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We would be happy to connect you with our business and sustainability experts, best practices, case studies and more.

Nancy Buzby email

Senior Director of Marketing, Strategic Initiatives
Boston Office
617-406-1821

Alex Marchyshyn email

Marketing Communications Coordinator, EDF+Business
New York Office
212-616-1396

Amy Morse email

Marketing Communications Coordinator, EDF+Business
Washington, DC Office
202-572-3357

 

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  • The New Normal: California-Quebec Auction Clears Above the Floor Price

    By Erica Morehouse

    Photo: Pxhere

    By Erica Morehouse and Katelyn Roedner Sutter

    California and Quebec released results today for the November 2017 auction which showed steady prices well above the floor for the second auction in a row. The November auction was also the second in a row to sell out of allowances. Both outcomes are a reflection of the secure market that is now set to run through 2030, and demonstrate that the design features of cap and trade are working as expected to maintain a strong and stable program.

    November Auction At-a-Glance

    • Approximately $862,407,989 raised for the Greenhouse Gas Reduction Fund to invest in a number of programs including clean transportation, urban greening, and improving local air quality.
    • All current vintage allowances were sold of the 79,548,286 offered for sale, including 15,909,657 allowances that were previously unsold in 2016. This is the first auction including held allowances.
    • Current vintage allowances sold at $15.06, $1.49 above the $13.57 floor price. This is 31 cents higher than the August clearing price.
    • All future vintage allowances sold of the 9,723,500 offered for sale. These allowances will not be available for compliance use until 2020. For the second auction in a row, future vintage allowances sold out above the floor price, showing strong confidence in the cap-and-trade program after 2020.

    The Nuts and Bolts of Cap and Trade, Important and Working

    This auction demonstrated how some of the “behind the scenes” elements of cap and trade are working – and succeeding – to keep the market strong and stable.

    Importance of Banking

    These auction results show that businesses’ ability to “bank” allowances for use in later years when prices will be higher and the cap tighter are critical for market stability, and most importantly, emissions performance. In 2016 and early 2017, before California legislatively extended its cap-and-trade program from 2020 to 2030, demand for allowances was falling off in part because emissions were already below the cap and the uncertainty of the future program discouraged any banking. With the cap extended to 2030, however, demand and prices are more stable and there is once again a strong incentive for polluters to save their allowances for future years and make cost-effective emission reductions sooner than required for compliance. Early reductions can be cost effective for companies, and are great for the environment.

    First Auction to Offer Unsold Allowances

    The November auction is the first to offer previously unsold allowances, in this case allowances held over from the 2016 auctions. Last year, when demand for allowances was lower, these unsold allowances were held to be re-offered at later auctions. This adjusted supply downward when needed and adds extra supply when allowances prices start to rise (as they are doing now), creating price stability in the market. These 15 million extra allowances now mean there was enough supply to meet demand.

    California Emissions Continue to Decline

    Further good news from November, as EDF reported yesterday, is that the California Air Resources Board released their 2016 emissions report and found that emissions covered by cap and trade have not only continued to decline, but are doing so at a faster pace than in previous years.

    • Emissions are a whopping 58 million metric tons below the cap for 2016, an amount equivalent to taking over 14 coal fired power plants off-line for a year. Even if some of these “saved” pollutants are emitted later, this is a win for the atmosphere since there will be several years where they will not be contributing to atmospheric warming.
    • The bulk of these reductions came from the electricity sector, which reduced emissions by increasing renewable production and hydroelectricity and decreasing imports from coal-generated electricity.
    • Transportation emissions did increase in California as they did in the rest of the world. However, the state has a number of policies that are targeted at reducing those emissions and cap and trade is keeping overall emissions in check so they have time to work.

    Today’s auction results show one more data point in the example California and Quebec are setting for the world in how to implement effective climate policies. This example was on display at the recent UN Conference of Parties (COP23) in Bonn, Germany that wrapped up last week. Governor Brown as well as three other U.S. Governors and many mayors were in attendance making sure the world knew Donald Trump cannot prevent U.S. states and cities from acting to reduce emissions and protect their residents.

    Read more »
  • Senate funding proposal to eliminate EPA’s IRIS program is a public health debacle

    By Jennifer McPartland

    Jennifer McPartland, Ph.D., is a Senior Scientist with the Health Program.

    Yesterday, the Senate Committee on Appropriations majority posted their version of the FY2018 Interior, Environment and Related Agencies appropriations bill online (see bill here and accompanying explanatory statement here; see the minority’s summary response here). The legislation lays out spending measures for a number of agencies including the Environmental Protection Agency (EPA).  In releasing the bill yesterday, the majority has bypassed the amendment and markup process.

    Among other cuts, the bill eliminates the EPA Integrated Risk Information System (IRIS) Program. At best a small fraction of its responsibilities – and only one-third of its funding – would be re-allocated to the Office of Chemical Safety and Pollution Prevention (OCSPP).

