Lawmakers Debate Carbon Tax; Studies Offer Look at Economic Impacts

The Nicholas Institute for Environmental Policy Solutions at Duke University

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As lawmakers plan to vote on an anti-carbon tax resolution from House Majority Whip Steve Scalise (R-La.) and Rep. David McKinley (R-W.Va.), another Republican is expected to roll out carbon tax legislation as early as next week.

According to a draft copy obtained by ClimateWire, Carlos Curbelo (R-Fla.) is preparing to introduce legislation that would eliminate the federal gas tax and impose a $23-per-ton tax on carbon emissions from energy industry operations. Some portion of the proposed tax, Bloomberg BNA reports, could be dedicated to increasing incentives for carbon capture and storage and clean technology and to assistance for low-income families affected by an uptick in energy costs related to putting a price on carbon.

“It really attempts to capture the political energy of the moment,” said Curbelo, who would not go into details about the pending legislation. “We know that infrastructure investment is highly popular in our country. It’s probably the only issue that [President] Trump and [Democratic nominee Hillary] Clinton agreed on in 2016.”

Tuesday, in a meeting of the House Rules Committee, the pending Curbelo bill came up during a debate over the Scalise and McKinley anti-carbon-tax resolution, which the committee passed in a 7-3 vote along party lines. A vote on that resolution by the House could come as early as Thursday.

A special issue in the journal Energy Economics highlights carbon tax modeling studies conducted through the Stanford Energy Modeling Forum Project. The issue includes an overview of the results co-authored by Brian Murray of the Duke University Energy Initiative and a faculty affiliate at the Nicholas Institute for Environmental Policy Solutions and an article on carbon tax implications for market trends and generation costs by my Nicholas Institute colleague Martin Ross. Comparison of the modeling studies’ results revealed similar conclusions: that a carbon tax is effective at reducing carbon pollution, although the structure of the tax and rate at which it rises are important, and that a revenue-neutral carbon tax would have a modest impact on gross domestic product. Even the most ambitious carbon tax was found to be consistent with long-term positive economic growth.

China, EU Renew Commitments to Meet Paris Climate Commitments

China and the European Union (EU) on Monday reaffirmed their commitment to the Paris Agreement to limit global warming, issuing a joint statement in which they also vow to work together in that pursuit. Amid fear that U.S. withdrawal from the agreement could undermine global cooperation on climate change, the statement issued at the 20th EU-China summit in Beijing said the climate accord is proof that “multilateralism can succeed in building fair and effective solutions to the most critical global problems of our time.”

The statement included plans to push for an agreement on a rulebook for the Paris Agreement after negotiations stalled this year; to release long-term, low-carbon development strategies by 2020; and to increase each side’s efforts before 2020; and to exchange knowledge on clean energy.

Notably, the joint statement extends cooperation on emissions trading schemes. China’s carbon market, which launched late last year, will, when fully implemented, be the largest in the world, covering an estimated 4 billion metric tons of emissions.

China, which has already met its 2020 target for carbon intensity, and the EU, which has met its 2020 emissions reduction target, also renewed their commitment to create a mechanism to transfer $100 billion a year from richer to poorer nations to assist them with climate change adaptation.

California Beats 2020 Emissions Target; Work Left on Transportation

The California Air Resources Board (CARB) released data revealing a decrease of approximately 2.7 percent in the state’s greenhouse gas emissions in 2016—a decrease that dropped the state’s emissions below 1990 levels four years earlier than the state’s 2020 target date specified in Assembly Bill 32.

The emissions reductions owe to a mix of state-level measures that include a mandate that a certain fraction of electricity come from renewable resourcesregulation of vehicle emissions, and a carbon pricing and trading program shared with Quebec.

There was an exception to the downward emissions trajectory. The state’s transportation emissions continue to rise. Right now, the Trump administration has plans to ease the corporate average fuel economy, or CAFE standards. California has vowed to stick to its own, stricter standards authorized under the Clean Air Act, but if miles-per-gallon targets for the state are rolled back, California’s transportation emissions could rise further.

For months, the state has been in conversations with the U.S. Environmental Protection Agency (EPA) about its vehicle emissions rules, which several other states (most recently, Colorado) follow. Earlier this week, the newly nominated EPA Administrator Andrew Wheeler met with top California officials about the matter. Although CARB Chair Mary Nichols called the meeting “pleasant,” she said “in terms of if there is a difference between Wheeler and Pruitt on these issues, I have yet to see any. It’s not better or worse; it’s the same.”

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions.

Draft Rule to Replace Clean Power Plan Moves Ahead

The Nicholas Institute for Environmental Policy Solutions at Duke University

Editor’s Note: The last issue of The Climate Post will circulate on July 19. Sign up to receive future mailings like this one to understand developments that could shape the energy and climate landscape. Our mailings deliver timely, in-depth, and fact-based analysis, through thought pieces and research publications, to improve environmental policy making. They also alert subscribers to events that aim to shed light on critical climate and energy issues breaking or on the horizon.

