2011 December 14

Investigation: EPA Has Not Restored Environmental Justice

EPA Administrator Lisa Jackson

Three years into Lisa Jackson’s tenure as head of the U.S. Environmental Protection Agency, more than a dozen formal complaints alleging air pollution is disproportionately harming low-income, minority communities remain unresolved. Each of these complaints has languished — in some instances, for more than a decade — in the EPA’s Office of Civil Rights despite Jackson’s stated commitment to environmental justice.

“We must include environmental justice principles in all of our decisions … especially with regard to children,” Jackson wrote in a January 2010 memo outlining the agency’s top priorities.

But EPA documents obtained by the Center for Public Integrity’s iWatch News and interviews with activists and residents reveal that the administrator’s words have brought little relief to underprivileged communities overburdened with pollution.

The Office of Civil Rights — whose leader reports directly to Jackson — has in its files a total of 38 unresolved complaints dating to July 1994, according to a list published on the office’s website following a Freedom of Information Act request from iWatch News. Fifteen of these OCR complaints involve air pollution.

The EPA did not explain why so many cases remain unresolved. However, a spokeswoman said in an email that “the Agency has made meaningful progress on many of the complaints that remain on its docket.”

Environmental justice advocates are dubious. “The backlog doesn’t seem greatly improved, and it’s not clear what processes they use to evaluate the complaints” said Marianne Engelman Lado, a lawyer at Earthjustice, a nonprofit environmental law firm. “Why is that progress?”

Rafael DeLeon, the head of the Office of Civil Rights, did not respond to reqests for an interview. Jackson has also not responded to multiple interview requests for iWatch News’ and NPR’s Poisoned Places series.

Study: Species From “Finding Nemo” Increasingly Face Extinction

In 2003, Pixar presented the American imagination with a tour of the world’s sealife led by America’s favorite fish, Nemo. But according to a new study, many of the species who swam on screen are close to no longer existing in real life. The International Union for Conservation of Nature found that 16 percent of the species found in “Finding Nemo” actually “face the threat of extinction“:

Sixteen percent of the species associated with characters in “Finding Nemo” that have been evaluated face the threat of extinction, according to the study, which was conducted by the International Union for Conservation of Nature (IUCN) and Canada’s Simon Fraser University. The analysis of 1,568 species is not just a whimsical look at American popular culture and its cartoon characters. It reveals how humans treat some of the ocean’s most charismatic inhabitants.[...]

The Oscar-winning 2003 Disney/Pixar movie, which details how the clownfish Marlin defies all odds to save his son from the aquarium trade, has a conservation message. But the film actually inspired a booming aquarium trade in the bright orange fish with white stripes, significantly reducing native clownfish populations on coral reefs in Australia and elsewhere.

While the IUCN classifies clownfish as a “species of least concern,” meaning it does not face an imminent extinction risk, 18 percent of the evaluated species that are related to Nemo — those of the scientific family Pomacentridae — are at risk of extinction. There have been few formal scientific assessments of coral reef fish populations that are sought by the aquarium trade, McClenachan said, so “it’s very hard to know the true extent of the aquarium, live reef and curio trade.”

Many of these species are endangered because of human activity. Sea turtles are vulnerable after years of getting caught in commercial fishing gear and getting their nesting area trampled or obstructed by development. More than half of hammer head sharks face extinction due to over-fishing and demand for shark fins. Indeed, “direct exploitation is the key driver of many of the species’ decline.” What’s more, they “are more threatened than the most threatened vertebrates on land.”

But not many of the species that are endangered and face extinction are listed as such. In fact, 40 percent of the birds, 50 percent of the mammals, and 80 to 95 percent of the other species like amphibians and insects that the IUCN recognize as endangered are not even listed on the official U.S. list of endangered species. This amounts to about 531 species that have not made the official protection list.

Researchers hope that the more people recognize the animals they see in movies like Finding Nemo, the more likely they are to care about human impact on them. These animals “got life histories that cause them to interact with people wherever they go,” said one researcher. “These are species that should be doing better because they are ones we care about.” Unless humans take notice, Nemo will be increasingly hard to find.

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Cuomo: Legislative Momentum Played Big Role In Marriage Equality Victory

New York Gov. Andrew Cuomo talks about his success in bringing marriage equality to the Empire State in the January issue of GQ magazine, emphasizing the role legislative momentum from past accomplishments played in pushing the measure over the top. “First, the budget worked,” Cuomo explained. “The budget comes up first—this was February. After the budget, you go through what’s called the legislative session, which is passing the normal bills. That worked. So now you had a sense of momentum. And the body politic was enjoying the success.” He added: “And then we did marriage equality last, which was the hardest of the session issues. But I think at that point there was a lot of energy, a lot of momentum. People—the legislature—liked getting things done.”

