First Name | John |
---|---|
Last Name | Busterud |
Email Address | jwbb@pge.com |
Affiliation | Pacific Gas and Electric Company |
Subject | PG&E's Comments on the ARB's October 2008 AB 32 Proposed Scoping Plan |
Comment | November 25, 2008 VIA ELECTRONIC FILING Ms. Mary Nichols, Chairman CALIFORNIA AIR RESOURCES BOARD 1001 I Street Sacramento, CA 95812-2828 Mr. James Goldstene, Executive Officer CALIFORNIA AIR RESOURCES BOARD 1001 I Street Sacramento, CA 95812-2828 Mr. Chuck Shulock, Chief Office of Climate Change CALIFORNIA AIR RESOURCES BOARD 1001 I Street Sacramento, CA 95812-2828 Re: Pacific Gas and Electric Company’s Comments on the California Air Resources Board’s October 2008 AB 32 Proposed Scoping Plan Dear Chairman Nichols and Messrs. Goldstene and Shulock: Pacific Gas and Electric Company (“PG&E”) welcomes the opportunity to provide these comments on the California Air Resources Board’s (“ARB”) October 2008 Proposed AB 32 Scoping Plan (“Plan”). We also incorporate here by reference our comments on the June 2008 Draft Scoping Plan filed with the ARB on August 5, 2008 and the comments we have filed on recommendations by the California Public Utilities Commission (“CPUC”) and the California Energy Commission (“CEC”) on AB 32 policies affecting electricity and natural gas services provided to California consumers, businesses, and public institutions (copies enclosed). I. INTRODUCTION. PG&E is committed to working with the ARB, other State agencies and concerned stakeholders to make AB 32 a success and a model for emerging regional and national greenhouse gas (“GHG”) reduction programs. We commend ARB Staff for their efforts in producing the Plan which provides a comprehensive, conceptual roadmap for the regulatory implementation process to follow between now and 2012. As the Plan recognizes, there remains much work to be done in the months and years ahead to ensure that the reduction measures ultimately adopted by ARB achieve the State’s GHG reduction targets in a “technologically feasible,” “cost-effective” and “equitable” manner as required by AB 32. / PG&E and our customers share California’s desire to continue leadership on climate change, and this is why we were the first investor-owned utility to support enactment of AB 32. PG&E is a gas and electric utility serving one in twenty Americans and is committed to leadership on climate change. Our customers have invested and continue to invest in customer energy efficiency (“CEE”) programs and a clean electric generating portfolio, so that our emissions are among the lowest of any utility in the nation. Indeed, over 50% of the electricity PG&E currently delivers to its customers comes from sources that emit no greenhouse gases at all. PG&E approaches AB 32 implementation guided by four key objectives: 1. Ensure environmental integrity through adoption and use of mandatory, real and verifiable reductions; 2. Manage costs to California consumers and businesses by pursuing technologically feasible and cost-effective reduction strategies using well-designed market-based mechanisms and a consumer-oriented allowance allocation approach; 3. Solidify California’s national leadership role on climate change by creating a model program that can be integrated effectively with future regional, national and international programs; 4. Equitably apportion reduction obligations to ensure that all sectors pay their fair share. State-wide reduction obligations should be apportioned to ensure that no single source, sector, nor its customers, assumes a disproportionate cost burden. With these objectives in mind, the following summary highlights our over-arching comments on the Plan. Our more detailed comments are set forth in section III following this summary. II. SUMMARY. A. The Proposed Plan Properly Takes a Comprehensive Approach To Achieving GHG Reductions. AB 32 calls for ARB to consider three critical questions as it implements measures to meet the AB 32 goals: 1. Are identified emissions reductions technologically feasible? 2. Are the emissions reduction measures cost-effective? For example, is each measure cost-effective compared to alternative measures or programs that could be undertaken to achieve the same quantity of reduction? 3. Are the emissions reduction measures fair and equitable when compared to the relative contribution of each source and sector to overall GHG emissions in California? The ARB will need to evaluate and pursue reduction measures across all sectors of the economy to achieve AB 32’s GHG reduction targets. The Plan takes an important first step toward this comprehensive approach by identifying a wide range of measures, including market mechanisms and programs, and by recognizing that all reduction measures must be carefully analyzed and compared for technological feasibility and cost effectiveness during the AB 32 regulatory implementation process (Plan, pp. ES-6 and 7, 84, 85 and 106). The Plan also recognizes that current cost estimates reflect a range of potential costs associated with programmatic measures and that