SOIL CARBON AND CLIMATE CHANGE NEWS

From Kansas State University's:

Consortium for Agricultural Soils Mitigation of Greenhouse Gases (CASMGS)

http://soilcarboncenter.k-state.edu

Charles W. Rice, K-State Department of Agronomy, National CASMGS Director

(785) 532-7217 cwrice@ksu.edu

Scott Staggenborg, K-State Department of Agronomy (785) 532-7214 sstaggen@ksu.edu

Steve Watson, CASMGS Communications (785) 532-7105 swatson@ksu.edu

April 16, 2008

No. 62

National:

* Carbon Prices and Volume Soar on Chicago Climate Exchange

Policy:

* America’s Climate Security Act: A Bill to Establish a Cap-and-Trade System in the U.S.

* Proposed Elements of a Mandatory Greenhouse Gas Cap-and-Trade Registry

International:

* World Environment Day 2008

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Carbon Prices and Volume Soar

on Chicago Climate Exchange

Carbon prices on the Chicago Climate Exchange (CCX) started out in 2008 at about $2.00 per metric ton of CO2. As of early April, prices on the exchange have tripled from that level to about $6.00 per million metric ton for essentially all vintage years. Current prices can be found at: www.chicagoclimatex.com

Trading volumes have also soared. The Chicago Climate Exchange and its wholly owned subsidiary, Chicago Climate Futures Exchange (CCFE), announced on April 2 that both Exchanges had record 2008 first quarter results, with substantial growth experienced in both its carbon complex and the CCFE’s flagship contracts - Sulfur Financial Instrument futures and options contracts and Nitrogen Financial Instrument futures contracts, when compared to first quarter 2007.

-- Steve Watson, CASMGS Communications

swatson@ksu.edu

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America’s Climate Security Act:

A Bill To Establish A Cap-and-Trade System in the U.S.

One of the “climate change” bills that has been proposed in the U.S. Senate is the Lieberman-Warner Climate Security Act (S. 2191). If it becomes law, this bill would set mandatory greenhouse gas emission limits and create a cap-and-trade system for greenhouse gases in the U.S. for the first time.

Senators Joe Lieberman (ID-CT) and John Warner (R-VA) introduced this bill in October 2007 in order to reduce United States greenhouse gas emissions, including CO2 and five other gases.

The bill establishes a market-driven system of tradable emission allowances and permits the use of domestic offsets and international credits.

The bill states that it is possible and desirable to cap greenhouse gas emissions at the current level in 2012, and to lower the cap each year between 2012 and 2050. Also called the America's Climate Security Act (ACSA), it is projected to reduce total U.S. greenhouse-gas emissions by as much as 19 percent below the 2005 level (4 percent below the 1990 level) in 2020, and by as much as 63 percent below the 2005 level in 2050, according to an October 2007 press release from Sen. Lieberman’s office. See: http://lieberman.senate.gov/newsroom/release.cfm?id=285619

The main provisions of the Climate Security Act includes the following provisions:

* Economy-wide coverage:

-- Upstream on petroleum and natural gas, as well as manufacturers of fluorinated gases and N2O

-- Downstream on coal facilities that use more than 5,000 tons of coal per year

* GHG emission targets for covered sectors (targets decline in each calendar year):

2012: 5,775 MtCO2e

2020: 4,924 MtCO2e

2030: 3,860 MtCO2e

2050: 1,732 MtCO2e (70 percent below 2005 emission levels from covered facilities)

* Establishes a market-driven system of tradable emission allowances

* Establishes a separate cap and trade system for the consumption of HFCs (halofluorocarbons)

* Domestic offsets may be used to meet 15 percent of compliance obligation

* International credits may be used to meet 15 percent of compliance obligation

* Establishes a Carbon Market Efficiency Board

* Set-asides for agriculture and forestry sequestration, as well as landfill and coal mine methane

* Bonus allowances for carbon capture and storage technology (CCS)

* International reserve allowance requirement

The U.S. Environmental Protection Agency (EPA) recently completed an analysis of the Act. The complete EPA analysis can be found at:

http://www.epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf

The key results and predicted impacts of the Act according to EPA’s analysis:

Emissions Impacts

* Total U.S. greenhouse gas (GHG) emissions would be approximately 40 percent lower than reference case emissions in 2030 (about 11 percent below 1990 levels) and 56 percent lower in 2050 (about 25 percent below 1990 levels).

