COOL TOOLS

Pamela Wexler, Policy Analyst, Center for Global Change

CONTRIBUTORS:

Susan Hedman, Clinical Assistant Professor, University of Michigan

Alan Miller, Executive Director, Center for Global Change

Frank Muller, Project Director, Center for Global Change

Harvey Sachs, Director of Policy Research, Center for Global Change

This work was prepared in part with assistance from the U.S. Environmental Protection Agency, Assistance I.D. Numbers CX-815954-01-0 and CR 816968-01-2. Its contents do not necessarily reflect the views of that Agency.

This report is part of a larger legislative project currently underway at the Center for Global Change. The Center is developing a computerized database to house selected laws, bills and policy proposals that address state and locally regulated activities which are sources of greenhouse gas emissions. Legislators, regulators, policymakers, advocacy groups and trade organizations can expect the collection to offer a single source of available initiatives related to global climate change.

INTRODUCTION

The search for options to protect the atmosphere is gathering momentum. Negotiations currently underway under United Nations auspices to produce an international agreement have attracted widespread participation, joining 130 countries, twenty intergovernmental bodies and nearly fifty nongovernmental organizations. In December 1991, environment and economic ministers of the European Community approved in principle an energy tax on all fossil and nonrenewable energies, advancing the Community's commitment to stabilization of carbon dioxide emissions at 1990 levels by 2000.[ 1] Except for the U.S., every major industrialized nation in the world has agreed either to stabilize or reduce emissions of carbon dioxide, the most prevalent greenhouse gas.[2]

In the U.S., where worldwide attention has focused on the limits of federal policy, concern over climate has stimulated initiatives on the state and local levels. In fact, when announcing its most recent position on climate change policy, the U.S. counted state and local actions among its list of programs to address climate change. Recent studies discuss possible roles and options for states in climate change policy.[3] Executive orders and legislative proposals indicate efforts on the part of states to define comprehensive, workable solutions to these complex problems. In Vermont, the comprehensive plan resulting from a 1989 gubernatorial directive includes a schedule of goals to reduce both greenhouse gas emissions and per capita nonrenewable energy consumption. Connecticut's 1992 legislature strengthened 1991 omnibus global warming legislation, adding annual C02 emissions reporting requirements and calling for the inclusion of reduction goals in the state energy plan beginning in 1993. Minnesota has launched a program to inventory the state's C02 emissions and to develop incentives to reduce them. And in Missouri, the legislature is currently reviewing a set of policy alternatives delivered by a Commission charged with assessing the state's contribution to global climate change.

Another idea that has attracted growing state interest is the incorporation of environmental values for unregulated emissions of pollutants in the process of evaluating alternative electricity supply resources. As of April 1991, seventeen states had adopted rules or policies in this area, several assigning an explicit value to emissions of greenhouse gases. New York, Massachusetts, California and Nevada are leading the effort, assigning explicit monetary values to carbon dioxide emissions.

Elsewhere in the world, subnational actions are progressing. The Australian territories of New South Wales, Victoria and Western Australia all have adopted an interim 20 percent reduction target. Each has established committees to canvass response strategies for meeting the target, and New South Wales has created a cabinet level committee to ensure coordinated response. In Toronto, Canada, which has adopted a 20 percent carbon dioxide reduction target, actions include a program to convert 80 percent of the city's commercial and industrial space to the highest efficiency lighting by 2000.[5] The International Council for Local Environment Initiatives' "Urban C02 Project" has enlisted eleven municipal governments to develop specific strategies for reducing energy use and C02 emissions. Based in Toronto, Canada, ICLEI networks more than 200 municipal officials from 42 countries interested in addressing climate change.

Implementing policies on the state level will be an essential element in slowing the buildup of atmospheric greenhouse gases. Authority to regulate some of the most important activities affecting emissions--utility regulation, building codes and land use planning--is held primarily, or at least shared, by state and local governments. Also, as large users and taxers of energy, states maintain an unavoidable relationship to greenhouse policy decisions. Whatever federal program develops, it ultimately will require a complementary set of state actions.

States can begin to weigh their options now, despite persistent scientific uncertainty as to the timing and ultimate effects of climate change. The lessons learned from other environmental problems, most notably the ozone hole, teach us that scientists cannot always predict with certainty how the environment will respond. In fact, even the most dire predictions now are shown to have underestimated future ozone loss.[6] September 1991 data indicated Antarctic ozone at its thinnest level in the thirteen years since it had been monitored, and preliminary readings from winter 1992 show potential for greater depletion than ever has been calculated previously.[7] Incorporating considerations of climate into policies formulated today may limit the potential economic and social shocks that will result if climate disruptions unfold in a similar, nonlinear manner.

The complexity and uncertainty of climate change calls for planning, not justification for further postponement of ameliorative policies. The lifetimes of the gases in question are long, as is the time required to set policies in motion. Continued delay assures only that the consequences of atmospheric assault will linger for decades, if not centuries. Future generations surely will wonder why, although possessing the ability, we chose not to protect them from a warmer world.

WHY A STATE RESPONSE TO A GLOBAL PROBLEM?

States Exercise Jurisdiction Over Many of the Attributable Activities

Atmospheric accumulation of carbon dioxide, the most prevalent greenhouse gas, is attributable primarily to the combustion of fossil fuels. Fossil fuels, however, underpin almost all economic activity, including electricity generation and transportation. States will play a central role in developing policies on climate change because many of the options to control emissions fall within traditional spheres of state or local jurisdiction.

Consider electricity generation, which represents approximately 35 percent of total U.S. carbon dioxide emissions. Some of the most significant actions currently being taken to reduce emissions of greenhouse gases result from initiatives to capture the economic benefits of "least cost planning" for electric and gas utilities. Several states, including Maine, now formally require utilities to give preference to conservation and demand-side management before considering new power plant construction. Numerous other states have developed or are now developing least cost planning processes through regulatory proceedings.

Meaningful opportunities also lie in efficiency gained from strengthened building codes, the administration of which lies with states and localities. Buildings account for more than a third of national energy use, yet more than half of the U.S. housing stock is built in states whose energy codes do not even approach modern technical and economic standards.[8] A relatively small group of Mid-Atlantic and Midwestern states, including Pennsylvania, Maryland, Virginia, Ohio and the metro D.C. area account for nearly 35 percent of the total projected energy savings from Model Energy Code adoption. At least three states and several communities in California have tapped into the potential for energy conservation by requiring that conservation investments be made when a home is sold.[9] By setting effective yet acceptable limits on conservation expenditures, such ordinances can increase efficiency, reduce the burden of high energy bills, make homes more comfortable and free resources that would have been spent on electricity or natural gas bills.

Taken together, the two principal clauses of the Tenth Amendment bestow expansive residual authority to the states. Except for the few areas states are prohibited from entering, such as foreign affairs, the result of the Tenth Amendment is to create concurrent jurisdiction between the states and the federal government.

States are presumed to share jurisdiction with the federal government, unless Congress manifests its clear intent to occupy the field by including a preemption provision in legislation. Courts are reluctant to find state activity preempted by implication; the onus consistently has been placed on Congress to clearly manifest its intent to "occupy the field" or preempt all state law on a matter.

