Climate Change: Greenhouse Gas Victorious?

By Published On: August 10, 2012

Is it time for California’s greenhouse gas reduction team to declare victory--before cap-and-trade? Emerging data show the state already may be on the cusp of meeting its 2020 goal of trimming greenhouse gas emissions back to their 1990 level. Data the state Department of Finance and the U.S. Energy Information Agency released last month show plunging gasoline sales since the financial crisis took root in 2007. National consumption is down by about half and state consumption is 23 percent lower, with the steepest decline in state sales occurring during the last fiscal year ending June 30 (Current, Aug. 3, 2012). More data that EIA released Aug. 1 show energy-related carbon dioxide emissions in the U.S. during the first quarter of 2012 sunk to their lowest level since 1992. The federal agency attributed the decline in part to a mild winter, but perhaps more significantly to a replacement of coal-fired power generation with natural gas-fired generation, plus the decline in gasoline consumption. On Aug. 3, federal data showed automobile mileage has been improving in the U.S. over much of the past decade after a long period with little improvement that began in the early 1980s. Today, new passenger cars are getting average combined city-highway mileage of almost 35 miles per gallon. While the latest breakdown of state emissions is not planned until October, the most recently published federal data show California carbon dioxide emissions in 2009 were 375.8 million metric tons compared to 364.5 million metric tons in 1990, the year that marks the 2020 benchmark goal under AB 32. California emissions in 2009 were down from a peak of 402 million metric tons in 2007, according to EIA. Various federal reports show that improved energy efficiency and a renewable energy standard can be expected to reduce the carbon footprint of energy use in the years ahead. With California leading the way with its energy efficiency and renewable energy programs, as well as its push for energy efficient vehicles, much of the heavy lifting appears to already be behind state regulators when it comes to meeting the law’s initial 2020 emissions goal. * * * * * California Public Utilities Commission president Mike Peevey ruled Aug. 2 to expand a proceeding covering how utilities should use proceeds from auctioning carbon emissions rights under the state’s cap-and-trade program to address the so-called legacy power purchase contract issue. Peevey’s ruling came after Panoche Energy Center last month asked the commission to step in and try to solve what has been an intractable issue for independent generators who entered into power sales agreements with utilities prior to enactment of the state’s climate protection law, AB 32 (Current, July 20, 2012). Under the cap-and-trade program the state has established to enforce the law, utilities get free emissions rights to cover the greenhouse gases associated with the power they supply. They then are to turn around and sell them to the generators of the power and use the proceeds to benefit their ratepayers and promote clean energy. Subsequent to AB 32, new power sales agreements generally have included provisions allowing independent generators to recover their cost of buying emissions rights and complying with cap-and-trade. However, contracts prior to the law generally did not address such a prospect, leaving independent generators unable to recoup greenhouse gas law compliance costs. Peevey’s ruling noted it would be preferable for parties involved in legacy contracts to negotiate how to handle greenhouse gas compliance costs, rather than subject themselves to a commission order. Peevey’s ruling promises an order on legacy contracts in two years if the parties don’t renegotiate the deals before then. The first emissions rights auction is due in November, at which time independent generators in the legacy contracts are to begin incurring compliance costs.

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