Sustainability & Climate Change Reporter

California Cap and Trade to Launch End of the World, Brave New World or Carbon Tax?

Posted in Cap & Trade

Six years after then-Gov. Arnold Schwarzenegger signed the California Global Warming Solutions Act, also known as AB 32, the California Air Resources Board (CARB) holds its first auction of emissions allowances on November 14. The California Chamber of Commerce, however, has weighed in with a lawsuit seeking to invalidate CARB’s authority to sell the allowances.

Background

AB 32 is a broad program intended to reduce the state’s emissions to 1990 levels by 2020 and an 80 percent reduction from 1990 levels by 2050. The cap and trade program being implemented by CARB is one piece of that regulatory puzzle. It covers facilities that emit more than 25,000 metric tons of carbon dioxide annually, roughly 600 California cement, cogeneration, glass, hydrogen, iron and steel, petroleum refining, electric generation, and pulp and paper manufacturing plants. Each ton of carbon dioxide emissions is equal to one allowance. CARB has given away most of allowances for free, but has reserved ten percent for the first auction November 14th at a floor price of $10 per allowance. The sale is expected to generate between $660 million and $3 billion. In subsequent years, the portion of allowances sold at auction will increase, while the cap on emissions will gradually decline.

Lawsuit

The California Chamber’s lawsuit alleges that the sale of the allowances is contrary to AB 32 and the California state constitution. The Petitioners claim that AB 32 did not explicitly or impliedly authorize CARB to reserve any portion of the allowances for sale and, they further claim, that the sale of the allowances constitutes a tax that was not adopted by a two-thirds vote in each house of the Legislature as required by the state constitution. The lawsuit asserts that it is not challenging the merits of climate science, the Legislature’s authority to regulate greenhouse gas emissions in California, or even the use of cap and trade as a tool for reducing those emissions. In essence, the lawsuit seeks to require CARB to allocate all of the allowances free of charge.

UCLA Prof. Ann Carlson, a contributor to the UCLA/Cal-Berkley Legal Planet Law and Environmental Policy blog, writes that the basis for the Chamber’s lawsuit seems “weak” because it’s unclear whether the auction really is a tax and because CARB was granted substantial discretion in designing the program. Prof. Carlson says regulated entities do not have to purchase allowances if their emissions are under the cap and non-regulated entities can purchase the allowances and retire them. Furthermore, she says the Legislature recently directed “the state’s Department of Finance and CARB to develop a plan to invest auction proceeds and to set up an account for the deposit of auction funds. If the Legislature did not intend to provide CARB with discretion to auction allowances it seems hard to imagine it would have passed legislation to assist in the processing of auction revenues.”

Carbon Tax?

While many eyes will be on California’s auction, the confluence of Hurricane Sandy, President Obama’s reelection and the pending fiscal “cliff” have renewed attention in D.C. on a carbon tax, the unpalatably of which was the original motivation for the much more market-oriented, yet complex, cap and trade system. Discussions on the once-taboo carbon tax may be only that, but the fact that they are taking place at all even as California launches its ambitious cap and trade auctions, could move a tax, in the words of former Rep. Bob Inglis (R-S.C.), from the “impossible . . . to the inevitable without ever passing through the probable.”

 

 

Green Roads Are Not an Oxymoron

Posted in Green Building

At first glance, the phrase “green road” might seem like a contradiction in terms. After all, what else is a road but a conveyance for greenhouse gas emitting vehicles? But with nearly four million miles of public roads in the U.S., there is every reason to consider ways to make roadways sustainable. We have enough impervious roadway (and attendant runoff and pollution issues) in the U.S. to cover the entire state of Ohio, our transportation sector accounts for a third of U.S. energy use and CO2 emissions (PDF), and it takes as much energy to build one mile of one lane road as 50 homes use in a year. Like LEED and Green Globes for buildings, a nonprofit organization called Greenroads™ is taking the (so far) less-traveled sustainability path for roadway projects, whether new, reconstructed or rehabilitated, and trying to change the way roads are designed and built to make them more friendly to the environment.

Projects first must complete 11 requirements to be considered a Greenroad. These are:

  • completion of an environmental review process;
  • performance of life cycle cost analysis for the pavement section and life cycle inventory;
  • development of plans for quality control management, noise mitigation, waste management, and pollution prevention;
  • performance of a feasibility study for low-impact development stormwater management;
  • have a pavement management system and site maintenance plan; and
  • publicize information about the project’s sustainability.