* The Act covers 82 percent of total U.S. GHG emissions in both 2030 and 2050.

* While the impacts of S.2191 on global CO2 concentrations are not explicitly analyzed here, based on EPA’s previous analysis of the Lieberman-McCain bill (S. 280) and the fact that S.2191 requires greater emissions reductions than that bill, the incremental impact of S.2191 on global CO2 concentrations would likely be greater than 25 parts per million (ppm) in 2095. Assuming Kyoto countries (excluding Russia) reduce emissions to 50 percent below 1990 levels by 2050, and all other countries adopt GHG emissions targets in 2025 and return emissions to 2000 levels by 2035, the global CO2 concentration in 2095, while not stabilized, would likely be lower than 491 ppm if the U.S adopts S.2191.

Sector Impacts

* The greatest emission abatement under S.2191 would occur in CO2 emissions from the electricity sector.

* The transportation sector would provide a relatively small proportion of CO2 emissions abatement. The price signal provided by S.2191 (about a 53-cent increase in the price of gasoline in 2030 and about a $1.40 increase in 2050), is not high enough to cause large changes in the demand for transportation or changes in how transportation services are provided.

Economic Impacts

* In the S.2191 scenario, modeled allowance prices range between $61 to $83/tCO2e in 2030, and $159 to $220/tCO2e in 2050.

* The average annual growth rate of consumption is about 0.08 percentage points lower than the reference case. In 2030, per household average annual consumption is about $1,375 lower, and gasoline prices increase about 53 cents per gallon. In 2050, per household average annual consumption is about $4,377 lower, and gasoline prices increase about $1.40 per gallon.

* Between 2010 and 2030, gross domestic product grows about one percent less than if the bill is not passed.

The Climate Security Act will not shift U.S. GHG emissions abroad in what the EPA calls “international emissions leakage,” according to the analysis. Exports of U.S. energy-intensive products to developing nations would increase, and imports of energy-intensive products from those countries would decrease.

If the bill becomes law, the price of an emission allowance would range from $22 per ton of CO2e in 2010 to $121 in 2050, according to the March 26, 2008 edition of Carbon Market North America from Point Carbon News. This scenario assumes that the necessary clean technology is deployed and that developing nations begin to accept caps on emissions in 2025. It also stated that carbon prices are significantly altered by the use of offsets in a cap-and-trade program.

EPA’s study added that if the use of domestic offsets and international credits is unlimited, then allowance prices fall by 71 percent compared to the bill as written.

For a discussion of the ACSA, see Carbon North America March 26, 2008:

http://www.pointcarbon.com/getfile.php/fileelement_135841/CMNA20080326_1.pdf

-- Katie Starzec, CASMGS Communications, Kansas State University

kstarzec@ksu.edu

-- Steve Watson, CASMGS Communications

swatson@ksu.edu

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Proposed Elements of a Mandatory

Greenhouse Gas Cap-and-Trade Registry

Accurate, consistent, and complete data collection on greenhouse gas (GHG) emissions is essential to the success of climate change policy in the U.S., according to the World Resources Institute (WRI) in its February 2008 Climate and Energy newsletter: http://pdf.wri.org/designing_a_us_ghg_emissions_registry.pdf/

A mandatory GHG emissions registry, or database for collecting, verifying, and tracking GHG emissions data from individual emitters, would provide the foundation for effective climate change policies. If a GHG cap-and-trade system is established in the U.S., a mandatory emissions registry, rather than a voluntary emissions registry, is essential.

