Issue Immersion Session: U.S. Climate Policy

WRI’s 2008 MindShare Meeting

September 17, 2008

What has happened in Congress thus far and what can we expect in

the future •2008: Dry run in Congress: Senate bill (Lieberman-Warner) did not pass but momentum was gained; process was constructive in educating policy makers on the issue and highlighting concerns

•Numerous bills introduced in House of Representatives; legislative hearings taking place – won’t vote on a bill this Congress

•With a new president supportive of cap and trade, landscape will change next year, will increase Congress’ likelihood of enacting legislation

•Timing – legislative activity in 2009 – pass law in 2010.

What are concerns most likely to slow down passage of legislation:• Cost to consumer; job losses; gas prices

• Is the technology available to meet the emission reduction targets called for by the science?

• Concerns about developing country actions, competitiveness and job loss

• Bill creates massive bureaucracy, redistribution of wealth, fighting over how revenue should be used

How does US policy fit into international need for action

• Global problem; requires commitments from developed and developing countries

• Need strong US domestic policy to bring to international negotiation process

• Treaty: requires 67 or 60 Senate votes – a heavy lift

WRI is working on many critical issues

Four examples:

• GHG reductions cost too much

• Technology is not available

• U.S. competitiveness will be compromised

• Targets and timetables are unattainable

Identifying policy options to reduce the cost of climate policy

• Primary focus on cap and trade

• Cost of compliance as well as cost to consumers

• Options include:– Domestic, international

“offsets”

– Banking and borrowing

– “Allowance reserve”

• Related policies (e.g. allowance allocation) also important

WRI’s work on cost containment

Evaluating mechanisms in federal bills

Boxer-Lieberman-Warner bill targets and U.S. emissions

if 15% offsets used

WRI’s work on cost containment

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Trade measuresCoordinated

international action

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“Leveling” mechanismsCost containment

mechanisms

Adapted from “Cutting Carbon in Europe”, April 31, 2008 presentation by Michael Grubb and Thomas Counsell

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Market price

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WRI’s work on international competitiveness

WRI’s work on international competitiveness

Identifying what it takes to generate a “Wedge”

WRI’s work on GHG abatement technology

“Humanity already possesses the fundamental scientific, technical, and industrial know-how to solve the carbon and climate problem for the next half-century.”

- S. Pacala and R. Socolow, Science, 13 Aug 2004, Vol. 305

Identifying the hurdles to deployment at scale

• Technical challenges• Policy challenges• Financing challenges• Example:

– CCS: Diverse stakeholder dialog to produce consensus guidelines on CO2 storage and liability

WRI’s work on GHG abatement technology

Targets vary in stringency

WRI’s work on meeting targets

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Example: Boxer-Lieberman-Warner bill would have been a significant departure from business as usual

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Total abatement required to meet national target

WRI’s work on meeting targets

EPRI analysis finds that covered sector abatement is possible

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EIA Base Case 2008

Technology EIA 2008 Reference Target

Efficiency Load Growth ~ +1.2%/yr Load Growth ~ +0.75%/yr

Renewables 60 GWe by 2030 100 GWe by 2030

Nuclear Generation 20 GWe by 2030 64 GWe by 2030

Advanced Coal Generation

No Existing Plant Upgrades

40% New Plant Efficiency by 2020–2030

130 GWe Plant Upgrades

46% New Plant Efficiency by 2020; 49% in 2030

CCS None Widely Deployed After 2020

PHEV None10% of New Vehicle Sales by

2017; +2%/yr Thereafter

DER< 0.1% of Base Load in

20305% of Base Load in 2030

EIA Base Case 2007

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Abatement from EPRI analysis won’t get us all the way there.

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Abatement potential from power sector as presented in EPRI full portfolio scenario

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What do we need to get the rest of the way there?

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Remaining abatement needed to meet target

What does your company need to achieve the abatement necessary

to meet strong targets?

• Technology

• Policy

• Management