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N ATURAL R ESOURCES D EFENSE C OUNCIL September 2009

Update on Climate and Clean Energy Legislation in the United States: The ACES Bill and Implications for India. N ATURAL R ESOURCES D EFENSE C OUNCIL September 2009. About NRDC. About NRDC NRDC’s India Initiative. Discussion outline. Climate Action in the U.S.

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N ATURAL R ESOURCES D EFENSE C OUNCIL September 2009

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  1. Update on Climate and Clean Energy Legislation in the United States: The ACES Bill and Implications for India NATURAL RESOURCES DEFENSE COUNCIL September2009

  2. About NRDC About NRDC NRDC’s India Initiative

  3. Discussion outline Climate Action in the U.S. American Clean Energy and Security Act (ACES) Overview International Provisions Timeline Implications for India Discussion

  4. History of Climate Legislation in U.S. U.S. signed but did not ratify Kyoto Protocol Numerous attempts to pass domestic climate legislation since the late 1990s—none passed No White House support 2001-2008 U.S. states took the lead on policy innovation Obama Administration priority to pass comprehensive cap-and-trade legislation

  5. American Clean Energy And Security Act of 2009 (“ACES”) Passed by House of Representatives on June 26, 2009 by 219-212 Major elements: First-ever national GHG cap-and-trade program Clean energy provisions Energy efficiency standards Combined Renewable/Efficiency Portfolio Standard Key International Provisions Other provisions: CCS deployment program, smart grid, vehicle electrification, building codes, appliance standards, etc.

  6. Cap and trade provisions Goal: Reduce GHG emissions by pricing carbon How? Set a limit on total emissions Distribute (either by auction or free) “allowances” equal to the limit. One allowance = one ton of CO2 equivalent Permit trading of allowances Companies that reduce emissions can sell extra allowances to other companies Penalize companies that do not have required allowances

  7. ACES: Cap and trade provisions Cap begins in 2012 Covers 85% of U.S. GHG emissions Steady reduction in emissions: 3% below 2005 levels by 2012 17% below 2005 levels by 2020 (3.2% below 1990 levels) 42% below 2005 levels by 2030 (32.4% below 1990 levels) 83% below 2005 levels by 2050 (80.2% below 1990 levels)

  8. US Emissions Path under ACES Source: Environment Northeast

  9. Key International Provisions International Financing Clean Technology Fund International Adaptation Fund Reduced Deforestation International Offsets Competitiveness Provisions Allowance Rebate Program International Reserve Allowance Program (border adjustment)

  10. International Financing Existing Allocations $579 million (FY09); likely ~$900 million (FY10) Clean Technology Fund Allowances to support the export of clean technologies to developing countries. The amount of allowances dedicated is 1% from 2012-2021, increasing to 2% from 2022-2026 and 4% 2027-2050. Can support: CCS, renewable electricity, energy efficiency, reductions in transportation emissions, black carbon reductions, and capacity building activities. International Climate Change Adaptation Program Allowances to support climate adaptation efforts through bilateral assistance, multilateral funds or institutions The amount starts at 1% of allowances from 2012-2021, increases to 2% for 2022-2026 and 4% for 2027-2050. 

  11. Reduced Deforestation 20% of global warming pollution from tropical deforestation Supplemental Providing "supplemental funding" to incentivize deforestation emissions reductions in developing countries Estimated equivalent of a 10% increase US reductions by 2020 5% of allowances for deforestation reductions from 2012-2025; 3% from 2026-2030; and 2% from 2031-2050. supporting national and subnational emissions reduction activities, forest governance, illegal logging prevention, and enforcement. Funds distributed to an international fund or through bilateral assistance. Offsets Offsets for national level deforestation reductions Requires Baseline deforestation declining to zero net emissions after 20 years Account for nationally appropriate mitigation commitments Cover all significant sources of deforestation emissions Compliment national “land use or forest sector strategic plans” Subnational crediting possible for States/Provinces representing significant levels of deforestation Project and program crediting possible for smaller emitters

  12. International Offsets Allow for the purchase of credits towards compliance with national cap through emissions reductions in developing countries. Must generate 5 tons of reductions for every 4 tons that a company used to comply with its cap. May be issued from an international body (e.g. UNFCCC) if same standards are met 3 different international offsets Sector-based program (electricity, industrial sources, transportation) Deforestation Other offset types

