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C+T update [part deux]

DDI 2008 <Kernoff/Olney>


Alyssa Schwartz

Cap-and-trade update[2]

Cap-and-trade update[2].......................................................................................................................................1
Some alt. energy now.............................................................................................................................................2
Ethanol tech evolving.............................................................................................................................................3
Natural gas demand increasing............................................................................................................................4
Fossil fuel use inevitable........................................................................................................................................5
Plan increases US/Canada relations.....................................................................................................................6
AT: States CP..........................................................................................................................................................7
AT: States [Perm solves]........................................................................................................................................9
AT: States [CP least effective].............................................................................................................................10
AT: States [links to bizcon]..................................................................................................................................11
AT: states [California].........................................................................................................................................12
C+T boosts investor confidence..........................................................................................................................13
C+T boosts econ...................................................................................................................................................14
C+T creates competitiveness [econ I/L].............................................................................................................16
Enviro policy creates competitiveness [study proves].......................................................................................17
Auctioning good...................................................................................................................................................18
Modeling EU = good............................................................................................................................................19
Obama likes C+T.................................................................................................................................................20
Bush won’t pass C+T...........................................................................................................................................21
McCain likes C+T................................................................................................................................................22
McCain =/= Bush [climate change]....................................................................................................................23
AT: Safety valve CP.............................................................................................................................................24

1
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Some alt. energy now

Alternative energy development beginning now


[ Matt Marshall; 7/1/2007; Alternative energy companies keep coming: Zeachem, Catilin, Range Fuels, Sopogy;
http://venturebeat.com/2007/07/01/alternative-energy-companies-keep-coming-zeachem-catilin-range-fuels-sopogy/; ]
A host of new alternative energy companies have emerged and raised funding.
Here’s a roundup of the latest action, including news at Zeachem, a cellulosic ethanol company; Catilin, a biodiesel company,
Range Fuels, another cellulosic company; Sopogy, a solar thermal company; and finally, a note on Greenvolts, a solar
company, and a setback at Greenfuel, an algae-biofuel company.

New types of alternative energy are emerging


[ Matt Marshall; 7/1/2007; Alternative energy companies keep coming: Zeachem, Catilin, Range Fuels, Sopogy;
http://venturebeat.com/2007/07/01/alternative-energy-companies-keep-coming-zeachem-catilin-range-fuels-sopogy/; ]
Greenvolts — The San Francisco company recently raised $1.5 million from undisclosed investors (we did not previously
cover), said Wednesday it will build a 2-megawatt solar electric power plant for PG&E based on its “concentrator”
photovoltaic technology. The facility’s ultimate purpose will be to deliver power to customers during peak energy times, but
at a lower cost to PG&E.
According to GreenVolts, its “photovoltaic system concentrates 625 suns of energy onto a highly efficient solar cell and
can deliver energy at a competitive cost. The size and flexibility of the company’s system allow it to be placed nearer to
the demand than other alternatives, helping utility companies avoid constructing costly transmission lines or having to
upgrade existing power grids.” GreenVolts’ facility will be on a farm outside Tracy, Calif., and will be finished in 2009. (PG&E
signed another, larger deal with Cleantech America, also based in San Francisco. As part of their agreement, Cleantech America
will build a 5-megawatt solar plant near Fresno, Calif. The company said that when the facility is finished in 2009, it will be
California’s largest solar plant.) GreenVolts also recently signed a deal with Spokane, Wash.-based utility company Avista to
build a prototype power plant.

2
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Ethanol tech evolving

New ethanol technology is almost ready for the market


[ Matt Marshall; 7/1/2007; Alternative energy companies keep coming: Zeachem, Catilin, Range Fuels, Sopogy;
http://venturebeat.com/2007/07/01/alternative-energy-companies-keep-coming-zeachem-catilin-range-fuels-sopogy/; ]
Zeachem — The company, of Menlo Park, Calif. has developed new way to create cellulosic ethanol, which is one of the
more promising alternative fuels for reducing harmful greenhouse emissions. Its claim to fame is to process materials that
are used for the cellulosic process in a way that reduces the amount of corn and other valuable sources needed for it. It is still in
the lab, however each of the individual steps of the process have been adequately tested, so that the company will see a
testing plant in 2008 and delivery to market in 2009, says Erik Straser, investor at Mohr Davidow. His firm led a $4 million
investment into the company. Firelake Capital participated.
No company has reached full production phase. Iogen in Canada is furthest along; it is building a 40 million gallon plant. Next
is Range Fuels, which we’ll get to below.
Zeachem claims it is more efficient, however, by combining two processes together that avoid any carbon being lost. (Other
processes lose up to a third of the carbon in the conversion process.) The first step is to convert the sugars of biomass into a
chemical intermediate called acetic acid. By taking the intermediate step, there’s no CO2 produced in the process — which
saves greenhouse emissions being produced as a byproduct. It then takes the lignen left in the biomass, and uses
gassification to covert it into hydrogen. This is combined with the acetic acid, and then converted into ethanol. Chief executive
Dan Verser said he was “surprised but pleased” that no other company had come up with the idea. The process is patented.
Wood chips other non-food sources of biomass can be used.

