Energy and Environmental Law and Policy in the Obama Administration

U.S. Energy and Environmental Policy in U.S. Energy and Environmental Policy in the Obama Administrationthe Obama Administration

Professor Joel B. EisenProfessor Joel B. EisenUniversity of Richmond School of LawUniversity of Richmond School of Law

[email protected]@richmond.edu

Leads his party & attempts to shape public opinion (press Leads his party & attempts to shape public opinion (press conferences, State of the Union, etc.)conferences, State of the Union, etc.)

-- Obama call for energy independence within 10 years: -- Obama call for energy independence within 10 years: meant to remind us of JFK’s “man on the moon” meant to remind us of JFK’s “man on the moon” commitment – builds public excitement and spurs commitment – builds public excitement and spurs investment and programsinvestment and programs

Works with Congress on energy/environmental legislationWorks with Congress on energy/environmental legislation

-- Success depends on many factors including who controls -- Success depends on many factors including who controls Congress Congress

Heads executive branch = large number of employees Heads executive branch = large number of employees report directly to the Presidentreport directly to the President

Represents the U.S. abroad (treaty negotiations)Represents the U.S. abroad (treaty negotiations)

The President’s Role in The President’s Role in Environmental Law and PolicyEnvironmental Law and Policy

Energy and environmental policy are important but a U.S. Energy and environmental policy are important but a U.S. President has other prioritiesPresident has other priorities

Swine flu and two warsSwine flu and two wars Economic downturn – limits $ to investEconomic downturn – limits $ to invest

– Emphasis on “green recovery”Emphasis on “green recovery” Car companies – bankruptcy(ies)?Car companies – bankruptcy(ies)?

– Car company opposition less important now because the auto companies Car company opposition less important now because the auto companies depend on federal government and will be required to make cleaner carsdepend on federal government and will be required to make cleaner cars

Important signals early on that energy and environmental Important signals early on that energy and environmental policy will be centralpolicy will be central

The President’s Role in The President’s Role in Environmental Law and PolicyEnvironmental Law and Policy

A New BeginningA New Beginning Many differences from Bush AdministrationMany differences from Bush Administration

Domestic high priority to energy and environmental Domestic high priority to energy and environmental mattersmatters

Foreign leadership Foreign leadership

Major actions at all 3 branches of national Major actions at all 3 branches of national government: judicial, legislative (Congress), executive government: judicial, legislative (Congress), executive (agencies)(agencies)

Specific recognition of need to address global Specific recognition of need to address global warmingwarming The most pressing environmental challenge The most pressing environmental challenge

((Massachusetts v. EPAMassachusetts v. EPA)) Important to US economyImportant to US economy Recent evidence of ice melting, need to act fastRecent evidence of ice melting, need to act fast

A New BeginningA New Beginning

Domestic and foreign policy team Domestic and foreign policy team appointments signal a seriousness of appointments signal a seriousness of purpose about energy/environmentpurpose about energy/environment

Lisa Jackson = respected state department Lisa Jackson = respected state department leader as EPA Administratorleader as EPA Administrator

Steven Chu = scientist heading the DoESteven Chu = scientist heading the DoE Carol Browner = “climate czar,” well-Carol Browner = “climate czar,” well-

respected EPA Administrator under Clintonrespected EPA Administrator under Clinton Todd Stern = climate envoyTodd Stern = climate envoy


Congressional leadership aligned to Congressional leadership aligned to support actionsupport action– ““this is the beginning of an incredibly this is the beginning of an incredibly

intense period of political debate in our intense period of political debate in our country.” (Rep. Edward Markey on CESA)country.” (Rep. Edward Markey on CESA)

“A surprise defeat in the race for the Energy and Commerce Committee’s chair sent Detroit’s longest serving and strongest advocate packing, and signaled hope for environmentalists.”

Foreign environmental policy also different from Foreign environmental policy also different from previous Administration: “we are ready to listen” previous Administration: “we are ready to listen” (Clinton)(Clinton)

Commitment to Copenhagen talksCommitment to Copenhagen talks– Team in place/negotiating position soonTeam in place/negotiating position soon– Domestic actions coordinated with negotiationsDomestic actions coordinated with negotiations

New relationship w/China on E&ENew relationship w/China on E&E– Secretary of State Clinton: the United States is Secretary of State Clinton: the United States is

“no longer absent without leave” in this area, “no longer absent without leave” in this area, but will make “climate change a central focus of but will make “climate change a central focus of our foreign policy.” our foreign policy.”

– Todd Stern = visit already to China, intends to Todd Stern = visit already to China, intends to do moredo more


President Obama and President Hu Jintao of China met at the President Obama and President Hu Jintao of China met at the G20 Financial Summit G20 Financial Summit

Press releasePress release: “The two sides agreed to intensify policy : “The two sides agreed to intensify policy dialogue and practical cooperation in energy, the dialogue and practical cooperation in energy, the environment and climate change building on the China-US environment and climate change building on the China-US Ten Year Energy and Environment Cooperation Framework, Ten Year Energy and Environment Cooperation Framework, carry out active cooperation in energy efficiency, renewable carry out active cooperation in energy efficiency, renewable energy, and clean energy technologies and work with other energy, and clean energy technologies and work with other parties concerned for positive results at the Copenhagen parties concerned for positive results at the Copenhagen conference.”conference.”

