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1. Policy Matters Ohio Climate Legislation and Jobs: An Overview of Issues and Options February 23, 2010 www.policymattersohio.org

2. The Science

3. Explaining the Greenhouse Effect Figure: www.myclimatechange.net

4. Warming is unequivocal:clear and unambiguous. Source: IPCC, AR4, WG1, Chap 6, Fig. 10

5. One fifth of our CO2 emissions today will remain in the air in 3009 Atmos. Chem. Phys.7, 2287-2312, 2007

6. Stabilization of CO2 concentration, temperature, and sea level takes centuries after emissions are reduced IPCC TAR SYN SPM Fig 5-2

7. Opportunities of the Low Carbon Economy • Why has China announced it will reduce emissions by 40% below 2005 levels by 2020? • Transition to a low energy economy by mature and developing nations offers the largest export market in the 21st century.

8. The 21st century is about exports • Demand grows as nations develop. • 40% of European GDP is export driven. • 40% of Chinese GDP is export driven. • 36% of Canadian GDP is export driven. • 11% of US GDP is export driven. • America must claim a place in the economy of the 21st century! • The low carbon economy will be the largest market.

9. The Dilemma (Ohio’s Opportunity/Danger) • Over 18% of Ohio’s GSP comes from manufacturing, 50% more than the nation’s share…. • Ohio is the third largest exporter of goods among the states… • Ohio ranks 5th in the nation for our total energy use   • Ohio ranks second in the nation for the level of pollution emitted by our electric power industry.

10. LABOR plays a BIG ROLE - Refrigeration/HVAC, Water Conservation – UA, Sheet Metal Workers - Lighting, solar energy, public utilities - IBEW - Weatherization, skylights- Glaziers Union - Roofing & energy efficient materials- Roofers - Insulation, energy efficient framing-International Association of Heat and Frost Insulators and Allied Workers - General Labor & Construction, emissions control, hazardous waste, demolition and recycling- LIUNA, IUOE - Green Building- Ironworkers - Greening the Ports- ILWU, Teamsters - Mass transit- Transit Employees - Cleaner manufacturing – USW, IAMAW, UAW, CWA-IUE, - Public health – AFSCME, SEIU, CNA - Education and career-tech – education unions

11. Legislative options on the table • American Clean Energy and Security Act of 2009 …aka • “ACES” or • Waxman Markey or • Cap & Invest • American Clean Energy Leadership Act of 2009 … aka “energy legislation” • Clean Energy Jobs and American Power Act of 2009 …aka • Senate version of Waxman Markey

12. More legislative options • Carbon Limits for Energy and America’s Renewal Act…aka • CLEAR Act of 2010 • Cantwell Collins or • Cap & Dividend • Kerry-Lieberman-Graham • Voinovich-Lugar

13. Policy Matters Ohio The American Clean Energy and Security Act of 2009: To create clean energy jobs, achieve energy independence, reduce global warming pollution and transition to a clean energy economy.” September 21,2009 www.policymattersohio.org

14. ACES – Five Titles • Clean Energy (Renewables, Coal Sequestration, transportation, smart grid, nuclear, State SEED funds, etc.) • Energy efficiency (built environment, appliances, transportation, neighborhoods, housing, State REEP funds.) • Global Warming (Cap & Trade) • Transition (energy intensive industries, consumer protection, climate workers adjustment assistance). • Agricultural and forestry offsets

15. Cap-and-Trade Systems Under Development EU Emissions Trading System (EU ETS) Western Climate Initiative (WCI) Participant Observer Regional Greenhouse Gas Initiative (RGGI, “Reggie”)

16. Cap-and-Trade Climate Policy Got it? A familiar game can help illustrate the concepts… • “Cap-and-trade” means a government authority establishes a cap that limits the total amount of pollution allowed, and then distributes allowances for “permission to pollute” the global atmosphere, which can be traded as private property. • The amount of greenhouse gas emissions permitted declines each year, creating demand for a new commodity: carbon permits. • When offered enough money (or faced with high enough costs), polluters who own permits (or need permits) will reduce their emissions. • These trades establish a market price for greenhouse gas pollution.

