The Times
April 18, 2009
Carl Mortished: On the money
Forget electric cars, you won't be driving one for decades, perhaps you never will. What matters is the liquid that fills the tank in the Mondeo and that liquid is becoming more peculiar every year. You may think that your car's diesel engine is burning brown sludge pumped out of a North Sea well and processed in a stinking jungle of pipes and pots on some blighted estuary in the North of England. That is only part of the story: what goes into your tank may be a cocktail of fossil-based fuels from Russia or the Gulf laced with vegetable oils imported from as far afield as Brazil and Malaysia. Making road fuel and delivering it to your car is a business that is becoming more complicated, costly and wasteful every year.
Fleets of ships, belching emissions of sulphur and carbon, are moving ethanol and other biofuels to Britain to ensure that the petrol and diesel sold at filling stations complies with the low-carbon diktat. A nightmarish transglobal web of logistics and manufacturing is required to meet the increasing biofuel obligation. In Britain, road fuel is currently 2.7 per cent ethanol or biodiesel (sourced from grains, such as wheat, rape or soya as well as palm oil and animal fat). The Renewable Transport Fuel Obligation will increase that to 3.5 per cent next year and an EU directive requires that it rise to 10 per cent by 2020.
It is a trade in bunkum: more ships burning more fossil fuel to move more biofuel in order to burn less fossil fuel. About 70 per cent of Britain's petrol and diesel is sourced from crude pumped from the UK and Norwegian North Sea, according to the UK Petroleum Industry Association, whose members run Britain's refineries.
The dwindling output of these wells means that more crude will in future be imported into Europe but biofuels will accelerate our rising dependence on imports. Only 8 per cent of the biofuel used in Britain is sourced locally. The biggest suppliers are Brazil, from which we import ethanol made from cane sugar, and the United States, which supplies grains, but our hunger for biofuels is forcing us to seek supplies from a host of countries including Indonesia, Malawi, Pakistan and Ukraine.
To make matters worse, Britain is now forced to import not just crude but oil products. Our refineries can no longer cope with the increasing clamour for diesel caused by the fashion for more fuel-efficient diesel cars. Petrol is spurned as the hunger for diesel increases. The imbalance between supply and demand (a barrel of crude can only produce so much diesel) has created more seaborne trade: 4.5 million tonnes of unleaded petrol shipped to America last year while 3.5 million tonnes of diesel arrived on our shores, mainly from Russia. At the same time, the budget airline industry is boosting demand for jet fuel and the refineries in the Gulf are supplying it — 5.3 million tonnes imported last year.
Perhaps we ought to make the stuff ourselves — build better refineries that can produce more diesel molecules from the sludge at the bottom of a barrel of crude. That is possible, say the refiners, but it's an energy intensive process: we should emit more carbon if we make more diesel. It would be harder for Britain to cut its emissions; it is easier to let the Saudis and Russians make the stuff offshore.
And so we run British industry into the ground, shying away from dirty processes, buying more fuels from distant lands that don't worry much about carbon in the hope that we can meet our self-imposed target of reducing emissions by 80per cent by 2050.
Today, agriculture ministers from the Group of Eight nations (including Britain) meet in Italy to talk about food security. Since last year's bout of severe food price inflation, the pressure has eased but the problems remain. Stockpiles of staple grains are very low and a drought could push the cost of rice and wheat higher again.
Meanwhile, at the refinery, diesel is being laced with methyl esters made from wheat and soya. It has cost us £100 million so far to build this low-carbon house. And the game has only just begun.
Saturday, 18 April 2009
The Ethanol Bubble Pops in Iowa
More evidence the fuel makes little economic sense.
By MAX SCHULZ
Dyersville, Iowa
In September, ethanol giant VeraSun Energy opened a refinery on the outskirts of this eastern Iowa community. Among the largest biofuels facilities in the country, the Dyersville plant could process 39 million bushels of corn and produce 110 million gallons of ethanol annually. VeraSun boasted the plant could run 24 hours a day, seven days a week to meet the demand for home-grown energy.
But the only thing happening 24-7 at the Dyersville plant these days is nothing at all. Its doors are shut and corn deliveries are turned away. Touring the facility recently, I saw dozens of rail cars sitting idle. They've been there through the long, bleak winter. Two months after Dyersville opened, VeraSun filed for bankruptcy, closing many of its 14 plants and laying off hundreds of employees. VeraSun lost $476 million in the third quarter last year.
A town of 4,000, Dyersville is best known as the location of the 1989 film "Field of Dreams." In the film, a voice urges Kevin Costner to create a baseball diamond in a cornfield and the ghosts of baseball past emerge from the ether to play ball. Audiences suspended disbelief as they were charmed by a story that blurred the lines between fantasy and reality.
That's pretty much the story of ethanol. Consumers were asked to suspend disbelief as policy makers blurred the lines between economic reality and a business model built on fantasies of a better environment and energy independence through ethanol. Notwithstanding federal subsidies and mandates that force-feed the biofuel to the driving public, ethanol is proving to be a bust.