The U.S. Environmental Protection Agency (EPA) said on Monday that it sent a proposed rule to reduce carbon dioxide emissions from power plants to the White House Office of Management and Budget (OMB) for review, a standard step before a proposal’s public release and comment.

The proposed rule would replace the Clean Power Plan, which was finalized in 2015 to regulate emissions from existing fossil fuel-fired power plants by setting state-by-state reduction targets. Although not yet publicly released, early reports indicate the new rule will adopt a narrower assessment of the means available to reduce greenhouse gases and therefore will implement less aggressive emissions reduction targets.

In October 2017, the Trump administration issued a Notice of Proposed Rulemaking that called for the Clean Power Plan to be repealed. In December 2017, EPA put out a notice asking the public to submit ideas for a replacement to the rule, which most agree the agency is obligated to produce. The Clean Air Act instructs the EPA to set “standards of performance for any existing source for any air pollutant,” and requires these standards to reflect “the degree of emission limitation achievable through the application of the best system of emission reduction.”

Since April 2017, the U.S. Court of Appeals for the District of Columbia Circuit has extended a temporary stay of the Clean Power Plan five times as the Trump administration contemplates a replacement.

The Monday nomination of Brett Kavanaugh to fill the seat of retiring Supreme Court Justice Anthony Kennedy could influence how litigation over this rule plays out. Kennedy was often the deciding vote in environmental cases brought before the court, including the landmark Massachusetts v. EPA climate change lawsuit in 2007 that laid the legal groundwork for federal action to reduce greenhouse gas emissions under the Clean Air Act. Kavanaugh voiced some skepticism that the EPA has the authority to limit greenhouse gases when his court heard oral arguments on the Clean Power Plan in 2016.

“Global warming isn’t a blank check” for the president to regulate carbon emissions,” he said during oral arguments. “I understand the frustration with Congress,” Kavanaugh added. But he said the rule, rather than Congress, was “fundamentally transforming an industry.”

Pruitt Resigns from the EPA

Scott Pruitt has resigned as administrator of the U.S. Environmental Protection Agency (EPA). Andrew Wheeler, who was confirmed by the Senate as the deputy administrator of the EPA in April, will now serve as the agency’s acting administrator. Wheeler, largely identified by the press as a coal industry lobbyist, began his career as an EPA employee and then oversaw the agency for years as chief of staff of the Senate Environment and Public Works Committee for Chairman James Inhofe.

Pruitt left the EPA facing more than a dozen inquiries into his spending and self-dealing practices and amid debate over his revisitation of six pollution policies during his 17 months. He cited in his resignation letter that these “unrelenting attacks” had taken a toll.

“It is extremely difficult for me to cease serving you in this role first because I count it a blessing to be serving you in any capacity, but also, because of the transformative work that is occurring,” Pruitt wrote.

What’s next is uncertain, but Wheeler has suggested that the EPA likely won’t change its priorities after Pruitt.

“If the environmentalists think [Trump is] going to make promises and we’re going to do the opposite, then there’s not a lot of common ground to work on,” said Wheeler. “I’m going to continue to move forward with those” priorities Pruitt laid out on behalf of Trump.

The Washington Post reported that although policy priorities are expected to remain the same, what may change is the way the EPA talks about deregulatory work.

Culturally, Wheeler also may bring change. In his opening speech with EPA employees, Wheeler reassured agency staff, saying “[t]o the employees, I want you to know that I will start with the presumption that you are performing our work as well as it can be done. My instinct will be to defend your work, and I will seek the facts from you before drawing conclusions.”

Study Finds Coal Bailout Proposal Could Increase Premature Deaths, Carbon Dioxide Emissions

A working paper released by the independent think tank Resources for the Future finds that if  President Donald Trump’s proposed bailout of coal-fired power plants goes into effect in 2019 and 2020 it could lead to the pollution-related deaths of 353 to 815 Americans. The paper indicates that each year the policy could cause 1 death for each 2 to 4.5 of the estimated total 790 coal-mine jobs estimated to be supported by the bailout.

According to the authors, delayed retirement of coal that have announced they will close by the end of 2020 could cause these deaths due to their additional sulfur dioxide and nitrogen oxide emissions. The paper’s modeling simulations show that over the two-year period the policy would increase carbon dioxide emissions by 22 million tons, or about the amount emitted by 4.3 million cars in a year. Applying the policy to nuclear generators would prevent only 24 to 53 premature deaths and 9 million tons of carbon dioxide emissions over the period.

The authors call these mortality estimates “conservative” in part because the number of plants prevented from retiring could be larger than the number modeled.

The assessment, which assumes that the Trump administration’s possible action would delay closure of some 3 percent of U.S. coal-fired generation capacity and 1 percent of U.S. nuclear capacity, is one of the first examinations of the evolving plan to prop up coal and nuclear power plants that are struggling to compete with power plants using cheap natural gas and renewable electricity.