    If realized, this short-sighted move would be a debacle in terms of protecting public health from harmful chemical exposures.  

    Most well-known for its gold-standard chemical toxicity reviews, EPA’s IRIS Program is a non-regulatory program that provides critical information and scientific expertise to support decision-making across the agency’s programs and regional offices as well as to other federal agencies, states, localities, and tribes.

    Among other things, IRIS chemical reviews are used to inform clean-up decisions at Superfund and other contaminated sites, set standards to ensure clean drinking water, assess health risks from toxic air emissions, and evaluate health risks of chemicals in commerce. These are all legally mandated activities stipulated under different laws to ensure the water we drink, the air we breathe, and the lands where we work, live, and play are safe.

    Beyond supporting requirements under the law, IRIS Program experts are often called in to help regions, states, and tribes respond rapidly to emergency and other priority situations. IRIS staff are invaluable in these moments, when time is of the essence and experts are few and far between.

    So, why would such a vital program be slated for elimination? Segments of the chemical industry and its allies in Congress (and now within EPA itself) have long complained about the quality of IRIS assessments, citing for support past reviews by GAO and the National Academy of Sciences (NAS). But they conveniently ignore the more recent impartial reviews of the program that have given it high marks.

    While NAS panels have been critical of IRIS in the past, the most recent NAS review from 2014 praised the program for substantial improvements made over a short period time. EPA’s Science Advisory Board echoed the same sentiments just this past summer, noting that no other federal entity performs IRIS functions. Critics also neglect to mention that much of the remaining critique, such as the program’s listing on the “high-risk” list maintained by GAO, points to insufficient resources and throughput, not quality issues.

    And, don’t be fooled, moving IRIS staff out of the non-regulatory Office of Research and Development (ORD) into OCSPP would cost EPA scientific expertise that serves the entire agency, severely undermining the legal responsibilities Congress has given it.

    Such a move would also sever the independence between scientific review and regulatory decisions informed by such reviews. This approach has been argued against in several NAS reviews of risk assessment. Indeed, per EPA’s website: “The placement of the IRIS Program in ORD is intentional. It ensures that IRIS can develop impartial toxicity information independent of its use by EPA’s program and regional offices to set national standards and clean up hazardous sites.”

    In sum, EPA’s IRIS program plays a vital role in ensuring that our health is protected from harmful exposures. Instead of eliminating the IRIS Program, Congress should be dedicating additional resources in order to maintain its current workload and boost the program’s ability to help support chemical risk evaluations under the newly reformed TSCA.

    Read more »
  • Clean energy is lowering electric bills in North Carolina – but this solar trade war could reverse that trend

    By EDF Blogs

    By Dionne Delli-Gatti, Director, Southeast Clean Energy

    North Carolina’s in the middle of a clean energy boom, but the looming threat of an international trade war may leave the state’s incredible success story a few chapters short.

    Over the last few months, two floundering solar manufacturers petitioned the U.S International Trade Commission (ITC) to take action against foreign competitors. These companies want the United States to levy tariffs on imported solar products because they can’t match the cheaper prices. Recently, the ITC agreed with the companies’ complaint and recommended to President Trump a 30 percent tariff.

    President Trump will decide this month what to do – he can follow the ITC recommendation, but, by law, doesn’t have to. He should reject the tariffs, so North Carolina’s clean energy economy can continue to thrive.

    Clean energy success

    Today, there are more than 34,000 clean energy jobs in North Carolina (a 30 percent increase since 2015), more than 5,600 MW of cumulative renewable energy capacity, and nearly 1000 clean energy firms that contribute more than $6 billion in annual revenue to the state’s economy. North Carolina also is now second in the nation for total installed solar energy capacity.


    President Trump should reject the solar tariffs, so North Carolina’s clean energy economy can…
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    Beyond these impressive job and revenue numbers, clean energy investments are putting downward pressure on electricity rates, saving North Carolina electricity customers money. A 2015 analysis of the drivers behind retail electricity rates in North Carolina concludes that, as the costs of conventional power generation (like coal and nuclear) continue to rise, investments in clean energy are helping to keep overall electricity rates lower. The report estimates that investments in clean energy have already saved North Carolinians more than $160 million on their electricity bills since 2007, and could produce more than $500 million in additional savings by 2029.

    The clean energy future in North Carolina looks bright indeed, but a tariff would risk the important financial benefits that clean energy is delivering to electricity customers in North Carolina.

    Economic benefits

    North Carolina’s business and political leaders know that clean energy is an economic issue. It brings investment and jobs, and future-proofs our economy from fluctuating energy prices and the increasing costs associated with fossil fuel-based generation.

    As a result, elected officials on both sides of the aisle in North Carolina have rallied around clean energy. The passage of the Competitive Energy Solutions for NC Act this past summer is the most recent example. The new legislation expands market opportunities for renewable energy developers and provides electricity customers with more clean energy access and choice. The measure also increases competition in the marketplace, helping to ensure that North Carolinians can get all the benefits of solar energy and other renewables at bargain prices.