In the fourth quarter of 2008, Aventine Renewable Energy, a large ethanol producer, lost $37 million despite selling a company record 278 million gallons of the biofuel. Last week it filed for bankruptcy. California's Pacific Ethanol lost $146 million last year and has defaulted on $250 million in loans. It recently told regulators that it will likely run out of cash by April 30.
How could this be? The federal government gives ethanol producers a generous 51-cent-a-gallon tax credit and mandates that a massive amount of their fuel be blended into the nation's gasoline supplies. And those mandates increase every year. This year the mandate is 11 billion gallons and is on its way to 36 billion gallons in 2022.
To meet this political demand, VeraSun, Pacific Ethanol, Aventine Renewable Energy and others rushed to build ethanol mills. The industry produced just four billion gallons of ethanol in 2005, so it had to add a lot of capacity in a short period of time.
Three years ago, ethanol producers made $2.30 per gallon. But with the global economic slowdown, along with a glut of ethanol on the market, by the end of 2008 ethanol producers were making a mere 25 cents per gallon. That drop forced Dyersville and other facilities to be shuttered. The industry cut more than 20% of its capacity in a few months last year.
What's more, as ethanol producers sucked in a vast amount of corn, prices of milk, eggs and other foods soared. The price of corn shot up, as did the price of products from animals -- chickens and cows -- that eat feed corn.
Texas Gov. Rick Perry reacted by standing with the cattlemen in his state to ask the Environmental Protection Agency last year to suspend part of the ethanol mandates (which it has the power to do under the 2007 energy bill). The EPA turned him down flat. The Consumer Price Index later revealed that retail food prices in 2008 were up 10% over 2006. In Mexico, rising prices led to riots over the cost of tortillas in 2007. The United Nations Food and Agricultural Organization and other international organizations issued reports last year criticizing biofuels for a spike in food prices.
Ethanol is also bad for the environment. Science magazine published an article last year by Timothy Searchinger of Princeton University, among others, that concluded that biofuels cause deforestation, which speeds climate change. The National Oceanographic and Atmospheric Administration noted in July 2007 that the ethanol boom rapidly increased the amount of fertilizer polluting the Mississippi River. And this week, University of Minnesota researchers Yi-Wen Chiu, Sangwon Suh and Brian Walseth released a study showing that in California -- a state with a water shortage -- it can take more than 1,000 gallons of water to make one gallon of ethanol. They warned that "energy security is being secured at the expense of water security."
For all the pain ethanol has caused, it displaced a mere 3% of our oil usage last year. Even if we plowed under all other crops and dedicated the country's 300 million acres of cropland to ethanol, James Jordan and James Powell of the Polytechnic University of New York estimate we would displace just 15% of our oil demand with biofuels.
But President Barack Obama, an ethanol fan, is leaving current policy in place and has set $6 billion aside in his stimulus package for federal loan guarantees for companies developing innovative energy technologies, including biofuels. It's part of his push to create "green jobs." Archer Daniels Midland and oil refiner Valero are already scavenging the husks of shuttered ethanol plants, looking for facilities on the cheap. One such facility may be the plant in Dyersville, which is for sale. Before we're through, we'll likely see another ethanol bubble.
Mr. Schulz is a senior fellow at the Manhattan Institute.
By MAX SCHULZ
Dyersville, Iowa
In September, ethanol giant VeraSun Energy opened a refinery on the outskirts of this eastern Iowa community. Among the largest biofuels facilities in the country, the Dyersville plant could process 39 million bushels of corn and produce 110 million gallons of ethanol annually. VeraSun boasted the plant could run 24 hours a day, seven days a week to meet the demand for home-grown energy.
But the only thing happening 24-7 at the Dyersville plant these days is nothing at all. Its doors are shut and corn deliveries are turned away. Touring the facility recently, I saw dozens of rail cars sitting idle. They've been there through the long, bleak winter. Two months after Dyersville opened, VeraSun filed for bankruptcy, closing many of its 14 plants and laying off hundreds of employees. VeraSun lost $476 million in the third quarter last year.
A town of 4,000, Dyersville is best known as the location of the 1989 film "Field of Dreams." In the film, a voice urges Kevin Costner to create a baseball diamond in a cornfield and the ghosts of baseball past emerge from the ether to play ball. Audiences suspended disbelief as they were charmed by a story that blurred the lines between fantasy and reality.
That's pretty much the story of ethanol. Consumers were asked to suspend disbelief as policy makers blurred the lines between economic reality and a business model built on fantasies of a better environment and energy independence through ethanol. Notwithstanding federal subsidies and mandates that force-feed the biofuel to the driving public, ethanol is proving to be a bust.
