Earlier this month, the U.S. Climate Action Partnership, a coalition of industry and environmental groups pushing for the enactment of emissions-reduction legislation, released a blueprint cap-and-trade proposal. During today's OnPoint, Manik Roy, vice president of federal government outreach at the Pew Center on Global Climate Change, and Melissa Lavinson, senior director of federal affairs at PG&E, explain why this proposal satisfies the goals of each of their organizations. They also address criticism that the plan's early targets are too low and that the proposal allows for too many offsets.
Monica Trauzzi: Welcome to the show. I’m Monica Trauzzi. With us today is Nikki Roy, vice president of Federal Government Outreach at the Pew Center on Global Climate Change, and Melissa Lavinson, senior director of federal affairs at PG&E. Both PG&E and Pew are part of the U.S. Climate Action Partnership. Welcome to both of you.
Melissa Lavinson: Thank you for having us.
Nikki Roy: Thank you.
Monica Trauzzi: Nikki, U.S. CAP recently released a blueprint for capping greenhouse gas emissions and it really pulls together a diverse set of players from both the environmental sector and also industry. And essentially everyone is agreeing on how we should move forward on a cap and trade. Why does this proposal work on both the environmental and industry sides?
Nikki Roy: It's a finely balanced proposal. The reductions that are recommended by the proposal are fairly, if I may say, aggressive. Yet at the same time, we have economic safeguards in there that the industry players felt would allow them to have some comfort as we went forward with this. So for example, we have cost containment mechanisms drawing largely on the use of offsets and strategic reserve allowances. We also have allowance allocation that provides transition for a lot of people and helps customers of some of these companies. So it's something that's worked out over a couple of years very intensively, agreed to at the CEO level, 100 percent consensus. And we think it actually strikes a pretty good balance.
Monica Trauzzi: Melissa, the plan is not without controversy and one of the main criticisms that we've heard is that the 2020 targets set out in the blueprint are a little too weak. Is there room for negotiation there? I mean is there a way to create some stronger targets and still keep industry and the environmental groups happy?
Melissa Lavinson: Well, as Nikki stated, what we've crafted in the blueprint was a linked set of issues, so timelines and targets, cost containment mechanisms, allowance value, the complementary policies and measures and all of those work together. If you look at the timelines and targets we actually provide a bit of a range in the early years of the targets, 80 to 86 percent reductions from 2005 levels. And, as we mentioned in there, that there is a relationship between cost-containment and targets, so if you were to get more aggressive on the near-term targets then we would have to say, well, let's take a step back and look at some of the cost containment mechanisms, including offsets, the strategic reserve pool and those types of things, allowance value.
Monica Trauzzi: And I want to talk about the offsets issue because it does play a significant role in the blueprint. A lot of people feel that the plan is allowing for too many and that they're basically in there to sort of serve the interests of these high emitting industries.
Nikki Roy: If it's properly done, offsets are a way of projecting the program into the untapped areas of the economy. So for example, we're not including agriculture in this program. We're not including small sources of emissions. So offsets basically create a market mechanism that creates a positive incentive for people to figure out how to contribute. Also, international offsets, that's, I think, a fairly controversial issue for a lot of people, but there are real, positive reasons to include international offsets in this program. Ultimately, we want to use a U.S. domestic law to create leverage and project leadership in the world to get the major economies, especially the major emerging economies to come to the table with actions that they would take on themselves. International offsets, U.S. use of international offsets creates an infrastructure. It creates political support for action in those developing countries. And the additional benefit is that, yes, they are less expensive than some of the direct emission reductions. But you can, and we are recommending you should, you must design them in a way that they create real environmental benefit.
Monica Trauzzi: Okay and you've reached out to some of the key committees with this blueprint. What has their reaction been? What is House Energy and Commerce saying? I mean they're going to be jumping out with legislation pretty soon. They want something out of the committee by May. What's the reaction that you've been getting on the Hill?
Nikki Roy: Very positive, I think.
