My RGGI Testimony to the Pennsylvania House of Representatives Environmental Resources & Energy Committee

On August 6, I tuned into the Pennsylvania Department of Environmental Protection (DEP) webinar titled “RGGI 101 How it Works and How it Benefits Pennsylvanians” because I have a long-standing interest in the Regional Greenhouse Gas Initiative (RGGI).  I prepared a https://wp.me/p8hgeb-slpost describing my impression of the presentation against the reality of my experience with it that caught the attention of Daryl Metcalfe, the Chair of the Pennsylvania House of Representatives Environmental Resources & Energy Committee who asked me to provide testimony at the August 25, 2020 committee meeting regarding RGGI.  This post summarizes my testimony.

I have been involved in the RGGI program process since it was first proposed prior to 2008.  I blog about the details of the RGGI program because very few seem to want to provide any criticisms of the program. I have extensive experience with air pollution control theory and implementation having worked every cap and trade program affecting electric generating facilities in New York including the Acid Rain Program, Regional Greenhouse Gas Initiative (RGGI) and several Nitrogen Oxide programs.  Note that my experience is exclusively on the industry side and the difference in perspective between affected sources trying to comply with the rules and economists opining about what they should be doing have important ramifications.  I think this background served me well providing the testimony presented.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

RGGI is a market-based program to reduce greenhouse gas emissions from the power sector.  According to a RGGI website: “The RGGI states issue CO2 allowances which are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs. Programs funded with RGGI investments have spanned a wide range of consumers, providing benefits and improvements to private homes, local businesses, multi-family housing, industrial facilities, community buildings, retail customers, and more.”

RGGI started in 2009 and the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont have participated ever since.  New Jersey was included at the start of the program, dropped out and re-joined in 2020.  Virginia recently announced that they would join in 2021.  According to this presentation Pennsylvania is planning to join in 2022.

According to the DEP’s RGGI website,  “Governor Wolf recently signed an Executive Order that directed DEP to begin a rulemaking process that will allow Pennsylvania to participate in the Regional Greenhouse Gas Initiative (RGGI), with the goal of reducing carbon emissions from the electricity sector”.  I know very little about Pennsylvania politics but I did figure out that the Governor is not planning to go through the legislature to have Pennsylvania to join RGGI.  Because Pennsylvania not only has significant coal-fired generation but also mines it, there are significant concerns about the impact of joining RGGI on the continued viability of those resources.

I have never presented testimony before so this was a new experience.  The web page for the Pennsylvania House of Representatives Environmental Resources & Energy Committee lists the transcript and presentations for the witnesses who presented testimony on August 24, 2020.  If you are very bored there is even a video of the testimony of the six presentations.

Testimony

I will summarize my main points in the remainder of this post.  For more detail you can go listen to the presentation or read the  testimony and  slides I submitted.

The first discussion point addressed carbon pricing because ultimately RGGI is a carbon pricing scheme.  I admit that the theory of putting a price on carbon is attractive but there are very real problems associated with implementation.  Unless the carbon price is set across the globe and covers all energy sectors pollution leakage, where a pollution reduction policy simply moves the pollution around the globe rather than actually reducing it, is an inevitable short-coming.  Within the electric generating sector there is a very real problem because power plants have limited control options: switching fuels or operating less.  As a result, generating companies simply treat it as an added cost to doing business which is pretty much the same as a tax.  While proponents call this a cap and dividend program I call it a cap and tax program and because all energy taxes are regressive this will impact those who can least afford additional energy costs.

RGGI proponents claim that it is a success and often cite the observed emission reductions.  As shown in my testimony and previous post, both the PA DEP and RGGI accurately claimed that regional CO2 emissions are down on the order of 50% since 2005, but RGGI had very little to do with it.  The vast majority of the reductions were due to fuel switching from coal and residual oil to natural gas. Because the RGGI price adder is small relative to the fuel cost differential RGGI itself had very little to do with the observed fuel switching.  I believe that the only reductions that RGGI can claim are those that result from the investment of RGGI proceeds.  Using that criterion, RGGI is only responsible for on the order of 5% of the observed reductions.

I also showed that the emission reductions would have a negligible effect on global warming itself.  I found there would be a reduction, or a “savings,” of approximately 0.0011°C by the year 2050 and 0.0023°C by the year 2100 if all Pennsylvania CO2 emissions were eliminated.  To give an idea of how small this temperature change is it is the same as a change in elevation of nine inches or change in latitude of two tenths of a mile.

Finally, I compared the emissions and operational changes of Pennsylvania relative to the nine states in RGGI since 2009 when RGGI started.  Pennsylvania without RGGI has accomplished nearly as much as the nine RGGI states in terms of maintaining fossil generation levels while reducing emissions, improving efficiency, and switching to cleaner fuels.

I concluded that despite the claims made by its proponents, upon close examination RGGI is an inefficient method for reducing CO2 emissions.  The affected sources will treat it simply as a tax.  As a result, that means that the primary impact to the public is a regressive tax.  Fuel switching to Marcellus Shale gas created by Pennsylvania’s fracking revolution was the primary cause of the observed decreases in emissions.  Clearly, Pennsylvania has done more to reduce CO2 in the RGGI states than the RGGI itself and that will continue whether or not Pennsylvania joins RGGI.

Media Coverage of Clean Energy

I had other plans for today but I have to post on this topic.  I came across two separate articles that stated that the costs of renewables are cheaper than power from existing alternatives which reminded me that I have to do a post on that topic.  However, the thing that prompted this post was buried at the bottom of the Christian Science Monitor article Power pivot: What happens in states where wind dethrones King Coal?

Background

In particular at the bottom of article was the statement: “This story was produced with support from an Energy Foundation grant to cover the environment.”  That link leads to a June 29, 2018 page that notes that “the Energy Foundation has given a grant to support the Monitor’s distinctive approach to climate change coverage”.  It goes on to say:

The Monitor believes the solution to climate change doesn’t come from speaking more loudly or citing even more peer-reviewed science, but from recognizing why people come to climate change from such vastly different perspectives – and meeting them where they are. Changing minds to find paths forward starts with a deep commitment to humanity and respect, not from frustrated finger-pointing.

That perspective has drawn the attention of some philanthropists interested in supporting media outlets bringing light to this divisive topic. The Monitor’s science desk is the proud recipient of a special grant from the Energy Foundation, a philanthropic organization dedicated to “serving the public interest by helping to build a strong, clean energy economy.” You can read more about the Energy Foundation here. These funds are specifically to bolster the Monitor’s approach to coverage of climate, energy, and the environment during the coming year.

Presumably, the grant was extended to continue support since it has longer than a year since this description appeared and the August 21, 2020 publication of Power pivot: What happens in states where wind dethrones King Coal?

Energy Foundation

I had never heard of the Energy Foundation.  Their mission statement makes their motivation clear: “Our mission is to secure a clean and equitable energy future to tackle the climate crisis.”

The following is their vision statement:

We envision a healthy, safe, equitable economy powered by clean energy. We believe a thriving clean energy economy can create sustainable opportunities, spur innovation, and protect our climate—for today and future generations.

Energy Foundation supports education and analysis to promote non-partisan policy solutions that advance renewable energy and energy efficiency while opening doors to greater innovation and productivity—growing the economy with dramatically less pollution. For nearly 30 years, Energy Foundation has supported grantees to help educate policymakers and the general public about the benefits of a clean energy economy. Our grantees include business, health, environmental, labor, equity, community, faith, and consumer groups, as well as policy experts, think tanks, universities, and more.

We are a complex, multi-site, multicultural nonprofit organization with big plans for the future. Under the leadership of our CEO, Energy Foundation has embarked on a major strategy refresh, a prioritized commitment to Diversity, Equity and Inclusion (DEI), and rapid geographic expansion.

Our comprehensive approach advances energy efficiency and renewable energy in the power, transportation, and buildings sectors. Our programs focus on developing innovative policies and campaigns to help propel clean energy development in these sectors. The Venues team is a cross-disciplinary team of policy, communications, and campaign experts dedicated to advancing strong state and regional climate and clean energy policies. The Policy team works to deliver strategy and network support services to our issue-focused grantees and funding partners. And the Strategic Communications team develops powerful narrative and communications strategies designed to build support for our work regionally and nationwide.

Energy Foundation’s founding office is in San Francisco, CA, with regional offices in Raleigh, NC; Chicago, IL; Washington, DC; and Las Vegas, NV.

Energy Foundation funds do not support legislative lobbying or electoral activities.

The Energy Foundation is not a small organization courageously fighting the noble cause against “Big Oil”.  Their 2017 IRS Form 990 claims total revenues in 2016 of $118.9 million and $110.2 million in 2017; total expenses of $113.6 million in 2016 and $114.1 million in 2017; and net assets of $62.4 million at the close of 2017.  The Form 990 is worth a read if only to see the large number of organizations that receive grants to “promote education and analysis” to support a clean energy future.  I was surprised to see universities among the grantees –           three California state universities received on the order of $2 million alone.  Missing from their web page is any description of who funds the Energy Foundation itself.

Conclusion

I wrote this post because this particular quote caught my eye: “We’ve reached a point where it is now cheaper to build and operate a wind farm or solar plant than it is to operate a coal plant,” says Joe Daniel, senior energy analyst at the Union of Concerned Scientists in Washington. “And that trend is going to continue.”  I see that often and get exasperated every time I see it because, like most people, I don’t care what it costs to build a power plant.  The only thing I care about is how much it costs me to get electricity when and where I need it.  When those considerations are added to the costs of any renewable source of electricity the price sky rockets.

I have long thought that any journalist that does not caveat such a statement either lacks understanding in general or does not understand the energy system well enough.  After finding out that there is a foundation that provides funding to news organizations I have to add a less flattering reason for not providing the full explanation.  The Christian Science Monitor has a motivated reason to continue to receive funding from an organization dedicated to “serving the public interest by helping to build a strong, clean energy economy.”  In that light even the possibility that a “clean energy economy” may have flaws and that overall it may not be in the best public interest is not going to be incorporated in any reporting.

Climate Leadership and Community Protection Act 1990 Emissions Inventory Requirements

In the summer of 2019 Governor Cuomo and the New York State Legislature passed the Climate Leadership and Community Protection Act (CLCPA) which was described as the most ambitious and comprehensive climate and clean energy legislation in the country when Cuomo signed the legislation.  On August 14 New York State Department of Environmental Conservation (DEC) Commissioner Basil Seggos released proposed regulations to support implementation of the CLCPA.  A key part of this regulation is defining the baseline 1990 emission inventory and this post expands on my initial inventory post and a second post on the emissions report timing by looking at the effect of four key considerations imposed by the CLCPA.

I am a retired air pollution meteorologist with nearly 40-years experience analyzing the effects of meteorology on electric operations. I believe that gives me a relatively unique background to consider the potential quantitative effects of energy policies based on doing something about climate change.  I have been following the implementation of the CLCPA and posting on it as it develops. The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

This 1990 emissions inventory is important because many of the targets of the CLCPA are based on reductions from this baseline.  For example, there is a target to reduce GHG emissions to 60 percent of 1990 emissions levels by 2030.  The CLCPA mandates specific requirements for the 1990 emission inventory that I am positive no legislator who voted for the law understood.  This post compares the proposed CLCPA 1990 emission inventory with the previous “official” New York greenhouse gas emission inventory was prepared by the New York State Energy Research and Development Authority (NYSERDA). 