the criteria for assessing cost-effectiveness may evolve during regulatory implementation. We support the ARB’s commitment to conduct additional and updated cost-effectiveness analyses of the proposed measures during the rulemaking phase in a rigorous and transparent process with full public participation and opportunity for review and comment (Plan, pp. 84, 85). We are concerned, however that the analysis performed to date has not provided a systematic comparison of all proposed measures across all sectors. To this end, we urge the ARB to take a comprehensive State-wide approach to assessing cost-effectiveness to ensure that all measures are analyzed and compared across all sectors of our economy during the rulemaking process. B. PG&E Supports the Proposed Plan’s Endorsement of Cap-and-Trade Market Mechanisms to Achieve Verifiable, Timely and Cost-Effective GHG Reductions. PG&E commends the ARB for recognizing that a well-designed, multi-sector regional or national cap-and-trade program linked to the Western Climate Initiative (“WCI”) and other emerging regional and national programs can provide real, sustained and cost-effective GHG reductions (Plan, p. 30). We strongly support the Proposed Plan’s recommendation to convene a rulemaking to design and implement the cap-and-trade program and to seek input from the public and stakeholders and those with expertise relevant to the design of cap-and-trade programs (Id., p. C 23). We look forward to participating in this process. To manage market volatility and minimize cost impacts to our customers, especially in these times of economic uncertainty, we believe it is essential that cap-and-trade market design include viable consumer cost protections, such as a price collar or a strategic allowance reserve, which could provide additional allowance supply in the event allowance prices exceed a pre-determined level. For example, a price collar would include market intervention to make additional GHG emission allowances available to mitigate substantial upward movement of allowance prices while maintaining a multi-year carbon budget. A lower bound on allowance prices could also specify minimum acceptable bids in allowance auctions or by other means. We therefore request that ARB amend the Proposed Plan expressly to provide for consideration of potential consumer cost protection mechanisms during the cap-and-trade rulemaking. It is also important that California's cap-and-trade program be designed from the outset to integrate seamlessly with other market based programs to ensure adequate market depth and liquidity. In this regard, we support the ARB’s recommendation that the cap-and-trade rulemaking be closely coordinated with the WCI’s timeline for developing a regional cap-and-trade program (Plan, p. 30). In this regard, it is very important that the rulemaking provide a clear process for integrating the design and implementation of the cap-and-trade program with the formal rulemaking process for the WCI cap-and-trade program and other regional and national programs. ARB should consider combining its cap-and-trade rulemaking with identical rulemaking proceedings among the other states participating in the WCI, so that the design, systems development and testing of a cap-and-trade program can proceed on an efficient, expedited basis with broad public participation by all the WCI states. Broad access to environmentally sound and verifiable offsets will be necessary to achieve AB 32’s reduction targets in a cost-effective manner and we believe there should be no geographic or quantitative limits on their use. While the Plan endorses broad geographic access to offset projects, we believe that the proposed quantitative limit of 49% of annual emission reductions would be unduly restrictive. We also strongly encourage ARB to adopt or approve offset protocols early in the regulatory implementation process to ensure an adequate supply of eligible projects by 2012. These critical components of the overall market design will no doubt benefit from closer analysis during the cap-and-trade rulemaking next year. C. Properly Designed and Equitably Administered Programmatic Measures Can Make a Meaningful Contribution to GHG Reductions. We agree that programmatic measures have the potential to provide significant GHG reductions in the years ahead if determined to be technologically feasible and cost-effective across all sectors. In this regard, PG&E is committed to increased investment in energy efficiency programs and increased use of renewable resources. However, as discussed more fully in Section III and in addition to the matters raised in our August 5, 2008 comments and comments at the CPUC and CEC, we have the following concerns regarding certain energy-related programmatic measures: (1) since the Plan acknowledges that ARB is not the agency with expertise in these programs, we urge ARB to look to current and evolving initiatives in the renewables, energy efficiency, and combined heat and power (“CHP”) areas at the agencies with expertise in these areas, and