EIA stunner: By year’s end, we’ll be 8.5% below 2005 levels of CO2 — halfway to climate bill’s 2020 target.

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"EIA stunner: By year’s end, we’ll be 8.5% below 2005 levels of CO2 — halfway to climate bill’s 2020 target."

The Energy Information Administration released its monthly Short-Term Energy Outlook (STEO) last week with a bombshell prediction for near-term carbon dioxide emissions:

Projected carbon dioxide (CO2) emissions from fossil fuels fall by 6.0 percent in 2009 because of the weak economic conditions and declines in the consumption of most fossil fuels (U.S. Carbon Dioxide Emissions Growth Chart).  Coal leads the drop in 2009 CO2 emissions, falling by nearly 10 percent because of fuel switching from coal to natural gas in the electric power sector.  The projected recovery in the economy contributes to an expected 0.9-percent increase in CO2 emissions in 2010.

Now that’s the perfect storm:  a weak economy, low natural gas prices, state renewable energy standards, and a clean-energy-friendly stimulus (see “EIA projects wind at 5% of U.S. electricity in 2012, all renewables at 14%, thanks to Obama stimulus!“).

This 6% drop in CO2 emissions from fossil fuels in 2009 is double the drop EIA had projected just 5 months ago in its  Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the American Recovery and Reinvestment Act and Recent Changes in the Economic Outlook, which had this chart:

If my calculations are right, this means by year’s end we’ll actually be more than 8.5% below 2005 levels in energy-related CO2 emissions, which make up the overwhelming majority of U.S. greenhouse gases.  And that is halfway to the 2020 Waxman-Markey target!  And EIA doesn’t project a dramatic recovery in emissions in 2010 — just a 0.9% rise.

This has a bunch of big implications for what the Senate should do in writing its climate bill:

  1. Senator Boxer (D-CA) should strengthen the 2020 target to, say 20% below 2005 levels.  If we keep using 2005 as the baseline, then EIA’s STEO analysis suggests the 2020 target of a 17% reduction just got even easier than it already was.
  2. The emissions allowances for at least the first several years also need to be reduced.  We certainly don’t want to issue excess allowances, as Europe did in its experimental phase.  Of course, Waxman-Markey won’t see a price collapse as the Europeans did since it has a built-in (rising) floor price and too weak targets to begin with.  But the starting floor price, $10, is sufficiently low that polluters are likely to buy excess allowances in the early years so they don’t have to buy more expensive ones later.
  3. Congress should quickly task the EIA with coming up with a revised projection of CO2 emissions through at least 2020, if not 2030.  In addition to the near term changes, EIA also needs to factor in CO2 reductions from Obama’s change in fuel economy standards (see “Obama to raise new car fuel efficiency standard to 39 mpg by 2016 “” The biggest step the U.S. government has ever taken to cut CO2“).   It is important to note that the EIA is likely to keep overestimating CO2 emissions, since they simply will not model any national or state policies that have not been enacted into law.  Thus, for instance, they assume that the wind production tax credit will be zero forever after the stimulus funding for it ends in 2012, concluding in April “wind capacity growth is projected to slow significantly after the expiration of the Federal tax credits in 2012.”   Slow significantly?  That’s an understatement.  EIA projects U.S. wind capacity rising from about 25 GW in 2008 to 66 GW in 2014 “” but then to only 68 GW in 2030! Anybody want to bet me that wind capacity will grow 2 GW from 2015 to 2030?  Didn’t think so.  And EIA projects solar thermal power in 2014 will be “¦ wait for it “¦ 790 MW, and in 2030 “¦ wait even longer and longer for it “¦ 860 MW. EIA just does not like renewables “” even those with power purchase agreements (see “World’s largest solar plant with thermal storage to be built in Arizona “” total of 8500 MW of this core climate solution planned for 2014 in U.S. alone“).
  4. The CBO, EIA, and EPA should redo their cost estimates based on those new EIA CO2 projections. If the emissions baseline drops, meeting the targets will be easier — especially if, as many fear, the Senate ultimately adopts a weaker target than the House.
  5. The Senate should raise the 2012 starting point for the auction floor price to $14 (rising 5% plus inflation a year).  Why?  Since EIA will keep overestimating CO2 emissions,  too many allowances are still likely to be issued.  To discourage companies from buying excess permits in the auction for hoarding, you want to have a higher floor price.  Any permits that are not sold in the auction should go into the strategic reserve.
  6. The climate bill should give the president authority for 5 years (2012 to 2017) to revise the number of allowances issued based on EIA’s short-term projection. The STEO is far more accurate and less susceptible to flawed methodology than EIA’s long-term forecast.   If, as I suspect, fossil fuel companies complain that this would be changing the rules after the fact, then I suggest at least giving the president the authority to put those extra allowances into the strategic reserve directly, rather than offering them up for auction.