Cuomo described his achievement on marriage as a “continuation of a legacy that I learned from Mario Cuomo as a progressive pioneer” and likened it to his father’s “fight on the death penalty, his fight on a woman’s right to choose”:

GQ: Let’s go back to marriage equality. So the timing was good. You had the momentum. You just said, “This has to be done”?

CUOMO: Look, there are issues that come across your desk…that you just say, “This is absurd.” Marriage equality changed life for people. When we did the gay-pride parade after the passage? I can’t tell you how many family members, friends, sisters, and brothers… It provided a level of acceptance for millions of people. And their families.

GQ: And you got the activists to work together—

CUOMO: Yeah. Because they were a fractured group. But I mean, you look at the injustice of the issue. [switches voices, mimicking the opposition] “You can’t get married if you’re gay.” Why? “Well, because you’re gay.” And? “And, well, you can’t make babies.” That’s the argument. Oh, really? So then we should change the law to say, “Only people who can and want to make babies can get married.” So an infertile man can’t. A woman who can’t, she can’t get married. People who don’t want to make a baby, they can’t get married. So let’s change the law so it says, “Only people who can and will make babies.” “Well, we don’t want to do that. You can get married if you don’t want to make a baby or if you can’t—except if you’re gay!” There’s no logic.

Once the state senate approved same-sex marriage on June 24, 2011, the number of Americans living in a state where gay and lesbian people can marry doubled.

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Cap and Trade Gives Massachusetts Economy Critical Boost, Creating 3,800 Jobs Since 2008

Report on a ten-state initiative to reduce greenhouse gas emissions shows the program is a success after three years.

By Maria Gallucci, excerpted from InsideClimate News

The state of Massachusetts is quietly reaping the benefits of cap and trade, the much-maligned process for curbing greenhouse gas emissions that federal lawmakers and many state governments resoundingly rejected in recent years. According to a recent study, cap and trade has created 3,800 jobs and nearly $500 million in economic activity for Massachusetts since 2008.

Massachusetts belongs to theRegional Greenhouse Gas Initiative (RGGI), the first and only mandatory carbon emissions trading scheme in America. A report analyzing data from the first three years of the effort found that of the 10 participating Northeast and Mid-Atlantic states, Massachusetts benefited most economically, because it used the bulk of its money to help fund its aggressive energy efficiency agenda.

“Energy efficiency investments have a much bigger multiplier effect than any other category of spending,” said Paul Hibbard, vice president of the Analysis Group, the Boston-based consulting firm that prepared the report. When homeowners and businesses used RGGI dollars to retrofit and weatherize buildings, they not only ended up saving on energy costs and spending money elsewhere in the economy—they also put contractors and installers to work.

RGGI “is a very successful program … and we look forward to continue achieving those results,” Mark Sylvia, commissioner of Massachusetts’ Department of Energy Resources, told InsideClimate News.

All the RGGI states saw a net economic benefit from the program, the report found, despite increased compliance costs for power plant operators and subsequent electricity rate hikes, largely thanks to energy conservation measures that reduced electric bills. Regionally, $912 million in total auction proceeds spurred $1.6 billion in economic value and created 16,000 jobs, the report found.

The states used their RGGI proceeds in a variety of ways, including patching state budget gaps, paying utility bills for low-income residents, and funding renewable energy projects. The other RGGI members include Connecticut, Delaware, Maine, Maryland, New Hampshire, New Jersey, New York, Rhode Island and Vermont….

How RGGI Works

Under RGGI, fossil fuel power plants must curb the amount of CO2 they emit each year to a pre-determined level, initially set at 188 million tons of CO2 across the ten-state region.

Operators of fossil fuel plants with at least 25 megawatts in capacity hold “carbon allowances” for every ton of CO2 emissions their plants give off. Plants that exceed their allowances must either reduce their emissions, or buy spare allowances from within the market, with the price determined by how many allowances are up for sale and how many are needed. Private financial firms can also buy and sell carbon allowances in the quarterly auctions run by RGGI Inc., a nonprofit organization that then transfers the proceeds to the states.

In Massachusetts, at least 80 percent of RGGI proceeds must be used for green building and energy-saving programs. In practice, however, the state sent 94 percent of its proceeds from the last 13 auctions—or $134 million—to efficiency efforts, according to Analysis Group.