Establishment of the “Strategic and Economic Dialogue”Establishment of the “Strategic and Economic Dialogue”– Builds on past efforts, but new frameworkBuilds on past efforts, but new framework


Global warmingGlobal warming-- Possible comprehensive federal law (Clean Energy and -- Possible comprehensive federal law (Clean Energy and

Security Act)Security Act)-- “Cap-and-trade” emissions reduction programs-- “Cap-and-trade” emissions reduction programs-- Federal regulation after -- Federal regulation after Massachusetts v. EPAMassachusetts v. EPA-- New international treaty (Copenhagen 2009) – active -- New international treaty (Copenhagen 2009) – active

participation in negotiationsparticipation in negotiations

Fuel economy standards for automobiles (CAFE)Fuel economy standards for automobiles (CAFE)-- May 2009 announcement of new standards-- May 2009 announcement of new standards

Renewable energy (deployment, portfolio standards, R&D)Renewable energy (deployment, portfolio standards, R&D) Nuclear power deploymentNuclear power deployment

Offshore drilling for oilOffshore drilling for oil

Key Energy and Environmental IssuesKey Energy and Environmental Issues

Fuel Economy Standards for AutomobilesFuel Economy Standards for Automobiles

CAFE Standards = Corporate CAFE Standards = Corporate Average Fuel EconomyAverage Fuel Economy

Established in 1975 (Energy Established in 1975 (Energy Policy Conservation Act)Policy Conservation Act)

Little change since mid-1980s – Little change since mid-1980s – blocked in Congress until recently; blocked in Congress until recently; new law requires 35 mpg by 2020 new law requires 35 mpg by 2020

Source: DOT, Congressional Source: DOT, Congressional Research ServiceResearch Service

Fuel Economy Standards for AutomobilesFuel Economy Standards for Automobiles

Automobile fuel economy has Automobile fuel economy has increased since 1970s = but increased since 1970s = but note most increases early onnote most increases early on

Some attribute this to Some attribute this to technological improvements, not technological improvements, not CAFE standardsCAFE standards

Others argue that only having Others argue that only having higher standards motivates higher standards motivates automakers to manufacture automakers to manufacture more fuel-efficient vehiclesmore fuel-efficient vehicles

1973 Ford 1973 Ford Gran Gran Torino, 9-12 Torino, 9-12 mpgmpg

Fuel Economy Standards for Automobiles: Fuel Economy Standards for Automobiles: Key ProposalKey Proposal

Obama proposal May 2009 = Obama proposal May 2009 = 35.5 mpg by MY 2016 35.5 mpg by MY 2016

Harmonizes with California’s Harmonizes with California’s standard (dashed line)standard (dashed line)

Makes passage of Waxman-Makes passage of Waxman-Markey less imperativeMarkey less imperative

Resolves confusing tangle of Resolves confusing tangle of administrative and judicial administrative and judicial battles over increasing battles over increasing standard standard

Nuclear EnergyNuclear EnergyCurrently 20% of electricity Currently 20% of electricity generation; no new plants for decades generation; no new plants for decades after Three Mile Island, but after Three Mile Island, but applications now pendingapplications now pending

Touted as a “zero-carbon” solution – Touted as a “zero-carbon” solution – but what about process of extracting but what about process of extracting and transporting uranium??and transporting uranium??

Obama: “It is unlikely that we can Obama: “It is unlikely that we can meet our aggressive climate goals if meet our aggressive climate goals if we eliminate nuclear power as an we eliminate nuclear power as an option. However, before an expansion option. However, before an expansion of nuclear power is considered, key of nuclear power is considered, key issues must be addressed including: issues must be addressed including: security of nuclear fuel and waste, security of nuclear fuel and waste, waste storage, and proliferation.”waste storage, and proliferation.”

Would eliminate Yucca Mtn., NV as Would eliminate Yucca Mtn., NV as a storage site.a storage site.

Domestic Oil ProductionDomestic Oil Production

Domestic Oil ProductionDomestic Oil Production OCS: Moratorium on drilling in protected OCS: Moratorium on drilling in protected

areas ended on Sept. 30.areas ended on Sept. 30. Campaign promise: “Use It Or Lose It” – Campaign promise: “Use It Or Lose It” –

drill on existing leases or turn them over.drill on existing leases or turn them over. April 2009 = framework for renewable April 2009 = framework for renewable

energy production on the OCS, still waiting energy production on the OCS, still waiting on lease policyon lease policy

Renewable Energy: A Response to Global Renewable Energy: A Response to Global WarmingWarming

One 500-MW coal-fired power plant One 500-MW coal-fired power plant produces approximately 3 million produces approximately 3 million tons/year of CO2. tons/year of CO2.

The U.S. produces close to 2 billion The U.S. produces close to 2 billion tons of CO2 per year from coal-tons of CO2 per year from coal-burning power plants. burning power plants.

GHG emissions from coal-fired GHG emissions from coal-fired electricity, now 27 percent of total electricity, now 27 percent of total U.S. emissions, are projected to U.S. emissions, are projected to grow by a third by 2025. grow by a third by 2025.