The Part 496 Regulatory Impact Statement (RIS) includes a section titled Key Requirements of the 1990 Emission Baseline section that explains the CLCPA mandates that required DEC to develop a new official inventory.   These requirements significantly affect the greenhouse gas (GHG) emission total for the State.  According to the latest edition of the NYSERDA GHG emission inventory (July 2019) Table S-1 New York State GHG Emissions 1990–2016 the New York State 1990 GHG emissions were 205.61 MMtCO2e The proposed Part 496 regulation 1990 emissions inventory total is 401.38 MMtCO2e for an increase of 195.77 MMtCO2e. 

Summary of 1990 Emission Inventories

Regulatory Impact Statement Table 1 Inventory in GWP20.

Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 254.43 70.12 1.31     4.00 329.87
IPPU 1.67 0.00 0.00 0.90 0.02 0.01 2.60
AFOLU 0.05 13.07 4.01       17.13
Waste 3.03 48.25 0.50       51.78
Total 259.18 131.45 5.83 0.90 0.02 4.01 401.38

NYSERDA July 2019 Table S-1 Emission Inventory in GWP100

Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 168.84 3.12 0.83 0.00 0.00 0.00 172.80
IPPU 1.16 0.00 0.00 0.34 9.48 0.17 11.15
AFOLU 0.00 4.51 4.35 0.00 0.00 0.00 8.86
Waste 0.00 12.20 0.61       12.80
Total 170.00 19.83 5.79 0.34 9.48 0.17 205.61

I will address the requirements and the effect on emissions in the following.

CLCPA Pollutants

The RIS states:

“The first requirement is that the greenhouse gases subject to the statewide emission limit include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), perfluorocarbons (PFC), hydrofluorocarbons (HFC), and sulfur hexafluoride (SF6). As the CLCPA references the IPCC, the IPCC protocol for national greenhouse gas inventories is used as a foundation for determining which sources of these gases are included in the 1990 baseline. That protocol applies a sectoral inventory, or a categorization of emission sources based on the broad economic sectors of energy, industry, waste, agriculture, and other land use.” 

The NYSERDA July 2019 emission inventory included all these parameters so this had no effect on emissions.

According to the RIS:

“The second key requirement of the CLCPA relevant to this proposed rule is that it directs the Department to set greenhouse gases on a common scale using the carbon dioxide equivalence metric (CO2e) and the 20-year Global Warming Potential (GWP20) of each gas, which the Department derived from the IPCC Fifth Assessment Report (AR5). The IPCC protocol requires national governments apply a 100-year Global Warming Potential metric (GWP100) from the IPCC Fourth Assessment Report (AR4),5 and thus other government inventories more frequently utilize the GWP100 metric rather than GWP20 metric set forth in the CLCPA. While Part 496 uses the GWP20 metric derived from AR5, the Department provides an estimate of the 1990 baseline using both metrics below. This is for the purposes of comparing 1990 emission estimates with those of the previous State inventory, the inventory reports of other governments, and other references that use the more standard GWP100 metrics.”

The RIS provides a table with the GWP100 emissions so that a comparison of the two inventories is possible.  As shown below, the difference between the two is almost completely related to changes in methane (CH4) in the energy and waste sectors.  Note that this difference accounts for 46% of the total change in emissions between the proposed regulation and the July 2019 NYSERDA inventory.

Comparison of GWP20 and GWP100 Inventories (MMtCO2e)

Proposed Part 496 1990 Emissions Inventory (GWP20).

Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 254.43 70.12 1.31     4.00 329.87
IPPU 1.67 0.00 0.00 0.90 0.02 0.01 2.60
AFOLU 0.05 13.07 4.01       17.13
Waste 3.03 48.25 0.50       51.78
Total 259.18 131.45 5.83 0.90 0.02 4.01 401.38

Regulatory Impact Statement Table 2 Inventory in GWP100.

Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 254.43 20.87 1.48     5.22 282.00
IPPU 1.67 0.00 0.00 1.35 0.02 0.01 3.05
AFOLU 0.05 3.89 4.53       8.47
Waste 3.03 14.36 0.57       17.96
Total 259.18 39.12 6.58 1.35 0.02 5.22 311.47

Difference GWP20 Inventory Minus GWP 100 Inventory

Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 0.00 49.25 -0.17 0.00 0.00 -1.22 47.86
IPPU 0.00 0.00 0.00 -0.45 0.00 0.00 -0.45
AFOLU 0.00 9.18 -0.52 0.00 0.00 0.00 8.66
Waste 0.00 33.89 -0.07 0.00 0.00 0.00 33.82
Total 0.00 92.32 -0.76 -0.45 0.00 -1.22 89.89

The RIS notes that the “final two key requirements of the CLCPA set New York State apart from other governments in a way that makes it challenging to directly compare the statewide emission limits with the goals from other jurisdictions”.  The question that comes up is was this really necessary and my opinion is that the added burden dealing with this far out-weighs any benefits or needs.  Due to the lack of comprehensive documentation I was unable to tease out the individual effect of the requirement to include emissions located outside of New York vs the effect of the requirement to “establish regulatory limits based on a percentage of gross 1990 emissions as opposed to net emissions” but I can show what the effect of these considerations is on emissions.

The RIS explains that in the third requirement:

“The CLCPA establishes that the statewide emission limit, and therein the emission reduction requirements of the CLCPA, include certain emission sources that are located outside of the State borders. As mentioned above, ECL § 75-0101(13) defines statewide greenhouse gas emissions as including emissions associated with imported electricity and fossil fuels. The IPCC protocol for national governments do not include similar requirements to incorporate emissions produced outside of the relevant jurisdiction associated with energy imported into the jurisdiction. If comparing the 1990 baseline to other jurisdictions’ emission reports, the imported fuels and electricity sectors should be excluded. However, the statutory emission reduction requirements of the CLCPA include these sectors.”

The RIS describes the final key component: “The fourth and final key component of the CLCPA for purposes of this rulemaking is that the 100 percent net emission reduction goal, or a goal of attaining net zero emissions, is not part of the Legislature’s direction to the Department for promulgating the statewide emission limits. The directives to reduce statewide greenhouse gas emissions (1) 40 percent from 1990 levels by 2030, and (2) 85 percent from 1990 levels by 2050 (40×30 and 85×50) are set forth in ECL § 75-0107, which further directs the Department to establish these statewide greenhouse gas limits as a percentage of estimated 1990 emissions.”  In order to meet this requirement DEC concludes that it is necessary to “establish regulatory limits based on a percentage of gross 1990 emissions as opposed to net emissions”.  The inventory includes anthropogenic CO2 emissions resulting from the combustion of biomass and biofuels in the 1990 baseline but notes that this assumption may have to be adjusted.  For waste emissions, the Department proposes a separate approach to the issue of accounting for gross and net emissions and a separate approach for anthropogenic versus non-anthropogenic emissions.

The following table shows the differences between the proposed emissions inventory and the July 2019 NYSERDA inventory as a function of the upstream out-of-state emissions, the gross vs. net adjustment for waste emissions and the adjustment for anthropogenic CO2 emissions resulting from the combustion of biomass and biofuels.  The waste emissions adjustment is 5.15 MMtCO2e but I cannot differentiate exactly how much is due to either remaining factor.  However, I believe that because biomass burning is a relatively small component of overall emissions most of the approximate 100 MMtCO2e difference is due to upstream added emissions.

Comparison of RIS Table 2 GWP100 Inventory and NYSERDA July 2019 Table S-1 GWP100 Without Other Part 496 Inventory Adjustments (MMtCO2e)

Regulatory Impact Statement Table 2 Inventory in GWP100.

Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 254.43 20.87 1.48     5.22 282.00
IPPU 1.67 0.00 0.00 1.35 0.02 0.01 3.05
AFOLU 0.05 3.89 4.53       8.47
Waste 3.03 14.36 0.57       17.96
Total 259.18 39.12 6.58 1.35 0.02 5.22 311.47

NYSERDA July 2019 Table S-1

Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 168.84 3.12 0.83 0.00 0.00 0.00 172.80
IPPU 1.16 0.00 0.00 0.34 9.48 0.17 11.15
AFOLU 0.00 4.51 4.35 0.00 0.00 0.00 8.86
Waste 0.00 12.20 0.61       12.80
Total 170.00 19.83 5.79 0.34 9.48 0.17 205.61

Difference GWP100 Inventory Minus NYSERDA 2019 Inventory

Sector CO2 CH4 N2O PFCs HFCs SF6 Total
Energy 85.59 17.75 0.65 0.00 0.00 5.22 109.21
IPPU 0.51 0.00 0.00 1.01 -9.46 -0.16 -8.10
AFOLU 0.05 -0.62 0.18 0.00 0.00 0.00 -0.39
Waste 3.03 2.16 -0.04 0.00 0.00 0.00 5.15
Total 89.18 19.29 0.79 1.01 -9.46 5.06 105.87

Discussion

The CLCPA also mandates specific requirements for the 1990 emission inventory that I am sure very few, if any, politicians who voted for the law understood.  The previous NYSERDA GHG inventory followed Intergovernmental Panel on Climate Change (IPCC) guidance for developing an emissions inventory.  Why wasn’t that good enough?  Instead the law includes specific language that requires the development of a revised inventory that has to rely on some speculative assumptions for some sectors, is inconsistent with everyone else making comparisons difficult, and leads to almost a doubling of emissions in the baseline year of 1990.

The previous 1990 New York GHG emission inventory was 205.61 MMtCO2e.  The proposed Part 496 regulation 1990 emissions inventory total is 401.38 MMtCO2e an increase of 195.77 MMtCO2e. 

One of the mandates specified that the global warming potential (GWP) had to be calculated over a 20-year time horizon.  The IPCC describes time horizons and the GWP[1] notes:

“The GWP has become the default metric for transferring emissions of different gases to a common scale; often called ‘CO2 equivalent emis­sions’ (e.g., Shine, 2009). It has usually been integrated over 20, 100 or 500 years consistent with Houghton et al. (1990). Note, however that Houghton et al. presented these time horizons as ‘candidates for discussion [that] should not be considered as having any special sig­nificance’. The GWP for a time horizon of 100 years was later adopted as a metric to implement the multi-gas approach embedded in the United Nations Framework Convention on Climate Change (UNFCCC) and made operational in the 1997 Kyoto Protocol. The choice of time horizon has a strong effect on the GWP values — and thus also on the calculated contributions of CO2 equivalent emissions by component, sector or nation. There is no scientific argument for selecting 100 years compared with other choices (Fuglestvedt et al., 2003; Shine, 2009). The choice of time horizon is a value judgement because it depends on the relative weight assigned to effects at different times.”

This boils down to the conclusion that the authors of this section of the CLCPA imposed their value judgements upon the state. 

The other mandate that makes this inventory unique is the requirement to include upstream out-of-state emissions.  The IPCC protocol for national governments do not include similar requirements to incorporate emissions produced outside of the relevant jurisdiction associated with energy imported into the jurisdiction.  There is no question that this requirement was deliberately included.

Conclusion

The 1990 GHG emission inventory proposed in DEC’s proposed Part 496, statewide emission limits had to establish a statewide greenhouse gas emissions limit as a percentage of 1990 emissions no later than one year after the effective date of the CLCPA.  As noted previously that deadline forced DEC to release the document with much less than the “best available” documentation required in the law. 