to monitor and acknowledge the efforts of these agencies to ensure any GHG “reduction measures” are feasible and cost-effective, both within the energy sector and across all sectors; (2) as a matter of equity, all load serving entities should be subject to the same targets and same cost-effectiveness criteria - the Plan provides for load serving entity (“LSE”) equity on energy efficiency, but does not do so explicitly for renewables and CHP. III. DISCUSSION. A. PG&E Supports the Proposed Plan’s Endorsement of Cap-and-Trade Market Mechanisms to Achieve Verifiable, Timely and Cost-Effective GHG Reductions. PG&E strongly supports the ARB’s recommendation to establish a cap-and-trade program that will link with the other Western Climate Initiative (“WCI”) jurisdictions, and we look forward to participating in the cap-and-trade rulemaking. PG&E also agrees with ARB’s stated intention to seek input from stakeholders and consult with experts on market design, including allowance allocation and use of auction revenue. In addition, we consider the following topics to be of critical importance for consideration in the rulemaking and by the experts, in addition to those topics listed in Appendix C to the Plan at pages C22-C23: • Allowance allocation and use of auction revenue, including detailed modeling on consumer economic impacts. • Consumer cost protection mechanisms. • Offset policy. • Integration with the WCI and other developing regional and national programs on cap-and-trade design. • Appropriate treatment of small commercial and residential natural gas use. In addition to a process for addressing the` policy issues above, it would be helpful for the public and all stakeholders if ARB created a clearer timeline and integrated regional rulemaking process, working back from 2012, with milestones for adopting specific components of the cap-and-trade program, including development, scaling up and testing of regional market systems. Experience with the implementation of other markets, including Regional Greenhouse Gas Initiative (“RGGI”) and California’s own Independent System Operator in the electric sector, highlights the need to build in time to allow for adequate systems development and stress testing, as well as schedule slippage. PG&E also recommends that the ARB invite experts from RGGI and the European Union (“EU”) to inform California about their experiences. 1. Consumer Cost Protection Mechanisms. One of the ARB’s core policy design principles is to “minimize the economic burden of the program on consumers.” (Plan, p. C 20.) Among the most important lessons California learned from the 2000 2001 energy crisis is that timely “backstop” mechanisms are essential to protect customers in the event that unregulated or partially regulated markets experience a catastrophic failure. The need for quick or automatic “backstop” mechanisms applies to other markets as well, including a cap-and-trade greenhouse gas emissions market. / A well-designed greenhouse gas emissions trading market can attract investment in new GHG reducing technologies and enable markets to determine the most economic and cost-effective means of reducing GHGs across multiple sectors of the economy. However, like any market, and especially commodities and futures markets, even the best designed greenhouse gas emissions trading market can experience failure or significant disruption through hoarding, manipulation, severe weather or other unforeseen circumstances, particularly during its start-up or transitional stages. During the October 23, 2008 ARB Board meeting, Board members asked staff to examine carefully near-term economic impacts of the Scoping Plan, especially in light of current economic turmoil and uncertainty. Consumer cost protection measures will be critical to managing economic impacts of AB 32 implementation, especially during the beginning stages of the cap-and-trade market or if the market is limited regionally. / Price spikes and crashes could impose unnecessary costs on Californians and threaten the long term viability of the GHG reduction program. The scope of ARB’s cap-and-trade rulemaking should expressly include an examination of potential consumer cost containment mechanisms, especially those that also maintain long-term environmental integrity. PG&E believes that consumer cost protection mechanisms can be implemented without impeding investment in low- and zero-carbon technologies or impairing our ability to meet emission reduction goals. As we described in our August 5, 2008 Comments on the Draft Scoping Plan, one possible policy tool to help manage overall volatility and unexpected economic costs, while at the same time provide a clear path for technology investment and ensure that there is a “price for carbon” is the allowance “price collar.” The elements of a “price collar” would include market intervention to make additional GHG emission allowances available to mitigate substantial upward movement of allowance prices while maintaining a multi-year carbon budget. A lower bound on allowance prices could also specify minimum acceptable bids in allowance auctions or by other means. / The Lieberman-Warner and Dingell-Boucher draft national GHG legislation provides another example of a cost protection mechanism that preserves environmental integrity and would enable linkage to other GHG markets: an allowance reserve. Other proposals worthy of examination include those of the U.S. Climate Action Partnership and the Nicholas Institute for Environmental Policy Solutions. / For these reasons, we believe examination and adoption of such mechanisms should be explicitly included in the scope of the cap-and-trade rulemaking. 