Issue Immersion Session: U.S. Climate Policy

1. Issue Immersion Session: U.S. Climate Policy WRI’s 2008 MindShare Meeting September 17, 2008

2. What has happened in Congress thus far and what can we expect in the future 2008: Dry run in Congress: Senate bill (Lieberman-Warner) did not pass but momentum was gained; process was constructive in educating policy makers on the issue and highlighting concerns Numerous bills introduced in House of Representatives; legislative hearings taking place – won’t vote on a bill this Congress With a new president supportive of cap and trade, landscape will change next year, will increase Congress’ likelihood of enacting legislation Timing – legislative activity in 2009 – pass law in 2010.

3. What are concerns most likely to slow down passage of legislation: • Cost to consumer; job losses; gas prices • Is the technology available to meet the emission reduction targets called for by the science? • Concerns about developing country actions, competitiveness and job loss • Bill creates massive bureaucracy, redistribution of wealth, fighting over how revenue should be used

4. How does US policy fit into international need for action • Global problem; requires commitments from developed and developing countries • Need strong US domestic policy to bring to international negotiation process • Treaty: requires 67 or 60 Senate votes – a heavy lift

5. WRI is working on many critical issues Four examples: • GHG reductions cost too much • Technology is not available • U.S. competitiveness will be compromised • Targets and timetables are unattainable

6. WRI’s work on cost containment Identifying policy options to reduce the cost of climate policy • Primary focus on cap and trade • Cost of compliance as well as cost to consumers • Options include: • Domestic, international “offsets” • Banking and borrowing • “Allowance reserve” • Related policies (e.g. allowance allocation) also important

7. WRI’s work on cost containment Evaluating mechanisms in federal bills Boxer-Lieberman-Warner bill targets and U.S. emissions if 15% offsets used

8. WRI’s work on international competitiveness “Leveling” mechanisms Cost containment mechanisms Coordinated international action Trade measures U.S. market price Market price CO2 costs Market price Global market price Market price Price of carbon intensive good Non-CO2 Costs Inside U.S. Outside U.S. Inside U.S. Outside U.S. Inside U.S. Outside U.S. InsideU.S. Outside U.S. Adapted from “Cutting Carbon in Europe”, April 31, 2008 presentation by Michael Grubb and Thomas Counsell

9. WRI’s work on international competitiveness

10. WRI’s work on GHG abatement technology Identifying what it takes to generate a “Wedge” “Humanity already possesses the fundamental scientific, technical, and industrial know-how to solve the carbon and climate problem for the next half-century.” - S. Pacala and R. Socolow, Science, 13 Aug 2004, Vol. 305

11. WRI’s work on GHG abatement technology Identifying the hurdles to deployment at scale • Technical challenges • Policy challenges • Financing challenges • Example: • CCS: Diverse stakeholder dialog to produce consensus guidelines on CO2 storage and liability

12. WRI’s work on meeting targets Targets vary in stringency

13. WRI’s work on meeting targets Example: Boxer-Lieberman-Warner bill would have been a significant departure from business as usual BAU Total abatement required to meet national target B-L-W Million metric tons CO2e

14. EPRI analysis finds that covered sector abatement is possible EIA Base Case 2007 EIA Base Case 2008

15. Abatement from EPRI analysis won’t get us all the way there. BAU Abatement potential from power sector as presented in EPRI full portfolio scenario B-L-W Million metric tons CO2e

16. What do we need to get the rest of the way there? BAU Remaining abatement needed to meet target Million metric tons CO2e B-L-W

17. What does your company need to achieve the abatement necessary to meet strong targets? • Technology • Policy • Management