Daily Score Blog

In October, the Center for American Progress released a report by economists at the University of Massachusetts Political Economy Research Institute called, “Green Recovery.” The report (definitely worth a close study) showed that a $100 billion green economic investment could create 2 million US jobs in two years -- not to mention the wonders it would do for breaking our dangerous fossil fuel addiction and cleaning up the climate.

A groovy new map on the CAP website illustrates how allocations to 34 states from this "green recovery program" would translate to net job creation and the dent this would make on each state’s unemployment rate (based on September 2008 unemployment figures). 

The CAP program proposes to boost public investment (and leverage private capital through loan guarantees) in six energy efficiency and renewable energy strategies: retrofitting buildings to improve energy efficiency; expanding mass transit and freight rail; constructing “smart” electrical grid transmission systems; wind power; solar power; and next-generation biofuels.

It would create 42,689 new jobs in Washington, reducing unemployment by 22.9 percent (from 5.3 to 4.1 percent).

In Oregon, 27,306 jobs would be created -- cutting unemployment by 23.7 percent.

This is fascinating. It's a hidden wildlife camera tracking grizzly bears in Montana. And this one captures 5 minutes of a single wolf harrassing a momma grizzly and her two cubs. By the end of the cilp, it almost looks like the wolf wants to play.

(It's the second most fascinating wildlife video I've ever seen.)

I'd meant to do a post about John McCain's bizarre fixation with grizzly bear DNA. The whole complaint is basically fraudulent -- and I'll write about it later -- but I got sidetracked by these remote camera videos.

Update 10/3: Well, I see my thunder's been stolen on this one. On the hustings, McCain has repeatedly used a $3 million dollar funding earmark for grizzly bear DNA as evidence of the worst kind of pork barrel spending. I was going to blow up this claim as patently absurd, but it's already been done by Bill Schneider at New West (and reprinted at Crosscut); and by John Aloysius at US News and World Report; and by Eric Olson at Scienceline; and by Coco Ballantyne at Scientific American; by the editorial board at the New York Times; and probably about a dozen other places too. But the best one may be this piece by Joel Achenbach at the Washington Post.

The upshot: the $3 million was an extremely cost-effective way to calculate grizzly populations in some rugged areas of western Montana. Biologists turned up more grizzlies than anyone expected: in short, the money revealed the suprising health of one of our nation's most magnificent endangered species. Now, officials are evaluating various "de-listing" proposals. Plus, John McCain actually voted for the bill. But whatever.

Mostly, I'm just bummed that I didn't get to use the title I had cooked up: "Grizzly Bears: The Other White Meat?"

Photo by Tom Smith, US Geological Survey

The Western Climate Initiative -- North America's biggest cap-and-trade system -- just released its final proposal: here.

This is historic stuff. The proposal leaves room for improvement -- I'll get to that in a minute -- but let's take note of where we are. This will be the first major climate policy to tackle all the principle sources of climate pollution. And it's by far the biggest cap-and-trade system proposed in North America. It's a giant step forward.

With 85 million people spread out across 7 states and 4 provinces, WCI all by itself represents nearly three-quarters of Canada's economy and a fifth of the American economy. (And in combination with states that are participating in other cap-and-trade programs, more than half of North America's population and economy are in cap-and-trade jurisdictions.)

The WCI also brings together a very diverse group of players. There's a big difference between Quebec and California, New Mexico and British Columbia. And the proposal WCI brings forward today represents ground rules -- a common foundation that everyone can agree to. Today's proposal is not a ceiling. Individual states and provinces can do better -- and they will

Here in the Northwest, Washington Governor Gregoire and Oregon Governor Kulongoski have both demonstrated tremendous leadership on climate protection over the last few years. (So has British Columbia premier Campbell, on whom I've heaped praise in the past.) So there is every reason to believe that leaders in the Northwest will springboard from WCI's recommendations to design a program that is effective and fair -- and that makes sense for the Northwest.

In the end, we'll benefit from joining other forward-looking states and provinces in a big program, even as we craft a local solution.