The project then can choose to purse 37 Voluntary Credits that cover environment and water, access and equity, construction activities, materials and resources and pavement technology. Based on points awarded for these voluntary credits, certification is granted at one of four levels — Certified, Silver, Gold, and Evergreen.

The credits system was tested on 120 design and construction projects and now certifications are being awarded. The first to certification was the Meador Kansas Ellis Trail in Bellingham, Washington, which received a Silver certification. The project is located on six blocks of downtown Bellingham and uses  elements in its design such as recycled porcelain aggregates made from more than 400 crushed toilets diverted from landfills, asphalt with 30 percent recycled concrete aggregates, porous pavements to treat runoff naturally, low-energy LED lighting and new pedestrian-bicycle amenities.

Other  projects receiving certification include a sustainable stormwater project for Cheney Stadium in Tacoma, Washington (Silver Certification); SE Pioneer Way Reconstruction, Oak Harbor, Washington (Silver); and South Division Street Promenade, Auburn, Washington (Bronze).

Having just certified its first project last February, it’s hard to say whether Greenroads will achieve the widespread adoption of LEED and other building rating systems, but a journey of a thousand miles has to begin with the first step.

FTC Updates Green Guides

Posted in Green Marketing

The Federal Trade Commission (FTC) has released its years-in-the-making update of the Green Guides, which are intended to ensure that environmental claims about products are accurate and not deceptive. In a teleconference on the release, FTC Chair Jon Liebowitz said the revisions were the result of a “herculean effort” by the agency that will result in a “win-win” for consumers and producers.” The draft guidelines were first announced two years ago and went through an extensive comment and consultation period. While the Green Guides are not regulations that carry the force of law, the FTC can use its authority under Section 5 of the FTC Act to bring enforcement actions against marketers who make claims inconsistent with the guides.

The original Green Guides were issued in 1992 and revised in 1996 and 1998. With the proliferation of environmental claims since the last revision, the update has been long overdue. The FTC says it took as much time as it did because the subject is complicated and  the agency wanted to “get it right.” The overarching themes of the Green Guides remain avoidance of broad, unqualified general environmental benefit claims, and qualifying in clear, prominent and understandable language with specific environmental benefits.

The FTC’s website has several explanatory publications, including a four-page summary of the major provisions. Revisions of existing sections include further guidance on not making claims of “environmentally friendly” or “eco-friendly,” not making unqualified claims that a product is degradable, cautioning that items that will be sent to a landfill or incinerator and will not degrade within a year are not degradable, and clarifying guidance on compostable, ozone, recyclable, recycled content and source reduction claims.

In addition, the Green Guides now have new sections on:

  • Certifications and seals of approval:
    • because certifications and seals may be endorsements, the FTC Endorsement Guides should be followed;
    • marketers should disclose any material connections with the certifying organization;
    • the basis for the certification or seal should be clearly conveyed to avoid making claims of general environmental benefits;
  • Carbon offsets:
    • competent and reliable scientific and accounting methods should be used to properly quantify claimed emission reductions and ensure that the same reduction is not sold more than once;
    • specifies that it is deceptive to represent than an offset is for emission reductions that will not occur for two years or more;
    • specifies that it is deceptive to claim an offset resulted in emission reduction that was required by law;
  • “free-of” claims:
    • a claim that a product is free-of a substance can be deceptive if it contains or uses substances that pose the same or similar environmental risks as the free-of substance or the free-of substance has not been associated with the product category,
    • but a claim is not deceptive if the substance is present in a trace or background amount, does not cause material harm that typically is associated with the product and has not been added intentionally to the product;
  • “non-toxic” claims: marketers should have competent and reliable scientific evidence that the product is non-toxic for humans and the environment or should clearly and prominently display qualifications to make the statement not deceptive;
  • “made with renewable energy” claims:
    • it is deceptive to make an unqualified renewable energy claim if fossil fuel or electricity derived from fossil fuel is used to make any part of the advertised item or to power any part of the advertised service, unless the marketer has matched the non-renewable energy use with renewable energy certificates;
    • unless a marketer has substantiation for all their express and reasonably implied claims, they should clearly and prominently qualify the renewable energy claims to avoid deception; and
  • “made with renewable materials” claims:  marketers should identify the material used and explain why it is renewable and qualify any claim unless the product or package is made entirely with renewable materials.