That proposed bailout, outlined in a memo in May, would use a Cold War-era law to keep aging coal and nuclear plants from shuttering. On June 1, Trump ordered U.S. Department of Energy Secretary Rick Perry to take immediate action to keep those plants open.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions

Study Says China’s Emissions May Have Already Peaked

The Nicholas Institute for Environmental Policy Solutions at Duke University

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As part of the Paris Agreement—a global treaty that aims to limit global warming to well below 2 degrees Celsius above preindustrial levels and to pursue efforts to limit that increase to 1.5 degrees Celsius—China pledged to peak its carbon dioxide emissions by 2030. A new study in the journal Nature Geoscience suggests China’s emissions peaked in 2013 and have declined in each year from 2014 to 2016.

“The decline of Chinese emissions is structural and is likely to be sustained if the growing industrial and energy system transitions continue,” said Dabo Guan, a University of East Anglia climate change economics professor and lead author. “China has increasingly assumed a leadership role in climate-change mitigation.”

The study suggests that slowing economic growth and a decline in the share of coal used for energy has aided in the rapid decrease in China’s rising emissions. These changes in industrial activities and coal use, along with efficiency increases, have roots in the changing structure of China’s economy and in long-term government policies, in particular, creation of China’s nationwide emissions trading scheme.

The policy context and initial program design of that scheme is reviewed by my colleague, Billy Pizer, a faculty fellow at Duke University’s Nicholas Institute for Environmental Policy Solutions, in an article in the journal AEA Papers and Proceedings. It highlights important concerns, discusses possible modifications, and suggests topics for further research.

FERC Rejects PJM Capacity Market Proposals

The Federal Energy Regulatory Commission (FERC), in a 3–2 decision, rejected two proposals filed by PJM as well as a proposal filed by a group of generators operating in PJM’s footprint about how the wholesale electric capacity market should handle state subsidies for power generation. FERC did, however, find that the PJM’s existing capacity market rules are unjust and unreasonable and outlined a framework for a new rule.

PJM, which oversees the grid in parts of the Mid-Atlantic and Midwest, operates a capacity market that allows utilities and other electricity suppliers to procure power to meet predicted demand three years into the future in order to ensure grid reliability. The grid operator and some power producers have argued that subsidized generators are entering into PJM’s capacity market at prices below their actual generation costs, lowering overall market prices and potentially forcing some competitors to shutter their operations.

The order rejects both of PJM’s proposals because FERC found that “they have not been shown to be just and reasonable, and not unduly discriminatory or preferential.” But FERC was “unable to determine, based on the record of either proceeding, the just and reasonable rate to replace the rate in PJM’s Tariff.”

FERC then proposed a framework for a replacement rule—resource offers that are deemed subsidized would be subject to an expanded Minimum Offer Price Rule (MOPR) with few or no exceptions, so as not to artificially lower capacity prices. On the other hand, PJM would have to expand the ability for utilities to purchase less from PJM’s capacity market so they wouldn’t be forced to buy capacity to comply with state policies and then procure a duplicate amount of capacity from PJM’s market.

In PJM’s April filing to FERC, PJM asked FERC to decide between two proposals to deal with the issue of how to address potential pricing impacts of state energy programs in its capacity market and to identify which aspects of the proposals need to be revised. Generators subsequently filed a complaint at FERC, alleging that the PJM capacity rules violate the Federal Power Act and proposing their own solution. But in FERC’s order, filed late on June 29, FERC rejected PJM’s two-part capacity repricing scheme and revisions to the MOPR that aimed to bump up capacity offers into the market from new and existing resources receiving state assistance, subject to certain proposed exemptions. It also rejected the generators’ proposal for a MOPR for a “limited set of existing resources.”

PJM, its stakeholders, and other commenters now have to answer FERC’s questions about how to flesh out FERC’s proposed replacement rule framework. Initial comments are due within 60 days and reply comments are due within 90 days of the publication date of the FERC order in the Federal Register.

Study Zeroes in on Hard-to-Decarbonize Sources

About a quarter of global carbon dioxide emissions from fossil fuels and industrial sources come from hard-to-cut sources, according to a study published in the journal Science.

The authors focused on long-distance shipping and transportation, on cement and steel production, and on provision of a reliable electricity supply, that is, the need, given the variable nature of renewables, for climate-neutral ways to increase output when needed. The demand for these services and products is projected to increase over this century, the study said, allowing absolute emissions from them to grow to equal the current level of global emissions.

“If we want to get to a net zero energy system this century, we really need to be scaling up alternatives now,” said lead author Steven J. Davis of the University of California.

What are those alternatives? Some analyzed by the study are the synthesis of energy-dense hydrogen or ammonia-based fuels for aviation and shipping, new furnace technologies for concrete and steel manufacture, and tools to capture and store hydrocarbon emissions. But deploying these technologies will be costly, say the authors, who also point to another obstacle: the inertia of existing systems and policies.

The Climate Post offers a rundown of the week in climate and energy news. It is produced each Thursday by Duke University’s Nicholas Institute for Environmental Policy Solutions