    Other voices

    Some in North Carolina’s congressional delegation have been strong and vocal in their opposition to potential tariffs. Senator Thom Tillis led a bipartisan group of Senators that urged the ITC to oppose tariffs. Senator Richard Burr urged the ITC to consider the consequences tariffs would have on North Carolina’s economy. Representatives Budd, Foxx, Holding, McHenry, Rouzer and Walker have all joined with other members of congress opposing tariffs.

    In a letter to the ITC, Duke Energy – North Carolina’s largest electricity provider and one of the largest electric utilities in the U.S. – urged the commission to consider the harmful consequences of actions that would artificially increase the costs of solar energy, like imposing tariffs. Duke Energy urged the ITC to avoid actions that would “disrupt the growing and developing clean energy marketplace”, adding that “[s]uch a disruption potentially harms our customers, our company, our employees and the larger power sector as a whole.” The company also noted that “the delivery of reliable, affordable, and increasingly clean energy relies upon international trade policies that increase supply chain stability, not policies that destabilize it.”

    Looming threat

    By artificially increasing costs and disrupting supply chains, the ITC’s proposed 30-percent tariff threatens to destabilize North Carolina’s new competitive renewable energy markets just as they are getting started. Higher costs imposed by a punitive tariff would leave families and businesses with fewer choices and higher bills.

    Unfortunately, the ITC has declined to heed the advice of our elected representatives in Congress, instead recommending this crippling 30-percent solar tariff. We need strong leadership more than ever, and we hope that our senators and representatives from The Tar Heel State and elsewhere will redouble their effort and direct their focus on the president.

    If we want North Carolinians to continue reaping the numerous benefits associated with a competitive and growing clean energy industry, we’ll need steadfast engagement to prevent the ITC’s tariff proposal from undermining our state’s favorable business environment.

    Photo source: Unsplash/AmericanPublicPowerAssociation

    Read more »
  • More questions than answers: EDF submits extensive questions to EPA in advance of public meeting on new chemical reviews

    By Richard Denison

    Richard Denison, Ph.D.is a Lead Senior Scientist.

    Environmental Defense Fund yesterday submitted questions to EPA that we hope are answered by the agency at the public meeting it is convening on December 6th on changes to its new chemicals reviews.

    Despite providing some new documents in advance of the public meeting, details about EPA’s new policies and practices for reviewing new chemicals under the reforms made to TSCA by the Lautenberg Act remain scant.  We identified a number of serious concerns when these changes were first announced by Administrator Pruitt in a news release issued on August 7 – concerns that the meeting background materials EPA has provided only serve to heighten.

    The questions we submitted today relate to our concerns in the following topics:

    • The statutory and scientific basis for EPA’s new policies, the timing of their application, and omissions from the new framework
    • EPA’s plan to use so-called “non-5(e) SNURs” in lieu of consent orders
    • Recent policy changes not included in EPA’s agenda for the public meeting
    • Public access to information
    • Confidential business information claims
    • Use of section 5(e) SNURs

    EDF has been raising concerns for some time now over the recent redirection of the new chemicals program starkly away from the approach taken following last year’s enactment of the Lautenberg Act.

    Many of the questions we’ve just submitted were formally submitted by letter to EPA’s Office of Pollution Prevention and Toxics (OPPT) more than 3 months ago, on August 16, 2017.  Unfortunately, we have yet to receive responses to them.  We hope they will be addressed at the December 6th meeting.

    Read more »
  • Five reasons we’re hopeful on World Fisheries Day

    By EDF Oceans

    The fortunes of people everywhere are inextricably linked to the oceans.  Overfishing remains one of the world’s most pressing environmental challenges, but around the world we are seeing incredible progress toward sustainable fishing.

    On World Fisheries Day, we wanted to share fives stories from the past year that inspire us:

     

    1) Belize continues to be a leader when it comes to ocean sustainability after announcing bold new commitments at the United Nations Oceans Conference in June. This announcement included voluntary commitments from the government of Belize which will secure their fisheries as an engine for sustainable development and poverty alleviation. Belize has already made major steps to protect its magnificent barrier reef, and the biodiversity and fisheries that live there. In doing so it has established itself as a global leader in small-scale fisheries management. These new commitments will secure those gains and strengthen the foundation for good governance of fisheries so that they continue to provide jobs, food, and income for fishing communities.

     

    2) Two more rockfish species from the U.S. Pacific groundfish fishery have been declared “rebuilt” well ahead of schedule. The fishery, which includes species of sole, flounder and rockfish, was declared a federal disaster in 2000. Now, nearly two dozen important species are certified as sustainable to eat, and just this year Bocaccio and Darkblotched rockfish were declared rebuilt. The National Oceanic and Atmospheric Administration attributes the recovery to a combination of habitat protection and the secure fishing rights program implemented in 2011. Commercial and recreational fishermen – who have worked for years to avoid catching the species in order to rebuild populations – will soon be much freer to harvest them. This means that commercial fishermen can supply consumers with these beautiful, delicious, sustainable rockfish and that recreational fishermen will have more opportunities to catch them. This success is just the latest of many for the West Coast groundfish fishery.

