Paul Gutermann spoke today at the annual global Carbon Expo in Cologne, Germany, about the ongoing battle between state and federal authorities in the U.S. concerning leadership in domestic climate change initiatives.

As states like California and the members of regional initiatives in New England, the West, and the Midwest establish programs to combat climate change, they run the risk of conflicting with federal programs or entering areas of exclusive federal power. A recent article by Robert Huffman and Jonathan Weisgall explored the constitutional issues arising from state climate protection leadership, and showed several areas where state action may be forced to yield to federal prerogatives.

Regional cap and trade programs are most susceptible to challenges under the Commerce, Compacts, and Supremacy Clauses of the U.S. Constitution.

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The Bay Area Air Quality Management District (BAAQMD) proposed one of the nation’s first carbon taxes to be assessed on stationary sources of greenhouse gas emissions. Over 2,500 district-permitted facilities would be subject to the tax, which would be computed by multiplying the total carbon dioxide equivalent (CDE) emissions from the permitted facility by the unit fee of $0.042 per metric ton of CDE. The proposed tax would raise about $1.1 million annually to help cover the cost of the District’s Climate Protection Program activities. BAAQMD estimates that most facilities with relatively low greenhouse gas emissions would have annual fees under $1. The largest emitters, however, would have annual fees in excess of $50,000 (i.e., the five Bay Area petroleum refineries and the two largest Bay Area power plants).

Several industry groups oppose the proposed carbon tax. These groups have raised concerns about the financial burden of the tax and the potential interference with a state-wide initiative to address greenhouse gas emissions. BAAQMD staff disputes these claims, explaining that the fees should have a minor financial impact on businesses. Moreover, the fees - not a “carbon tax” according to District staff - represent a modest step to recover the District’s costs and would not lead to inconsistencies or confusion with a state-wide program. A public hearing is scheduled for May 21, 2008 to consider adoption of the proposed fees.

For further information about this topic, please contact Akin Gump.

In a recently released “Dear Colleague” letter, Senator Corker (R-TN) questioned the number of carbon credits that would be auctioned under the Lieberman-Warner climate bill (S. 2191), which is scheduled to be debated in the Senate in early June.

For further information about this topic, please contact Akin Gump.

The House Energy and Commerce Committee’s Energy and Air Quality Subcommittee convened a hearing yesterday to examine the Renewable Fuels Standard (RFS) provisions of the Energy Independence and Security Act of 2007 (EISA). The RFS requirements in EISA substantially increase those contained in the Energy Policy Act of 2005, mandating renewable fuel use of 9 billion gallons by the end of 2008 and 36 billion gallons by 2022. Subcommittee Chairman Rick Boucher (D-VA) opened the hearing by noting recent calls for a “reexamination” of the RFS in light of rising food prices and the national debate on carbon emissions.

Full Committee Ranking Member Joe Barton (R-TX) contended that the higher RFS mandate contained in EISA “cannot be met” and said he will introduce a bill to repeal the RFS mandate contained in the new law. Full Committee Chairman John Dingell (D-MI) did not attend the hearing, but submitted a statement for the hearing record suggesting, in part, that amending the RFS “would be unwise and could lead to unintended consequences.”

Subcommittee Democrats, joined by Rep. John Shimkus (R-IL), generally characterized the RFS as a success, suggesting that greater ethanol use was helping to lower gas prices and increase U.S. energy supplies. Republican Members of the Subcommittee generally advocated revisions to the RFS mandate.

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With numerous exchanges now trading various carbon-related financial instruments (CERs, EUAs, futures, etc.), carbon investors face new questions regarding where, when, and how to get involved in the carbon trading market.

ClimateIntel prepared a table (excerpted below) to help market participants track and evaluate these choices.

For further information about this topic, please contact Akin Gump.

Adding to the evolving debate on how and whether the US should regulate greenhouse gas (GHG) emissions from aircraft, the Environmental Protection Agency (EPA) announced plans to seek public comment on two petitions urging the Agency to curb aviation emissions, during recent testimony to the House Select Committee on Energy Independence and Global Warming.