Renewable Energy SourcesRenewable Energy Sources

Lessons From The PastLessons From The Past

““You wouldn’t want You wouldn’t want those those houses” (Chesterfield houses” (Chesterfield County, 1993)County, 1993)

Governmental policies Governmental policies are key to developing are key to developing renewable power renewable power industriesindustries

By 2010, renewable energy will contribute 10% of the country’s By 2010, renewable energy will contribute 10% of the country’s gross energy consumption, increasing to 16% by 2020.gross energy consumption, increasing to 16% by 2020.

It took less than 18 months to craft and implement the It took less than 18 months to craft and implement the Renewable Energy Law. The law requires power grid operators to Renewable Energy Law. The law requires power grid operators to purchase resources from renewable energy producers. The law purchase resources from renewable energy producers. The law also offers financial incentives, such as a national fund to foster also offers financial incentives, such as a national fund to foster renewable energy development, and discounted lending and tax renewable energy development, and discounted lending and tax preferences for renewable energy projects.preferences for renewable energy projects.

"Passing such comprehensive renewable energy legislation is a "Passing such comprehensive renewable energy legislation is a remarkable feat for any country.”remarkable feat for any country.”

Where’s This Miracle Nation?Where’s This Miracle Nation?

What We Have Instead: What We Have Instead: Notice the YellowNotice the Yellow

Renewable Energy: Key ProposalsRenewable Energy: Key Proposals

Renewing production tax creditRenewing production tax credit “ “10% federal [RPS] = require 10 percent of 10% federal [RPS] = require 10 percent of

electricity consumed in the U.S. derived from electricity consumed in the U.S. derived from clean, sustainable energy sources, like solar, clean, sustainable energy sources, like solar, wind and geothermal by 2012.”wind and geothermal by 2012.”– Recognizes state leadership: “Many states are Recognizes state leadership: “Many states are

already well on their way to achieving statewide already well on their way to achieving statewide goals and it’s time for the federal government to goals and it’s time for the federal government to provide leadership for the entire country to support provide leadership for the entire country to support these new industries.”these new industries.”

– CESA would supplant this with national standardCESA would supplant this with national standard

GHG Control:GHG Control:Action on Many FrontsAction on Many Fronts

International agreements International agreements – Negotiation to create a post-Kyoto Protocol Negotiation to create a post-Kyoto Protocol

international climate change agreementinternational climate change agreement Domestic litigation: Domestic litigation: Mass. v. EPAMass. v. EPA, tort , tort

litigationlitigation State/regional initiatives (e.g., RPS)State/regional initiatives (e.g., RPS) Federal initiatives (e.g., EISA/CAFE)Federal initiatives (e.g., EISA/CAFE) Regulation: CAA/CA waiver etc.Regulation: CAA/CA waiver etc. Comprehensive Climate Change Comprehensive Climate Change

Legislation (Climate Security Act/2009 Legislation (Climate Security Act/2009 proposals)proposals)

Obama Campaign Promises: Obama Campaign Promises: Domestic PolicyDomestic Policy

Obama Campaign Plan – New Obama Campaign Plan – New Energy/EnvironmentEnergy/Environment

Fight climate change = importantFight climate change = important Tied to 5 million new jobs = Tied to 5 million new jobs =

renewable energy industriesrenewable energy industries $150 billion over 10 years$150 billion over 10 years 10% RPS by 2012, 25% by 202510% RPS by 2012, 25% by 2025 Cap-and-trade 80% by 2050Cap-and-trade 80% by 2050

Global Warming: Global Warming: Obama Campaign Platform Obama Campaign Platform

EPA = endangerment findingEPA = endangerment finding– Would be preempted in CESA, shows it is important Would be preempted in CESA, shows it is important

politicallypolitically Action on CA waiverAction on CA waiver Reduction target: 80% reduction by 2050 Reduction target: 80% reduction by 2050 Initial distribution of allowances: 100% auction Initial distribution of allowances: 100% auction

vs. 100% distribution based on historic vs. 100% distribution based on historic emissions emissions – Pros of Obama approach: doesn’t reward pollution, Pros of Obama approach: doesn’t reward pollution,

amounts collected go to R&D and offsetting amounts collected go to R&D and offsetting economic impactseconomic impacts

– Pros of other approach: gives time for adaptation, Pros of other approach: gives time for adaptation, comparable to ARP approachcomparable to ARP approach

GHG Control:GHG Control:Federal Initiatives in the Obama AdministrationFederal Initiatives in the Obama Administration

Regulation at the EPA: Regulation at the EPA: – Endangerment finding under the CAA Endangerment finding under the CAA

clears the way to regulation of CO2 as a clears the way to regulation of CO2 as a “criteria pollutant”“criteria pollutant”

– Waiver allowing CA standards to proceedWaiver allowing CA standards to proceed Comprehensive climate change Comprehensive climate change

legislationlegislation– Climate Security ActClimate Security Act– 2009: Clean Energy and Security Act2009: Clean Energy and Security Act

Global warming addressed now or put off to Global warming addressed now or put off to 2010 after Copenhagen?2010 after Copenhagen?