2. Offsets. PG&E agrees with the Plan’s recommendation to endorse the use of offsets without geographic restrictions. However, PG&E is concerned by the numerical limitation on offset quantity, “limited to no more than 49 percent of the required reduction of emissions.” In particular, this policy drastically limits the amount of offsets allowed in the first years of the program, which may unintentionally greatly increase adverse economic impacts of the cap-and-trade market. For example, if the 2013 cap is set at 1% below the 2012 emissions level, then this policy implies that the offset quantity would be severely limited to 0.49% of the cap level in 2013. New GHG reducing technology will take time to develop and is generally not likely to be available in the early years of the cap. The Scoping Plan offset policy raises serious concerns about California’s ability to meet the cap in the most cost-effective manner in the early years of the program. Additionally, the policy described does not enable a specific entity to know the quantity of offsets that it will be able to use for compliance. The policy bases the quantity limit on the reductions of the entire cap and provides no guidance for individual entities. Forty-nine percent of the required reductions may be as little as less than 1% of an entity’s compliance obligation in early years and possibly 10% of an entity’s compliance obligation in later years. During the rulemaking process, the ARB needs to clarify application of offset policy so that individual entities have adequate understanding and notice of the offsets they may use. Finally, the Scoping Plan should contain a process to have the Board or Executive Officer start approving protocols in a timely fashion to ensure an adequate supply of offset projects by 2012. The Scoping Plan states that offsets must be “quantified according to Board-adopted methodologies, and ARB must adopt a regulation to verify and enforce the reductions” (Plan, p. 36). The development of offset projects will take years, and project proponents will need surety in the protocols they are allowed to use. The Board should adopt a schedule to review and adopt existing protocols in order to not stifle the offset market and prevent access to these cost-effective GHG reduction options. 3. Natural Gas Sector. PG&E agrees with the ARB decision not to include small commercial and residential natural gas use in the first term of the cap-and-trade program. As we have stated in past comments, this sector of natural gas users may be better served by taking into account reductions already forecast under energy efficiency programs. Evaluation of whether and how small natural gas end users should be regulated should be included in the scope of the cap-and-trade proceeding and in the continuing consideration of the cost-effectiveness and feasibility of energy efficiency measures as part of AB 32. B. Programmatic Measures. 1. Renewable Energy Resources. PG&E supports the increased use of renewable energy and agrees that the expanded development and procurement of renewable resources can play a significant role in meeting AB 32’s GHG reduction goals. Indeed, in Executive Order S-14-08, issued November 17, 2008, Governor Schwarzenegger has called for all sellers of electricity to “serve 33 percent of their load with renewable energy by 2020.” The Executive Order properly notes that achieving this goal will require “greater coordination and streamlining of the siting, permitting, and procurement processes for renewable generation,” including addressing “various challenges that impeded...timely realization [of renewables goals], relating to transmission, financing, siting, permitting, integration, environmental and military objectives, technology development and commercialization and equipment.” Governor Schwarzenegger also found that “there are substantial barriers to generation siting, permitting and transmission that must be addressed in order to achieve the 2010 and 2020 RPS goals.” / The ARB, in the Proposed Plan, also describes some of the challenges to achieving a 33 percent renewable energy procurement goal, especially those related to transmission and system integration. Nevertheless, the Scoping Plan counts on the emissions avoided from this target and assumes these challenges will be addressed in time to achieve the 33 percent goal. For example, the Scoping Plan does not currently acknowledge the