Climate Change, Environmental Justice and Cap and Trade

Beyond Adaptation

October 31, 2008Yale FES

Barbara Bamberger

Climate Change, Environmental Justice and Cap and Trade

Beyond Adaptation

October 31, 2008Yale FES

Barbara Bamberger

Source: David Woo

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Today’s Discussion Today’s Discussion

• Environmental Justice (EJ) & Climate Change

• Context of EJ and Global Warming Solutions Act (AB32) Legislation

• Proposed Scoping Plan

• Designing EJ into Cap and Trade

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Environmental Justice and Climate Change

Environmental Justice and Climate Change

• EJ Communities are effected: – Impacts to EJ communities as a result of

climate change – Adaptation response– Impacts on EJ communities resulting from

GHG reduction policies – Mitigation policies

What are the implications to EJ communities from climate policy Who benefits? Who bears the cost?

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Environmental Justice & Climate Change

Environmental Justice & Climate Change

•Disproportionately impacted communities•Race, Ethnicity, low-income

•Communities around Ports Sea level impacts, Rail yards,

Shipyards, Goods Movement, Bulk Oil Unloading….Citing of Facilities

• Urban – Power plants, refineries, shipyards, truck movement, rail yards•Rural – Agricultural bi-products, Biofuel plants

Access – health care and transit

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EJ Definition EJ Definition

Federal: Exec Order 12898 (1994):

“the fair treatment of people of all races, income, and culture with respect to the development, implementation, and enforcement of environmental laws, regulations and policies.”

(EO12,898; Ca Government Code 65040.12 ( c ) and defined in statute by SB115, Chapter 690, Statutes 1999) )

No person or group or people should shoulder a disproportionate share of the negative environmental impacts resulting from the execution of this country’s domestic and foreign policy programs.

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The Making of AB32The Making of AB32

Global Warming Solutions Act (AB32)

Late 2005/2006 • Legislature – time to act• Governor – on board• Environmental NGOs – Co-sponsoring

(NRDC, EDF) agnostic on C/T• EJ – concerns over C/T, holding support• Business – C/T

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The Making of AB32The Making of AB32

AB32 “MUST” or “MAY” Include C/T

• NGOs – held to ‘may’ due to EJ concerns• EJ – agreed to “May” with conditions, did not oppose bill,

key language added to AB32

• Exec Order establishing “Market Advisory Committee” 2007

• February 2008 “EJ Declaration Against Cap/Trade”

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AB32 EJ Language AB32 EJ Language

•NO Backsliding – existing emissions•NO Increases in co-pollutants locally•Ensure Co-Benefits (co-pollutants) to support public health and diversification of energy•Ensure NO Cumulative, Disparate Impacts (challenge for C/T analysis)

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AB32 EJ Language AB32 EJ Language

GHG regulation must:

•NOT disproportionately impact low-income communities

•Maximize additional environmental co-benefits and complement improvements in air quality

•Complement efforts to achieve existing ambient air quality standards

•Consider overall societal benefits including diversification of energy sources, economy, environment and public health

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EJ Critique of Cap and TradeEJ Critique of Cap and Trade

Transformation to Low Carbon Economy Too much risk to experiment, only 12 years to ‘get it right’

Reductions first in EJ communities Foregone benefits, Possible localized increases Offsets shift reductions elsewhere

Transparency in TradingEIA, EIS, Community Right to Know, Participatory Justice

Existing Programs

Challenges to success: EU ETS, RECLAIM, RGGI

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AB 32 TimelineAB 32 Timeline

20202007 2008 2009 2010 2011 2012

Launch Program

Adopt GHG

reduction

measures

Publish list of early actions

Adopt Scoping Plan by 1/1/09

Mandatory reporting &

1990 Baseline

Reduce GHG emissions to 1990 levels

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Scoping Plan Scoping Plan

• Reduce California’s GHG emissions to 1990 levels by 2020

• Protect and improve public health• Provide a model for regional, national and international

programs• Grow the State’s economy and promote investment in

green technology• Proposed Scoping Plan – October 2008• Mix of strategies that combine market mechanisms,

regulations, voluntary measures, and fees

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Proposed Scoping Plan Proposed Scoping Plan