Now. None of this is say the proposal is perfect. To be frank, WCI's position is not what we hoped for. It leaves unanswered some large questions about fairness. And in the early years it doesn't go far enough -- or quickly enough -- to capture all the major sources of carbon. These are the sorts of things that local leadership will address.

***

Cool update, 11:00 a.m.: Just as I expected, Northwest leaders are stepping up to make WCI fair and effective. Here's Oregon's Governor Kulongoski:

I will work with the state legislature, stakeholders and other jurisdictions to expand the scope of auctions because the ten percent minimum is just that – a minimum – and I believe we can achieve a balanced program that meets both our environmental and economic goals. 

***

How does cap and trade work? Check out Sightline's brand new Cap and Trade 101: A Climate Policy Primer.

What exactly does WCI's new proposal say? If you want to read the 122 page document you can find it here. Otherwise, I hit the highlights below the jump...

This is the eighth in a short series of posts that explain some important but often overlooked policy issues in the Western Climate Initiative -- the West's regional cap-and-trade system. (Much to readers' delight, this is the last installment I'm planning to write.)

You can't talk about regional cap and trade very long before someone brings up the subject of pre-emption. What happens if the federal government creates a national cap and trade program? Would the regional programs disappear? And if so, why bother working on them?

First, let's get one thing straight: no one knows what will happen.

Seriously. No one has any idea. And that includes me.

No matter how confidently anybody expresses an opinion on pre-emption, you can rest assured that it's just speculation. And that uncertainty is precisely why it's so important to work on regional programs like WCI: regional cap and trade is what we've got. There's simply no guarantee we'll have a federal alternative soon.

Sure, we know that a new president will be elected in November. But while both John McCain and Barack Obama have proposals for a national cap and trade program, it is hardly a foregone conclusion that a serious policy will emerge intact in the near future. Here are a few ways that things could play out:

This is the seventh in a short series of posts that explain some important but often overlooked policy issues in the Western Climate Initiative -- the West's regional cap-and-trade system.

Earlier in this series, I've worried that WCI is waiting too long to include some major sources of climate pollution in their program. But worse, they are also proposing to completely ignore some sources of emissions. Early on, the latest draft contains this terse statement:

Carbon dioxide emissions from the combustion of biomass or biofuel are not included in the cap-and-trade program.

This is alarming. Ignoring biofuels in a cap and trade program is like investing in insulation for your house but forgetting to shut the windows.

Somewhat strangely there's no explanation for this statement. At minimum, however, it demands elaboration as the terms "biomass" and "biofuel" can refer to a vast and diverse array of products, some of which are climate killers and others of which may yet be climate saviors. "Biomass” can refer to everything from corn for ethanol to algae to Indonesian palm oil to Oregon canola. It can refer to argricultural waste from wheat harvesting to the woody slash left by small-scale logging; or it can even mean your table scraps. The point is: these are very different things, with very different features and climate consequences.

"Biofuels" are similarly hard to pin down. On one reading of WCI's statment you might wonder if gasoline blended with corn ethanol and diesel blended with soybean biodiesel will be entirely off the hook? (B-20 biodiesel, for instance, is considered a "biofuel" but it's still 80 percent petroleum-based.) Or does the draft just that the biological components of those fuels will be ignored? Presumably, it's the later, but it would be nice for WCI to say that clearly.

Not that greater clarity alone would solve the problem here. There is evidence that at least some conventional biofuels are harmful to the climate, perhaps extremely harmful. We need to be careful about how we treat them.

This is the sixth in a short series of posts that explain some important but often overlooked policy issues in the Western Climate Initiative -- the West's regional cap-and-trade system.

Although there is tremendous urgency to reducing climate pollution in the near-term, it can be time-consuming to fire up a cap and trade system. The Western Climate Initiative is no exception. Policymakers have to sort out a number of details -- about scope, offsets, reporting protocols, allowance distribution, reduction schedules, and more --  and not all the participating states and provinces agree. Then they have to set a start-date for the program so that the emitters have enough time to prepare themselves. So there's a lot of work to be done just getting to the starting gate.