Biodiesal innovation is happening now


[ Matt Marshall; 7/1/2007; Alternative energy companies keep coming: Zeachem, Catilin, Range Fuels, Sopogy;
http://venturebeat.com/2007/07/01/alternative-energy-companies-keep-coming-zeachem-catilin-range-fuels-sopogy/; ]
Catilin — The Ames, Iowa company, is a biodiesel company that also uses a more efficient method, which avoids some of
the toxic processes used by other biodiesel companies that require substantial cleanup. It has raised $3 million in a first
round of funding, also led by venture firm Mohr Davidow.
It works on a broad range of feedstocks – from soybean oil to animal fats. The company is building a pilot production
facility. It uses a nano-technology catalyst that essentially functions as a teabag, allowing undesirable products to be kept in the
bag and avoiding them having to be washed out in a cleaning process, which wastes water. It is run by Larry Leinhart, a former
“Entrepreneur in Residence” at Mohr Davidow. The company is a spin out of the Iowa State University, and needed an operator
like Leinhart to run the business, said MDV’s Straser.

3
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Natural gas demand increasing

Natural gas demand is increasing without sufficient supply


[Randy Southerland; Contributing writer; Atlanta Business Chronicle; Saturday, 1/10/2004; Natural gas and electricity prices
facing hikes; http://www.bizjournals.com/atlanta/stories/2004/01/12/focus7.html?t=printable]
In 2004, consumers and businesses can expect to shell out more for electricity and natural gas products. On the up side, a well-
positioned and well-maintained system of electricity providers will continue to give customers some of the lowest rates in the
nation.
But buyers of natural gas will be subjected to tight supplies and potentially wide price swings in the coming year,
according to a recent report, "Georgia Economic Outlook 2004," from the University of Georgia's Terry College of Business.
The state's electric utility industry has the advantage of low operating costs coupled with a long-term outlook for the regional
economy that includes growth that exceeds the national average, the report said.
In addition, energy trading is likely to begin a recovery from the fallout generated by Enron Corp.'s collapse, creating an
overall bright outlook for the industry.
"We're in a very good position as far as reserve capacity goes, and I think it will continue for the next 10 years," said Dennis
Zvosec, an electric utility expert with Utilities Analyses Inc.
The state's demand for electricity will grow at about 3 percent a year, and utilities should expect slightly above-trend growth
in 2004, according to the UGA report. There also will be a modest expansion in business activity, including an increase in
industrial production and more new business startups, the report said.
A return to normal weather conditions after the unusually cool summer also will trigger an increase in power consumption. On
the other hand, these increases may be dampened by fewer households formed and fewer new residential and nonresidential
construction projects, according to the report.

4
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Fossil fuel use inevitable

Fossil Fuels use will continue


[ H. Josef Herbert; Associated Press; Fossil fuels will remain big part of worldwide energy equation; Thursday,6/26/2008;
http://www.charleston.net/news/2008/jun/26/fossil_fuels_will_remain_big_part_worldw45697/]
WASHINGTON — World energy demand will grow 50 percent over the next two decades, oil prices could rise to $186 a
barrel and coal will remain the biggest source of electricity despite its effect on global warming, government experts predict.
The Energy Information Administration's long-range forecast to 2030 said the world is not close to abandoning fossil fuels.
They will continue to be at the core of energy production in transportation and electricity generation, according to the
report released Wednesday.
It said the steepest increases in energy use will come in China and other developing economies, including some in the Mideast
and Africa, where demand is expected to be 85 percent greater in 2030 than it is today.
"What jumps out is the very strong growth in the emerging economies," said Guy Caruso, head of the agency that serves as the
government statistical and forecasting arm on energy.

Fossil Fuel demand is on the rise


[ H. Josef Herbert; Associated Press; Fossil fuels will remain big part of worldwide energy equation; Thursday,6/26/2008;
http://www.charleston.net/news/2008/jun/26/fossil_fuels_will_remain_big_part_worldw45697/]
It said fossil fuels are expected to continue supplying much of the energy used worldwide despite the growth of renewable
energy sources, including wind and biofuels.
The report assumes oil prices ranging from a low of $113 a barrel to as high as $186 a barrel by 2030; a barrel was trading
above $133 on Wednesday. Adjusted for inflation, the $113 price would be about $70 in 2006 dollars, the report said.
Global demand for liquid fuels, mostly oil, will grow to 113 million barrels a day by 2030, nearly one-third more than
today, the report said. But high prices could have an impact, shaving demand by as much as 13 million barrels a day.

