President Obama's top energy aides repeated the well-worn myth that past regulation has been a major driver of energy innovation while neglecting to mention the wholly inadequate clean energy R&D investments in the ACES climate bill.
Flanked by Energy Secretary Steven Chu and Carol Browner, the administration's Energy and Climate 'Czar,' President Obama discussed his thoughts Monday on the House of Representatives' recent passage of the ACES energy and climate bill.
Secretary Chu stuck, for the most part, to his favorite talking point: comparing US energy policy to the hockey playing of Wayne Gretzsky. We need to play policy like the latter played hockey, Chu is fond of saying, by concentrating on where the puck is going to be rather than where it is at the moment.
Browner (joined at one point by Chu) continually, and almost dogmatically, asserted that prior regulation had successfully spurred rapid innovation and transformed industry. According to Browner:
"That story can be told time and time again about environmental rules, that's probably the clearest -- same thing for CFCs. The Senate decided to ban -- the bill banned CFCs, there wasn't a replacement via the guaranteed market -- the investments were made, the replacements came forward, it was cheaper, much more quickly than we thought." (via NYT)
Browner believes it was the Senate that regulated CFCs and, thereafter, industry that responded. Regulation breeds innovation and successful policy goals, Browner clearly maintains.
The truth of the matter is far subtler. The Clean Air Act Amendments of 1977 only banned non-essential use of CFC's, and it was not until the Dupont Corporation had long acknowledged that it had developed a CFC substitute that the international Montreal Protocol banned their use entirely. The real story here was that innovation bred (or at least enabled) regulation, not the other way around.
The American Clean Energy and Security Act passed in the House this Friday by a narrow margin of 219-212, and US lawmakers immediately began patting themselves on the back. Rep. Henry Waxman touted the bill as "decisive and historic action to promote America's energy security and to create millions of clean energy jobs that will drive our economic recovery and long term growth."
Some international observers joined in the praise, expressing levels of support varying from China's cautious endorsement to the EU's enthusiastic approval; some hailed the bill as a sign of commitment by the US, likely to encourage efforts toward a workable international climate treaty in Copenhagen. Coverage in the UK's Guardian introduced ACES favorably as "a milestone," "the first time either house of Congress had acted to reduce the carbon emissions that cause climate change," and quoted environmentalists who called the bill "a signature achievement."
Criticism of Cap and Trade
But not everyone's so excited. Among the critics speaking up against Waxman-Markey, Todd Darling wrote in the LA Times that the newly passed climate bill is full of "smoke and mirrors." We only have to look to Europe to see the "critical weakness" of a cap and trade plan that gives away too many pollution credits, Darling argues; and since ACES gives 85% of credits to polluting industries for free, it won't establish a strong carbon market, won't result in emission reductions, and won't generate money to fund new technology.
The American Clean Energy and Security Act (ACES) needs a major makeover in the Senate to redress its critically insufficient provisions for funding clean energy R&D, according to Mark Muro, policy director at the Brookings Institution's Metropolitan Policy Program.
The American Clean Energy and Security Act (ACES) that passed by a margin of 219-212 in the House on Friday needs a major makeover in the Senate in order to redress its critically insufficient provisions for funding clean energy R&D, according to Mark Muro, policy director at the Brookings Institution's Metropolitan Policy Program.
In a Brookings article criticizing the climate bill, Muro argues:
"While a $20 to $30 billion a year R&D outlay would be optimal, Waxman-Markey would invest just 1.5 percent of the 40-year revenue stream of the cap-and-trade system in the R&D efforts of ARPA-E and the innovation hubs--which comes to just $1.4 billion a year or so at accepted permit price forecasts... The bottom line: Reps. Waxman and Markey did well to install several crucial innovation provisions in the House bill, but the political trades that were required to pass it have left far too little revenue behind for the most crucial use of cap-trade money--investments to catalyze a radically cleaner energy future."
Muro's points reaffirm Breakthrough Institute's analysis, which has shown how ACES invests far more cap and trade revenue in polluting industries and foreign offsets than it does in building new clean energy industries in the U.S.
Muro mentions that some ACES provisions -- such as the funding it would direct toward ARPA-E and the eight regional "Energy Innovation Hubs" it would establish -- constitute a modest start toward the kind of public investment that will promote the development and commercialization of clean energy technologies. Breakthrough Institute, too, has pointed to some of the same provisions as promising -- but only if they are adequately funded.
On a morning radio show, Congressman Waxman responded directly to the Breakthrough Institute. His response raises concerns about whether ACES can be significantly strengthened in the Senate.
Earlier today, Congressman Henry Waxman was asked to directly respond to the Breakthrough Institute's analysis of the American Clean Energy & Security Act (ACES) during an interview on the Montel Williams Across America radio show. His segment came after my interview on the same show, where I highlighted Breakthrough's analysis and spoke about some of our concerns with the bill.