Getting the number of allowances right is a big deal.  It is very important that Congress and the President do this right.  The Senate should even consider holding a hearing on this.  It would certainly be a far more useful subject than ” price volatility in the energy sector as a result of a greenhouse gas trading program.”

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22 Responses to EIA stunner: By year’s end, we’ll be 8.5% below 2005 levels of CO2 — halfway to climate bill’s 2020 target.

  1. Brian J. says:

    So shouldn’t you be thanking George Bush for wrecking the economy? That’s why CO2 emissions are down, after all.

  2. ecostew says:

    Another nail to go into dirty coal’s coffin:

    EPA Expects to Revise Rules for Wastewater Discharges from Power Plants

    Discharges from power plants can have major adverse effects on water quality and wildlife

    WASHINGTON – The U.S. Environmental Protection Agency plans to revise the existing standards for water discharges from coal-fired power plants to reduce pollution and better protect America’s water. Wastewater discharged from coal ash ponds, air pollution control equipment, and other equipment at power plants can contaminate drinking water sources, cause fish and other wildlife to die and create other detrimental environmental effects.

    Earlier this year, EPA completed a multi-year study of power plant wastewater discharges and concluded that current regulations, which were issued in 1982, have not kept pace with changes that have occurred in the electric power industry over the last three decades. Air pollution controls installed to remove pollution from smokestacks have made great strides in cleaning the air people breathe, saving lives and reducing respiratory and other illnesses. However, some of the equipment used to clean air emissions does so by “scrubbing” the boiler exhaust with water, and when the water is not properly managed it sends the pollution to rivers and other waterbodies. Treatment technologies are available to remove these pollutants before they are discharged to waterways, but these systems have been installed at only a fraction of the power plants.

    As part of the multi-year study, EPA measured the pollutants present in the wastewater and reviewed treatment technologies, focusing mostly on coal-fired power plants. Many of the toxic pollutants discharged from these power plants come from coal ash ponds and the flue gas desulfurization systems used to scrub sulfur dioxide from air emissions.

    Once the new rule for electric power plants is finalized, EPA and states would incorporate the new standards into wastewater discharge permits.

    More information about EPA’s study is provided in an interim report published in August 2008. A final study will be published later this year.

    More information on wastewater discharges from power plants: http://www.epa.gov/waterscience/guide/steam/

  3. John Hirsch says:

    The way this story reads, you would think the level of CO2 in the atmosphere was going down as well.

    [JR: Uhh, no you wouldn't think that -- at least if you read the article, which I'm not sure you did based on your final comment.]

    But this is hardly the case. Latest numbers for August are in from Mauna Loa and show a 1.77 ppm increase over 2008 (albeit a smaller increase than 2008 over 2007 which was 2.19 ppm). Nevertheless, just because industrial production of CO2 has decreased (temporarily due to the recession) doesn’t mean overall production and accumulation of greenhouse gases has decreased as well.

    Hardly the time to get smug and think we can relax action on climate change!!

  4. Rick says:

    These 17% below 2005 emission goals are like the targets in a shooting range where all the shooters are blind.

    As we note in the post, CO2 emissions are tied to the economy and it’s pretty hard to know how the economy is going to go unless we intentionally cool it down. Is that the plan? If the industrial age is the problem, then killing industry would seem to be the most effective solution. I guess that’s where we’re going.

  5. Jeff Huggins says:

    One key point (of course) that we should repeat over and over again, and actually act on, is this: We need to change our sources of energy so that the economy (or as a better aim, sustainable human and environmental well-being) rids itself of a dependence on CO2-producing fuels.

    Consider one ingredient in the DJIA, for example: The price of ExxonMobil stock.

    Given their own choices (i.e., things don’t have to be this way), ExxonMobil is essentially prolonging a situation where they force people to make a choice: Either we (public) make choices that are good for the climate and environment, in which case ExxonMobil stock (and at least that component of the DJIA) goes down, or we do what ExxonMobil would have us do, which is good for their stock but bad for the climate and environment (among other things).

    In essence, regarding that component of the DJIA, we either need to “vote” FOR the climate and environment and future, OR, FOR ExxonMobil (and oil and coal). Of course, that should be an easy vote.

