www.policymattersohio.org 

Policy Matters Ohio 

Climate Legislation and Jobs:

An Overview of Issues and Options

February 23, 2010

The Science

Figure: www.myclimatechange.net

Explaining the Greenhouse Effect

Warming is unequivocal:clear and unambiguous.

Source: IPCC, AR4, WG1, Chap 6, Fig. 10

One fifth of our CO2 emissions today will remain in the air in 3009

Atmos. Chem. Phys. 7, 2287-2312, 2007

IPCC TAR SYN SPM Fig 5-2

Stabilization of CO2 concentration, temperature, and sea level takes centuries after emissions are reduced

Opportunities of the Low Carbon Economy

• Why has China announced it will reduce emissions by 40% below 2005 levels by 2020?

• Transition to a low energy economy by mature and developing nations offers the largest export market in the 21st century.

The 21st century is about exports

• Demand grows as nations develop.• 40% of European GDP is export driven.• 40% of Chinese GDP is export driven.• 36% of Canadian GDP is export driven.• 11% of US GDP is export driven.• America must claim a place in the

economy of the 21st century! • The low carbon economy will be the

largest market.

The Dilemma (Ohio’s Opportunity/Danger)

• Over 18% of Ohio’s GSP comes from manufacturing, 50% more than the nation’s share….

• Ohio is the third largest exporter of goods among the states…

• Ohio ranks 5th in the nation for our total energy use  

• Ohio ranks second in the nation for the level of pollution emitted by our electric power industry.

LABOR plays a BIG ROLE

- Refrigeration/HVAC, Water Conservation – UA, Sheet Metal Workers

- Lighting, solar energy, public utilities - IBEW- Weatherization, skylights- Glaziers Union - Roofing & energy efficient materials- Roofers- Insulation, energy efficient framing-International

Association of Heat and Frost Insulators and Allied Workers

- General Labor & Construction, emissions control, hazardous waste, demolition and recycling- LIUNA, IUOE

- Green Building- Ironworkers- Greening the Ports- ILWU, Teamsters- Mass transit- Transit Employees- Cleaner manufacturing – USW, IAMAW, UAW, CWA-IUE, - Public health – AFSCME, SEIU, CNA- Education and career-tech – education unions

Legislative options on the table• American Clean Energy and Security Act

of 2009 …aka – “ACES” or – Waxman Markey or – Cap & Invest

• American Clean Energy Leadership Act of 2009 … aka “energy legislation”

• Clean Energy Jobs and American Power Act of 2009 …aka– Senate version of Waxman Markey

More legislative options

• Carbon Limits for Energy and America’s Renewal Act…aka – CLEAR Act of 2010 – Cantwell Collins or– Cap & Dividend

• Kerry-Lieberman-Graham

• Voinovich-Lugar

www.policymattersohio.org 

Policy Matters Ohio 

To create clean energy jobs,

achieve energy independence, reduce global

warming pollution and transition to a clean energy economy.”

The American Clean Energy and Security Act of 2009:

September 21,2009

ACES – Five Titles• Clean Energy (Renewables, Coal

Sequestration, transportation, smart grid, nuclear, State SEED funds, etc.)

• Energy efficiency (built environment, appliances, transportation, neighborhoods, housing, State REEP funds.)

• Global Warming (Cap & Trade)• Transition (energy intensive industries,

consumer protection, climate workers adjustment assistance).

• Agricultural and forestry offsets

Western Climate Initiative (WCI)

Regional Greenhouse Gas Initiative(RGGI, “Reggie”)

EU Emissions Trading System(EU ETS)

Cap-and-Trade Systems Under Development

Participant

Observer

Cap-and-Trade Climate Policy• “Cap-and-trade” means a government authority establishes a cap that

limits the total amount of pollution allowed,

and then distributes allowances for “permission to pollute” the global atmosphere, which can be traded as private property.

• The amount of greenhouse gas emissions permitted declines each year, creating demand for a new commodity: carbon permits.

• When offered enough money (or faced with high enough costs), polluters who own permits (or need permits) will reduce their emissions.

