Transcript Slide 1

EPA Climate Change
Regulation
Joseph A. Siegel
US EPA Region 2
Conference on Carbon Politics and Finance
October 29, 2010
Fordham Graduate School of Business
Center for Research in Contemporary Finance
New York, New York
Administrator Lisa Jackson
Sept. 14, 2010
Remarks on the 40th Anniversary of the Clean Air Act
“The Clean Air Act does not require
EPA to act in a reckless and
irresponsible manner. We will
proceed carefully through [a] series
of sensible steps…. I am outlining
today five principles that will inform
all of our clean air efforts in the
months and years ahead. These
are the guiding points that will help
us confront everything from
lingering challenges like smog and
mercury, to new challenges like
greenhouse gases.”
Obama Administration Climate Change
Regulatory Developments
• Motor Vehicles
– Final Endangerment
Finding• Signed Dec. 7, 2009
• Response to MA v. EPA
– EPA/NHTSA Final GHG
Rule for Light Duty
Vehicles
• April 1, 2010
– EPA NHTSA Proposed
Heavy Duty Vehicle Rule
• Oct. 25, 2010
– Final Renewable Fuel
Standards
• March 26, 2010
– California Waiver Granted
• June 30, 2009
• Stationary Sources
– Final CAA Tailoring Rule
• May 13, 2010
– Johnson Memo
Reconsideration – Final
Action March 29, 2010
– Final GHG Reporting Rule
• Published 10/30/09
– Proposed Waste Energy
Recovery Registry
• July 2009
Final Endangerment Finding
• 2 Findings:
– Endangerment Finding: The mix of 6 Key GHGs threaten the
public health and welfare of current and future generations
• CO2, CH4, N2O, HFCs, PFCs, SF6
– Cause or Contribute Finding: Combination of 4 GHGs from
new motor vehicles and engines contribute to atmospheric
concentrations of these GHGs and therefore are a threat
• Co2, CH4, N2O, and HFCs
• Sector contributes 4% of global GHG and 23% of US GHG
EPA/NHTSA Final Light Duty Rule
• Covers MY 2012 -2016
– Will reach 35.5 mpg by 2016 instead of 2020 under
EISA; Standard of 250 g CO2/mile
• Large pickup trucks: 25 mpg
• Compact cars: 41 mpg
Stationary Source Control For GHGs
• March 29, 2010 Final Action– Administrator
Jackson announced that regulation begins in
2011
– “Johnson Memo Reconsideration”
GHG Tailoring Rule
2011
2012
2013
2014
2015
• Step 1: Source already
subject to PSD “anyway”
(tpy CO2e)
New source: NA
Modification: 75,000
• Step 2: Sources already
subject to PSD (tpy CO2e)
New source: 100,000
Modification: 75,000
• Step 3: Implementation of
potential additional phasein and streamlining options
• 5-year study: To examine
GHG permitting for smaller
sources
• Implementation of rule
based on 5-year study
Study Complete
2016
WHAT ABOUT BACT?
• Clean Air Act Advisory Committee Climate
Change Workgroup
– Formed October 2009
– Initial Recommendations Feb. 3, 2010
• EPA Action related to CAAC Recommendations
• Next Steps
Renewable Fuel Standard-2
Volumes
40
Advanced Biofuel: Unspecified
Advanced Biofuel: Biomass-Based Diesel
35
Advanced Biofuel: Cellulosic Biofuel
Conventional Biofuel
25
20
15
10
RFS1 – 7.5 bg in 2012
5
Year
20
22
20
21
20
20
20
19
20
18
20
17
20
16
20
15
20
14
20
13
20
12
20
11
20
10
0
20
09
Billion Gallons
30
Final GHG Reporting Rule 10/30/09
About 10,000 U.S. Facilities Covered
Total US GHG Emissions & Sources of
Abatement
Scenario 1 - Reference & Scenario 8 – Updated H.R. 2454 (ADAGE)
12,000
AEO 2009
Reference Case
10,000
AEO 2006
Reference Case
MtCO2e
8,000
Historical
Emissions
6,000
• The reference case for this analysis is based on
the March release of AEO 2009. This is the
same reference case used in EPA’s analysis of
H.R. 2454. The old reference case is from
EPA’s S. 2191 analysis and was based on AEO
2006.
