Australia’s inaugural cap-and-trade legislation is causing the nation’s political climate to heat up so much that it has now become the deciding factor between whether or not the country will see an early election this year.

The country’s opposition leader, Malcolm Turnbull, has made it clear that his coalition will vote against the nation’s first-ever climate change legislation next month, unless the bill is amended from its current form. Known as the Carbon Reduction Pollution Scheme (CRPS), the bill was originally presented to the upper house Senate in June, 2009. The bill is slated for a second vote on August 13^th and according to Australia’s laws, if the bill does not pass on it’s second time through, the Australian Labor government will have reason to call for a snap election.

Originally proposed by Prime Minister Kevin Rudd’s Labor government, the bill requires an extra seven votes to pass through the upper house, which is controlled by opposition parties. It was hoped that Rudd would be able to pass the legislation through the Senate before the American Clean Energy and Security Act, and before the UN climate talks in Copenhagen. Turnbull has offered the support of his opposition coalition if the bill is amended to provide more economic support to power generators who leverage coal as a fuel source to generate roughly 80% of the country’s electricity. Additionally, Turnbull is seeking to exclude the agricultural sector from the trading scheme. Those who oppose the amendments proposed by Turnbull argue that if accepted, the bill will do little to affect the country’s overall greenhouse gas emissions.

The legislation contains 11 bills that have become highly controversial in the country’s political arena as politicians and industry leaders debate the impacts that the laws may have on the economic health of the nation. As it now stands, the bill will regulate 1,000 of Australia’s largest companies and will price carbon initially at $5 (USD) per ton, giving businesses a financial incentive to reduce their emissions over time. Opponents of the bill claim that the economic impacts will be too great and that the nation’s industries won’t be able to compete with foreign nations who have either have less stringent climate change laws or, none at all.

Although the opposition is largely against the proposed cap and trade scheme, they have a vested interest in passing the bill because if they don’t, they are fairly certain that Rudd will call for the early election which polls project he can easily win. Instead, many opposition leaders are interested in passing the bill now and holding out for the previously scheduled election in late 2010, when they will have a better shot at winning.

Despite Turnbull’s admonitions that he controls the votes of the opposition, the Labor party only needs seven more votes to pass the bill. Unfortunately, what it might come down to is that Australia’s political leaders may vote on their nation’s first ever carbon trading scheme not based on the scientific and economic merits of the legislation but more so, out of their personal interests in political survival.

On Wednesday of this week, the G8 leaders failed to pass unanimously a climate bill to mandate a 50% reduction in CO2 emissions by 2050. The group’s failure to agree is further evidence that international agreements on a global climate change policy are stalling. The cause of the gridlock stems from disagreements among national leaders on primarily two fronts: efficacy and equity. History plays a part as well, as exemplified by Obama’s struggle to overcome the legacy of the Bush administration’s inaction on the climate issue.

As progress towards an international agreement stalls, climate change policy critics are gaining a stronger voice in the debate over the issue. In fact, an international group of academics are now encouraging world leaders to simply abandon their current climate change policies. Instead, the authors advocate for the G8 nations and developing countries to emphasize improvements in energy efficiency and to deploy low-carbon technologies.

The report, entitled, “How to Get Climate Policy back on Course” was published on July 7th as a joint publication from the London School of Economics and the University of Oxford. Ultimately, the report claims that there is evidence that carbon trading schemes such as those executed by Kyoto and proposed by the American Clean Energy and Security Act “have no meaningful effect whatsoever.” Instead, the authors claim that effective policies should be based on strategies that have proven to work in the past and that policies should not be based on untested systems that require the creation of bureaucratic systems for oversight.

While some environmentalists have praised the report for acknowledging a lack of urgency in the political arena’s response to climate change, others have harshly criticized the report, claiming that shifting the focus of current climate negotiations would slow down the negotiation process even further.

Advocates for policy-driven improvements in energy efficiency and low-carbon technologies typically look to Japan as evidence of how emissions reductions can be accomplished without complex trading regimes. Japan’s energy policy model, known as “Mamizu” serves as a model for an approach that is based on goals that can clearly be accomplished without relying on indirect initiatives such as trading schemes.

An international team of researchers led by Princeton academics is proposing another alternative approach, which is considered to be a direct strategy to reduce emissions. The focus of this approach moves away from the traditional emphasis on national emissions and instead, targets a global class of roughly one billion individuals who they claim are responsible for a vast portion of the world’s carbon emissions. This strategy is derived as a means of avoiding the disagreements among nations as to what nation-based targets are fair and effectual.