Listen to Teryn Norris interview with Montel:
Listen to Rep. Waxman interview with Montel:
Below is a transcript of Waxman's response (starting at 5:00 minutes, podcast also available here). Rep. Waxman is Chairman of the House Committee on Energy and Commerce and lead author of the ACES climate bill:
Montel Williams: "Teryn Norris from the Breakthrough Institute and several other people say that this [bill] is based on credits that would be given out and traded by companies to meet their carbon footprint - I'm being told that 85% of these are being given away when they could have been auctioned off, which would have been a revenue source that could have been put toward more forms of renewable energy. Why did we decide to give away these credits rather than auction them off?"
Congressman Waxman: "We're giving away the credits to utilities in order to protect ratepayers. The credits they won't have to pay for won't be charged to ratepayers, both individual consumers and businesses... So this is a way to be fair to the consumers.
Representative Doggett (D-TX): "Doing nothing actually results in more renewable energy than approving ACES... Largest corporate welfare program in US history... I cannot support it." Rep. Doggett is citing analysis by the EPA, which found that ACES would reduce the amount of renewable energy deployed in the United States relative to business-as-usual, increase the amount of coal-fired electricity generation relative to 2005 levels, and provide no incentive for a move to cleaner cars.
Representative DeFazio (D-OR): "Wall Street predicts this is the new trillion dollar market." Rep. DeFazio echoes a recent study by Friends of the Earth, which found that "the federal cap and trade proposals put forth so far would create a system that poses almost identical challenges as those in the mortgage-lending industry."
And, finally, tried and true progressive Dennis Kucinich (D-OH), who ultimately voted against the bill, had this say: "I oppose H.R. 2454, the American Clean Energy and Security Act of 2009. The reason is simple. It won't address the problem. In fact, it might make the problem worse.
"It sets targets that are too weak, especially in the short term, and sets about meeting those targets through Enron-style accounting methods. It gives new life to one of the primary sources of the problem that should be on its way out- coal - by giving it record subsidies. And it is rounded out with massive corporate giveaways at taxpayer expense. There is $60 billion for a single technology which may or may not work, but which enables coal power plants to keep warming the planet at least another 20 years.
"Worse, the bill locks us into a framework that will fail." (get the full text of Kucinich's address here)
Leading energy experts from across the country sent a letter to President Obama and members of Congress on Thursday calling for a massive increase in clean energy investments included in the American Clean Energy & Security Act.
Leading energy experts from across the country sent a letter to President Obama and members of Congress on Thursday calling for a massive increase in clean energy investments included in the American Clean Energy & Security Act.
"We express our profound concern about the abysmal funding for energy technology innovation in the Waxman-Markey American Clean Energy and Security (ACES) Act," the energy experts wrote. "As it stands, this Act ignores President Obama's consistent call for investing $150 billion over ten years in energy research and development."
Analysis by the Breakthrough Institute has shown that ACES invests only one-fifteenth of what President Obama has consistently promised for energy R&D. As Michael Shellenberger and Ted Nordhaus wrote today, "While the White House web site still promises $15 billion annually for clean energy R&D alone, the House climate legislation would invest just $800 million to 1.4 billion in R&D."
The energy experts called for a clean energy RD&D budget of $20-30 billion annually. "Moreover, we believe that at least $30 billion will be needed annually to research, develop, and demonstrate low- and no-carbon energy technologies, with the aim of achieving breakthroughs that can make them much cheaper."
This letter echoes the recommendations of the Brookings Institution, International Energy Agency, Apollo Alliance, Breakthrough Institute, and others. In late 2007, 30 energy experts including several Nobel Laureates wrote a letter to Congress calling for $30 billion of annual investments in clean energy RD&D.
While the White House web site still promises $15 billion annually for clean energy R&D alone, the House climate legislation would invest just $800 million to 1.4 billion in R&D.
Since he launched his campaign for president in 2007, President Barack Obama has promised legislation that would deliver more clean energy jobs through the creation of new and larger clean energy industries, like solar and wind manufacturing, to drive future economic growth. On Tuesday and again yesterday, Obama claimed that climate legislation to be voted on as early as tomorrow in the House of Representatives legislation "will create a set of incentives that will spur the development of new sources of energy, including wind, solar, and geothermal power."
But analyses by the Environmental Protection Agency, the Union of Concerned Scientists, the Breakthrough Institute, and others show that the Waxman Markey climate legislation will not significantly grow the number of clean energy jobs or industries. The EPA analysis released on the same day as Obama's speech shows that the deployment of renewables could be less than without the legislation. An analysis of the renewable energy standard (RES) provision of the legislation by the Union of Concerned Scientists, whose model of various RES exemptions is the most thorough, finds that the legislation could actually require less renewables deployment than projected to occur under the U.S. Energy Information Administration's conservative business-as-usual forecasts. And EPA says the impact of the legislation on gasoline prices ($0.13 a gallon in 2015, $.25 in 2030) will be too small to motivate consumers to drive less or buy smaller cars, or provide incentive for the automotive industry to produce more fuel efficient and technologically advanced vehicles like plug-in hybrid cars.