• These trades establish a market price for greenhouse gas pollution.

A familiar game can help illustrate the concepts…

Got it?

Musical Chairs A Helpful Analogy for Managed Scarcity

Each chair represents the “permission to pollute”:

one metric ton of carbon dioxide (1 mtCO2) or an equivalent amount of any other greenhouse gas

If you have an “allowance”, you can have a chair.

Players: Polluters at Points of Regulation

Oil Refineries Natural Gas

companies

Chemicalcompanies

Aluminumsmelters

PowerPlants

Cap-and-TradeDeclining Cap

Covered Entities

Polluters Compete for Scarce Permits

Carbon Price Established by Market Activity

So, is it more profitable to: buy a permit, OR reduce my own emissions?

Profit opportunities are a main driver for innovation and investment, and the climate challenge needs both.

Carbon Price Established by Market Activity

Would anyone accept $40 for your permit?

$40

Moving to Clean Energy

Players seek better options as costs rise.

Cap-and-trade lets players choose at what price they leave the game

– and how they want to make that change.

$30$150$20

$100

$200$50

2050204020302020

Wind power

Rail Transport

Green buildings

Nuclear power

2010

Solar power

Hybrid vehicle

Carbon Cap vs. Carbon Tax

PriceOn Carbon

Q

P

CarbonCap

Demand

Quantityof Emissions

Q

P

Demand

CarbonTax

Should we set the price and let markets determinethe quantity of pollution?

Should we set the quantity and let markets determinethe price for a scarce resource?

Emission Allocations: Free versus Auctioned Over Time

American Clean Energy and Security Act of 2009

• Cap and Trade

• National Renewable Energy Standard

• 85% in Free Allowances

• 15% to cushion lowest income

• CBO estimates annual impact of $175 per household

• Most studies find a somewhat progressive impact

• Includes substantial investment provisions

Key Job Provisions• 15% for energy intensive industries

• 44% for utilities (Regional equity)

• IMPACT - $30BB to help firms with fewer than 500 employees become energy efficient and retool for new markets

• Production based rebates and border adjustments

• CWAA

Cantwell Collins (CLEAR* Act)

• Cap and Dividend

• Trade occurs only in the private sector

• 75% goes directly to consumers in a flat rebate to households

• 25% goes to investment

*”Carbon Limits for Energy and America’s Renewal”

Cantwell- Collins, continued

• Cap is on fossil fuels, not on emitters.

• 99% of firms are not subject to the cap; only sellers of fossil fuel

• 81% of economy covered.

• Border adjustments

Kerry-Lieberman-Graham

• Specific support for expanded oil and gas drilling

• Specific support for expanded nuclear capacity

• Significant focus on coal sequestration

• Renewables and energy efficiency remain focus

Voinovich Lugar Proposal???

Proposal would deal solely with emissions from

electric utilities; would address Nox, SO2, CO2

and Mercury. • limit GHG emissions from power plants; • new financial incentives for nuclear power;• carbon capture and sequestration; • energy efficiency mandates for buildings and• stronger corporate fuel economy standards

The American Clean Energy Leadership Act

• Senate Energy and Natural Resources Committee in June.

• Establishes a Renewable Energy Standard (15 percent)

• allows more oil and natural gas leases in the eastern Gulf of Mexico,

• overhauls federal financing for clean energy projects,

• boosts energy efficiency programs and• Includes new federal authority to site major

electric transmission lines.

Clean Energy Jobs and American Power Act of 2009

• Looks like ACES but – lacks investment, – Renewable Energy and – emissions allocations.

• Support for nuclear and natural gas as bridge fuels

Key Issues for Ohio• How to minimize the downside

– Border adjustments– Production based rebates– Regional equity - Protecting household budget

Protecting employers from energy spikes

• How to maximize opportunity– Building a national market– Ensuring domestic content– Access to capital for domestic manufacturers

Key initiatives to watch

• Senator Brown’s tax credits for domestic advanced energy manufacturing

• IMPACT legislation

• Regional Borrowing Authority

• Regional equity

• Transition assistance – unemployment and training

• Prevailing wage