Climate Change Policy Climate Change Policy & the Business Response: & the Business Response:

Key Developments in the U.S.Key Developments in the U.S.

Truman Semans Truman Semans Director for Markets and Business StrategyDirector for Markets and Business Strategy

Pew Center on Global Climate ChangePew Center on Global Climate ChangeAug. 30, 2007Aug. 30, 2007

33rdrd AustraliaAustralia--New Zealand Climate New Zealand Climate Change & Business ConferenceChange & Business Conference

Presentation Outline

• Introduction to the Pew Center & BELC

• U.S. State and Regional Climate Developments

• U.S. Public and Business Opinion on Climate Change

• The U.S. Climate Action Partnership and Federal Policy Developments

Pew Center on Global Climate Change

• Established in 1998 as an independent, non-partisan climate organization

• Three-fold structure – a “do” tank:

– Research – 90+ reports over 9 years

– Actively advise on policy – state, federal, international

– Business Environmental Leadership Council (BELC)

• Strict independence earns credibility: the Center does not accept any general support funding from corporations, associations, or governments

Business Environmental Leadership Council

• 44 large corporations active on climate

• Primarily Fortune 500 multinationals with major US operations

• Employ over 3.8 million people and have a market value of $2.8 trillion

• Wide range of industries

• Most have either large direct GHG emissions or a large GHG “footprint” through their products and services

44 BELC Companies

Presentation Outline

• Introduction to the Pew Center & BELC

• U.S. State and Regional Climate Developments

• U.S. Public and Business Opinion on Climate Change

• The U.S. Climate Action Partnership and Federal Policy Developments

U.S. State and Regional Policy

• Northeast Regional Greenhouse Gas Initiative (RGGI)• California – AB 32• Western Regional Climate Action Initiative• The latest important state to move: Florida announced

major policy process this summer

Almost every state is doing something on climate, which is increasing pressure for federal action

Completed Climate Action Plans

Climate Action Plans

Renewable Portfolio Standards

MN: 25%by 2025

by 2013

DC: 11% by 2022

MD: 9.5% by 2022

ME: 30% by 2000

HI: 20% by 2020

IA: 105 MW

AZ: 15% by 2025

CO: 20%

by 2020

NM: 20%

by 2020

TX: 10,000 MW

by 2025

CA: 20% by 2010

NV: 20% by 2015

MT: 15% by 2015

WI: 10% by 2015

NY: 25% MA: 4% New by 2009

NJ: 20% by 2020CT: 10% by 2010

RI: 16% by 2009PA: 18% by 2020

VT: equal to load growth 2005 -2012

-

DE: 20% by 2019

WA: 15% by 2020

NH: 25% by 2025OR: 25% by 2025

FL: 20%

Voluntary RegistriesThe Climate Registry

GHG Reporting & Registries

Regional Initiatives

• Northeast Regional Greenhouse Gas Initiative (RGGI)– 10 Northeastern States in first U.S. cap-and-trade program– Initially covers only CO2 emissions from power plants– Caps emissions at current levels by 2009; requires 10%

reductions by 2019 – States develop their own implementing regulations

• Western Regional Climate Action Initiative– Established February 2007 by Governors of Arizona,

California, New Mexico, Oregon, and Washington– Established a target this month of reducing emissions 15%

below 2005 levels by 2020– By September 2008 aim is to devise a market-based

program to reach target– Multi-state registry will be set up to track regional emissions

CA

OR

WA

UT

AZ NM

ME

NY

NHVT

MA

CT

NJ

DEMD

RI

California

• AB 32 passed in 2006; set statewide GHG targets of 1990 levels by 2020

• Market Advisory Committee (MAC) established by governor to aid in design of cap-and-trade program

• MAC report released in June. Key recommendations include:– Eventually incorporate all major

