Environmental Law ReSource : Environmental Lawyer & Attorney : Reed Smith Law Firm : Climate Change, Sustainability

Specifically, the Copenhagen Accord offers a statement of purpose, which is to meet the “objective of the UN Framework Convention on Climate Change to stabilize GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system”; that is, to keep global warming to 2˚C. It offers $30 billion a year in financial support to poor countries with “balanced allocation between mitigation and adaptation,” growing to $100 billion by 2020, as the Copenhagen Green Climate Fund. The Accord includes key U.S. requirements such as international oversight of emissions reductions (transparency) for both Annex I and (more importantly) non-Annex I countries. The Accord also doesn’t address certain issues. Missing was hard-core MRV (monitoring, reporting and verification) for non-Annex I countries - the Accord only commits signatories to domestic MRV with “provisions for international consultation and analysis ... that will ensure that national sovereignty is respected” for non-Annex I countries. In other words, China will not open its books to verification by the West but will allow “clearly defined guidelines” for international consultation with regard to its domestic MRV. Missing also was any firm commitment to fund the promised $100 billion a year by 2020. A commitment (as requested by Africa and other vulnerable countries) for deeper emission cuts to hold the global temperature rise to 1.5˚C this century was not accepted. More of a surprise, missing was any 2050 goal of reducing global CO2 emissions by 80 percent - something that had been steadily included in discussion drafts up to that point. No overall targets for emission reduction for 2020 were specified, although individual parties are welcome to volunteer what they will reduce. Perhaps most tellingly, missing was any pledge to formalize the Accord as a binding treaty in Mexico City next year. In the end, it seems to be a short-term cash deal with a “to each his own” voluntary reduction pledge - but with non-Kyoto parties at the table.

Some countries criticized the side discussions that led to the Accord as a “back room” deal. In the language of the formal proceedings, the COP only “took note” of the presence of the Copenhagen Accord, and made it an attachment to the proceedings. Despite the informality of how it was developed, other countries were invited to join the Accord, and so far 27, including Australia and the European Union, have signed on with their own pledges. It is indeed a daunting task to try to get 193 countries to agree on anything, let alone something as complicated as addressing climate change, but Maldives President Mohamed Nasheed predicted Saturday that about 120 nations are already engaged in the overall international negotiation process and would sign up with reduction pledges before a 31 January 2010 deadline under the Accord to turn in pledges. If this “back room” approach proves successful, it raises questions as to whether the UN is the most effective forum to address international agreement on climate-change issues.

As we stated in the Day 1 post, the original goal of COP-15 had been an update to the Kyoto Protocol, and development of a Long-Term Cooperative Agreement, and in that it is a half-empty outcome. Negotiating the details of the two prime agreements still needs time, and many issues couldn’t be decided by party negotiators, but needed political decisions at the minister (or higher) level. But when the ministers arrived in Copenhagen, the gaps were too large and the time remaining too short to come to resolution. However, on the half-full side, there were originally four overriding issues that needed to be resolved: (1) How much will Annex I countries reduce their emissions of greenhouse gases? (2) How much will major developing countries such as China and India limit the growth of their emissions? (3) What is financial aid offered by Annex I countries to developing countries to engage in reducing their emissions and adapting to the impacts of climate change? (4) How is that money going to be managed? Looking at these four overriding issues, the Accord addresses but fails to completely resolve all of them. In that, COP-15 was a limited success. Clearly, there is still work to do this year and at the COP next year in Mexico City.

Earlier in the day at the high level Plenary Session, President Obama said that the framework for an agreement was clear and had three parts: “mitigation, transparency and financing”. He added that all major economies must take decisive national action to reduce emissions, there must be a mechanism in place to insure commitments are being kept and there must be accountability among nations and finally developed countries must provide financing for the “poorest and most vulnerable” countries. He agreed on to $10/100 billion aid number but clearly indicated that there were issues to be worked out on how the money was to be distributed. He guaranteed that US would meet its commitments despite what happened in Copenhagen (a guarantee that the GOP will likely seize upon).

President Obama was preceded at the podium by the Chinese premier Wen Jiabao who said “trust us” on our emission reduction program and emphasized that in China there were still more than 125 million poor people in China. President Obama and Prime Minister Wen Jiabao also had two meetings over the course of the day.