In the fourth quarter of 2008, Aventine Renewable Energy, a large ethanol producer, lost $37 million despite selling a company record 278 million gallons of the biofuel. Last week it filed for bankruptcy. California's Pacific Ethanol lost $146 million last year and has defaulted on $250 million in loans. It recently told regulators that it will likely run out of cash by April 30.
How could this be? The federal government gives ethanol producers a generous 51-cent-a-gallon tax credit and mandates that a massive amount of their fuel be blended into the nation's gasoline supplies. And those mandates increase every year. This year the mandate is 11 billion gallons and is on its way to 36 billion gallons in 2022.
To meet this political demand, VeraSun, Pacific Ethanol, Aventine Renewable Energy and others rushed to build ethanol mills. The industry produced just four billion gallons of ethanol in 2005, so it had to add a lot of capacity in a short period of time.
Three years ago, ethanol producers made $2.30 per gallon. But with the global economic slowdown, along with a glut of ethanol on the market, by the end of 2008 ethanol producers were making a mere 25 cents per gallon. That drop forced Dyersville and other facilities to be shuttered. The industry cut more than 20% of its capacity in a few months last year.
What's more, as ethanol producers sucked in a vast amount of corn, prices of milk, eggs and other foods soared. The price of corn shot up, as did the price of products from animals -- chickens and cows -- that eat feed corn.
Texas Gov. Rick Perry reacted by standing with the cattlemen in his state to ask the Environmental Protection Agency last year to suspend part of the ethanol mandates (which it has the power to do under the 2007 energy bill). The EPA turned him down flat. The Consumer Price Index later revealed that retail food prices in 2008 were up 10% over 2006. In Mexico, rising prices led to riots over the cost of tortillas in 2007. The United Nations Food and Agricultural Organization and other international organizations issued reports last year criticizing biofuels for a spike in food prices.
Ethanol is also bad for the environment. Science magazine published an article last year by Timothy Searchinger of Princeton University, among others, that concluded that biofuels cause deforestation, which speeds climate change. The National Oceanographic and Atmospheric Administration noted in July 2007 that the ethanol boom rapidly increased the amount of fertilizer polluting the Mississippi River. And this week, University of Minnesota researchers Yi-Wen Chiu, Sangwon Suh and Brian Walseth released a study showing that in California -- a state with a water shortage -- it can take more than 1,000 gallons of water to make one gallon of ethanol. They warned that "energy security is being secured at the expense of water security."
For all the pain ethanol has caused, it displaced a mere 3% of our oil usage last year. Even if we plowed under all other crops and dedicated the country's 300 million acres of cropland to ethanol, James Jordan and James Powell of the Polytechnic University of New York estimate we would displace just 15% of our oil demand with biofuels.
But President Barack Obama, an ethanol fan, is leaving current policy in place and has set $6 billion aside in his stimulus package for federal loan guarantees for companies developing innovative energy technologies, including biofuels. It's part of his push to create "green jobs." Archer Daniels Midland and oil refiner Valero are already scavenging the husks of shuttered ethanol plants, looking for facilities on the cheap. One such facility may be the plant in Dyersville, which is for sale. Before we're through, we'll likely see another ethanol bubble.
Mr. Schulz is a senior fellow at the Manhattan Institute.
Ed Miliband plans clean coal scheme worth millions
• Energy minister hopes to defuse global warming row • Cabinet support for plan, but Treasury balks at cost
Juliette Jowit and Tim Webb
The Guardian, Saturday 18 April 2009
Ed Miliband, the climate change and energy secretary, is pushing an ambitious plan to spend billions of pounds on cleaning up pollution from dirty coal plants.
He is said to have cabinet support for the proposal which could help to head off controversy about global warming pollution and the UK's future energy security.
Ministers are still discussing how to fund the expensive and unproven carbon capture and storage technology, including a possible levy on customer bills.
Miliband is said to favour developing "clusters" of carbon capture and storage (CCS), fitted on both coal- and gas-fired power stations, and a "national grid" for transporting and storing the polluting emissions. Such a move would be a change from the current policy of building up to eight coal plants, with only one equipped with pollution-trapping technology.
However, Treasury officials have balked at the cost and a less ambitious plan, starting with two or three plants, is also on the table.
It had been hoped the proposals could be announced alongside next week's budget, but the announcement might have to be delayed until financing is agreed.
Ministers have already delayed announcing permission for the first proposed new coal plant, at Kingsnorth, Kent, because of wrangling over the cost of CCS, said to have risen to between £750m and £1.5bn for the first trial alone.
Energy companies have warned that further delay in decisions on new coal power would pose serious security of supply problems as other ageing plants are closed down.
Greenpeace urged the government to go further. John Sauven, its executive director, said: "Climate scientists have made it clear that any outcome which results in a jumble of half measures would be another Heathrow-sized fiasco.
"Miliband should be focused on cutting emissions, not appeasing German energy giants like E.ON who want to build a new coal-fired power station at Kingsnorth without guaranteeing it will capture and store any of its emissions."