Either way, a catalyst is needed to spark forward progress on the talks leading up to the Copenhagen climate conference. As mentioned earlier, one cause of the current gridlock is the issue of equity. Governments are unwilling to agree to ambitious reductions targets because it could mean high costs to their taxpayers and because leaders are afraid of losing market advantages to countries with weaker reductions targets. Typically, countries with weaker targets would be developing economies that don’t have the financial strength to invest in clean technologies to the extent that industrialized nations are able to.

As a result, we now have a political conversation where industrialized nations are seeking equitable reductions targets across all nations as a means of protecting their competitive advantages. Conversely, developing nations argue that they should have weaker targets because per capita, they contribute less GHG emissions and because the industrialized nations have been polluting carbon for longer periods of time. As a result, equity is at the heart of the stalled progress.

Debate over the efficacy of proposed targets is also a central factor in the mired talks as nations differ on what reductions levels will make a meaningful difference in mitigating human-induced climate change.

On Friday, the World Trade Organization (WTO) and the United Nations Environment Program (UNEP) published a report that indicates increased economic activity could result in a rise in carbon dioxide emissions. However, the report also stipulates that increased ease of trade can also help combat climate change through delivering energy efficient and renewable energy technologies to more markets.

Although these findings align with the existing beliefs of numerous business managers and policy makers, the conclusions issued in the report are significant because this is the first time the WTO and UNEP have collaborated to examine the connections between trade and climate change. These types of multilateral cooperation and findings are critical measures to ensure the success of the upcoming UN climate negotiations in Copenhagen (December 2009).

In summary, the report illustrates that it is within the scope of WTO rules to enact trade policies that address climate change at the national level, but that the efficacy of these policies are determined by the design of the policies and the implementation conditions in the local regions. Although the report does not highlight specific examples, it does assert that the energy intensive sectors of our global economy (agriculture, forestry, fisheries, tourism and transport) can reduce their contribution to GHG emissions if we increase the diffusion of mitigation technologies through free trade policies.

In support of this notion, WTO Director General Pascal Lamy and UNEP’s Executive Director Achim Steiner are urging nations to adopt policies that open up trading for environmental goods and services as a means of reducing GHG emissions. Specifically, Lamy and Steiner issued a joint news release, urging the international community to finalize the stalled Doha trade talks that began in 2001 in hopes of and opening trade reducing barriers for innovative products and services that support cleantech economies.

The comprehensive, 161-page report examines the relationship between trade and global climate change through four perspectives:
1) Climate change science
2) National and international economics
3) Multilateral efforts to combat climate change
4) The implications of national climate change policies on trade.
The report provides an overview of the traditional regulatory instruments, economic incentives and other financial measures that have been used worldwide to increase energy efficiency and to reduce emissions. More in-depth coverage of the mainstream pricing mechanisms (carbon tax and emissions trading) provide insight into how to prevent emissions leakage through off-shoring production and how to protect competitiveness across markets.

A common concern among policy makers is that new taxes and tariffs could be put in place, which protect domestic industries and exclude products and services that are made available through countries with weaker environmental standards. The new report indicates that these types of border adjustment measures would become trade barriers that negatively impact the shared international goals of increasing income and reducing harmful impacts to the environment.

Environmentalists, economists, business leaders and policy makers may differ in their beliefs regarding the potential for free trade policies to successfully address increasing global GHG emissions. However, the consensus seems to be that climate change and free trade are intricately linked and that there is a critical need to address both arenas when shaping a new, clean energy economy.

Recent studies estimate that the IPCC’s projections of an 18 to 59 centimeter rise in sea level due to the melting of the Antarctica and Greenland ice sheets is well within the range of possibilities during this century. In fact, a study conducted by the Arctic Climate Impact Assessment estimates that a sea level rise of 2 meters is an unfortunate possibility. The implications of a dramatic rise in sea level on the 634 million people who live along coastlines in the Low Elevation Coastal Zone represents the potential for a vast displacement of refugees on a scale that our planet has never seen.

The World Resources Institute estimates the total number of potential refugees to be 144 million in China alone. Countries such as India, Bangladesh, Vietnam, Indonesia, Japan, Egypt and the United States also have massive numbers of vulnerable people in low lying areas. Urban centers such as London, New York, Shanghai and Kolkata are at risk, along with the agricultural regions of Asia, which supply food throughout the world.

