Who is the National Commission on Energy Policy and why are they the bad guys?
[If readers know any of the NCEP commissioners listed at the end, I’d suggest sharing your thoughts with them on what useful role they might play in the clean energy and climate debate.]
Jason Grumet, a former campaign adviser to President Obama, said there is little reason for Boxer to try and set stronger emission targets when Obama opened this year’s debate calling for a 14 percent target by 2020.
“There’s not a lot of room to expect to move the legislative product more aggressively than the House,” said Grumet, the executive director of the National Commission on Energy Policy. “You have to ask how much value there is in pushing the bill. What does the advocacy community get by pushing farther to the left if there’s no sense they can sustain that outcome?”
So writes E&E News (subs. req’d) today. I guess Grumet has never heard of actually advocating emissions targets that are based on science (see “Is 450 ppm politically possible? Part 8: The U.S. needs a tougher 2020 GHG emissions target“).
Readers know I try to be as much a political realist as I am a climate science realist (see here and here), but Grumet’s argument falls apart on both grounds. I spelled out the scientific perspective from the Intergovernmental Panel on Climate Change on what the 2020 GHG target should be in the link above, which is unequivocal that we need to push for as strong a 2020 target as possible, ideally much stronger than the House Bill.
Grumet’s first political argument — that “Obama opened this year’s debate calling for a 14 percent target by 2020″ — simply does not withstand scrutiny. Since I expect it will be a common refrain in the fall, let me debunk it right now.
Yes, Obama campaigned on returning U.S. GHG levels to 1990 levels by 2020, roughly a 14 percent cut from 2005. But Obama has never to my knowledge proposed allowing any offsets to be used in place of those domestic emissions reductions — certainly not the whopping two billion offsets allowed in the bill. For the record, the IPCC science-based analysis says that offsets should be entirely additional to the 2020 target, not a substitute. Further, Obama never proposed anything like the strategic reserve in the House Bill, which acts as something like a price cap. Obama also proposed a full auction and, during the campaign, that we “Require 25 Percent of Electricity to Come from Renewable Sources by 2025.”
So there is no possible apples-to-apples comparison between Obama’s 14 percent reduction target for 2020 and the 17 percent target in the House bill. Grumet worked for the campaign and should understand that.
Now if Grumet wants to argue for not strengthening the 2020 target on the grounds of RealPolitik, that’s his business, I suppose, except that when he speaks, he represents the entire Commission. I must ask: Is publically giving up on fixing the single biggest flaw in the House climate bill really a useful role for the National Commission on Energy Policy, with its array of uber-prestigious members?
Since I was present at the creation of NCEP, let me give a little background on it. You can read the official history here.
Once it became clear that President Bush and VP Cheney were dedicating themselves to advancing the worst possible energy policy and opposing all action on global warming, the Éminence grises of the U.S. energy and climate community decided to get together a bipartisan group to pull the debate from the far right back toward the center a tad (see list of Commissioners here and at end — original co-chair John Holdren has since moved on to greener pastures). I know many of the grises and actually ended up writing two background reports for NCEP – Hydrogen and Fuel Cells, Technology and Policy Overview and The Car and Fuel of the Future.
In December 2004, after more than two years of research and debate, the Commission released its long-term energy strategy, Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s Energy Challenges.
The report isn’t as bad as it looks today if you can remember a time when the federal government was run by people who had dedicated all their efforts to stopping clean energy and climate action. Such is the context with which you have to read such modest commitments as:
- Establish a $1.5 billion program over ten years to increase domestic production of non-petroleum renewable transportation fuels.
Or this recommendation on “reducing risks from climate change”:
- Establish a mandatory, economy-wide tradable-permits program to limit greenhouse gas emissions while capping initial costs at $7 per metric ton of CO2-equivalent reduction…. The price for additional permits (or so-called “safety valve” price) would increase by 5 percent each year in nominal terms. This annual increase is designed to modestly exceed inflation….
Yes, NCEP is one of the big boosters of the infamous safety valve, one of the least helpful contributions to the climate debate, especially when set at such a ridiculously low level (see “Safety Valves Won’t Make Us Safer“). I have been an opponent of the safety valve for a long, long time (see “The history of the ‘safety valve’ debate“).
So I was not terribly thrilled with the NCEP report, even at the time.
The problem for NCEP now is that the science has gotten much more dire in the past 5 years and the politics have moved from the far right all the way to the progressive side. Whereas there was some political and scientific benefit of moving the debate from the far right of the Cheney-Bush administration toward what I’ll call the center-right of NCEP, there is no scientific benefit whatsoever of pulling the debate off the center-left of Obama-Waxman-Markey. And I’m not certain there is much political benefit, based on what is coming out of NCEP recently.
Indeed, on July 16, they released a press release ominously titled, “NCEP Recommends Simplifying and Strengthening the Cost Containment Provisions in Pending Climate Legislation.” While simplifying the climate bill is something everybody can cheer for, “strengthening the [absurd number of] cost containment provisions” in Waxman-Markey hardly seems like the useful subject for a report. Typically, “strengthening cost containment” are code words used by those who want to weaken environmental integrity. In fact, the climate bill already has too many cost-containment provisions:
- It has too weak of a 2020 target.