    But, (ideally), companies’ goals should be aligned, at least reasonably well, with the well-being of humankind and the environment. We shouldn’t have to “choose” between “environment” OR “economy”. That is an unhealthy choice, and we should make it a false one. We (companies, government, consumers) should do a much better job of aligning things — i.e, so that actions can contribute to the “economy” AND to sustainability and the environment at the same time.

    Cheers,

    Jeff

  6. John Thacker says:

    It has to do with the economy far more than anything else. That’s why GWB’s “record” on greenhouse gases according to the EIA and EPA was much, much better than Clinton’s, even though you couldn’t say that Bush’s policies were better. Look at the US Greenhouse Gas Inventory from 2009.

    Greenhouse gases increased by 853 Tg CO2 equivalent from 1992 to 2000. From 2000 to 2007, they increased by only 141 Tg CO2 equivalent, and the drop in 2008 means that GWB might have left office with less greenhouse gas emissions than when he came in.

    The economy, scientific discoveries, and everything else has a lot more to do with CO2 emissions right now than anything that’s actually been passed or proposed by government. Call me when the gas tax goes up by $1 or $2.

  7. Ken Johnson says:

    Re “Getting the number of allowances right is a big deal. It is very important that Congress and the President do this right.”: I think getting the price floor right is more important than getting the number of allowances right. If allowances are selling at the floor price, the number of allowances issued will be determined by the market, not by the Congress or the President. A robust price floor could potentially achieve 20% GHG reduction from 2005, irrespective of the cap.

    Joe – How would you priority-rank your six recommendations?

    [JR: I've always said strengthening the 2020 target may be the most important thing to change.]

  8. Stan says:

    Good God! Just think how far down emissions would be if unemployment hit 25%. Here’s hoping for the Second Great Depression……

  9. Ken Johnson says:

    Joe – One of your recent blogs stated that “I expect the CO2 price will hug the auction floor price for at least the first five years and possibly the first 10 years.” A $14 (+5%) price floor would make that even more likely. What effect would the 2020 target have if allowances are trading at the price floor?

    [JR: A tougher target would push prices to somewhere between CBO and EIA projections, but then you have to weigh that against the lower emissions projections. I'll do another blog post on this after Boxer comes out with her bill.]

  10. CO2 emissions carry less meaning than CO2 concentrations

    And reduced atmospheric CO2 levels will take decades for impact to be felt as reduced climate temperatures

    This is wonderful news, but it is a very tiny token.

  11. T, Caine says:

    I think this is a testament to how much more progress we could make just through efficiency alone. If driving less, buying less and saving more can help lower emissions 6% then think about what we could do if the country really took efficiency seriously in the home and office. I am drawn to the Rocky Mountain Institute figure of possibly reducing consumption up to %30.

    At the same time, how many people are simply waiting to spend more, use more and drive more once our economic pothole is behind us? As much as people should see this as proof that change is not all that difficult, it could be a short-lived victory for the planet if recovery wipes out our progress.

  12. Ken Johnson says:

    Joe – A tougher target might push prices to somewhere between CBO and EIA projections, but a price floor will — with “certainty” — push prices to whatever level you choose.

  13. Kevin says:

    I tend to agree with Ken Johnson on this one — the floor price can have a bigger impact than haggling over the details of the 2020 number. If the market has plenty of allowances and their is too much downward price pressure, the reserve price on the auctions will not be met, keeping additional allowances off the market (and lowering the cap during that period). Since all allowances would be bankable, this mightn’t have that great an impact as everyone will be keeping an eye on that 2030 and 2050 target and looking at what is happening in terms of tech deployment — are non-emitting techs coming around? If so, prices will not be that high. If folks see no techs deploying (big nukes or CCS or renewable investment for example) then they’ll see that those future targets are going to be hard and prices will increase (again, because you can bank and use later). If folks are worried they should push for a little higher price floor — gotta thread the political needle.

    Re the drop in emissions due to the recession — there is little fundamental change in the existing emitting infrastructure. When the economy comes back, we should fully expect a similar emissions rate per unit of economic activity as we had before.

  14. Mike#22 says:

    (from the report is this explanation):

    “The energy-specific provisions of ARRA that were represented in some fashion in NEMS
    include:
     Weatherization and assisted housing
     Energy efficiency and conservation block grant programs
     State energy programs
     Plug-in hybrid vehicle tax credit
     Electric vehicle tax credit
     Updated tax credits for renewables
     Loan guarantees for renewables and biofuels
     Support for carbon capture and storage (CCS)
     Smart grid expenditures.”

    Figure 3 above shows the early impact of efficiency and renewables created by the Stimulus Bill.