Still, time is of the essence and it's not clear that WCI is acting with sufficient urgency. In the most recent draft proposal, WCI recommends starting in 2012.

The delay is problematic enough, but it's compounded by a slack reduction schedule that will become very abrupt in later years. It could create undermine the environmental benefits of the program even while it risks undue economic pain and perhaps a political backlash. In a worst case scenario, it might actually increase pollution in the near term. But more on all that in a moment.

Specifically, WCI's schedule will play out like this: 

• In 2009, states and provinces will adopt the initiative's provisions, including its protocols for reporting emissions from polluters;
• In 2010 and 2011, WCI will implement the reporting program, gathering two years worth of pollution data;
• From 2012 to 2014, WCI will have its first "compliance period." (A compliance period is a unit of time over which the regulated firms must match their climate emissions to the number of carbon permits that they have obtained.) Unfortunately, the first compliance period will be limited in scope: it will include the electricity sector, plus emissions from big industry such as smelters and refineries.
• In 2015 to 2017, the second compliance period, WCI will expand its scope to include transportation fuels, the largest source of climate pollution in the west, and the natural gas that is used in homes and businesses, which is also a very significant source of emissions.
• The final compliance period will be 2018 to 2020, by which point WCI aims to have reduced economywide climate pollution by 15 percent below 2005 levels.

It's actually slower that I've made it sound.

This is the fifth in a short series of posts that explain some important but often overlooked policy issues in the Western Climate Initiative -- the West's regional cap-and-trade system.

“Offsets” are surely one of the most contentious issues in cap and trade. That's because they could improve the cost-effectiveness of cap and trade while bringing substantial side-benefits for free. Or they could also gut cap and trade, making it a sham. The devil is in the details.

Offsets are reductions in emissions that are legally or geographically outside the cap but that are honored like carbon allowances under the cap. For example, an electric utility in the Northwest might buy a 1-ton carbon offset -- for one ton of CO2 removed permanently from the atmosphere -- from a Northwest forest land owner who put a legally binding (and permanent) conservation easement on her land and thereby soaked up and sequestered, or stored, 1 ton of CO2. Alternatively, an oil company in the Northwest might buy 100 offsets from a coal-fired power plant in China that shut down one of its generators and replace the power through conservation programs. To use the offsets under cap and trade, the electric utility or oil company would present public officials with documentation of the offsets as a substitute for an equal number of carbon allowances.

WCI’s July 2008 draft proposal contemplates allowing companies to include up to 10 percent offsets in their portfolios of carbon allowances. That means that they could use offsets to achieve two-thirds of WCI’s 2020 reduction goal of 15 percent.

We think 10 percent is too much, especially when the entire goal is only 15 percent. Here's why. 

This is the fourth in a short series of posts that explain some important but often overlooked policy issues in the Western Climate Initiative -- the West's regional cap-and-trade system.

In cap and trade, bigger is better -- or at least cheaper. That's because of the flexibility that is built into the program: the "cap" sets the overall level of emissions while the "trade" harnesses the profit motive to seek out the cheapest and easiest reductions wherever they occur in the economy. So it's good news when the Western Climate Initiative expands to add new member states and provinces.

Cap and trade gets even better (and cheaper) when different cap and trade programs "link" with one another. Linking means that two different programs honor one another's carbon permits. So the members of WCI could, in theory, trade carbon permits with the members of the European cap and trade program (the ETS), or with the carbon market in the northeast United States (RGGI). By linking, we can create huge economies of scale where all the participants can benefit because the emissions reductions will come at the lowest possible price across a very large economic area. Basically, linking is free trade for reducing climate pollution.

But linking can only happen if cap and trade programs are designed correctly.

This is the third in a short series of posts that explain some important but often overlooked policy issues in the Western Climate Initiative--the West's regional cap-and-trade system.

