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POSSIBLE CLIMATE STRATEGIES FOR POSSIBLE CLIMATE STRATEGIES FOR A ROMNEY PRESIDENCY A ROMNEY PRESIDENCY Presentation for November 2012 Presentation for November 2012 USAEE Conference in Austin, Texas USAEE Conference in Austin, Texas James L. Plummer, MBA, Ph.D. James L. Plummer, MBA, Ph.D. President, QED Group President, QED Group IAEE Founder IAEE Founder

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THE 2012 ROMNEY CLIMATE POLICY POSITION THE 2012 ROMNEY CLIMATE POLICY POSITION

• It is worded differently in different places:

It is worded differently in different places: “ “I don I don’ ’t think t think a convincing enough case has yet been made to justify the a convincing enough case has yet been made to justify the costs of either a cap and trade system or a carbon costs of either a cap and trade system or a carbon emissions tax. I am willing to change my mind if there is emissions tax. I am willing to change my mind if there is new evidence. new evidence.” ”

• A pretty nuanced position. Particularly the word

A pretty nuanced position. Particularly the word “ “yet. yet.” ”

• I will examine two kinds of decisions:

I will examine two kinds of decisions:

• Things he can do by executive order to increase his information

Things he can do by executive order to increase his information base and thus increase his future options base and thus increase his future options

• The events that may cause him to

The events that may cause him to “ “pivot pivot” ” to having a bipartisan to having a bipartisan Presidential Commission recommend legislative options Presidential Commission recommend legislative options

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EARLY ORGANIZATIONAL CHANGES THAT CAN BE EARLY ORGANIZATIONAL CHANGES THAT CAN BE IMPLEMENTED BY EXECUTIVE ORDERS IMPLEMENTED BY EXECUTIVE ORDERS

• Transfer the function of estimating the health effects of global

Transfer the function of estimating the health effects of global warming warming pollutants from EPA to the Dept. of Health & Human Services pollutants from EPA to the Dept. of Health & Human Services

• Create an Office of Pollution Impact and Damage Assessment withi

Create an Office of Pollution Impact and Damage Assessment within the n the Bureau of Economic Analysis of the Dept. of Commerce and have th Bureau of Economic Analysis of the Dept. of Commerce and have them em initiate damage and adaptation studies for all global warming po initiate damage and adaptation studies for all global warming pollutants llutants

• Policy decisions would still remain with EPA

Policy decisions would still remain with EPA

• Changes in U.S. foreign policy positions:

Changes in U.S. foreign policy positions:

• Request that AR5 from the IPCC include study of Black Carbon

Request that AR5 from the IPCC include study of Black Carbon

• The Green Global Fund should focus on adaptation options

The Green Global Fund should focus on adaptation options

• Initiate discussions with the World Bank and regional developmen

Initiate discussions with the World Bank and regional development t banks to integrate climate damage insurance options into banks to integrate climate damage insurance options into development finance decisions development finance decisions

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REQUEST A BROADER CLIMATE CHANGE ASSESSMENT REQUEST A BROADER CLIMATE CHANGE ASSESSMENT BY THE NATIONAL ACADEMY OF SCIENCE BY THE NATIONAL ACADEMY OF SCIENCE

• Such a study would provide competition and/or validation for

Such a study would provide competition and/or validation for the conclusions coming out of the IPCC AR5 review. the conclusions coming out of the IPCC AR5 review.