5
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Plan increases US/Canada relations

Canada is increasing the use of alternative energy now – US action will


strengthen relations
[Energy Bulletin; 5/2/2008; United States and Canada; http://www.energybulletin.net/node/43590]
The House of Commons is expected to give the green light in coming days to legislation that could boost Canadian
production of ethanol.
... Liberal environment critic David McGuinty said he is open to reviewing the policies on a regular basis, but he disagrees with
critics who believe ethanol production is causing a global food crisis.
"It's overly simplistic to draw a causal connection directly between the production of biofuels, chiefly ethanol, and food
shortages. There are a number of factors at play here," McGuinty said. "This notion that Canadian ethanol production is
leading to world starvation and food shortages, I just think it's leftist rhetoric and not productive."
Baird said the existing federal policies and programs could result in about five per cent of agricultural land being used to
produce fuel instead of food. But New Democrat environment critic Nathan Cullen said the growing food crisis is a sign that
it's time to rethink government policies. "We hope that the overwhelming evidence that's coming in and ... the moral
implications, as well as environmental, will start to sway the Liberals and Conservatives to rethink their policies," Cullen said.
He said his party has promoted biofuels in the past and still supports renewable fuels which reduce the environmental
impact of energy consumption. But he said he was troubled by the prospect of using food for fuel.

6
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

AT: States CP

A national emissions trading scheme is most effective


[ESAA; esaa calls for national emissions trading scheme; secure Australia’s energy future, ensuring reliable and competitively-priced
energy for the community; The Energy Supply Association of Australia (esaa) represents Australia’s electricity and downstream gas
businesses; 2/26/2007;
http://www.esaa.com.au/media_releases/2006_media_releases/esaa_calls_for_national_emissions_trading_scheme.html]
The Energy Supply Association of Australia has called for an emissions trading scheme and emission reduction target for 2050
as part of a single national greenhouse gas emissions policy applying to the entire Australian economy. esaa represents the
views of the Chief Executives of more than 40 electricity and downstream natural gas companies. esaa Chief Executive
Officer Brad Page said uncertain greenhouse gas emission policy is adversely affecting new energy supply decisions and
that a national policy approach incorporating a greenhouse gas emissions price signal is needed. "In our view, the most
efficient way to deliver that price signal is through a national emissions trading scheme coupled with funding for the
development of new, low-emission technologies,"said Mr Page.

States create more inefficient and expensive policies than a national scheme
[ESAA; esaa calls for national emissions trading scheme; secure Australia’s energy future, ensuring reliable and competitively-priced
energy for the community; The Energy Supply Association of Australia (esaa) represents Australia’s electricity and downstream gas
businesses; 2/26/2007;
http://www.esaa.com.au/media_releases/2006_media_releases/esaa_calls_for_national_emissions_trading_scheme.html]
"Unlike some proposals that have been released recently, esaa strongly believes that an emissions trading scheme should cover
the widest possible range of emitting facilities and sectors of the economy. To not do so risks unfair greenhouse abatement
burden shifting and distorted capital allocation decisions. This would be a bad outcome for the future prosperity of the
Australian economy," said Mr Page.
"What we have got in Australia currently is an inefficient and costly mixture of State-by-State and Commonwealth
measures that focus almost exclusively on the electricity sector, but largely ignore the other 65 per cent of the nation’s
greenhouse emissions. It’s time we have a comprehensive, national scheme that deals with all of the major emitters and not
just one industry."
esaa said the emissions trading scheme should operate on a national, if not international, basis.

US EPA experience and technology is key to a successful cap-and-trade system


[INECE; (No date given) Making Law Work –Environmental compliance and sustainable development; Chapter 8, emissions
trading compliance; http://www.inece.org/mlw/Chapter8_EmissionsTradingCompliance.pdf]
Emissions trading schemes have been successful where monitoring and compliance were high. National level programs
in Europe and the U.S. have benefited from sophisticated monitoring technology that allows regulators to track the
emissions of participating firms. For example, the US EPA has experienced nearly 100 percent compliance with its sulfur
dioxide emissions trading program in part due to its use of continuous emissions monitoring technology (CEM).
Participating facilities are required to install Continuous emissions monitoring systems, which allow the EPA to maintain an
accurate tally of S02 emissions. The EPA has described the CEM data as “the gold standard to back up the paper currency of
emissions allowances” by “verifying the existence and value of the traded allowance.” The success of the SO2 program
indicates that, with high compliance, emissions trading schemes can succeed in identifying cost-effective methods to
reduce emissions. But it is important to note that CO2 emissions and other green house gases are ubiquitous, and monitoring
compliance present difficult challenges, requiring different approaches and technologies.

7
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Nationally consistent standards create the most effective emissions trading


programs
[NETT; National Emissions Trading Taskforce; Australia; 2008; Chapter 8 – institutional arrangements;
http://www.emissionstrading.net.au/__data/assets/pdf_file/0020/1973/Discussion_Paper_-_Ch_8_-_Institutional_arrangements.pdf]
To work effectively, the NETS would require a consistent legislative framework and approach to implementation across
jurisdictions. Stakeholders were unanimous in their view that scheme rules, institutions and implementation should be
nationally consistent.