A consultation on the proposals is expected to include how to fund more demonstration coal plants to test the technology, which is not yet commercially proved. Senior officials are also understood to be concerned about the long-term cost and responsibility for storing huge quantities of carbon dioxide and other global warming emissions.
Energy companies will also be required to fit CCS to their coal plants over a period of time once the technology is proved. Companies not able to secure European commission funding will pass on the costs of the CCS programme to consumers.
Supporters of a levy said it would be spread over millions of homes and businesses across several decades, but fuel poverty campaigners say 6m householders are already struggling to pay for gas and electricity.
Until now the government has offered to fund one CCS demonstration plant but has not said how much money would be made available or how. The Treasury is not in a position to commit significant funds to an expanded programme. The Department for Energy and Climate Change (DECC) said: "We have to strike the right balance between affordability and getting the level of demonstration we want."
Miliband is said to have asked officials to draw up a new coal plan to meet conflicting warnings about global warming emissions and a looming gap in Britain's energy supplies when old coal and nuclear plants are closed in the next decade.
The Climate Change Committee watchdog has said the UK should make coal plants fit CCS by the early 2020s to meet the government's pledge to cut greenhouse gases by 80% by 2050.
The DECC believes clusters of coal and gas plants with CCS would offer efficiency because they could share the costs of building and operating pipelines to storage facilities, probably in old North Sea oil and gas fields.
Juliette Jowit and Tim Webb
The Guardian, Saturday 18 April 2009
Ed Miliband, the climate change and energy secretary, is pushing an ambitious plan to spend billions of pounds on cleaning up pollution from dirty coal plants.
He is said to have cabinet support for the proposal which could help to head off controversy about global warming pollution and the UK's future energy security.
Ministers are still discussing how to fund the expensive and unproven carbon capture and storage technology, including a possible levy on customer bills.
Miliband is said to favour developing "clusters" of carbon capture and storage (CCS), fitted on both coal- and gas-fired power stations, and a "national grid" for transporting and storing the polluting emissions. Such a move would be a change from the current policy of building up to eight coal plants, with only one equipped with pollution-trapping technology.
However, Treasury officials have balked at the cost and a less ambitious plan, starting with two or three plants, is also on the table.
It had been hoped the proposals could be announced alongside next week's budget, but the announcement might have to be delayed until financing is agreed.
Ministers have already delayed announcing permission for the first proposed new coal plant, at Kingsnorth, Kent, because of wrangling over the cost of CCS, said to have risen to between £750m and £1.5bn for the first trial alone.
Energy companies have warned that further delay in decisions on new coal power would pose serious security of supply problems as other ageing plants are closed down.
Greenpeace urged the government to go further. John Sauven, its executive director, said: "Climate scientists have made it clear that any outcome which results in a jumble of half measures would be another Heathrow-sized fiasco.
"Miliband should be focused on cutting emissions, not appeasing German energy giants like E.ON who want to build a new coal-fired power station at Kingsnorth without guaranteeing it will capture and store any of its emissions."
A consultation on the proposals is expected to include how to fund more demonstration coal plants to test the technology, which is not yet commercially proved. Senior officials are also understood to be concerned about the long-term cost and responsibility for storing huge quantities of carbon dioxide and other global warming emissions.
Energy companies will also be required to fit CCS to their coal plants over a period of time once the technology is proved. Companies not able to secure European commission funding will pass on the costs of the CCS programme to consumers.
Supporters of a levy said it would be spread over millions of homes and businesses across several decades, but fuel poverty campaigners say 6m householders are already struggling to pay for gas and electricity.
Until now the government has offered to fund one CCS demonstration plant but has not said how much money would be made available or how. The Treasury is not in a position to commit significant funds to an expanded programme. The Department for Energy and Climate Change (DECC) said: "We have to strike the right balance between affordability and getting the level of demonstration we want."
Miliband is said to have asked officials to draw up a new coal plan to meet conflicting warnings about global warming emissions and a looming gap in Britain's energy supplies when old coal and nuclear plants are closed in the next decade.
The Climate Change Committee watchdog has said the UK should make coal plants fit CCS by the early 2020s to meet the government's pledge to cut greenhouse gases by 80% by 2050.
The DECC believes clusters of coal and gas plants with CCS would offer efficiency because they could share the costs of building and operating pipelines to storage facilities, probably in old North Sea oil and gas fields.
US clears way for carbon emissions regulations
By Andrew Ward and Sarah O’Connor in Washington
Published: April 17 2009 19:14
Barack Obama’s administration on Friday took its first concrete step towards regulating greenhouse gas emissions by declaring carbon dioxide a danger to human health and welfare.
It clears the way for the US Environmental Protection Agency to regulate CO2 emissions under existing air pollution laws, without the need for fresh legislation.
It also appeared designed to increase pressure on Congress to pass new laws to tackle global warming, amid resistance on Capitol Hill to measures that would increase energy costs for businesses and consumers.