The two primary drivers for the doubling of the emissions inventory both add a little under 100 MMtCO2e to the 1990 inventory.  As I noted it is not obvious why the authors of the law included those requirements that they had to know would increase the 1990 baseline.  On one hand a higher baseline may mean that the politicians can more easily claim victory for the interim target in 2030.  On the other hand, making the inventory more expansive by adding upstream requirements and two other smaller impact mandates makes compliance harder.  Couple that with the global warming potential specification that increases methane emissions I suspect that the authors tried to use the law to make the use of out-of-state natural gas impossible sooner rather than later.

I believe it is only a matter of time until economic reality slams into the CLCPA.  New York’s war on natural gas is a war on the most economical fuel that has been responsible for the vast majority of CO2 reductions observed to date.  When these policies require the use of more expensive fuels the inevitable result will be significant price increases on energy costs that are already among the highest in the country.  When the Cuomo Administration can no longer hide those cost increases in utility rate cases, hidden fees, or programs that are taxes in all but name, the reckoning will come.


[1] Reference: Myhre, G., D. Shindell, F.-M. Bréon, W. Collins, J. Fuglestvedt, J. Huang, D. Koch, J.-F. Lamarque, D. Lee, B. Mendoza, T. Nakajima, A. Robock, G. Stephens, T. Takemura and H. Zhang, 2013: Anthropogenic and Natural Radiative Forc­ing. In: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

Climate Leadership and Community Protection Act Emissions Report Timing

In the summer of 2019 Governor Cuomo and the New York State Legislature passed the Climate Leadership and Community Protection Act (CLCPA) which was described as the most ambitious and comprehensive climate and clean energy legislation in the country when Cuomo signed the legislation.  I have maintained that this legislation is deeply flawed because it presumed that its aspirational targets could be met without doing a feasibility study, that is to say they put the cart before the horse.  Before I can prepare a post on the differences between the new emissions inventory and the old one I want to discuss another flaw in the structure of the act.

I am a retired air pollution meteorologist with nearly 40-years experience analyzing the effects of meteorology on electric operations. I believe that gives me a relatively unique background to consider the potential quantitative effects of energy policies based on doing something about climate change.  I have been following the implementation of the CLCPA and posting on it as it develops. The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

CLCPA greenhouse gas emissions (GHG) reporting

In § 75-0105, the CLCPA mandates a statewide greenhouse gas emissions report.  No later than two years after the law was promulgated, and each year thereafter, the New York Department of Environmental Conservation (DEC) must issue a report on statewide greenhouse gas emissions from all greenhouse gas emission sources in the state. The report is required to “include an estimate of what the statewide greenhouse gas emissions level was in 1990”. It is supposed to be a “comprehensive evaluation” not only of direct emissions but also include an “estimate of greenhouse gas emissions associated with the generation of imported electricity and with the extraction and transmission of fossil fuels imported into the state”.  There are explicit requirements to ensure it is high quality: “The statewide greenhouse gas emissions report shall utilize best available science and methods of analysis, including the comparison and reconciliation of emission estimates from all sources, fuel consumption, field data, and peer-reviewed research” and “shall clearly explain the methodology and analysis used in the department’s determination of greenhouse gas emissions and shall include a detailed explanation of any changes in methodology or analysis, adjustments made to prior estimates, as needed, and any other information necessary to establish a scientifically credible account of change.  Finally, it requires DEC to hold at least two public meetings to seek public input regarding the methodology and analysis.

The next section in the CLCPA, § 75-0107, Statewide greenhouse gas emissions limits, mandates that “No later than one year after the effective date of this article, the department shall, pursuant to rules and regulations promulgated after at least one public hearing, establish a statewide greenhouse gas emissions limit as a percentage of 1990 emissions, as estimated pursuant to section 75-0105 of this article”.  There also is a requirement that “in order to ensure the most accurate determination feasible, the department shall utilize the best available scientific, technological, and economic information on greenhouse gas emissions and consult with the council, stakeholders, and the public in order to ensure that all emissions are accurately reflected in its determination of 1990 emissions levels”.

There is a contradiction in these two sections.  How can § 75-0107, Statewide greenhouse gas emissions limits, establish a limit estimated pursuant to § 75-0105 which is due later than this requirement?  Both sections mandate the use of the “best available” information and consultation with the public, but the timing requirements preclude that from happening.

In order to meet the requirements of § 75-0107 New York State Department of Environmental Conservation (DEC) Commissioner Basil Seggos released proposed regulation Part 496 to establish statewide greenhouse gas emission limits based on 1990 emissions on August 14,2020.  In my opinion, the process is not meeting the requirement to use the “best available” or consult with the public.  I show below that the description of the emission inventory methodology is less extensive than the previous NYS GHG emission inventory and much less comprehensive that the EPA inventory that I would define as the “best available”.  Consultation with the public is not possible until November. In order to meet the legislative mandate schedule, the rule has been officially proposed.  During the comment period, consultations with the public are forbidden and the only recourse is to comment on the regulation.  In my opinion, consultation with the public should be an iterative process with multiple opportunities to interact with the DEC and respond to comments by others.

Documentation

Up until this time the “official” New York greenhouse gas emission inventory was prepared by the New York State Energy Research and Development Authority (NYSERDA).  This inventory of greenhouse gas emissions in the state follows the standard Intergovernmental Panel on Climate Change (IPCC) protocol. The July 2019 edition is 73 pages long and there is an accompanying fact sheet and a 196 page supplement: New York State Oil and Gas Sector Methane Emissions Inventory.

In April 2020, the US Environmental Protection Agency its annual Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2018.  The complete report is 733 pages, has ten chapters and nine appendices.  In my opinion that sets the standard for the “best available” supporting information for an emissions inventory.

In order to meet the CLCPA deadline for an emission limit one year after promulgation, DEC was forced to propose Part 496, Statewide Greenhouse Gas Emission Limits.  That includes an emissions inventory for 1990 but the only documentation is in the Regulatory Impact Statement.  The section on needs and benefits includes a description of sectoral methods and results that comprises the entirety of the documentation for the 1990 emissions inventory.  The documentation is on the order of 20 pages so it clearly is not “best available”.

Stakeholder Input

According to the Regulatory Impact Statement:

“The Department conducted pre-proposal, stakeholder outreach starting the date on which the CLCPA went into effect, or January 1, 2020, through May 2020. This included two public webinars held on February 14 and 28, 2020 to discuss the scope and key considerations of this rulemaking as well as other presentations and meetings with various stakeholders, including members of the Climate Action Council, by request. For example, the Department presented to the Manufacturers Association of Central New York and the Air and Water Managers Association in May 2020 and participated in meetings with Covanta, National Fuel Gas, and natural gas transmission pipeline companies62 in April 2020. The Department also consulted with other State agencies and authorities, including NYSERDA, the Department of Transportation, the Department of Public Service, and the Department of Agriculture and Markets. The Department reviewed the feedback received in this stakeholder outreach as part of further developing Part 496.”

The Regulatory Impact Statement for proposed Part 496 explains that DEC worked with NYSERDA to incorporate the CLCPA requirements that differ from the IPCC protocol and conduct new analyses as needed for the rulemaking. They also noted that:

“Some of these analyses were also assisted by a NYSERDA consultant (Eastern Research Group, Inc) and subcontractor (Synapse Energy Economics, Inc) and reviewed by subject matter experts from the US Environmental Protection Agency, the US Department of Energy, the Environmental Defense Fund, and university partners. Additional stakeholder input is described later in this document. New analyses were not required in all cases, as the new requirements of the CLCPA do not completely differ from the methodology historically used by NYSERDA. As such, many components of the estimates provided here are the same or similar to the previous State inventory.”

One of the big changes in the proposed 1990 emissions inventory is how methane is handled.  A primary reference in the RIS is a Science article that was also published as an Environmental Defense Fund (EDF) report that claims “that in 2015, supply chain emissions were ∼60% higher than the U.S. Environmental Protection Agency inventory estimate”.  Given that the paper is cited as “proof” that the proposed bottom-up baseline is valid, it is inappropriate for New York policy to be reviewed by subject matter experts from EDF that were from the organization that published such an influential paper on the methane emissions.

I believe that an effective public stakeholder process has to be an iterative process including a DEC document for discussion, a DEC presentation of their rationale, a chance for the public to respond with questions and comments, a response to those comments that is available for the public to consider, and another chance to provide comments.  DEC held webinars that were very general in nature and offered little opportunity for technical questions.  Stakeholders responded with their thoughts but there was not another round of discussion.  Instead the inventory went into rule making and it is impossible to get answers to anything but general questions.  The rule-making process requires a public hearing but that won’t be interactive either.  It is only an opportunity to publicly submit comments which, frankly, can be done more effectively in written comments.

Conclusion

There are serious problems with the promulgation of an emissions standard based on an unvetted 1990 emission inventory.  There is no opportunity for meaningful comments based on a fully documented inventory.  The CLCPA inconsistency of the timing of the comprehensive statewide greenhouse gas emissions report that is issued a year after the emissions standard is required to be promulgated is an indictment of the political process that produced the CLCPA.  The rush to meet the schedule has over-ridden the alleged goal of using the “best available” inventory.

My fear that the CLCPA answer is already in the back of the book appears to be coming true.  The emission inventory is only one aspect of this massive transition.  If there is no opportunity for meaningful discourse for this element what hope is that there will be opportunities to fully evaluate other aspects of the rule.  Not only is the cart before the horse, the cart is fully loaded without the opportunity to examine its contents.

Climate Leadership and Community Protection Act 1990 Emissions Inventory

In the summer of 2019 Governor Cuomo and the New York State Legislature passed the Climate Leadership and Community Protection Act (CLCPA) which was described as the most ambitious and comprehensive climate and clean energy legislation in the country when Cuomo signed the legislation.  On August 14 New York State Department of Environmental Conservation (DEC) Commissioner Basil Seggos released proposed regulations to reduce greenhouse gas emission statewide and implement the CLCPA.  A key part of this regulation is defining the baseline 1990 emission inventory and this is a quick initial post about the inventory.

Up until this time the “official” New York greenhouse gas emission inventory was prepared by the New York State Energy Research and Development Authority (NYSERDA)  According to the latest edition of the NYSERDA GHG emission inventory Table S-2 New York State GHG Emissions 1990–2016 the New York State 1990 GHG emissions were 236.19 MMtCO2e.

The CLCPA mandates specific requirements for the 1990 emission inventory that I am positive no legislator who voted for the law understood.  The most impactful requirement was to specify that the global warming potential (GWP) be calculated over a 20-year time horizon.  The following section of the Intergovernmental Panel on Climate Change (IPCC) describes time horizons and the GWP.