Legislative Branch (Global Legislative Branch (Global Warming Legislation)Warming Legislation)

Omnibus energy bill with or without Omnibus energy bill with or without targeted global warming titletargeted global warming title

Cap-and-trade included in House bill Cap-and-trade included in House bill but NOT in Senate, shows political will but NOT in Senate, shows political will difficult for C&Tdifficult for C&T

Differences would be reconciled in a Differences would be reconciled in a “conference committee”“conference committee”

Possible plans to offer GW title in Possible plans to offer GW title in conferenceconference

A Lobbyists’ “Super Bowl”A Lobbyists’ “Super Bowl”

"I've never seen this much media "I've never seen this much media spending on a bill that is only in the spending on a bill that is only in the subcommittee." (John Larson, WRI)subcommittee." (John Larson, WRI)

“ “The number of climate change lobbyists The number of climate change lobbyists in Washington rose to 2,430 last year – an in Washington rose to 2,430 last year – an increase of 300% over the previous five increase of 300% over the previous five years – which works out to about four years – which works out to about four lobbyists for every member of the Senate lobbyists for every member of the Senate and House of Representatives” and House of Representatives”

Legislative Branch (Global Legislative Branch (Global Warming Legislation)Warming Legislation)

Omnibus energy bill with or without Omnibus energy bill with or without targeted global warming title?targeted global warming title?

Cap-and-trade included in House bill Cap-and-trade included in House bill but NOT in Senate, shows political will but NOT in Senate, shows political will difficult for C&Tdifficult for C&T

Differences would be reconciled in a Differences would be reconciled in a “conference committee”“conference committee”

Possible plans to offer GW title in Possible plans to offer GW title in conferenceconference

American Clean Energy and American Clean Energy and Security Act (ACESA)Security Act (ACESA)

Introduced May 14, 2009 after Introduced May 14, 2009 after Committee hearings on discussion draftCommittee hearings on discussion draft

Committee markup this week & final Committee markup this week & final action by Memorial Dayaction by Memorial Day

Waxman-Markey bill = two of the most Waxman-Markey bill = two of the most influential Democratic Members on influential Democratic Members on environmental issuesenvironmental issues

ACESA – Major ThemesACESA – Major Themes

Core provisions Core provisions – Compare to previous bills and efforts in Compare to previous bills and efforts in

other nationsother nations Political compromises so far = signs Political compromises so far = signs

of difficulty of passageof difficulty of passage– Allowance distribution (Inslee/Doyle, car Allowance distribution (Inslee/Doyle, car

mfrs./Dingell)mfrs./Dingell) Significance of a major energy Significance of a major energy

/carbon bill & likelihood of passage/carbon bill & likelihood of passage

ACESA – Core ProvisionsACESA – Core Provisions

Renewable energy/national RPSRenewable energy/national RPS Energy efficiency/utility mandateEnergy efficiency/utility mandate Global warming/cap-and-tradeGlobal warming/cap-and-trade

– First attempt at national cap for GHG First attempt at national cap for GHG emissions emissions

– Allowance distribution (similar to CSA in Allowance distribution (similar to CSA in “hybrid” construction; some distributed, “hybrid” construction; some distributed, some auctioned)some auctioned)

“ “Transition provisions” Transition provisions”

ACESA Discussion Draft Title IACESA Discussion Draft Title I

Renewable energy = RPS @ 6% in Renewable energy = RPS @ 6% in 2012 and going to 25% by 20252012 and going to 25% by 2025

Carbon capture and sequestration Carbon capture and sequestration (early demo/incentives)(early demo/incentives)

$ support for electric vehicles$ support for electric vehicles– Demonstration programsDemonstration programs– Support for car companiesSupport for car companies

“ “Smart grid” and electricity Smart grid” and electricity transmission provisions transmission provisions

ACESA Discussion Draft Title I: ACESA Discussion Draft Title I: Pre-Introduction CompromisePre-Introduction Compromise

Renewable energy = RPS @ 6% in 2012 and Renewable energy = RPS @ 6% in 2012 and going to 25% by 2025going to 25% by 2025

Reduced to 15% by 2020.Reduced to 15% by 2020.– Nuclear and CCS are includedNuclear and CCS are included

Combined with a higher utility energy Combined with a higher utility energy efficiency mandate (Title II) efficiency mandate (Title II)

Spin = this is a “combined” standardSpin = this is a “combined” standard ““This combined renewable energy and energy This combined renewable energy and energy

efficiency standard will drive the deployment of efficiency standard will drive the deployment of clean energy from solar, wind, geothermal, and clean energy from solar, wind, geothermal, and biomass resources and promote cost-effective biomass resources and promote cost-effective investments in energy efficiency,” said investments in energy efficiency,” said Waxman.Waxman.

ACESA Discussion Draft Title I: ACESA Discussion Draft Title I: Pre-Introduction CompromisePre-Introduction Compromise

If the governor of a state determines that If the governor of a state determines that utilities in the state cannot meet the 15% utilities in the state cannot meet the 15% renewable requirement, the governor may renewable requirement, the governor may reduce the renewable requirement to 12% and reduce the renewable requirement to 12% and increase the efficiency requirement to 8%. increase the efficiency requirement to 8%.