The regulation of commercial nuclear power--specifically a California law conditioning the construction of nuclear plants on demonstrated availability of adequate storage and disposal facilities--symbolizes a concurrent scheme of jurisdiction. In 1983, the Supreme Court declined to find the federal Atomic Energy Act preemptive of California's law, even though it agreed that Congress intended that the federal government regulate the safety aspects involved in construction and operation.

Instead, the Supreme Court found that California retained its traditional responsibility for regulating electrical utilities, and that Congress left sufficient authority for states to slow or even stop the development of nuclear power for economic reasons.

State Activity Holds Practical Value

State and municipal initiatives provide an ideal testing ground for environmental strategies. When no national policy is apparent, the variety offered by different approaches is a strength because it provides leadership. Small-scale experiments allow for a wider degree of innovation than do federal ones, and interim adjustments are easier. And this so-called "laboratory of the states" does not demand that one strategy emerge as clearly superior. In fact, a mix of strategies, suitable to different parts of the country having different climates, tastes, industrial bases, power sources and commuting patterns, often are preferable.[10]

Modest trials also facilitate evaluation, important if and when proposals subsequently are adopted by other jurisdictions or adapted for federal application. For example, California and Maine have initiated requirements for utilities to weigh investing in efficiency and conservation measures against building new power plants. These state and regional experiments have had significant impacts on the policy debate.[11]

Citizens are more likely to respond positively to statutes that address the particular needs of their community, as opposed to the broad or ambiguous guidelines, often perceived as insensitive, that usually emanate from national or international bodies. Local officials are positioned to give preference to their citizens, and are better able to appreciate the costs of achieving a goal in their locality, thereby requiring less sacrifice on the local level. Local processes enhance individual participation, and citizens are much more likely to identify with government decisionmaking that directly affects their locality. Consequently, local government often is more successful than federal government when it initiates and implements policy.

Environmental issues are but one of many problems requiring adequate funding, at a time when states, by default, are being asked to assume more of the financial burden of governing. Recession in the early 1990s only magnifies the impact of this era of new federalism; collectively, a majority of the states cut spending and increased taxes by more than $35 billion in the 1991 fiscal year, on top of more than $10 billion in additional budget reductions recently enacted by states to balance their 1990 books.[13] Considering these fiscal pressures, limiting or suspending programs may appear to be the best solution, particularly when investment in pollution control and environmental quality typically is discussed in policy debates as a drag on economic growth, a cost that limits the availability of capital for more productive purposes. Recent studies, however, present a more complex picture of the relationship between environmental policy and economic growth. Michael Porter, a professor at the Harvard Business School, concluded in a study of international economic policies that "strict environmental codes may actually foster competitiveness." This is because such regulations, when structured to encourage innovation, can result in better products at lower prices. "The 3M Company, for example, estimates that its Pollution Prevention Pays program has saved $482 million since 1975, while eliminating more than 500,000 tons of waste and pollutants, and has saved another $650 million by conserving energy." Those industries that have been subjected to the toughest environmental regulations, including chemicals and plastics, accordingly are among the most competitive in international markets. Those nations with the toughest environmental standards, including Germany and Japan, also have the highest rates of economic growth.[14]

States can seize this opportunity to rethink many structural and social maxims, particularly with respect to the costs normally associated with environmental protection. A case in point: a recent National Academy of Sciences study estimates that the U.S. could reduce its greenhouse gas emissions by up to 40 percent of 1990 levels at "very low cost."[15] Other research shows that most costs are expected to occur several decades hence, and only if opportunities for energy efficiency improvements are exhausted and no practical alternatives to fossil fuels are developed.[16] Prominent in the list of low cost options are subjects appropriate for state and local treatment: transport, efficiency investment in new buildings, electric utility supply decisions and forestry.[17]

Another opportunity for states in this process is to reverse historical attitudes about the value of environmental resources. States already rely extensively on taxing gasoline, electricity and other forms of energy. But currently, such taxes do not reflect the differences in environmental impact, and thus fail to communicate the true costs of energy. Incorporating the environmental costs of products and services into prices will require the use, replacement or augmentation of direct regulation with innovative fiscal tools--including taxes, fees or other disincentives--in order to promote environmentally beneficial results such as the sale of energy efficient equipment.[18]

While state and local governments must be sensitive to potential costs associated with legislative programs, policies to reduce greenhouse gas emissions can be designed to achieve revenue neutrality. Many of the programs described in this report have the potential for reducing costs and raising revenue, the best example being the energy savings found in life cycle costing initiatives and shared savings contracts. Notable too are retrofit programs like the U.S. Environmental Protection Agency's Green Lights Program; participants voluntary agree to survey existing lighting facilities and install energy efficient equipment only where it is profitable and does not compromise lighting quality. In Maryland, participation in Green Lights is predicted to cut the state's lighting bill by 25 percent, for a savings of $10.5 million per year.[19] For the nations schools, which collectively faced a $7.4 billion energy bill in 1990, energy management programs potentially could reduce costs by 25 percent.[20]

The logic of improving energy efficiency is compelling. Energy efficiency investments result in fewer dollars being exported out of the local economy for interstate or international energy supplies, releasing capital for investment elsewhere. Particularly in the building and utility sectors, states will realize immense opportunity costs as stocks of buildings and electric generating plants are replaced. Solar and renewable investments typically provide several times as many jobs per dollar as do more capital intensive fossil investments.[21] The state of Washington, for instance, estimates that C02 savings realized from tightening residential energy codes will reach 3.3 million tons annually--an environmental bonus from energy efficiency worth approximately $16.5 million, at $5.00/ton, by 2005.[22]

The potential impact of global warming regulations is noteworthy in that most industrialized countries, but not the U.S., have indicated a willingness to limit their emissions of C02. Because C02 controls may require adjustments in both energy sources and in the efficiency with which energy is used throughout the economy, the impact on competitiveness may be greater than perhaps any previous environmental regulations if policies to reduce emissions are adopted widely. Thus, policy responses to global warming will be measured in part by the overall efficiency of production rather than more traditional environmental issues, which have been viewed much more in terms of additional investment in end-of-process controls. As one energy expert observed, the potential consequences for competitiveness cannot be safely ignored.[23] And as one Japanese utility executive recently responded when asked to justify that country's global climate program: "We can't take a chance that we won't remain competitive."[24]

INITIATIVES DIRECTED SPECIFICALLY AT CLIMATE CHANGE

A few states have demonstrated leadership on the issues of climate change and have enacted legislation explicitly motivated by concerns over climate.

California: AB 4420[25]

In 1988, the California legislature called for an interagency study on how climate trends might affect the state's energy supply and demand, economy, environment, agriculture and water supplies. In addition to studying potential effects, the legislation called for the California Energy Commission, the lead agency, to develop policy recommendations for avoiding, reducing and addressing these impacts. To meet the mandate, the Commission produced a series of staff reports and organized a symposium. A final report, "Global Climate Change: Potential Impacts and Policy Recommendations," was delivered to the Governor and the Legislature in October 1991. As part of the process to develop policy recommendations, the CEC in February 1992 conducted its first public hearings on whether the state should establish a C02 reduction goal. Commission staff will continue to assess the impact of a target on emissions and existing programs, and is expected to make official recommendations to the governor in late 1992.