     

    3) Sustainable fishing commitments in the Philippines. The Philippines recently announced it has partnered with EDF to implement sustainable fishing reforms based on science. More than 70 percent of fish stocks in the Philippines, for which there are data, are considered overfished. Science-based fishing reforms can put the Philippines on the road to improved food security for the millions of Filipinos who depend on fish as a source of food and for their livelihoods.  This monumental step forward for the Philippines can set an example for how to build policies that can improve food security and provide economic prosperity, while at the same time recover fisheries.

     

    4) New online trainings from our own Fishery Solutions Center will help practitioners around the world manage their fisheries sustainably. The Virtual Fisheries Academy is a brand new, free online learning center that allows stakeholders to build upon their existing knowledge in order to develop fishery management solutions tailored to their own fisheries. Since we launched the Academy in September, more than 250 fishery practitioners from 52 countries have signed up to take the courses. We are excited to see how these stakeholders apply what they learn to enable good fishery governance around the globe. To learn more about the Virtual Fisheries Academy, join our Open Channels webinar on December 5th.

     

    5) By getting fishing right today, we can help ensure a more resilient ocean world tomorrow. Climate change will cause undeniable shifts and changes to global fisheries—threatening the people who depend on them most for food security and nutrition. The good news is that with practical solutions, we can increase the number of fish in the sea, the amount fish on the plate, and prosperity even in the face of climate change. Preliminary research from EDF, Oregon State University, and the University of California Santa Barbara shows that cooperation and responsive management are needed to ensure these benefits, but we are confident and hopeful that countries can come together and find solutions that work for fishing communities all over the world.

     

    Read more »
  • Methane management is risk management

    By amymorse

    When I worked on the trading floor at Goldman Sachs, one of the major services we provided our corporate clients was risk management. Sitting on the commodity desk, we bought and sold financial products that allowed the world’s biggest consumers and producers to manage their exposure to the often fluctuating price of natural resources like aluminum, crude oil, and natural gas. Companies take action to manage this price risk in order to provide long-term stability for the company and its investors.

    Now as a member of the EDF+Business team, I focus on a different kind of risk: climate risk. And just like financial risk, it needs to be managed for the long-term benefit of all stakeholders involved.

    Kate Gaumond, Analyst, EDF+Business

    Methane Risk is Climate Risk

    Investors are catching on, recognizing that information about climate risk is vital to maintaining robust portfolios of well-managed companies. And for investors to be serious on climate, they have to be serious not just on carbon dioxide, but on methane as well.

    Beyond contributing to climate change, methane poses a specific reputational risk to the long-term future of the oil and gas industry. Oil and gas operators are betting on the idea that natural gas could be the cleaner burning fuel of the future. However, until the methane problem is fixed, operators are leaking away much of the climate benefit of natural gas, and tarnishing their product’s brand of “clean” energy.

    Fortunately, investors have a unique business-minded voice, and important power, to influence industry and policymakers to ensure that climate risk, like any other material risk, is managed and disclosed to everyone’s gain.


    From Goldman Sachs to @EDFBiz: How @Kate_Gaumond is leveraging her expertise to understand how…
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    Shareholder Resolution Successes

    One kind of powerful leverage investors have to call for better methane management is through direct company engagement. This engagement can involve collaborative problem-solving between investors and operators to best address methane risk. Another route is shareholder resolutions. In 2017, investors filed 17 total methane resolutions with companies across the natural gas value chain. And this year these resolutions had unprecedented success.

    The resolutions that went to a vote achieved near majority turnout. Resolutions for ExxonMobil, Kinder Morgan, and Occidental all received roughly 40% votes. And while those votes do not obligate a company to respond, the investor voice is a persuasive one to management. When 40% of a company’s shareholder base wants information, it is in the company’s best interest to act. For example, just months after the near 40% vote on methane, ExxonMobil announced a sensible and innovative plan to manage methane emissions on all upstream and midstream XTO assets. Investors spoke and management listened.

    Methane management disclosure still has room to improve. The oil and gas industry prides itself on continuous improvement, and investors must hold these companies to high standards on methane risk management, calling for clear reduction targets and detailed action plans on how to achieve them.

    Regulations and Returns

    Not limited to company engagement, investors can use their voice to advocate for sensible and effective policy as well. In an industry as fragmented as oil and gas, investors understand that smart, common-sense methane rules are necessary to ensure that the best operational practices are standard across the industry, minimizing the risk of long-term reputational damage to natural gas. In 2017, investors engaged on policy at the state, national, and international level. Investors testified in front of EPA hearings to stop short-sighted attempts at delaying US federal methane rules. Internationally, investors co-signed a letter to Canadian policymakers to strengthen the proposed methane rules in order to best protect investors’ stake in the oil and gas industry.