multi-year, multi-agency permitting challenges that are slowing renewables development. A February 2008 State Auditor’s Report indicated that it can take 36 months for a generator to receive all the necessary permits to begin site construction. / The Plan should now reflect the same findings on these challenges as noted in the Governor’s Executive Order, and acknowledge the uncertainty of relying on emissions reductions from a 33 percent renewables mandate until the barriers to implementation and cost-effectiveness issues are addressed and removed. It is essential that the Proposed Plan provide compliance off-ramps and flexibility for issues such as transmission availability, system integration, siting and other permits, as well as availability of financing, all of which may be beyond the control of PG&E and other load-serving entities. In the Draft Scoping Plan, PG&E noted that the 33% renewables goal referenced actions by both investor-owned and publicly-owned utilities. This language was removed in the Proposed Scoping Plan 33% renewables goal. It is critical that state GHG measures be applied equally, with consistent mandates and accountability rules, to all entities in the state. / This is the approach that was taken by the Legislature, CPUC, and CEC in implementing the emissions performance standard under SB 1368, and it should be the same approach taken by ARB on any programmatic measures that are included under AB 32. It is also now directly acknowledged by the Governor’s call for “all retail providers of electricity” to be covered under his Executive Order. To further encourage the development of new renewable generation and to foster achievement of the State’s renewables goals, PG&E has proposed an innovative pilot program in its 2008 RPS Solicitation that would streamline the contracting process for renewable generators greater than 1.5 MW by offering a form PPA available year-round, with no requirement for renewable generators to participate in the competitive solicitation, thus eliminating the bidding and negotiation process for any renewable generator that accepts the form PPA’s terms and conditions. The pilot program would reduce negotiation time, time and effort required for CPUC approval, and still ensure adequate, reliable energy supplies through the use of suitable terms and conditions in a simplified contracting process. Larger generators should continue to participate in PG&E’s competitive solicitations and provide credit assurances and performance guarantees to assure that these resources begin to deliver renewable energy to the grid at the time and in the amount required by their contract. Recognizing that certain generators may desire a more streamlined process, however, PG&E has proposed an innovative pilot program in its 2009 RPS Solicitation that could reduce the time and cost for renewable generators – of any size – to secure a contract, while still protecting PG&E and its customers from potential non-performance under such a contract. However, PG&E’s pilot program is not mentioned as an alternative that could increase the number of renewable projects under contract. 2. Combined Heat and Power. The ARB recommends the addition of 4,000 MW of efficient CHP to reduce GHG emissions. Under the ARB assumptions, 3200 MW of this CHP would be under 5 MW and all of it would operate at 85% capacity factor. PG&E appreciates the explicit addition of the criteria of efficiency to the Scoping Plan, for some CHP may actually increase GHG emissions. / We understand that the ARB intends only for efficient CHP sized to minimum, consistent thermal load to be included as a GHG measure. PG&E recommends the ARB communicate its assumption on efficient CHP to the agencies developing the CHP measure such that only CHP that truly represents GHG reductions is supported. Recommendations on CHP policy extraneous to reducing GHG emissions are beyond the mandate of AB 32 and should not be included in ARB recommendations. The CPUC is already planning to address CHP policy in a new CHP proceeding and in the AB 1613 proceeding, and the CEC should open a similar proceeding to apply equal policies and AB 1613 to publicly-owned utilities (“POUs”). Therefore, the Proposed Scoping Plan Appendix C’s inclusion of CEC Integrated Energy Policy Report (“IEPR”) CHP recommendations is either inappropriate for AB 32 Scope or is already being addressed by the CPUC for investor-owned utilities (“IOUs”). PG&E recommends that Appendix C be updated to acknowledge that some IEPR recommendations are contrary to legislation or to well-established CPUC findings / and other IEPR recommendations are already being considered or implemented by the CPUC. As such, the status of CHP policy should be changed in Table 32 to correctly characterize the status of policy development. For example, the CPUC has established a proceeding to implement AB 1613 that will establish a feed-in tariff for efficient CHP up to 20 MW. However, the Plan states that AB 1613 “stops short of providing small CHP operators with the guaranteed access to wholesale