Also at the Plenary Session this morning at the COP, Business and Industry groups delivered a high level statement for the entire COP/CMP, and written copies of the states were provided in the room for the UNFCCC secretariat and others. Recognizing that as a stakeholder group, BINGOs have a big “stake” as over 80 per cent of the resources required to fund global activities to halve emissions by 2050 and develop and deploy the required technologies will come from the private sector via investments and carbon markets, the BINGO statement called for (1) predictability through the adoption of medium- and long-term realistic and ambitious objectives and actions in all major economies, and (2) clear, simple and flexible processes to stimulate the innovation.

The headline from Secretary of State Clinton’s remarks is that the United States would contribute to a $100 billion fund to help developing countries cope with climate change. Japan and the European Union have already committed to building such a fund by 2020, and it was viewed as providing new hope to an agreement in Copenhagen. She said United States was ready to enter into a partnership with the world under the following conditions:

• that there would exist a strong operational accord which binds nations to their commitments (and emphasized that there would be no deal for developing countries without a strong operational accord)

• that the accord would include transparency in tracking emissions reductions with regard to national efforts (read: China needs to open up)

• that financial aid has to go to the “poorest and most vulnerable nations” (read: not China)

• that the US preferred reforestation and adaptation projects in developing countries.

The Secretary of State added that the Obama Administration was also ready to move forward (with Congress) on a 30% reduction in GHG emissions in 2025, a 42% reduction in 2030 and an 80% reduction in 2050. She also lamented the disruption in talks and stressed that all counties had to now work together. On the last point, I saw some sarcasm in her voice when she quoted a Chinese philosopher: “When you are in a common boat you must cross the river peacefully together”.

Her remarks underscore the challenge of reducing GHG emissions while maintaining US companies’ competitiveness and ensuring that countries, especially China, carry out their commitments. The Obama Administration and the US Congress do not want any emissions reductions actions or outgoing foreign assistance to hurt US industry and lead to the loss of domestic jobs. In the last day of COP-15 negotiations, look for increased pressure on China to agree to transparent MRV: monitoring, reporting and verification of GHG emission reductions. 

Beyond the COP, others have focused on how to reduce carbon dioxide emissions throughout the globe. The International Energy Agency (IEA) is one of the groups focused on this issue. The IEA is an intergovernmental organization that acts as an energy policy advisor to countries in their effort to ensure reliable, affordable and clean energy for citizens. After attending the IEA side event, it is obvious that much of what is going on at COP-15 is based on the work of the IEA. They have an incredible amount of real information in their data base and have prepared several roadmaps to advance innovative energy technology. The technology roadmaps identify gaps in financing, research and development, and the needed “revolution” in technology to reduce GHG emissions.

Underlying the IEA’s technology roadmaps is a model with two scenarios that predicts the necessary changes in world energy use to achieve GHG emissions reduction goals. One scenario is based on limiting GHG concentrations in the atmosphere at 450 ppm of CO2 equivalent (the current atmospheric concentration is about 385 ppm). This is called their 450 scenario and is equivalent to a 2 degree temperature increase. They also have a 550 scenario. When asked why they did not create a 350 ppm scenario, the IEA responded that they could not find one that would work.

Here are some key conclusions from their 450 scenario:

• a fifty dollar per ton carbon price is needed to “decarbonize” the energy sector in order to meet 2020 goals;
• a fifty percent cut in world-wide CO2 emissions is needed by 2050;
• current COP-15 pledges will not be enough to meet the 450 goal;
• major tools for achieving the 450 goal include (a) implementation of IEA energy efficiency recommendations, (b) decommissioning most of the world’s coal fired power plants, and (c) limiting use of gasoline to fifty percent of world’s transportation fleet; and
• natural gas will remain a large part of the energy sector with growth of gas production from shale (interesting news for my home state of Pennsylvania).

According to the IEA’s Richard Baron, it is also exploring the proposition that the carbon market should be brought to developing countries because the Clean Development Mechanism has not brought the type of emission reductions needed in those countries. The proposal is that new carbon mechanisms could cost-effectively support larger scale projects in developing countries. The objective is to move away from small projects to ones which can affect the developing countries’ own baseline. 

The IEA underscored that an energy technology revolution will involve a portfolio of solutions: greater energy efficiency, increased renewable energies and nuclear energy, and the near-decarbonization of fossil fuel-based power generation. It has identified carbon capture and storage (CCS) as the only technology available to mitigate GHG emissions from large-scale fossil fuel usage in fuel transformation, industry and power generation.

Tom Kerr, who is with the IEA’s Energy Technology Policy Division, reported there were currently only five CCS projects in existence in the world and none of them involved power plants. The IEA estimates that one hundred CCS projects will be needed by 2020 and three thousand by 2050 in order to meet the 450 scenario. The IEA believes CCS is required not just for new coal-fired power plants but natural gas and oil fired plants as well as for various manufacturing sectors of the world economy. The IEA is projecting more than enough capacity exists for CO2 storage under its 450 scenario. 