Connecticut: HB 5696 "An Act Concerning Global Warming"[26]

Opting for a comprehensive approach, 1990 Connecticut legislation imposes standards for automobile fuel economy and addresses energy efficiency in building codes as well as in public utility decisions. The Act sets energy performance standards for existing and new state buildings, intended to reduce energy use by 15 percent by 1995, 30 percent by 2000 and 50 percent by 2010; prohibits utility service hook-up to buildings not evaluated against the proposed standards; and authorizes higher utility rates for buildings that fail to comply. Follow-up 1991 legislation includes a request to the Office of Policy and Management to report annually beginning in 1993 on net state C02 emissions.[27]

Iowa: SF 2403 - "An Act Relating to Energy Efficiency"[28]

While not titled to reflect concern over climate change, Iowa's 1990 legislation nonetheless is aimed at using energy resources more efficiently, particularly those that have negative environmental impacts. A multitude of efficiency measures are included: state agencies are required to identify energy costs in their budgets and to adopt life cycle costing for new building contracts; a new building efficiency rating system is being developed; and new state vehicle purchases must meet minimum fuel economy ratings. Regulated utilities are under new requirements to develop and implement a comprehensive efficiency management plan, and the legislation specifies the percentage of gross operating revenue each type of utility must expend on such programs. Energy planning also will be enhanced by requiring biennial updates to the state's energy plan and development of a central repository for energy data. And assessments on gross operating revenues of investor-owned utilities will finance two university based research centers.

Missouri: HCR 12[29]

In Missouri, 1989 legislation established a Commission on Global Climate Change and Ozone Depletion and charged it with assessing the state's contribution to greenhouse emissions, the impact of projected growth on emissions, and alternatives to reduce these emissions. The Commission's Report, delivered to the Governor and legislature in September 1991, contained recommendations in nine sectors including options for increasing public awareness.[30] In characterizing its findings, the Commission noted Missouri's substantial contribution to the problem--when ranked with 191 nations, Missouri ranks 47th--as well as the state's potential for economic benefits if properly positioned to provide advanced technologies, equipment and personnel to other states seeking to meet the challenges of climate change.

Minnesota

In 1990, the Minnesota legislature commissioned a study to evaluate the feasibility of using trees to reduce net emissions of carbon dioxide.[31] The report, delivered in January 1991 by the Department of Natural Resources and the Pollution Control Agency, identifies and quantifies the major sources of carbon dioxide and provides an estimate of the major storage pools of organic carbon in Minnesota.[32] It further explores the economics, strategy and feasibility of using trees to reduce energy demand as well as to sequester carbon. Among the study's findings: sequestration of carbon could be an important component of an emissions reduction program, and tree planting for energy conservation typically is a good investment. The report to the legislature also recommends an annual $13.5 million fund for tree planting sufficient to offset the state's C02 emissions. Funding would be derived from a tax on the primary fuel use sectors--electric utilities and transportation. Pursuant to this recommendation, the Minnesota legislature requested an implementation plan from the Minnesota Pollution Control Agency including recommendations on a fee structure for carbon emissions.[33]

New Jersey: Executive Order 219

Signed in October 1989, the Order directs state agencies to ensure all procurement, policies and actions that directly or indirectly relate to the production or consumption of energy provide maximum incentives to conserve energy and increase reliance on non greenhouse gas emitting sources. One-for-one tree replacement due to state construction is mandated and state agencies with responsibility for open space are directed to further the creation of corridors which aid the adaptation of natural systems to the possible effects of climate change. Also authorized are studies on the potential impact of sea level rise.

Vermont: Executive Order 79

The October 1989 executive order establishes a specific schedule for reducing greenhouse gas emissions, per capita nonrenewable energy use in the state, and overall energy use in state buildings. A Task Force on Energy to oversee the implementation of emission reduction strategies was established, with specific responsibility for developing programs on life cycle costing, assigning explicit costs to nonrenewable energy use and reducing vehicle fuel consumption.

COOL TOOLS

The ideas presented in this report represent a fraction of the innovative environmental and energy policy developments taking place across the country. While many of them are still in preliminary stages and a few have yet to be implemented, they offer considerable hope for demonstrating the practicality and benefits of strategies to reduce greenhouse gas emissions. While some experts and national officials warn that such reductions may be prohibitively expensive and disruptive of society, the policies contained in COOL TOOLS illustrate the potential for a wide range of steps that are consistent with other economic and environmental goals. Every state has an interest in improving its energy efficiency and promoting new technology. State acceptance of these ideas may lay the groundwork for overcoming what only seems like gridlock on achieving national policies on energy and climate change.

We have reviewed a range of policies responsive to different sources of greenhouse gases. Because no one approach is likely to be appropriate for every state, it is difficult to conceive of a comprehensive model state law on greenhouse gas emissions. There is, though, room for considerable variation and adaptation in each proposal. For example, as a first step toward tying vehicle registration fees to fuel economy ratings, a state could restructure its sales tax on vehicles to create several tiers based on ranges of fuel efficiency.

The following pages summarize or describe policy initiatives--enacted, defeated and considered--arranged by areas of activity relevant to emissions abatement. The proposals in COOL TOOLS are intended to indicate the range of innovation offered on the state and local levels, rather than simply the most recent or successful.

COOL TOOLS is structured so that readers can access topics of particular interest easily. Each section describes the issue, particularly its relevance to state policymaking, and outlines how state and local governments are currently treating the issues. Examples of policies--enacted, introduced and proposed--are then described. Full legislative text of relevant items is appended to each section.

THE CENTER FOR GLOBAL CHANGE'S STATE AND LOCAL LEGISLATIVE PROJECT

In May 1990, the Center for Global Change initiated a project to collect and analyze state and local legislative bills, laws and policy proposals having either direct or incidental effects on greenhouse gas emissions. Legislators, regulators, policymakers, advocacy groups and trade organizations can expect the inventory to offer a single source of available initiatives related to global climate change. The Center's legislative project is an attempt to capitalize on the unique position of state and local governments to affect individual behaviors, an essential component of a global emission reduction scheme. Because the actions required to moderate global change very often have local benefits, we expect users to find the database a repository of initiatives having specific economic and/or environmental benefits valued by citizens.

The Center has developed software which supports a computerized collection of materials, including the full text of all legislative items. The organizing concept of the Center's database calls for coding items according to two variables: the type of proposal and type of jurisdiction. By combining these variables, users are able to search for subsets matching their interests. For instance, a search could request all items on a particular topic (i.e. lighting efficiency standards), all items on that topic enacted by a particular type of jurisdiction (lighting efficiency standards passed by states), or the items on that topic from a particular jurisdiction (lighting efficiency standards passed in California, or by all counties in California, or by Berkeley, California).