The Green Guides updates do not attempt to provide advice about what constitutes appropriate use of the terms ”sustainable” and “natural.” The FTC says it lacks sufficient evidence on which to base general guidance on these terms, but in the release conference call the FTC noted that this does not mean marketers can make claims of “sustainable” or “natural” with impunity and could be subject to Section 5 enforcement action.

PACE Fights Regulatory and Legal Headwinds

Posted in Green Building, Renewable Energy, Solar Power, Tax Credits/Incentives

Once lauded by the Harvard Business Review as a “Breakthrough Idea of 2010,” the promise of an innovative financing method for residential renewable energy and energy conservation retrofits under Property Assessed Clean Energy (PACE) programs has been running into a seemingly insurmountable roadblock by the the Federal Housing Finance Agency (FHFA). Despite an August 9 Federal court ruling in California, that roadblock is unlikely to be removed. While the California ruling bucks the trend of courts dismissing legal challenges to the FHFA’s position, it may be only a momentary procedural victory for the plaintiffs as the agency forges ahead with adopting regulations that would continue to halt, or at best severely limit, PACE in its tracks.

On-Again/Off-Again

In theory at least PACE seemed like a genuine breakthrough idea. State and local governments, with money primarily from bonds, would provide the financing for installing residential solar panels and energy and water efficiency upgrades. The property owner would be obligated to repay the costs through assessments added to their property taxes for a period up to 20 years. The arguments favoring PACE – among them creating local jobs, use of private capital and not taxes, saving money for building owners and increasing property values, voluntary, promoting energy security without driving up energy costs, avoiding the need to build costly new power plants and reducing air pollution — led twenty-eight states and the District of Columbia to authorize PACE programs.

But the very popularity of PACE ran headlong into the FHFA, which oversees the Federal National Mortgage Association (“Fannie”) and the Federal Home Loan Mortgage Corporation (“Freddie”), the two government-sponsored entities that guarantee the majority of home mortgages in the U.S. Just as PACE programs were gaining popularity, Fannie and Freddie were encountering existential threats following the collapse of the housing market. As the appointed conservator of Fannie and Freddie, FHFA was charged with minimizing future financial risk to the two entities. FHFA worried about PACE programs harming Fannie and Freddie because the liens to repay the financing of clean energy retrofits in most, but not all, cases take a first position priority over pre-existing first mortgages. Thus, in FHFA’s view, a mortgagee foreclosing on a property subject to a PACE lien must pay off any past-due and future PACE assessments and, therefore, is at risk for any diminution in property value caused by the outstanding lien or retrofit project.

In July 2010, FHFA issued a statement that PACE programs “present signficant safety and soundness concerns that must be addressed by Fannie, Freddie and the Federal Home Loan Banks.” Subsequently, Fannie and Freddie announced that they would not purchase mortgages issued after July 6, 2010, that were secured by properties encumbered by PACE liens.

Court Rulings

Litigation ensued but challenges to the FHFA in the Eastern and Southern Districts of New York and in Florida were uniformly unsuccessful. Those courts relied on the statute that created the FHFA and bars courts from taking any action to restrain or affect the FHFA’s exercise of powers or functions as a conservator. The courts considered any action on FHFA’s PACE statements as improper interference.

This summer’s decision, however, by Northern District of California Judge Claudia Wilken in California ex rel. Harris v. Federal Housing Finance Agency ruled that the FHFA was not acting as a conservator, but instead as a regulator that had improperly exercised substantive regulatory oversight in stopping PACE programs. Judge Wilken ruled that the FHFA should have followed the proper administrative notice and comment procedure for rulemaking. Although the FHFA is appealing an earlier similar decision by the same court, and appeals are pending on the other courts’ rulings, FHFA has been taking comment on proposed rules (PDF) that would still bar most PACE liens, but offer some very narrow exceptions.