By the way, in support of the IEA’s carbon capture and storage efforts, Dave Wagner of Reed Smith is part of an IEA working group that will draft a model legal framework for carbon capture and storage that would be used to assist governments in the development of national legal and regulatory frameworks around the world.

But that doesn’t mean that things outside of the Bella Centre are not productive. In addition to the high level talks there are a number of important and informative side meetings going on here. For example, the International Emissions Trading Association alone has brought together panels on 105 different topics ranging from the September 2009 agreement of the G-20 leaders in Pittsburgh “to phase out subsidies for fossil fuel over the medium term” to a session involving the smart green grid industry in the United States.

One side event entitled, “The Environment: A Core Corporate Strategy” featured a discussion by a vice president at Applied Materials (makers of hardware for the computer and solar industry) who discussed the fact that “sustainability” had moved out of the traditional role of the environmental department in the corporate structure to the core of business management. He discussed changes by management that included going from two plants to one, adding onsite energy production and making dietary changes in the cafeteria. At the same event, a vice president from PG&E discussed why they resigned from the US Chamber of Commerce and how they had integrated climate issues into their businesses.

At another side event called, “Managing Carbon as a Currency”, a panel discussed how and why companies had to treat carbon reductions like currency, i.e., how GHG assets and liabilities should be determined and valued. The panel discussed efforts to identify and standardize different GHG trading instruments and various accounting and tax issues associated with a carbon asset as well as futures trading. Yvonne McIntyre, vice president at Calpine (a wholesale electric generator using only natural gas and geothermal sources to generate electricity) talked about the medium term opportunities for her company as it moved to replace coal as coal becomes more expensive. She stated that they “are already factoring the cost of carbon in our new long term contracts”. She also announced the permitting of a new large plant in California which had gone through the best available control technology process for carbon dioxide. 

Are businesses ready for climate change? A recent analysis of the 300 largest global companies by market capitalization reveals a high level of unmitigated climate-change risk, despite some improvements during the past year. Of the 1,000 largest U.S. companies by market cap, only 8.4 percent have stated environmental policies that address emissions of greenhouse gases. Recognizing this, the COP is trying to bring in business and share knowledge and viewpoints. Over the weekend, Jennifer Smokelin of Reed Smith attended the “Bright Green Expo” at the Copenhagen Forum – a showcase and information sharing opportunity of European (with some US) companies’ leadership on clean energy, with ceremonies being opened by statements from the Danish Prime minister and US Secretary of Commerce. And free Segue rides. 

One day before, the International Chamber of Commerce (ICC) - World Business Council for Sustainable Development (WBCSD) hosted a Business Day event at the Copenhagen Climate Conference, which was very well attended with executives of multinational corporations including Coca-Cola and Unilever.   Yvo de Boer, Executive Secretariat of the UNFCCC, told a meeting of corporate CEOs that the international climate change discussion was currently carried out between governments, with little involvement from the business world. He said the challenge for corporate leaders was to “make yourself relevant” to what happens at the U.N. climate conference, where negotiators from 192 countries are hammering out the details of a global warming pact. However, the business community points back at government today, calling for leadership. In an interview today, the Secretary General of the International Chamber of Commerce, the world business association, Jean Rozwadowski said “At one point, there were many that thought that the economic crisis would push climate issues down on the global agenda. However, there are many indications that this is not the case. The need for global leadership after the crisis is enormous. And a global climate agreement is a way for the world’s governments to demonstrate such leadership,” (as reported by the Danish business newspaper Børsen.). One thing is clear: If there is a framework agreed to at the COP, businesses will have to get ready, fast – with help of expertise from people in the “know”. And these events (like the one Reed Smith attended) help share the knowledge and make connections.

In the United States’ continued effort to woo the world, today’s special guest at the US Pavilion was Secretary of Commerce Gary Locke.  Secretary Locke called for a “unified international action” that calls on “each of us” to do our part.  Not surprisingly, his speech focused on green job and how green commerce can spur the economy.  Retreating from Secretary of Interior’s statement regarding coal use in the future, Secretary Locke was clear that the days of fossil fuels, and fossil fuel subsidies, are “gone”. 

