Case for Climate Action: Policies Produce Major Co-Benefits

1. Case for Climate Action: Policies Produce Major Co-Benefits Ned Helme, Executive Director Center for Clean Air Policy * * * Phoenix, AZ April 29, 2004

2. Center for Clean Air Policy • Non-profit environmental think-tank, founded by governors in 1985, to work with governments to develop practical strategies to protect AQ and climate • Designed emission trading and climate policy measures for European Community and range of developing and Eastern European countries • Major issues currently include climate change, air quality, transportation/smart growth • Working with many states to take action on climate change (including CA, CT, MA, ME, NJ, NY, WA, WI)

3. Source: IPCC

4. Effects of Warming Climate • Melting glaciers and ice caps • Rising sea level • Adverse impacts on water supplies • Heat waves & more severe storms • Disruption of ecological systems, shift or loss of species • Invasive species and vector-borne illness • Changes in crop productivity • Bleaching of coral reefs • Premature deaths, lung disease (black carbon)

5. Observed Evidence of Climate Change • Global-average surface temperature increased by about 0.6 ºC over 20th century, 0.5 ºC since 1950 • 1990s warmest decade and 1998 warmest year in last 1000 years in Northern Hemisphere, 2003 3rd warmest year • Widespread retreat of mountain glaciers during 20th century • Northern Hemisphere spring and summer sea-ice extent decreased by 10-15% since 1950s • Global-average sea level has increased by 10-20 cm during 20th century • 0.5-1% per decade increase in Northern Hemisphere mid-latitude precipitation during 20th century • 2-4% increase in frequency of heavy precipitation events in Northern Hemisphere mid- and high-latitudes over latter half of 20th century

6. Policy to support emission constraints Policy Timeline (1) Reduction in carbon intensity (environmental incentives) Creation of material new energy sectors (economic growth incentives) Emissions 1990 2015 2040 2100 Policy to support technology breakthrough Policy to support economic developmentand competitiveness Source: BP

7. Policy Timeline (2)

8. China FSU Japan India Germany Texas UK Canada Italy Australia France Mexico California Ohio Pennsylvania Netherlands Florida Illinois New York Michigan New England New Jersey Belgium Wisconsin Washington Maryland 0 100 200 300 400 500 600 700 800 MMTCE CO2 (1998) The World’s Leading Emitters of CO2

9. Co-benefits of What? • Difficult to talk about Co-benefits without identifying which policy is primary • Comm. Bob Shinn of New Jersey: CO2 reduction is the unifying theme for environmental/energy policy • If you reduce CO2, most other pollutants are swept up in the process

10. Climate Policy Touches All Sectors of the Economy • Smart Growth/infrastructure • Vehicles • Energy Efficiency • Renewable Energy • Energy Fuels • Consumer Products • Agriculture and Forestry • Waste

11. Co-Benefits of Climate Policies • Health, Air Quality • Energy Security • Technological Innovation • Enhanced Mobility • Economic Competitiveness • Infrastructure cost savings • Economic Development/Jobs

12. Approaches to Reducing CO2 and Achieving Co-Benefits 1. “Follow the Money” – Directing state budget outlays toward climate-friendly investments 2. Moving Markets - Using state financial leverage to move new product markets 3. Regulations or Incentives – push and pull policies to encourage reductions and technological innovation

13. Shifting Funding Towards Better Alternatives Funding transit, biking, and walking facilities, and encouraging in-fill and transit-oriented development. –50% difference in VMT in dense areas vs. suburban sprawl • New York: State Energy Plan - redirects State funding toward energy-efficient transportation alternatives – evaluates GHG impacts • New Jersey: Executive Order 4 - requires that state funding be consistent with smart growth principles • Massachusetts “fix-it-first” policy + targeting infrastructure monies to climate-friendly projects