A single national oversight provides effectiveness and consistency


[NETT; National Emissions Trading Taskforce; Australia; 2008; Chapter 8 – institutional arrangements;
http://www.emissionstrading.net.au/__data/assets/pdf_file/0020/1973/Discussion_Paper_-_Ch_8_-_Institutional_arrangements.pdf]
Given the initial focus of the scheme on stationary energy, the preferred approach would be to have an existing Ministerial
Council, such as the Ministerial Council on Energy, provide appropriate Ministerial oversight. The Ministerial Council
would oversee the implementation and ongoing administration of the NETS, providing for national consistency and an
efficient and effective scheme.
The Ministerial Council would have responsibility for: the policy framework for a NETS, including decisions on setting
the cap and future gateways, scheme coverage and any future expansions, approval of permit allocation methodology,
eligible offset projects and management of transitional arrangements; policy oversight and future strategic directions for a
NETS (including possible linking to other international schemes); governance and institutional arrangements for a NETS,
including oversight of regulatory and policy bodies; the legislative and regulatory framework within which the NETS operated,
and agreement on any changes to that framework.

Only the federal government solves


[NGF; National Generators Forum; National Emissions Trading Taskforce secretariat; 12/20/2006;
http://www.emissionstrading.nsw.gov.au/__data/assets/pdf_file/0010/5140/NGF.pdf]
The Discussion Paper deals with many of the issues which have plagued other greenhouse gas emissions trading schemes and
suggested actions for avoiding such problems. The NETT has done a good job in elucidating the real issues and challenges. It
has closely assessed and learnt from the EU emissions trading scheme, and in particular the NETT has clear views on
issues such as compensation to existing asset holders.
The NGF believes that the states are unlikely to succeed in establishing a meaningful national emissions trading scheme.
The NGF believes that such a scheme would only be viable at the national level if initiated and managed by the Federal
Government.

8
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

AT: States [Perm solves]

Perm solves – states want the Federal government involved in emissions


trading
[NETT; National Emissions Trading Taskforce; Australia; 2008; Chapter 8 – institutional arrangements;
http://www.emissionstrading.net.au/__data/assets/pdf_file/0020/1973/Discussion_Paper_-_Ch_8_-_Institutional_arrangements.pdf]
In designing the NETS, the clear preference of all State and Territory Governments and stakeholders is for the
Commonwealth Government to be involved. Therefore, the preferred options in this Chapter are based on Commonwealth
Government participation and the use of existing institutional arrangements. These institutions could be, for example, those
created for energy market governance in Australia (that is, the Ministerial Council on Energy, the Australian Energy Market
Commission, and the Australian Energy Regulator). However, other options may also be possible (for example, the National
Environment Protection Council and other policy and regulatory agencies).

State and federal governments can work together for the best possible policy
approach
[NETT; National Emissions Trading Taskforce; Australia; 2008; Chapter 8 – institutional arrangements;
http://www.emissionstrading.net.au/__data/assets/pdf_file/0020/1973/Discussion_Paper_-_Ch_8_-_Institutional_arrangements.pdf]
The preferred approach is for the Commonwealth to enact legislation to create the scheme on a basis agreed with the
State and Territory Governments, with complementary legislation passed by the State and Territory Governments as
required.85 The advantages of this approach include: the legislative change process would be simplified [and] Policy,
regulatory and administrative functions may be able to be conferred on an existing policy agency and regulator.

9
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

AT: States [CP least effective]

Counterplan will always solve less than the perm or plan


[NGF; National Generators Forum; National Emissions Trading Taskforce secretariat; 12/20/2006;
http://www.emissionstrading.nsw.gov.au/__data/assets/pdf_file/0010/5140/NGF.pdf]
Complex new governance arrangements would be required to implement an emissions trading scheme and support its ongoing
operation and administration. States and territories would seek Federal Government involvement in the scheme but this is
currently uncertain. A new ministerial council, supported by a scheme developer and scheme regulator are likely to be
necessary. A key role of a ministerial council would be to review the scheme every 5 years and determine future gateways,
commencing in 2015. Complete agreement amongst the states and territories would be needed to implement the scheme more
or less effectively. The scheme can never be fully effective without Federal Government involvement, particularly when
linkages to other international schemes are contemplated. There is also a high risk of the scheme’s failure if not all states
participate, or participate on equal terms.