Note this (from a conservative Dem):Note this (from a conservative Dem): ““Regional difference present complicated Regional difference present complicated

challenges, especially in the area of renewable challenges, especially in the area of renewable energy. I appreciate Chairman Waxman and energy. I appreciate Chairman Waxman and Chairman Markey working with us to create a Chairman Markey working with us to create a Renewable Electricity Standard that is not Renewable Electricity Standard that is not regionally punitive and includes the flexibility to regionally punitive and includes the flexibility to accommodate regional differences.” accommodate regional differences.”

ACESA Discussion Draft Title II: ACESA Discussion Draft Title II: Energy EfficiencyEnergy Efficiency

Building, manufactured home and Building, manufactured home and appliance energy efficiency provisionsappliance energy efficiency provisions

Harmonize transportation standardsHarmonize transportation standards Mandate for utility energy efficiency Mandate for utility energy efficiency

improvementsimprovements– Applies to distribution (local) companiesApplies to distribution (local) companies– 1% electricity savings and 0.75% natural 1% electricity savings and 0.75% natural

gas savings in 2012gas savings in 2012– 15% cumulative electricity savings and a 15% cumulative electricity savings and a

10% cumulative natural gas savings by 10% cumulative natural gas savings by 2020 2020

ACESA Discussion Draft Title II: ACESA Discussion Draft Title II: Pre-Introduction CompromisePre-Introduction Compromise

Requirement increased to 5% and Requirement increased to 5% and merged with the RPSmerged with the RPS

Ability to trade off RPS for increased Ability to trade off RPS for increased efficiency = shows political appeal of efficiency = shows political appeal of forcing utilities to do betterforcing utilities to do better

But is this really progress? Could But is this really progress? Could have a RPS as low as 12% -- doesn’t have a RPS as low as 12% -- doesn’t do more than some state standards do more than some state standards already in placealready in place

ACESA Discussion Draft Title III: ACESA Discussion Draft Title III: Global WarmingGlobal Warming

Market-based cap-and-trade program Market-based cap-and-trade program Would cover large emitters: electric utilities, oil Would cover large emitters: electric utilities, oil

companies, large industrial sources, and other companies, large industrial sources, and other covered entities that collectively are responsible for covered entities that collectively are responsible for 85% of U.S. global warming emissions. 85% of U.S. global warming emissions.

Goal: reduce emissions by 3% below 2005 levels in Goal: reduce emissions by 3% below 2005 levels in 2012, 20% in 2020, 42% in 2030, and 83% in 2050 2012, 20% in 2020, 42% in 2030, and 83% in 2050

Safety valves:Safety valves:– OffsetsOffsets: can increase emissions above their : can increase emissions above their

allowances if they can obtain “offsetting” allowances if they can obtain “offsetting” reductions (5:4 ratio) at lower cost from other reductions (5:4 ratio) at lower cost from other sources. sources.

– Unlimited banking and rolling 2-year compliance Unlimited banking and rolling 2-year compliance period period

““Cap-and-trade” is a market-based Cap-and-trade” is a market-based system of pollution reduction = system of pollution reduction = unlike traditional regulationunlike traditional regulation

Companies start with allowances (1 Companies start with allowances (1 ton = 1 allowance) & must have ton = 1 allowance) & must have sufficient allowances to cover sufficient allowances to cover emissions.emissions.

Flexibility: companies can make $ Flexibility: companies can make $ by selling or trading excess by selling or trading excess allowances to other companies that allowances to other companies that need them. Companies that don't need them. Companies that don't want to reduce their emissions want to reduce their emissions have to consider the price of have to consider the price of buying or trading credits from buying or trading credits from these other companies. these other companies.

Global Warming: “Cap-And-Trade” Global Warming: “Cap-And-Trade” BasicsBasics

Key Features of Emissions TradingKey Features of Emissions Trading Regulatory FlexibilityRegulatory Flexibility: sources can choose how : sources can choose how

to reduce emissions; can buy additional to reduce emissions; can buy additional allowances from other sources that reduce allowances from other sources that reduce emissionsemissions

Allowance tradingAllowance trading: sources can buy or sell : sources can buy or sell

allowances on the open marketallowances on the open market ComplianceCompliance: at the end of each compliance : at the end of each compliance

period, each source must own at least as many period, each source must own at least as many allowances as its emissions. allowances as its emissions. – Penalty in ARP: more than $2,000 for each excess ton of Penalty in ARP: more than $2,000 for each excess ton of

emissionsemissions

Phase I (1995-1999): 110 plants to cut emissions by 5 Mtonnes

Phase II (>=2000): 800 plants to cut emissions by further 5 Mtonnes

ACESA Discussion Draft Title ACESA Discussion Draft Title III: Global WarmingIII: Global Warming

No provisions for allowancesNo provisions for allowances– W-M knew they’d be added in committeeW-M knew they’d be added in committee– Other legislation (e.g., Inslee-Doyle) Other legislation (e.g., Inslee-Doyle)

Safety valves:Safety valves:– OffsetsOffsets: can increase emissions above their : can increase emissions above their

allowances if they can obtain “offsetting” allowances if they can obtain “offsetting” reductions (5:4 ratio) at lower cost from other reductions (5:4 ratio) at lower cost from other sources. sources.