    Especially considering today’s political environment, investors will need to continue to leverage their voice to make policy makers understand the business case for smart regulations. Investors have the unique ability to hold companies accountable for their public statements, and to their lobbying and trade association memberships that attempt to dismantle risk-reducing rules.

    Looking to 2018

    Investors understand the risk methane poses to their portfolio, and are increasingly tilting their portfolios towards companies that are seriously addressing climate risks like methane. Astute operators recognize this trend and are listening to the voices of their investors. The risks of unresponsiveness are too great to ignore. With the progress of 2017 as a springboard, operators should only expect investor engagement on this material risk to grow.

    planning and investment. It’s about leadership. Will you make your voice heard?


    Follow Kate and EDF+Business on Twitter.


    Stay on top of the latest facts, information and resources for oil and gas industry investors. Sign up for our Methane Matters Investor Newsletter.

    Read more »
  • California Bucks Global Trend with another Year of GHG Reductions

    By Jonathan Camuzeaux

    This post was co-authored by Maureen Lackner and originally appeared on the EDF Talks Global Climate blog.

    The California Air Resources Board’s November 6 release of 2016 greenhouse gas (GHG) emissions data from the state’s largest electricity generators and importers, fuel suppliers, and industrial facilities shows that emissions have decreased even more than anticipated. California’s emissions trends are showing what is possible with strong climate policies in place and provide hope even as new analysis projects that global emissions will increase by 2% in 2017 after a three-year plateau.

    California’s emissions kept falling in 2016

    The 2016 emissions report, an annual requirement under California’s regulation for the Mandatory Reporting of Greenhouse Gas Emissions (MRR), shows that emissions covered by the state’s cap-and-trade program are shrinking, and doing so at a faster pace than in prior years. Covered emissions have dropped each year that cap and trade has been in place, amounting to 31 million metric tons of carbon dioxide-equivalent (MMt CO2e) over the whole period, or 8.8% reduction relative to 2012. The drop between 2015 and 2016 accounts for over half of these cumulative reductions (16 MMt CO2e; 4.8% reduction relative to 2015). The electricity sector is responsible for the bulk of this drop: electricity importers reduced emissions about 10 MMt CO2e while in-state electricity generation facilities reduced emissions by about 7 MMt CO2e.

    Some sectors’ emissions grew in 2016. Just as with global transportation emissions, California’s transportation emissions have steadily crept up in recent years, and the MRR report suggests this trend is continuing. Transportation fuel suppliers, which account for the largest share of total emissions, reported a 1.8 MMt CO2e increase in emissions covered by cap and trade since 2015. Cement plants and hydrogen plants also experienced small increases in covered emissions. One of the benefits of cap and trade, however, is that if the clean transition is occurring more slowly in one sector, other sectors will be required to reduce further to keep emissions below the cap while the whole economy catches up.

    Emissions that are not covered by the cap-and-trade program dropped, from 92 MMt CO2e in 2015 to 87 MMt CO2e in 2016. While small, this represents the largest reduction in non-covered emissions since 2012 and is mostly driven by suppliers of natural gas/NGL/LPG and electricity importers. Net non-covered and covered emissions reductions resulted in a 20.5 MMt CO2e drop in total emissions from these sectors.

    These results are a welcome reminder that the cap-and-trade program is working in concert with other policies to accomplish the primary objective of reducing emissions.

    The California climate policies are accomplishing their emissions reductions goals

    The 2016 MRR data indicate impactful reductions in GHG emissions and progress toward reaching the state’s target emissions reductions by 2020. The 2016 emissions drop is a consequence of several factors: a CARB analysis of the year’s electricity generation points to increased renewable capacity, decreased imports of electricity from coal-fired power plants, and increased in-state hydroelectric power production. To put it in perspective, the 20.5 MMt CO2e emissions reductions is equivalent to offsetting the energy use of about 2.2 million homes, or 16% of California’s households.

    Emissions below the cap are a climate win, not a concern

    Total covered emissions in 2016 were about 324 MMt CO2e, well below California’s 2016 cap of roughly 382 MMt. Some observers of the cap-and-trade program worry that an “oversupply” of credits will result in reduced revenue for the state and lesser profits for traders on the secondary market. This concern was especially pronounced when secondary market prices dipped below the price floor in 2016 and 2017.

    Importantly, oversupply of allowances is not a bad thing for the climate. As Frank Wolak, an energy economist at Stanford, points out, oversupply may be a sign of an innovative economy in which pollution reductions are easier to achieve than anticipated. Furthermore, having emissions below the cap represents earlier than anticipated reductions which is a win for the atmosphere. Warming is caused by the cumulative emissions that are present in the atmosphere so earlier reductions mean gases are not present in the atmosphere for at least the period over which emissions are delayed.