- It allows emitters to purchase up to 1 billion domestic offsets in place of emissions allowances.
- It allows emitters to purchase up to 1 billion international allowances (a number that can be potentially revised upward to 1.5 billion if the domestic number is revised down).
- It has a strategic reserve of allowances that are available for auction if allowance prices exceed 160 percent of their three-year average. This is sort of a safety valve with (some) environmental integrity (since at the start, the reserve is created from tons that are skimmed off of the targets from 2012 through 2050).
- It distributes allowances to regulated utilities and other entities to directly mitigate cost impacts on the public and businesses.
- It has tremendous energy efficiency efforts that will also directly mitigate cost impacts on the public and businesses.
These measures combine to ensure that the permit price will stay quite low, as both CBO and EPA find. The only good news is that the price will probably stay so low that emitters won’t buy many offsets — and the reserve will probably not be triggered — at least through, say, 2025. Indeed, given the too-weak 2020 target and the myriad cost-effective clean energy strategies advanced by the bill and available to emitters, it is hard to imagine that the permit price will significantly exceed the auction floor price through at least 2020, which starts at $10 in 2012 and rises 5 percent plus inflation ever year thereafter (see Game changer, Part 2: Unconventional gas makes the 2020 Waxman-Markey target so damn easy and cheap to meet).
So of the top 10 things that need to be “strengthened” in the climate and clean energy bill, “cost containment” doesn’t make the list. That said, the NCEP report that accompanies the release, “Managing Economic Risk in a Greenhouse Gas Cap-and-Trade Program,” isn’t actually so bad, if you ignore certain parts, like this conclusion:
A simple price cap that is paired with a minimum price floor and that escalates in a pre-determined manner over time still offers, in our view, the most straightforward and effective response to the cost concerns expressed by many stakeholders.
Fortunately, they follow that unhelpful — and I believe inaccurate — statement with this:
An allowance reserve coupled with a price floor offers, in our view, many of the benefits of a simple price cap and has the not insignificant advantage of providing greater certainty about cumulative emissions reductions over the time horizon of the program.
But then they follow that tantalizing statement with another analytically dubious one:
While NCEP has not undertaken a full analysis of this issue, our preliminary estimates suggest that roughly 6 billion tons of allowances should be available in the reserve to cover the first 10 years of the program.
That just makes no sense. The reserve is quite unlikely to be significantly tapped in the first decade.
I do think, however, that by taking a few pieces of Waxman-Markey’s cost containment provisions along with a couple of NCEP ideas plus part of a recent report by Brookings here, we can come up with a cost containment strategy that is environmentally superior to Waxman-Markey but politically more acceptable to swing Senators than W-M! Call me a cock-eyed optimist! I will describe that proposal, which I’d label “price collar plus,” tomorrow.
Finally, if you have ideas for more useful things that NCEP might be doing — might I suggest developing a bipartisan natural gas strategy rather than, say, trying not to strengthen the environmental integrity of the climate bill — contact your favorite commissioner:
William K. Reilly: Co-Chair, Senior Advisor, TPG, Inc.; Former Administrator, U.S. Environmental Protection Agency
John W. Rowe: Co-Chair, Chairman and CEO, Exelon Corporation
Susan Tierney: Co-Chair, Managing Principal, The Analysis Group; former Assistant Secretary of Energy
Philip R. Sharp: Congressional Chair, President, Resources for the Future; former U.S. Representative, IN
Marilyn Brown: Visiting Distinguished Scientist, Oak Ridge National Laboratory; Professor, School of Public Policy, Georgia Institute of Technology
John E. Bryson: Chairman, President and Chief Executive Officer Edison International and Chairman, Southern California Edison
Ralph Cavanaugh: Senior Attorney and Co-Director, Energy Program, Natural Resources Defense Council
Erroll B. Davis Jr.: Chancellor of the University System of Georgia
Senator Rodney Ellis: State Senator, TX
Leo W. Gerard: International President, United Steelworkers of America
Robert E. Grady: Managing Partner, Carlyle Venture Partners, The Carlyle Group and former Executive Associate Director of the OMB
F. Henry Habicht: Managing Partner, SAIL Venture Partners, LLC; Former Deputy Administrator of the U.S. Environmental Agency
Richard A. Meserve: President of the Carnegie Institution and former Chairman of the U.S. Nuclear Regulatory Commission (NRC)
Mario Molina: Professor, University of California, San Diego
Sharon L. Nelson: Chair, Board of Directors, Consumers Union; Former Chief, Consumer Protection Division, Washington Attorney General’s Office
Richard L. Schmalensee: Howard W. Johnson Professor of Economics and Management and John C Head III Dean, Emeritus, Sloan School of Management, Massachusetts Institute of Technology
Norm Szydlowski: President and Chief Executive Officer of Colonial Pipeline
R. James Woolsey: Vice President, Booz Allen, Hamilton; former Director of Central Intelligence
Martin B. Zimmerman: Clinical Professor of Business, Ross School of Business, University of Michigan; Group Vice President, Corporate Affairs, Ford Motor Company (2001 – 2004)
What does NCEP get by pushing farther to the right if there’s no sense that the outcome is sustainable?