The two petitions - one by a group of states including California and the other by a coalition of environmental groups - urge EPA to (1) determine that aircraft emissions cause or contribute to air pollution and endanger public health and (2) adopt regulations to control such emissions.

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Tuesday, May 6

2:00 PM - Aviation and the Environment: Emissions; House Transportation & Infrastructure Subcommittee on Aviation; 2167 Rayburn House Office Building; webcast.

Wednesday, May 7

9:30 AM - Oversight Hearing on Science & Environmental Regulatory Decisions; Senate Environment & Public Works Subcommittee on Public Sector Solutions to Global Warming, Oversight, and Children’s Health Protection; 406 Dirksen.

Thursday, May 8

9:30 AM - Testimony on the Decision to Restructure the FutureGen,; Senate Appropriations Subcommittee on Energy & Water Development; SD-192 Dirksen.

2:30 PM - Improving the Capacity of U.S. Climate Modeling for Decisionmakers and End-Users; Senate Commerce Committee; location TBA.

2:30 PM - Discussion on EPA’s Draft National Water Program Strategy: Response to Climate Change; free registration for webcast.

For further information about this topic, please contact Akin Gump.

In a show of the increasing influence of climate change concerns at the state level, the Kansas legislature failed yesterday to override Governor Kathleen Seblius’ veto of a bill that would have opened the door for expansion of Sunflower Electric Power Corp’s (“Sunflower”) coal-fired power plant in Holcomb, Kansas. Although the Kansas Senate easily approved the veto override by a vote of 32 to 7, the House fell four votes short.

Legislative leaders who supported the project told Sebelius last week to accept a compromise that would reduce the size of the project from 1,400 megawatts to 1,200 megawatts, or face a veto override. Sebelius, who had already vetoed the 1,400 megawatt power plant and proposed a single 660 megawatt facility, rejected the proposal, citing concerns over projected emissions of 11 million tons of carbon dioxide annually.

The showdown between Sebelius and the legislature resulted from a decision by Kansas Secretary of Health and Environment Rod Bremby last October to deny an air-quality permit for Sunflower on climate change grounds. Legislators argued that the decision to hold up the project would damage Kansas’ business climate and result in higher costs for electricity.

For further information about this topic, please contact Akin Gump.

While Lieberman-Warner has garnered most of the headlines since late last year, other climate change bills continue to appear in Congress, illustrating the difficulties ahead for forging a consensus on carbon legislation.

Senator Voinovich (R-OH) recently drafted, but has not formally introduced, the “Incentives-Based Climate Policy Act” as an alternative way of reducing greenhouse gas (GHG) emissions. The Voinovich proposal calls for more modest reduction targets than Lieberman-Warner, with a goal of reducing emissions to - but not below - 2006 levels by 2020 and 1990 levels by 2030.

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China’s wind power generation rose 95.2% to 5.6 billion kw hours in 2007, from a year ago, reported the Xinhua News Agency. A report released by the government said that China had wind power facilities with a combined installed capacity of 6.05 gigawatts at the end of 2007, up from 2.67 gigawatts in 2006. The country achieved the goal set for the 2010 three years ahead of schedule. Wind power projects under development will make up for a combined installed capacity of 4.2 gigawatts.

According to the Medium and Long-Term Development Plan for Renewable Energy in China published by the National Development and Reform Commission (”National Development Plan”), China will generate 15% of its energy from renewable sources such as wind by 2020. To achieve the goal, the government plans to increase its wind power equipment to a combined installed capacity of 10 gigawatts by 2015, and to 30 gigawatts by 2020. Shanghai Daily reported that the 2020 target is likely to be increased by the government to as much as 100 gigawatts, which, according to WSJ Environment Capital, would be greater than the total global current installed wind capacity.

The rapid increasing utilization of wind power for electricity generation has been driven by the following factors:

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