Hibbard said the study proves that cap-and-trade programs can work and can deliver economic benefits, especially when funding is steered toward energy efficiency.

“It would be impossible to not have that be a key takeaway,” particularly after seeing the economic impact in Massachusetts, he said.

The Massachusetts Experiment

Massachusetts wasn’t always the RGGI proponent it is today. Former Gov. Mitt Romney, now a GOP presidential candidate, championed RGGI in 2005, when it was in its early stages. But he pulled Massachusetts out of RGGI after he failed to get a limit placed on the amount of money power plants would be charged for exceeding their emissions limits.

When Democratic Gov. Deval Patrick took office in 2007, he set out to make energy efficiency the “first fuel” for Massachusetts’ power plants. Rejoining RGGI was among Patrick’s earliest steps as governor, because he saw it as a strong vehicle to help realize that goal, said Sylvia, the state’s energy resources commissioner.

In 2008, Patrick passed a set of ambitious policies to curb energy consumption, driving down electricity costs and slashing greenhouse gas emissions. First among them was the Green Communities Act, which requires gas and electric companies to exhaust all cost-effective energy efficiency measures before building new plants or procuring more power.

By 2020, Massachusetts aims to meet about 30 percent of its energy needs through these energy efficiency measures. Already it has leapfrogged California as the most energy-efficient state, according to an October ranking by the American Council for an Energy-Efficient Economy, a Washington, D.C.-based nonprofit.

Although Massachusetts’ $143 million in total RGGI auction proceeds account for only a fraction of the $2 billion the state plans to invest in energy efficiency programs from 2010 to 2012, Sylvia said RGGI money is still a critical source of funding.

RGGI dollars provided electric utilities with about $30 million in 2010, or 11 percent of total utility program budgets, according to afirst-year report from the state’s Energy Efficiency Advisory Council. They also provided $18 million in grants to nearly 75 municipal efficiency programs.

Aside from funding specific programs, RGGI has helped fuel an economic engine that is creating jobs across the state.

In 2010, some 33,800 people in Massachusetts—20 percent more than in 2003—worked in the broad field of energy efficiency, including providing home energy assessments, creating energy-saving lighting and appliances, and renovating and upgrading green buildings, according to a green jobs count by the Brookings Institution….

– Maria Gallucci.  For the full piece, go to InsideClimate News

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A Properly Designed Feed-in Tariff Can Lower the Cost of Capital and Keep Electric Rates Down

by Richard W. Caperton

Conversations about building new renewable energy almost always come back to the electricity from these projects being more expensive than fossil fuel energy.  This may be the case (although it’s almost certainly overstated), but this shouldn’t lead to the conclusion that the way to minimize rate impacts is simply to use less renewable energy.  In fact, there are policy tools that can help lower the cost of renewable energy, letting us meet renewables goals at a lower price.

One of these policies is a feed-in tariff, also known as “CLEAN Contracts.”  Perhaps most famous for its successful implementation in Germany, a feed-in tariff is a policy tool that guarantees a fixed price at which renewable generators can sell the electricity they produce.  The tool works by requiring that utilities offer a standardized, long-term contract to clean energy developers, with a price determined by a public body or regulatory authority.  Feed-in tariffs provide the transparency, longevity, and certainty that banks need to finance projects, which leads to significant investment.  Indeed, feed-in tariffs are responsible for 75 percent of the solar photovoltaic power installed worldwide, as well as 45 percent of the wind energy.

The key element of a feed-in tariff is to set a price that reflects the cost of generating the energy, including a reasonable rate of return that is fair and equitable to both investors and ratepayers.  This is generally the same way that regulators set electricity rates, by looking at a utility’s costs – including investments in new generation – and setting rates at a level to recover those costs plus a reasonable rate of return to their investors.  The rate of return is critical, because there is evidence that the necessary rate of return under a feed-in tariff program can be lower than the typical rate of return that utilities require.  This means that renewable energy is cheaper with a feed-in tariff than without.

Publicly-available data on utility rates of return, feed-in tariff policies, and costs of renewable energy can give important insights into just how big this difference can be.

[JR:  Warning -- This is a wonky post, which is why I like it!]

To start, we need to determine what rate of return utilities generally get on their investments.  There are some exceptions, but theorists generally agree that the rate of return a utility should get is the same as their cost of capital (that is, how much their investors expect to earn on their investment). According to data compiled by the Edison Electric Institute, investor-owned electric utilities can expect to earn a return on equity of just over ten percent.  Of course, this can vary by utility, with some utilities earning rates of return of closer to eleven percent.  (Non-profit electric companies, such as electric cooperatives and municipal utilities, likely have a different cost of capital, so this analysis is specific to investor-owned utilities.)