Reference: Myhre, G., D. Shindell, F.-M. Bréon, W. Collins, J. Fuglestvedt, J. Huang, D. Koch, J.-F. Lamarque, D. Lee, B. Mendoza, T. Nakajima, A. Robock, G. Stephens, T. Takemura and H. Zhang, 2013: Anthropogenic and Natural Radiative Forc­ing. In: Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

“The GWP has become the default metric for transferring emissions of different gases to a common scale; often called ‘CO2 equivalent emis­sions’ (e.g., Shine, 2009). It has usually been integrated over 20, 100 or 500 years consistent with Houghton et al. (1990). Note, however that Houghton et al. presented these time horizons as ‘candidates for discussion [that] should not be considered as having any special sig­nificance’. The GWP for a time horizon of 100 years was later adopted as a metric to implement the multi-gas approach embedded in the United Nations Framework Convention on Climate Change (UNFCCC) and made operational in the 1997 Kyoto Protocol. The choice of time horizon has a strong effect on the GWP values — and thus also on the calculated contributions of CO2 equivalent emissions by component, sector or nation. There is no scientific argument for selecting 100 years compared with other choices (Fuglestvedt et al., 2003; Shine, 2009). The choice of time horizon is a value judgement because it depends on the relative weight assigned to effects at different times. Other important choices include the background atmosphere on which the GWP calculations are superimposed, and the way indirect effects and feedbacks are included (see Section 8.7.1.4).”

According to the draft regulation released on August 14, § 496.4 Statewide Emission Limits (a) For the purposes of this Part, the estimated level of statewide greenhouse gas emissions in 1990 is 401.38 million metric tons of carbon dioxide equivalent, using a GWP20 as provided in the IPCC assessment report.

More to come on this topic.

Critique of RGGI 101 How it Works and How it Benefits Pennsylvanians

Update:  Correction added for temperature savings interpretation.  Thanks Denis Rushworth.

Because I have a long-standing interest in the Regional Greenhouse Gas Initiative (RGGI), I tuned into the Pennsylvania Department of Environmental Protection (DEP) webinar held on August 6, 2020.  The webinar was titled “RGGI 101 How it Works and How it Benefits Pennsylvanians” and outlined “how participating in RGGI will lower greenhouse gas and other air pollution emissions from electric power plants” and also covered benefits of the program, including health and economic benefits.  This post describes my impression of the presentation against the reality of my experience with RGGI.

I have been involved in the RGGI program process since it was first proposed prior to 2008.  I blog about the details of the RGGI program because very few seem to want to provide any criticisms of the program. I have extensive experience with air pollution control theory and implementation having worked every cap and trade program affecting electric generating facilities in New York including the Acid Rain Program, Regional Greenhouse Gas Initiative (RGGI) and several Nitrogen Oxide programs.  Note that my experience is exclusively on the industry side and the difference in perspective between affected sources trying to comply with the rules and economists opining about what they should be doing have important ramifications.  I think this background served me well commenting on this DEP presentation.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

RGGI is a market-based program to reduce greenhouse gas emissions from the power sector.  According to a RGGI website: “The RGGI states issue CO2 allowances which are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs. Programs funded with RGGI investments have spanned a wide range of consumers, providing benefits and improvements to private homes, local businesses, multi-family housing, industrial facilities, community buildings, retail customers, and more.”

RGGI started in 2009 and the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont have participated ever since.  New Jersey was included at the start of the program, dropped out and re-joined in 2020.  Virginia recently announced that they would join in 2021.  According to this presentation Pennsylvania is planning to join in 2022.

According to the DEP’s RGGI website,  “Governor Wolf recently signed an Executive Order that directed DEP to begin a rulemaking process that will allow Pennsylvania to participate in the Regional Greenhouse Gas Initiative (RGGI), with the goal of reducing carbon emissions from the electricity sector”.  The presentation described this process and explained how the revenues could potentially be invested.

RGGI 101: How it Works and How it Benefits Pennsylvanians

This post will focus on the webinar presentation available at DEP’s RGGI website at the August 6, 2020 RGGI 101 webinar link.  The presentation claimed climate change impacts are happening now in Pennsylvania, gave an overview of RGGI, described how it works, provided information on the DEP’s modeling efforts, claimed that it will benefit “Pennsylvanians and Communities”, talked about plans to invest RGGI revenues and then concluded with plans for the next steps in the process.

Both New York and Pennsylvania rationalize their CO2 emission reduction programs the same way.  First there is a list of bad things that happened followed by claims of changes in the climate.  Clearly the effects were caused by the changes in the climate.  There is never any attempt to attribute just how much of the effect could have been caused by climate as opposed to plain old weather and never any suggestion that the effect of CO2 emissions on climate relative to natural variability is very uncertain.

After the webinar presented those slides, they added a wrinkle that New York has not included yet.  There was a slide that claimed that according to the 2019 Yale Climate National Survey 72% of Pennsylvanians support regulating CO2 as a pollutant.  Personally, I think that a survey get whatever answer the sponsor wants by tuning the questions.  But if DEP wants to play the survey game what about the Gallup poll, taken July 1-23, among U.S. 1,007 adults, that asked respondents, “What do you think is the most important problem facing this country today?”  A plurality, or 30 percent, chose “coronavirus/diseases” as the most important problem, followed by “the government/poor leadership” (23 percent), race relations/racism (16 percent), “unifying the country” (six percent), and “crime/violence” (five percent).  Notably, “climate change/environment/pollution” came at the very bottom of the list, garnering just one percent support.

Slide 6 describes Pennsylvania participation in RGGI.  It graphically shows how five steps of RGGI participation will lead to helping the state combat climate change.  One of the steps says: “Since 2005, RGGI states have significantly reduced their power sector CO2 pollution” beneath a graphic that indicates that there was a 45% reduction.  This statement is an important part of the reason why I think RGGI has not been an unqualified success despite proponent’s claims that it is.

On July 29, 2020 RGGI released their Investment of RGGI Proceeds in 2018 report that tracks the investment of the RGGI proceeds and the benefits of these investments throughout the region. That report contains a similar statement: “As a whole, the RGGI states have reduced power sector CO2 pollution over 50% since 2005, while the region’s gross domestic product has continued to grow”.  Both DEP and RGGI make the observed reduction sound like the reductions are due to RGGI.  RGGI did not start until 2009 so the reductions from 2005 until then could not be due to RGGI.

Table 1 lists the total CO2 emissions for the 12-states that have always been in RGGI, the total including PA, NJ and VA, as well as just the PA emissions totals from 2005 to 2018.  The first year of the RGGI program was 2009, when the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont emitted 108,487,823 tons of CO2.  In 2005 emissions from those nine states equaled 147,032,069 tons.  This report was for 2018 and those states emitted 75,177,614 tons of CO2 so my estimate of the reduction since 2005 is 49%.  But 19% of the reductions had occurred by 2008 before RGGI started so clearly some other factor was at play.

Table 1: State-Level CO2 Emissions for Twelve RGGI States 2005 to 2019

9-State 12-State
Year Total PA Total
2005 147,032,069 121,858,351 321,908,874
2006 128,402,332 119,193,505 295,374,145
2007 133,903,150 123,585,266 310,185,905
2008 119,577,750 119,393,275 287,267,461
2009 108,487,823 114,331,904 269,527,189
2010 118,444,437 125,655,768 299,647,928
2011 104,844,813 118,689,447 270,233,082
2012 95,595,518 111,175,907 249,110,371
2013 89,115,999 112,108,370 249,609,392
2014 89,554,562 104,303,446 244,555,455
2015 86,382,080 95,211,399 235,122,647
2016 82,650,554 89,188,551 229,818,881
2017 67,830,311 84,201,372 203,002,123
2018 75,177,614 81,411,494 209,998,758
2019 63,537,644 82,798,637 196,614,413

I have used the EPA’s Clean Air Markets Division emissions data to determine why emissions decreased as shown in the RGGI 12-State EPA Clean Air Markets Division All Program Annual Emissions Data by Primary Fuel Type table.  It is obvious that emissions reductions from coal and oil generating are the primary reason why the emissions decreased.  Note that both coal and oil emissions have dropped over 78% since the baseline over all 12 states.  Natural gas increased but not nearly as much.  I believe that the fuel switch from coal and oil to natural gas occurred because natural gas was the cheaper fuel and had very little to do with RGGI because the CO2 allowance cost adder to the plant’s operating costs was relatively small.   There is no evidence that any affected source in RGGI installed add-on controls to reduce their CO2 emissions.  The only other option at a power plant is to become more efficient and burn less fuel.  However, because fuel costs are the biggest driver for operational costs that means efficiency projects to reduce fuel use means have always been considered by these sources.   Because the cost adder of the RGGI carbon price was relatively small I do not believe that any affected source installed an efficiency project as part of its RGGI compliance strategy.

I believe that fuel switching is the primary cause for the observed emission reductions.  Nonetheless RGGI did cause some reductions but that is limited to reductions due to the investments made with the auction proceeds.  RGGI prepares an annual Investments of Proceeds  report that I used to calculate the annual emission reductions accumulated since the beginning of the program through 2018.  The table Accumulated Annual Regional Greenhouse Gas Initiative Benefits Through 2018 lists the annual avoided CO2 emissions generated by the RGGI investments from four previous reports.  The accumulated total of the annual reductions from RGGI investments is 3,091,992 tons while the difference between total annual 2005 and 2018 emissions is 71,854,455 tons.  The RGGI investments are only directly responsible for 4% of the total observed annual reductions over the 2005 to 2018 timeframe!  I believe that the average of the three years before the program started is a better baseline and using that metric there was a 52,116,796 annual ton reduction (41%) in the nine RGGI states to 2018 and RGGI investments accounted for 6%.

The next slide lists benefits of RGGI participation.  In order to respond to each of these bullet points would take a lot of effort.  One claim is that “CO2 emissions will decrease by more than 10x when compared to future emissions without program participation”.  That is based on modeling results and those results are largely based on assumptions about the price of natural gas relative coal.  The model has been used from the beginning to determine the effects of RGGI and if one were to verify the original predictions of emissions reductions against what happened the results would be terrible because natural gas became so much cheaper since 2009.  My instinct is that the cost differential will remain the same which I believe will lead to continued fuel switching that will be the primary cause of reductions not RGGI participation.  The economic benefits are based on another model that I don’t trust.  The improvements to healthcare costs and quality of life all assume that there is a linear, no-threshold relationship with air pollution.  I have looked at the PM2.5 relationship in New York City and am unimpressed with the purported benefits.

There are five slides that explain how RGGI works.  It is basically a more detailed description of material already presented.  There are a couple of items of note.  The DEP proposes a cap of 78 million tons a little over 3 million tons less than the emissions in 2018.  The CO2 limit slide includes a bullet that states: “Analyzing emissions impacts in environmental justice (EJ) areas and developing EJ principles”.  It is currently fashionable among progressive environmentalists to incorporate consideration of EJ communities.  Unfortunately, I think the concern about emissions from power plants directly affecting health in neighboring communities is mis-placed because they usually claim health impacts from ozone and PM2.5 which are secondary pollutants.  That means that formation takes time and by that time that happens the pollution has been transported away from the immediate neighborhood.  That is not to say that they are not nuisance impacts from the neighborhood power plants.  DEP expects $300 million in 2022 from the sale of allowances.  Under existing statutes, they can only use auction revenue for the “elimination of air pollution” and that affects the revenue investment strategy.