– Unlimited banking and rolling 2-year Unlimited banking and rolling 2-year compliance period compliance period

ACESA Discussion Draft Title III: ACESA Discussion Draft Title III: Pre-introduction Compromises = AllowancesPre-introduction Compromises = Allowances

Remember Obama’s campaign position:Remember Obama’s campaign position: Auctioning off 100 percent of the Auctioning off 100 percent of the

allowances.allowances. Estimated to raise nearly $650 billion over Estimated to raise nearly $650 billion over

the next decade. the next decade. Most of the money would have paid for a Most of the money would have paid for a

tax credit to offset higher energy prices tax credit to offset higher energy prices expected to be passed down from expected to be passed down from industries as they reduce the pollution that industries as they reduce the pollution that causes global warming.causes global warming.

ACESA Discussion Draft Title III: ACESA Discussion Draft Title III: Pre-introduction Compromises = AllowancesPre-introduction Compromises = Allowances The reality: allowances become a rich pot of The reality: allowances become a rich pot of

funds to use to pacify individual funds to use to pacify individual constituencies and membersconstituencies and members

Key members: ten Democratic members Key members: ten Democratic members from conservative Southern and Midwestern from conservative Southern and Midwestern districtsdistricts– Republicans on the margin = broadly opposed, not a single Republicans on the margin = broadly opposed, not a single

member likely to vote in favormember likely to vote in favor “ “A leading conservative Democrat said he A leading conservative Democrat said he

would not vote for a climate change law would not vote for a climate change law under any circumstances. "This thing is out of under any circumstances. "This thing is out of control," said Collin Peterson, who heads the control," said Collin Peterson, who heads the agriculture committee. "I've had it.” agriculture committee. "I've had it.”

ACESA Discussion Draft Title III: ACESA Discussion Draft Title III: Pre-introduction Compromises (Allowances)Pre-introduction Compromises (Allowances)

Auto industry allowances (Dingell)Auto industry allowances (Dingell) ““incentives to make electric and advanced incentives to make electric and advanced

technology vehicles.”: The industry will receive technology vehicles.”: The industry will receive 3% of allowances from 2012 through 2017, and 3% of allowances from 2012 through 2017, and after that will receive 1% of allowances through after that will receive 1% of allowances through 2025.2025.

Recognizes importance of auto Recognizes importance of auto manufacturers/Dingell in securing agreementmanufacturers/Dingell in securing agreement

Also shows there will be lots of horse trading = Also shows there will be lots of horse trading = lobbying for allowances regardless of economic lobbying for allowances regardless of economic efficiencyefficiency


Major manufacturer allowances Major manufacturer allowances (Inslee/Doyle)(Inslee/Doyle)

Folds in text of their standalone bill = Folds in text of their standalone bill = very commonvery common– Standalone bill not likely to move given Standalone bill not likely to move given

the omnibus bill movementthe omnibus bill movement– Allows Members to claim credit for Allows Members to claim credit for

having drafted/created part of a larger having drafted/created part of a larger billbill

– Secures their agreementSecures their agreement


Major manufacturer allowances (Inslee/Doyle)Major manufacturer allowances (Inslee/Doyle) Energy-intensive, trade-exposed industries will be Energy-intensive, trade-exposed industries will be

allocated 15 percent of all carbon dioxide emission allocated 15 percent of all carbon dioxide emission allowances in 2014.allowances in 2014.– Manufacturers will receive allowances based on the average carbon Manufacturers will receive allowances based on the average carbon

emissions from the sector, scaled by the manufacturer's U.S. emissions from the sector, scaled by the manufacturer's U.S. production.production.

– To provide adequate transition time, the industries will To provide adequate transition time, the industries will receive allowances through 2025, at which time the receive allowances through 2025, at which time the President will determine whether they are still needed.President will determine whether they are still needed.

"This agreement will allow energy-intensive American "This agreement will allow energy-intensive American industries like Alcoa, Weyerhaeuser, and Nucor Steel industries like Alcoa, Weyerhaeuser, and Nucor Steel in Washington state to fairly compete and protect jobs in Washington state to fairly compete and protect jobs while reducing our national emissions." (Rep. Jay while reducing our national emissions." (Rep. Jay Inslee, D-WA)Inslee, D-WA)

Shows how ACESA is similar to DoD appropriations Shows how ACESA is similar to DoD appropriations bills: parts for aircraft carrier made in every districtbills: parts for aircraft carrier made in every district


Potential trouble??Potential trouble?? “ “[T]he bill would auction only 15 percent [T]he bill would auction only 15 percent

of the allowances to help lower- and of the allowances to help lower- and middle-income families pay for higher middle-income families pay for higher energy bills. The rest will be given away to energy bills. The rest will be given away to a variety of industries and states to ease a variety of industries and states to ease costs and to help pay for improvements in costs and to help pay for improvements in energy efficiency and investments in energy efficiency and investments in clean-energy technology.”clean-energy technology.”

“ “Energy tax” argument comes back . . .Energy tax” argument comes back . . .