Secretary Locke specifically said we need to rely on the entrepreneurs and inventors an all countries to come up with ideas and ways to get us out of the climate crisis and create a “new model for economic growth”.  The transition to a clean energy economy, Secretary Locke said, will not be easy, but we can look to the Danish example that accomplished a two-fold increase in GDP while keeping energy consumption the same since 1970.  The change to a clean energy economy will take regulatory reform in zoning, permitting for renewables, as well as a gas tax and removal of any oil subsidies to promote renewable fuel.  To the naysayers that call cap and trade an “Armageddon”, Secretary Locke pointed to the success of the United States acid rain sulfur dioxide allowance trading program. He failed, however, to address the “scale” issues inherent in such a comparison: the acid rain program included a little over 100 sources; the proposed cap and trade system includes over 10,000 sources which is an increase by TWO orders of magnitude. Think of it this way: just because you can serve a nutritious dinner to 4 people and make sure everyone eats their vegetables, that does not mean it is just as easy or the food is as good when you prepare a meal for 4000. 

Also, the leaders of the AWG-KP were asked to name their biggest frustration so far in the negotiations, and all unanimously agreed that “lack of time” haunted them.  If it is to meet its mandate under the Bali plan (again, see Day 2 post), the AWG-KP only has two days to finalize negotiations and report to the COP.  AWG-KP leaders admitted there was still no consensus on major issues: what gases would be covered under the Kyoto Protocol in the new compliance period, what the length of time was for the new compliance period, the base year applicable to the new compliance period, and most important, the reduction commitments by Annex B countries (remember, not the United States) for the new commitment period. 

The most interesting question came from the floor regarding Canada’s lack of compliance and what, if anything, the AWG-KP was doing about it in this or the next compliance period. The Chair answered quickly and correctly that the commitment period under Kyoto Protocol ends in 2012, followed by a true-up period that ends 2015. So it’s not until 2015 that any determinations regarding non-compliance can be made. If there is a party in non-compliance, the Chair said there was a “complex committee” who would deal with that. He joked, “Thanks for the heads up” regarding Canada and they would be on the lookout for Canada’s compliance.

USEPA and its Endangerment Finding: Still in the News

Also today, David McIntosh, USEPA’s Associate Administrator in the Office of Congressional and Intergovernmental Relations, addressed BINGOs.  Perhaps to allay industry’s fears of little transparency if USEPA is solely responsible for regulating GHGs and in contrast to many expert opinions that the Endangerment Finding is “the most significant” action of USEPA in recent years, Mr. McIntosh stressed that the Endangerment Finding triggers three (and only three) USEPA actions under the Clean Air Act.  First, he said it triggered the GHG reporting rule.  This might be a bit disingenuous as my understanding was the GHG reporting rule was triggered by a congressional mandate buried in a budget bill.  Nonetheless, in an attempt to preempt challenges to the reporting threshold of 25,000 pounds, Mr. Mcintosh explained that the mandate required reporting at “reasonable” level and USEPA set that at 25,000 carbon dioxide equivalent, or roughly 2300 times the carbon footprint of the average US household. 

Second, Mr. McIntosh explained that the Endangerment Finding required USEPA to take steps under the Clean Air Act to regulate mobile sources. To meet this mandate, USEPA proposed (in September 2009) and will finalize in March 2010 the rules for light duty vehicles for model years 2012-2016.  Mr. McIntosh clearly inferred that these were the only rules USEPA would publish - that this covered all mobile sources.  This is clearly disingenuous as Title II of the Clean Air Act covers all mobile sources (that is, anything with wheels, aviation included) not just light duty vehicles.  Finally, McIntosh explained that the only other automatic implication of the Endangerment Finding is that once the light-duty rule is finalized (that is, as of March 2010), any new (or major modification to an existing) large stationary source must include GHGs in the best available control technology (BACT) demonstration for permitting.

Most experts agree it will be harder for Congress to act to preempt USEPA with regard to regulating GHG from stationary sources once USEPA actually starts to regulate GHGs from stationary sources, so one could view the March 2010 date stated by Mr. McIntosh as a deadline given by USEPA to Congress and industry, that is, if you want cap and trade, pass it by March 2010 – otherwise you’ll get BACT and command and control permitting.  To ease industry’s fears with regard to BACT permitting, USEPA is preparing guidance.  Such guidance will focus on “available” technology, and Mr. McIntosh specifically said, for example, that the Agency would not consider carbon capture and storage as “available”.  In fact, the guidance will likely rely on merely requiring state of the art efficiency for existing stationary sources rather than require (at least immediately) any new control equipment for GHGs.  Mr. McIntosh also stated that USEPA will be coming out with carbon capture and storage regulations under the Safe Drinking Water Act, but such regulations will not address any CERCLA and RCRA concerns that may arise under carbon capture and storage.