Proposed Rule & Exceptions

The FHFA Notice of Proposed Rule would direct Fannie and Freddie ”not to purchase any mortgage that is subject to a first-lien PACE obligation or that could become subject to first-lien PACE obligations without the consent of the mortgage holder.” The agency, however, is considering three alternative exceptions:

  • Alternative 1: in the event of a foreclosure or similar default, repayment is irrevocably guaranteed by a qualified insurer or a qualified insurer that guarantees Fannie and Freddie against 100 percent of any net loss attributable to the PACE obligation, or the PACE program provides a sufficient reserve fund for mortgage holders that would cover 100 percent of the any net loss from a PACE obligation;
  • Alternative 2: if the PACE obligation is less than or equal to $25,000 or 10 percent of fair market value, whichever is lower; the loan-to-value ratio is less than or equal to 65 percent; the debt-to-income ratio is less than or equal to 35 percent; the borrower’s credit score is greater than or equal to 720; and the PACE lien is recorded;
  • Alternative 3: the underwriting standards in HR 2599 (PDF) are satisfied (i.e. total PACE assessments for the property not to exceed 10 percent of appraised value, homeowner equite at least 15 percent of appraisal without the PACE assessment or improvement, 20 year maximum term on assessment, all property taxes are current, no involuntary liens in excess of $1000, the property has not filed bankruptcy in the previous seven years, the mortgage debt is current, the property owner is the holder of record, title is not subject to any restrictions on the owner’s authority to subject the property to a PACE lien, the property meets geographic eligibility requirements, the improvement has been subject to an audit or feasibility study that includes the estimated potential cost savings, useful life, benefit-cost ratio and return on investment, and an estimate of the estimated overall difference in annual energy costs with or without the improvements).

The FHFA has expressed “reservations” about each of these alternatives. The guarantee/insurance alternative might not effectively insulate Fannie and Freddie from material financial risks if the insurance provider fails, “potentially leaving the [government-sponsored entities] to bear the the very risks they were to be insured against.” The agency is concerned about the second alternative’s reliance on a substantial equity cushion because “market conditons in which equity is substantially eroded (i.e. severe declines in home prices) would cause the risks associated with such liens and borne by [Fannie and Freddie] to become even more material.” Finally, the FHFA has reservations about the third alternative because, among other things, there is no methodology for computing the costs and savings and “assumptions as to applicable discount rates are significant and indeed can be determinative — especially since PACE-funded projects may be cash-flow negative for the first several years.”

A coalition of PACE supporters has been organizing to respond to the Notice of Proposed Rule, including drafting a joint comment letter that 1) diagrees with FHFA’s position that PACE poses significant safety and soundness concerns; 2) challenges the legal right of FHFA to determine how and under what circumstances state and local governments can make valid special assessments that meet public purposes; 3) recommends adopting a revised rule that allows Fannie and Freddie to purchase and consent to mortgages with PACE liens if an appropriately constructed Alternative 1 (insurance/loan loss reserve) or Alternative 3 (HR 2599 standards) is satsified; and 4) provide additional evidence to support PACE and the two alternatives.

The comment period on the rule was scheduled to expire on July 30, 2012, but has been extended to  September 13, 2012. It’s not clear how long the agency will take to finalize the proposed rule, and there are likely to be legal challenges once it is finalized. But given the extensive analysis in the proposed rulemaking, the decisions of the lower courts shielding the FHFA from judicial review, and the high “arbitrary and capricious” standard for overturning an agency rulemaking, it will be an uphill battle to revive what was  heralded as a breakthrough program.

British Columbia Carbon Tax Four Years On

Posted in Cap & Trade, Tax Credits/Incentives

The fourth anniversary of British Columbia’s carbon tax — the only one of its kind in North America – was marked with an increase on July 1 that raises the tax on gasoline a penny per litre to 6.67 cents ($0.25 per gallon). The tax has been controversial from the start, and it is no less so now four years into the program. The B.C. government, headed by the Liberal Party, has launched a comprehensive review of the tax, but with an election coming up next year the voters could have the final say.

The tax started at a price of $10/tonne on carbon emissions from the burning of fossil fuels, and with the July 1 increase is now up to $30/tonne. Income tax breaks and credits are provided to consumers and business intended to make the carbon tax revenue neutral, but last year’s $1.15 billion in tax cuts and credits exceeded the $960 million in tax revenue. Morevoer, it is not clear whether the tax is having the intended effect of actually reducing greenhouse gas emissions.

A June 27 report,  British Columbia’s Carbon Tax Shift: The First Four Years, by Sustainable Prosperity concluded that the tax has produced substantial enviornmental benefits by reducing B.C. residents’ use of petroleum fuels by 15.1 percent, and by 16.4 percent compared to the rest of Canada. The report concludes that B.C.’s economic growth has been slightly ahead of the rest of Canada, indicating that while the the tax has not had a positive effect on the B.C. economy, neither has it had an adverse effect. In addition, the provincial government has returned more than $300 million in tax cuts than it received in carbon tax revenue. The report concludes the carbon tax shift “has contributed to noteworthy environmental gains, and lower overall taxes, without evident harm to B.C.’s economy (and potentially improving its future positioning,” but suggests detailed economic analysis is necessary.