1. STATE ENERGY OFFICES

1.1 DESCRIPTION OF THE ISSUE

1.1.1 Introduction

Greenhouse gas emissions, particularly C02 resulting from fossil fuel combustion, involve a myriad of activities that are affected by interrelated, yet disconnected state regulatory and institutional decisions. One example is the connection between land use and transportation: zoning, development and construction regulations have significant impact on the level of private auto use, but no single agency coordinates policy between these sectors. State agency structure, typically characterized by autonomous agencies having specific mandates and authority, therefore, inhibits development and implementation of crosscutting reduction strategies.

Two elements critical to an effective multisectoral approach are consolidation of authority over energy and environmental issues, and the ability to affect the energy planning process. Consolidation of authority in an environment or energy office positions a state to deal effectively with multiple energy, environmental and economic challenges. Such an arrangement provides states with a comprehensive perspective for determining cost effective policies to reduce energy use and control emissions. Consolidation also permits a thorough planning exercise, in which states can ensure the involvement of all relevant state agencies and consider the impact of its policies on energy users, energy providers and the state's economic as well as environmental well-being. Incorporating energy offices into the state regulatory apparatus ensures that the energy evaluation process will be comprehensive, as is involving the office in energy facility siting decisions. Over ten states now have involved their energy offices in facility siting.

Ultimately, it is the scope of responsibility and authority delegated to a state energy office that will govern its success. An essential first step in creating a comprehensive scheme is to entitle energy offices with broad powers to request and synthesize information.[34] Because of the large distributional implications of climate change, individual states may have much more at stake than the country as a whole. Current models can suggest only future global averages--none can predict precise regional effects. One of the most important state roles, therefore, is the development of processes to study individualized risks and to identify strategies for adaptation. Relevant actions include: impact studies, inclusion of global warming in state requirements for environmental impact statements and tighter coastal regulations. While any of these functions could be performed by an individual division, authority to collect and direction to synthesize this information is placed appropriately with an energy or environmental agency.

Of incidental concern is the placement of a state's energy office relative to other units of state government. Since energy is not a primary mission of many state agencies, elevating energy to a level of priority signifies a state's desire to have other departments take the issue seriously. Independent agencies or cabinet level positions indicate the importance of energy in state planning.

State energy offices with sufficient authority also can assist in the development and implementation of policies, for instance life cycle costing, to reduce energy use by other state agencies. Comprehensive energy planning creates an ability to look at overall state energy use, specifically state facilities. And the integration and synthesis of this information with private data collected is consistent with an overall state energy policy. For additional details on life cycle costing for state facilities see Section 2 of this report on State Procurement.

State energy offices also serve as ideal overseers of state efficiency incentives programs. A longstanding deficiency in efficiency-based procurement policies has been the lack of incentives for agency personnel for whom energy efficiency is not a central mission. Given the large potential for savings--and current funding difficulties--one incentive would be to allow the agencies that conserve energy to keep a portion of the money that otherwise would have been spent.[Ê35]

1.1.2 Level of Interest or Activity

Few policymakers have focused on the need for institutional reform on a state level in order to address global climate change. Most suggestions respond to a lack of authority in a given sector, rather than a need for comprehensive energy oversight authority. For instance, a 1990 National Governor's Association report, which made seven specific recommendations both to states and the federal government, made no mention of how states could enable their energy offices to implement policies successfully.[36]

Legislation from states that have revamped the structure of energy decisions typically notes the advantages of interagency coordination, data collection or comprehensive planning, but no state has published a follow-up report analyzing the results of a reorganization.

1.1.3 Jurisdictional Issues

There are no jurisdictional issues involved in the authorization of state energy offices, agencies or departments. A state may create administrative agencies as desired, and is free to confer any of its powers upon such agencies.

1.2 ADOPTED LAWS, ORDINANCES AND REGULATIONS

1.2.1 Comprehensive Powers/Affecting the Energy Planning Process

The California Energy Commission (CEC) provides the best illustration of an agency vested with a broad range of powers over energy and the environment. Since 1974, the CEC has been charged with conducting a "continuing assessment of trends in the consumption of electrical energy" and with analyzing "the social, economic, and environmental consequences of these trends." The assessment, which includes recommendations for legislative, administrative and regulatory actions, constitutes California's Energy Plan, a biennially updated report that forms the basis for action by the state. The state's most recent Plan makes recommendations for electric utility supply and conservation programs, building and appliance standards, efficiency measures for state facilities, development and demonstration of alternative vehicle and fuel technologies, and integrated land use and transportation planning.[37]

In 1988, New York established a state energy planning process to be undertaken by the State Energy Office, with cooperation from the Departments of Public Service and Environmental Conservation.[38] Updated biennially, the plan is intended to provide a current assessment of the state's energy future, evaluate the impacts of various options for meeting future needs, and identify policies to guide state energy decisionmaking. Independent bodies and public authorities are expected to defer to the findings of the plan. The New York scheme is unique in that it includes authority for the State Energy Office to inventory state emissions of greenhouse gases. This critical baseline data will make possible policy responses by New York that neither other states nor the federal government currently are prepared to make. Continued, adequate reporting also will permit complete evaluation of reduction options.

Recent legislation in Iowa bolstered the state's energy planning process, requiring the Department of Natural Resources to include in its biennial update an evaluation of all state energy programs.[39] The evaluation is to include an analysis of expected versus actual benefits from the programs, as well as forecasts of future energy demand.

A few other states have recognized the need for explicit comprehensive powers, although with mixed practical results. Arkansas' Energy Reorganization and Policy Act specifically notes, "only an agency with comprehensive duties and powers can collect, analyze, and disseminate information necessary to promote a reliable and efficient energy delivery system for the state."[40] Although Arkansas has conducted no planning or research specifically directed at climate change, siting its energy office in the Industrial Development Commission does indicate a recognition of the inextricable link between the environment and economics. In 1987, Michigan oversaw an organizational merger of its Energy Administration and Public Service Commission, with specific intent to strengthen energy planning.

1.2.2 Data Collection and Analysis

California's comprehensive energy planning process recognizes the need for extensive data gathering power. To that end, powers of the CEC include the ability to "collect from utilities, fuel producers and wholesalers, and other sources forecasts of future supplies and consumption of all forms of energy, including electricity, and of future energy or fuel production and transporting facilities to be constructed." Most importantly, the CEC is authorized to "independently analyze such forecasts in relation to statewide estimates of population, economic, and other growth factors and in terms of the availability of energy resources and costs to consumers."

Oregon has established its Department of Energy as a central repository for the collection of data on energy resources in the state. In creating the Department and outlining its duties, the legislature dictated that it be "a clearinghouse for energy research to which all agencies shall send information on all energy related research."[41]

At least six states--California, Florida, Iowa, New York North Carolina and Wisconsin--have established research programs to study and promote opportunities in energy efficiency. North Carolina is home to both the Alternative Energy Corporation, which identifies and implements efficiency measures; and the Energy Development Authority, a one stop energy shop to help governments in the state cut energy costs and use. The Florida Solar Energy Center, administered by the University of Central Florida, conducts research on solar technologies and energy reduction technologies.

Iowa legislation in 1990 imposed a gross operating revenue assessment on utilities to finance two new university-based research centers--Iowa State's Energy Center and University of Iowa's Global Warming Center.[42] The Center at Iowa State will target energy efficiency; the Global Warming Center will analyze state contribution to greenhouse gas emissions and develop policy recommendations for emissions reduction.