– Complementary measures

• Direct Regulations: vehicle efficiency and low-carbon fuel standard, heavy-duty vehicle efficiency, high speed rail, refinery

• CA Cap and Trade program linked to WCI• 33% renewable requirement on utilities • Sets a reduction goal for local governments • Fees: High GWP (refrigeration), public goods charge

on water• Energy efficiency programs

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California Cap-and-TradeReduction target

California Cap-and-TradeReduction target

2020 Capped sector BAU: 512 MMTCO2E1990: 365 MMTCO2E

147 MMTCO2E= Reduction target

Direct measures: 112 MMTCO2E

Cap-and-Trade: 35 MMTCO2E

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Cap-and-Trade Cap-and-Trade

California cap-and-trade program caps emissions

– industrial facilities (2012)– electricity (including imports) (2012)– commercial/residential fuel combustion (2015)– transportation fuels (2015)

Begins in 2012 and declines over time to meet 2020 & 2050 targets

Links to Western Climate Initiative to create regional market

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Sector-Specific MeasuresSector-Specific Measures

CAPPED SECTORS• Transportation (Fuel Efficiency standard, LCFS, regional

VMT targets) • Electricity (EEfficiency, 33% renewables, Solar Roofs and

water heating)• Industry (Combustion sources, refineries, paper mills)

UNCAPPED SECTORS• High Global Warming Potential Gases (New products

and existing banks)• Forests (Preserve sequestration, biomass utilization)• Recycling & Waste (Landfill methane, high recycling/zero

waste)• Agriculture (Methane capture at large dairies)• Industry (Fugitive emission sources)

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Cap-and-Trade Definitions

Cap-and-Trade Definitions

Cap: Total emissions for entire state or regionAllowance: Permit to emit 1 ton CO2e per

facility, based on total emissions, declines over time

Compliance obligation: Requirement per facility based

on total emissions (allowance + offset)

Offset: A portion of total compliance obligation that can be reduced from

non-capped sources.

Western Climate: An alliance of 7 Western states and 4 Initiative Canadian provinces

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Major IssuesMajor Issues

• Cap-and-Trade: Firm cap on 85 % of GHGs and cost-effective complementary measures.

• Allocation: Will seek input from broad range of experts on how allowances should be distributed.

Recommends: – Minimum of 10% auction in 2012– Minimum of 25% auction in 2020– 100% auction is a worthwhile goal

• Offsets: At least half of the reductions must come from capped sources. All offsets must meet high quality standards. No geographic limits.

• Use of Revenue: Many potential beneficial uses of revenue.

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California Cap-and-TradeWhat is an Offset?

California Cap-and-TradeWhat is an Offset?

• Quantification protocols would specify what reductions are real and additional for offsets to count – Examples: forests, manure

management, waste management (landfill methane)

• Safeguards to avoid regional and local health-based pollutants

• Limited use per facility

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Next steps: Retooling cap and trade designNext steps: Retooling cap and trade design

Addressing EJ language in AB32

1. Revenue stream generated by allowances

2. Co-pollutant and GHG Bifurcation (Stavins/Goulder)

Rethink cap and trade design itself and

1. Incorporate social elements into market mechanism

2. Design co-benefits into the architecture of cap and trade design

3. Provide economic incentives to reduce emissions in EJ communities into trading itself

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How to retool cap and trade designHow to retool cap and trade design

Requires new thinking, new analysis of cap and trade design measures:

•Incorporates incentives for co-benefits utilizing economic tools •Create incentives for reductions in heavily-impacted communities•Addresses co-pollutant reductions, increases equity

•Encourage reductions of GHG and associated health-based pollutants•Develop baseline data to track changes in cumulative emissions

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Next steps: Retooling cap and trade designNext steps: Retooling cap and trade design

Possible options:

• Phase-in of trades amongst EJ communities• Discounting/price incentives for reductions in EJ

communities • Limiting use of offsets in EJ communities • Restrict trading

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Design Mechanisms for C/TDesign Mechanisms for C/T

• Next Steps:

– Calling upon researchers to submit concepts on C/T Design, enforcement, transparency

– Invitation will be released next week – submittals of abstracts due November 25th

– Symposium in January/February 2009

– Cap and Trade Begins 2012