    This bending of the emissions pathway is exactly what we need to see. Curb fossil fuel use while sustaining the economy.

  15. BBHY says:

    The remaining portion can easily be met through efficiency gains. The goal should be much more aggressive.

  16. David B. Benson says:

    Combining several sources, ending with the fascinating Climate Strategy with Co2 Capture from the Air
    http://www.springerlink.com/content/y81415636r82065g/
    I estimate that air capture of CO2, in Oman, followed by in situ peridotite carbonation to completely remove the CO2, could be done for about $36 per tonne of CO2, plus some capital costs (which might double that price), plus leasing fee paid to the government of Oman and private landholders (if any). This ultramafic rock formation could acccept about 10% of current emissions for many, many years.

    This same scheme probably works equally well in northwest Australia, but I’m uncertain how large the two rock formations there are. It might also work on the island of New Caledonia, provided the climate is dry enough (which it may well not be).

    Unlike David W. Keith, Minh Ha-Duong and Joshuah K. Stolaroff in the paper linked above, I think starting on this now would be an excellant idea. Now. Urgently.

  17. Ed Kuipers says:

    Hmzzz, economy yes, globalisation also. If more and more products are imported (and the US are a importing not an exporting nation) more and more CO2 is taken out of the US energy basket and is transfered to China, India, Malleisia, Europe, Russia and what not. An average American produces 28.6 tons of CO2 equivalent. A Dutchman like me 16.8 tons, and an inhabitant of Malawi 1 ton (and he is sustainable). And that is mostly due to imported good which come with oil, gas and coal attached.

    Greetings from a dying planet!

    Ed Kuipers

  18. Peter Wood says:

    I really like these points, especially the idea to expand the number of permits that go into the strategic reserve. Having many more emissions allocations go into the strategic reserve would significantly reduce emissions if the required carbon price is less that US$40 per tonne — but if it goes up to $40 per tonne then the US has nothing to lose, because $40 per tonne is very manageable, as shown by the experience with the EU ETS.

    This is why a modified price collar is such a good idea.

  19. Don says:

    The economy and nature always combine in wonderful ways to create effective long-range negative feedback loops that keep short-term positive loops in check. On the other hand, governmental solutions create false economies that, sooner or later, always seem to come back and hurt the cause(s) they were intended to support. Use energy wisely, adapt to renewables where it makes economic sense, diversify the energy base to the greatest extent possible, allow nature to take its course and let anthropogenic global warming theories remain an academic discussion. There is no scientifically verifiable (by controlled experimentation) parameterization that assures less climate change through legislated measures. Such measures usually lead to economic loss to those parties charged with actually delivering solutions and at the expense of the general public – particularly the lower income population. Take it from one who has been engaged for 35 years in renewable energy and environmental systems development and commercialization.

  20. Rockfish says:

    “This 6% drop in CO2 emissions from fossil fuels in 2009 is double the drop EIA had projected just 5 months ago”

    “And EIA doesn’t project a dramatic recovery in emissions in 2010 — just a 0.9% rise.”

    “Congress should quickly task the EIA with coming up with a revised projection of CO2 emissions through at least 2020, if not 2030.”

    So, if I read this correctly – the EIA estimates have proven wildly inaccurate and unreliable; BUT we can be sure the estimates for NEXT year are right (because we like what they say); and we should have the wildly inaccurate EIA make longer term predictions (with still less certainty) on which we will base our climate policy?

    I’m obviously missing something.

  21. James Newberry says:

    Removing fossil fuel suppliers from the Dow Jones “Wall Street” Index is a great suggestion for our common survival. Thanks Jeff (#5).

    By the way, philosophically speaking, petroleum is not an energy resource. It is a (mined) material resource. Combustion is the opposite of photosynthesis, which made the chemical bond in hydrocarbons with about 0.5% efficiency from the radiant source (of energy). Current sustainable western world energy efficiency is just about zero. Ponzi petroleum propaganda profitering promotes planetary impoverishment.

    Our current efficiency measurements and concepts of energy and “the economy” are so much hubris that we are in a virtual dark age of ignorance. Will the dawn of light arrise just as the ship of state, like the Titanic, submerges to its grave?

    Peace

  22. Chuck Warden says:

    If the U.S. CO2 levels are falling faster that the milestone set under a capitalistic model, why does the government want to impose new taxes that will nothing but hurt capitalism. The government does not have very good track record for taxing and enforcing reductions in CO2. Let capitalism run it’s course with stricter laws for violators but leave the taxpapers alone and stop this government takeover of the free soon to be not so free market.