States alone can’t solve – they at least need to act with the federal
government
[NGF; National Generators Forum; National Emissions Trading Taskforce secretariat; 12/20/2006;
http://www.emissionstrading.nsw.gov.au/__data/assets/pdf_file/0010/5140/NGF.pdf]
In summary, with respect to institutional arrangements, the NGF recommends that:
• If a national emissions trading scheme is to be implemented, it should be done exclusively at the Federal Government level,
• Complex governance arrangements amongst the States should be avoided as they would lead to increased costs,
• Institutional arrangements should be developed and implemented at the Federal Government level, supported by
robust processes involving the State jurisdictions,
• There will need to be a better recognition of potential failure of the proposed NETS and the possibility of legal redress by
affected generation businesses.

10
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

AT: States [links to bizcon]

States links to bizcon – perm doesn’t


[NGF; National Generators Forum; National Emissions Trading Taskforce secretariat; 12/20/2006;
http://www.emissionstrading.nsw.gov.au/__data/assets/pdf_file/0010/5140/NGF.pdf]
NGF members question the ability of the States to create investor certainty, particularly in the absence of Federal
Government involvement and coordinated international action involving all key economies. By attempting to do it alone,
the States may well undermine investor confidence, particularly when the States themselves compete on a very non-level
playing field with the resource rich states increasingly dependent on electricity and the manufacturing and
commercially centred states demanding low cost electricity as part of containing input costs.

11
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

AT: states [California]

Interstate trading and multi-step energy transmission means California cap-


and-trade fails
[LA Times; California’s cap-and-trade won’t work - A plan to combat greenhouse gas emissions is open to abuse; March 10, 2008;
http://www.latimes.com/news/opinion/la-ed-captrade10mar10,0,2201883.story]
Cap and trade has proved a winning strategy in the U.S. for reducing emissions that cause acid rain. It's also being tried
in Europe for carbon emissions, though its progress there so far has been rocky. All existing cap-and-trade programs have one
thing in common: They regulate the source of the emissions. The power plant or refinery or factory churning out the carbon
is responsible for controlling its own emissions and trading credits. That won't work in California, because from 22% to
32% of our power is generated out of state, and California can't regulate plants outside its borders. Moreover, those out-
of-state plants tend to be much dirtier than local ones. So how does a statewide cap-and-trade program account for all that
pollution?
The solution proposed by the California Public Utilities Commission, which is developing the outlines of the program (the final
decisions will be made by the state Air Resources Board, but the PUC's recommendations will carry a lot of weight), is to
regulate the "first deliverer" of electricity. This is whatever entity sells power to the California grid.
A lot of this outside power comes not from individual plants but middlemen who buy power from plants all over the
Western U.S. and sell it to investor-owned utilities in California. It's very hard to track where these power wholesalers
are getting their juice. That presents an invitation for power dealers to game the system by pretending they're selling
clean power when it's really dirty. It's also questionable whether the program would reduce emissions. If power
wholesalers are the ones responsible for buying carbon credits, there's little incentive for dirty plants outside California to
clean up their act.

12
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

C+T boosts investor confidence

Cap-and-trade increases investor confidence


[ESAA; esaa calls for national emissions trading scheme; secure Australia’s energy future, ensuring reliable and competitively-priced
energy for the community; The Energy Supply Association of Australia (esaa) represents Australia’s electricity and downstream gas
businesses; 2/26/2007;
http://www.esaa.com.au/media_releases/2006_media_releases/esaa_calls_for_national_emissions_trading_scheme.html]
"A greenhouse gas emissions price signal – along with a target for 2050 – is required to promote investor confidence,
deliver greenhouse gas abatement and reward the uptake of new low-emission technologies.
"The electricity industry has a huge challenge before it. Demand will increase by 65 per cent over the next few decades
while greenhouse emissions will have to fall. New investment in generation facilities alone to meet demand could top $75
billion by 2030 while total system investment is likely to be double what we have now," he said.
"Stable, efficient and long-term greenhouse abatement policy that fully recognises any economic loss of value faced by
greenhouse gas emitting facilities is essential if the industry is to deliver a least-cost, reliable power system that will
transition Australia to a lower emission future."

Emissions monitoring and reductions solve for investor confidence


[ESAA; Prof Garnaut proposes emissions trading scheme design; 3/21/2008;
http://www.energymatters.com.au/index.php?main_page=news_article&article_id=20]
“A global emissions trading scheme is clearly our end goal. I have looked at all the design issues through the lens of what
would allow the most efficient and effective integration with international schemes,” says Professor Garnaut. The paper
suggests fixed and clear limits on emissions through the establishment of defined emissions ‘trajectories’, which would
transparently map the pathway to emissions reduction targets/commitments. Permits would be regularly auctioned in line
with the trajectory.
“A long-term, firm trajectory for emissions reduction – which could only be tightened, not loosened, in line with emerging
international commitments – would provide greater investor confidence and strengthen the credibility of the scheme,” he
says.