markets recommended in the CEC’s” IEPR. AB 1613 provides this guaranteed access to wholesale markets for CHP up to 20 MW if the customer wishing access is a bundled IOU customer, PG&E interprets the Plan to be referring to AB 1613’s lack of a statewide guarantee for small CHP wholesale market access in non IOU service territories. PG&E agrees that to be truly a comprehensive effort, AB 1613 should be extended state-wide to POU service territories and to community choice aggregators, if they are established. Rather than relying on IEPR, the Scoping Plan should point out that assumptions about likely market penetration, likely efficiencies, likely operating characteristics, and suggested methods for overcoming market barriers are all preliminary. PG&E’s conversations with customers who could install CHP indicate that primary concerns are gas price volatility, maintenance requirements, reliability of cogeneration technology, and the lack of requisite expertise for CHP operations. As the CPUC has recognized, further study and analysis remains before the likely contribution from CHP to GHG emission reductions can be ascertained. PG&E looks forward to working with all concerned stakeholders to study the market, technologies, potential, emissions reductions, costs and benefits of CHP in the energy agency proceedings. 3. Customer Energy Efficiency. PG&E commends ARB for proactively and aggressively committing to remove barriers to more effective deployment of energy efficiency (“EE”) resources in the state. Given the very ambitious targets specified in the Plan, success in these programs can only be accomplished by transforming markets in EE products. PG&E supports changes that have been made to the Plan. In particular, the Plan recognizes the importance of comparable energy efficiency targets in all regions of California, for all retail providers. The Plan also provides additional needed clarity on the origin of the energy efficiency goals, acknowledging that the goals are contingent on innovation, unprecedented market transformation, and unprecedented success of programs. However, the Plan still contains an error that could have important implications for the goal’s feasibility. The Plan states that in the CPUC and CEC Aggressive Case in the E3 model, “it is assumed that the 32,000 GWH of savings are net of about 15,000 GWh of energy efficiency believed to be “embedded” in the CEC’s baseline demand forecast.” Examination of the E3 model, as supported by the recent CPUC/CEC Final Decision, / shows that the Aggressive Case results in approximately 20,000 additional GWh of energy efficiency over the 16,450 GWh assumed to be embedded in the load forecast. The discrepancies between the agencies’ understanding on this important assumptions highlights the need for continued coordination between the agencies as this issue is further explored. In particular, ARB can help by acknowledging and supporting the role of the agencies and stakeholders with expertise in EE programs, including the development by those agencies and stakeholders of sector-specific and customer-specific programs and goals. In particular, ARB should acknowledge that the CPUC, CEC, local governments, and public utilities will all be collaborating in the development of specific EE programs and goals for the 2012 2020 period, and the cost-effectiveness and feasibility of those goals on a customer-specific and utility-specific basis are still in development. Thus, the ARB’s AB 32 goals will need to be adjusted and revised to take into account these revised goals and programs. Key challenges in pursuing EE programs include: • Standardized measurement, evaluation, and oversight of the EE measures across agencies (CPUC, CEC) and entities (POU, IOU). • Energy Commission efforts to improve and increase compliance with codes and standards. • A regular and more structured cycle for codes and standards review and updates which continually tighten the standards and continue to deliver more GHG reductions. This should apply both to building codes and for appliance standards. In addition new standards should be developed for a broader ranger of appliances such as electronics and other energy using devices. • Addressing the continued challenges of lower federal energy efficiency standards relative to California (through state efforts at the national level). • The securing of timely funding to provide IOUs an opportunity to meet the additional and ambitious EE targets. • Complementary legislation such as AB 811, which allows any city to provide loans for EE and solar that can be repaid through tax assessments. To attain the goals of AB 32 a roadmap needs to be developed that matches the POU and IOU EE strategic plans goals with the very ambitious ARB proposed EE targets. ARB can then monitor progress of those programs and the role they can play in achieving AB 32’s overall emissions targets. 