While the B.C. government, currently headed by the Liberal Party, has undertaken a comprehensive review of the carbon tax, there also is an election next year and the carbon tax could be a key issue. The Liberal Party wants to keep the tax, while Conservative leader John Cummins, whose party vows to repeal the tax, recently called it a “job-destroyer and hugely unfair to anyone outside of metro Vancouver who depends on a car. Said Cummins, “It is not a good tax, which is why we’re the only jurisdiction in North America with a carbon tax.” The opposition New Democratic Party, which campaigned against the tax in 2009, now wants to keep it, but with some revisions such as elimination of corporate tax breaks.

At this point it’s hard to tell who is right, and in large part the outcome of the provincial election and the tax will hinge on public perception. On that score, however, there may be some differences between policy makers and the public. The Pembina Institute produced a June 25 report, British Columbia’s Carbon Tax, which relied on interviews with 39 participants from business, government, and academia. The results differ in some signficant ways with the results of an April 2011 public opinion poll. In the interviews, 65 percent of the participants had a somewhat or very favorable view of the overall consequences of the tax, while only 33 percent of the public opinion poll respondents were positive to somewhat positive. Similarly, when asked whether the tax should increase beyond the new July 1, 2012, rate, 41 percent of the interview participants agreed, while only 29 percent of the public poll did.

While more rigorous modeling and study are needed, in the rough-and-tumble political world where messaging counts for almost everything, a detailed study of the tax may have less effect ultimately than how B.C. voters feel come next spring.

D.C. Circuit Decision on EPA Greenhouse Gas Rules Emphasizes Importance of Massachusetts v. EPA

Posted in Cap & Trade, Climate Change

The District of Columbia Court of Appeals decision in Coalition for Responsible Regulation v. EPA (PDF) rejecting all of the industry and state challenges to EPA’s greenhouse gas emissions rules is an important milestone in U.S. climate change regulation, but certainly not the last word. In its 82-page opinion, a unanimous panel on June 26 denied all of the claims that sought to overturn the EPA’s rules. The court concluded that EPA’s foundational Endangerment Finding — that motor vehicle emissions of greenhouse gas emissions contribute to air pollution and is reasonably anticipated to endanger public health and welfare — and the resulting Tailpipe Rule regulating emissions from motor vehicles, are not arbitrary or capricious; that the EPA was “unambiguously correct” in interpreting the Clean Air Act governing provisions; and that none of the multitude of petitioners had standing to challenge the Timing/Tailoring Rules, which delay and raise the threshold for applicability to stationary facilities.

The court had some sharp words for the challenges, as the Washington Post put it:

In its remarks, the three-judge panel seemed to bristle at the opponents’ argument that the EPA improperly relied on assessments of climate science by the Intergovernmental Panel on Climate Change, the National Research Council and the U.S. Global Change Research Program to support its findings that greenhouse gases contribute to warming, posing a threat to human health.

This argument is little more than a semantic trick,” the opinion said. “EPA did not delegate . . . any decision-making to any of those entities. EPA simply did here what it and other decision makers often must do to make a science-based judgment.

This is how science works. EPA is not required to re-prove the existence of the atom every time it approaches a scientific question,” the court said.

Throughout the opinion, the court references not only the plain language of the Clean Air Act, but also emphasizes the important role played by the U.S. Supreme Court’s 2007 decision in Massachusetts v. EPA in determining the outcomes. The court repeatedly cites to Massachusetts not only as the foundational support for EPA’s initial determination to regulate greenhouse gases as an air pollutant under the Clean Air Act, but also in disposing of several challenges. For example, in rejecting the challengers claim that the EPA should have considered policy concerns in determining whether greenhouse gases endanger public health, the court cited Massachusetts for that decision’s rejection of EPA’s earlier attempt to inject policy considerations into its determination. Similarly, challenges to the Tailpipe Rule on the basis that EPA should have deferred to the National Highway Traffic Safety Administration fuel-efficiency standards, the court referred to Massachusetts‘ rejection of a “near-identical” argument.

