Abby Schultz's Climate Chronicles

The U.S. Senate returns from its summer recess today with climate change, and particularly the debate over how to distribute emissions permits and protect consumers, coming up on the agenda.

As Sens. Barbara Boxer (D-Calif.), John Kerry (D-Mass.) and Finance Chairman Max Baucus (D-Mont.) begin writing their chamber's versions of a climate bill, they'll be wrestling with the questions of whether companies should receive permits to emit greenhouse gases for free or whether these “allowances” should be sold through an auction. Also on the table is what the government should do with the auction proceeds.

Baucus mentioned several options — from a full auction with the proceeds going into tax cuts or rebates to consumers, to allowances given for free to industries — when he opened his committee's Senate hearings on allowances just before the Congressional recess in early August.

"Whatever the approach, we need to devise a system that both meets environmental goals and passes political muster," he said. "That won’t be easy. The close vote in the House tells us that. But it is something that we can — and must — do."

Across Capitol Hill and out to the White House, there is still no clear agreement on the best approach.

The American Clean Energy and Security (ACES) bill passed by the U.S. House in June gives most allowances freely in the initial years of the program, then scales back. President Obama’s updated budget, on the other hand, still calls for the government to raise $627 billion by selling allowances in a cap-and-trade program and for nearly 80% of those dollars to be returned to consumers.

Part III of a three-part series on cap-and-trade looking at the successes, failures and lessons the U.S. government can learn from three programs already in place.

The European Union’s Emissions Trading Scheme creates a common market for trading permits to emit carbon dioxide in 27 countries and puts a price on carbon emissions. But the 5-year-old program isn’t flawless, and critics question whether it’s powerful enough to meaningfully affect global climate change.

Part II of a three-part series on cap-and-trade looking at the successes, failures and lessons the U.S. government can learn from three programs already in place.

The Regional Greenhouse Gas Initiative, a program to regulate carbon dioxide emissions in 10 Northeastern and Mid-Atlantic states, is proving a mandatory cap-and-trade program to address greenhouse gas emissions can work in the United States.

The program’s goals are modest — only one greenhouse gas is regulated and only power plants of at least 25 megawatts are covered. Emissions are capped at current levels through 2014, then the cap is reduced by 2.5 percent annually for four years until emissions are cut 10% by 2018.

Still, the fact 10 states overcame their differences to create a single compliance market to reduce carbon dioxide emissions is a “remarkable achievement,” says Judi Greenwald, vice president for innovative solutions at the Pew Center on Global Climate Change.

Also significant is that the system is working; the market has established a price for carbon dioxide emissions and power companies are willing to pay for allowances to emit.

“From a political perspective, it demonstrates that you actually can design and implement a cap-and-trade program in the U.S.,” Greenwald says. “A lot of people want to see a home-grown example. I think it’s very important that it’s working well and it’s working here.”

At the heart of the Waxman-Markey American Clean Energy and Security (ACES) bill is a national program to cap carbon dioxide emissions, with an accompanying market where polluters can buy and sell an increasingly limited number of pollution allowances.

Over the next few days, we’ll look at three cap-and-trade programs already in place – what works about them, what doesn’t, and what the U.S. government can learn.

Getting the U.S. Congress to consider a cap-and-trade program to reduce greenhouse gas emissions is no easy feat, but the fact it is even being considered at all owes much to the U.S. Acid Rain Program.

Created under Title IV of the 1990 Clean Air Act Amendments, the Acid Rain Program defied critics who saw it as a costly mistake that would burden the economy and concentrate pollution in regional “hot spots.” Instead, emissions of sulfur dioxide (SO2) and nitrous oxide (NOx), which mix with water, oxygen and oxidants in the atmosphere to cause acid rain, have declined dramatically nationwide at far lower costs than expected.

The reductions have had a significant health impact, too: The annual health and welfare benefits of the program are estimated to be $122 billion, in year 2000 dollars, and the prevention of “tens of thousands of premature deaths each year,” says Sam Napolitano, director of the U.S. Environmental Protection Agency’s Clean Air Markets Division. The annual cost of the program is $3 billion.