As a result, there has never been a more compelling reason to support international policies that seek to regulate human-induced climate change. Exciting progress is being made along this front, as exemplified by the American Clean Energy and Security Act and the upcoming UN climate negotiations in Copenhagen. Supporting climate change legislation that regulates greenhouse gas emissions not only protects our limited and valuable natural resources, it also protects the livelihood of one eighth of the world’s urban population. Getting involved today by learning about and lobbying for your country’s climate change legislation can help to ensure the safety of millions of potential climate refugees worldwide.

On Wednesday, The UN Framework Convention on Climate Change (UNFCCC) released a first draft of a treaty to replace the Kyoto Protocol (1997) which is set to expire in 2012. This new 53 page document is considered to be the basis for the agreements to be made in the international climate talks scheduled for December 7th-18th in Copenhagen.

The key-differentiating factor between this document and the original Kyoto Protocol is that the newly proposed treaty calls for significant reductions in greenhouse gas emissions by both, developed and developing nations. Bridging this gap should satisfy the historical Kyoto opposition from both sides, which plagued the original framework since it’s inception. Under the Bush administration, opposition to Kyoto was founded in the notion that due to output volume of GHG emissions, developing nations should be included in the framework. Conversely, opposition from developing nations was founded in the argument that as the leaders in per capita pollution of CO2, the industrialized nations should hold the primary burden of emissions reductions.

With revised emission reductions for both developed and developing countries, the UNFCCC’s latest draft attempts to satisfy the needs of all involved parties. The head of the UNFCCC, Yvo de Boer indicates that the release of the new draft marks, “an important point on our road.” The document contains a nearly complete list of industrialized nations’ commitments to cut emissions after 2012, which allows for cross-national comparisons of reduction goals. The intent is that information sharing of this type will encourage the creation of more ambitious goals on behalf of participating nations.

According to the newly proposed treaty, emerging countries such as China and India would commit to targeting reductions of GHG emissions to 15% – 30% of 2000 levels by 2020. If agreed upon, this commitment would represent a first-ever international agreement for developing nations to reduce greenhouse gas emissions. Under the newly proposed framework, developed nations would target carbon emissions reductions to 75% – 95% of 1990 levels by 2050.

With only 200 days remaining until the final December talks in Copenhagen, this document represents the promise of a comprehensive and shared set of agreements to sign-off on in Copenhagen. That being said, there is still more work to be done on the proposed treaty between now and December. In June, governments will meet in Bonn, Germany to debate the details of the new draft. Specifically, the Bonn talks will examine the various proposals for establishing emissions limits and the allocation of funding and penalty payments.

Currently, the draft treaty has indicated that a nation’s population trends, access to technology and economic trends will be considered. The new document also proposes that funding priorities be placed on regions with glaciers, regions affected by desertification as well as low-lying areas that are at high risk of flooding.

In addition to setting revised targets for emissions cuts, the draft document also describes detailed mechanisms for financing, technology development and capacity building initiatives in the fight against climate change.

China’s Ministry of Finance and Ministry of Environmental Protection have requested research from a regional think-tank to develop preliminary proposals for a national carbon tax. The proposals, which are due for publication within the month, may one day become a part of the Chinese government’s strategy to reduce greenhouse gas emissions.

International governments have pressed Beijing to implement legislation to curtail their carbon dioxide emissions and the Chinese response has typically been a call for rich countries to lead by example in the development of CO2 regulation schemes. With the possibility of a US cap-and-trade regime being approved later this year, the Chinese government’s request for research on carbon tax policies may indicate that China will head off in it’s own direction.

Devising an agreement on an appropriate taxation cost for carbon is complex, as it is affected by a number of uncontrollable variables. Preliminary research by the World Bank and the Dutch and British governments has come up with a range of $70 to $280 per ton of CO2. Certainly, further research is necessary to refine the range of taxation and more importantly, to devise one that is appropriate to the practices and scale of a country as large as China.

Revenue from a carbon tax in China represents a significant financial stream when you consider that China is the world’s largest source of CO2 with roughly 80% of its electricity being generated by coal-fired power plants. China has a population of 1.3 billion people and the country produces roughly four metric tons of GHG emissions per person. Although China’s total emission count now exceeds that of the US, the US averages about 20 metric tons of GHG emissions per person.