The slide titled How RGGI Reduces Air Pollution describes a theory of this market-based approach for pollution control.  When the affected sources purchase allowances to cover their emissions, they factor that cost into the price they sell their electricity.  Theory says that the less pollution a power plant creates the cheaper they can sell the electricity.  Grid operators buy the cheapest electricity first so cleaner energy is cheaper electricity.  I believe that there is a gap between theory and the reality of the RGGI cost to the affected sources.  As noted previously I believe the RGGI CO2 allowance cost adder to the plant’s operating costs has been relatively small and will continue to be small.  That was based on conversations with people who would know at the power company I worked at before retirement and discussions with colleagues.  Until such time that someone calculates those costs and shows that my presumption is wrong then I continue to believe that this theory, while correct, in practice does not affect power plant dispatch and emissions simply because the allowance cost adder is too small relative to differences in fuel costs.

There is a slide discussing the models used that I am not going to discuss.  Just keep in mind that all models reflect the assumptions used by the model developers.  I have yet to see verification tests that prove that the models in question have accurately made future projections in the past.  Nonetheless there is a later slide that claims nine different health benefits.

The webinar then turned to a discussion of revenue reinvestment scenarios.  They looked at three scenarios for discussion and emphasized that they do not reflect funding commitments. The three scenarios were: balanced approach, ratepayer assistance, and general fund and varied by the relative percentage in each of the five broad categories.  Because they can only use auction revenue for the “elimination of air pollution” they only discussed the balanced approach which will “utilize auction revenue to spur innovation, technology deployment and incentivize private sector investments”.  Investments will basically be one third to the energy efficiency, clean and renewable energy and greenhouse gas abatement categories.  Their modeling shows that it generates jobs and grows the economy, all with only a slight decrease in disposable income.

I believe that the ratepayer assistance reinvestment scenario is the best choice.  During the presentation it was noted that energy efficiency investments can be targeted to those who are having trouble paying their energy costs and other than direct bill assistance this is the only category that has that advantage.  More importantly, the results so far in RGGI reported in the annual Investments of Proceeds suggest that investments in clean and renewable energy and greenhouse gas abatement would not be a good deal for Pennsylvania.  As noted previously the accumulated total of the annual reductions from RGGI investments is 3,091,992 tons.  In the 2018 RGGI All-Time Benefits of RGGI Investments table I list the accumulated total annual RGGI investments as $2,578,305,737.  The RGGI CO2 reduction cost per ton based on those numbers is $898 dollars per ton of CO2 reduced.

2018 RGGI All-Time Benefits of RGGI Investments

RGGI Avoided Electric Energy Energy
Investments CO2 Savings Savings
($) (Short tons) (MWhr) (mmBtu)
Through 2018 $2,578,305,737 39,359,169 56,990,140 199,317,431

One way to determine if the GHG emission reduction costs are an effective tool is to compare the cost per ton reduced against a damage metric.  The social cost of carbon (SCC) is the metric used by Federal agencies for this purpose.  I recently posted an overview summary of the SCC but for the purposes of this post you need to know that the values range widely depending on assumptions.  The most widely used value at this time is from the Obama-era Interagency Working group.  If you use a discount rate of 3% and consider global benefits then the 2020 SCC value is $50.  The RGGI investments exceed that metric by over an order of magnitude so they cannot be considered cost-effective relative to the alleged negative impacts of CO2 emissions.

What’s the Point?

According to DEP’s RGGI website: “Governor Wolf states that climate change is the most critical environmental threat confronting the world, and given that power generation is one of the largest contributors to greenhouse gas emissions, it is time to take concrete, economically sound and immediate steps to reduce emissions”.  If Pennsylvania joins RGGI what effect will it have on climate change?   I could not find an estimate by DEP so I made my own.  I simply adapted the the calculations in Analysis of US and State-By-State Carbon Dioxide Emissions and Potential “Savings” In Future Global Temperature and Global Sea Level Rise  to estimate the potential effect.  This analysis of U.S. and state by state carbon dioxide 2010 emissions relative to global emissions quantifies the relative numbers and the potential “savings” in future global temperature and global sea level rise.   These estimates are based on MAGICC: Model for the Assessment of Greenhouse-gas Induced Climate Change) so they represent projected changes based on the Intergovernmental Panel on Climate Change estimates.  All I did in my calculation was to pro-rate the United States impacts by the ratio of Pennsylvania electric sector emissions in 2019 divided by United States emissions to determine the effects of a complete cessation of all CO2 Pennsylvania electric sector emissions to estimate the best-case for joining RGGI.

As shown in the Pennsylvania RGGI Potential savings in future global warming table I found there would be a reduction, or a “savings,” of approximately 0.0011°C by the year 2050 and 0.0023°C by the year 2100.  To give you an idea of how small this temperature change is  consider changes with elevation and latitude.  Generally, temperature decreases three (3) degrees Fahrenheit for every 1,000-foot increase in elevation above sea level.  The projected temperature difference is the same as going up 9 inches.  The general rule is that temperature changes three (3) degrees Fahrenheit for every 300-mile change in latitude at an elevation of sea level.  The projected temperature change is the same as going north two tenths of a mile.

Pennsylvania’s action should also be considered relative to the rest of the world.  According to the China Electricity Council, about 29.9 gigawatts of new coal power capacity was added in 2019 and a further 46 GW of coal-fired power plants are under construction.  If you assume that the new coal plants are super-critical units with an efficiency of 44% and have a capacity factor of 80%, the reductions provided by this program will be replaced by the added 2019 Chinese capacity in 389 days or 153 days if the 2019 capacity and the units under construction are combined.  Clearly, in the absence of worldwide commitments Pennsylvania joining RGGI will have no tangible benefits relative to global warming.

Conclusion

I have followed the RGGI program for years and summarized my observations late last year.  I believe that RGGI is not the success that its adherents believe. Based on the numbers there are some important caveats to the simplistic comparison of before and after emissions.  At the bottom of the DEP’s RGGI website there is a link stating “Learn more about the Regional Greenhouse Gas Initiative and its results over the last ten years”.  The link is to the Acadia Center report “The Regional Greenhouse Gas Initiative: Ten Years in Review”.  That report and the claims for success made in the presentation both make the same error because they attribute all the reductions in CO2 emissions and air quality improvements to the RGGI program.  Fuel switching independent of RGGI was the most effective driver of emissions reductions since the inception of RGGI.  Emission reductions from direct RGGI investments were only responsible for 5% of the observed reductions.  RGGI investments in emission reductions were not efficient at $897 per ton of CO2 removed.  In my opinion those are not the hallmarks of a successful pollution control program.

As a model for future programs, RGGI proved that a regional entity could implement a cap and auction program.  However, the actual cause of observed reductions should be considered before Pennsylvania joins RGGI.  For all intents and purposes RGGI is simply a tax.  If Pennsylvania does join RGGI, based on the results to date, I think all the investments should go to energy efficiency and direct bill assistance so that those least able to afford the additional costs imposed by the program can get some benefits.

As to the effects on climate change if Pennsylvania joins RGGI, it is obvious that there will be no discernable impact.  That being the case, this is nothing more than virtue signaling to appeal to a motivated political constituency.

Climate Leadership and Community Protection Act Implementation Risk Management

In the summer of 2019 Governor Cuomo and the New York State Legislature passed the Climate Leadership and Community Protection Act (Climate Act) and this summer the implementation process is in full swing.  This post addresses risk management concerns about the implementation process.

I am a retired electric utility meteorologist with nearly 40-years experience analyzing the effects of meteorology on electric operations. I believe that gives me a relatively unique background to consider the potential effects of energy policies related to doing “something” about climate change.  I have written a series of posts on the feasibility, implications and consequences of this aspect of the Climate Act.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

The Climate Act establishes a Climate Action Council at §75-0103 that will develop a scoping plan to implement the requirements of the law.  The Citizens Budget Commission developed an overview of the CLCPA targets in Green in Perspective: 6 Facts to Help New Yorkers Understand the Climate Leadership and Community Protection Act.  The current emphasis is implementation of plans to meet the requirement to reduce GHG emissions from electricity production by 70% in 2030 and eliminate them altogether by 2040.  In my opinion, the proponents of the Climate Act believe that meeting the aspirational goal of a carbon-free electric system by 2040 is simply a matter of political will.  I am not nearly as optimistic because every time I look at any aspect of that transition I find unexpected complications, unintended consequences, and ever higher costs.

The basis of this article is work by the Risk Monger, a blog “meant to challenge simplistic solutions to hard problems on environmental-health risks”. The author of the blog, David Zaruk, is an EU risk and science communications specialist since 2000, active in EU policy events and science in society questions of the use of the Precautionary Principle. He is a professor at Odisee University College where he lectures on Communications, Marketing, EU Lobbying and PR. In my opinion, he clearly explains the complexities of risk management and I recommend his work highly.  I found his work apropos to the Climate Act implementation process.

Precautionary Principle

The Precautionary Principle is a strategy to cope with possible risks where scientific understanding is incomplete.  Unfortunately, many rely on this idea that to be safe we have to eliminate all risks as a precaution.  Zaruk explains that the problem is that policy-makers and politicians have confused this uncertainty management tool with risk management.  The conclusion of a recent series of posts on the failures of risk management of the COVID-19 response, while fascinating on its own, also provides a cautionary tale relative to New York’s energy policy and implementation of the Climate Act.

New York’s Climate Act is generally driven by the precautionary principle approach.  New York is trying to remove the risks of climate change impacts despite our lack of complete knowledge about climate variations.  For example, the Regulatory Impact Statement (RIS) for proposed revisions to the Part 242 CO2 Budget Trading Program states that “Overwhelming scientific evidence confirms that a warming climate poses a serious threat to the environmental resources and public health of New York State”.  After pointing out that anthropogenic GHG emissions have increased and that ambient levels of CO2 are “higher than at any point in the past 800,000 years”, the RIS goes on to say “The large and persuasive body of research demonstrates through unequivocal evidence that the Earth’s lower atmosphere, oceans, and land surfaces are warming; sea level is rising; and snow cover, mountain glaciers, and Greenland and Antarctic ice sheets are shrinking”.  In order to confront those risks the Climate Act focuses on greenhouse gas emission reductions but does not include a process to ensure that their cure is not worse than the alleged disease.

Risk Monger’s Risk Management Approach

Zaruk outlines seven steps of risk management:

        1. Scenario Building – all options must be mapped out;
        2. Risk Assessment – collect and refine data and evidence;
        3. Risk Analysis – weigh data against benefits and consequences;
        4. Apply Risk Reduction Measures – identify vulnerable groups and reduce exposures on them;
        5. Risk Communication (Empowerment) – inform public of risks and how to protect themselves;
        6. As Low as Reasonably Achievable (ALARA) – reduce exposures to a reasonable level vis-à-vis social well-being; and
        7. Refine ALARA: continuous exposure reductions – continually lower exposure levels so as to ensure benefits at higher safety levels

If these steps fail, apply the precautionary principle – As benefits and social goods will be lost, this is the last step and should only be temporary

These seven steps are the basis for twelve strategies he proposes as an alternative policy approach for rational discussion.  He believes that using these risk management strategies would have provided a better solution to the COVID-19 crisis and I believe that it would be appropriate to consider his alternative with respect to the Climate Act.

Zaruk argues that the docilian mindset, demanding a world with zero-risk, helped drive a solution that caused economic and social collapse in Western economies trying to reduce the effect of the virus outbreak.  Unfortunately, as he points out, there are influential forces lobbying for even more precaution.  His strategies for better risk management are entirely appropriate to consider with respect to the transition to an energy system that eliminates the use of fossil fuels because of the risks to affordability and reliability.  In the next section I address his strategies in this context.