The program works because its central purpose is to reduce emissions, analysts say.

Where the natural gas from the Alaska Natural Gas Pipeline will end up is a murky question tied up in a 30-year-old treaty, expansion of Canadian tar sands operations, and trends in natural gas supplies both in the United States and in Canada.

Environmentalists fear at least half of the relatively clean-burning Alaskan North Slope gas will end up fueling tar sands operations in Alberta, where the pipeline will end, instead of coming to the lower 48 states to replace carbon-intensive coal in power plants. The tar sands operations already consume about 20 percent of Canada’s natural gas, and they are expected to need as much as twice that by 2035.

Michael Brune of the Rainforest Action Network calls the pipeline "a stealth dirty oil mega-project … conceived by Big Oil.”

“Under Plan Palin, ExxonMobil and TransCanada would construct a 1700-mile natural gas pipeline from the Arctic, heading south,” Brune writes. “About half of it is likely to be siphoned to help produce the dirtiest oil on earth.”

It might not be that simple, though.

Lawmakers in Congress are leaving a gaping hole in their discussions of climate legislation: the voluntary market for renewable energy.

This is no small omission.

The volume of wind, solar and biomass power voluntarily purchased by big corporations, organizations and individuals is nearly neck-and-neck with the volume of renewable energy purchased to meet mandatory state targets, according to the National Renewable Energy Laboratory.

As the American Clean Energy and Security (ACES) bill is currently written, however, these voluntary purchases of renewable power would ironically end up giving polluters more license to pollute, removing any incentive for an individual or corporation to voluntarily pay for renewable power.

Even the most socially responsible companies may not be so responsible after all, according to a three-year Greenpeace investigation into the continuing destruction of the Amazon rainforest.

The demand for leather goods and beef by Nike, Timberland, Adidas, Ikea, Wal-Mart and Honda, among other corporate leaders, is helping to fuel the growth of the Brazilian cattle industry on forestland that has been illegally cleared, the environmental advocacy group writes in its latest report, "Slaughtering the Amazon".

Greenpeace’s main concern: The growing cattle industry in Brazil is driving deforestation, and deforestation is a leading contributor to climate change. 

For the past two years, Idaho’s largest utility has been stockpiling the green credits that it earns for each megawatt-hour of renewable energy it buys.

It could have sold those credits for millions and used the money to lower its customers' rates. Or it could have retired the credits, as environmental groups requested.

Instead, Idaho Power Co. held on to them, hoping to bank the credits to help meet any future federal requirement that utilities get a percentage of their power from renewable sources.

That credit-banking plan was scuttled last week after the state Public Utility Commission overturned an earlier ruling and ordered the utility to sell its 320,000 renewable energy credits, known as Green Tags.

A new report from the Council on Foreign Relations touts the Canadian tar sands as an important future source of oil for the U.S. market. It argues that the tar sands' greenhouse gas emissions can be safely limited by regulations, and it concludes that both climate change concerns and energy security issues have been overstated.

The problem, environmental groups say, is that both the CFR report and a similar study recently released by IHS Cambridge Energy Research Associates, brush aside the considerable environmental costs of extracting the tar from the sands.

To Merran Smith, climate director at Forest Ethics, the problem with the CFR report begins with its definition of energy security:

“The real definition of energy security should not be about maintaining an addiction to oil, it should be about stopping our addiction and about creating renewable, clean energy that creates job in the U.S.”

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The climate bill under discussion in U.S. House would require electric utilities to draw an increasing amount of power from renewable sources, spurring growth of wind, solar, biomass and geothermal energy and reducing carbon emissions.

Opponents argue that it would raise consumer's electricity prices too high. But is that true?

The question is critical to whether a final bill contains a Renewable Electricity Standard mandating that retail electric utilities generate 25% of their power from renewable sources by 2025.

The answer, according to the Department of Energy’s Energy Information Administration, is no.