The question remains, what is driving Chinese interest in pursuing the possibility of a carbon tax policy when for years, they have adamantly declared that developed nations who have caused the climate crisis should lead the way in mitigating climate change? It seems apparent that developed nations are now heading in the direction of a cap-and-trade regime versus a carbon tax. Perhaps, the Chinese government views a cap-and –trade system as being overly laborious on the regulation side. Or, perhaps China is making preparations in advance of the December climate talks in Copenhagen.

However, the more likely motivation is that China strives to become a leading nation in the reduction of carbon emissions.

As industry leaders closely watch the consumer response to new electric vehicles, ideas are quickly taking shape in regards to where manufacturers should target their sales and production. While North American, European and Chinese auto manufacturers race to bring a viable electric car to market, the question remains, who will arrive first and where will the manufacturing centers be located?

A recent announcement that Think, Norway’s pioneering electric carmaker is opening a manufacturing plant in the US is an indication that the US may be overtaking Europe as a more lucrative marketplace for the production of electric vehicles.

Think CEO, Richard Canny has stated, “The U.S. is quickly overtaking Europe as an attractive market for EVs and is an ideal location to engineer and build EVs” and he may be right. Think is currently in discussion with eight US states to determine where to build their new manufacturing facility which will initially employ 300 workers and will have a production capacity of 16,000 cars per year. Think’s technical center will also provide 70 additional jobs for engineers and electric drive specialists. Long term plans for this facility include employment for roughly 900 total employees and production capacity of 60,000 electric vehicles per year.

In addition to job creation and dealer sales, the migration of Think manufacturing to the US will also impact our national economy through contributing to a growing supply chain which serves the electric vehicle and plug-in hybrid car markets. Currently, Think is partnering with US battery makers Ener1, Inc. and A123 to provide compact, high-powered lithium-ion power systems for “TH!NK city” which, is Think’s flagship vehicle.

The TH!NK city is estimated at being capable of traveling 65 miles per hour and up to 112 miles per charge. Although numbers such as those are impressive in terms of what consumer options have been in the past, the question still remains as to whether or not those specs are enough to draw in US consumers. If the failure of China’s marketplace to embrace the F3DM electric car is any indication as to the possible future of the TH!NK city, the Norwegian-run company may have some more design work ahead of them before being able to capture revenue through US sales.

However, with talks underway with eight US states (including Michigan), a recent acquisition of $5.7 million in interim financing and loans available through the US Department of Energy’s Advanced Technology Vehicle Manufacturing program, the arrival of a vibrant Think presence on the streets of America seems inevitable.

The question remains, will US consumers respond to an fully electric car that can travel 112 miles with a top speed of 65mph or, will they hold out for longer range and higher speed hybrid electric vehicles?

It’s been an exciting week as commentaries on the merits and shortcomings of the American Clean Energy and Security Act have taken place among the sustainability and business leadership communities. If enacted, this legislation could propel the US into an entirely new economy comprised of clean energy technologies & infrastructure, reduced greenhouse gas emissions across industries, and an innovative green jobs workforce.

If passed, this bill will certainly change the manners in which we do business and the costs of doing so. Forward thinking business leaders are staying ahead of the curve and preparing their businesses for the upcoming changes by closely following the development of this critical legislation.

The goal of this article is to provide business leaders with an overview of the American Clean Energy and Security Act and to highlight the aspects of the bill that may significantly change how you do business in the very near future. In addition to understanding the details of this proposed legislation, business leaders are encouraged to be informed of the details surrounding the debate of a carbon tax versus cap-and-trade.

Materials:
American Clean Energy and Security Act of 2009 Discussion Draft Full Text
American Clean Energy and Security Act of 2009 Discussion Draft Summary

Opening Commentary:
The focus of much debate surrounding the draft version of this bill is centered on questions of: 1) the efficacy of a cap and trade system on affecting emissions reductions and 2) the impact of a cap and trade regime on company profits and consumer prices.

A key issue that the draft does not address is how the allowances for tradable emissions will be allocated across and within industries. This issue will be refined through upcoming conversations among Committee members. Although the resolution of this issue may not affect the overall cost of implementing the cap and trade program, it will certainly affect the finances of businesses as some businesses may now be facing potentially very large fines for exceeding allowable emissions counts as early as 2012.

In addition to being quiet on the details of how the allowable emissions will be allocated, the legislation also avoids laying out the details of consumer price protection strategies that it refers to in the “transitioning” title portion of the legislation.