The US president wants progress before United Nations climate change talks in Copenhagen in December, to signal US commitment and encourage other countries, – particularly China and India – to make concessions.
The EPA has been considering its approach since a Supreme Court ruling in 2007 found it was entitled to regulate CO2 emissions under the Clean Air Act.
George W. Bush’s administration declined to take up the authority but the White House this week gave the green light for the EPA to start preparing the ground for regulation.
The Obama administration would prefer to tackle climate change through new legislation to set up a cap-and-trade system, which would be similar to the one used to regulate carbon emissions in Europe. The Clean Air Act provides a fallback option if Congress fails to act.
The EPA said the science pointing to man-made pollution as a cause of global warming was “compelling and overwhelming”, with CO2 emissions from burning fossil fuels the main cause. In a finding that qualifies CO2 for regulation, it said the gas posed “a threat to public health and welfare”.
Copyright The Financial Times Limited 2009
Published: April 17 2009 19:14
Barack Obama’s administration on Friday took its first concrete step towards regulating greenhouse gas emissions by declaring carbon dioxide a danger to human health and welfare.
It clears the way for the US Environmental Protection Agency to regulate CO2 emissions under existing air pollution laws, without the need for fresh legislation.
It also appeared designed to increase pressure on Congress to pass new laws to tackle global warming, amid resistance on Capitol Hill to measures that would increase energy costs for businesses and consumers.
The US president wants progress before United Nations climate change talks in Copenhagen in December, to signal US commitment and encourage other countries, – particularly China and India – to make concessions.
The EPA has been considering its approach since a Supreme Court ruling in 2007 found it was entitled to regulate CO2 emissions under the Clean Air Act.
George W. Bush’s administration declined to take up the authority but the White House this week gave the green light for the EPA to start preparing the ground for regulation.
The Obama administration would prefer to tackle climate change through new legislation to set up a cap-and-trade system, which would be similar to the one used to regulate carbon emissions in Europe. The Clean Air Act provides a fallback option if Congress fails to act.
The EPA said the science pointing to man-made pollution as a cause of global warming was “compelling and overwhelming”, with CO2 emissions from burning fossil fuels the main cause. In a finding that qualifies CO2 for regulation, it said the gas posed “a threat to public health and welfare”.
Copyright The Financial Times Limited 2009
U.S. in Historic Shift on CO2
Businesses Brace for Costly New Rules as EPA Declares Warming Gases a Threat
By JONATHAN WEISMAN and SIOBHAN HUGHES
WASHINGTON -- The Obama administration declared Friday that carbon dioxide and five other industrial emissions threaten the planet. The landmark decision lays the groundwork for federal efforts to cap carbon emissions -- at a potential cost of billions of dollars to businesses and government.
The Environmental Protection Agency finding that the emissions endanger "the health and welfare of current and future generations" is "the first formal recognition by the U.S. government of the threats posed by climate change," EPA Administrator Lisa Jackson wrote in a memo to her staff.
The Capitol Power Plant, which heats and cools Congress's halls, still uses coal and emits greenhouse gases.
The finding could touch every corner of Americans' lives, from the types of cars they drive to the homes they build. Along with carbon dioxide, the EPA named methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride as deleterious to the environment. Even if the agency doesn't use its powers under the Clean Air Act to curb greenhouse gases, Friday's action improves the chances that Congress will move to create a more flexible mechanism to do so.
On a conference call Friday with environmentalists, EPA officials stressed they would take a go-slow approach, holding two public hearings next month before the findings are official. After that, any new regulations would go through a public comment period, more hearings and a long review.
"Whatever the process it, it will be the time-honored and ordinary process of soliciting public input," an EPA official said.
New regulations driven by the finding could be years away. But unless superseded by congressional action, the EPA ruling eventually could lead to stricter emissions limits. Businesses that stand to be affected range from power plants and oil refineries to car makers and cement producers.
The finding could touch every corner of Americans' lives, from the types of cars they drive to the homes they build. Along with carbon dioxide, the EPA named methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride as deleterious to the environment. Even if the agency doesn't use its powers under the Clean Air Act to curb greenhouse gases, Friday's action improves the chances that Congress will move to create a more flexible mechanism to do so.
On a conference call Friday with environmentalists, EPA officials stressed they would take a go-slow approach, holding two public hearings next month before the findings are official. After that, any new regulations would go through a public comment period, more hearings and a long review.
"Whatever the process it, it will be the time-honored and ordinary process of soliciting public input," an EPA official said.
New regulations driven by the finding could be years away. But unless superseded by congressional action, the EPA ruling eventually could lead to stricter emissions limits. Businesses that stand to be affected range from power plants and oil refineries to car makers and cement producers.
Uncertainty about the impact of such regulation is already affecting some companies. Consol Energy Inc., a big coal and energy company based in Pittsburgh, says it is delaying two large mining projects in Northern Appalachia because of uncertainty around pending carbon emission regulation.