The losing states and industry groups already have said they will ask the U.S. Supreme Court to review the D.C. Circuit’s decision, which raises the question whether the 5-4 majority that resulted in Massachusetts has survived the retirements of Justice John Paul Stevens, the author of Massachusetts, and of Justice David Souter. While they were replaced by Justices Sonia Sotomayor and Elena Kagen, with such a close majority and the difficult questions, particularly about standing, that were raised by the challengers in Coalition for Responsible Regulation, it remains to be seen how the current Supreme Court will deal with Massachusetts and its application in Coalition for Responsible Regulation. Moreover, its also likely that, in parallel with the legal efforts, opponents of EPA will redouble their efforts in Congress to roll back the agency’s authority. The success or failure in that arena will depend on the outcome of the November elections.

West Coast Electric Highway Goes East

Posted in Electric Cars

To date most of the focus on the West Coast Electric Highway has been on the series of DC fast charge stations situated along I-5 between the British Columbia and California borders, but now there’s an eastern component along U.S. Highway 2 that greatly extends EV range in a way the the I-5 corridor has not as yet. The US2/Stevens Pass Scenic Byway now features a series of the AeroVironment stations with 480-volt DC fast chargers and 240-volt charging, all located at strategic spots between Sultan and Wenatchee that allow EVs to make the 130-mile trek from Seattle to Wenatchee undaunted by the 4050-foot high Stevens Pass in the middle.

The DC fast chargers are a critical component to extend EVs beyond their primary commuter use because they allow for an 80 percent charge in 30 minutes. The I-5 corridor charging stations still have some gaps and so it’s not yet possible to make an EV trip between Seattle and Portland or Seattle and Vancouver, B.C. But an inaugural rally/test drive on Highway 2 over the weekend of June 16 demonstrated that the Cascades are not an obstacle to an EV.

The rally featured 10 Leafs (including ours), a Mitsubishi i-Miev and a Tesla in staggered starts to launch the Hwy. 2 portion of the Electric Highway. Organized by the Washington State Department of Transportation, Plugin Center.com, the Seattle Electric Vehicle Association and local businesses and governments, the rally was part of an ongoing effort to establish North Central Washington as an EV destination.

Thanks to some detailed, pioneering survey work by Tom and Cathy Saxton, EV drivers had very useful information about how many bars their instrument panel should be showing at critical spots to ensure minimum “road anxiety,” particularly when it came to climbing Stevens Pass. Their information proved to be so reliable that no one ran out of juice and had to resort to the infamous “Flatbed of Shame.”

Indeed, as we experienced it, the trip proved to be highly enjoyable. Although the usual two and a half hour travel time between Seattle and Wenatchee (longer when there is summer weekend traffic) more than doubles with having to stop three times for charging, there is a valuable benefit to taking a slower pace — you actually get to meet people in towns along the way that we normally speed through, everyone wants to talk about EVs, and you provide some economic goodwill to local businesses. The US2/Stevens Pass electic highway is an important step forward for EVs.

What Does an EV Fire in China Say About Safety?

Posted in Electric Cars

A recent item in the China Daily headlined “Concerns on electric cars after fiery crash” is making the rounds on Twitter, but should be read with a large grain of salt given the details of the accident that triggered the article. According to the story, an e6 electric taxi in Shenzen, made by BYD Automotive, was hit from behind and burst into flames killing the driver and two occupants. Ever since the Chevy Volt was pulled from the U.S. market temporarily for investigation of a post-collision battery fire (and ultimately cleared by the U.S. National Transportation Safety Board), anytime an EV is involved in a car fire it’s apparently more newsworthy than a fire in a gasoline-powered car. But this particular incident in Shenzen occurred when a sports car driven by a drunk driver drove into the EV taxi at 180 kilometers per hour (111 miles per hour)!

Rather than attributing the fire to the extreme high speed of the collision, the story claims that the fire has “aroused public concerns about the safety of BYD’s electric cars and other similar vehicles.” For support, the article refers to “local media reports” that  another taxi driver in Shenzhen who has driven the e6 for two years said he found fewer people are willing to take the electric taxis after the fiery crash. The article then cites another Chinese manufacturer’s EV that spontaneously caught fire last year, as well as the Chevy Volt investigation. To be sure, the article also repeats BYD’s statement that the e6 had passed crash tests, met national safety standards, and that 18 previous rear-end collisions involving a vehicle that has logged more than 15 million kilometers (9.3 million miles) in two years had no fires or casualties. Nevertheless, by relying on the anecdotal observation of a single taxi driver in a city with a regional population of 10 million, the implication is that the EV somehow made the fire and deaths more likely than, say, driving into the rear end of any car at speeds in excess of a hundred miles an hour.