A final point of note is that although the bill articulates that the cap and trade regime is for businesses emitting more than 25,000 tons of GHGs, businesses that emit less are not free of regulation. Instead, the emissions reductions from these companies will be regulated directly by the EPA. Government rebates will be awarded to high energy consuming industries as a means of enabling them to remain competitive in domestic and foreign markets. However no U.S. businesses are off the hook with regards to emissions regulation through this bill.

Overview: On March 31, 2009, the American Clean Energy and Security Act was introduced as a discussion draft into the House Committee on Energy and Commerce. Also known as “The Waxman-Markey Bill”, the discussion draft was authored by Representatives Henry Waxman (California) and Edward Markey (Massachusetts).

The discussion draft represents a comprehensive piece of energy legislation that aims to create millions of new clean energy jobs, save consumers hundreds of billions of dollars in energy costs, enhance America’s energy independence and cut global warming pollution.

Goals: The draft legislation aspires to reduce greenhouse gas (GHG) emissions by 20% of 2005 levels by 2020. It is worth noting that this target is substantially more aggressive than President Obama’s goal of a 14% reduction by 2020.

Framework: The discussion draft is organized into four titles:

• Clean energy – Promotes of renewable sources of energy, technologies for carbon capture and sequestration, low-carbon fuels, clean electric vehicles and smart grid technologies & infrastructure.
• Energy Efficiency – Increases energy efficiency throughout activities such as buildings, appliances, transportation and industry.
• Global Warming – Places limits on the allowable amount of emissions of GHG’s.
• Transitioning – Safeguards U.S. companies and consumers and advances green jobs during the shift to a clean energy economy.

Schedule: The House Energy and Commerce Committee will complete deliberation on the legislation by May 25th. The preliminary schedule for completing the House consideration is as follows:

Week of April 20: Energy and Environment Subcommittee Hearings
Week of April 27: Energy and Environment Subcommittee Markup Period Begins
Week of May 11: Full Energy and Commerce Committee Markup Period Begins

With the increasing likelihood of a federally mandated system for regulating carbon emissions (aka “cap and trade”), it is becoming apparent that businesses will soon be required to implement accounting measures to report on their emissions of greenhouse gases. A cornerstone measurement to be required in this process will be the consumption of services and products that require the use of fossil fuels.

This type of consumption tracking is entirely new to many businesses and consumers. Steps taken now to develop in-house capabilities or forming outside partnerships to account for carbon emissions will ensure the long-term success of your organization assuming the new laws come into place.

Web-based consumption calculation has evolved since it first hit the scenes in 2006 in the form of carbon calculators. Traditionally, carbon calculators factored in annual data from numbers of miles driven, number of flights taken, number of household members and the average cost of monthly utilities. Today, we are seeing an emerging trend in online consumption calculation in which advanced calculations are taking place behind the scenes to provide a more robust measurement of the energy consumed to fuel our lifestyles.

Specifically, we see the units of measurement migrating from tons of carbon emitted per year to watts per person. A significant emerging trend that we are seeing in the online calculators is the functionality for business and consumers to create online profiles that store their data, which enables long-term monitoring and assessment, supporting the user in their efforts to reduce consumption. Forum applications on these sites provide businesses with a critical avenue for communication with an audience of new and existing customers.

Some of the leading applications for online calculation of consumption include WattzOn, The Almanac and Wattbot. For an emerging energy assessment tool with enterprise applications, be sure to keep your eye on the work of AMEE.

WattzOn: This free online tool is intended to be used for tracking the energy needs of all the many aspects of your lifestyle. From iPods to rolls of toilet paper, Wattzon provides a novel and detailed presentation of your total energy consumption.

The Almanac: Still in it’s beta stage, The Almanac enables users to record consumption and provides a snapshot of their energy footprint along with recommendations for reducing the environmental impact of your lifestyle.

Wattbot: Through combining an analysis of energy usage and recommended strategies for the adoption of renewable energy resources, Wattbot is a one-stop online shop which connects businesses and consumers with cost saving strategies that also reduce the environmental impact of doing business.

AMEE: Although they are more about enterprise solutions for mapping, measuring and tracking carbon and energy usage, AMEE provides a powerful API that businesses can leverage to develop and deliver their own online consumption calculators for customers and internal systems.

GE’s amazing application renders a 3D digital hologram of smart grid technology right in your hands. There are a variety of amazing opportunities for leveraging this type of a tool to shape the public’s visualization of what a world would look like if we embraced renewable energy resources.