Watch What Happens: Top 5 U.S. Climate & Energy Questions in 2012
Climate Change Insights 2012-11-08
President Obama came into his first term in office focused on 3 key energy and climate issues: 1) cap & trade legislation, 2) offshore oil production and 3) scaled-up support for nuclear energy. 2011 saw all those issues depart as centerpieces of U.S. policy direction. 2012 will bring a set of high stakes questions that will set the direction.
1) Presidential Politics and the Environmental Protection Agency (EPA): Backwards or Forwards? In the absence of Congressional action, the EPA has moved forward aggressively on climate and energy issues. In the coming year new rules regulating carbon dioxide under the Clean Air Act are anticipated. In addition, the EPA has a number of petitions, rulemakings, compliance actions and studies in its pipeline that will impact the future of shale gas development in the United States. As the November Presidential election inches closer, the already sensitive positioning on how far and fast the EPA should go will only increase leaving the pace of both Clean Air Act and shale gas regulatory issues in an uncertain space. 2) Keystone XL: What to Do? The Keystone XL pipeline that would bring additional oil sands fuel to U.S. refineries from Canada has gained increasing national attention. The Obama Administration has tried to avoid making a decision on the Presidential Permit for the project until after 2012. However, the recent Congressional payroll tax-cut extension included provisions that seemingly require a final decision by the President in February of 2012. Whether the US need for secure sources of oil delivered in a manner balanced with environmental concerns can be accommodated in a politically charged year remains to be seen. 3) California Cap & Trade: Ready or Not? While the term “cap and trade” has become “so 2010” in Washington, D.C. , California has moved ahead. After citizens voted down Proposition 23 that would have stopped AB32, Governor Jerry Brown’s administration has moved aggressively on enacting the climate provisions within the legislation. Implementation of the legislation in earnest was delayed a year to the beginning of 2013 to ensure the government and private sector are fully prepared. 2012 will be a crucial year for finalizing the market mechanisms, regulatory capacity, and carbon offset mechanisms are in place to reduce greenhouse gas emissions. Success or failure in the California market will influence how federal policy might address climate change in the coming years. 4) Solar Drama for Obama? The collapse of Solyndra and the subsequent loss of U.S. taxpayer dollars through Department of Energy loan guarantees has provided political fodder for those who seek to limit the scope of the President’s green jobs agenda. Furthermore the end of 2011 sees the expiration of a key federal incentive for renewable energy development, called the 1603 cash grant program. The program allows solar developers to monetize tax equity, thereby lowering the cost of debt and construction costs for the sector. The U.S. solar industry grew by 140 percent year over year in the third quarter of 2011. In addition a growing trade war with China over solar manufacturing standards is emerging. Market analysts will be closely watching how the U.S. sector can overcome these challenges in 2012. 5) Showdown in the Friendly Skies? The aviation industry accounts for just over 2% of all global greenhouse gas emissions and that figure will increase to at least 3% by 2050. In December, European Court of Justice (ECJ) ruled that emissions taxes on the sector pursuant to the European Union Emissions Trading Scheme are legal despite the protests of the U.S., Canada and China. Airlines will be charged for carbon emissions created by flights to and from 27 EU countries starting January 1. Secretary of State Hillary Clinton has pledged “appropriate action” to ward off these taxes and the issue could spill into the arcane International Civil Aviation Organization (ICAO). 2012 will see increased legal and political wrangling over this issue.