Ordinarily what happens in China with one EV (and a lone taxi driver’s impressions of peoples’ reactions) shouldn’t have much bearing on EVs here, except that we live in a world where details and nuance often are overlooked. EVs are a particularly tempting target for clean tech critics. Whether or not U.S. sales of the BYD e6 ever start next year, EV critics will seize on the Shenzen EV fire no matter how tenuous the connection because, in the end, it’s the truthiness that’s important.

European Union Court Stays Course on Airline Emissions Rules

Posted in Uncategorized

The Court of Justice for the European Union has ruled that airlines operating in and out of EU countries must comply with the union’s rules for greenhouse gas emissions starting January 1, 2012. In a decision that was presaged last October by a preliminary opinion from the Court’s advocate general, the Court rejected claims by the Air Transport Association of America and American, Continental and United Airlines that applying the EU’s emissions rules to international air carriers violates international law, the 1944 Chicago Convention on international civil aviation and the 2010 Open Skies Agreement under the Kyoto Protocol.

Decision

The Court ruled:

  • The EU is not bound by the Chicago Convention because it was not a party to the agreement;
  • The Kyoto Protocol does not limit the EU to regulating aviation greenhouse gas emissions only through the International Civil Aviation Organization (“ICAO”);
  • The Open Skies Agreement does not preclude the EU Court from exercising jurisdiction and, by applying the emissions requirements to all airlines entering and leaving EU airports, the rules do not unfairly burden U.S. airlines in favor of European airlines; and
  • Customary international law does not prohibit the regulations.

EU Rules

In 2003, the EU adopted a cap and trade system to regulate greenhouse gas emissions, but did not include air transportation. Subsequently, in 2008, the EU added aviation activities beginning January 1, 2012. The ATA and U.S. airlines brought a challenge to the High Court of Justice of England, which referred the case to the EU Court of Justice.

Under the EU rules, allowances totaling 97 percent of airlines’ historic operations will be allocated the first year, declining to 95 percent in 2013. During the first two years 15 percent of the allowances will be auctioned, with the potential for a greater percentage auctioned in subsequent years. Each aircraft operator will apply for the free allowances by submitting verified data on its fuel consumption for the monitoring year. On April 30 of each year airlines will have to surrender allowances equal to their total emissions for the previous year. Those who fail to surrender enough allowances will be penalized 100 Euro for each ton of carbon dioxide equivalent emitted in excess of the number of allowances surrendered.

Response

Days before the ruling, the U.S. and 42 other countries wrote to EU ministers objecting to applying the emissions trading scheme to airlines. The letter urges the EU to work with, rather than against, the international community in a multilateral forum, such as the ICAO, to develop ways to reduce aviation emissions.

We strongly urge the EU and its Member States within their respective competencies to reconsider this current course; halt or, at a minimium, delay or suspend application of this Directive; and re-engage with the rest of the world to find away forward at ICAO to address this important issue. The United States stands ready to engage in such an effort. Absent such willingness on the part of the EU, we will be compelled to take appropriate action.

[emphasis added]

It’s unclear what “appropriate action” means, but the U.S. House of Representatives, in anticipation of the EU Court ruling, passed the European Union Emission Trading Scheme Prohibition Act of 2011, HR 2594 (PDF). In early December, Sen. John Thune (R-S.D.) introduced a companion measure, S. 1956. Both bills would require the Secretary of Transportation to prohibit an operator of a civil aircraft of the U.S. from participating in any emissions trading scheme unilaterally established by the EU and directs the executive branch to conduct international negotiations and take other actions necessary “to ensure that operators of civil aircraft of the United States are held harmless” from the EU’s emissions trading scheme.

A coalition of aviation groups under the name Airlines for America says its member airlines will comply under protest but it also is urging the Senate to adopt the bill because the emissions scheme will cost U.S. airlines $3.1 billion over the next eight years. According to the coalition’s letter to Congress:

Airlines and other operators have operated with a razor-thin profit margin over the last 40 years and have lost more than $55 billion nd 160,000 jobs since 9/11. * * * If unilateral emissions schemes, such as the EU ETS, are allowed to proliferate, scarce capital in the aviation industry will be siphoned into foreign governments’ general funds inhibiting the industry’s ability to improve our mutual goal — fuel efficiency.