The U.S. EPA projects renewable energy sources like wind, solar and biomass will generate just 9% of U.S. electricity by 2020 under the Waxman-Markey renewable electricity standard.
The U.S. Environmental Protection Agency projects renewable energy sources like wind, solar and biomass will generate just 9% of U.S. electricity by 2020 under the Waxman-Markey renewable electricity standard (RES). This contrasts with the bill's nominal 20% combined efficiency and renewable electricity standard due to numerous exemptions in the standard. Total renewable electricity generation under EPA's modeling of Waxman-Markey with the renewable electricity standard is just 41 terawatt-hours (or 7%) higher than the Agency's business as usual projections.
As we reported, EPA concludes that the expansion of new wind farms, solar arrays and other renewable energy power plants will actually be somewhat slower under their core scenario for Waxman-Markey than under their BAU projections [p. 27]. Total renewable electricity generation under their core scenario is somewhat higher (3%) in 2025 under Waxman-Markey than in their BAU scenario, but this extra generation comes in the form of biomass co-firing at existing coal-fired power plants, EPA predicts [p. 26].
However, EPA's core scenario does not attempt to model the impacts of the Waxman-Markey bill's RES. EPA apparently decided they were not confident enough in their results to include the effects of the RES in their core scenario and chose to model it instead as a "sensitivity analysis" for the power sector only. Here we look at their projections for the impacts of the bill's RES.
The Breakthrough Institute has published twenty separate "real-time" analyses of major provisions in the Waxman-Markey climate and energy bill, entitled the "American Clean Energy and Security Act" (ACES), tracking changes and conducting analysis as the bill has evolved from initial discussion drafts in May into House-passed legislation in June. The following bullets summarize major findings of these analyses, which primarily focus on the potential impact of the legislation on energy innovation, the deployment of emerging clean energy technologies, and the competitive position of American clean energy industries:
The bill's greenhouse gas emissions cap is effectively non-binding for the first decade or more and is unlikely to drive significant near-term changes in the U.S. energy economy. In order to control costs of the cap and trade program created by the bill, firms are permitted to purchase up to 2 billion tons of offsets annually - roughly equal to one third of total emissions in sectors of the economy that fall under the emissions cap - instead of reducing their own emissions. Up to 1.5 billion tons could be offset by overseas emissions reduction projects. Projections of likely offset usage are generally lower than the legal maximum due to expected limits in the supply and availability of low-cost offsets. However, analysis of the legislation published by multiple government agencies projects that regulated firms will utilize enough offsets each year to render the cap effectively non-binding for most of the next decade or two. Firms would be legally permitted to continue business-as-usual emissions and practices through the end of 2017 under the most conservative offset projections (from the CBO) and through 2027 under the most expansive estimate (from the EPA). Emissions could fall for other reasons during this time period but would not be required to by the emissions 'cap.'
The global recession is likely to drive an oversupply of emissions permits under the cap and trade program for several years. Unless the economy rapidly recovers, U.S. emissions in 2012 (when the cap and trade program would be implemented) will likely remain lower than the emissions cap for several years, leading to an over-supply of permits and a collapse in carbon market prices to at or near the floor price on auctioned permits established by the bill ($10 per ton, rising slowly over time). Firms will purchase and bank low-cost permits and emissions offsets during this period, undermining the stringency of the emissions cap in future years, as well. Under likely emissions and economic recovery scenarios, U.S. emissions in capped sectors could rise for much - if not all - of the next two decades by utilizing only a fraction of the offsets permitted by the bill.
The carbon price signal established by the cap and trade program is expected to be modest and insufficient to pull emerging clean energy technologies into the market or spur significant investment in clean energy innovation. Estimates of carbon prices for the first decade under the bill range from $11-$16 per ton of CO2 under EPA forecasts to $15-$26 per ton under CBO projections. If the economic recession results in lower-than-previously-forecasted emissions levels and emissions permits are over-supplied (as discussed above), prices will be even lower, likely remaining at or near the $10 per ton auction floor price established by the bill. For comparison, carbon prices in the European Union's Emissions Trading Scheme (ETS) have regularly traded at more than $30 per ton of CO2 and have been insufficient to drive significant clean energy innovation or deployment of low-carbon energy sources.
The renewable electricity standard (RES) established by the bill will not ensure any increase in U.S. renewable energy deployment beyond already conservative business-as-usual projections. After exemptions are factored in, the bill's combined energy efficiency and renewable electricity standard will require between 8% and 11.5% of U.S. electricity generation from qualifying renewable sources by 2020. Without any RES, the U.S. Energy Information Administration (EIA) already projects 10% of U.S. electricity will come from qualifying renewable energy sources by 2020 under their business-as-usual forecasts. EIA's projections are considered conservative, because they assume tax credits driving wind, solar and other renewable energy deployment expire without renewal (in 2012 for the production tax credit and 2018 for the investment tax credit). Analysts with the Union of Concerned Scientists conclude, "Bottom line: The Waxman-Markey RES does not ensure that any new renewable electricity will be developed beyond the renewables that are already projected to occur under the business as usual forecast by the [EIA]."
