BioCycle February 2011, Vol. 52, No. 2, p. 53
Mark Jenner

As 2010 came to a close and 2011 began, several notable climate change policy events occurred. In the last few months the Chicago Climate Exchange has closed its doors, the California Air Resources Board voted to implement a carbon cap and trade program, the US EPA relaxed its position on carbon dioxide emissions, and one of the bright and shining stars of cellulosic fuel commercialization, Range Fuels, closed its doors. As carbon emission reduction programs move forward in the U.S., they seem to move sideways and backwards as well.

CCX CLOSES
The first U.S. greenhouse gas (GHG) trading exchange closed in December. The Chicago Climate Exchange (CCX) was a bold voluntary carbon trading program that began in 2003. Delays in enacting federal cap and trade legislation in the U.S. over the last few years created large problems for CCX pricing. As legislative talks began, there was hope that the CCX program would become integrated into the U.S. cap and trade program. Lack of legislative action eroded investor confidence that carbon credits traded through the CCX would play a role in U.S. and global carbon reduction programs. The CCX had carved out a niche as a voluntary program in supplementing mandatory European GHG reduction programs. Once the U.S. began thinking about federal legislation the risks of investing in the CCX increased.
Although the CCX closure is a great loss, it is incorrect to think it failed. CCX says it reduced emissions by nearly 700 million metric tons of CO2 since 2003 through the credits traded. In addition, steps to aggregate credits through the Iowa Farm Bureau and the North Dakota Farmers Union legitimized climate change for farmers. The CCX reports that 15,000 farmers, ranchers and foresters, managing 25 million acres of land, were part of the program.
California and New England created mandatory carbon trading frameworks after CCX was established. The voluntary CCX protocols for counting sequestered carbon were less rigorous than the protocols developed for the mandatory programs. However the reach of CCX provided an invaluable service in the U.S. and educated many about the benefits and costs of sequestering carbon.

CALIFORNIA MOVES ON CAP AND TRADE
Also in December, the California Air Resources Board (CARB) voted to implement the California mandatory cap and trade program as part of AB 32, the California Global Warming Solutions Act of 2006. The California program is mandatory thus established greenhouse gas emitters are subject to the law. This market/policy coordinating mechanism will have a different kind of impact than CCX (which required participants to follow mandatory protocols, but no one was forced to join).
The first group of facilities that must comply with the cap and trade regulation are electric utilities and others that emit over 25,000 metric tons of carbon dioxide equivalent (CO2e) each year. The first compliance period begins in 2012. By 2015, a second group of emitters will be subject to compliance, which includes transportation fuel distributors emitting less than 25,000 metric tons of CO2. The goal is to have the entire California cap and trade regulated community emitting no more than 334 million metric tons of CO2e by 2020.
This is a very ambitious policy made all the more challenging because the state of California is reportedly spending $28 billion more than it is collecting annually. If the law raises the cost of doing business in California enough, industry and citizens may begin moving out. California intends to develop mechanisms to bring out-of-state suppliers of electricity into the cap and trade program, but the most effective way to assure the policy’s success is to have other states develop similar ones. While California is a partner in the larger Western Climate Initiative (WCI), it remains to be seen whether surrounding states will follow suit.

EPA POSTPONES BIOMASS GHG EMISSION REGULATION
The topic of this column in the October 2010 BioCycle was about the definitional conflicts between the Department of Energy (DOE) and the EPA regarding emissions from biomass. The DOE follows the UN protocols for GHG accounting, which count CO2 emissions from biomass as carbon neutral (no impact). The EPA, however, is in the process of developing regulations on CO2 emissions that track them just like all the other emissions in the Clean Air Act. If a pollutant gets emitted, it counts. Having the DOE operate as if biomass emissions have no impact and the EPA operate as though every biomass emission counts, is a serious problem.
In January, the EPA announced that it would defer establishing permitting requirements for CO2 emissions from biomass-fired and other biogenic sources for three years. During that time the EPA will continue to collect information and attempt to develop rules that utilize the best science available.

RANGE FUELS CLOSES
Finally, also in January, Range Fuels, a commercial cellulosic biofuel technology developer, announced that it was closing its doors for the time being. The Soperton, Georgia-based facility has successfully produced methanol for biodiesel and ethanol from wood, but was unable to do so economically. Range Fuels received one of the first large commercial bioenergy grants from DOE of $76 million in 2007 and then received another $80 million in loan guarantees from USDA in 2010.
The common denominator in all these cases is that change is costly. Still if it was easy, it wouldn’t be any fun. I find EPA’s postponement regarding biomass CO2 emissions particularly heartening. If we can all follow that kind of flexibility there is still hope.

Mark Jenner, PhD, and Biomass Rules, LLC, has joined the California Biomass Collaborative. Burning Bio News and other biomass information is available at www.biomassrules.com.