Climate Change Activities in Florida’s Air Program – Three Drivers

1. Climate Change Activities inFlorida’s Air Program – Three Drivers • 2007 Governor’s Executive Order (07-127) • Diesel idle reduction rule (done) • California vehicle emissions rule (hearing open) • Electric utility GHG reduction rule (2009 priority) • 2008 Florida Energy Bill (HB-7135) • Authorizes electric utility cap-and-trade rule, to be ratified by legislature • Governor’s Climate Action Team • Final report (October 2008) makes recommendations for cap-and-trade rule

2. Diesel Idle Reduction Rule • Rule effective 12/15/08 • Applies to heavy-duty commercial and governmental vehicles (trucks & buses) • Prohibits idling for longer than 5 minutes • Exemptions for traffic, emergency operations, bus passenger comfort, powering work equipment, etc. • After September 2013, long-duration idling to heat and cool truck’s sleeping berth no longer allowed • Portion of clean diesel grant to provide $1,500 rebates, as funds permit, for auxiliary power unit installations on older sleeper-berth trucks

3. Adoption of California MotorVehicle Emission Standards Rule • Includes fleet-wide average GHG standards for autos and light-duty trucks (Pavley standards) • Assumes EPA’s denial of California waiver will be reversed; DEP has joined lawsuit • Rule adoption hearing opened 10/29/08 and continued to 12/2/08; if adopted, rule must be ratified by legislature • California program brings about greater and sooner reductions than federal CAFE • Automakers claim rule will limit availability of popular light-duty trucks and discourage use of E85; DEP strongly disagrees

4. Highlights of 2008 Florida Energy Bill • Creates Florida Energy & Climate Commission • Authorizes DEP to develop cap-and-trade rule for utility GHG emissions; requires economic analysis • Allows utilities to recover cost of research and geologic assessments of carbon sequestration • Requires utilities to report to the Climate Registry • Directs Public Service Commission to develop Renewable Portfolio Standard rule • Mandates 100% E10 by end of 2010 • Creates the Florida Energy Systems Consortium in state university system

5. Electric Utility Cap-and Trade Rule - Key Factors to be Considered (HB-7135) • Overall cost-effectiveness • Minimizing administrative burden • Impacts to utility prices • Costs and benefits to state economy • Potential effects of leakage • Consistency with other state/federal programs • Feasibility of expanding to other emitters and carbon sinks • Considerations for linking to efforts of other states or countries

6. Electric Utility GHG Reduction Rule • Governor’s order sets GHG reduction targets: • Year 2000 emissions by 2017 • Year 1990 emissions by 2025 • 20% of 1990 emissions by 2050 • Energy bill authorizes cap-and-trade approach and requires DEP to: • Consult with Public Service Commission, Florida Energy and Climate Commission (FECC), and Governor’s Climate Action Team • Consider certain key factors in developing rule, and provide report to legislature through FECC • Submit rule to legislature in 2010 for ratification

7. Overall Recommendations of Governor’s Climate Action Team • Final report provides 50 policy recommendations, plus additional comments on cap-and-trade program. Report produced by Center for Climate Strategies and available at http://www.flclimatechange.us/documents.cfm. • If fully implemented, recommendations would result in GHG reductions in excess of Governor’s 2017 and 2025 emission reduction targets, for all sectors, by 11% and 34 %, respectively. • While some recommendations result in an overall societal cost to implement, many were identified to have an overall societal cost-savings. Net cost savings of all Action Team recommendations combined is more than $28 billion from 2009 to 2025. • Recommendations would reduce dependence on fossil fuels, resulting in total fuel savings of 53.5 billion gallons of petroleum, 200.2 million short tons of coal, and 6.394 billion cubic feet of natural gas during the period 2009 through 2025.

8. Action Team General Comments on Cap-and Trade Program • First and foremost, a strong national cap-and-trade program is the preferred method for achieving substantial reductions in GHGs, and Florida should advocate for a national program. • However, as the federal government deliberates on a national program, Florida should join a regional program to advance its GHG reduction goals. Initial analysis indicates that Florida would benefit from joining RGGI and may benefit from joining the cap-and-trade portion of WCI. • At the same time, Florida should reach out to other Southern states to explore collaborating in one or more ways: (1) jointly influence the development of a national cap-and-trade program; (2) explore the potential for multiple Southern states joining one or more regional programs; (3) help address “leakage” issues; and (4) explore the creation of a Southern regional climate initiative.

9. Specific Recommendations of Action Team on Cap-and-Trade Rule • Florida’s cap-and-trade rule should be designed to achieve the emission reduction goals set forth in Executive Order 07-127. • The cap-and-trade program should strive to be revenue-neutral to consumers as much as possible. There are five broad purposes to which allowance value (either the allowances themselves or proceeds from their sale) should be applied: • Promote energy efficiency investments, • Mitigate impacts on ratepayers and consumers with particular attention to low-income consumers, • Accelerate the development and use of emissions mitigation technologies, including renewable or zero-carbon technologies, • Mitigate impacts of climate change (for example, fund adaptation strategies), and • Protect regulated emitters from competitive disadvantage. • Other uses of allowance value should also be considered, such as stimulating or rewarding development of emissions abatement technologies, funding program administration, and protecting regulated emitters from economic disadvantage.

10. Specific Recommendations of Action Team on Cap-and-Trade Rule (cont.) • The cap-and-trade rule should allow offsets without limits; however, the offset program must ensure rigorous quality standards. • The cap-and-trade program needs appropriate allowance price containment mechanisms, especially in the early years; further study needed before specific mechanisms can be recommended. • The cap-and-trade program should allow unlimited banking. • Borrowing is an important cost containment mechanism and should be allowed, but agreement by the Action Team was not reached on what conditions (e.g., Warner-Lieberman-type limits by emitter, time limits, or interest) should be imposed. • If any revenues are generated from the sale of allowances, they should never be used to supplement General Revenue. • Leakage must be addressed by other means if a regional cap-and-trade program does not do so.