Weekly Climate Change Policy Update - September 8, 2008

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Article by Kyle Danish, Shelley Fidler, Andrea Campbell, Kevin Gallagher

Commentary

States and science are in the news this week . . . Futures trading of Regional Greenhouse Gas Initiative allowances show low prices for December 2009. Analysts say the low prices could reflect short selling, or an expectation that emissions in the region will keep falling . . . Stakeholders are keeping an eye on an emerging executive order in New York that might allow the governor to revoke state regulations deemed too burdensome. Concerns about the RGGI requirements expressed by business interests apparently were an inspiration for the order . . . Deutsche Bank issued an extensive analysis of the California Air Resources Board's scoping plan for AB 32 compliance and concluded that allowance prices for the trading portion of the program could be anywhere between $15-60. The extent to which companies subject to the trading program may use offsets is a key determinant of allowance prices. Deutsche Bank notes the significant reliance of CARB on a range of direct measures aimed at what are assumed to be zero- or negative-cost abatement opportunities . . . The Western Climate Initiative model rule is expected to come out later this month . . . A raft of scientific reports came out this week with bad news about climate change, including findings that: (1) climate change could push some ecosystems beyond restoration; (2) the Arctic is an island for the first time in recorded history; and (3) melting permafrost is both an effect and then a cause of climate change.

States and Cities

• California Legislature Passes Smart Growth Law Aimed at Limiting Emissions. The California Legislature has passed a smart growth law that provides incentives for low GHG emission development projects. The bill aims to reduce emissions growth by providing streamlined permitting procedures for developers who implement such smart growth principles as increased population density and the discouragement of the use of cars and trucks. Governor Arnold Schwarzenegger (R) is expected to sign the bill into law.
  
  
• Draft NY Executive Order Could Give State Ability to Withdraw from the Regional Greenhouse Gas Initiative. According to a draft executive order obtained by The New York Times from the office of Gov. David Paterson (D), the Governor would be authorized to review all regulations issued in the last five years and revoke any that are overly burdensome. The draft responds to concerns from state businesses over taxes and strict regulations; RGGI is said to be one of the regulations about which businesses have complained. The governor's office noted that executive order is still in draft form and is subject to change.
  
  

Emissions Trading

• Deutsche Bank Predicts California Emission Allowances will be in $15-60 Range. The bank issued a report on the California Air Resources Board's (CARB) scoping plan for complying with the emissions targets in the state's Global Warming Solutions Act of 2006 – more commonly known as the "AB 32" legislation. AB 32 requires California to reduce emissions to 1990 levels by 2020. The report notes that CARB's scoping plan is an innovative mix of measures aimed at reducing demand for energy coupled with a cap-and-trade program for large emitters (i.e., a "supply-side" program). Deutsche Bank found that the cost of offsets and the costs of switching from coal-fired electricity generation to lower-emitting forms of generation would be the main factors in driving allowance prices under the cap-and-trade program. Deutsche Bank said that allowances should be in the range of $15-60 if CARB allows offsets to be used to cover up to 10 percent of the emissions cap.
  
  

• RGGI Futures Fall by 16 Percent in CCFE Trading. December 2009 Regional Greenhouse Gas Initiative (RGGI) futures on the Chicago Climate Futures Exchange dropped to $4.60 this week, nearly 16 percent below where the futures closed at the end of last week. Traders and market analysts believe the decline is due to short selling, as well as predictions that emissions from facilities that will be covered under RGGI have fallen and are well below the regional cap of 188 million tons of CO₂.
  
  

Studies and Reports

• Federal Report Warns that Preserving Ecosystems May be Impossible due to Climate Change. A report from the U.S. Climate Change Science Program published for comment on September 2 warned that global warming could cause some ecosystems to cross thresholds from which recovery is very difficult or impossible. As a result, the report recommends that federal agencies monitor ecosystems to determine when these thresholds are approaching and reduce other environmental problems, such as air and water pollution and invasive plant species, to further protect ecosystems. The report, which is a synthesis and assessment of scientific research on the effects of climate change, will be open for public comment until October 17. A copy of the report is available at: http://www.climatescience.gov/Library/sap/sap4-2/public-review-draft/default.htm
  
  

• Study Finds Global Warming Anomalous Over Last 1,500 Years. A study published in the Proceedings of the National Academy of Sciences reevaluated data on historical climate patterns, concluding that climate change over the last decade is unmatched in the past 1,500 years. The authors examined tree rings, corals, ice cores, and other data to determine past climate patterns.
  
  
• Scientists Predict that Melting Permafrost Will Increase Climate Change. A study published in the American Institute of Biological Sciences magazine BioScience found that melting permafrost is expected to release GHGs as it melts, causing higher atmospheric GHG concentrations and thus, increased climate change – an example of a negative feedback effect from climate change. The scientists examined the amount of carbon dioxide and methane stored in permafrost that would be released through melting, comparing it to the effects of massive land use changes such as tropical deforestation.
  
  
• Data Shows Northwest and Northeast Passages Both Free of Ice for First Time. NASA satellite data compiled by scientists at the University of Bremen showed that the two passages through the Arctic – the Northwest Passage around Canada and the Northeast Passage around Russia – are free of ice at the same time. Scientists believe that this is the first time both passages have been clear in at least 125,000 years. Although ice melt is seasonal, and should be reversed in winter, the Arctic is now an island.
  
  

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