17. Musical Chairs A Helpful Analogy for Managed Scarcity If you have an “allowance”, you can have a chair. Each chair represents the “permission to pollute”: one metric ton of carbon dioxide (1 mtCO2) or an equivalent amount of any other greenhouse gas

18. Players: Polluters at Points of Regulation Chemical companies Power Plants Oil Refineries Natural Gas companies Aluminum smelters

19. Cap-and-Trade Declining Cap Covered Entities

20. Polluters Compete for Scarce Permits

21. Carbon Price Established by Market Activity So, is it more profitable to: buy a permit, OR reduce my own emissions? Profit opportunities are a main driver for innovation and investment, and the climate challenge needs both.

22. Carbon Price Established by Market Activity $40 Would anyone accept $40 for your permit?

23. Moving to Clean Energy 2010 2020 2030 2050 2040 Rail Transport Hybrid vehicle Nuclear power Solar power Wind power Green buildings $100 $50 $200 Players seek better options as costs rise. Cap-and-trade lets players choose at what price they leave the game – and how they want to make that change. $30 $20 $150

24. Carbon Cap vs. Carbon Tax Carbon Cap Price On Carbon Demand Demand Carbon Tax P P Q Q Quantity of Emissions Should we set the quantity and let markets determine the price for a scarce resource? Should we set the price and let markets determine the quantity of pollution?

25. Emission Allocations: Free versus Auctioned Over Time

27. American Clean Energy and Security Act of 2009 • Cap and Trade • National Renewable Energy Standard • 85% in Free Allowances • 15% to cushion lowest income • CBO estimates annual impact of $175 per household • Most studies find a somewhat progressive impact • Includes substantial investment provisions

28. Key Job Provisions • 15% for energy intensive industries • 44% for utilities (Regional equity) • IMPACT - $30BB to help firms with fewer than 500 employees become energy efficient and retool for new markets • Production based rebates and border adjustments • CWAA

29. Cantwell Collins (CLEAR* Act) • Cap and Dividend • Trade occurs only in the private sector • 75% goes directly to consumers in a flat rebate to households • 25% goes to investment *”Carbon Limits for Energy and America’s Renewal”

30. Cantwell- Collins, continued • Cap is on fossil fuels, not on emitters. • 99% of firms are not subject to the cap; only sellers of fossil fuel • 81% of economy covered. • Border adjustments

31. Kerry-Lieberman-Graham • Specific support for expanded oil and gas drilling • Specific support for expanded nuclear capacity • Significant focus on coal sequestration • Renewables and energy efficiency remain focus

32. Voinovich Lugar Proposal??? Proposal would deal solely with emissions from electric utilities; would address Nox, SO2, CO2 and Mercury. • limit GHG emissions from power plants; • new financial incentives for nuclear power; • carbon capture and sequestration; • energy efficiency mandates for buildings and • stronger corporate fuel economy standards

33. The American Clean Energy Leadership Act • Senate Energy and Natural Resources Committee in June. • Establishes a Renewable Energy Standard (15 percent) • allows more oil and natural gas leases in the eastern Gulf of Mexico, • overhauls federal financing for clean energy projects, • boosts energy efficiency programs and • Includes new federal authority to site major electric transmission lines.

34. Clean Energy Jobs and American Power Act of 2009 • Looks like ACES but • lacks investment, • Renewable Energy and • emissions allocations. • Support for nuclear and natural gas as bridge fuels

35. Key Issues for Ohio • How to minimize the downside • Border adjustments • Production based rebates • Regional equity - Protecting household budget Protecting employers from energy spikes • How to maximize opportunity • Building a national market • Ensuring domestic content • Access to capital for domestic manufacturers

36. Key initiatives to watch • Senator Brown’s tax credits for domestic advanced energy manufacturing • IMPACT legislation • Regional Borrowing Authority • Regional equity • Transition assistance – unemployment and training • Prevailing wage