Jonathan Pershing jpershing@wri.org

Director, Climate, Energy and Pollution ProgramWorld Resources Institute

http://www.wri.org

Context Setting: United States

IISD-WRI WorkshopExploring the Challenges and Opportunities for

Establishing a North American Emissions Trading SystemNovember 14-15, 2007

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• US Emissions• State Action• Regional Action• Federal Action• Business Action• Looking Forward

Key Points

3

US Emissions

GHG Emissions

Source: IPCC, AR4, 2007

US GHG Emissions

Source: WRI, Submission to US Senate, April 2006

US Emissions by Gas

Source: USEPA: April 2007, US GHG Inventory

State GHG Emissions

State Per Capita Emissions

9

State Action

States with Biofuel Mandates

Source: WRI, CAIT

Ethanol Mandates Biodiesel Mandates

Renewable Energy Mandates

Source: Pew Climate Center

Stakeholder initiatives on climate change

States with climate change advisory groups or commissions, by initiator

Legislature Governor/Agency NGO

2006

Stakeholder initiatives on climate change are becoming the norm

States with climate change advisory groups or commissions, by initiator

Legislature Governor/Agency NGO

2007

Climate Action Plans

Source: Pew Climate Center, July 2007

States with GHG targets: 30% of US Emissions

CA: 2000 levels by 2010; 1990 levels by 2020; 80% below 1990 levels by 2050

FL: 2000 levels by 2017; 1990 levels by 2025; 80% below 1990 levels by 2050

IL: 1990 levels by 2020; 60% below 1990 levels by 2050

NJ: 1990 levels by 2020; 80% below 2006 levels by 2050

HI: 1990 levels by 2020

State action will reduce national emissions

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1990 2000 2010 2020 2030 2040 2050

Mill

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Current State Action

Business as Usual (DOE-EIA)

Historical Emissions (U.S. EPA)

Business as Usual (99% above 1990 levels)

U.S. emissions if all current state targets are met (56% above 1990 levels)

Key states to watch:• Alaska

– Observer to Western Climate Initiative (WCI)– Hard hit by climate change, big oil state

• Florida– Considering joining Regional Greenhouse Gas Initiative

(RGGI)– GHG targets on par with California

• Illinois– Big coal, corn state– Governor strongly considering cap and trade

• Utah– Big coal state– Participant in WCI, legislature not behind Governor

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Regional Action

Linking State Programs

The Climate Registry today: Uniform GHG reporting across 40 states

States involved in emissions trading program/design

Regional Greenhouse Gas Initiative (and observers)

Western Climate Initiative (and observers)

State-based GHG trading is expanding

• 10 States• Power Plants• Emissions source-

based like EU ETS• Stabilize emissions

through 2014; 10% Reduction by 2018

• 13% Below 1990 Levels by 2019

NE Regional Greenhouse Gas Initiative

Source: www.rggi.org

• Quantitative Limit on Offsets: The RGGI “Offsets Valve”– Initial 3.3% limit on offset use– $7 trigger increases to 5.0%– $10 trigger increases to 10%

• Offsets—5 Initial Types with Clear Requirements:– Natural Gas, Propane, Heating Oil Efficiency;– Land to Forest;– Landfill Gas Capture & Combustion;– Methane Capture from Animal Operations; &– SF6 Leak Prevention.– Add additional types over time as appropriate.

• Geography: Initially inside the United States; but recognition of CDM Offset Credits above $10

RGGI Offsets

• Allocations– States agreed to propose minimum 25%

“public benefit allocation” in MOU– Most states will auction 100%, including

Connecticut, Maine, Massachusetts, New Jersey, New York, and Vermont

– Delaware, Maryland, New Hampshire, & Rhode Island yet to decide

• Auction Design in Progress

RGGI Allowance Distribution

• 3-year compliance period.• Emissions from combustion of sustainably

harvested biomass or bio-fuel not subject to compliance requirement.

• No cost-containment mechanism beyond offsets component

• Linking with other mandatory caps desired

Other RGGI Features

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

RGGI Status

RGGI Update: Is the cap tight enough?

RGGI region emissions by state 2000-2006

Source: PointCarbon

Emissions drop 20 million tons below 2009 cap

Emissions drop largely due to high oil prices

Annual emissions variability in the RGGI Region

Western Climate Initiative

• 6 U.S. States + 2 Canadian Provinces--AZ, CA, NM, OR, WA, UT, BC & MB

• Observers include: Colorado, Idaho, Kansas, Nevada, Wyoming, Ontario, Quebec; Saskatchewan; Sonora, Wyoming

• August 2007: regional reduction goal

• August 2008: design of a “regional market-based, multi-sector mechanism”

WCI member requirements and goals

• Requirements– Economy-wide GHG reduction goal– Multi-sector action plan to meet goal– Climate Registry membership– Adoption of CA vehicle standards

• Goals– Set regional GHG reduction target– By 2008, establish a multi-sector cap and

trade program to help meet the goal

Aug. 07: WCI set regional target15% below 2005 levels by 2020

33% below BAU

15% below 2005 levels

Key Considerations for WCI

• “Multi-sector” Cap-and-Trade--will sectors be phased in?

• Electricity sector--will WCI take an emissions-source approach, a load-based approach, or a hybrid approach?

• How will offsets be incorporated into the program design?