Emissions trading increases investor confidence


[INECE; (No date given) Making Law Work –Environmental compliance and sustainable development; Chapter 8, emissions
trading compliance; http://www.inece.org/mlw/Chapter8_EmissionsTradingCompliance.pdf]
Emissions trading schemes require strict compliance to succeed. High compliance is a “prerequisite of investor
confidence.” Low or even moderate levels of compliance can destroys markets and undermine the financial incentives
that drive emissions trading.

13
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

C+T boosts econ

Cap-and-trade boosts the economy


[INECE; (No date given) Making Law Work –Environmental compliance and sustainable development; Chapter 8, emissions
trading compliance; http://www.inece.org/mlw/Chapter8_EmissionsTradingCompliance.pdf]
The mandatory monitoring and reporting requirements under the ETS have forced companies to establish CO2 budgets and
carbon management systems for the first time. The carbon market created by the scheme has spawned a new industry
comprised of carbon traders, carbon finance specialists, carbon management specialists, and carbon auditors. New
businesses such as Climate Change Capital in the U.K., and the Chicago Climate Exchange in the U.S., are poised to benefit
from the ETS. In addition to driving practically an entire new sector of the economy, the scheme is expected to allow the
EU to achieve its Kyoto target at a cost of between 2.9 and 3.7 billion euros annually – less than 0.1% of the EU’s GDP.
Without the scheme, compliance costs could reach up to 6.8 billion euros a year.

Reducing emissions is profitable for individual business which helps the


economy on the whole
[INECE; (No date given) Making Law Work –Environmental compliance and sustainable development; Chapter 13,
Competitiveness and compliance: The Porter hypothesis; http://inece.org/mlw/Chapter13_PorterHypothesis.pdf]
As environmental regulation progressed from the original command-and-control model to embrace more flexible
performance standards, firms and regulators began to appreciate that pollution not only imposed a cost on the public but
was also a waste of the firms’ resources. They also learned that pollution and other improvements in environmental
management could not only provide vital benefits to the public, but also actually save the firm itself money. Waste was
reduced at the source, before it became pollution, and the cost compliance started to come down, and in some cases it
actually provided a profit.

14
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Cap-and-trade flexibility and strict regulation decreases the cost of compliance


and boosts the ability of companies to comply
[INECE; (No date given) Making Law Work –Environmental compliance and sustainable development; Chapter 13,
Competitiveness and compliance: The Porter hypothesis; http://inece.org/mlw/Chapter13_PorterHypothesis.pdf]
There are two key design principles for the “Porter Hypothesis.” First it requires regulations that focus on outcomes, for
example, by specifying performance standards, as opposed to regulations that impose technology standards or otherwise limit
flexibility. Second, it requires strict regulations that are complied with. Under these conditions, Porter and van der Linde show
that firms re-examine their processes and technologies, and often find greater efficiencies and cleaner processes.
The first Porter deign principle, flexibility, requires performance based regulations that set the goals the firms must meet,
without specifying the means: firms are allowed to use any strategies they see fit to achieve the goals, providing incentive
to innovate as the search for the efficient and effective strategies. An example of a successful flexible regulation is the sulfur
dioxide regulation on electric generating facilities in the United States. The US government formerly regulated the
emission at a cost of $7 billion a year by mandating specific technology – the installation of scrubbers on smokestacks.
However, in 1990 the law was changed to a performance standard – an emission cap and trade system, allowing firms
maximum flexibility, including the flexibility to innovate in their choice of technological solutions. As a consequence of this
new flexible regulation and resulting innovation, the cost of compliance came down dramatically and about a fourth of
firms were able to comply with the standard at a profit.
The second element of the Porter hypothesis required strict standards that are complied with. Stringent regulations are
necessary for innovation and innovation offsets because lax regulations can be dealt with incrementally and often with “end-
of-pipe” or secondary treatment solutions, discouraging any innovation. Stringent regulations, on the other hand, focus
greater company attention on discharges and emissions, and compliance with such regulations requires more fundamental
solutions, like reconfiguring products and processes.

15
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

C+T creates competitiveness [econ I/L]

Cap-and-trade helps business economically, which boosts international


competition
[INECE; (No date given) Making Law Work –Environmental compliance and sustainable development; Chapter 13,
Competitiveness and compliance: The Porter hypothesis; http://inece.org/mlw/Chapter13_PorterHypothesis.pdf]
This is the holy grail of environmental regulation – win-win solutions – where firms might be forced to take strong
medicine to clean up their pollution and protect the public, but when the medicine would save the firms money and make
them, and the countries where they are located, healthier competitors in the long run. Professor Michael E. Porter and
Class van der Linde developed the “Porter Hypothesis” to show how environmental compliance can achieve this.
Porter and van der Linde theorized that properly designed environmental regulations trigger innovations within the firm
that partially or more than fully offset the costs of complying with those regulations. Such “innovation offsets” can not only
improve product quality and value but also may lower the total cost by allowing companies to use a range of inputs more
efficiently. Ultimately, according to Porter and van der Linde, this enhanced resource productivity makes companies – and
countries – more competitive.