"In terms of starting to move dirt, we would postpone that until there's some clarity," said Thomas Hoffman, vice president of investor relations.
Friday's announcement marks a significant turn in U.S. policy on climate change. The U.S. has never ratified the Kyoto climate treaty. President Bill Clinton, who signed the pact, didn't submit it to the Senate for ratification because of strong opposition to the deal, which didn't impose greenhouse gas limits on China and other developing economies. President George W. Bush also didn't submit the Kyoto treaty for ratification, and largely resisted calls for stronger action on climate change, including the endangerment finding.
That approach began to crumble two years ago, when the Supreme Court found that carbon dioxide is a pollutant under the Clean Air Act and declared that the EPA can regulate it.
With Friday's finding, the U.S. takes a big step closer to European Union nations, which have agreed to Kyoto greenhouse gas limits and are pushing for a new treaty on climate change at a December meeting in Copenhagen.
Some Republicans and business groups that have long blocked action on climate-change legislation shifted positions in response, saying Congress now must act on legislation that would give businesses more flexibility in meeting emissions targets than rules issued under the Clean Air Act.
Rep. Edward J. Markey (D., Mass.), a co-author of sweeping climate change legislation, called the EPA's decision "a game changer."
"It's now no longer a choice between doing a bill or doing nothing," said the lawmaker, who will hold four days of climate change hearings next week before the formal drafting of a bill begins the last week of April. "It is now a choice between regulation and legislation."
Lamar Alexander of Tennessee, chairman of the Senate Republican Conference, sought a middle ground, proposing to focus carbon caps on coal-fired power plants and vehicle tailpipes -- and holding off any move until the nation emerges from recession.
American Electric Power, a utility giant with 5.2 million customers in states from Texas to Michigan to Virginia, is already considering what coal plants would have to be shuttered and how high rates would have to go to comply with either a regulatory or legislative mandates to curb carbon dioxide. AEP spokesman Pat Hemlepp said rate increases stretch from 25% to 50% and beyond, depending on the climate change strategy that finally emerges from Washington.
A proposal by President Barack Obama would cap the emissions of greenhouse gases, then force polluters to purchase emission permits, which could be traded on the open market. The details of the cost of carbon credits have been left to Congress, although Mr. Obama has said he wants all emissions covered, with no allowance for free emissions, as some business groups and lawmakers want.
Heavy carbon emitters, such as utilities that rely on coal-fired power, would pay a hefty price, but the cost of compliance would be alleviated by purchasing extra emissions permits from companies that emit less or can more easily adapt with energy-saving technology.
Regulation, on the other hand, would probably exclude such flexibility, and simply force businesses to reduce emissions. Businesses also see a more favorable playing field in Congress than with EPA regulators, who do not have to face the voters.
"We're pretty confident that Congress is going to be much more sensitive to the economic impact of this than some unelected bureaucrats," said Hank Cox, a spokesman for the National Association of Manufacturers.
The impact of the EPA finding could be dramatic. Using the Clean Air Act, the EPA could raise fuel-efficiency standards for automobiles, such as by authorizing nationwide adoption of California's rules for greenhouse-gas tailpipe emissions.
That could require auto makers to produce more hybrid and electric vehicles, such as the Chevrolet Volt plug-in hybrid under development by General Motors Corp. The Volt, however, is expected to carry a sticker of about $40,000, or roughly twice the price of a conventional Chevrolet Malibu sedan.
In electric power, the EPA could force new power plants to include emissions-reduction technology, although it is unclear whether emerging technologies to capture carbon-dioxide emissions would be feasible.
The EPA could order older power plants to be retrofitted, such as with more-efficient boilers, and it could mandate more reliance on wind and other renewable energy if coal-fired power plants can't be made to run more cleanly. That could present technological and infrastructure challenges.
White House officials made clear Friday that President Obama prefers a legislative approach to curbing global warming. The House Energy and Commerce Committee will hold hearings next week on an Obama proposal to cap carbon emissions and sell tradable permits that businesses must buy to emit carbon dioxide. The White House will dispatch senior officials to those hearings, an official said.
The EPA finding comes about two years after the Supreme Court found that carbon dioxide is a pollutant under the Clean Air Act and that the EPA can regulate it.
Write to Jonathan Weisman at jonathan.weisman@wsj.com and Siobhan Hughes at siobhan.hughes@dowjones.com
"In terms of starting to move dirt, we would postpone that until there's some clarity," said Thomas Hoffman, vice president of investor relations.
Friday's announcement marks a significant turn in U.S. policy on climate change. The U.S. has never ratified the Kyoto climate treaty. President Bill Clinton, who signed the pact, didn't submit it to the Senate for ratification because of strong opposition to the deal, which didn't impose greenhouse gas limits on China and other developing economies. President George W. Bush also didn't submit the Kyoto treaty for ratification, and largely resisted calls for stronger action on climate change, including the endangerment finding.
