Perhaps the only thing under heaven that moves slower and more unpredictably than evolution is the evolution of carbon policy. Biofuels investors have long since written off carbon as a factor, saying that the uncertainty of policy has led them to fund only those projects that can survive without a price on carbon.
But with Senator John Kerry signaling that he expects to have the Kerry-Lieberman-Graham cap-and-trade bill ready as soon as early May — in time for passage this year — leads us to review “What’s Up with Carbon?” as we heard into the second half of April.
The cap-and-trade — or the hybrid energy — bill
In Washington last month, Senator Lindsey Graham of South Carolina, Senator Joe Lieberman of Connecticut and Senator John Kerry of Massachusetts saying that a hybrid of energy and climate legislation is more likely to pass the Senate than cap and trade legislation. What is more likely to emerge is a bill that includes support for development of nuclear and clean coal. Implementation is expected to target key industries – here, read the US power and transportation industries — and roll out over a period of years to all sectors of the economy, rather than a sudden shift.
The Carbon price — $31 per ton, or $0.27 cents per gallon
Point Carbon’s North American Research division has forecast a price of $31 per ton of carbon dioxide equivalent (CO2e) in a US Emissions Trading System (US ETS) from expected parameters of the forthcoming Kerry-Graham-Lieberman (KGL). Point Carbon is projecting an increase of 27 cents per gallon of gasoline at the pump for the average US consumer. Would have been 30 cents a gallon except for ethanol’s carbon reductions (a gallon of pure gasoline contains 0.0097 tons of carbon, or 19.4 pounds).
Point Carbon is assuming that transportation is going under the Kerry cap, and will pay a “linked fee” pegged to carbon prices. If the market were to include only the power sector under the cap, Point Carbon finds prices would fall to $15 per ton of CO2e on average. The value of the US carbon market is pegged at $255 billion, compared to the $99 billion carbon market created by the European Union’s Emission Trading Scheme in 2009.
Where do the carbon payments go? Aviation says, why not use the funds to invest in alternative fuels?
At World Biofuels Markets, British Airways’ Head of Environment Jonathon Counsell presented on the impact of the carbon emissions on the aviation sector. Counsell presented the concept that a portion of up to $20 billion per year collected from the airline industry for carbon credits should be spent in support of low-carbon industry technologies.
Oil companies prefer carbon tax to cap-and-trade
The New York Times reported in March that oil companies have shifted to a stance in favor of a carbon tax, after concluding that the House climate bill imposed more stringent limits on the oil industry than comparative limits on the coal and manufacturing industries that have stronger political ties. Senator Mary Landrieu of Louisiana said that she has been working for a “linked-carbon fee” on transportation fuels, which would provide rebates to consumers against higher gas prices, and the Time is reporting that Senators Graham, Keyy and Lieberman are considering shifting the transportation industry out of the cap and trade system and into a carbon tax that would bring transportation tax money into transportation projects.
Economic Impact of climate change legislation
In Washington, American Farmland Trust released a comprehensive study analyzing the effects of climate change legislation on the agricultural economies of Arizona, Colorado and New Mexico. Preliminary findings suggest the possibility for increases in state-level, net farm income of 1.2% in Arizona, 2.9% in Colorado and 4.1 % in New Mexico in 2020, based on expected patterns of cost and price changes.
State Low Carbon Fuel Standards – constitutional?
In Washington, the National Petrochemical & Refiners Association has joined the American Trucking Association and other groups in a third bid to overthrow the California low-carbon fuel standard on constitutional grounds. The most prominent suit to date had been filed by Growth Energy, suggesting that the LCFS violates the supremacy clause of the Constitution.
City-based “Low Carbon Diets” – feasible?
In California, the city of Davis voted to set a “Low Carbon” city-wide diet of shedding 50 percent of its community’s carbon emissions by 2013. The “Cool Davis” program follows in the ware of other urban “low carbon” programs, heralded by the Col Portland project that realized an annual reduction of 22 percent per household in a pilot project last month. The program emphasizes a wide range of simple carbon-saving tactics at the household level.
25 national author Nationally Appropriate Mitigation Actions for carbon reductions
At the UN, 25 developing nations have authored Nationally Appropriate Mitigation Actions (NAMAs) in February, a program in which voluntary national actions to reduce GHGs are reported to the UN Framework Convention on Climate Change.
The Digest’s take
Expect US climate change legislation this year, but a $0.27 increase in the price per gallon is not going to fly with US consumers unless the money is wisely spent and put in a lock-box. A carbon cap on the power industry would be easier to envision. Meanwhile, state low carbon standards may prove irrelevant if we see a revision of the Renewable Fuel Standard in the next 18 months.