President Bush signed the Consolidated Appropriations Act in December 2007, which directs the EPA to require mandatory reporting of GHG emissions from appropriate sources in all sectors of the U.S. economy. Such a mandatory registry must be well-designed, transparent, and consist of measurements that are compatible with existing voluntary registries and international standards.

The EPA currently compiles a national GHG inventory each year to identify broad trends within the economy as a whole, but that data is not associated with individual emitters and is not designed to be used within a GHG cap-and-trade system.

There are also several voluntary GHG registries currently in place in the U.S., including:

* The Acid Rain Program, which requires that electricity generators regulated under the SO₂ cap-and-trade program also measure and report CO₂ emissions to the EPA;

* State-level mandatory reporting for large facilities in Maine, New Jersey, and Connecticut (and in the development stage in California, New Mexico, Nevada, Oregon, and others); and

* Voluntary corporate-wide registries, including the Climate Registry, the California Climate Action Registry, the Department of Energy’s 1605(b) Voluntary Reporting Program, and the Gold Standard Voluntary Emissions Reductions (VER) Registry.

A mandatory, national GHG registry would provide a more complete and consistent emissions reporting system than the current array of voluntary systems can provide.

As for timing, a mandatory registry should ideally begin operating several years before cap-and-trade programs start trading GHG offset credits. A trading program that begins in 2012 would benefit from emissions reporting beginning as early as 2009. Without high-quality emissions data, the basis of any trading program may be inaccurate from the start.

A mandatory national GHG registry will depend on a sound system for monitoring and verification. Monitoring guidelines have to be established in a way that ensures consistency. A “ton of emissions” must mean the same thing whether it is in Oregon, Florida, France, or Taiwan. Consistency is also important to make sure there is a smooth transition to the national registry from emerging state and regional trading programs, such as the Regional Greenhouse Gas Initiative. The WRI report suggests that federal registry guidelines should build upon the work of the Climate Registry, a joint initiative of more than 40 U.S. states and tribes to measure and collect GHG data using a common standard and a unified emissions reporting system. The WRI report also states that consistency hinges on following a common international standard such as the Intergovernmental Panel of Climate Change’s “Guidelines for National Greenhouse Gas Inventories.”

Verification of emissions in a mandatory registry system could either be done by the regulatory agency staff, or by a third-party.

Finally, all emissions data in any mandatory national GHG registry should be made publicly available on the internet in a timely fashion, according to the WRI report.

-- Steve Watson, CASMGS Communications

swatson@ksu.edu

-- Katie Starzec, CASMGS Communications, Kansas State University

kstarzec@ksu.edu

**********

World Environment Day 2008

This year’s World Environment Day will focus on reducing greenhouse gas emissions.

Sponsored by the United Nations Environment Program (UNEP), “CO2 Kick the Habit! Towards a Low Carbon Economy” will be celebrated in Wellington, New Zealand on June 5, the traditional World Environment Day.

World Environment Day is the United Nations’ way of educating the public about environmental issues and stimulating political attention and action. This year it will be dedicated to promoting low carbon economies and life-styles through improved energy efficiency, alternate energy sources, forest conservation and eco-friendly consumption.

The UNEP is asking everyone to educate themselves and to be aware of GHG emissions with the hope of slowing global warming and creating a better future. People across the globe can participate in WED in many ways, such as riding bikes, recycling, cleaning up communities or rallying. The UNEP’s Web site, www.unep.org/wed/2008/english, has more suggestions and information about the event.

World Environment Day was established by the United Nations General Assembly in 1972 to mark the opening of the Stockholm Conference on the Human Environment. Another resolution, adopted by the General Assembly the same day, led to the creation of UNEP.

-- Katie Starzec, CASMGS Communications, Kansas State University

kstarzec@ksu.edu

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MEETINGS OF INTEREST

April 24-25, 2008

Carbon and Climate Change Conference

Austin, Texas

http://www.utcle.org/conference_overview.php?conferenceid=807

May 15-16, 2008

Navigating the New Carbon World

San Diego, California

http://www.pointcarbon.com/Events/Navigating%20the%20Carbon%20World/category1538.html