That approach began to crumble two years ago, when the Supreme Court found that carbon dioxide is a pollutant under the Clean Air Act and declared that the EPA can regulate it.
With Friday's finding, the U.S. takes a big step closer to European Union nations, which have agreed to Kyoto greenhouse gas limits and are pushing for a new treaty on climate change at a December meeting in Copenhagen.
Some Republicans and business groups that have long blocked action on climate-change legislation shifted positions in response, saying Congress now must act on legislation that would give businesses more flexibility in meeting emissions targets than rules issued under the Clean Air Act.
Rep. Edward J. Markey (D., Mass.), a co-author of sweeping climate change legislation, called the EPA's decision "a game changer."
"It's now no longer a choice between doing a bill or doing nothing," said the lawmaker, who will hold four days of climate change hearings next week before the formal drafting of a bill begins the last week of April. "It is now a choice between regulation and legislation."
Lamar Alexander of Tennessee, chairman of the Senate Republican Conference, sought a middle ground, proposing to focus carbon caps on coal-fired power plants and vehicle tailpipes -- and holding off any move until the nation emerges from recession.
American Electric Power, a utility giant with 5.2 million customers in states from Texas to Michigan to Virginia, is already considering what coal plants would have to be shuttered and how high rates would have to go to comply with either a regulatory or legislative mandates to curb carbon dioxide. AEP spokesman Pat Hemlepp said rate increases stretch from 25% to 50% and beyond, depending on the climate change strategy that finally emerges from Washington.
A proposal by President Barack Obama would cap the emissions of greenhouse gases, then force polluters to purchase emission permits, which could be traded on the open market. The details of the cost of carbon credits have been left to Congress, although Mr. Obama has said he wants all emissions covered, with no allowance for free emissions, as some business groups and lawmakers want.
Heavy carbon emitters, such as utilities that rely on coal-fired power, would pay a hefty price, but the cost of compliance would be alleviated by purchasing extra emissions permits from companies that emit less or can more easily adapt with energy-saving technology.
Regulation, on the other hand, would probably exclude such flexibility, and simply force businesses to reduce emissions. Businesses also see a more favorable playing field in Congress than with EPA regulators, who do not have to face the voters.
"We're pretty confident that Congress is going to be much more sensitive to the economic impact of this than some unelected bureaucrats," said Hank Cox, a spokesman for the National Association of Manufacturers.
The impact of the EPA finding could be dramatic. Using the Clean Air Act, the EPA could raise fuel-efficiency standards for automobiles, such as by authorizing nationwide adoption of California's rules for greenhouse-gas tailpipe emissions.
That could require auto makers to produce more hybrid and electric vehicles, such as the Chevrolet Volt plug-in hybrid under development by General Motors Corp. The Volt, however, is expected to carry a sticker of about $40,000, or roughly twice the price of a conventional Chevrolet Malibu sedan.
In electric power, the EPA could force new power plants to include emissions-reduction technology, although it is unclear whether emerging technologies to capture carbon-dioxide emissions would be feasible.
The EPA could order older power plants to be retrofitted, such as with more-efficient boilers, and it could mandate more reliance on wind and other renewable energy if coal-fired power plants can't be made to run more cleanly. That could present technological and infrastructure challenges.
White House officials made clear Friday that President Obama prefers a legislative approach to curbing global warming. The House Energy and Commerce Committee will hold hearings next week on an Obama proposal to cap carbon emissions and sell tradable permits that businesses must buy to emit carbon dioxide. The White House will dispatch senior officials to those hearings, an official said.
The EPA finding comes about two years after the Supreme Court found that carbon dioxide is a pollutant under the Clean Air Act and that the EPA can regulate it.
Write to Jonathan Weisman at jonathan.weisman@wsj.com and Siobhan Hughes at siobhan.hughes@dowjones.com
How Carbon Dioxide Became a 'Pollutant'
By KEITH JOHNSON
The Environmental Protection Agency's decision to classify rising carbon-dioxide emissions as a hazard to human health is the latest twist in a debate that has raged for decades among politicians, scientists and industry: whether a natural component of the earth's atmosphere should be considered a pollutant.
The EPA's finding doesn't say carbon dioxide, or CO2, is by itself a pollutant -- it is, after all, a gas that humans exhale and plants inhale. Rather, it is the increasing concentrations of the gas that concern the agency.
Carbon-dioxide levels in the Earth's atmosphere have fluctuated wildly for millennia; at one point billions of years ago, it was the dominant gas in the atmosphere.
However, the EPA ruled that today's higher concentrations are the "unambiguous result of human emissions." Concentrations of carbon dioxide and other gases "are well above the natural range of atmospheric concentrations compared to the last 650,000 years," the agency said.