GHG-emitting sectors into cap-and-trade program

– Use mixed approach of free allocation and allowance auctioning

– Allow offsets both within and outside state borders

– Encourage linkage with similar policy initiatives in other jurisdictions

Presentation Outline

• Introduction to the Pew Center & BELC

• U.S. State and Regional Climate Developments

• U.S. Public and Business Opinion on Climate Change

• The U.S. Climate Action Partnership and Federal Policy Developments

Media Coverage Drives Public Awareness

Most think Global Warming is Happening…

70%

58%

74%80%

11%18%

11%5%

19%24%

15% 15%

All Rep Ind Dem

Probably happeningProbably not happeningDK if happening

Source: Ayres, McHenry & Associates for Environmental Defense | July 9-13, 2006

… that Human Activity is the Cause …

25%

36%

22%16%

62%

50%

63%

74%

12% 10%14%

9%

All Rep Ind Dem

Normal cyclesHuman activityDon't know

Source: Ayres, McHenry & Associates for Environmental Defense | July 9-13, 2006

… and that more Government Action is Needed

More Less Right Amount No Opinion

70%

21%

7%2%

Source: Washington Post, ABC, Stanford | April 5-10, 2007

Americans Support Mandatory Carbon Limits …

79%

19%

75%75%

23%22%

2003 2006 2007

Favor Oppose

Source: Gallup Poll | March 11-14, 2007

… But Oppose Policies that Increase Costs …

Increase taxes onelectricity

Increase taxes ongasoline

FavorOppose

79%

20%

32%

67%

Source: Washington Post, ABC, Stanford | April 5-10, 2007

… and Put Some Companies out of Business

Should the government impose restrictions on U.S. industries and utilities that are so tough it would put

some of them out of business?

Should Should not No Opinion

38%

58%

3%

Source: Gallup Poll | March 23-25, 2007

Businesses: “Why Take Action? Regulation.”

December 2005 poll of 31 large corporations:• 17 percent expect US regs to take effect before 2010• 67 percent between 2010 and 2015

>>Implies expected Congressional legislation much sooner

Even before change of power in Congress, savvy companies saw regulations coming soon

Corporate Strategies Report Takeaways

• Main drivers of corporate climate strategy -- profit, pending legislation, corporate reputation and responsibility

• Starting point -- assessing carbon footprint and value chain sensitivities to climate-related impacts

• Integrate climate fully into core planning, with CEO leading and all functions involved

• Most companies focus first on risk management, then shift to capture business opportunity

• If possible, implement game-changing strategies

• For most, influencing policy is central to strategy

Integrating Climate into Corporate Strategy

Feedback and monitoring to refine business case, strategy

elements, and tactics.

Step 8Step 7Step 6Step 5Step 4Step 3Step 2Step 1

Manage External Relationships

Formulate Policy

Strategy

Engage the Organization

Develop Financial

Mechanisms

Set Goals and Targets

EvaluateAction

Options

Gauge Risks and

Opportunities

Assess Emissions

Profile

Stage IIIFocus Outward

Stage IIFocus Inward

Stage IDevelop A Climate Strategy

Process organization: CEO sponsorship; ongoing senior mgmt involvement; cross-functional participation

Presentation Outline

• Introduction to the Pew Center & BELC

• U.S. State and Regional Climate Developments

• U.S. Public and Business Opinion on Climate Change

• The U.S. Climate Action Partnership and Federal Policy Developments

Growing Momentum in Congress

Congress has entered the design phase for national climate change legislation

• June 2005: Sense of the Senate Resolution

• April 2006: Senate Energy Committee hearings

• November 2006: Change of leadership in Congress; Speaker Pelosi declares climate a top priority

• January 2007: USCAP presents recommendations to Congress

• April 2007: Supreme Court rules EPA can regulate CO2

• June 2007: Senators Lieberman and Warner announce new bipartisan legislation on climate change

U.S. Climate Action Partnership

• USCAP is a unique coalition of 25 major businesses and 6 leading climate and environmental groups

• Goal is rapid enactment of federal legislation to slow, stop and reverse the growth of emissions

• Believe U.S. must promptly establish an economy-wide, market-driven approach to climate protection

• Consensus principles and policy recommendations developed after a year of intense dialogue

US Climate Action Partnership

Test, demonstrate, and set up promptly all needed regulation for commercial scale geologic sequestrationAddress air, rail, sea emissions