1.3 DISCUSSION

The cross-cutting issues implicated in the demands of emissions reductions may require changes to established structures. While no one arrangement is ideal for all states, certain elements can constitute a baseline: consolidation of authority to permit effective integration of energy, environment and economics; input into the energy planning process; and responsibility to collect and analyze information from a variety of relevant actors.

ARKANSAS CODE

TITLE 15 NATURAL RESOURCES AND ECONOMIC DEVELOPMENT

SUBTITLE 1 DEVELOPMENT OF ECONOMIC AND NATURAL RESOURCES

CHAPTER 10 ENERGY CONSERVATION AND DEVELOPMENT

SUBCHAPTER 2 ARKANSAS ENERGY REORGANIZATION AND POLICY ACT

@ 15-10-202. Declaration of policy.

The General Assembly finds and declares that:

(1) The adequacy of future energy supplies will be crucial to the state's economic development;

(2) In order to create a favorable environment for economic development and in order to preserve and enhance our present quality of life, Arkansas must promote the efficient use of energy and the development of a reliable and economic energy delivery system which includes the use of renewable energy resources as well as conventional sources of energy such as coal, lignite, uranium, oil, and natural gas;

(3) The need exists for comprehensive state leadership[43] to insure the wise and efficient production, distribution, use, and conservation of energy;

(4) Only an agency with comprehensive duties and powers can collect, analyze, and disseminate information necessary to promote a reliable and efficient energy delivery system for the state;

(5) It is in the best interest of the citizens of this state to establish a division within the Arkansas Industrial Development Commission to coordinate the planning and execution of comprehensive energy conservation programs;

(6) The development and use of a diverse array of energy resources must be encouraged.

CALIFORNIA PUBLIC RESOURCES CODE

DIVISION 15. Energy Conservation and Development

CHAPTER 3. State Energy Resources Conservation and Development Commission

@ 25216. Duties; Assessment of electrical energy consumption; Forecasts of supplies and consumption; Development of alternative sources of energy.

In addition to other duties specified in this division, the commission shall do all of the following:

(a) Undertake a continuing assessment of trends in the consumption of electrical energy and other forms of energy and analyze the social, economic, and environmental consequences of these trends; carry out directly, or cause to be carried out, energy conservation measures specified in Chapter 5 (commencing with Section 25400) of this division; and recommend to the Governor and the Legislature new and expanded energy conservation measures as required to meet the objectives of this division.

(b) Collect from electric utilities, gas utilities, and fuel producers and wholesalers and other sources forecasts of future supplies and consumption of all forms of energy, including electricity, and of future energy or fuel production and transporting facilities to be constructed; independently analyze such forecasts in relation to statewide estimates of population, economic, and other growth factors and in terms of the availability of energy resources, costs to consumers, and other factors; and formally specify statewide and service area electrical energy demands to be utilized as a basis for planning the siting and design of electric power generating and related facilities.

(c) Carry out, or cause to be carried out, under contract or other arrangements, research and development into alternative sources of energy, improvements in energy generation transmission, and siting, fuel substitution, and other topics related to energy supply, demand, public safety, ecology, and conservation which are of particular statewide importance.

OREGON REVISED STATUTES

TITLE 36. PUBLIC HEALTH AND SAFETY

CHAPTER 469. ENERGY CONSERVATION

DEPARTMENT OF ENERGY

469.030. Department of Energy; creation; duties.

(1) There is created the Department of Energy.

(2) The department shall:

(a) Be the central repository within the state government for the collection of data on energy resources;

(b) Endeavor to utilize all public and private sources to inform and educate the public about energy problems and ways in which the public can conserve energy resources;

(c) Engage in research, but whenever possible, contract with appropriate public or private agencies and dispense funds for research projects and other services related to energy resources, except that the department shall endeavor to avoid duplication of research whether completed or in progress;

(d) Qualify for, accept and disburse or utilize any private or federal moneys or services available for the administration of ORS 176.820, 192.501 to 192.505, 192.690, 469.010 to 469.225, 469.300 to 469.580, 469.990, 757.710 and 757.720;

(e) Administer federal and state energy allocation and conservation programs and energy research and development programs and apply for and receive available funds therefore;

(f) Be a clearinghouse for energy research to which all agencies shall send information on all energy related research;

(g) Prepare contingent energy programs to include all forms of energy not otherwise provided pursuant to ORS 757.710 and 757.720;

(h) Maintain an inventory of energy research projects in Oregon and the results thereof;

(i) Collect, compile and analyze energy statistics, data and information;

(i) Contract with public and private agencies for energy activities consistent with ORS 469.010 and this section; and

(k) Upon request of the governing body of any affected jurisdiction, coordinate a public review of a proposed transmission line according to the provisions of ORS 469.445.

MICHIGAN COMPILED LAWS

CHAPTER 460. PUBLIC UTILITIES

EXECUTIVE REORGANIZATION ORDER

460.901. Energy administration transferred from department of commerce to public service commission.

WHEREAS, Article V, Section 2, of the Michigan Constitution of 1963 empowers the Governor to make changes in the organization of the Executive Branch or assignment of functions among its units which he considers necessary for efficient administration; and

WHEREAS, efficient use and adequate supplies of competitively priced energy are vital to the maintenance and growth of Michigan's economy, and

WHEREAS, the state's ability to coordinate strategic energy planning, policy and program development and evaluation must be strengthened to assure that sufficient energy resources are available to Michigan's citizens and businesses at competitive prices; and

WHEREAS, the current functions and responsibilities of the Energy Administration include coordination of non-regulatory state governmental actions relating to energy problems and planning; gathering and analysis of information on energy issues, including Michigan's policy and planning alternatives; development and implementation of statewide energy conservation programs, including the collection of reports from local units of government and school districts; provision of public information on the state's energy situation and energy conservation programs; liaison for the state with the federal government, other states, and local units of government on energy matters; and provision of assistance to the Executive Office with energy policy and planning matters, as well as with the preparation of energy conservation plans; and

WHEREAS, the current functions and responsibilities of the Public Service Commission include broad supervision and regulation of all rates, services, rules, conditions of service, and other matters relating to the operations of public utilities providing services in Michigan; and

WHEREAS, the organizational merger of the Energy Administration and the Public Service Commission will significantly strengthen the regulatory and non-regulatory energy planning, policy and program capabilities of the State of Michigan and improve the administrative coordination and efficiency with which the state's energy-related programs are conducted;

NOW, THEREFORE, I, JAMES J. BLANCHARD, Governor of the State of Michigan, pursuant to the authority vested in me by the provisions of Article V, Section 2, of the Constitution of the State of Michigan of 1963, do hereby order that:

1. All functions and responsibilities of the Energy Administration, Department of Commerce...are hereby transferred to the Michigan Public Service Commission...

...3. The Public Service Commission shall make the internal organizational changes necessary to implement a strengthened regulatory and non-regulatory strategic energy planning, policy and program development and evaluation capability, and to improve the administrative efficiency and coordination of the state's energy-related program activities...

...5. All state agencies shall cooperate with the Michigan Public Service Commission in the performance of its functions and responsibilities described herein.