Risk Management Strategies

The Risk-Monger’s first strategy is to place precaution properly in risk management.  The Climate Act is taking the precautionary step to ban the use of fossil fuels for electric generation by 2040.  Zaruk argues that stopping an activity can have significant consequences so it is more appropriate to implement this kind of stringent policy at the end of the process when “our capacity to prevent harm has failed or the value of the benefits could not be justified”.  The fact is that there are undeniable benefits to fossil fuels and alternative technologies are not well developed which could cause reliability problems and increase costs.  The Climate Act targets put the “cart before the horse” by not evaluating the potential consequences of the alternatives before setting the targets.

Two other strategies are related.  He argues that setting up government risk management units to provide independent oversight and foresight about emerging issues has tremendous value and proposes to have an independent risk assessment process outside of the political process that can present their findings to the public without interference.  Zaruk notes that “While Churchill’s saying: ‘Scientists should be kept on tap, but not on top’ stands as a truism of modern democracies and accountability, it does not mean that political leaders can be allowed to try to hide facts or deny evidence by pressuring their advisers”.  Unfortunately, this is directly opposite of the actions of the Cuomo Administration.  In the summer of 2019 a group of retired Department of Public Service employees submitted a letter that stated “Until the current administration, Governors have generally respected the plain language of the Public Service Law (PSL), which … safeguards the mission of the DPS to serve not political interests but the public interest.”  Based on my private discussions with staff at different agencies, the Governor’s minions micro-manage every decision based on political ramifications. This mindset permeates the state effectively eliminating any criticisms by industry in general and the utility industry in particular.

Zaruk recommends a strategy to promote scenario building in the governance process:

“Contrary to common practice in policymaking today, it is not a sign of weakness to have a Plan B or consider alternative eventualities. Examining a multitude of scenarios allows a risk manager to prepare for any situation, avoid black swans and limit unforeseen consequences. In most cases it is common sense: you better reduce your exposure to risks if you can imagine a wide range of scenarios and likelihoods and suitably prepare for them. “

The Climate Act mandates a scoping plan to implement an energy transition to meet the aspirational goals to reduce GHG emissions.  To me a scoping plan implies that there is no question about feasibility and the plan is simply a matter of picking the components to assemble the plan.  I have my doubts about the feasibility of the Climate Act targets.  There is no question in my mind that in order to prepare for any situation, avoid black swans and limit unforeseen consequences that outreach to many disciplines is necessary.  For example, as a meteorologist, I have spent some time trying to determine renewable resource availability for long duration periods of low renewable resources (most notably a period of calm winds in the winter when solar is at a minimum).  One scenario that I think is necessary is to look short-term at solar resource availability using an existing representative data set.  There has been no indication that state planners are considering the use of that resource.  My expectation is that the scoping plan will develop a narrow set of options that will allegedly meet the targets of the Climate Act but will sacrifice current reliability standards that reflect many different scenarios.

There are two recommended strategies directly at odds with the Climate Act implementation process: ensure expertise lies at the foundation of risk management and bring in different sources of expertise.  Zaruk points out that the European Union had an independent chief scientific advisor but that when there were results that were not politically correct, activist lobbying led to the abolishment of the position.  The position offered the opportunity to double-check policies to make sure that it represents science in the public interest and not just science that represents the most vocal proponents.  He explains that “Risk management needs to be based on the best evidence, not the strongest political ideology but as precaution serves as an easy, expedient, blameless solution, the battle to undo its dominance will be challenging”.  Such a function would be useful in New York but in the current Administration is clearly a non-starter.

He goes on to explain the need for different sources of expertise by noting that “limiting your advice pool is how mistakes are made”.    He states:

“I can’t count how many times in 2020 I have heard people talk about “the” science as if you simply needed to put a question into a machine and the answer would come out. Science is complex, often contested and defines itself by a method of challenging its theories and paradigms. Only consensus-loving neophytes (and a Swedish teenager) would talk about “the” science as if it meant something certain. Part of the risk management process is to plan out scenarios based on the best available scientific voices at that time.”

The Climate Action Council mandated to develop the scoping plan to implement the Climate Act ignores the importance of expertise.  The Council has 22 voting members: 12 political appointees who head various agencies and the rest non-agency experts: two appointed by the governor, three each appointed by majority leaders of the Assembly and Senate and one each appointed by the minority leaders of the Assembly and Senate.  The ten at large members shall “include at all times individuals with expertise in issues relating to climate change mitigation and/or adaptation, such as environmental justice, labor, public health and regulated industries”. In my opinion, it is lunacy that the Council that is supposed to determine how the future energy system of the state is supposed to operate does not specify energy system expertise as a criterion.  The bottom line is that none of these 22 people have relevant expertise for choosing options for a reliable energy system.

The only hope for New York’s future energy system is the requirement that the “The council shall convene advisory panels requiring special expertise and, at a minimum, shall establish advisory panels on transportation, energy intensive and trade-exposed industries, land-use and local government, energy efficiency and housing, power generation, and agriculture and forestry”. The advisory panels are charged “to provide recommendations to the council on specific topics, in its preparation of the scoping plan, and interim updates to the scoping plan, and in fulfilling the council’s ongoing duties”.  My concern is that it is not clear how any of these panels can provide recommendations that are inconsistent with the agendas of the Council that is weighed so heavily for those who believe that the meeting the goals is simply a matter of political will.  The plan for the Climate Act is directly at odds with these risk management expertise strategies.

Zaruk states that the key to risk management is that we should not be aiming for safe, but rather safer.  He defines this step: “As Low as Reasonably Achievable (ALARA)” and includes a strategy to use ALARA as a return to risk realism.  He explains:

“This zero-risk mindset, this demand for total safety, is built on a false objective. We should not be aiming for safe, but rather safer. But what level of safer is safe enough? Like any situation with uncertainty, it depends on the circumstances, needs and realities. If you are dying of thirst in a desert, what level of water purity will you accept? This is always a question of what is reasonably achievable. The principle goal for risk managers is to reduce exposure to hazards (risks) to as low as reasonably achievable”.

He explains what goes in ALARA:

“Some say it is simply a cost-benefit analysis (and then they would add that you cannot put a price on a human life). Every risk is different (to everyone) and the variables affecting our reasoning range from resources, available equivalent alternatives, time to undesired consequences, public perception of the risk, traditional practices, accountability, trust relations and the public willingness to change certain lifestyle habits.”

My primary concern with the Climate Act is the risk to electric system reliability that will occur when the system has to rely on intermittent and diffuse renewable energy.  There is a related principle particularly applicable to the Climate Act.  The Pareto principle states that, for many events, roughly 80% of the effects come from 20% of the causes. The primary worry here, in the absence of using an ALARA strategy, is that 80% of the risks to the electric system will occur as the amount of fossil fuel use goes below 20% of the total.  As noted before, I expect the primary problem will be the need for dispatchable electric power when renewable resources are low (think a calm period in the winter when solar resources are weak).  The great advantage of fossil-fired power plants is dispatchability and the risks of losing this firm capacity must be evaluated.

He concludes this strategy as follows:

 “There is no one rule guiding risk management as ALARA. Each situation looks at what is reasonable and what is achievable. Dreamers and idealists want a world that is simply unachievable; pragmatists could probably achieve more. Continuous improvement is a key element to ALARA. It is not just to lower the risk to what is reasonably achievable, but to then push that exposure reduction even lower … continuously in an iterative, reasonable process.”

Zaruk also recommends some long-term strategies that are not directly applicable to Climate Act implementation but would serve New York’s policy process well.  They all relate to public education and I think the primary target should be politicians and policy making bureaucrats.  He suggests that we all need to accept that risk management is not about assuring 100% safe and that means we have to abandon the precautionary logic.  In order to manage the expertise necessary for risk assessment we need to develop a viable means for public consultation.  With that in place then we can create a community trust/communication mechanism.  All this can promote a risk resilient population.

Conclusion

I spend a lot of time writing about the oncoming train wreck of New York’s Climate Act.  I wrote this hoping someone, somewhere with some influence might pick up on the need to step back and assess the risks of trying to meet the aspirational goals.  Zaruk has much more influence but is frustrated by the fact that the precautionary principle is driving so much current policy.  His conclusion, after writing 15 articles on the response to COVID-19, is what I expect to be the likely outcome of the Climate Act on its present trajectory:

“I do not have the millions of euros of foundation-fed interests, the guru-led tribal passion or activist-driven fear-making machinery of the privileged zealots. What that crap-cash has bought them over the past two decades (relying on a misplaced precautionary policy tool) is expedience, irresponsibility and catastrophic risk management failure. And now as these relentless fundamentalists line up again at the public trough, we are facing economic collapse, famine and their insistence on even more precaution.”

Investment of RGGI Proceeds Report for 2018

Update: August 7, 2020:  I submitted a  Letter to RGGI on August 3 2020 describing the issues raised in this article.  Further updates if there is a response.

This is the third installment of my annual updates on the Regional Greenhouse Gas Initiative (RGGI) annual Investments of Proceeds update.  This post compares the claims about the success of the investments against reality.

I have been involved in the RGGI program process since its inception.  I blog about the details of the RGGI program because very few seem to want to provide any criticisms of the program. The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

Background

RGGI is a market-based program to reduce greenhouse gas emissions. It is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector.  According to a RGGI website: “The RGGI states issue CO2 allowances which are distributed almost entirely through regional auctions, resulting in proceeds for reinvestment in strategic energy and consumer programs. Programs funded with RGGI investments have spanned a wide range of consumers, providing benefits and improvements to private homes, local businesses, multi-family housing, industrial facilities, community buildings, retail customers, and more.”  Note that New Jersey has re-joined RGGI and Virginia will be joining in 2021.

The latest update was released on July 29, 2020.   The Investment of RGGI Proceeds in 2018 report tracks the investment of the RGGI proceeds and the benefits of these investments throughout the region. According to the report, the lifetime benefits of RGGI investments made in 2018 include:

        • $2 billion in lifetime energy bill savings
        • 4.6 million short tons of CO2 emissions avoided

RGGI notes that “The largest share of the investments was directed to energy efficiency, with 38% of the 2018 total. Greenhouse gas abatement programs, which include carbon-reducing beneficial electrification projects, received 20% of 2018 investments. 19% of investments were directed to clean and renewable energy programs, with direct bill assistance receiving 16%.”

Although proponents claim that this program has been an unqualified success I disagree.  I believe that the report mis-characterizes some of the numbers relative to the value of the program as an emission reduction approach.  This is because they present “lifetime” benefits of the investments.  Everyone is talking about emissions reductions from some annual value, usually 1990.  In order to determine effectiveness to meet those goals the only benefits that count are annual reductions due to RGGI.  While it may be appropriate to document the lifetime dollar savings for energy efficiency, I am convinced that using lifetime values for any other parameter is bogus.