With both houses of Congress on holiday recess, it appears that the bill won’t be passed before the January 1, 2012, start date of the emissions scheme. It is, however, possible that the Senate could take action on the emissions bill if Senators have to come back to consider changes to the payroll tax extension measure before the new year.

The airlines have advocated for a global approach, through the ICAO. While the EU agrees, no such resolution has emerged after many years of trying. The Court’s ruling and EU implementation of the airlines emissions trading scheme could break the stalemate but, in the meantime, the decision is bound to escalate this long-simmering dispute.

The Western Climate Initiative is Dead, Long Live the WCI

Posted in Cap & Trade

The Western Climate Initiative (WCI) has quietly ended its nearly four-year experiment with a regional economy-wide cap and trade scheme. Arizona announced its formal withdrawal from the WCI, and five other states have done so informally. That leaves California as the only western state remaining in the WCI, along with four Canadian provinces – British Columbia, Manitoba, Ontario and Quebec. The WCI’s website noted the transition more by omission than direct announcement; its partner list no longer shows Arizona, Montana, New Mexico, Oregon, Washington and Utah. While the demise of the WCI has been forecast for some time, the formal announcement by Arizona brings one chapter to a close and raises questions about the next.

In the Beginning

WCI launched in February 2007 when the governors of California, Arizona, Washington, Oregon and New Mexico agreed to "collaborate in identifying, evaluating and implementing ways to reduce GHG emissions and achieve related co-benefits."  Soon Utah, British Columbia and Manitoba signed on as full partners and they were joined by official observers from six other western states, three Canadian provinces and one Mexican state. The WCI’s goal was to reduce emissions to 15 percent below 2005 levels by 2020, with a regional cap and trade program as the centerpiece. Unlike the northeastern states’ Regional Greenhouse Gas Initiative (RGGI), whose cap and trade scheme is limited to emissions from power plants, the WCI’s was intended to be economy-wide.

Within the WCI, California was first among equals, largely because it had already adopted the Global Warming Solutions Act, also known as AB 32, mandating reductions in that state’s greenhouse gas emissions. But other states, such as Washington and Oregon, participated fully by adopting similar emissions reduction goals and sending representatives to numerous planning, scoping and design meetings.

Economic Pressures

The beginning of the end came with the onset of the Great Recession, which decimated state budgets. Legislatures in Washington and Oregon in 2009 declined to pass bills authorizing participation in WCI’s cap and trade and, earlier this year, Arizona signaled its eventual withdrawal by barring any agency from participating without the legislature’s express approval.

Changes in several governships also were a factor. Where WCI’s original governors, including Janet Napolitano (D-AZ), Jon Huntsman (R-UT) and Bill Richardson (D-NM), strongly supported taking a regional approach to addressing climate change, their replacements, Jan Brewer (R-AZ), Gary Herbert (R-UT), and Susanna Martinez (R-NM), each oppose cap and trade. Initially the new administrations in those states said they would continue to participate in WCI, but their ultimate withdrawal seemed to be a foregone conclusion.

California Cap and Trade

The final straw likely came last month with California’s formal adoption of cap and trade rules to be implemented January 1, 2013. There are, however, likely to be legal challenges to those rules. Affected industries probably will file a lawsuit, and citizens’ groups could attack the rules from the other side. How this will play out is uncertain. 

California’s four Canadian partners are staying with WCI for now, but it remains to be seen whether they will actually implement cap and trade. Following Arizona’s announcement, British Columbia’s Environment Minister could only say that the province has not made a final decision.  B.C. will have a particularly tough choice to make because it is in the third year of a carbon tax, which complicates adding on a cap and trade regime. Meanwhile, Ontario’s environment minister last spring said that province will not be ready to join the program at the targeted start date, but remains committed to the WCI. 

North America 2050

The six departing states have joined North America 2050, a WCI-light organization, formed to "facilitate state and provincial efforts to design, promote and implement cost-effective policies that reduce greenhouse gas emissions and create economic opportunities." NA2050 is not limited to any one region and is entirely voluntary. It may be that NA2050 could turn out to be more flexible and workable than WCI, but the emphasis on "2050" in the name signals that there won’t be any short-term efforts to reduce greenhouse gas emissions along the lines of WCI’s 2020 goals.