• Such a study might provide a basis for modifying EPA

Such a study might provide a basis for modifying EPA’ ’s previous s previous “ “endangerment finding endangerment finding” ” for carbon dioxide for carbon dioxide

• It could fund original research that could increase our

It could fund original research that could increase our information base on climate change pollutants other than carbon information base on climate change pollutants other than carbon dioxide dioxide

• All the resources of the National Oceanic and Atmospheric

All the resources of the National Oceanic and Atmospheric Administration could be made available to the study Administration could be made available to the study

• The IPCC is essentially a

The IPCC is essentially a “ “consensus striving consensus striving” ” operation, which

• peration, which

has to give consideration to scientists worldwide, regardless of has to give consideration to scientists worldwide, regardless of their professional standing their professional standing

• Some competition to the IPCC would be a good thing

Some competition to the IPCC would be a good thing

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THE WORLDWIDE IMPORTANCE OF BLACK CARBON (SOOT) THE WORLDWIDE IMPORTANCE OF BLACK CARBON (SOOT)

• Black carbon causes 3 types of damage:

Black carbon causes 3 types of damage:

• As much as 25% of the radiative forcing of all pollutants (Raman

As much as 25% of the radiative forcing of all pollutants (Ramanathan and Carmichael) athan and Carmichael)

• When it deposes on snow or ice, it raises temperature and accele

When it deposes on snow or ice, it raises temperature and accelerates melting (climate damage) rates melting (climate damage)

• When ingested, causes nasty health effects

When ingested, causes nasty health effects

• The atmospheric residence time of black carbon is between a few

The atmospheric residence time of black carbon is between a few days as a few weeks. days as a few weeks. The geographic transport is highly variable. A few miles under The geographic transport is highly variable. A few miles under quiet weather, to quiet weather, to several thousand miles if it is driven by winds in the upper at several thousand miles if it is driven by winds in the upper atmosphere. mosphere.

• The U.S. only accounts for 5.1% of world black carbon emissions,

The U.S. only accounts for 5.1% of world black carbon emissions, and U.S. mobile and U.S. mobile sources account for 52.8% of U.S. black carbon emissions. EPA sources account for 52.8% of U.S. black carbon emissions. EPA’ ’s reaction has been s reaction has been to regard U.S. black carbon reduction as a byproduct of other re to regard U.S. black carbon reduction as a byproduct of other regulation of motor gulation of motor vehicle fuel economy . vehicle fuel economy .

• Other nations ( including China and India) give a much higher p

Other nations ( including China and India) give a much higher priority to black riority to black carbon abatement (from diesel engines, cookstoves and biomass bu carbon abatement (from diesel engines, cookstoves and biomass burning) . Shrinkage rning) . Shrinkage

• f the Himalayan glaciers and the rivers they feed may be partly
• f the Himalayan glaciers and the rivers they feed may be partly due to black carbon.

due to black carbon.

• Black carbon is an aerosol rather than a GHG, so these nations a

Black carbon is an aerosol rather than a GHG, so these nations are given no credit re given no credit under Kyoto for any efforts to reduce black carbon. under Kyoto for any efforts to reduce black carbon.

• The low priority that the U.S. assigns to black carbon is harmfu

The low priority that the U.S. assigns to black carbon is harmful in achieving more l in achieving more international cooperation on global warming policy. international cooperation on global warming policy.

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TREASURY DEPARTMENT STUDY OF INTEGRATING A TREASURY DEPARTMENT STUDY OF INTEGRATING A CORPORATE INCOME TAX REFORM WITH A CARBON TAX CORPORATE INCOME TAX REFORM WITH A CARBON TAX

• There is bipartisan support for the notion that the U.S. Corpora

There is bipartisan support for the notion that the U.S. Corporation Income tion Income Tax rate of 35% is too high and damages the U.S. competitive pos Tax rate of 35% is too high and damages the U.S. competitive position in ition in world trade. world trade.

• The general Romney position in the 2012 campaign is to reduce th

The general Romney position in the 2012 campaign is to reduce the marginal e marginal rates of all taxes by limiting exemptions and deductions. rates of all taxes by limiting exemptions and deductions.