ACESA Discussion Draft Title III: ACESA Discussion Draft Title III: Pre-introduction Compromises (Target)Pre-introduction Compromises (Target)

The compromise deal waters down the original The compromise deal waters down the original targets in the bill. The target of a 20% cut in targets in the bill. The target of a 20% cut in emissions on 2005 levels by 2020 has been emissions on 2005 levels by 2020 has been reduced to 17%.reduced to 17%.

The US would be falling short of EU targets of a The US would be falling short of EU targets of a 20% reduction in emissions by 2020. 20% reduction in emissions by 2020.

The compromise bill could undermine the EU’s The compromise bill could undermine the EU’s pledge to increase its target to a 30% reduction pledge to increase its target to a 30% reduction by 2020 if the US agreed to similar measures.by 2020 if the US agreed to similar measures.

““Unless strengthened, this bill could undermine Unless strengthened, this bill could undermine America’s ability to secure an effective America’s ability to secure an effective international agreement during climate international agreement during climate negotiations in Copenhagen this fall,” . . . .but negotiations in Copenhagen this fall,” . . . .but clearly not going in that direction.clearly not going in that direction.

Clean Energy and Security Act: Clean Energy and Security Act: Transition Provisions (Title IV)Transition Provisions (Title IV)

Rebates to companies incurring Rebates to companies incurring “additional costs”“additional costs”

Green jobs programGreen jobs program Consumer assistance (to be Consumer assistance (to be

developed)developed) Exporting clean technology (only to Exporting clean technology (only to

nations signing new GHG treaty) nations signing new GHG treaty)

Grading the ACESAGrading the ACESA Climate ProgressClimate Progress: B+ = “fails to address how : B+ = “fails to address how

allocations for GHG emissions allowances would be allocations for GHG emissions allowances would be distributed.”distributed.”

Auction vs. distribution?Auction vs. distribution?– “ “Give the vast majority of the revenues back to the Give the vast majority of the revenues back to the

public, so they are held harmless (or, in fact, do public, so they are held harmless (or, in fact, do better than break even because they can adopt better than break even because they can adopt efficiency measures).”efficiency measures).”

– Defeats the "biggest tax" argument.Defeats the "biggest tax" argument. “ “Rip-offsets”: allowing offsets “pokes a giant hole in Rip-offsets”: allowing offsets “pokes a giant hole in

the carbon cap and robs us of billions of dollars of the carbon cap and robs us of billions of dollars of auction revenue that can and should be reinvested to auction revenue that can and should be reinvested to accelerate and smooth the transition to a clean accelerate and smooth the transition to a clean energy economy.”energy economy.”

“ “Trading of rights to pollute … introduces speculation Trading of rights to pollute … introduces speculation and makes millionaires on Wall Street . . . I hope cap and makes millionaires on Wall Street . . . I hope cap and trade doesn’t pass, because we need a much and trade doesn’t pass, because we need a much more effective approach.” (James Hansen)more effective approach.” (James Hansen)

Another View

Congressional Action on Global Congressional Action on Global Warming LegislationWarming Legislation

Bill discussion draft w/aggressive timetable : Bill discussion draft w/aggressive timetable : House Energy and Commerce Committee aims House Energy and Commerce Committee aims for 5/31for 5/31– HearingsHearings– MarkupMarkup

Other committees promise to complete work Other committees promise to complete work by end of 2009by end of 2009– Many committees will be involved, work slowMany committees will be involved, work slow– Energy Policy Acts of 1992, 2005, and EISA 2007 Energy Policy Acts of 1992, 2005, and EISA 2007

were considered by multiple committeeswere considered by multiple committees– Science and Technology: “All energy research, Science and Technology: “All energy research,

development, and demonstration, and projects development, and demonstration, and projects therefor, and all Federally owned or operated therefor, and all Federally owned or operated nonmilitary energy laboratories.nonmilitary energy laboratories.


Democrats control both houses of Congress but Democrats control both houses of Congress but cannot act alone cannot act alone

Republican opposition to global warming Republican opposition to global warming regulation continues (Boehner)regulation continues (Boehner)– ““We would hope to have Republican votes as we go We would hope to have Republican votes as we go

forward on this . . . Will I not put it forth unless I do? forward on this . . . Will I not put it forth unless I do? No. There’s an inevitability to this that everyone No. There’s an inevitability to this that everyone has to understand.” (Nancy Pelosi)has to understand.” (Nancy Pelosi)

60 Senate votes needed to overcome filibuster 60 Senate votes needed to overcome filibuster – Al Franken/Arlen Specter – 60 votes? Al Franken/Arlen Specter – 60 votes?