Emissions Reductions

The first mis-leading statement claims that “As a whole, the RGGI states have reduced power sector CO2 pollution over 50% since 2005, while the region’s gross domestic product has continued to grow”. The first year of the RGGI program was 2009, when the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont emitted 108,487,823 tons of CO2.  Their comparison starting date was 2005 when the emissions from those nine states equaled 147,032,069 tons.  The insinuation in the 50% claim is that the RGGI program had something to do with the reduction but the reduction between 2005 and the start of the program was 26% so clearly something else has been going on.  This report was for 2018 and those states emitted 75,177,614 tons of CO2 so my estimate of the reduction since 2005 is 49%. Data are listed in the State-Level CO2 Emissions for Nine RGGI States 2005 to 2019 table. I used the EPA Clean Air Markets Division Data and Maps query tool to download the emissions from all programs by state for the period 2005 to 2018 so slight differences could be due to the data  used.

The important question is why did the emissions go down.  I believe that the real measure of RGGI emissions reductions success is the reduction due to the investments made with the auction proceeds so I compared the annual reductions made by RGGI investments.  The biggest flaw in this report is that it does not provide the annual RGGI investment CO2 reduction values accumulated since the beginning of the program.  In order to make a comparison to the CO2 reduction goals we have to sum the values in the previous reports to provide that information.  The table Accumulated Annual Regional Greenhouse Gas Initiative Benefits Through 2018 lists the annual avoided CO2 emissions generated by the RGGI investments from four previous reports as well as the lifetime values.  The accumulated total of the annual reductions from RGGI investments is 3,091,992 tons while the difference between total annual 2005 and 2018 emissions is 71,854,455 tons.  The RGGI investments are only directly responsible for 4% of the total observed annual reductions over the 2005 to 2018 timeframe!  I believe that the average of the three years before the program started is a better baseline and using that metric there was a 52,116,796 annual ton reduction (41%) to 2018 and RGGI investments accounted for only 6%.

Cost Efficiency

One way to determine if the GHG emission reduction costs are an effective tool is to compare the cost per ton reduced against a damage metric.  The social cost of carbon (SCC) is the metric used by Federal agencies for this purpose.  It is the present-day value of projected future net damages from emitting a ton of CO2 today.  I recently posted an overview summary of the SCC as used in New York. but for the purposes of this post you need to know that the values range widely depending on assumptions.  For example, if you use a discount rate of 3% and consider global benefits like the Obama-era Environmental Protection Agency (EPA) did then the 2020 SCC value is $50.  On the other hand, the current Administration interim SCC value is $7 for a 3% discount rate and $2 for a 5% discount rate that represents only benefits to the United States.  The Institute for Policy Integrity report “Expert Consensus on the Economics of Climate Change” projected a higher 2020 SCC value of ~$140 based on a survey of experts.  A 2015 paper in Nature Climate Change “Temperature impacts on economic growth warrant stringent mitigation policy” suggest that the SCC value should be $220.

The Accumulated Annual Regional Greenhouse Gas Initiative Benefits Through 2018 table lists the data needed to calculate the RGGI CO2 reduction cost per ton.  From the start of the program in 2009 through 2018 RGGI has invested $2,775,635,415 and reduced annual CO2 emissions by 3,091,992 tons.  The cost per ton reduced result, $898 per ton reduced, is four times greater than the highest SCC value and two orders of magnitude greater than the current EPA SCC value for United States benefits.

The RGGI report also provides mis-leading cost per ton reduced information.  Chart 5, RGGI Investments as a Subset of Total Proceeds states that RGGI Investments totaled $2,578,305,737 through 2018 and Table 6: All-Time Benefits of RGGI Investments states that 39,359,169 tons of CO2 were avoided.  Using those two numbers to calculate the cost per ton avoided gives a value of $65.51, which compares much better to the SCC values presented before.  Unfortunately, that approach is wrong.  All the political target reductions are based on emissions from a given year.  Therefore, the cost per ton reduced must only consider annual avoided tons.

Conclusion

The fact is that, for policy purposes, the annual reductions from RGGI have to be considered because that is the “apples to apples” comparison.  It is very disappointing that the RGGI investment reports no longer report the accumulated annual reductions.  I have to believe the reason why is because the values appropriate for determining the effectiveness of this program as a control program reflect so poorly on the program.

There is another change in the reported values between the 2018 report and previous reports that is troubling.  Until this report the first table listed the annual and life-time benefits of that year’s investments for eight categories.  The 2018 report only lists the benefits for two categories: energy bill savings and total CO2 avoided.  I guess showing that the investments in 2017 only managed to train 83 workers was not deemed important enough to include for 2018.

Reductions of CO2 directly attributable to investments made from the auction proceeds only total 4% of the observed CO2 reductions from 2005 to 2018 and only 6% from a representative background before the program started until 2018.  Those poor results combined with $2.6 billion investments costs result in a nearly $900 cost per ton of CO2 reduced.  That value far exceeds the social cost of carbon value contrived to prove the value of CO2 reductions.

Court Decision: Interim Social Cost of Greenhouse Gas Metric

This article was also posted at Watts Up With That

Recently a federal district judge found that the Bureau of Land Management (BLM, sorry it was their acronym first) arbitrarily relied on an aggressively scaled-back social cost of greenhouse gases metric to justify a rollback of methane standards for oil and gas equipment.  This post summarizes the decision, the reaction of the trade press, and a discussion on the background of the issue.

Background

The General Accounting Office (GAO) published a report to Congressional requesters, Social Cost of Carbon: Identifying a Federal Entity to Address the National Academies’ Recommendations Could Strengthen Regulatory Analysis, that provides good background information on the current controversy regarding the valuation of greenhouse gas emission climate impacts used by Federal agencies.  The Social Cost of Carbon (SCC) is the metric most commonly used and represents the long-term net economic damages associated with an incremental increase in carbon dioxide or other greenhouse gas emissions in a given year.  In 2009, the Office of Management and Budget and the Council of Economic Advisers convened the Interagency Working Group on Social Cost of Carbon (IWG) to develop government-wide estimates of the social cost of carbon for federal agencies to use in conducting regulatory cost-benefit impact analyses for rulemaking.  The IWG issued updates to the Technical Support Document that included revised estimates of the social cost of carbon in 2013, minor technical corrections in 2015, and enhanced discussion of uncertainties around the estimates in 2016.

In 2016, the BLM promulgated a rule to reduce waste of natural gas from venting, flaring, and leaks during oil and natural gas production activities on onshore Federal and Indian leases.  The benefits out-weighed the costs primarily because the social cost of methane, same idea as the social cost of carbon, IWG values showed benefits.  On March 28, 2017, President Trump issued Executive Order 13783, “Promoting Energy Independence and Economic Growth,” directing the BLM to review the 2016 rule and, if appropriate, to publish proposed and final rules suspending, revising, or rescinding it.  An interim SCC value was prepared as part of the Executive Order  The BLM reviewed the 2016 rule and determined that it would have imposed costs exceeding its benefits based on the interim SCC values and on September 28, 2018 rescinded the rule after determining that it would have imposed costs exceeding its benefits.

The GAO report was prepared to explain the differences between the IWG values and the interim values.  It found “Although both the prior and current estimates were calculated using the same economic models, two key assumptions used to calculate the current estimates were changed: using (1) domestic rather than global climate change damages (see table) and (2) different discount rates (3 and 7 percent rather than 2.5, 3, and 5 percent). As a result, the current federal estimates, based on domestic climate damages, are about 7 times lower than the prior federal estimates that were based on global damages (when both prior and current estimates are expressed in 2018 US dollars and calculated using a 3 percent discount rate).” 

The litigation in question only focused on the adequacy of the Rescission, and not the 2016 Rule itself. In this regard, Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of CA found “that the rulemaking process resulting in the Rescission was wholly inadequate”.  I am only going to focus on one aspect of the decision – the cost benefit calculation.  The Court analyzed whether BLM acted in an arbitrary and capricious manner in using a new model, the “interim domestic” social cost of methane, for its analysis in enacting the Rescission, instead of using the previous social cost of methane model that was developed and used for the 2016 rule.

Trade Press Reaction

The environmental trade press discussed the flaws Rogers used for her decision. Bloomberg Law said the judge “rebuked the Bureau of Land Management for eliminating Obama-era restrictions on releases of the potent greenhouse gas from oil and gas infrastructure on public and tribal lands” and that “Her opinion included a detailed assault on how the land agency used a metric called the social cost of methane, calling the approach ‘riddled with flaws’”.  The Hill quoted parts of the decision: “In its haste, BLM ignored its statutory mandate under the Mineral Leasing Act, repeatedly failed to justify numerous reversals in policy positions previously taken, and failed to consider scientific findings and institutions relied upon by both prior Republican and Democratic administrations” and “In its zeal, BLM simply engineered a process to ensure a preordained conclusion” In the decision’s conclusion she said:  “Where a court has found such widespread violations, the court must fulfill its duties in striking the defectively promulgated rule.”  Energy & Cleantech Counsel discussed the implications of the rejection of BLM’s redefinition of the social cost of methane on other rules.

The environmental activist trade press, not surprisingly, thought the decision was good.  One headline crows: Court Slaps Down Trump Administration’s Rollback Of Methane Rule and another article states “Since the first day they came into office, the Trump administration has sought and failed to undermine the Methane Waste Prevention Rule at every turn – in Congress, through the regulatory process, and in the courts. Today’s ruling shows their efforts are illegal, and provides for the reinstatement of common sense protections that are in the best interest of the American public,” said EDF senior attorney Rosalie Winn.”

Decision Rationale Discussion

In the Costs Exceeded Benefits section of the decision there is a sub-section giving the Court’s background description.  For this discussion, the following is the relevant text, absent footnotes and the legal references:

“In 2016, to estimate the benefits of reducing methane emissions, BLM drew upon the conclusions of an Interagency Working Group (“IWG”) founded under the Administration of George W. Bush. The IWG was specifically organized to develop a single, harmonized value for greenhouse gas emissions for federal agencies to use in their regulatory impact analyses for rulemaking under Executive Order 12866. The IWG’s approach, known as the social cost of greenhouse gases, estimates the present value of the damages caused from each additional ton of greenhouse gas emitted at a point in time, or conversely, the present value of the benefits from reducing a ton of greenhouse gas emissions. As the IWG stated in 2015, these damages must be considered globally “because emissions of most greenhouse gases contribute to damages around the world and the world’s economies are now highly interconnected.” This approach was developed over several years through robust scientific and peer-reviewed analyses and public processes, and represents the best available science on this issue. (Notably, federal agencies have relied on the IWG’s valuation of the impacts of greenhouse gas emissions in rulemaking since 2009, and courts have upheld this approach.”

Firstly, a clarification note.  This paragraph refers to the social cost of greenhouse gases rather than the social cost of carbon.  Carbon dioxide is not the only greenhouse gas and this regulation specifically addressed methane.  The IWG ”Addendum Valuing Methane and Nitrous Oxide Emission Changes in Regulatory Benefit-Cost Analysis” argues that using directly calculated societal cost values for methane and other non-CO2 greenhouse gases rather than global warming potential values (i.e. converting them to CO2 equivalents) is more appropriate. 

The simplistic argument that the social cost of greenhouse gases must be considered globally because it is a global problem overlooks the fact that the rationale for the IWG work was to evaluate costs and benefits of regulations in the United States.  The Federal requirements for these analyses all call for assessments based on national, not global impact. See, for example, discussion by Gayer and Viscusi.