The Midwest is a big emitter

Midwest India

GHG Emissions =

1.8 billion tonnes CO2e

•27% of U.S. GHG emissions•5% of global GHG emissions•24 votes in the Senate•100 votes in the House of Representatives

Midwest Governor’s Association is poised to jumpstart regional action

• Midwest Governor’s Association Energy Summit: November in Milwaukee

• Focus on regional initiatives for biofuels, energy efficiency, renewables and CCS

• Regional agreement to set GHG targets and construct a Midwest cap and trade program is on the table

Gov. Jim Doyle (D-WI)

MGA Chair

Gov. Tim Pawlenty (R-MN)

MGA Former Chair

Midwest states played a key role in Climate Registry development

ECR

CCAR

WRAPLADCO

Potential linking of state emissions trading programs

Regional Greenhouse Gas Initiative (and observers)

Western Climate Initiative (and observers)

Midwest could link state efforts, increase pressure on Washington

Midwest Governor’s Initiative (and observers)

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1990 2000 2010 2020 2030 2040 2050

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Current State Action

Current State Action Plus Entire Midwest

Business as Usual (DOE-EIA)

Historical Emissions (U.S. EPA)

Midwest action could double state GHG reductions Business as

Usual (99% above 1990 levels)

U.S. emissions if all current state targets are met (56% above 1990 levels)

U.S. emissions with Midwest action (13% above 1990 levels)

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Federal Action

Popular Opinion Is Shifting

110th Congress: Climate Bill Comparison

Lieberman-Warner

Lieberman Warner: The Bill to watch

Potential emission reductions under S. 2191

Allocation distribution under S. 2191

International forestry 2.50%

Tribal governments,

0.50%

Auction73%

U.S. ag5%

States9%

Electricity (LSE)10%

International forestry2.5%

Tribal governments

0.5%

Auction23%

CCS4%

U.S. ag5%

Early Action5%

States9%

Electricity (LSE)10%

Power sector20%

Manufacturing20%

2012 2036 and beyond

Auction allocation distribution(percent of total allocations)

International forestry 2.50%

Tribal governments,

0.50%

Auction73%

U.S. ag5%

States9%

Electricity (LSE)10%

Wildlife adaptation

(4.56%) Low-income energy

consumers (4.56%)

Zero and low carbon

technologies (9.03%)

CCS (3.51%)

Climate change and security

(1.20%)

Worker training(1.14%)

State allocation distribution (percent of total allocations)

Manufacturing20%

Power sector20%

Electricity (LSE)10%

States9%

Early Action5%

U.S. ag5% CCS

4%

Auction23%

Tribal governments

0.5%

International forestry2.5%

General state allocation:based on

population, LIHEAP

expenditures and fossil fuel production

(5 %)

States that adopt model building

efficiency codes (1%)

States that decouple and adopt building

standards (1%)

States with GHG programs that exceed federal targets, (2%)

-20

-10

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WY AK ND WV LA IN TX MT KY AL NM OK KS IA UT NE AR DE MO PA OH MS SC TN CO WI NV GA IL MN NC MI AZ VA SD HI WA FL MD NH ME OR NJ ID CA MA NY CT RI VT DC

Winning and Losing StatesPer capita allocations: power plants and & covered industry sources only

Pe

r C

ap

ita T

CO

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U.S. National Average = 7.39

State per capita allocation is higher than national average

State per capita allocation is lower than national average

CA NY CT

Source: Clean Air Watch analysis

NJ

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Business Action

USCAP Proposal• Call for a cap and trade program• Establishment of a national GHG inventory and registry• Credit for early action• Aggressive technology research and development• Policies to discourage new investments in high-emitting facilities• Policies to accelerate deployment of zero and low-emitting

technologies and energy efficiency

Alcan Inc. Alcoa American International Group, Inc. (AIG) Boston Scientific Corporation BP America Inc. Caterpillar Inc. Chrysler LLC ConocoPhillips Deere & Company The Dow Chemical Company Duke Energy

Natural Resources Defense Council The Nature Conservancy

NRG Energy, Inc. PepsiCo

Pew Center on Global Climate Change PG&E Corporation PNM Resources

Shell Siemens Corporation

World Resources Institute Xerox Corporation

DuPont Environmental Defense

Exelon Corporation Ford Motor Company

FPL Group, Inc. General Electric

General Motors Corp. Johnson & Johnson

Marsh, Inc. National Wildlife Federation

US CAP Members’ Market Capitalization: ~$2 trillion

USCAP Recommended Reductions

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Looking Forward

The Democratic Presidential Candidates

Obama• 80% reduction by

2050• 100 % auction• Co-sponsor of

Sanders-Boxer• Co-sponsor of

Lieberman-

McCain in 2007

Clinton• 80% reduction

by 2050• 100% auction• Co-sponsor of

Sanders-Boxer• Co-sponsor of

Lieberman -

McCain in 2007

The Republican Presidential Candidates

McCain• Authored bill to

reduce emissions 65% by 2050

• First high-profile Republican to address climate change (2003 bill with Lieberman; re-introduced in 2005 and 2007)

• Has made climate change among top three campaign issues

Giuliani• Has not ruled out

cap and trade but prefers voluntary measures

• Has said he believes the earth is warming, but has not said definitively that humans are causing it

Romney• Willing to

consider a cap only if enacted globally

• Introduced climate plan as Gov of MA to reach a goal of 1990 levels by 2010 (largely voluntary)

• Withdrew MA from RGGI in 2005 due to cost concerns

Issues to Watch

• Additional state policies• Multi-state “national” climate registry--”The Climate

Registry”• Midwest Regional Potential• WCI design• How do state efforts inform the federal debate in

Washington, DC?– Preemption?– Derogations?

• International processes, including ICAP, EU- ETS and UNFCCC

Jonathan Pershing jpershing@wri.org

World Resources Institute

http://www.wri.org