The bill invests far less in clean energy technologies and industries than either the American Recovery and Reinvestment Act (ARRA) or the direct investments being made by competing nations, including China, South Korea and Japan. At an average carbon price of $15 per ton of CO2, clean energy technologies would receive just $9 billion out of over $70 billion in annual allowance revenue generated by the bill's cap and trade program. Only about $1 billion annually would be directed to clean energy R&D, just one fifteenth of President Obama's proposed investment in next-generation energy research and development. An additional $1 billion annually would be directed through a separate provision towards the demonstration and early deployment of carbon capture and storage (CCS) technology for coal-fired power plants, bringing the bill's total direct investment in clean energy technology to an estimated $10 billion annually. In contrast, ARRA (the stimulus bill) will invest over three times more - roughly $33 billion annually - in clean energy technology in 2009 and 2010. The Chinese government is planning to invest $44 to $66 billion annually in China's own clean energy technologies and industries over the next ten years and South Korea and Japan are also making aggressive investments to position their clean energy industries at the lead of the burgeoning global clean energy sector.
The latest version of ACES reduces funding for CCS and state funding for renewable energy deployment while increasing funding for R&D and location distribution companies.
The allowance allocation in the latest version of the American Clean Energy & Security Act (available here) contains some differences compared to the first version, which we analyzed after its introduction on May 15th. Below is a graph comparing the bill's average annual value of allowances between 2012-2025 for each sector (at $15/allowance). Sectors highlighted in gray experienced a decrease in funding, while sectors highlighted in yellow experienced an increase:
Waxman-Markey would reduce the amount of renewable energy deployed in the United States relative to business-as-usual, increase the amount of coal-fired electricity generation relative to 2005 levels, and provide no incentive for a move to cleaner cars, according to a new analysis by the U.S. EPA
The Waxman-Markey climate bill (AKA the American Clean Energy and Security Act) would reduce the amount of renewable energy deployed in the United States relative to business-as-usual, increase the amount of coal-fired electricity generation relative to 2005 levels, and provide no incentive for a move to cleaner cars, according to a new analysis by the U.S. Environmental Protection Agency (EPA).
We certainly can't vouch for EPA's methodology or assumptions. However, with EPA's conclusions about the likely cost of the Waxman-Markey bill on U.S. Households and the broader economy being widely cited, the surprising and even counter-intuitive projections that underlie EPA's cost estimates are worth a close look. In this post we dig passed the EPA's executive summary to take a closer look at their modeling and projections.
The climate bill is now poised for a vote on the floor of the U.S. House of Representatives as soon as Friday, following a deal struck late yesterday between the bill's champion and Energy Committee Chairman Henry Waxman (D-CA) and Agriculture Committee Chairman Collin Peterson (D-MN). Waxman agreed to further concessions to secure the support of agricultural interests and their Congressional champions, including agreeing to strip EPA of primary oversight over the domestic carbon offsets market, giving the US Department of Agriculture jurisdiction over these programs instead, provide additional free allowances for rural electric co-operatives, and place a moratorium on new EPA rules to strengthen the environmental integrity of biofuels like corn ethanol.
NPR's Morning Edition ran a segment on the Breakthrough Institute this morning, featuring our work to re-frame global warming as an economic opportunity and advance a fundamental shift in policy capable of seizing that tremendous opportunity. You can listen to the segment online here.
If you're visiting The Breakthrough Institute's web site for the first time -- welcome! Many folks who heard us on NPR this morning have emailed to say hello and read about our work. Below are a few recommendations of things to read -- we love your comments, so please don't hesitate to opine.
The segment with Morning Show host Amy Allison begins at 1:10:00 into the show which you can listen to below or click here to download an mp3 of the segment and listen on your computer:
The Los Angeles Timesreports that the Environmental Protection Agency projects coal plant electricity generation would grow through 2020 if Waxman-Markey climate legislation becomes law.
Electricity generation from coal will grow if Waxman-Markey climate legislation becomes law, according to a Los Angeles Times investigation. The Times notes that "coal-fired power plants are the largest source of heat-trapping gases that cause global warming," and yet the EPA projects [pdf] (p. 23) that conventional (not CCS) coal power generation will increase from 2013 TWh in the year 2005 to 2030 TWh in 2020.
According to a new analysis by Public Citizen, Waxman-Markey (W-M) climate legislation would inadequately protect American consumers from electricity price increases, despite claims by the bill's authors that the value of the free pollution allowances allocated to utilities would be returned to consumers.
According to a new analysis [pdf] by Public Citizen, the Waxman-Markey (W-M) climate legislation would inadequately protect American consumers from electricity price increases, despite claims by the bill's authors that the value of the free pollution allowances allocated to utilities would be returned to consumers. W-M grants 30 percent of all of the emission allowances to local distribution companies (LDCs) -- otherwise known as regulated utilities. The bill's authors suggest that 50 different state utility regulators will ensure that the benefits will be passed onto consumers.
