Climate Change Policy in an Obama Administration

Tom LindleyPerkins Coie LLP

November 22, 2008

The debate has shifted:• From causes and effects to

mitigation methods and timelines

• From voluntary, incentive-based programs to mandatory, market-based regulation

U.S. Federal Approach to Climate Change

• President Bush's approach focused on voluntary, market-based incentive programs and partnerships managed by the Environmental Protection Agency and Department Of Energy

• Only limited regulatory action has taken place recently:• Carbon Sequestration Rules (July 2008)• Advance Notice of Proposed Rulemaking (July2008)• GHG Reporting Rules (draft to OMB)

Federal Climate Change Policy in the Bush Administration: 2000-2008

• Regional Action:• RGGI, Midwest Accord, WCI

• California's AB 32 leads the way

• 18 states now have mandatory greenhouse gas reporting rules

State & Regional Climate Change Policy

There have been many more developments with regional and state-based regulation

U.S. Regional Programs

Pew Center on Global Climate Change, Oct. 17, 2008

President-Elect Obama:

Climate Change & Energy

Campaign policies vague, but emphasize:• Cap-and-trade-style emissions reductions• Improved energy efficiency• Energy independence• Green job creation

• Economy-wide cap-and-trade system

• Invest $150 billion over 10 years in advanced energy technologies

• Improve energy efficiency

• Make the U.S. an international leader in combating climate change

Obama Campaign

During the campaign, Obama proposed broad reforms in climate and energy policy :

• Mandatory, economy-wide• Reduce emissions to 1990 levels by 2020• 80% reduction below 1990 levels by 2050• Allocation: 100% auction of allowances• Limited use of offsets

Obama's cap-and-trade plan:

Obama Campaign

• Sectors covered• Reporting start date• Emissions cap start date• Early action credit• Preemption of state/regional programs

Obama's cap-and-trade plan does not specify:

Obama Campaign

• $150 billion over 10 years in:•Plug-in hybrids•Commercial scale renewable energy•Energy efficiency and weatherization projects•Low emissions coal plants•Next generation biofuels and fuel infrastructure•Transition to new digital electricity grid

• Assist workers and low income families with "transition" costs

Obama's cap-and-trade plan would reinvest allocation revenues:

Obama Campaign

• Re-engage with the UNFCCC• December 2008: UN Climate Change Conference, Poznań, Poland• November/December 2009: UN Climate Change Conference, Copenhagen

• Create "Global Energy Forum" of largest emitters• Technology transfer to developing countries• Confront deforestation; promote carbon sequestration

International Commitments:

Obama Campaign

Agency roles in the Obama Administration

• Possible elevation to cabinet status

• EPA to regulate emissions under existing Clean Air Act

• CA waiver would be approved

EPA DOE

• Large role: climate change is an energy issue

• Clean energy initiatives

• Possible appointment of National Energy Security Director

Congress & Climate Change Policy

• New cap-and-trade legislation is expected to be introduced in the latter half of 2009 or early 2010. • Until then, three recent bills are being discussed as starting points for the 111th Congress:

• Senate: Lieberman-Warner• House: Dingell-Boucher• House: Markey

Recent Climate Change Bills:

S. 2191 Lieberman-Warner

• First cap-and-trade bill to be voted out of committee• Defeated by Senate procedural vote in June 2008• Some language/initiatives may carry over, but bill will die in 110th Congress• New sponsorship needed: McCain, Boxer expected to lead

Congress & Climate Change Policy

Recent Climate Change Bills:

Dingell-Boucher "discussion draft"

• Released for comment October 7, 2008

• Four scenarios proposed• Less aggressive initial reductions• Blanket preemption of state/regional cap-and-trade initiatives • May become leading bill in 111th Congress unless Waxman replaces Dingell as chair of Energy and Commerce Committee

Congress & Climate Change Policy

Recent Climate Change Bills:

H.R. 6186: Markey's iCAP Act

• Chair of select committee on Energy Independence and Global Warming• Named by House Speaker Pelosi to specifically address global warming issues • Introduced June 4, but no further action taken• Committee may dissolve in favor of Rep. Dingell's Energy and Commerce Committee

Congress & Climate Change Policy

Policy Lieberman-Warner (S.2191) Dingell-Boucher (discussion draft) Obama (campaign policies)

Targets 19% below the 2005 emissions by 2020 71% below the 2005 emissions by 2050.

6% below 2005 levels by 202080% below 2005 levels by 2050

Reduction to 1990 levels by 2020 80% below 1990 levels by 2050

Allowance Allocation

Initially: 76% allocated and 24% auctionedBy 2036: 27% allocated and 73% auctioned

Mix of allocation and auction until 2026100% auction of allowances beginning in 2026 with revenues returned on a per capita basis to citizens unless Congress reauthorizes the legislation

100% auction from beginning

Preempt

state/regional programs

No explicit preemption, incentives to encourage states to fold into national program

Blanket preemption of state cap-and-trade initiatives

Not specified, but probably would not favor blanket preemption

Use of offsets 2012: 30% of allowance allocation may be satisfied with offsets

Initially limited to 5% of allowance allocation due to low initial reduction targets

2024: up to 35%

Not specified ("limited")

Cap-and-Trade Policy Comparison

Many competitors…• Recession, economy• Subprime mortgage crisis• Tax and healthcare reform• Wars in Iraq & Afghanistan

Will emissions reductions remain a top priority in an Obama Administration?

Federal Climate Change Policy

• Level and timing of cuts• Offsets: domestic, international, or none?• Grandfathered vs. auctioned allowances• Federal preemption of state and

regional programs

Many key issues under a cap-and-trade program remain unresolved…

Federal Climate Change Policy

• Leakage: whether to first obtain international commitments from developing countries• Support for bridge technology (CCS, nuclear)• Expansion of renewables (wind, solar, biofuels)• Early action credit

Key cap-and-trade debates continued:

Federal Climate Change Policy

Questions & Comments