MINNESOTA STATUTES

PART I DEPARTMENTS, AGENCIES

CHAPTER 216C DEPARTMENT OF PUBLIC SERVICE; ENERGY DIVISION

216C.09 Duties

The commissioner shall:

(a) manage the department as the central repository within the state government for the collection of data on energy;

...(c) undertake a continuing assessment of trends in the consumption of all forms of energy and analyze the social, economic, and environmental consequences of these trends;

...(e) collect and analyze data relating to present and future demands and resources for all sources of energy,

...(g) study the impact and relationship of the state energy policies to international, national, and regional energy policies;

(h) design and implement a state program for the conservation of energy; this program shall include but not be limited to, general commercial, industrial, and residential, and transportation areas; such program shall also provide for the evaluation of energy systems as they relate to lighting, heating, refrigeration, air conditioning, building design and operation, and appliance manufacturing and operation;

(i) inform and educate the public about the sources and uses of energy and the ways in which persons can conserve energy,

(j) dispense funds made available for the purpose of research studies and projects of professional and civic orientation, which are related to either energy conservation, resource recovery, or the development of alternative energy technologies which conserve nonrenewable energy resources while creating minimum environmental impact;

(k) charge other governmental departments and agencies involved in energy related activities with specific information gathering goals and require that those goals be met;

(I) design a comprehensive program for the development of indigenous energy resources. The program shall include, but not be limited to, providing technical, informational, educational and financial services and materials to persons, businesses, municipalities, and organizations involved in the development of solar, wind, hydropower, peat, fiber fuels, biomass, and other alternative energy resources. The program shall be evaluated by the alternative energy technical activity,...

2. STATE PROCUREMENT

2.1 DESCRIPTION OF THE ISSUE

2.1.1 Introduction

State and local government facilities are major energy consumers, spending almost $20 billion annually to light, heat and cool owned and leased commercial building space.[44] Improving government energy use, therefore, promises huge savings. While few cost studies have been conducted on the state level, a 1991 report from Congress' Office of Technology Assessment estimates that commercially available, cost effective measures likely could conserve at least 25 percent of the energy used in federal buildings.[45] The Alliance to Save Energy predicts that federal taxpayers could save $864 million a year if federal agencies installed the wide range of cost effective energy products now available, without sacrificing either comfort or productivity.[46]

Traditionally, states have strived to acquire facilities economically, requiring, for example, competitive bids for construction. A more comprehensive view of "least cost" procurement additionally requires consideration of both energy usage patterns and design decisions before construction or renovation. Life cycle costing is a concept which calls for the design and construction of a building to minimize the costs of occupancy, including the net present value of money spent over the lifetime of the building for operations, maintenance, and energy.[47]

Two concepts related to but different from life cycle costing are shared savings programs and performance standards. Under a shared energy savings contract, state or local governments contract with a private energy service business which agrees to finance and install cost effective cogeneration systems or efficiency measures. A portion of the savings realized from reduced energy costs repay the business for its investment. Performance standards, most notably building codes, are another approach to life cycle cost minimization. However, building codes, as consensus documents, do not capture all cost effective capital investments for buildings and equipment. Because life cycle cost analysis is designed to capture these savings, many policy analysts believe that life cycle costing can serve to change construction practices; in time codes may catch up.

Some states stress the role of the energy audit in identifying retrofit opportunities for reducing energy consumption.[48] This approach is largely complementary to the life cycle costing approach. Life cycle costing is most appropriate for new construction and major renovations, while energy audits identify incremental opportunities for better energy management and improvements (e.g., new lighting, boiler upgrades) in existing buildings.

2.1.2 Level of interest/activity

Most initiatives generally require that life cycle cost analysis be undertaken for all new construction, significant additions, and major renovation. The analysis may be required of the architect doing the design work, or of state employees reviewing the proposed capital project.

The legislative initiatives of at least four states--Arizona, Colorado, Connecticut and Maryland--require that procurement achieve or come close to achieving the lowest feasible life cycle cost. Two others, Rhode Island and Washington, provide strong encouragement to procure buildings with minimum life cycle costs, but do not require it.

2.3 ADOPTED LAWS, ORDINANCES AND REGULATIONS

2.3.1 The basic law: Colorado Revised Statutes 24-30-1304; 24-30-1305

Sections 1304 and 1305 of the Colorado Revised Statutes present the legislative findings and prescription for life cycle findings for state facilities. The text is an example of clear expression of legislative intent and the legislative findings also are instructive: that state facilities use significant amounts of energy; that conservation practices will help the State; that the cost of the energy consumed by these facilities over the life of the facilities must be considered, in addition to the initial cost of constructing such facilities; and that this includes initial construction and the costs of operations and maintenance, including energy.

Based on these findings, Colorado's General Assembly moved to promote energy conservation by requiring that all state agencies "analyze the life-cycle cost of each facility constructed, or each major facility constructed or renovated, over its economic life, in addition to the initial construction or renovation cost."

Section 1305 applies these principles by requiring life cycle costing and the use of design and construction methods for state-owned and state-assisted facilities that further the minimum life cycle cost goals of 1304. The prescriptive requirements are quite detailed, with relatively few exemptions. For example, the legislation requires inclusion of specific elements (e.g., orientation on site, fenestration, envelope performance, design occupancy conditions, illumination, and a comprehensive energy consumption analysis).

Exceptions are made for historic buildings and facilities owned or operated by county and local governments, and exceptions can be made under specified conditions in other cases. No evaluations of the law's effects on state procurement or on affected (commercial) construction practices have been conducted. Similar laws have been enacted in Iowa, Maine, North Carolina, Oregon, Rhode Island, and Washington.

2.3.2 The Solar Extension: Florida Statutes, Chapter 255 @.254

Section 254 of this statute includes three requirements that go beyond the Colorado legislation described above. First, in addition to conducting a life cycle analysis, both the capitalization (construction cost) and life cycle costs must be disclosed. Disclosure comports with the intent to make life cycle costs a "primary consideration in the selection of a building design." Second, the Florida law requires use of solar systems when they are the minimum life cycle solution. Lastly, Florida specifically requires life cycle costing of major retrofits to state facilities, which seems to be implicit in most other legislation.

The obvious intent of this legislation is to apply pressure on procurement officials to ensure that proper analyses are carried out, and to stimulate the use of solar energy wherever feasible. The Legislature may have intended the latter both to stimulate the market for solar products and to establish an experience base among architects and contractors of attractive solar projects, thereby stimulating the much larger commercial market.

2.3.3 Pressure on Professionals: Massachusetts General Laws Title XXI, Chapter 149

Section 44M of this Massachusetts legislation requires the professional community of architects and engineers to carry out life cycle cost analysis as part of the preliminary design phase for all state projects, and sets penalties for noncompliance. It also establishes reporting requirements and calls on the state's Offices of Consumer Affairs or Business Regulation to develop training methods for professionals who request assistance in carrying out their responsibilities under the statute.

Requirements placed on design professionals are an appropriate complement to requirements that state agencies prepare a life cycle cost analysis. No evaluation currently exists of the costs to the state of the additional design services, or a comparison of those costs with any savings that might have resulted from building with life cycle cost analysis, instead of building to minimum building code requirements.