Robert Atkinson argues in BusinessWeek that both neoclassical and Keynesian economics are misguided on climate policy -- innovation economics and public investments in technology should lead the way.
Robert Atkinson, one of the leading experts on technology policy and President of the Information Technology and Innovation Foundation, published an article in BusinessWeek yesterday explaining how conventional economic doctrines led to the Waxman-Markey climate bill and why innovation economics offers a better climate strategy:
While the so-called cap-and-trade mechanism (or some kind of carbon pricing) is needed, it isn't enough. To really avert climate change, the government needs to adopt an explicitly green innovation policy. Unfortunately, green innovation is getting short shrift in this bill and in Washington generally...
Both conservative and liberal neoclassicists oppose any government allocation of scarce goods and services. They prefer a market tool such as emissions trading that would set a price for carbon pollution, believing -- incorrectly -- that companies seeing potential profits would then develop needed technologies. The two camps differ slightly in how to determine a carbon price. In line with their faith in markets, most supply siders who worry about global warming favor carbon taxes, while liberal neoclassicists favor cap and trade...
Innovation economists see efforts to reduce emissions of carbon dioxide and other greenhouse gases as fundamentally an innovation challenge. They are less sanguine than neoclassicists about the power of price signals alone to bring about a solution, believing that the profit motive works only when there are adequate alternatives to shift to. Without viable electric cars, for example, people will still drive gasoline-powered cars, no matter how much fuel costs, although they might switch to more fuel-efficient models.
Moreover, they believe that even if the price signal is "correct," the innovation that's needed is often delayed because of market failures such as externalities -- situations where innovators can't get the full reward from their innovations. Consequently, adherents of innovation economics say that the government must spend more on research and development to develop cost-effective noncarbon or low-carbon energy alternatives.
"The whole point of cap and trade is to create the market conditions necessary for viable clean energy at a massive scale. So why don't we cut to the chase and simply provide those market conditions directly?
We can't just make the pollution business harder, we need to create a better business for polluters to be in. By direct investment in efficiency, solar, wind, grid R&D, new batteries, etc., we could potentially find solutions faster than the indirect process of forcing the private market to transition by making polluters feel the pain of a carbon cap. ...
It's time to realize that government can do more than prop up banks and auto industries to avoid economic collapse - it can invest directly in REAL climate solutions to avoid global environmental collapse and the political chaos that will follow. ...
At the end of the day, it will be hard to call the Waxman-Markey bill a success if it represents merely a political achievement, while "offsetting" actual results. Keeping our attention, policies, and budgets focused on developing and implementing solutions is critical if we are to relegate carbon pollution and carbon taxes to the scrap heap of the past."
EPA analysis of the American Clean Energy and Security Act projects that firms regulated under the bill's cap and trade program will opt to purchase over one billion tons of offsets each year from 2012-2020 rather than reduce their own emissions.
[Updated 6/18/09 with graphics that more clearly reflect banking of offsets under EPA's projected offsets scenario.]
The Waxman-Markey climate bill (HR 2454) will not require emissions reductions below projected business as usual (BAU) growth in emissions for at least a decade ahead, according to an EPA analysis [pdf]. EPA projects that firms covered under the bill's cap and trade program will opt to purchase over one billion tons of offsets each year from 2012-2020 rather than reduce their own emissions.
EPA predicts that firms would use 110 - 120 million metric tons (mmt) of available domestic offsets each year between 2012 and 2020 [see graphic, p. 6] and the full 1 billion mmt of international offsets permitted under the cap and trade program [p. 5].
If offsets are utilized at the levels projected by EPA, cumulative emissions in the sectors of the U.S. economy covered by the Waxman-Markey cap and trade program will be legally permitted to exceed EPA's business as usual emissions rates from 2012-2020 by nearly five billion mmt. If emissions in covered sectors were actually required to fall to the 17% below 2005 levels by 2020 targeted by the legislation, cumulative emissions would be just 49.5 billion mmt, 10.1 billion mmt lower than the levels legally permitted under EPA's projections for offsets utilization.
"I believe that energy, not the dollar, is the currency of the world. It is the joule that drives every economy and gives people a way out of poverty."
Last week, eight young leaders and intellectuals from around the country arrived at the Breakthrough Institute for the 2009 Breakthrough Generation Fellowship. Breakthrough Generation is the young leaders initiative of the Breakthrough Institute, a public policy think tank, and this summer represents our second annual fellowship program.
Selected from a large pool of applicants from the world's top universities, this year's fellows will continue Breakthrough Generation's efforts to empower progressive young leaders to advance bold ideas for a stronger, safer, and more prosperous world. I invite you to follow their writing and join the discussion at the Breakthrough Generation website:
Our 10-week fellowship includes a two-week introductory program, including a graduate-level reading course, daily blogging, and presentations from some of the country's top energy and economic experts (reading syllabus is available for PDF download here). After this introduction, the fellows will perform research and writing throughout the summer to develop and advance the Breakthrough Institute's efforts on energy, climate, and economic policy.