    While market stability is a valid concern, the design of the program has built-in features to prevent market disruptions. Furthermore, the California legislature’s recent two-thirds majority vote to extend the cap-and-trade program through 2030 provides long-term regulatory certainty. Both the May and August auctions were completely sold out suggesting that the extension has succeeded in stabilizing demand.

    These results are a welcome reminder that the cap-and-trade program is working in concert with other policies to accomplish the primary objective of reducing emissions, and that we’re doing it cheaply is an added bonus. Early reductions at a low cost can lead to sustained or even improved ambition as California implements its world-leading climate targets.

    As California closes its fifth year of cap and trade, it should be with a sense of accomplishment and optimism for the future of the state’s emissions.

    Read more »
  • California Bucks Global Trend with another Year of GHG Reductions

    By Jonathan Camuzeaux

    A parabolic trough solar thermal electric power plant located at Kramer Junction in California | Photo: Wikimedia

    By Jonathan Camuzeaux and Maureen Lackner

    The California Air Resources Board’s November 6 release of 2016 greenhouse gas (GHG) emissions data from the state’s largest electricity generators and importers, fuel suppliers, and industrial facilities shows that emissions have decreased even more than anticipated. California’s emissions trends are showing what is possible with strong climate policies in place and provide hope even as new analysis projects that global emissions will increase by 2% in 2017 after a three-year plateau.

    California’s emissions kept falling in 2016

    The 2016 emissions report, an annual requirement under California’s regulation for the Mandatory Reporting of Greenhouse Gas Emissions (MRR), shows that emissions covered by the state’s cap-and-trade program are shrinking, and doing so at a faster pace than in prior years. Covered emissions have dropped each year that cap and trade has been in place, amounting to 31 million metric tons of carbon dioxide-equivalent (MMt CO2e) over the whole period, or 8.8% reduction relative to 2012. The drop between 2015 and 2016 accounts for over half of these cumulative reductions (16 MMt CO2e; 4.8% reduction relative to 2015). The electricity sector is responsible for the bulk of this drop: electricity importers reduced emissions about 10 MMt CO2e while in-state electricity generation facilities reduced emissions by about 7 MMt CO2e.

    Some sectors’ emissions grew in 2016. Just as with global transportation emissions, California’s transportation emissions have steadily crept up in recent years, and the MRR report suggests this trend is continuing. Transportation fuel suppliers, which account for the largest share of total emissions, reported a 1.8 MMt CO2e increase in emissions covered by cap and trade since 2015. Cement plants and hydrogen plants also experienced small increases in covered emissions. One of the benefits of cap and trade, however, is that if the clean transition is occurring more slowly in one sector, other sectors will be required to reduce further to keep emissions below the cap while the whole economy catches up.

    Emissions that are not covered by the cap-and-trade program dropped, from 92 MMt CO2e in 2015 to 87 MMt CO2e in 2016. While small, this represents the largest reduction in non-covered emissions since 2012 and is mostly driven by suppliers of natural gas/NGL/LPG and electricity importers. Net non-covered and covered emissions reductions resulted in a 20.5 MMt CO2e drop in total emissions from these sectors. 

    These results are a welcome reminder that the cap-and-trade program is working in concert with other policies to accomplish the primary objective of reducing emissions.

    The California climate policies are accomplishing their emissions reductions goals

    The 2016 MRR data indicate impactful reductions in GHG emissions and progress toward reaching the state’s target emissions reductions by 2020. The 2016 emissions drop is a consequence of several factors: a CARB analysis of the year’s electricity generation points to increased renewable capacity, decreased imports of electricity from coal-fired power plants, and increased in-state hydroelectric power production. To put it in perspective, the 20.5 MMt CO2e emissions reductions is equivalent to offsetting the energy use of about 2.2 million homes, or 16% of California’s households.

    Emissions below the cap are a climate win, not a concern

    Total covered emissions in 2016 were about 324 MMt CO2e, well below California’s 2016 cap of roughly 382 MMt. Some observers of the cap-and-trade program worry that an “oversupply” of credits will result in reduced revenue for the state and lesser profits for traders on the secondary market. This concern was especially pronounced when secondary market prices dipped below the price floor in 2016 and 2017.

    Importantly, oversupply of allowances is not a bad thing for the climate. As Frank Wolak, an energy economist at Stanford, points out, oversupply may be a sign of an innovative economy in which pollution reductions are easier to achieve than anticipated. Furthermore, having emissions below the cap represents earlier than anticipated reductions which is a win for the atmosphere. Warming is caused by the cumulative emissions that are present in the atmosphere so earlier reductions mean gases are not present in the atmosphere for at least the period over which emissions are delayed.

    While market stability is a valid concern, the design of the program has built-in features to prevent market disruptions. Furthermore, the California legislature’s recent two-thirds majority vote to extend the cap-and-trade program through 2030 provides long-term regulatory certainty. Both the May and August auctions were completely sold out suggesting that the extension has succeeded in stabilizing demand.