4,000
Covered GHG Emissions
(Net of Offsets)
2,000
H.R. 2454 Cap
0
1990
CO2 - Electricity
CO2 - Transportation
CO2 - Energy Int. Manufacturing
CO2 - Other
NonCO2 - Covered
Offsets - Domestic
Offsets - International
Discounted Offsets
Int'l Forest Set-Asides
NSPS - CH4
HFCs (separate cap)
2000
2010
2020
2030
2040
• Cumulative 2012-2050 GHG emissions are 14%
(51 bmt) lower in the AEO 09 baseline compared
to the AEO 06 baseline in ADAGE due to the
inclusion of EISA, lower initial (2010) GDP
($13.2 trillion in AEO 09 vs $14.6 trillion in AEO
06), and a lower projected GDP growth rate
(2.5% in AEO 09 vs 3.0% in AEO 06).
• Discounted offsets, international forest setasides, NSPS for landfill and coal mine CH4, and
2050 the HFC cap provide additional abatement that
does not help to meet the main cap.
Consumption
Scenario 1 – Reference & Scenario 2 - APA
ADAGE
% Change
Annual Change / HH
NPV of Change / HH
U.S. Consumption
$30
Trillion 2005 $
$25
Scn. 1 - Reference - ADAGE
Scn. 2 - APA - ADAGE
Scn. 1 - Reference - IGEM
Scn. 2 - APA - IGEM
2015
-0.14%
-$122
-$91
2020
-0.17%
-$169
-$99
Average Annual Cost per Household (NPV)
Total Cost per Household (2010-2050) (NPV)
$20
IGEM
% Change
Annual Change / HH
PV of Change / HH
$15
$10
$5
2015
0.00%
-$3
-$2
2020
0.01%
$12
$7
Average Annual Cost per Household (NPV)
Total Cost per Household (2010-2050) (NPV)
$0
2015
2020
2030
2040
2050
Avg. Annual Consumption Growth Rate
(2010-2030)
•
ADAGE
IGEM
•
Scn. 1 - Reference
Scn. 1 - Reference
2.53%
•
Scn. 2 - APA
2.51%
•
2.81%
Scn. 2 - APA
2.79%
•
0.0%
1.0%
2030
-0.46%
-$529
-$190
2.0%
•
3.0%
•
2040
-0.68%
-$901
-$199
2050
-0.86%
-$1,316
-$178
-$146
-$5,985
2030
-0.16%
-$153
-$55
2040
-0.72%
-$786
-$173
2050
-1.10%
-$1,360
-$184
-$79
-$3,225
The average annual cost of the APA per household is the 2010 through 2050 average of the
net present value of the per household consumption loss in “scenario 2 – APA.”
• The net present value of the per household consumption loss is the cost in a particular
year discounted back to today.
The costs above include the effects of higher energy prices, price changes for other goods
and services, impacts on wages and returns to capital, and importantly, the the value of
emissions allowances returned lump sum to households, which offsets much of the APA’s
effect on household consumption. The cost does not include the impacts on leisure.
This analysis is a cost-effectiveness analysis, not a cost-benefit analysis. As such, the
benefits of reducing GHG emissions were not determined in this analysis.
The $79 - $146 average annual cost per household is the annual cost of achieving the
emissions reductions and resulting climate benefits associated with this bill.
Across all scenarios, the highest average annual NPV cost per household is $350 in ADAGE
scenario 7, requested by Senator Voinovich, without international offsets and restricted
nuclear, bioelectricity and CCS.
See Appendix 1 for a discussion of consumption accounting differences between ADAGE and
IGEM and of composition of GDP.
See Appendix 5 for a more detailed discussion of the average annual NPV cost per
household calculation, and additional consumption cost metrics.
THANK YOU
Joseph A. Siegel
[email protected]
212-637-3208
ADDENDUM
Applicability Tool
• http://www.epa.gov/climatechange/emissio
ns/GHG-calculator/index.html