4. Control of Natural Gas Emissions. The Proposed Scoping Plan includes a measure to improve operating practices and replace older equipment of natural gas pipelines. The Plan states that this will save 0.9 MMT (or 2,230,000 MMBtu) at an annualized cost of $0.5 Million and annualized savings of $17.7 Million, estimated by applying the natural gas savings from the U. S. Environmental Protection Agency’s (“EPA’s”) Natural Gas STAR program actions to a number of units in the current emissions inventory. PG&E was a charter member of EPA’s Natural Gas Star program, having joined the program in 1994. Through our participation, we have been tracking the emissions reductions achieved through this program. Since 1994, PG&E has reduced over one million tons of CO2e. In our most recent estimates, total vented emissions from all sources were less than 1,000,000 MMBtu. Assuming that the other natural gas pipeline companies in California have similar emissions, fugitive emissions would have to be entirely eliminated to reach the ARB goal of eliminating 2,230,000 MMBtu of natural gas emissions. Completely eliminating fugitive emissions will be extremely difficult and is likely to cost far more than ARB estimates. PG&E agrees that a detailed industry survey is needed to determine the magnitude of potential costs and savings, and the Scoping Plan should reflect that the goals for fugitive emissions are still under development. We look forward to continuing to work with the ARB on efforts to reduce these GHG emissions. C. Economic Modeling. 1. The ARB Should Conduct Cross Sector Cost-Effectiveness and Technological Feasibility Analysis For All Measures Across All Sectors. The Scoping Plan correctly states that modeling results are highly dependent on input assumptions, and that these input assumptions vary in detail and quality (G 3, G 4). The cost estimates are likely to change during the regulatory process as the measures are further developed and analyzed. As cost-effectiveness information will be developed for the measures, or will be refined for the few cases where such information exists, the ARB needs to have a process to continue systematic, cross-measure cost-effectiveness analysis through the regulatory process and into the implementation phase. This analytical process is necessary to understand how new information on the inputs changes the cost-effectiveness of a measure in comparison to the other measures. By undertaking this analysis, the ARB can ensure its responsibility that it pursues only those measures which are technologically feasible and cost-effective. 2. Additional Insights from the Economic Modeling PG&E has identified serious drawbacks to the economic modeling that limit the utility of the results presented in the Scoping Plan. Continued economic modeling in the upcoming regulatory process will both improve the quality of the inputs and allow insight from comparing the results of various policy scenarios. Economic modeling results are best used to compare various policy options. For example, the ARB could evaluate the use of additional amounts of $10 or $20 per ton offsets rather than implementing 33% RPS at $133 per ton. The model impacts of this scenario on the economy versus the Scoping Plan case would provide meaningful insights. The preliminary nature of the inputs combined with the dependence of modeling outputs on the measure cost-effectiveness suggests that model outcomes are not currently reliable. The ARB should continue to run the models with the improved input assumptions throughout the regulatory process, and beyond, to understand the economic ramifications of the Scoping Plan. Certain aspects of modeling results cast additional doubt on the validity of the results. For example, all “command and control” options in BEAR and E-DRAM are shown to be more beneficial to the economy than the option that allows some cap and trade. This result appears contrary to the approach taken by ARB when it included additional energy efficiency and conservation in the cap-and-trade scenario. The counterintuitive result of the cap and trade option being more expensive requires explanation. Additionally, the modeling result of a carbon price of $10 per ton is not reflective of the full cost of the AB 32 program. For example, the price of the 33% renewables measure is not included in this figure. Finally, the ARB has provided no evidence for why offsets were modeled at $20 per ton. For example, PG&E has procured offsets for less than half this amount for its ClimateSmart program. Thank you for the opportunity to submit these comments. We look forward to working constructively with ARB, other state agencies, concerned stakeholders, and members of the public to tackle the challenge of global climate change and to ensure the successful implementation of AB 32. Very truly yours, /s/ John W. Busterud JWB:kp:bd Attachment |
Attachment | www.arb.ca.gov/lists/scopingpln08/826-112508_ab_32_comments_with_various_previously_filed_comments_attached.pdf |
Original File Name | 112508_AB 32 Comments with various previously filed comments attached.pdf |
Date and Time Comment Was Submitted | 2008-11-25 15:28:34 |
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