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Policy News Update

Month date, 2009

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NEGOTIATIONS: COPENHAGEN DAYS AWAY; US SETTLES ON SPECIFICS

With the Copenhagen climate summit set to begin December 7, the US has been faced with mounting international pressure to offer hard numbers on its climate contributions.  Many of the key players, including Russia, Brazil, Korea and the European Union, announced their targets earlier and have been calling on the US and China—the world’s largest emitters—to follow suit.  Of chief concern to the international community are numbers on the following two matters:

US Treasury officials recently released a proposal for an international fund, similar to ones issued by Mexico and Australia.  The proposed fund would operate under the World Bank, contributing to initiatives including renewable energy development, funding for energy efficiency investments, and insurance for disasters or crop shortages.  The involvement of the World Bank may produce some controversy, since the institution is frequently accused of favoring wealthy nations and initiatives like fossil fuel development.  But Treasury representatives say that the World Bank’s expertise is best suited for the job, and the fund would be governed not through the bank’s existing channels, but rather by a board comprised equally of donors and recipients.  According to the US proposal, all countries but the least-developed would contribute to the fund, although the level of contribution would depend on “national circumstances and respective capabilities.” Increasingly, discussions of the fund have moved toward incorporating a broad range of contributors—not only nations that are already developed, but also ones such as China, which are developing but have quickly growing economies.

Since Congress did not pass a climate bill in time for the summit, the US will face the added challenge of determining how to finance its contribution to the fund.  A cap-and-trade program would have raised the necessary revenue, but without one in place, funding will have to come from the yearly budget process.  In the interest of having something to offer in Copenhagen, the Obama Administration may tap into 2010 appropriations to make a short-term offering.  But the bill for state and foreign operations, which has $1.2 billion for climate financing in developing countries, may not be finalized in time for the talks, and the international community may call for a larger contribution as part of a global agreement. 

Long-term funding targets have not been decided and may not be resolved in Copenhagen, although UN climate change chief Yvo de Boer said he expects the annual contribution from developed nations to be around $100 billion in the future.  Although the US has not suggested what its contribution might be, the climate bills passed by the House (HR 2454) and Senate Environment and Public Works Committee (S 1733) both include several hundred billion dollars in emission allocations over the four-decade lifespan of the program.

NEGOTIATIONS: CHINA ANNOUNCES CLIMATE TARGETS

Following President Obama’s announcement of an emissions reduction target range for the coming decade, China said it would reduce its carbon intensity to 40-45 percent below 2005 levels over the same time period.  This goal will require China to reduce greenhouse gas emissions by 4 percent each year, assuming an annual economic growth rate of 8-9 percent.

What is carbon intensity? Carbon intensity is, in essence, a measure of efficiency rather than total emissions.  In this case it refers to carbon dioxide emissions per unit of economic growth.  In 2006, for example, China emitted 2.85 metric tons of carbon dioxide from fossil fuels for every $1,000 of GDP—a 15 percent reduction from the previous decade but four times as much as the US figure from 2006 (0.54 metric tons per $1,000 GDP).  For China and other developing countries, carbon intensity targets are more appealing than emissions caps because they are more compatible with rapid economic growth.  Although they take a different approach than caps, carbon intensity targets still translate into emission reductions and can make a significant difference, particularly in countries with fast-growing economies.  In 2002, former President George W. Bush set a carbon intensity goal for the US (18 percent by 2012—equivalent to a 1.96 percent annual cut in emissions), which the country is on track to meet slightly ahead of schedule.  Still, critics argued that the target was far too modest for a developed country whose economy has stabilized, and particularly for the US, which until recently was the world’s largest emitter. 

China’s target has received mixed reactions from the international community.  Critics point to projections from the International Energy Agency (IEA), which indicate that China simply needs to follow the track it’s already on to achieve the goal.  Others touted the announcement as an important milestone, saying that the IEA’s numbers are based on steps that China has already taken—instituting fuel economy standards stricter than those of the US, for example—as well as assumed investments and regulatory actions in the future. 

There is also some uncertainty about whether China will adhere to the targets it announced.  The numbers, although domestically binding, do not constitute an international agreement.  Since all participating countries will want the Copenhagen talks to appear successful, China’s actions have been interpreted by some as a political exercise.  The international community will therefore look to the summit as an opportunity to determine whether China is willing to negotiate an international agreement—a matter that will in many ways be as important as increasing carbon intensity goals. 

SENATE CLIMATE DEBATE: KERRY UNVEILS HIS PORTION OF THE SENATE CLIMATE BILL; TIMING REMAINS UNCERTAIN

On December 4, Senate Foreign Relations Chairman John Kerry (D-MA) introduced his committee’s contribution to the broader climate proposal that he is working on with Senators Lindsey Graham (R-SC) and Joe Lieberman (I-CT).  Although the bipartisan package won’t be ready until next year, Kerry said his bill will serve as a “foundation” for US foreign aid offerings at the Copenhagen summit by detailing how the country will help developing nations mitigate and adapt to climate change.  The bill’s key points include:

Kerry has said he is not planning to mark up the bill, and has not scheduled a vote so far.

As for the Kerry-Graham-Lieberman package, the schedule depends largely on how quickly supporters can win over additional votes.  Currently, they are about 19 seats shy of the 60-vote threshold.  Kerry had originally planned to introduce the full bill prior to the Copenhagen summit, but decided to delay the release until after he could gather more cosponsors.  Behind the scenes, though, Democratic leaders are maintaining a sense of urgency—the controversial legislation’s chances in a floor vote will narrow as the 2010 midterm elections approach, and UN officials are aiming to hold a final negotiation session in either June or December of 2010. 

BIOFUELS: EPA SIGNALS SUPPORT BUT DELAYS DECISION ON INCREASING ETHANOL BLENDS

Responding to a petition from ethanol advocates, the US Environmental Protection Agency (EPA) acknowledged that “ethanol will need to be blended into gasoline at levels greater than the current limit of 10 percent" to meet federal renewable fuel mandates.  The agency said that it may increase the maximum ethanol concentration in gasoline from 10 percent to 15 percent, but that it will wait to decide until mid-2010 to allow for additional testing by the Department of Energy (DOE).  Results from EPA tests suggest that E15, the 15-percent blend, will be compatible with 2001 and newer vehicles.  DOE will be tasked with testing the component durability and long-term emissions of E15. 

Opponents of the petition range from automakers and petroleum refiners to environment and public health groups.  Chief concerns include pollution from ethanol refineries and the stresses that higher blends could place on engines, gas pumps, and exhaust emission control systems.  Because ethanol-blended fuel burns hotter than pure gasoline, many stakeholders worry that E15 could degrade equipment not specifically built to handle blends above 10 percent.  To address this, EPA may approve E15 for newer cars only, instituting a fuel pump labeling system to direct customers to the appropriate fuel. 

The concerned groups have been calling for additional testing, and while some praised EPA’s prudence, many also worry that Congress will now intervene with legislation to raise the limit, particularly via the jobs bill that could come up in the next few months.  Both Senators Charles Grassley (R-IA) and Ben Nelson (D-NE) have said they would consider introducing legislation if EPA does not act.  Still, such a bill would face strong opposition and would be difficult to pass—Grassley says he would urge EPA to approve an interim measure and request President Obama’s involvement before resorting to legislation. 

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Sources: Environment and Energy Daily, Greenwire, ClimateWire, Politico, the Washington Post, USA Today

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