In the first projections from a government agency of the likely impacts of the American Clean Energy and Security Act, the Congressional Budget Office projects that the legislation will cut cumulative emissions in supposedly capped sectors of the economy by just 2% through 2020. Economy-wide emissions would fall just 5%, CBO projects.
[Updated with correction, 6/18/09: Thanks to John Larson at WRI for alerting us to an error in our data. Our data is now corrected and impacted figures and conclusions have been bolded in the text below so readers can see what has changed. An updated spreadsheet has been uploaded.
In summary: a smaller portion of economy-wide emissions were included in the emissions profile for sectors that fall under the cap starting in 2012 and a larger portion was included in the sectors that are phased into the cap starting in 2014. The result is slightly lower emissions under the ACES target scenario and CBO projected offsets scenario for the years 2012 and 2013 and slightly lower cumulative emissions between 2012-2020.
This effects the post's key result: assuming offsets are utilized at CBO's projected levels, cumulative emissions from 2012-2020 are 2.0% below BAU levels , not 0.5% as originally posted. This change has no effect on other years, on the difference between emissions at the CBO projected offsets scenario and emissions at the ACES target scenario, or on the BAU scenario. As always, we will continue to publish all of our assumptions and calculations and invite readers to look at the data and our analysis themselves. - Jesse Jenkins, Director of Energy and Climate Policy]
The Waxman-Markey climate bill (HR 2454 or the American Clean Energy and Security Act) would reduce cumulative emissions by just 2% between 2012 and 2020 in the sectors of the U.S. economy regulated under the bill's cap and trade program, according to the Congressional Budget Office's analysis of the legislation.
The CBO analysis is significant in that it is the first published predictions from a government agency about the likely actual impact on U.S. emissions resulting from the version of Waxman-Markey legislation passed by the Energy and Commerce Committee and now heading towards debate on the House floor.
According to a new, as-yet-unpublished analysis from the Union of Concerned Scientists (UCS), the combined efficiency and renewable electricity standard (CERES -- formerly RES) in the Waxman-Markey climate legislation will not increase renewable electricity generation and might actually reduce it.
UCS concludes:
"Bottom line: The Waxman-Markey RES does not ensure that any new renewable electricity will be developed beyond the renewables that are already projected to occur under the business as usual forecast by the U.S. Energy Information Administration (EIA)."
UCS created a high-deployment and a low-deployment scenario to predict the impact of the CERES provision in Waxman-Markey, as compared to the EIA's business-as-usual (BAU) baseline projections of renewable electricity generation. Under the high-deployment scenario, the Waxman-Markey CERES provision "would lead to slightly more renewable energy to be developed than business as usual" -- but only starting in 2020.
The Breakthrough Institute joins the Brookings Institution and the Information Technology and Innovation Foundation to discuss the need for a explicit innovation policy to discuss the price gap between fossil fuels and clean energy, and what innovation policies are needed to overcome it.
As the House considers climate legislation, many have come to believe that regulations alone will result in a reduction of emissions. But energy and technology experts say a more explicit federal investment in technology is needed. Please join the Brookings Institution, the Information Technology and Innovation Foundation, and the Breakthrough Institute to discuss the need for a explicit innovation policy to address the challenge of global climate change. At the event, policy experts will discuss the price gap between fossil fuels and clean energy, and what innovation policies are needed to overcome it.
Robert Atkinson
President, The Information and Innovation Foundation
Speakers
The Honorable Jay Inslee (D-WA), United States House of Representatives
The Honorable David Wu (D-OR), United States House of Representatives
"The Technological Barriers to Climate Mitigation"
Nate Lewis
George L. Argyros Professor of Chemistry, Caltech
"Climate Policy Requires Making Clean Energy Cheap"
Michael Shellenberger and Ted Nordhaus
President, The Breakthrough Institute and Chairman, The Breakthrough Institute
"The Case for Energy Discovery Institutes"
Mark Muro
Fellow and Policy Director, Metropolitan Policy Program, Brookings Institution
William B. Bonvillian
Director, Masschussettes Institute of Technology, D.C. Office
"If China is going to put in $440-660 billion [in clean energy development investments this year], how will $190 billion (actually under $130 billion) over 20 years put us in the leadership position?"
Effective climate policy must include a proactive strategy to spur clean energy technology development and deployment. The Waxman-Markey climate bill contains several smart provisions that could be key components of an effective clean technology strategy -- but only if they are adequately funded.
Several of the bill's provisions aim to do that, but we conclude that most are currently either completely unfunded or critically underfunded. Here we take a look at three smart provisions in the ACES bill that could be key components of a proactive clean energy technology strategy -- but only if they are adequately funded.
Clean Energy Deployment Administration: this provision would establish a sort of public clean energy bank charged with creating an attractive investment environment for the widespread deployment of a suite of advanced clean energy technologies. Notable for being a deployment policy explicitly dedicated to advancing technology development goals, this provision also enjoys strong bipartisan support on both the House and Senate. However, ACES provides zero funding for this critical component of a proactive clean energy technology strategy. At least $16 billion in initial seed funding should be provided for CEDA, consistent with the Senate version of this provision.