One of the core questions in cap and trade -- really, for any regulatory system -- is who, exactly, participates. Ideally, the program would include as many sources of climate pollution as possible without creating an administrative nightmare. (In fact, administrative simplicity is one of the main reasons why an "upstream" approach to regulation works best.) So we want to include refineries and coal plants, but not necessarily the neighborhood propane dealer. This is a good deal for both the regulators, who can work with a manageable system, as well as for businesses. An oil importer is sophisticated enough to account for emissions and hold tradeable carbon permits, while a smaller business can't do so as easily.

So to balance comprehensiveness with parsimony, WCI needs to establish an emissions "threshold" for regulation: facilities that generate more than the threshold participate in cap and trade, but smaller facilities don't have to. Luckily, the lion's share of emissions come from fairly large sources, so the trade-off isn't too severe in most cases. Still, there is a trade-off and it's important to get the balance right.

In it's latest draft, WCI suggested a threshold of 25,000 metric tons of carbon-dioxide-equivalent (often expressed as 25,000 metric tons CO2e or 25,000 MTCO2e). That was at the very the high end of what they had been considering. In previous drafts they had said they would set the threshold "within the range of 10,000 to 25,000 metric tons of CO2e per year per facility." The vast majority of public interest groups  -- Sightline included -- have argued that the threshold should be set no higher than 10,000 tons.

This is the second in a short series of posts that explain some important but often overlooked policy issues in the Western Climate Initiative. We've written extensively on "allocations" -- the method of distributing the carbon permits to the public through auctions or free distribution -- but there's a related issue often confused with allocations. Called "apportionment," it has important ramifications.

I know, I know, nothing gets the skin tingling like the word "apportionment." But this is a big question for the Western Climate Initiative -- the seven-state-four-province regional cap and trade system. Which states and provinces get to pass out the carbon permits? How many does each get? And who gets the revenue if the permits are auctioned? Ultimately, it's about the money.  Carbon permits have a real cash value, whether they are sold or handed out for free. And we all know that nothing sharpens a negotiation like a pile of money sitting in the middle of the table.

Maybe that's why WCI has so far produced this masterfully crafted position (pdf):

The Partners are working on an apportionment methodology based on Partner and regional emission reduction goals and requirements. The apportionment methodology will address factors such as production and consumption of electricity, projected population growth and economic activity, and other factors. The Partners intend to have a recommended apportionment methodology by Fall 2008. [Section 7]

Say what?

Before I explain what's going on here, I'll put my cards on the table: Sightline believes that state apportionment should be based on protecting consumers and working families -- in short, it should be based on climate fairness. That means figuring out where the price impacts will occur and awarding state apportionments there so that auction revenue can be used to assist families. One way to do that might be to apportion permits among states and provinces in proportion to their spending on carbon-energy. I'll come back to this in a monent, but first I should explain that some of the intuitive answers to apportionment are unfair.

At first blush, it might seem pretty straightforward to figure out the apportionment (sometimes called an "allowance budget").

Last week when the Western Climate Initiative's latest draft appeared it mystified most folks who aren't insiders to the process. That's a shame because WCI is hugely important. So over the next few days I'm going to embark on a series of posts that I hope will clear up some of the misunderstandings. Along the way, I'm also going to explain what Sightline wants to see improved.

Maybe the single most important question in cap and trade is the question of "scope," the question of what we should include under the cap. How do we decide which carbon pollution counted? And who must obtain the tradeable carbon permits that are equal to the cap?

WCI gets a couple of things right. First, they will regulate all six of the major greenhouse gases. And they've opted for an "upstream" approach: regulating carbon at the handful of points where it enters the economy (pipelines, refineries and so on) rather than further downstream where hundreds or thousands of fuel users would be implicated. It's the coal plant, not the residential electricity meter, that gets treated.

But other questions have been stickier. Some sectors are getting a pass, at least for now, because they are technically infeasible to cover. For example, emissions from agriculture and forestry are difficult to count and there are multitudes of small-scale emitters who have little capacity to participate in a cap and trade program. Fortunately, however, the vast majority of the West's carbon pollution is relatively easy to count, and the polluters are large and sophisticated companies that are accustomed to regulatory requirements. (Think utilities, oil refiners, and smelter operators.) The right thing -- for the climate, for the program's cost-effectiveness, and for equity among businesses -- would be to include as many sources of carbon pollution as is technically feasible.