Promote and facilitate production of lower carbon fuels

Promote smarter growth and enhanced mass transit

TransportationStronger building codes and standards

“Decouple” utility sales and profits, incentivize utility DSM investments

Need for policies to speed transition to low and zero carbon sources that can easily capture CO2 for sequestration (e.g. generation or retail portfolio standards, new source policies)

Decrease auto emissions through GHG/emissions performance standards

• Need for a new national technology institution, with public/private oversight, guided by a clear technology roadmap, and funded through a stable, long-term source not dependent on annual Congressional appropriations

• Deployment policies to incentivize use of low-GHG technologies and overcome financial/regulatory barriers, with public/private cost sharing (e.g. competitive matching grants, loan guarantees, investment tax credits)

#4 Technology Research, Development, Demonstration, and Deployment

Options: (a) Upstream program in which fuel producers hold allowances and the price is added to fuel costs, or (b) “Hybrid” program with a downstream cap on large, stationary sources (approx. 80% of emissions) and an upstream

cap or other tool that is applied to the remaining sourcesEither option should include use of appropriate cost control mechanisms and credit for early action

Power Generation and Coal

• Congressional should strongly urge the Administration to engage in the international negotiating process• Post-2012 agreements should include all major emitting countries, protect U.S. economic interests, establish global carbon

markets, assist poor and vulnerable nations, and boost climate-friendly technology in developing countries

#5 Need for Renewed U.S. Leadership in International Efforts

#2 Economy-Wide Cap and Trade System is Essential to Create Market Price Signal for GHGs

#1#1 Targets: Between 100-105% of today’s levels within five years of rapid enactment90-100% of today’s levels within 10 years, and 70-90% of today’s levels within 15 years of rapid enactment Goal of 60-80% reduction by 2050 (atmospheric concentrations of 450-550 ppm)

SUMMARY OF USCAP RECOMMENDATIONS FOR U.S. CLIMATE POLICY

Incentives to support efficient technologies and distributed generation. with separate incentives for regulated entities, building owners and others to encourage energy efficiency

#3 Additional Policies/Measures Needed Where Price Signal Alone is Not Sufficient

Buildings & Energy Efficiency

Summer Congressional focus on energy bills

• Summer 2007 Congressional focus has been on energy bills that include climate provisions

• Senate Energy Bill passes in June 2007– First boost in passenger vehicle fuel economy standards since 1988– Ethanol mandate increased to 36 billion gallons by 2022– New lighting and appliance efficiency standards– Authorizes at least 7 large-scale CCS demonstration projects

• House Energy Bill passes in August 2007– National renewable electricity standard of 15 percent by 2020– Repeals tax breaks for oil industry, channels savings to alternative

energy projects– Sets goal for federal government to go carbon neutral by 2050– Funds “green” worker training program

Congress Shifts to Climate this Fall

Climate-specific legislation• Record number of economy-wide climate bills

introduced recently– Senate includes: Bingaman-Specter, Sanders-Boxer,

Kerry-Snowe, Lieberman-McCain, Lieberman-Warner (forthcoming)

– House includes: Olver-Gilchrest, Waxman, Dingell-Boucher (forthcoming)

• Several “electricity sector only” cap-and-trade bills have emerged in the Senate as well

Comparison of Senate bills in 110th Congress

Design Elements of Pending Proposals

• Allowance Allocation– Lieberman-Warner: 24% auction from 2012-2034 rising to 52% in

2035– Bingaman-Specter: 24% auction from 2012-2017 rising to 53% in

2030• Cost Containment

– Lieberman-Warner: authorizes allowance borrowing against future caps; NO safety valve

– Bingaman-Specter: $7/ton “safety valve,” increases 5%/year• Offsets

– Lieberman-Warner: 30% total limit on use of domestic & international offsets

– Bingaman-Specter: provides initial categories for domestic offsets. President may authorize use of international offsets up to 10% limit

• Others key issues: sectors covered, point of regulation, credit for early action

Key Bills and Tentative Timelines

• Lieberman-Warner – Introduction scheduled for September– Complete committee process by October– Proceed to Senate floor by end of year

• Dingell-Boucher– Introduction scheduled for September– Committee process complete by October– Bill goes to House floor in fall

For More Information

www.pewclimate.org

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