LOST IN THE POLITCAL FLOOD

New Climate and Energy Policies Could Create 2.5 Million Jobs, Hold Down Energy Costs
July 22, 2010 (PRNewswire)

THE POINT
The same day Senate Majority Leader Harry Reid (D-Nev) announced he would not pursue comprehensive energy and climate legislation, the widely respected Johns Hopkins University Center for Climate Strategies (CCS) released a study detailing what could be gained – though it is now lost in rising political tides for the foreseeable future – from such legislation.

In Impacts of Comprehensive Climate and Energy Policy Options on the U.S. Economy, CCS derived a set of 23 policy actions that have proven cost-effective in the building of New Energy and Energy Efficiency and the reduction of greenhouse gas emissions (GhGs) and other pollutants in the real-world practices of 16 states. It developed three scenarios, one in which the 23 policy actions are applied independently, one in which they are applied in conjunction with a rigorous Cap&Trade system and one in which they are applied with a less ambitious Cap&Trade system like the one just rejected by Reid's Senate.

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In the scenarios, the report showed the partisan, election year infighting in Congress has cost the nation the opportunity to generate millions of new jobs and hundreds of billions of dollars in domestic economic activity while securing the nation’s energy supply and restraining the rising cost of electricity. In the most ambitious scenario, in which the building of New Energy and Energy Efficiency and the fight against climate change are all prioritized, U.S. GhGs could be cut 27% below the 1990 level in 2020 and, at the same time, (1) energy prices would fall, (2) GDP would grow $159.6 billion and the workforce would gain a net 2.5 million new jobs.

For its cost-benefit analysis of the less aggressive GhG-cutting scenario, the study modeled the Kerry-Lieberman American Power Act Cap&Trade system, the last actual bill to be rejected by Reid and the Senate Democratic leadership before they announced they had given up on substantive climate and energy action for this year.

The one comfort is that, in giving up comprehensive energy and climate legislation, the Senate protected the Environmental Protection Agency's legal authority to enforce limits on GhGs.

Latest update: Senator Reid delayed itroduction of the scaled-back legislation, suggesting there could be a last minute change in plans.

Afterthought: Since the moment the Democrats announced there would be no comprehensive legislation, they and there partisan allies have aggressively placed blame for the legislation's failure on the Republican opposition. In fact, there is a contingent of moderate Democrats that was equally opposed to action on climate. The vigorous polemics and finger-pointing suggest some Democrats may see as much electioneering value in not taking action as do their opponents.

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THE DETAILS
CCS has participated in the development of energy and energy policy with 40 states, several U.S. regions and Mexico and China.

The 23 actions for achieving GhG targets, building New Energy (NE) and Energy Efficiency (EE) capacity and infrastructure and reaping economic benefits while doing so include policies and measures that span all economic sectors and all levels of government, and include targeted funding support, tax incentives, price incentives, reform of codes and standards, technical assistance, information and education, reporting and disclosure, and voluntary or negotiated agreements.

The 16 states from which the 23 actions were drawn: Alaska, Arkansas, Arizona, Colorado, Florida, Iowa, Maryland, Michigan, Minnesota, Montana, New Mexico, North Carolina, Pennsylvania, South Carolina, Vermont, and Washington.

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The 23 Climate Mitigation Actions:

(1) In the Agriculture, Forestry, Waste Management category:
(a) Crop Production Practices to Achieve GhG Benefits
(b) Livestock Manure – Anaerobic Digestion and Methane Utilization
(c) Forest Retention for carbon sequestration
(d) Reforestation/Afforestation
(e) Urban Forestry
(f) MSW Source Reduction
(g) Enhanced Recycling of Municipal Solid Waste
(h) Landfill Gas Management

(2) In the Energy Supply category:
(a) Renewable Electricity Standard (RES)
(b) Nuclear incentives
(c) Incentives for Carbon Capture Sequestration/Reuse
(d) Coal Plant Efficiency Improvements and Repowering

(3) In the Residential, Commercial and Industrial sector category:
(a) Demand Side ManagementPrograms
(b) High Performance Buildings (Private and Public)
(c) Appliance standards
(d) Building Codes
(e) Combined Heat and Power

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(4) In the Transportation and Land Use sectors:
(a) Vehicle Purchase Incentives, Including Rebates
(b) Renewable Fuel Standard (Biofuels Goals)
(c) Smart Growth/Land Use
(d) Transit
(e) Anti–Idling Technologies and Practices
(f) Mode Shift - Truck to Rail

Aggregate benefits of the 23 policies alone, applied in all 50 states:
(1) 2.5 million net new jobs in 2020
(2) A $159.6 billion expansion in 2020 GDP
(3) $5+ billion in 2020 net direct economic savings, $1.57 per ton of GhGs avoided/removed
(4) 0.56% reductions in consumer gasoline and oil prices by 2020
(5) 0.60% reductions in consumer fuel oil and coal prices by 2020
(6) A 2.01% reduction in the consumer electricity price by 2020
(7) A 0.87% reduction in the consumer natural gas price by 2020
(8) A 27% reduction of U.S. GhGs from the 1990 level by 2020 (a 4.46 billion metric tons of carbon dioxide equivalent, BMtCO2e reduction)

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The GhG-cutting Cap&Trade (C&T) system modeled in the study was based on the one included in the American Power Act proposed by Senator John Kerry (D-Mass) and Senator Joe Lieberman (I-Conn). ~21% of the C&T system’s Electricity and Industrial sector emissions would be auctioned in 2020 and ~50% of the auction revenue would go to low-income consumers. The rest of the revenue would go the Highway Trust Fund and to deficit reduction.