2.4 OTHER IDEAS OFFERED IN THE POLICY ARENA

As noted above, shared savings and performance standards attempt to achieve similar goals of improving energy efficiency in state and local government buildings. Shared savings offer the opportunity to "expense" capital investments by allowing a private organization such as an energy service company or utility to invest in energy efficiency and be paid a share of the energy savings over a fixed number of years. In certain instances, counties and local governments may need explicit state authority to enter into multi-year lease-purchase agreements that involve guaranteed energy savings.[49] Where appropriate operations and maintenance arrangements can be made, opportunities for real savings exist. A 1991 pact between Union County, NJ and Honeywell's Commercial Buildings Group requires no up front expenditures by the County and guarantees the County $500,000 annual energy savings. After ten years, Union County will own the installed equipment.[50]

Performance standards, of which building codes are the most common example, strive to raise the performance of all buildings, not just state facilities. It has been found that codes lag behind fully cost effective construction technologies.[51]

2.5 DISCUSSION

The benefit of life cycle cost analysis is that it disciplines the design process, reminding the design team that recurring costs for energy and maintenance matter. The adoption of life cycle cost analysis requirements by about 25 states suggests that the benefits of this procurement requirement are high and that the costs are moderate. One cost is for the preparation (and adoption, where required) of an analytic framework for analysis that will be acceptable for state purposes. Costs, of course, will depend on the sophistication of the approach adopted. Another factor is the compliance cost: time taken by architects and/or engineers to perform the analysis, and for state personnel to review it.[52]

Life cycle cost methods are important because building codes and conventional construction practices do not capture all cost-effective efficiency measures, even at todays energy costs. Life cycle cost analysts must choose an appropriate interest rate to judge investments in efficiency, and must make assumptions about the future cost of energy. They also must assume a lifetime for the measures being evaluated. Low interest rates, predicted fuel cost escalation rates, greater than expected inflation rates, and realistic building and component life expectancies all increase efficiency investments and decrease fuel consumption.

A smaller number of states have attempted to require that building designs actually achieve a minimum life cycle cost. Though a worthy goal, it is likely to lead to objections from professionals who believe that other values, often site specific, should be permitted to override the last increment of energy cost minimization, or that design responsibilities should have precedence over engineering projections. Unless care is taken to include protective language in mandatory procurement bills, air quality, lighting quality, or other values will be sacrificed. Oregon is one state that explicitly has attempted to address these issues, requiring that indoor air quality issues be addressed together with energy costs.[53]

The economic value of life cycle cost analysis and construction requirements is compelling: as a state lowers energy costs, resources are made available for other activities, both private and public, which tends to increase the state's competitiveness. As yet unquantifiable advantages--such as the potential benefits on commercial construction--need not be discounted either. By showing that better performance is feasible, and by constructing buildings that demonstrate cost effective technologies and methods, state action may lead to greater efficiency being attained voluntarily in private projects. Utilities in states which reduce energy costs also can benefit, because considerable consumption reductions could offset power purchases on the wholesale market or the construction of expensive new capacity.

COLORADO REVISED STATUTES

TITLE 24. GOVERNMENT

ARTICLE 30. DEPARTMENT OF ADMINISTRATION

PART 13. STATE BUILDINGS

24-30-1304. Life-cycle cost--legislative findings and declaration

(1) The general assembly hereby finds:

(a) That state-owned and state-assisted facilities have a significant impact on the state's consumption of energy;

(b) That energy conservation practices adopted for the design, construction, and utilization of these facilities will have a beneficial effect on the state's overall supply;

(c) That the cost of the energy consumed by these facilities over the life of the facilities must be considered, in addition to the initial cost of constructing such facilities;[54] and

(d) That the cost of energy is significant, and facility designs must take into consideration the total life-cycle cost, including the initial construction cost, the cost, over the economic life of the facility, of the energy consumed, replacement costs, and the cost of operation and maintenance of the facility, including energy consumption.

(2) The general assembly declares that it is the policy of this state to insure that energy conservation practices are employed in the design of state-owned and state-assisted facilities. To this end the general assembly requires all state agencies to analyze the life-cycle cost of each facility constructed, or each major facility constructed or renovated, over its economic life, in addition to the initial construction or renovation cost.

24-30-1305. Life-cycle cost--application

(1) The general assembly authorizes and directs that state agencies shall employ design and construction methods for state facilities and design and construction methods for state-assisted facilities under their jurisdiction, in such a manner as to further the policy declared in section 24-30-1304, insuring that life-cycle cost analyses and energy conservation practices are employed in new state-owned and state-assisted facilities and in new or renovated major state-owned and state-assisted facilities.

(2) The life-cycle cost analysis shall include but not be limited to such elements as:

(a) The coordination, orientation, and positioning of the facility on its physical site;

(b) The amount and type of fenestration employed in the facility; (c) Thermal performance and efficiency characteristics of materials incorporated into the facility design;

(d) The variable occupancy and operating conditions of the facility, including illumination levels;

(e) Architectural features which affect energy consumption; and (f) An energy consumption analysis of a major facility's heating, ventilating, and air conditioning system, lighting system, and all other energy-consuming systems. The energy consumption analysis of the operation of energy-consuming systems in the major facility should include but not be limited to:

(1) The comparison of two or more system alternatives;

(2) The simulation or engineering evaluation of each system over the entire range of operation of the major facility for a year's operating period; and

(3) The engineering evaluation of the energy consumption of component equipment in each system considering the operation of such components at other than full or rated outputs.

(3) The life-cycle cost analysis performed for each major facility shall provide but not be limited to the following information:

(a) The initial estimated cost of each energy-consuming system being compared and evaluated;

(b) The estimated annual operating cost of all utility requirements, including consideration of possible escalating costs of energy;

(c) The estimated annual cost of maintaining each energy-consuming system; and

d) The average estimated replacement cost for each system expressed in annual terms for the economic life of the facility.

(4) The life-cycle cost analysis shall be certified by a licensed architect or registered professional engineer, or by both architect and engineer, particularly qualified by training and experience for the type of work involved.

(5) In order to protect the integrity of historic buildings, no provision of section 24-30-1304 or this section shall be interpreted to require such analysis with respect to any property eligible for, nominated to, or entered in the national register of historic places, designated by statute, or included in an established list of places compiled by the state historical society.

(6) Selection of the optimum system or combination of systems to be incorporated into the design of state facilities and state-assisted facilities shall be based on the life-cycle cost analysis over the economic life of the facility, unless a request for an alternative system is made and approved by the department prior to beginning construction.

(7) The principal representatives of all state agencies shall be responsible for implementing the provisions of this section and the policy established in section 24-30-1304.

(8) The provisions of section 24-30-1304 and this section shall not apply to municipalities or counties nor to any agency or department of any municipality or county.

OREGON REVISED STATUTES

TITLE 26. PUBLIC FACILITIES, PURCHASING AND PRINTING

CHAPTER 276. PUBLIC FACILITIES

STATE AGENCY FACILITY ENERGY DESIGN

276.915. Energy design requirements; rules; fees; exemptions.

(1) Except as provided in subsection (4) of this section, on and after October 3, 1989, an authorized state agency may construct or renovate a facility only if the authorized state agency determines that the design incorporates all reasonable cost-effective energy conservation measures and alternative energy systems. The determination by the authorized state agency shall include consideration of indoor air quality issues and operation and maintenance costs.