But that hasn't happened.

The single biggest problem with scope is that WCI is excluding oil companies -- even though transportation fuels are the single largest source of emissions -- until the second "compliance period," which doesn’t start until 2015. (A "compliance period" is a unit of time over which the regulated firms must match their climate emissions to the number of carbon permits that they have obtained.) Seven years is a long time to wait to address the central climate threat of the West. And it gets worse: because each compliance period is three years long -- meaning that polluters have three years to match their emissions to their carbon permits --we might not see meaningful reductions until eight or nine years from now.

That's hardly the only problem.

The new draft proposal is here.

Just the major points. First off, the proposal is basically pretty good. We should keep in mind that what the Western Climate Initiative (WCI) is doing represents a big -- gigantic -- step in the right direction for the climate. So I'll raise a glass to everyone who's worked so hard on the WCI proposal so far.

But there's room for improvement. Below, I highlight the core areas of the proposal. These are bedrock issues that make me concerned.

Transportation is in. Sort of.
It appears that transportation fuels – the region’s largest source of carbon pollution – will be delayed until 2015, the second “compliance period.” The document is not crystal clear, but in Section 6, “Setting the Regional Cap,” it says that the regional cap will be adjusted in 2015 to add both transportation and the natural gas that is used in homes and businesses. (See 6.3). It's critical that we included transportation fuels ASAP.

Auctioning is in limbo.
WCI appears to be punting on this hugely important question. In past communications they’ve said that states and provinces will be required to auction a minimum percentage of between 25 and 75 percent of their allowances. In today’s draft (see 8.7) they say this:

The issue of establishing a minimum percentage of allowances subject to auction by each Partner is still under discussion by the Partners. The Partners expect to make a recommendation on this issue by Fall, 2008.

That's not wildly helpful. But in defense of WCI, they do include quite a bit of language about how the value of allowances are to be used (Sections 8.2 and 8.3) most of which are clearly good public interest goals.

Offsets are on the table.
WCI is apparently considering allowing offsets in the amount of 10 percent of any regulated firm’s allowances. They say, “not greater than 10 percent of an individual entity’s or facility’s compliance obligation” (section 9.2). (A firm's compliance obligation is its total amount of carbon emissions.) Since WCI is shooting for a 15 percent reduction, allowing a firm to submit offsets to cover 10 percent of its total emissions is tantamount to allowing offsets to cover more than half of all the WCI reductions. In my judgment, 10 percent is probably much too high a figure. We shouldn’t have so much confidence in offsets. (For more on the trouble with offsets, see this excellent 2-page summary from economist Chris Busch with the Union of Concerned Scientists. It's California-centric, but completely relevant to WCI.)

A strange loophole, maybe.
Finally, there’s some odd language sprinkled throughout the document that appears to nudge open the door for some states or provinces to avoid capping transportation fuels. In Section 1.4, for example, the document says:

WCI Partners acknowledge that individual jurisdictions may instead utilize comparable fiscal measures, such as British Columbia’s carbon tax, to address transportation fuels and fuel use by residential and commercial sources.

That would be a mistake. Consistency and comprehensiveness are key to the program's success. To use this particular example, BC's carbon tax can easily integrate with a cap and trade program (the taxes would basically become a "reserve price" in the auction system). But a legal cap on carbon is important because it makes certain we meet our climate targets.

One of the biggest sticking points in the Western Climate Initiative (WCI) has been the question of "Scope" -- which emissions get included in the cap and trade program. Most public interest organizations argue for a broad cap that includes all the major sources of emissions that can be reliably measured and regulated. (Sightline's argued this here, here, here, and here.) And the biggest source of emssions, of course -- the biggest by far -- is transportation fuel.