Melissa Lavinson: Yes, I mean as you know, there was a hearing that was in House Energy and Commerce Committee last week or the week before that, I think, overall was a productive hearing. I think it will provide an opportunity for our organizations to talk about the blueprint, talk about various aspects of the blueprint and how it all linked together. And I think that there was a real dialogue and engagement that occurred and so we appreciated that opportunity. And as you've noted and Nikki has noted, we’ve been reaching out and we've done briefings for staff. We’re reaching out to other members and we look forward to the continued constructive engagement. Again, U.S. CAP has been trying to be sort of the constructive voice in the dialogue in helping bring the debate forward and providing some alternatives and solutions to some of the questions that are being raised.
Monica Trauzzi: I wanted to touch on the carbon capture aspect of this puzzle. A lot is riding on how quickly this technology will become commercially viable. And quite frankly, there's a lot of uncertainty there as well. We don't know when this is all going to happen. So, should coal plants that are built now and in the near future benefit from that uncertainty?
Nikki Roy: First, let me say just on coal generally, coal is cheap. It's plentiful. We're likely to burn it in the United States for the foreseeable future. Even if we didn't, India and China have huge coal reserves. They're going to continue to burn their coal. So, to the extent that -- you know, I look at this law, I look at climate policy as an effort to change technology, to give clear signals to industry to figure out in which direction to grow their technology. On coal in particular, we have to think of this as a race to figure out how we can use the energy value in coal in a way that is sustainable, in a way that is consistent with us dramatically shrinking our climate footprint. Do we know for sure that we can capture carbon and store it underground at a scale that is relevant to commercial energy generation? There is uncertainty. To be clear, we have little pieces of the -- we have, I think, all of the individual pieces of the technology suite demonstrated. But we don't have them together in that scale.
Monica Trauzzi: Right.
Nikki Roy: Can we wait until we have certainty? We can't afford to wait on any of these things. We really have to be technology optimists here to confront this problem. But I think there's reasonable reason to expect that it will succeed.
Melissa Lavinson: And if you look in the blueprint, we do have a whole section talking about complementary measures for coal, how to move from where we are today to the coal fleet of the future. And we get pretty specific on some of those, but we are calling for significant funding. We are calling -- particularly something that can happen now is to get the regulatory structures in place now so that we know what we're dealing with, the liability issues, to get all of those in place because those are really important. And then we can move forward. But taking a step back, if you look at the blueprint, we also talk about the whole suite of technologies. We burn coal now. We want to burn coal in the future. We want to burn it responsibly and that's what we’re focused on doing. At the same time, we recognize energy efficiency is going to play a huge role. It plays a huge role today in the state of California for example. We think it could play a large role nationally. You know, renewables, they play a significant role in some states today. We know that they're going to play a larger role. We recognize in the blueprint that nuclear plays a role today. It's going to play a role tomorrow. We recognize that advanced transportation technologies are going to have to play a greater and greater role going forward. So we look at them as a full suite of technologies and not just relying on one.
Monica Trauzzi: Final question here, Nikki. As industry and environmentalists are seemingly coming together on a plan like this, there are still economists out there and certain industries that are concerned about the impacts that cap and trade might have on the economy. So where is the disconnect? Why can you have certain industries and environmental groups coming together, yet an absolute opposite opinion coming from other industries and economists?
Nikki Roy: I think it's legitimate with an effort this big. We're talking about trying to cut the emissions of the United States by 80 percent over four decades. That is a large technological step and it's worth kicking the tires on that idea. And so we invite that. We invite the stakeholders, the members of Congress to kick the tires with us. We have. We feel that we have and through very intensive discussion with a very broad set of stakeholders within U.S. CAP we’ve developed a lot of confidence that the factors that we present are actually very sound.
Melissa Lavinson: And we've had a lot of discussion about this and I think as you're looking now at what's going on in Congress right now, working on a stimulus bill energy is a big component of that, listening to President Obama and the administration talk about the need to transform our economy, to transform the technologies that we have today. So if you're looking at what’s going on in the stimulus, we see this as sort of amplifying and the next step of what's happening there. Again, what's in the stimulus package will be a very good start on this and then to provide that long-term certainty. Because these are long-term investments that we’re going to be making, we need to recognize what the long-term policy objective is of this country, what our technology objectives are, and then business will step up and we’ll get there. So, we really see this as sort of the next step in the amplifying effect to what's already happened.
Monica Trauzzi: All right, we’ll end it right there. I thank you both for coming on the show and thanks for watching. We'll see you back here tomorrow.