One Senator can stop everything (“courtesy”)One Senator can stop everything (“courtesy”) Congress ends on 2010, must restartCongress ends on 2010, must restart


Even though a majority, Democrats do Even though a majority, Democrats do not always vote togethernot always vote together– Example = proposed change to allow Example = proposed change to allow

bankruptcy judges to modify home loans to bankruptcy judges to modify home loans to avoid foreclosure change rejected avoid foreclosure change rejected

– 13 Democrats voted with all Republicans 13 Democrats voted with all Republicans Members often represent narrow Members often represent narrow

economic interests of their states and economic interests of their states and districtsdistricts


““Double-down” strategy: House bill Double-down” strategy: House bill includes includes both both energy and climate titlesenergy and climate titles

Underscores time pressure of enacting Underscores time pressure of enacting a law by December (Copenhagen a law by December (Copenhagen climate talks)climate talks)

May make passage of any bill difficultMay make passage of any bill difficult– ““We will work to see that it dies as quickly We will work to see that it dies as quickly

as possible” (CEI Director of Energy and as possible” (CEI Director of Energy and Global Warming Policy Myron Ebell)Global Warming Policy Myron Ebell)


Lobbying trench warfare already under way . . . Lobbying trench warfare already under way . . . Hundreds of thousands of dollars in print and TV Hundreds of thousands of dollars in print and TV adsads

Better coalitions this time = environmental and Better coalitions this time = environmental and liberal organizations as well as major corporations liberal organizations as well as major corporations that support energy reform, even some religious that support energy reform, even some religious organizations, are pushing back hard, launching organizations, are pushing back hard, launching new ads on TV, in print, on the web, and even on new ads on TV, in print, on the web, and even on subway platforms.subway platforms.

Oil/coal/utility companies much better funded: Oil/coal/utility companies much better funded: the oil, gas and coal industry has increased its the oil, gas and coal industry has increased its lobbying budget by 50%, spending $44.5m in the lobbying budget by 50%, spending $44.5m in the first three months of this year to try to influence first three months of this year to try to influence legislationlegislation


Republicans: offering 449 (!) Republicans: offering 449 (!) amendments to weaken the billamendments to weaken the bill

““the provisions in the bill would boost the provisions in the bill would boost a typical family's energy costs by a typical family's energy costs by more than $3,000 a year and trim more than $3,000 a year and trim the nation's economic output by $7 the nation's economic output by $7 trillion over the next two decades” – trillion over the next two decades” – – Doesn’t need to be correctDoesn’t need to be correct– Scare tactic (“energy tax”) Scare tactic (“energy tax”)


“ “Creating an artificial market for Creating an artificial market for government-mandated carbon credits government-mandated carbon credits would be monstrously stupid to do would be monstrously stupid to do right right nownow.” .” – Charlie Munger (Berkshire Hathaway CEO) – Charlie Munger (Berkshire Hathaway CEO)

"[Lawmakers] are literally rewriting the ground "[Lawmakers] are literally rewriting the ground rules about what types of energy they want us to rules about what types of energy they want us to use” use”

What’s the response? What’s the response? – Transformation to a green economy/new Transformation to a green economy/new

jobsjobs– Measures to protect consumers Measures to protect consumers

My PredictionMy Prediction

““Green Recovery” program for job creation Green Recovery” program for job creation and start of low-carbon economy = energy and start of low-carbon economy = energy bill with most of current Titles I, II, IV bill with most of current Titles I, II, IV

Followed by a cap-and-trade program in Followed by a cap-and-trade program in 2010 or beyond2010 or beyond

Why? Why? – Political pragmatism that meets main goal Political pragmatism that meets main goal

(start with a jobs/economy program)(start with a jobs/economy program)– Commit to global warming measures in Dec. Commit to global warming measures in Dec.

2009 at Copenhagen and then implement 2009 at Copenhagen and then implement themthem

““Personnel Is Policy” Personnel Is Policy” ((Reagan and othersReagan and others))

““Mr. Obama named John D. Podesta, Mr. Obama named John D. Podesta, the former Clinton White House chief the former Clinton White House chief of staff, to lead his transition team . . of staff, to lead his transition team . . .” .” (NYT, 11/5/08) (NYT, 11/5/08)

““Founded in 2003, CAP is headed by John D. Podesta, former chief of Founded in 2003, CAP is headed by John D. Podesta, former chief of staff to President Bill Clinton and professor at the Georgetown staff to President Bill Clinton and professor at the Georgetown University Center of Law.” University Center of Law.”

Basics of “Green Recovery”Basics of “Green Recovery”

““Our report looked at investments that Our report looked at investments that were funded through an increase in were funded through an increase in near-term government spending, near-term government spending, which which could ultimately be repaid by future could ultimately be repaid by future carbon cap-and-trade revenuescarbon cap-and-trade revenues.” (my .” (my emphasis added)emphasis added)

$100 billion = $50 billion in tax credits, $100 billion = $50 billion in tax credits, $46 billion in direct spending, $4 billion $46 billion in direct spending, $4 billion in loan guaranteesin loan guarantees

Summing Up . . . Summing Up . . .

“ “At a time when four out of five Americans say At a time when four out of five Americans say America is on the wrong track and are demanding America is on the wrong track and are demanding change – [we] can deliver change by committing change – [we] can deliver change by committing to building a clean energy economy.”to building a clean energy economy.”

New sense of purpose in energy and New sense of purpose in energy and environmental policyenvironmental policy

International cooperation much more likelyInternational cooperation much more likely Some form of omnibus bill and/or regulation of Some form of omnibus bill and/or regulation of

GHG expected in 2009GHG expected in 2009 Not likely C&T before 2010Not likely C&T before 2010

Energy and Environmental Law and Policy in the Obama Administration

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