Benefits of the 23 actions in all U.S. states in conjunction with an aggressive C&T system:
(1) 2.1 million net new jobs in 2020
(2) A $116.9 billion expansion in 2020 GDP
(3) $5+ billion in 2020 net direct economic savings, $1.57 per ton of GhGs avoided/removed
(4) 0.18% reductions in the consumer gasoline price by 2020
(5) A 1.74% reduction in the consumer electricity price by 2020
(6) A 0.31% reduction in the consumer natural gas price by 2020
(7) $19.2 billion in new revenues for recycling to consumers and the Highway Trust Fund
(8) A 27% reduction of U.S. GhGs from the 1990 level by 2020 (a 4.46 billion metric tons of carbon dioxide equivalent, BMtCO2e reduction)

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Benefits of the 23 actions implemented with a less aggressive C&T system similar to those currently proposed in Congress:
(1) 0.9 million net new jobs in 2020
(2) A $50.7 billion expansion in 2020 GDP
(3) $6.7+ billion in 2020 net direct economic savings, $3.89 per ton of GhGs avoided/removed
(4) 0.02% reductions in the consumer gasoline price by 2020
(5) A 1.65% reduction in the consumer electricity price by 2020
(6) A 0.11% reduction in the consumer natural gas price by 2020
(7) $19.2 billion in new revenues for recycling to consumers and the Highway Trust Fund
(8) A 17% reduction of U.S. GhGs from the 2005 level by 2020 (a 5.98 BMtCO2e reduction)

These benefits are more limited because less rigorous actions would be needed to achieve less ambitious goals.

The policies and measures included in the 23 actions span economic sectors, methodological approaches and government levels. They demonstrate that the greatest cost-benefit effectiveness comes from a balanced portfolio of action and through integrating a variety of actions at local, state and federal levels: 38% of total potential emissions cuts come by combined federal and state level action, 31% come from state action and 31% come from local or combined state and local action.

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Key Findings
(1) Sector-based approaches for GhG cuts produce better employment, income, and gross domestic product net outcomes and reduce energy prices
(2) The 23 climate, energy, transportation, and resource actions, applied in all 50 states, produce significant national economic benefits
(3) Most climate and energy actions have net positive economic and employment impacts and cut GhGs, but some have net negative impacts if supporting policies such as C&T do not raise adequate revenues to offset costs for low-income consumers and key, high-emission industries
(4) Comprehensive, cross-sector, cross-government-level and multi-method approaches cut GhGs most cost-effectively with the best associated energy and environmental benefits and security
(5) No single policy can be as effective as a combined approach
(6) State Climate Action Plans have demonstrated that specific local decisions about design and implementation are crucial
(7) The two biggest barriers to effective climate and energy polices are (a) adequate investment and (b) authority to implement
(8) Federal preemption of state and local programs could impede some of the most cost-effective and job-creating actions
(9) Federal, state and local levels must partner but the broadest reach is at the state level
(10) Local and regional policies can work at the national level if they have a national framework
(11) A C&T system will cost less and generate greater benefits if applied in conjunction with strong complementary policies
(12) Allowance auctions will increase costs and energy prices and should be implemented with revenue recirculation to low-income consumers and key high-emission industries
(13) Policies for the next 10 years should be combined with policies aimed at future decades.

The majority of GhG-reduction policies have positive economic impacts. Demand Side Management has the highest single GDP gains. Demand Side Management and Urban Forestry have the highest job gains. The combined 23 options have a positive Net Present Value of ~$406.74 billion in GDP and 2.52 million full-time-equivalent (FTE) jobs by 2020. The gains come from lowered production costs and improved Energy Efficiency, leading to more purchasing power for consumers.

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QUOTES
- From the report: “The national debate over federal climate policy and its impact on the broader economy should be informed by the experience of the states and their stakeholders, which have been engaged in broad scale comprehensive climate policy planning, analysis and implementation since 2005. This study compiles and updates the findings of 16 comprehensive state climate action plans and extrapolates the results to the nation. The study then takes those results and using a widely accepted econometric model projects the national impact of these policies on employment, incomes, gross domestic product (GDP) and consumer energy prices…”

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- From the report: “The economic gains result primarily from the ability of mitigation options to lower the cost of production…Several tests were performed to determine the sensitivity of the results to major changes in key variables such as capital costs and avoided fuel costs. The…lower capital cost or higher value of avoided energy costs of the mitigation policy options would result in more favorable outcomes to the economy.”

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- From the report: “The estimates of economic benefits reported in this study represent a lower bound…They do not include the avoidance of damage from the climate change that continued baseline GHG emissions would bring forth, the reduction in damage from the associated decrease in ordinary pollutants, the reduction in the use of natural resources, the reduction in traffic congestion, etc…Overall, the findings from this study suggest that implementing the various mitigation policy options recommended in the state climate change action plans at the federal level would generate net positive economic impacts to the nation’s economy.”