16
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Enviro policy creates competitiveness [study proves]

Countries with the most aggressive environmental policy are the most
competitive
[INECE; (No date given) Making Law Work –Environmental compliance and sustainable development; Chapter 13,
Competitiveness and compliance: The Porter hypothesis; http://inece.org/mlw/Chapter13_PorterHypothesis.pdf]
The porter design principles have been well received by many scholars, policy makers, and industry leaders, and an
increasing body of empirical evidence confirms their success. For instance, in 2002, Daniel Esty and Michael Porter
analyzed various countries’ environmental regulations and their competitiveness and economic status in the world. In their
study they found that, “there is no evidence that higher environmental quality compromises economic progress. Environmental
performance is positively and highly correlated to GDP per capita. The preliminary evidence suggests that countries with
stricter environmental regulations than would be expected at their level of GDP per capita enjoy faster economic
growth.” Indeed Esty and Porter found that countries that have the most aggressive environmental policy regimes are the
ones most competitive and economically successful.

17
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Auctioning good

Program simplicity/ Auctioning permits = good


[ESAA; Prof Garnaut proposes emissions trading scheme design; 3/21/2008;
http://www.energymatters.com.au/index.php?main_page=news_article&article_id=20]
Garnaut says that ‘simplicity’ is the key to an effective ETS for Australia. The ETS discussion paper supports the
auctioning of all permits, arguing that any increase in the price of goods or services, such as energy, will not be prevented
through the free allocation of permits.
“Whether permits are allocated freely or auctioned to existing [electricity] generators, the price impact on households
will be the same,” the discussion paper states.
“The auctioning of permits will generate very large amounts of revenue, and the Government will face many competing
demands on how that is used. These will include from households affected by increased prices of goods and services,
employees and communities dependent on emissions-intensive industries, and non-traded sectors whose costs are directly
impacted,” says Professor Garnaut.
“The revenue should be spent on improving the productive or adaptive capacity of the economy, in ways that are consistent
with reducing greenhouse gas emissions.

18
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Modeling EU = good

The EU emissions trading Scheme should be modeled


[CCC ; Climate Change Capital: Welcomes Commission Ruling on Second Phase National Allocation Plans; 11/29/2006;
http://www.climatechangecapital.com/pages/pressdetail.asp?id=281&]
Today's announcement of stricter National Allocation Plans (NAPs) for Phase 2 of the EU's Emissions Trading Scheme (EU
ETS) puts the Commission on track to reduce national allocations beyond what was expected and is consistent with national
targets set out in the Kyoto Protocol and the EU's State Aid rules. The EU ETS is now firmly established as a flagship system,
giving confidence to other countries currently considering trading schemes and positioning Europe as the leader in carbon
financing.
Kate Hampton, CCC's Head of Policy, said, "The EU has set a lead worth following. Today's decision will inspire investor
confidence in emissions trading and the Commission's ability to effectively regulate the market. The EU has now
demonstrated its commitment to the legally binding targets adopted under Kyoto, by providing a solid platform for Phase 2 that
will reward investors in low carbon technologies and processes in both Europe and the developing world by means of the Clean
Development Mechanism. Policy makers elsewhere should watch and learn."
Commenting on the decisions long term implications, Hampton said, "This decision will strengthen the policy signals to
be provided by next year's EU ETS Review and longer term emission reduction targets. A strong emissions trading
scheme in conjunction with a credible emissions pathway through to 2020 will constitute a giant leap towards establishing post
2012 market visibility."
With this pivotal decision made, there are fewer permits than are needed, which will force companies to reduce emissions. The
Commission has seized the opportunity to provide a strong signal to investors in climate change markets. This precedent
means that there is a real chance that investors will be convinced that the EU is serious enough about global warming to
work to achieve its longer term objective of avoiding warming above two degrees Celsius by making significant emissions
reductions between now and 2020.

19
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Obama likes C+T

Obama supports the plan


[William L. Watts; reporter for MarketWatch; Obama calls for cap-and-trade program; 10/8/2007;
http://www.marketwatch.com/news/story/obama-calls-pollution-cap-and-trade-program/story.aspx?guid=%7BE704950B-F8D6-
49EB-9C20-BCCECEB72374%7D]
Democratic presidential contender Barack Obama on Monday said that if elected he would establish an economy-wide cap-
and-trade program that would sharply cut greenhouse-gas emissions by 2050.
In a speech prepared for delivery in Portsmouth, N.H., the Illinois senator said the cap-and-trade plan would be the
centerpiece of a wide-ranging set of measures designed to cut emissions of gases tied to global warming and weaning the
United States off of dependence on oil.
Under a cap-and-trade plan, companies that produce carbon dioxide and other greenhouse gases receive or buy credits that give
them the right to emit a certain amount. Companies that emit less carbon than their credits allow can profit by selling any
excess credits on the open market, while those that exceed their emission allowance have to make up the difference or face
heavy fines.
Obama's plan would require all credits to be purchased at auction, rather than allocated by industry -- a move his
campaign said would ensure that all polluters pay for every ton of emissions released.