    These results are a welcome reminder that the cap-and-trade program is working in concert with other policies to accomplish the primary objective of reducing emissions, and that we’re doing it cheaply is an added bonus. Early reductions at a low cost can lead to sustained or even improved ambition as California implements its world-leading climate targets.

    As California closes its fifth year of cap and trade, it should be with a sense of accomplishment and optimism for the future of the state’s emissions.

    Read more »
  • Methane management is risk management

    By EDF Blogs

    By Kate Gaumond, Analyst, EDF+Business 

    When I worked on the trading floor at Goldman Sachs, one of the major services we provided our corporate clients was risk management. Sitting on the commodity desk, we bought and sold financial products that allowed the world’s biggest consumers and producers to manage their exposure to the often fluctuating price of natural resources like aluminum, crude oil, and natural gas. Companies take action to manage this price risk in order to provide long-term stability for the company and its investors.

    Now as a member of the EDF+Business team, I focus on a different kind of risk: climate risk. And just like financial risk, it needs to be managed for the long-term benefit of all stakeholders involved.

    Methane Risk is Climate Risk

    Investors are catching on, recognizing that information about climate risk is vital to maintaining robust portfolios of well-managed companies. And for investors to be serious on climate, they have to be serious not just on carbon dioxide, but on methane as well.

    Beyond contributing to climate change, methane poses a specific reputational risk to the long-term future of the oil and gas industry. Oil and gas operators are betting on the idea that natural gas could be the cleaner burning fuel of the future. However, until the methane problem is fixed, operators are leaking away much of the climate benefit of natural gas, and tarnishing their product’s brand of “clean” energy.

    Fortunately, investors have a unique business-minded voice, and important power, to influence industry and policymakers to ensure that climate risk, like any other material risk, is managed and disclosed to everyone’s gain.

    Shareholder Resolution Successes

    One kind of powerful leverage investors have to call for better methane management is through direct company engagement. This engagement can involve collaborative problem-solving between investors and operators to best address methane risk. Another route is shareholder resolutions. In 2017, investors filed 17 total methane resolutions with companies across the natural gas value chain. And this year these resolutions had unprecedented success.

    The resolutions that went to a vote achieved near majority turnout. Resolutions for ExxonMobil, Kinder Morgan, and Occidental all received roughly 40% votes. And while those votes do not obligate a company to respond, the investor voice is a persuasive one to management. When 40% of a company’s shareholder base wants information, it is in the company’s best interest to act. For example, just months after the near 40% vote on methane, ExxonMobil announced a sensible and innovative plan to manage methane emissions on all upstream and midstream XTO assets. Investors spoke and management listened.

    Methane management disclosure still has room to improve. The oil and gas industry prides itself on continuous improvement, and investors must hold these companies to high standards on methane risk management, calling for clear reduction targets and detailed action plans on how to achieve them.

    Regulations and Returns

    Not limited to company engagement, investors can use their voice to advocate for sensible and effective policy as well. In an industry as fragmented as oil and gas, investors understand that smart, common-sense methane rules are necessary to ensure that the best operational practices are standard across the industry, minimizing the risk of long-term reputational damage to natural gas. In 2017, investors engaged on policy at the state, national, and international level. Investors testified in front of EPA hearings to stop short-sighted attempts at delaying US federal methane rules. Internationally, investors co-signed a letter to Canadian policymakers to strengthen the proposed methane rules in order to best protect investors’ stake in the oil and gas industry.

    Especially considering today’s political environment, investors will need to continue to leverage their voice to make policy makers understand the business case for smart regulations. Investors have the unique ability to hold companies accountable for their public statements, and to their lobbying and trade association memberships that attempt to dismantle risk-reducing rules.

    Looking to 2018

    Investors understand the risk methane poses to their portfolio, and are increasingly tilting their portfolios towards companies that are seriously addressing climate risks like methane. Astute operators recognize this trend and are listening to the voices of their investors. The risks of unresponsiveness are too great to ignore. With the progress of 2017 as a springboard, operators should only expect investor engagement on this material risk to grow.

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  • EPA’s latest analysis shows perchlorate risks to fetal brain development

    By Tom Neltner

    Tom Neltner, J.D.is Chemicals Policy Director and Maricel Maffini, Ph.D., Consultant

    Pursuant to a consent decree with the Natural Resources Defense Council (NRDC), the Environmental Protection Agency (EPA) is developing drinking water regulations to protect fetuses and young children from perchlorate, a toxic chemical that inhibits the thyroid’s ability to make the hormone T4 essential to brain development. The rulemaking is part of a long process that began in 2011 when the agency made a formal determination that Safe Drinking Water Act standards for perchlorate were needed. Under the consent decree, EPA should propose a standard by October 2018.