  13. Eligibility(Financing and Offsets) In order to receive incentives, the developing country has to: Entered into a bilateral or multilateral agreement; Put in place national policies and measures to reduce their emissions; Develop a mitigation strategy for substantial emission reductions.  Least developed countries are excluded from these eligibility criteria. No more than 15% of total funds can go to any one country Provided through bilateral assistance or multilateral funds and institutions Costs shared with recipient, private sector, or multinational development bank (LDCs exempt)

  14. International Competitiveness Provisions Rebate program: Rebates for energy/carbon intensive, trade-affected industries phase out beginning in 2021 Border Tax Adjustment (BTA) Would require US importers of carbon-intensive products to hold allowances for imports Essentially acting as a tax on such imports. Aim is to prevent “carbon leakage” and prevent US industries from being less competitive because of cap-and-trade program.

  15. Border Tax Adjustment (BTA) Would start in 2020 in carbon-intensive sectors in which 15% or more of imports come from countries: That are not party to an international agreement, That do not have a sectoral emissions reduction agreement with the US, or Whose manufacturers are more energy and carbon-intensive in the particular sector than the US. Unless President and Congress decide BTA is against US economic/environmental interests.

  16. What next: Senate version of bill Senate version must go through six committees: Environment and Public Works Energy and Natural Resources Finance Foreign Relations Agriculture Commerce, Science and Transportation

  17. Voting in the Senate Need 60 (out of 100) votes to end a “filibuster” and a “majority” to pass the bill. 57 Democrats, 2 Independents in the Senate, some moderate Republicans But some Democrats from coal and manufacturing states are holdouts. Will be a challenge to get their votes

  18. Voting in the Senate If the bill passes in the Senate: Conference to reconcile House and Senate bills Both House and Senate vote on final bill, and President signs Additional future challenge -- Copenhagen Treaty: Any treaty reached in Copenhagen will require 67 votes to be ratified by Senate

  19. Issues to address in Senate NRDCEnvironmental NGOs and others will seek to strengthen Senate bill: Increase GHG reduction target from 17% to at least 20% from 2005 levels. Increase share of allowances to be invested in energy efficiency, especially electric consumers. Increase percentage of auctioned allowances. Reduce proportion of offsets and ensure offset quality. Consider total GHG effects of biofuels.

  20. NRDC’s Priorities for Senate Bill Strengthen short-term emission target to at least 20% by 2020; Direct more allowance revenue to energy efficiency; Preserve EPA authority to set reasonable New Source Performance Standards for major industrial sources under CAA; Retain state authority to go beyond federal minimum requirements; Develop strong standards to ensure that offsets represent verifiable emissions reductions; Ensure that bionenergy and biofuels emissions are accounted for; Increase funding for international clean energy export and adaptation provisions.

  21. Implications for India First steps towards climate stabilization: hope for avoiding worst impacts of climate change New markets for low-carbon technologies, including renewables, energy efficiency, electric vehicles . . . Initiation of commitment to adaptation for vulnerable communities CCS deployment program will reduce costs of CCS for India and others Opportunities for international offsets projects, but with stricter oversight by US EPA. Improves US credibility and commitment to reaching a strong international agreement at Copenhagen Border tax adjustment, discussed above

  22. Thank you For more information and questions about U.S. climate legislation, US-India energy and climate cooperation, or NRDC’s India Initiative please contact: Anjali Jaiswal Senior Attorney NRDC ajaiswal@nrdc.org

  23. CCS Deployment Large financial and regulatory CCS deployment program Combines CCS-based emission standard for all new coal power plants with large CCS financial subsidy Coal plants permitted after January 2009 must capture 50% or more of CO2. New and existing plants that capture CO2 are eligible for up to $90/ton of CO2 captured.

  24. Cost of the bill Congressional Budget Office (non-partisan government research organization) analysis: Will cost an average $175 per household per year But poorest households will save money NRDC analysis finds that in 2020, US households will save $6/month on electricity bills and $14/month on costs of owning and driving vehicles.

  25. Key Cap-and-Trade Design Issues Source: World Resources Institute

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