20
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

Bush won’t pass C+T

Bush won’t push cap-and-trade


[William L. Watts; reporter for MarketWatch; Obama calls for cap-and-trade program; 10/8/2007;
http://www.marketwatch.com/news/story/obama-calls-pollution-cap-and-trade-program/story.aspx?guid=%7BE704950B-F8D6-
49EB-9C20-BCCECEB72374%7D]
The market will set the price, but unlike the other cap-and-trade proposals that have been offered in this race, no business will
be allowed to emit any greenhouses gases for free," Obama said. "Businesses don't own the sky, the public does, and if we want
them to stop polluting it, we have to put a price on all pollution."
President Bush has resisted calls for setting a cap on emissions, saying such a move would hurt the economy and put the
United States at a disadvantage to rapidly developing economies.

21
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

McCain likes C+T

McCain supports Cap-and-trade


[David Roberts; 5/11/2008; McCain's climate plan: Republican candidate's climate proposals better than expected but still behind
the curve; http://gristmill.grist.org/story/2008/5/11/23034/2638]
It comes as no surprise that the focus is on a cap-and-trade program, something McCain has supported for five years. In
fact, there is virtually no mention of any emission reduction policies outside of cap-and-trade -- no efficiency or fuel economy
mandates, no electrical utility decoupling, no mention of public transit. McCain obviously retains his conservative allergy to
regulation and public spending. There is some discussion of funding research and incentivizing market deployment of new
technology, but the details are tantalizingly vague. Perhaps they'll be fleshed out in the energy speech.

22
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

McCain =/= Bush [climate change]

McCain is working to distance himself from Bush on the issue of climate


change
[David Roberts; 5/11/2008; McCain's climate plan: Republican candidate's climate proposals better than expected but still behind
the curve; http://gristmill.grist.org/story/2008/5/11/23034/2638]
On Monday, John McCain will deliver a speech on climate change from Portland, Oregon. In it he will lay out the
framework for climate policy under a McCain administration. After a primary spent shoring up his credentials among the
Republican base, this is the beginning of his general election strategy: Operation I'm Not Bush.
(One important note: the speech is not on energy. McCain will be delivering a major speech on energy in a few weeks,
probably early June, wherein he will lay out specific thoughts and policies on coal, nuclear power, renewables, etc. Today is all
about climate policy.)

23
C+T update [part deux]
DDI 2008 <Kernoff/Olney>
Alyssa Schwartz

AT: Safety valve CP

High risk of environmental catastrophe means “safety valve” fails


[Charles Komanoff; 03/11/2008; Carbon Tax center: guest colomnist ; http://www.carbontax.org/blogarchives/2008/03/11/guest-
column-behind-the-cap-and-trade-safety-valve/]
Congress' effort to pass passing global warming legislation faces many sticking points, but few are as sticky -- or as wonky --
as the battle over whether a cap-and-trade system for greenhouse gas emissions should include what is called a "safety
valve." What started as an obscure, almost monastic dispute among economists three decades ago has now emerged as a
potential make-or-break point for the proposed legislation. Tracking its tangled history may now be essential to outsiders who
want to understand this issue -- and the huge economic stakes involved -- as champions on both sides of the political arena
saddle up to do battle over it. In recent years, New Mexico Democratic Sen. Jeff Bingaman has become the lawmaker most
linked to this cause. His version of the safety valve emerged in 2005 in a legislative proposal that created a price cap on carbon.
It would guarantee that American companies pay no more than $12 for every ton of carbon dioxide they release into the
atmosphere. This rate would go up five percent annually beyond inflation. Rallying against him are environmental groups and
commodity traders who are concerned his plan would stifle investment in new low- and zero- carbon energy technologies.
Meanwhile industry and labor unions are forming up their ranks behind Bingaman. Finding a compromise to settle this feud
won't be easy. It has been brewing since 1974 when Martin Weitzman, then an economist at Massachusetts Institute of
Technology, lit the fuse for the first salvo. An expert on how socialist governments distributed goods, Weitzman published
"Prices vs. Quantities." In it, he examined the best way to set a government policy where there is considerable uncertainty over
a potential regulation's costs and benefits. Weitzman's work didn't have global warming specifically in mind. In fact, it touched
only tangentially on environmental issues. But as many other academics have since noted, his findings helped to trigger the
debate over how to minimize costs while reducing heat-trapping emissions. Essentially, Weitzman found that government is
best positioned to regulate by stepping in to manipulate prices when there is uncertainty about the net environmental
benefits of taking action. But when the chances for an environmental catastrophe are high, Weitzman said, it's better to
tackle a problem with a quantity-based target.

24