The average investor owned utility has a capital structure that is roughly 50 percent equity and 50 percent debt, and faces an effective tax rate of about 33 percent.  If we assume that their cost of equity is ten percent and cost of debt is five percent, then the “weighted average cost of capital” for a utility is 6.7 percent.  Ultimately, this is the cost of capital that will be passed on to ratepayers on every investment.

Now, let’s consider two ways that a feed-in tariff can lower this cost of capital.  First, the capital structure can change, because a feed-in tariff adds certainty to a project that makes it desirable to banks.  Second, some investors will require a lower return on equity, because they have non-financial reasons to make the investment.

Under the first example, we can simply change the expected capital structure to 70 percent debt and 30 percent equity.  In fact, this is the capital structure that the province of Ontario used in calculating their feed-in tariff rates.  Keeping the cost of equity, cost of debt, and tax rate the same as above, this has the effect of lowering the weighted average cost of capital to 5.4 percent.  The only thing that has changed is that the project is being built in a policy environment that includes a feed-in tariff, which has allowed the project developer to attract more debt.

With this information on rates of return, we can use Dr. James White’s “Renewable Energy Payment/Feed-In Tariff Calculator” to estimate what price this implies for a hypothetical feed-in tariff.  Dr. White’s model only covers the United States, but we can use it to calculate the required feed-in tariffs just across the Great Lakes, in Michigan.  There, a utility installing a large wind turbine would require 10.72 cents per kilowatt-hour (kWh) to make the appropriate return on their investment.  However, if Michigan had a feed-in tariff, the exact same project would only require a rate of 9.8 cents per kWh, due to the change in capital structure.  (These rates are purely hypothetical and are meant to serve as examples.  Any feed-in tariff rate setting procedure should involve a careful analysis of the cost of owning and operating a renewable generation system, which has not been done in this paper.)

This difference of .92 cents may seem like a little, but it adds up fairly quickly.  As of June, Michigan had generated 157 million kilowatt-hours of electricity from wind.  If Michigan had had a feed-in tariff in place for the first half of 2010, Michigan’s ratepayers could have saved over $1.4 million.

The other way that a feed-in tariff can save ratepayers money is by encouraging renewable development by investors who will be satisfied with a lower return on equity than traditional electricity infrastructure investors.  The primary reason why someone would accept a lower return is that utilities see investments primarily as financial investments, whereas small developers – such as a homeowner installing rooftop solar – have some non-financial motivations, including the desire to take personal action against climate change.

Now, we can calculate the cost of capital for a small investor.  Gainesville, Florida, has implemented a feed-in tariff through their municipal utility and will attract rooftop solar installations.  Depending on the project specifications, Gainesville projects that renewable developers will earn returns of up to 4.99 percent.  For simplicity’s sake, let’s say that the return on equity in Gainesville is five percent.  Financing structures for small installations tend to be more complicated than a simple debt/equity mix, such as financing models involving leases.  Rather than trying to account for these effects on the cost of capital, let’s just assume that the project is paid for entirely with cash by the homeowner.  (Effectively, this is a 100 percent equity capital structure, so the weighted average cost of capital is the same as the cost of equity.

For a small solar project in Florida, Dr. White’s calculator suggests that a utility with a 6.7 percent cost of capital would need to receive about 34.72 cents per kilowatt-hour on their investment.  An investor who only expected a rate of return of five percent, however, would need to receive just 30.40 cents per kWh to make the same investment.  (Again, these rates are only intended to serve as examples.)

This difference of 4.3 cents per kwh can turn into significant savings for ratepayers.  Suppose this hypothetical utility sold 2.1 million megawatt-hours of electricity (as Gainesville Regional Utilities did in 2009).  If half of a percent of their power was generated from solar, that would be 10,500,000 kWh of solar power sales.  With a feed-in tariff system that saves 4.3 cents per kWh, this utility would have saved $450,000, savings which can be passed on to their consumers.

In both of these scenarios, the only thing that’s changed is the existence of a feed-in tariff.  With this tool in place, some renewable energy will be built by people who demand a smaller financial return on their investment, because they benefit from non-financial returns.  Even the traditional infrastructure investors – who demand the same return on equity as investor-owned utilities – will be able to sell power more cheaply, because a feed-in tariff allows them to leverage their investment with more debt.  This means that the exact same amount of renewable generation can get built, but consumers will pay less for it.  Building clean energy and saving money: this is the optimal solution.

Richard Caperton is the director of clean energy finance at the Center for American Progress

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