The paragraph notes “This approach was developed over several years through robust scientific and peer-reviewed analyses and public processes, and represents the best available science on this issue”.  While this sounds impressive and scientific the reality is different.  In 2016, when the IWG was preparing their analyses, they noted that “new estimates of the social cost of non-CO2 GHG emissions have been developed in the scientific literature, and a recent study by Marten et al. (2015) provided the first set of published estimates for the social cost of CH4 and N2O emissions that are consistent with the methodology and modeling assumptions underlying the IWG SC-CO2 estimates”.

During the earlier iteration of the IWG work the US Environmental Protection Agency (EPA) realized that a social cost of gases other than CO2 were needed and found that there was a “paucity of peer-reviewed estimates of the social cost of non-CO2 gases in the literature”.  In response the EPA National Center for Environmental Economics developed estimates of the social cost of methane and nitrous oxide consistent with the methodology and modeling assumptions underlying the IWG SCC estimates.  Their work was published in two papers: Marten, A.L., and S.C. Newbold. 2012. Estimating the social cost of non-CO2 GHG emissions: methane and nitrous oxide Energy Policy 51: 957-972 (paywalled) and Marten, A.L., Kopits, E.A., Griffiths, C.W., Newbold, S.C., and A. Wolverton. 2015. Incremental CH4 and N2O Mitigation Benefits Consistent with the U.S. Government’s SC-CO2 Estimates. Climate Policy. 15(2): 272-298 (published online, 2014). (Paywalled)

I suspect that I am not the only one suspicious when an agency prepares a study that forms the basis of the regulatory metric proposed by other agencies.  I question the independence of the results in that approach.  Ultimately, the work and findings of agency work go through political appointees before they are released and there is no question that process motivates particular outcomes.  In anticipation of such cynicism the Addendum states:

“The methodology and estimates described in this addendum have undergone multiple stages of peer review and their use in regulatory analysis has been subject to public comment. With regard to peer review, the study by Marten et al. (2015) was subjected to a standard double-blind peer review process prior to journal publication. In addition, the application of these estimates to federal regulatory analysis was designated as Influential Scientific Information (ISI), and its external peer review was added to the EPA Peer Review Agenda for Fiscal Year 2015 in November 2014. The public was invited to provide comment on the peer review plan, though EPA did not receive any comments. The external peer reviewers agreed with EPA’s interpretation of Marten et al.’s estimates; generally found the estimates to be consistent with the approach taken in the IWG SC-CO2 estimates; and concurred with the limitations of the GWP approach, finding directly modeled estimates to be more appropriate. All documents pertaining to the external peer review, including a white paper summarizing the methodology, the charge questions, and each reviewer’s full response is available on the EPA Science Inventory website.”

I had no idea that the EPA Science Inventory website existed so I looked up this reference. According to the peer review plan: a contractor picked three reviewers, the public, including scientific or professional societies was not asked to nominate peer reviewers, no public nominations were allowed through the Peer Review Agenda, the Agency did not provide significant and relevant public comments to the peer reviewers before they conducted their review, the review was not a public panel, and public comments were not allowed at the panel review.  The fact that no comments were received from the public suggests that this was not well publicized and I am annoyed that the papers are paywalled when my tax dollars paid for the work.  Having to pay for the privilege to review their work is not inclusive.

EPA asked the three external reviewers recommended by a contractor to provide comments: Karen Fisher-Vanden, Professor of Environmental and Resource Economics, Director, Institute for Sustainable Agricultural, Food, and Environmental Science (SAFES), and Co-Director, Program on Coupled Human and Earth Systems (PCHES) at Penn State College of Agricultural Sciences; John Reilly, Senior Lecturer, Sloan School of Management and Co-Director, MIT Joint Program on the Science and Policy of Global Change at the Massachusetts Institute of Technology; and Steven Rose, Energy and Environmental Analysis Research Group, Electric Power Research Institute.  All three are well-qualified to review the work but I have this nagging concern that the reviewers from academia would be reluctant to provide negative feedback lest it affect review of future funding.

The request for peer review focused on the mechanics of vetting the Addendum.  The Science Inventory includes a peer review report that describes the process.  EPA developed a white paper, Valuing Methane Emissions Changes in Regulatory Benefit-Cost Analysis, that described the problem, the two different approaches for estimating societal valuation of impacts, the limitations of the global warming potential approach (GWP), and then developed its estimate of the direct estimation social costs.  The reviewers were asked seven questions about the white paper and the primary Marten et al. reference.  The peer review report includes the responses from the three reviewers and concludes with a summary and response description: 

“EPA recently conducted a peer review of the application of the Marten et al. (2014) non-CO2 social cost estimates in regulatory impact analysis (RIA). Three reviewers considered seven charge questions that covered issues related to the EPA’s interpretation of the estimates, the consistency of the estimates with the social cost of carbo estimates used in RIAs, EPA’s characterization of the limits of the alternative GWP approach to approximate the social cost of non-CO2 GHGs, and the appropriateness of using the Marten et al. estimates in RIAs. The reviewers agreed with EPA’s interpretation of Marten et al.’s estimates; generally found the estimates to be consistent with the social cost of carbon estimates; and concurred with the limitations of the global warming potential approach, finding directly modeled estimates to be more appropriate.”

Judge Rogers claimed that the approach used was “developed over several years through robust scientific and peer-reviewed analyses and public processes”.  I do not accept that the social cost of methane developed by one group, published in two papers, and peer-reviewed by three people is robust science. 

If you are interested in the social cost of GHG emissions metric, the peer review report is a worthwhile read.  It explains the metric and problems well and the comments from the experts indicate that there are significant issues that need to be resolved. 

Conclusion

When judges make decisions based on the “science”, the results generally reflect more their biases than the science itself.   The opinion by Judge Rogers reversed the recission because it “failed to consider scientific findings and institutions relied upon by both prior Republican and Democratic administrations” and “In its zeal, BLM simply engineered a process to ensure a preordained conclusion.”  Based on a review of the specific scientific findings used to develop the social cost of methane the same conclusions could be said for the metric developed by the IWG.

The bigger problem in my opinion, is an inappropriate reliance on peer review in the regulatory process.  Peer review focuses on the veracity of a specific scientific problem.  Even if the validity of the analysis is not subject to the value judgements of the use of certain parameters and assumptions, peer review does not address the needs of the public affected by the regulation.

The social cost of greenhouse gas emissions is a particularly important metric for any emission reduction program related to global warming.  Although there have been some attempts to describe the parameter and how it is used, the thing that is missing is an explanation of the impacts of the input parameters for the layman.  Consider the choice whether the benefits should be considered globally or nationally.  While climate change is a global problem, I am sure the public generally does not understand that the money that they have to spend for emission reductions provide minimal direct benefits to themselves or their families because most of the benefits are elsewhere on the globe.  I am positive that they don’t understand that the calculations of the benefits extend out 300 years and that the majority of expected benefits occur in the later years.  Surely there is a limit to how much they would be willing to pay for such a low payback on their investments?

Climate Leadership and Community Protection Act White Paper Comment

In the summer of 2019 Governor Cuomo and the New York State Legislature passed the Climate Leadership and Community Protection Act (Climate Act) and this summer the implementation process is in full swing.  I have written a series of posts on the feasibility, implications and consequences of this aspect of the law based on evaluation of data.  This post documents comments  I submitted to the New York Department of Public Service (DPS) on the White Paper on Clean Energy Standard Procurements to Implement New York’s Climate Leadership and Community Protection Act (White Paper).

I am a retired electric utility meteorologist with nearly 40-years experience analyzing the effects of meteorology on electric operations. I believe that gives me a relatively unique background to consider the potential effects of energy policies related to doing “something” about climate change.  The opinions expressed in this post do not reflect the position of any of my previous employers or any other company I have been associated with, these comments are mine alone.

I am following the implementation of the Climate Act because I believe it will affect the affordability and reliability of New York’s energy.  The White Paper outlines how the DPS proposes to provide subsidies to get sufficient renewable resources built to meet the Climate Act targets.  I submitted comments because the definition of “renewable energy systems” as amended in the public service law with the addition of section 66-p is inconsistent with the reliability of the future electric system.

Renewable Energy System Definition

The Climate Act states:

      • 66-p. Establishment of a renewable energy program.
        1. As used in this section:

(b) “renewable energy systems” means systems that generate electricity or thermal energy through use of the following technologies: solar thermal, photovoltaics, on land and offshore wind, hydroelectric, geothermal electric, geothermal ground source heat, tidal energy, wave energy, ocean thermal, and fuel cells which do not utilize a fossil fuel resource in the process of generating electricity.

Problem

At the second Climate Action Council meeting on June 24, 2020 Energy and Environmental Economics (E3) presented results from their report “Pathways to Deep Carbonization in New York State”.  I have analyzed options for the future Climate Act electric system and agree with their concern about multiple-day periods when wind and solar resources could provide negligible power to the grid.  The report notes that “This long-duration (interday) challenge can be solved through a combination of large-scale hydro resources, renewable natural gas (RNG) or synthetic fuels such as hydrogen, Carbon Capture Storage (CCS), and nuclear power”.  During the question and answer period following the presentation, Climate Action Council members argued that RNG was not acceptable because it was not included in the definition of renewable energy systems.  In my opinion, there are two problems with the definition in that light: firm capacity and air source heat pumps.

E3 explains in their report that “Firm capacity is the amount of energy available for power production which can be guaranteed to be available at a given time. As the share of variable resources like wind and solar grows substantially, firm capacity resources will be needed to ensure year-round reliability, especially during periods of low renewables output.”  The options that they included in their deep carbonization pathway included two that are unlikely sources of much additional capacity in New York, large-scale hydro and nuclear, because of development concerns while two others, synthetic fuels and carbon capture storage, are only at the demonstration technical readiness level according to the International Energy Agency.  That leaves RNG as the most likely source of firm capacity.  Based on my work I believe that the alternative approach of using energy storage for this application will be a major technological challenge and surely will be extraordinarily expensive so excluding RNG would make providing firm capacity more difficult.  Therefore, I recommend that this technology not be rejected due to the magnitude of the firm capacity problem.

The argument that RNG is not a “renewable energy system” is based entirely on the fact that it is not explicitly included in the definition.  Note, however, that “geothermal ground source heat” is included but air source heat pumps are not.  As a result, then does that also mean the air source heat pumps are not an acceptable technology to meet the requirements of the Climate Act?  In order to meet the GHG emission reduction targets electrification of heating will be necessary.  Because air source heat pumps are cheaper and easier to install than ground source heat pumps, they are the preferred alternative.  Because this resource is necessary for the Climate Act it should be considered a renewable energy system even though it is not explicitly included in the definition.

Conclusion

It will be interesting to see whether RNG is accepted as a renewable energy system.  I have no doubt that it was deliberately excluded from the Climate Act definition because some well-connected but naïve lobbyist successfully argued to exclude that technology.  I don’t know why this technology is unacceptable but the fact is that in order to provide sufficient electric power during the long-duration low renewable resource periods New York needs as many sources of firm capacity as possible.  I believe that E3 knows this and had to propose the technology in order to reduce the need for energy storage.  They have not provided cost estimates yet but they know the numbers will be staggering if the necessary firm capacity has to be provided by battery energy storage.  The naïve opponents of RNG must not understand this inconvenient truth.

One final note, while I believe that RNG is needed, I do not believe it will solve the problem.  There simply are not enough sources of RNG that can provide enough stored gas to make much of a difference for the critical long-duration low renewable resource period peak load when that load includes electrification of heating and vehicles.