Energy Innovation Institutes: largely consistent with the recommendations of the Brookings Institution, Breakthrough Institute, Third Way and others, ACES establishes new "Clean Energy Innovation Centers" at research universities, national labs and private research facilities, creating new cross-sector and multi-disciplinary hubs for applied research and development on clean energy technologies. However, these energy innovation institutes are critically underfunded, receiving less than $1 billion/year in funding from the bill's cap and trade allowance value. To bring federal energy R&D programs to a scale sufficient to address the urgent energy innovation imperative and address the needs of a $1.5 trillion annual industry, at least $15 billion in new annual funding should be dedicated to energy R&D, with a significant portion of this new funding dedicated to establishing a robust nationwide network of energy innovation institutes.
Carbon Capture and Sequestration Demonstration and Early Deployment Program: financed by a micro-carbon fee on all electricity sold in the United States, this program would dedicate $10 billion over the next ten years to promote the commercialization and large-scale demonstration of carbon capture and sequestration technologies for coal plants and other major point-source emitters of CO2. This program is a good example of the kind of direct public investment necessary to bring down capital and technology risk barriers and accelerate clean technology commercialization. But a much better-funded and technology neutral program that would provide competitively awarded funding for the demonstration of a whole suite of first-of-their-kind clean energy technologies is needed, and would be vastly superior to this technology-specific, industry-managed program.
We delve into each of these programs in more detail after the break...
Sachs echoes Breakthrough Institute's call for a new focus on accelerated clean technology development and deployment instead of emission reduction targets.
Jeffrey Sachs, in a recent interview with TreeHugger, echoed Breakthrough Institute's call to focus on accelerating the development and deployment of clean energy technology instead of setting emission reduction targets.
As TreeHugger notes: "Sachs's big point: The debate over cap-and-trade, the clamoring for a carbon tax, and the bickering over greenhouse gas targets are distracting from serious efforts at advancing technological and policy solutions."
Sachs states:
"What I want is more plan that says quantatively how do we achieve our targets. ...
If we say 50 percent by 2020, I want people to know what is a realistic way for that to be achieved. What does it mean in terms of the auto sector, what does it mean in terms of housing, what does it mean in terms of the power sector. ...
Simply setting a target will be setting us up for disappointment. And simply believing that cap-and-trade will be sufficient to accomplish these goals I think is a mistake. When you have major technologies that need to be tested, demonstrated, when you have land use that needs to be changed, when you need to develop a new kind of power grid, those will not be solved by cap-and-trade alone."
Sachs isn't alone, the TreeHugger article notes, citing Breakthrough Institute as one of the key proponents of a public investment-led strategy to spur the development and deployment of clean energy technologies:
He's Not Alone
The idea that technological R&D, not a cap-and-trade or carbon tax system, would be the best solution to lowering greenhouse gas emissions is one that environmental contrarians Ted Nordhaus and Michael Shellenberger recently put forward in an article for Yale Environment 360.
Targets mean nothing if we can't get there, and they argue that neither a market nor tax approach to pricing carbon will help us do that. "No government in the world so far has been willing to establish and sustain a high price on carbon," the economists write.
Instead, we need to use public spending to bring down the costs of clean energy technologies, they argue, a tactic that would not only make it easier to achieve lower emissions in the U.S., for instance, but in a developing country like China, where such technologies could be manufactured and tested.
In new independent analysis released yesterday, the Southern Alliance for Clean Energy concludes, as Breakthrough earlier analysis has, that the the impact of the now severely-weakened Waxman-Markey renewable electricity standard on U.S. renewable electricity generation will be "effectively zero."
SACE also looks at the likely impact of the efficiency requirements in the now combined efficiency and renewable electricity standard (which the Alliance refers to using yet another new acronym: "CERES") and concludes it falls far short of President Obama's campaign pledge to reduce U.S. electricity consumption 15% by 2020 (below business as usual projections).
Although it may make the Wall Street Journal and Fortune magazine writers uncomfortable, the kinds of market failures that plague energy innovation, combined with a clear public imperative for transformative change, is a recipe demanding more active government engagement with innovation and industry, not less.
Marc Gunther, the excellent Fortune magazine and GreenBiz.com writer and fellow blogger at the Energy Collective, published a piece last week skeptical of the Obama Administration's new push to support the commercialization of advanced batteries in the United States and help accelerate the day when efficient plug-in hybrid electric vehicles are rolling off American assembly lines and parked in a driveway near you. At issue is $2.4 billion in new funding made available by the U.S. Department of Energy to support advanced battery commercialization and manufacturing.