Instead of Marvin Gaye, the Secretary of Interior Sings from the US Pavilion

Today at the US pavilion, Secretary of Interior Ken Salazar (accompanied by Deputy Secretary of Interior, David Hays) addressed a SRO crowd, stating the US understands the danger that climate change presents and that the United States is committed to confronting that danger “together with our partners in the international community”. As for its part to combat climate change, the U.S. Department of Interior (DOI) has three roles: (1) promote renewable energy (particularly mentioned at least in the near term was solar and wind, although nothing was ruled out), (2) identify the right places on public lands for carbon capture and storage, and (3) promote certain adaption measures (address shifting water supplies, wildlife corridors, and raising sea levels).  Specifically, Secretary Salazar stated that by the end of 2010, DOI expects to have more than 5300 MW worth of new solar and wind projects ready for construction - enough to meet the needs of 1.6 million houses and create 56,000 new jobs.  He elaborated on DOI’s recent announcement to open up a new office for renewable energy permitting in the Atlantic states, to promote, among other things permitting for wind energy on the outer continental shelf in Delaware and New Jersey.  In conclusion, Secretary Salazar stated his belief that those who believe climate change is not real are “wrong”, and that as a nation we will pass comprehensive energy and climate change legislation, we will build a clean energy future, and we will establish a comprehensive international framework to address GHGs.

So with that, it’s time to head for the best tasting “kaffe” I can find.

While it takes two in Copenhagen, it also takes two in Washington, DC. After Laurie Fulton, U.S. Ambassador to Denmark introduced USEPA Administrator Lisa Jackson, Ms. Jackson’s first comment was to note that “each of us” has responsibilities regarding GHG reduction to “make up for lost time”. She then touted USEPA accomplishments in addressing responsibilities to this point – the Administration’s Clean Energy incentives including $80 billion in renewable energy, the largest such investment in renewable energy in history, Energy STAR, Clean Cars program, GHG reporting requirements, and newly published Endangerment Finding. 

At the mention of the last, the room erupted into spontaneous applause. But Administrator Jackson was careful to clarify the significance of the Endangerment Finding. She stated that 2009 marks the year that the United States “seriously addresses” climate change, and stressed that USEPA only intends to continue as it always has under the Clean Air Act to address GHG - that is, to take “reasonable efforts” and “meaningful commonsense steps” to address GHG under the Act. She stressed that the Administration still expects to “work closely with Congress to pass Clean Energy reform” because only through Congressional action can the US get economy-wide legislation that sends a clear signal regarding the United States’ commitment to GHG and accomplish the buy-in that is necessary for national legislation through “give and take”. What does this mean? Again, it takes two. 

It also means that the Endangerment Finding opens the door to USEPA regulation of GHGs under existing regulation through the Clean Air Act and, although a blunt tool, technically no congressional action would be necessary to move forward with GHG regulation in this country. So when President Obama shows up here for negotiations next week, it is not necessary for him to only agree to GHG limits that Congress would agree to. But on the international level, Congress still holds the upper hand, because Senate approval (by a two-thirds vote) is required to ratify any international treaty. 

So unless Administrator Jackson wants a repeat of what happened in Kyoto (delegation agrees to certain limits, only to have that agreement repudiated by Congress), the President must be careful from a political standpoint how he uses the Endangerment Finding. And based on Ms. Jackson's statement, the Administration is carefully signaling that regulation of GHGs in this country is “both/and” not “either/or” when the question is whether Congress or USEPA will regulate GHGs. Ms. Jackson also took pains to calm what might be jittery corporate nerves (corporation worry about the “lack of transparency” if USEPA solely has authority over regulation of GHG) by stating at least twice that any move by USEPA to regulate GHG under the Clean Air Act would be through “reasonable” and “common sense” approaches that has served as the hallmark of regulation under the Clean Air Act since its inception in 1970. 

So the Endangerment Finding should not be veiled as a red flag to be waived in the face of Congress with a warning that USEPA will act in the face of continued congressional inaction. Nor should it be viewed as a carte blanche pass for negotiation of the US delegation at the COP. Rather, according Administrator Jackson, it is merely a “clear signal” (to other countries and industry) that the United States “is on the road to putting price on carbon”. The Administrator also took a moment to refute the recent attack on climate science (i.e., Climategate) saying that climate change is a household word and that the data and the science behind it has been extensively “peer reviewed”. This statement anticipates the likely court challenge to the Endangerment Finding that will make the argument that there is no “scientific basis” for such a finding.