Somewhat surprisingly, the debate about including petroleum is not a greens versus businesses standoff. In truth, most of the participating businesses and utilities are on the same page about Scope: they want it to be comprehensive. But this important agreement gets too often overlooked.

So, I'm setting the record straight here with a list of Western utilities and businesses already on record for a genuinely economy-wide cap (i.e. one that includes transportation fuels):

Alcoa, Boise Cascade, Chelan County Public Utility District, Clark Public Utilities, Florida Power & Light, Grant County Public Utility District, Independent Energy Producers Association, Industrial Customers of Northwest Utilities, Oregon Business Association , Oregon Forest Industries Council, Oregon Municipal Electric Utilities Association, Oregon’s Public Utility Commission, Pacific Gas and Electric Company, Pacific Northwest Generating Cooperative, Portland General Electric, Oregon's Public Power Council, Puget Sound Energy, Sempra Energy, Southern California Edison, Tucson Electric Power Company, Washington Public Utility Districts Association, WEST Associates Members (including Arizona Electric Power Cooperative, Arizona Public Service, Colorado Springs Utilities, Idaho Power Company, Basin Electric Power Coop, Los Angeles Department of Water and Power, Pacificorp, Platte River Power Authority, Xcel Energy/PSCo, Public Service Company of New Mexico, Salt River Project, Sierra Pacific Power, Southern California Edison, Tri-State Generation and Transmission, and Tucson Electric Power), and Weyerhaeuser. [You can find their written comments here, here, and here.]

The Western Climate Initative just released an "allocation" recommendation for its cap and trade program, which (together with complementary policies) aims to reduce the region's emissions 15% below 2005 levels by 2020. ("Allocation" refers to the method of distributing carbon permits, whether for free or by auction.) In case folks are interested in the highlights, I've selected key passages from the document:

"Each Partner will auction a minimum percentage between 25% and 75% of its allowance budget through a coordinated regional auction process by which each Partner will auction allowances throughout the WCI region and receive the proceeds of the auction."

"The minimum percentage of allowances to be auctioned should be increased over time, potentially to 100%. Even before such an increase, each Partner will have discretion to auction a greater portion of its allowances at the program outset or gradually over time as it sees fit."

"Purchasers and covered entities will be allowed to bank allowances without restrictions on the amount of allowances that may be banked or for how long."

"Borrowing of allowances from future compliance periods will not be allowed."

"The compliance periods will be three years long."

"...allowances will be issued by each Partner rather than issued by a regional organization."

"Each Partner initially will have flexibility to issue, beyond the minimum percentage auction amount discussed below and subject to the sector-specific assessments discussed below, its remaining allowances as it sees fit, including (i) auctioning more than the minimum amount of allowances; (ii) issuing some or all of the remaining allowances for free; (iii) holding some or all of the remaining allowances within a compliance period; and/or (iv) retiring some or all of the remaining allowances."

So that's it, basically. (Though if you follow this stuff closely, there's other stuff that's worth reading too -- including ways to assess economic dislocations for certain sectors and ensure fairness between jurisdictions.) 

I should also mention that the reporting recommendations are out too. Offsets recommendations are supposed to be released today too, but they're not up on the web yet. Okay, here they are.

I'll have some commentary later.

p.s. In many cases, free allocation can have big consequences for windfall profits. For an explanation of how this work, see our handy little primer on the subject.

Last night, eating dinner at the Chinese place down the street, I had a window-side table where I could watch the sleet and pouring rain. It was all so wintry and miserable that I wondered if maybe we'd fixed that whole global warming thing.

But then -- dang it -- this morning I found a first-rate new report documenting how climate change is affecting the West. And unlike my idle speculations last night, it's not based on anecdote or wishful thinking: it's carefully researched, drawing on dozens of scienitifc studies and scores of hard data sources. The upshot, if you must know, is that the impacts are more profound here than in the East -- and that we're already feeling them.

This map really says it all:

Here's the full pdf: Hotter and Drier: The West's Changed Climate. It's a joint venture of the Rocky Mountain Climate Organization and the Natural Resources Defense Council.