Gunther quotes a Wall Street Journal article that shares his skepticism of this new funding, which will (in their words) "annoint" new technological and corporate "winners" -- something the Journal clearly sees as an unnecessary intrusion of government on free markets. Gunther agrees, writing:
"They've got a point, though, don't they? One unhappy result of all the bank bailouts of the fall is that $2.4 billion doesn't seem like much--hey, Citi alone has collected north of $45 billion, last time I checked--but a billion here, a billion there, and you're starting to talk real money. And if electric cars are going to be as big a business as a lot of people think, then why government investment should be needed at all? Particularly since we have a climate change bill making its way through Congress that will, at long last, if all goes well, put a price on carbon emissions--thereby giving low-carbon energy sources what they desperately need, which is a fighting chance to compete with fossil fuels on something resembling a level playing field. I thought the whole idea behind cap-and-trade (which I strongly favor) is to capture the externalized cost of global warming pollutants, and then let the market figure out how best to reduce greenhouse gas emissions: regulation that would have a light touch but a profound impact.
But no--with Waxman-Markey, CAFE standards, biofuels mandates, subsidies for "green jobs" and the like--the administration is giving us a belt and a couple of pairs of suspenders, too. Much as I admire Steven Chu, the energy secretary, do we really want to entrust him and his staff to decide which battery technologies are likely to succeed and which companies can most wisely spend that $2.4 billion?"
And as much as I respect Marc Gunther, I quickly took issue with this pretty classic set of objections to government involvement in technological development. I wrote this response, which Gunther dubbed "Defending Big Government," and was happy to post at his personal blog and at GreenBiz. It has now been syndicated at The Energy Collective and at Reuters as well. Here it is for Breakthrough readers:
While we obviously disagree with George Will's views on climate change, his reading of our piece, alongside the reaction from many greens, provides a useful primer for the ways that ideology shapes perception.
Update 06/05: Last night, Joe Romm of Climate Progress launched another ad-hominem attack on Ted Nordhaus, Michael Shellenberger, and Breakthrough Institute, asserting we have "the exact same worldview" as George Will and are opposed to "any major government effort to take collective action to reduce global warming emissions." This follows an attack last week claiming our agenda and analysis of Waxman-Markey is "anti-environmental" and "anti-climate-action."
A growing number of independent media watchdogs and journalists are now criticizing Joseph Romm's behavior, including the Columbia Journalism Review, the Center for Environmental Journalism, and Keith Kloor at Collide-a-Scape Blog. An article in Columbia Journalism Review states, "[Breakthrough Institute's analyses] are perspectives worth considering, despite Romm's pompous dictate that journalists should ignore them," calling Romm's attacks an "unwarranted attempt to shut Nordhaus and Shellenberger out of the debate."
An article in the Center for Environmental Journalism states, "Romm is constitutionally incapable of sticking to ideas and showing respect and civility... Romm takes most disagreement with his ideas personally. He then lashes out using language that describes nothing other than his own approach." And independent journalist Keith Kloor writes, "By now, it should be clear to sensible greens that Romm can't help himself. He seems possessed by a fanatical hatred for Shellenberger and Nordhaus... Romm lumps Will and S&N together in a series of false associations that wholly distorts the latter's critique on contemporary environmentalism and their policy prescriptions for global warming."
A couple weeks have passed since The New Republic ran our piece on "The Green Bubble," and today George Will has a column out, "Green With Guilt," which quotes from it. Will made waves recently arguing against the scientific consensus for human-caused global warming. While we obviously disagree with Will's views on climate change, his reading of our piece, alongside the reaction from many greens, provides a useful primer for the ways that ideology shapes perception.
Later this month, three Senior Fellows at the Breakthrough Institute will speak at UC Berkeley as part of a special public lecture series on national climate policy and environmental politics (lecture descriptions below). Please RSVP to teryn-at-thebreakthrough.org if you plan on attending. Note that seating is only guaranteed for those who RSVP.
Lecture I: Dr. Marty Hoffert: June 17th, 6:00-7:30PM
Lecture II: Dr. William Chaloupka: June 24th, 6:00-7:30PM
Lecture III: Dr. Roger Pielke, Jr: July 1st, 6:00-7:30PM
As debate moves on around the Waxman-Markey climate bill, there seems to be no one contesting the conclusion that the legislation notably does not establish a binding cap on U.S. emissions.
But whether or not you believe the legislation would result in lower emissions, there appears to be universal acknowledgment that various provisions in Waxman-Markey -- including but not limited to the extensive number of offsets permitted and the strategic reserve pool -- prevent the "cap" from being binding. Given this, Waxman-Markey cannot be accurately referred to as establishing a "cap" on U.S. emissions, much less a "binding cap." Probably the most accurate term is "non-binding cap."
[M]ore importantly, if the best that the US can bring to the negotiating table ahead of the talks on a new post-Kyoto emissions treaty, is a 3% cut in emissions versus 1990 baseline, then this may not be enough to tickle out an agreement from China and India [at the international climate negotiations in Copenhagen, December 2009.]
-Global investment firm HSBC on the Waxman-Markey American Clean Energy and Security Act (via WSJ.com's Environmental Capital blog). We note that HSBC's conclusions about the Waxman-Markey climate bill strongly echo Breakthrough's own (see links in quote above).
