves, The Heritage Foundation<http://www.heritage.org/Research/EnergyandEnvironment/sr0072.cfm>

Chapter 34: Other Resources


• “The Climate of Belief: American Public Opinion on Climate Change,”by Barry Rabe and Christopher P. Borick, The Brookings Institution<http://www.heritage.org/Research/EnergyandEnvironment/sr0072.cfm>

• “The EPA Tackles Greenhouse Gas,” by Ted Gayer, The Brookings Institution<http://www.brookings.edu/opinions/2009/1228_greenhouse_gas_gayer.aspx>

• “More on “Negative Costs” of Reducing Greenhouse Gases,”by Ted Gayer, The Brookings Institution<http://www.brookings.edu/opinions/2009/1230_negative_costs_gayer.aspx>

• “All Cost, No Gain,” by Ted Gayer, The Brookings Institution<http://www.brookings.edu/opinions/2009/0706_capandtrade_gayer.aspx>

• “Offsets Chipping Away at the Cap,” by Ted Gayer, The Brookings Institution<http://www.brookings.edu/opinions/2009/0623_offsets_gayer.aspx>

• “Equity and Efficiency in Cap-and-Trade: Effectively Managing theEmissions Allowance Supply,” by Adele Morris, The Brookings Institution<http://www.brookings.edu/papers/2009/10_cap_and_trade_emissions_allowance_morris.aspx>

• “Designing a Cap-and-Trade System for the United States,” an Energy SecurityInitiative Event, November 4, 2009 at the Brookings Institution (full event audio)<http://www.brookings.edu/events/2009/1104_cap_and_trade.aspx>

• “Cost Containment for Cap-and-Trade: Designing Effective ComplianceFlexibility Mechanisms,” by Bryan K. Mignone, The Brookings Institution<http://www.brookings.edu/papers/2009/09_cap_and_trade_cost_containment_mignone.aspx>

• “Prices in Emissions Permit Markets: The Role of Investor Foresightand Capital Durability,” by Bryan K. Mignone, The Brookings Institution<http://www.brookings.edu/papers/2008/11_carbon_market_mignone.aspx>

• “The Intractable Flaws of Cap-and-Trade Scheme,” by Kenneth P. Green,American Enterprise Institute For Public Policy Research<http://www.aei.org/article/100590>

• “When the Cap isn’t a Cap, the Trades Are a Charade,” by Kenneth P. Green,American Enterprise Institute For Public Policy Research<http://www.aei.org/article/100578>

• “The Cap-and-Trade Bait and Switch,” by David Schoenbrodand Richard B. Stewart, American Enterprise Institute For Public Policy Research<http://www.aei.org/article/100938>



Books

• “Carbon Markets An International Business Guide,” by Arnaud Brohé, Nick Eyre andNicholas Howarth with a Foreward by Nicholas Stern, (Earthscan 2009), ISBN: 9781844077274

• Leveling the Carbon Playing Field: International Competition and US Climate PolicyDesign,” by Trevor Houser, Rob Bradley, Britt Childs, Jacob Werksman, and Robert Heilmayr,(The Peter G. Peterson Institute for International Economics and the World ResourcesInstitute 2008), ISBN: 978-0-88132-420-4

• Carbon Finance: The Financial Implications of Climate Change, by Sonia Labatt and RodneyR. White, (John Wiley & Sons, Inc. 2007), ISBN-13: 978-0-471-794677; ISBN-10: 0-471-79467-8

• Emissions Trading: Principles and Practice, by Professor T.H. Tietenberg,(Resources for the Future 2006), ISBN: 1-933115-30-0 ISBN: 1-9331115-31-9

• International Trade and Climate Change: Economic, Legal, and Institutional Perspectives,(Environment and Development Series) by The World Bank, (The International Bank forReconstruction and Development/The World Bank 2008), ISBN: 978-0-8213-7225-8

• Voluntary Carbon Markets: An International Business Guide to What They Are and HowThey Work, (Environmental Markets Insight Series), second edition, by Ricardo Bayon,Amanda Hawn, and Katherine Hamilton, editors, (Earthscan 2009), ISBN: 978-1-84407-561-4

• Carbon Tax and Cap-and-Trade Tools: Market-Based Approaches for Controlling GreenhouseGases (Climate Change and Its Causes, Effects and Prediction), Nelson E. Burney, editor,(Nova Science Pub., Inc., January, 2010), ISBN-10: 1608761371 ISBN-13: 978-1608761371

• The Skeptical Environmentalist: Measuring the Real State of the World,by Bjorn Lomborg, ISBN 10: 0521010683

• Cool It: The Skeptical Environmentalist's Guide to Global Warming,by Bjorn Lomborg, ISBN 10: 030738652X

• Unstoppable Global Warming: Every 1,500 Years, Updated and Expanded Edition,by Fred Singer, ISBN 10: 0742551245

• A Primer on CO2 and Climate, 2nd Edition, by Howard C. Hayden, ISBN 10: 0971484562

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