    In the latest step in that process, EPA’s scientists released a draft report in September that, at long last, answers questions posed by its Science Advisory Board in 2013: does perchlorate exposure during the first trimester reduce production of T4 in pregnant women with low iodine consumption? Does reduction in maternal T4 levels in these women adversely affect fetal brain development? According to EPA’s scientists, the answers are Yes and Yes.

    For several years, EPA and the Food and Drug Administration (FDA) have developed and refined a model that would predict the effect of different doses of perchlorate on levels of T4 in pregnant women. The latest version of the model addresses women during the first trimester, especially those with low iodine intake. This is important because iodine is essential to make T4 (the number four indicates the number of iodine atoms present in the hormone); perchlorate inhibits its transport from the blood into the thyroid. The risk of perchlorate exposure to fetuses in the first trimester is greatest because brain development starts very early and is fully dependent on maternal T4. If the mother gets insufficient iodine to offset the perchlorate inhibition, she will not produce enough T4 for the fetal brain to develop properly. When free T4 (fT4) levels are low but without increase in thyroid stimulating hormone (TSH), the condition is known as hypothyroxinemia. When T4 production is lowered further, the pituitary gland releases TSH to increase T4 production by a feedback loop mechanism.

    EPA’s scientists reviewed 55 research studies and concluded that “Overall, the results of this literature review lend support to the concept that maternal fT4, especially in the hypothyroxinemic range, is critical to the offspring’s proper neurodevelopment” and “the impact of altered fT4 is seen even with small incremental changes in fT4 (and in populations with fT4 across the “normal” range).”[1] From the literature search, EPA identified IQ, motor skills, cognitive and language development and reaction time as measurements of neurodevelopment that enable them to quantify the effects of perchlorate exposure in the first trimester.

    EPA also estimated the impact of perchlorate exposure in the population of pregnant women in the first trimester and with low iodine consumption; in other words, how many pregnant women will become hypothyroxinemic due to perchlorate exposure thus increasing the risk of adverse neurodevelopmental effects in their children. They predicted that a dose of:

    • 0.3-0.4 micrograms of perchlorate per kilogram of body weight/day (µg/kg bw/day) is associated with a 1% increase in pregnant women with hypothyroxinemia; and
    • 2.1-2.2 µg/kg bw/day is associated with a 5% increase in pregnant women with hypothyroxinemia.[2]

    While these percentages appear small, they represent a significant number of potentially affected children since neurodevelopmental harm is likely irreversible. EPA did not estimate the number of pregnant women or children potentially affected. We did. Based on four million children born in the US each year,[3] an estimated 400,000 were born to women with hypothyroxinemia. A 1% shift in the population of women with hypothyroxinemia associated with perchlorate exposure would correspond to an increase of 4,000 impacted children; if there is a 5% shift, the number of impacted children born to hypothyroxinemic mothers would increase to 20,000.

    The agency is accepting public comments until November 20, 2017 and will convene a peer review panel to review its findings in January 2018. After considering the panel’s feedback, EPA will develop a Maximum Contaminant Level Goal (MCLG) and, eventually, a drinking water standard for perchlorate. The model’s conclusions and identification of a new reference dose are also expected to inform EPA’s standards for hypochlorite bleach to limit degradation to perchlorate and FDA’s assessment of its decision to allow perchlorate to be added to plastic packaging and food handling equipment at concentrations as high as 1.2%.

    EDF and NRDC submitted joint comments to EPA supporting the draft report and its analysis.  We also made the following general observations:

    1. Incremental changes in free T4 (fT4) are fundamental: Critical neurodevelopmental adverse effects could be missed by measuring full range maternal fT4. Windows of susceptibility are common in all organs during development. Hormonal control of brain development is no exception. Therefore, adverse neurodevelopmental outcomes will vary based on the time and duration of decreases in fT4 levels. We appreciate seeing the agency building a model based on this fundamental principle of developmental biology.
    2. EPA’s scientists provide an essential service: Academic researchers laid a solid foundation for the analysis. Without their work, typically funded by government grants, we would not have the evidence necessary to recognize the harm from perchlorate at the levels under consideration. But it took the independent scientists at EPA, building on a model developed by FDA, to provide the objective rigorous review of the evidence and adapt the model.
    3. The peer-review process works: The agency rose to the challenge of two previous peer-review panels, one established by EPA’s Science Advisory Board and the other by EPA’s Office of Water. The panels operated in a transparent process and provided independent and objective review of the analysis by EPA, and we expect that this third and final panel will do the same. However, the integrity of the process depends on credibility of the experts on the panel. Screening out these experts because they receive government funding as EPA is now doing is irresponsible. It undermines the quality of the review and the credibility of the process.

    [1] EPA, Draft Report, at page 5-61.

    [2] EPA Draft Report, Section 7.1, Table 35 and Section 9, Table 40.

    [3] Centers for Disease Control and Prevention, National Vital Statistics System, Birth Data accessed on November 4, 201 at https://www.cdc.gov/nchs/nvss/births.htm.

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