Climate Change Policy Landscape

Brief to theAPPA CEO Roundtable

March 19, 2007Dave Conover, Counsel

National Commission on Energy Policy

The National Commission on Energy Policy

• Launched in 2002, Commission met a dozen times; sponsored over 35 independent research analyses

• $10 million effort over 3 years• Privately funded, principally by the William and

Flora Hewlett Foundation along with its funding partners

• Funding extended; revised recommendations soon

The CommissionersJohn Holdren (co-chair),Harvard University; Director of the Woods Hole Research CenterWilliam K. Reilly (co-chair)Founding Partner, Aqua International US EPA Administrator, Bush IJohn W. Rowe (co-chair)Chairman and CEO, Exelon CorporationPhilip Sharp (congressional chair)President, Resources for the Future; FormerCongressman, IndianaMarilyn BrownGeorgia Tech University; former Director, Oak

Ridge National Lab Ralph CavanaghCo-Director, Energy Program, NRDCErroll B. Davis, Jr. Chancellor, University System of GeorgiaRodney EllisState Senator, TexasLeo W. GerardInternational President, United Steelworkers of

AmericaRobert E. GradyManaging Partner, Carlyle Venture Partners,

former Executive Associate Director ofthe Office of Management and Budget (OMB)

F. Henry HabichtCEO, GETF; Deputy Administrator , US EPA

(Bush I) Frank KeatingCEO of the American Council of Life Insurers;former governor of OklahomaRichard A. Meserve President of the Carnegie Institution; former

Chairman of the U.S. Nuclear Regulatory Commission (NRC)

Mario MolinaProfessor, University of California, San DiegoSharon L. NelsonBoard of Directors, Consumers UnionRichard L. Schmalensee Dean, Professor of Economics and

Management, MITSusan TierneyManaging Principal, The Analysis Group;

former Assistant Secretary of Energy R. James WoolseyVice President, Booz, Allen, Hamilton; former Director of Central Intelligence Martin ZimmermanClinical Professor of Business, Ross School ofBusiness, University of Michigan; Group VicePresident, Corporate Affairs, Ford Motor

Company (2001 - 2004)

Science Informs

IPCC AR-4, February 2007:

• “Warming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global mean sea level.

• There is a 90% probability that human activities have contributed to this warming

• The main ingredients for global climate change, increases in the concentration of carbon dioxide, methane, and nitrous oxide are “due primarily to fossil fuel use . . . land-use change” and “agriculture.”

Science Predicts

Scientific Expert Group, Confronting Climate Change: Avoiding the Unmanageable and Managing the Unavoidable, February 2007

• “Global climate change . . . is a growing threat to human well-being in developing and industrialized nations alike. Significant harm from climate change is already occurring, and further damages are a certainty. The challenge now is to keep climate change from becoming a catastrophe.”

Stern Review, October 2006: • Stern review:

– The evidence shows that ignoring climate change will eventually damage economic growth.

– Our actions over the coming few decades could create risks of major disruption to economic and social activity, later in this century and in the next, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century .

Science Warns

Political System Responds

• The stage is set– House in Democratic hands for first time since

1994– Senate in Democratic hands

• As long as Senator Johnson (D-SD) stays healthy

– Lame Duck President looking for a legacy

House of Representatives

• Pelosi, Markey, Waxman– Dingell, Boucher, Blue Dogs

• House Select Committee on Climate Change– “Feathers on a fish”– “Committee on press releases and junkets”

• Legislative markers:– Waxman– Gilchrest-Olver– Udall-Petri

United States Senate

• Boxer, Bingaman, Carper, Lieberman, McCain– Domenici, Inhofe, McConnell, Lott

• EPW versus ENR or EPW + ENR?• Legislative Markers:

– (Sanders)-Boxer – 1990 GHG levels by 2020– McCain-Lieberman – 2004 levels by 2012– Bingaman-Specter – Slow, stop, reverse w/

safety-valve

Senate Whip Count

• Sanders-Boxer– ~29 votes

• McCain-Lieberman– ~45 votes

• Bingaman-Specter– 60+ votes?

Whip Count Principles

• Don’t support Boxer or Mc-L

• 53 for 2005 SOS assumed for Bingaman

• Assume additive, not retributive

• Assume good faith, not holdout

• Assume favorable vote structure, i.e.,– Up or down on Boxer, then Mc-L, then

Bingaman

• Any change in above changes result

Key Targets – No, No, Yes?

• Baucus• Byrd• Casey• Conrad• Dorgan• Johnson• Landrieu• Levin• Tester

• Alexander• Brownback• Coleman• Domenici• Murkowski• Specter• Smith• Stevens• Sununu• Vitter• Warner

How and when, not whether

• Carbon tax?– Economists “yes”– Politicians “NO”

• Cap and trade?– 1990 Acid Rain program – pro– European experience - con

• Clean energy portfolio standards + CAFE– ?

Can we get there from here?

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1990 2005 2020 2035 2050 2065 2080 2095

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Cumulative Emissions = 780 GtC

Avoided Emissions = 500 GtC

13 GtC/Year in 2100

GTC = Giga-Tonnes Carbon

Source: Placet M; Humphreys, KK; Mahasenan, NM. Climate Change Technology Scenarios: Energy, Emissions and Economic Implications. Pacific Northwest Nation Laboratory, PNL-14800, August 2004. Available at: http://www.pnl.gov/energy/climatetechnology.stm

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Expected Benefits of Advanced Climate Change Technology Development

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Cumulative CO2 Emissions Ref BSS NEB CLC

Cumulative Emissions vs. Cumulative Cost (2000-2100)for Different Mitigation Levels and Advanced Technology Scenarios

470

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Technology can get us there from here

• Double Federal $$ for energy R&D• Expand cooperative domestic &

international RD3• ↑ incentives for private sector energy RD3

– Coal gasification and carbon sequestration

– Domestically produced efficient vehicles– Domestically produced alternative

transportation fuels– Advanced nuclear reactors– Increased renewables and enabling

infrastructure