• The FY 2012 revenue from the Corporation Income Tax is about $32

The FY 2012 revenue from the Corporation Income Tax is about $329B 9B

• The revenue that would be raised from a $30 per metric ton carbo

The revenue that would be raised from a $30 per metric ton carbon tax is n tax is about $116B about $116B

• So, maybe the two things could be combined

So, maybe the two things could be combined

• Timing problem: The CIT reduction will come up early in a Romne

Timing problem: The CIT reduction will come up early in a Romney y administration, whereas consideration of a carbon tax, if it hap administration, whereas consideration of a carbon tax, if it happens at all pens at all would not be until 2015 or 2016 would not be until 2015 or 2016

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INTEGRATING CLIMATE ADAPTATION, INTEGRATING CLIMATE ADAPTATION, PUBLIC INSURANCE AND PRIVATE INSURANCE PUBLIC INSURANCE AND PRIVATE INSURANCE

• Order an update of 2010 Interagency Task Force Report on Climate

Order an update of 2010 Interagency Task Force Report on Climate Adaptation, such study to include Adaptation, such study to include:

:

• Potential changes in USDA crop insurance to reflect greater futu

Potential changes in USDA crop insurance to reflect greater future re climate damage risks climate damage risks

• Same for FEMA flood insurance programs

Same for FEMA flood insurance programs

• Draw upon some of the

Draw upon some of the “ “contingent liability contingent liability” ” features of the Price features of the Price-

• Anderson Act

Anderson Act

• Include study of mechanisms to improve integration of public sec

Include study of mechanisms to improve integration of public sector and tor and private sector insurance relevant to climate change private sector insurance relevant to climate change

• Include study of mechanisms to improve integration of federal, s

Include study of mechanisms to improve integration of federal, state, and tate, and local insurance programs relevant to climate change local insurance programs relevant to climate change

• The areas of the world most vulnerable to climate change damage

The areas of the world most vulnerable to climate change damage are also the are also the areas that have the least developed insurance institutions. Ins areas that have the least developed insurance institutions. Insurance urance development needs to be more integrated into all forms of aid to development needs to be more integrated into all forms of aid to LDCs LDCs

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2014 OR 2016 POLICTICAL SCENARIOS THAT MAY 2014 OR 2016 POLICTICAL SCENARIOS THAT MAY COMPEL A COMPEL A “ “PIVOT PIVOT” ” ON CLIMATE POLICY ON CLIMATE POLICY

• The

The “ “pivot point pivot point” ” is the point in time when a Romney Administration would is the point in time when a Romney Administration would have to decide whether to go have to decide whether to go beyond beyond the above the above-

• discussed Executive Order

discussed Executive Order type of actions (for example, to form a bipartisan Presidential type of actions (for example, to form a bipartisan Presidential Commission to Commission to recommend legislative options for climate legislation) recommend legislative options for climate legislation)

• What kinds of things might trigger the

What kinds of things might trigger the “ “pivot point pivot point” ”? ?

• Accelerated global warming

Accelerated global warming

• If the Democrats somehow can make political hay in the 2014

If the Democrats somehow can make political hay in the 2014 Congressional elections about Republican Congressional elections about Republican “ “inaction inaction” ” on climate policy

• n climate policy
• If , somehow, much more international pressures are brought to b

If , somehow, much more international pressures are brought to bear for ear for U.S. action U.S. action

• Are these kinds of pressures very likely. NO

Are these kinds of pressures very likely. NO

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BUT WOULD MITT ROMNEY THE PERSON BUT WOULD MITT ROMNEY THE PERSON WANT WANT TO TO “ “PIVOT PIVOT” ” FROM HIS CURRENT POSITION? FROM HIS CURRENT POSITION?