14. State Funding for Energy Improvements • 14 states have public benefit charge (PBC) funds to pay for renewable energy & 16 have funds for energy efficiency • Fee added to electricity rate to pay for projects • California program spent $542 million over 3-yr period; ~$1.35 billion over next 10 yrs. • New York spends ~$142 million per yr. on EE from PBC • New Jersey spends ~$90 million per yr. on EE

15. Moving Markets (1) State spending can spur markets through targeted procurement • Ct exec order requires state RE purchases of 20% by 2010, 100% by 2050 • Many states set energy use efficiency goals • Massachusetts – Replacement of state vehicles with high-efficiency vehicles, disposal of non-essential SUVs, bar SUV purchase in future • New York – clean fuel bus purchase program

16. Moving Markets (2) State tax and grant programs can encourage particular products: • Indiana – 30% of project costs for fuel cells & CHP • Maryland – up to $2,000 excise tax exemption for purchases of hybrid vehicles, sales tax exemption for energy star AC, heating & refrigerators • Georgia – up to $2500 tax credit for electric & biofuel vehicles • Arizona – 25% tax credit for home solar and wind • New York – grants for energy efficient industrial process improvements

17. Regulation vs. Incentives • Regulations include appliance efficiency standards, emission caps, portfolio standards • Incentives include R&D programs, tax credits, production credits, loan programs • Tradeoff between policy based regulation or market incentive • Regulation = less politically popular, less impact on state budget, broader participation, more certainty of achieving goal • Incentives = more politically popular, more impact on state budget, voluntary participation, less certainty

18. Regulations/Incentives to Encourage Renewables • Regulation: • CA Renewable Portfolio Standard (RPS) - 20% by 2017 - equates to between 3,000 and 8,000 MW of additional RE • Tx RPS coupled w/ robust REC trading market – 2000 MW by 2009 • Incentive: • MI NextEnergy program – 20-year state and local tax exemption for alternative energy producers and system designers • MN Renewable Energy Production Incentive - generation incentive payments of $0.015 per kilowatt-hour (kWh) for qualifying renewable energy technologies

19. Renewable Portfolio Standards Source: Union of Concerned Scientists

20. Electricity Sector Regulations/Incentives Regulation: • Mass, NH cap CO2 emissions from power plants, RGGI developing 9 state cap and trade strategy by April, 2005 • WI/MN – standards for electric transformers Incentives: • Texas – streamlined permitting for clean gen • Ohio – Third Frontier Project –fuel cells incentives • Illinois – R&D on geologic carbon sequestration

21. Curbing Automobile Emissions • 13+ states implemented transport measures with climate benefits • California GHGstandard for automobiles • Regulation to reduce emissions 20% by model year 2009,more by 2015 • If States that have CA stds. for LEV (MA, NY, VT, NJ, CT and ME) and Canada follow this std.,29% of N. Amer. auto market would be included • Minnesota mandates 2% biodiesel by 2005, numerous ag states have ethanol requirements + sales tax redux

22. Strategies for Coal States: the Real Challenge • potential adverse economic impacts of reduced coal use block climate action • Key lies in new technologies to remove carbon from coal generation – IGCC w/CCS • State/fed action needed to commercialize the technology, reduce costs and improve performance

23. Coal States Strategy • States can provide incentives thru utility ratemaking, R&D programs • Fed loan guarantees can reduce financing costs and risk • Coupling emphasis on IGCC/CCS w/ RPS and EE efforts can reduce emissions w/ less impact on coal market

24. “Laboratories of Democracy” • Many environmental laws enacted by states have charted the way for later passage of major national legislation • State early action, in 1980’s, to address acid rain had major impact on passage of national legislation • Acid rain laws initially introduced in a number of states • California’s air quality laws laid groundwork for national air quality law passed in early 1970

25. Conclusions • Range of cost-effective opportunities for climate policy • Many have significant economic and environmental co-benefits • States have many policy options that can be tailored to fit local conditions • State programs can be linked thru trading to EU, Canada and others

26. Center for Clean Air Policy www.ccap.org Nhelme@ccap.org Tel: 202-408-9260