Over the years, many pro-business groups have discouraged regulation of carbon-dioxide emissions by arguing that CO2 is an essential ingredient of life. In its decision, the EPA stressed that it considers CO2 and other so-called greenhouse gases to be pollutants because of their role in propagating climate change, not because of any direct health effects.
In 1998, the Clinton administration EPA studied the question and determined that the Clean Air Act was "potentially applicable" to CO2 and other greenhouse gases. But despite continued pressure from environmental groups, the administration never moved to regulate the gases.
According to the bulk of scientific research, such as that assembled by the Intergovernmental Panel on Climate Change, the more greenhouse gases there are in the atmosphere, especially carbon dioxide, the more heat is trapped. That leads to rising temperatures. The EPA endorsed the IPCC research and specifically said that "natural variations" in climate, such as solar activity, couldn't explain rising temperatures.
The EPA lumped carbon dioxide with five other gases -- methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride -- into a single class for regulatory purposes. That's because they share similar properties: All are long-lived and well-mixed in the atmosphere; all trap heat that otherwise would leave the earth and go into outer space; and all are "directly emitted as greenhouse gases" rather than forming later in the atmosphere.
Alternatively, tropospheric ozone wasn't included in the class, even though it creates smog and contributes to global warming. But that gas isn't emitted directly; rather, it is created in the atmosphere when sunlight reacts with greenhouse gases emitted by human activity such as engine combustion and industrial processes.
Similarly, the EPA declined to consider regulating water vapor or soot, also known as "black carbon," both of which are big contributors to the greenhouse effect but which don't share common properties with the six greenhouse gases.
The EPA did acknowledge some positive impacts from higher CO2 concentrations.
One is faster-growing trees in tropical forests, which helps offset deforestation. Another is marshes that can more quickly grow above rising sea levels, providing an insurance policy of sorts for some low-lying areas against the potential ravages of rising sea levels resulting from warmer global temperatures.
The EPA also acknowledged some positive aspects of rising temperatures, but concluded that on balance, the negative impacts of climate change outweigh the positive.
Write to Keith Johnson at keith.johnson@wsj.com
The Environmental Protection Agency's decision to classify rising carbon-dioxide emissions as a hazard to human health is the latest twist in a debate that has raged for decades among politicians, scientists and industry: whether a natural component of the earth's atmosphere should be considered a pollutant.
The EPA's finding doesn't say carbon dioxide, or CO2, is by itself a pollutant -- it is, after all, a gas that humans exhale and plants inhale. Rather, it is the increasing concentrations of the gas that concern the agency.
Carbon-dioxide levels in the Earth's atmosphere have fluctuated wildly for millennia; at one point billions of years ago, it was the dominant gas in the atmosphere.
However, the EPA ruled that today's higher concentrations are the "unambiguous result of human emissions." Concentrations of carbon dioxide and other gases "are well above the natural range of atmospheric concentrations compared to the last 650,000 years," the agency said.
Over the years, many pro-business groups have discouraged regulation of carbon-dioxide emissions by arguing that CO2 is an essential ingredient of life. In its decision, the EPA stressed that it considers CO2 and other so-called greenhouse gases to be pollutants because of their role in propagating climate change, not because of any direct health effects.
In 1998, the Clinton administration EPA studied the question and determined that the Clean Air Act was "potentially applicable" to CO2 and other greenhouse gases. But despite continued pressure from environmental groups, the administration never moved to regulate the gases.
According to the bulk of scientific research, such as that assembled by the Intergovernmental Panel on Climate Change, the more greenhouse gases there are in the atmosphere, especially carbon dioxide, the more heat is trapped. That leads to rising temperatures. The EPA endorsed the IPCC research and specifically said that "natural variations" in climate, such as solar activity, couldn't explain rising temperatures.
The EPA lumped carbon dioxide with five other gases -- methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride -- into a single class for regulatory purposes. That's because they share similar properties: All are long-lived and well-mixed in the atmosphere; all trap heat that otherwise would leave the earth and go into outer space; and all are "directly emitted as greenhouse gases" rather than forming later in the atmosphere.
Alternatively, tropospheric ozone wasn't included in the class, even though it creates smog and contributes to global warming. But that gas isn't emitted directly; rather, it is created in the atmosphere when sunlight reacts with greenhouse gases emitted by human activity such as engine combustion and industrial processes.
Similarly, the EPA declined to consider regulating water vapor or soot, also known as "black carbon," both of which are big contributors to the greenhouse effect but which don't share common properties with the six greenhouse gases.
The EPA did acknowledge some positive impacts from higher CO2 concentrations.
One is faster-growing trees in tropical forests, which helps offset deforestation. Another is marshes that can more quickly grow above rising sea levels, providing an insurance policy of sorts for some low-lying areas against the potential ravages of rising sea levels resulting from warmer global temperatures.
The EPA also acknowledged some positive aspects of rising temperatures, but concluded that on balance, the negative impacts of climate change outweigh the positive.
Write to Keith Johnson at keith.johnson@wsj.com
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