• My

My many many liberal friends think that Romney is such a neanderthal conserv liberal friends think that Romney is such a neanderthal conservative ative that he would never want to do anything on climate policy that he would never want to do anything on climate policy

• My personal interactions with Mitt Romney:

My personal interactions with Mitt Romney:

• Hour long interview in 1988 for my book

Hour long interview in 1988 for my book Venture Capital Financial Venture Capital Financial Analysis Analysis

• Conversations and panel discussions at meetings of the Western

Conversations and panel discussions at meetings of the Western Association of Venture Capitalists Association of Venture Capitalists

• My own conclusion about him: He is an incurable

My own conclusion about him: He is an incurable “ “policy wonk. policy wonk.” ” He loves He loves to take on puzzles and challenges that others can to take on puzzles and challenges that others can’ ’t do. Compared to Mitt t do. Compared to Mitt Romney, Bill Clinton was a wuss! I doubt if, as President, he w Romney, Bill Clinton was a wuss! I doubt if, as President, he will care much ill care much about what conservatives think of him. He will care about getti about what conservatives think of him. He will care about getting re ng re-

• elected.

elected.

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An important new book: Dieter Helm, An important new book: Dieter Helm, The Carbon Crunch: The Carbon Crunch: How We Are Getting Climate Change Wrong How We Are Getting Climate Change Wrong— —and How to and How to Fix It Fix It (Yale University Press, October 2012) He is an Oxford (Yale University Press, October 2012) He is an Oxford University professor of economics University professor of economics

• He makes a very convincing case that EU policies (the ETS plus m

He makes a very convincing case that EU policies (the ETS plus massive assive subsidies to wind farms and solar panels) have been worse than d subsidies to wind farms and solar panels) have been worse than doing nothing

• ing nothing

at all. at all.

• He congratulates the U.S. for having the good sense to do nothin

He congratulates the U.S. for having the good sense to do nothing (at least at g (at least at the federal level) rather than cap and trade. the federal level) rather than cap and trade.

• The reason is that

The reason is that “ “carbon leakage is a much bigger problem than previously carbon leakage is a much bigger problem than previously

• thought. If the ETS or a carbon tax makes production or export
• thought. If the ETS or a carbon tax makes production or export more costly

more costly in OECD countries, that just pushes that production to countries in OECD countries, that just pushes that production to countries that have that have much higher carbon intensive production. much higher carbon intensive production.

• Cap and trade or carbon taxes would only work if they were accom

Cap and trade or carbon taxes would only work if they were accompanies by panies by “ “border adjustments border adjustments” ” (apparently OECD penalties on imports, proportional (apparently OECD penalties on imports, proportional to the carbon content of the imports). to the carbon content of the imports).

• Unfortunately, any real world system of

Unfortunately, any real world system of “ “border adjustments border adjustments” ” would require would require institutions and analytical capabilities beyond what would ever institutions and analytical capabilities beyond what would ever be possible be possible

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WHAT I THINK WILL HAPPEN WHAT I THINK WILL HAPPEN

• I don

I don’ ’t think new federal carbon law will happen, because events t think new federal carbon law will happen, because events will preclude implementation of a will preclude implementation of a “ “pivot point pivot point” ” (thus no (thus no Presidential Commission or legislative agenda for climate policy Presidential Commission or legislative agenda for climate policy): ):

• If the current 16 year

If the current 16 year “ “lull lull” ” in global warming continues, the whole public in global warming continues, the whole public rationale for global warming policy will weaken rationale for global warming policy will weaken

• As more evidence of the failure of EU climate policy accumulates

As more evidence of the failure of EU climate policy accumulates, there , there will be less support in the U.S. for imitating those kind of app will be less support in the U.S. for imitating those kind of approaches, roaches, particularly cap and trade particularly cap and trade

• “

“Green energy Green energy” ” investment tip from a energy venture capitalist: investment tip from a energy venture capitalist: Invest in the stock of Babcock and Wilcox Invest in the stock of Babcock and Wilcox

• Modular nuclear power plants in 180MW chunks, passive safety sys

Modular nuclear power plants in 180MW chunks, passive safety systems tems

• The Obama Administration is providing loan guarantees for the

The Obama Administration is providing loan guarantees for the demonstration plants demonstration plants

• Will look more attractive to regulatory commissions once they re

Will look more attractive to regulatory commissions once they realize the alize the full impact of Resource Portfolio Standards on electricity bills full impact of Resource Portfolio Standards on electricity bills

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