(2) Whenever an authorized state agency determines that any major facility is to be constructed or renovated the agency shall cause to be included in the design phase of the construction or renovation a provision that requires an energy consumption analysis identifying all reasonable cost-effective energy conservation measures and alternative energy systems to be prepared for the facility under the direction of a professional engineer or licensed architect. The authorized agency and the Department of Energy shall agree to the list of energy conservation measures and alternative energy systems to be analyzed. The analysis and facility design shall be delivered to the Department of Energy during the design development phase of the facility design. The Department of Energy shall review the analysis and forward its findings to the authorized state agency within 10 working days after receiving the analysis, if practicable.

(3) The Department of Energy shall adopt rules to carry out the provisions of ORS 276.900 to 276.915.

These rules shall:

(a) Include a simplified and usable method for determining which energy conservation measures and alternative energy systems are cost-effective. The method shall reflect the energy costs of the utility serving the facility.

(b) Prescribe procedures for determining if a facility design incorporates all reasonable cost-effective energy conservation measures and alternative energy systems.

(c) Establish fees through which an authorized state agency will reimburse the Department of Energy for its review of energy consumption analyses and facility designs and its reporting tasks. Such fees imposed shall not exceed 0.2 percent of the capital construction cost of the facility. The fees shall be included in the energy consumption analysis required in subsection (2) of this section.

(4) Any facility that is in the design development phase and for which principal decisions have been fixed or set on or before the effective date of rules adopted under subsection (3) of this section shall be exempt from the amendments to ORS 276.900, 276.905 and this section by chapter 556, Oregon Laws 1989. Any facility for which the Sixty-fifth Legislative Assembly does not appropriate funds for the purposes of complying with the provisions of subsection (1) of this section shall be exempt from subsection (1) of this section.

(5) On October 1, 1990, and biennially thereafter, the Department of Energy shall submit a report to the Energy Policy Review Committee evaluating the compliance of the authorized agencies with the objectives of ORS 276.900, 276.905 and this section.

MASSACHUSETTS GENERAL LAWS

PART I. ADMINISTRATION OF THE GOVERNMENT

TITLE XXI. LABOR AND INDUSTRIES

CHAPTER 149. LABOR AND INDUSTRIES; FAIR COMPETITION FOR BIDDERS ON CONSTRUCTION, ETC., OF PUBLIC WORKS

Section 44M. Energy systems; life-cycle cost estimates

As used in this section the following words shall have the following meanings:

"New Building", an entire building or any addition to an existing building that adds at least ten per cent gross floor space to the building, where the cost of construction is estimated to exceed one hundred thousand dollars.

"Energy system", any equipment that is employed to heat or cool a building, or to heat hot water used in a building, or to generate electricity for a building and that uses the sun, wind, water, biomass, oil, natural gas, or electricity as its power supply in whole or in part.

"Life cycle cost estimate", the estimated cost of installing, financing, fueling, maintaining, and replacing an Energy system, including the cost of any Energy Conservation measures to reduce the required capacity or fuel consumption of an Energy system.

Every contract for architectural or engineering services necessary for the preliminary design of all new buildings or for the modification or replacement of an Energy system in an existing building entered into by a public awarding authority subject to the bidding requirements...of this chapter shall contain a stipulation that life-cycle cost estimates shall be obtained at an initial stage and as a regular part of the services to be performed under said contract.

Prior to the preparation of plans and specifications for the purposes of bidding requirements...the awarding authority shall ensure that the life-cycle cost estimates have been completed and shall file summaries of said cost estimates with the building code commission and the secretary of consumer affairs and business regulation. No construction project shall be advertised for bids by any such awarding authority, nor shall any contract for construction be awarded by such authority, nor shall any building permit be issued until said summaries of cost estimates have been filed with the building code commission and with the secretary of consumer affairs and business regulation and approved by the secretary of consumer affairs and business regulation.

Any contractor for architectural services necessary to the preliminary design of a new building who fails to obtain life-cycle cost estimates in the performance of a contract containing language which stipulates such, shall be prohibited by the secretary of consumer affairs and business regulation from contracting, directly or indirectly, with the commonwealth or any political subdivision thereof for similar architectural services for a period of one year from the date of determination of said violation. The secretary of consumer affairs and business regulation may offer to all public awarding authorities and other interested parties assistance and training in the performance of the requirements of this section. The secretary of consumer affairs and business regulation shall promulgate rules and regulations to implement the provisions of this section.

FLORIDA STATUTES TITLE XVIII PUBLIC LANDS AND PROPERTY

CHAPTER 255 PUBLIC PROPERTY AND PUBLICLY OWNED BUILDINGS

255.254 No facility constructed or leased without life-cycle costs

(1) No state agency shall lease, construct, or have constructed, within limits prescribed herein, a facility without having secured from the division a proper evaluation of life-cycle costs, as computed by an architect or engineer. Furthermore, construction shall proceed only upon disclosing, for the facility chosen, the life-cycle costs as determined in s. 255.255 and the capitalization of the initial construction costs of the building. The life-cycle costs shall be a primary consideration in the selection of a building design. Such analysis shall be required only for construction of buildings with an area of 5,000 square feet or greater. For leased areas of 20,000 square feet or greater within a given building boundary, a life-cycle analysis shall be performed, and a lease shall only be made where there is a showing that the life-cycle costs are minimal compared to available like facilities.

(2) On and after January 1, 1979, no state agency shall initiate construction or have construction initiated, prior to approval thereof by the division, on a facility or self-contained unit of any facility, the design and construction of which incorporates or contemplates the use of an energy system other than a solar energy system when the life-cycle costs analysis prepared by the division has determined that a solar energy system is the most cost-efficient energy system for the facility or unit.

(3) After September 30, 1985, when any state agency must replace or supplement major items of energy-consuming equipment in existing state-owned or leased facilities or any self-contained unit of any facility with other major items of energy-consuming equipment, the selection of such items shall be made on the basis of a life-cycle cost analysis of alternatives in accordance with rules promulgated by the division under s. 255.255.

MASSACHUSETTS GENERAL LAWS

PART I. ADMINISTRATION OF THE GOVERNMENT

TITLE VII. CITIES, TOWNS AND DISTRICTS

CHAPTER 40. POWERS AND DUTIES OF CITIES AND TOWNS

s 4. Towns; power to contract; purposes

A town may make contracts for the exercise of its corporate powers including the following purposes:

...For the leasing, leasing with the option to purchase or installment purchase of Energy Conservation equipment, including but not limited to boilers, furnaces, hot water and space heating equipment, for a period up to ten years, by a majority vote...

...such leasing, leasing with the option to purchase or installment purchase, shall not be subject to debt limits, or for the purchase of Energy management services for a period up to ten years. For the purpose of this clause Energy management services shall include but not be limited to Energy audits, Energy Conservation measures, and Energy Conservation projects as defined by section three of chapter twenty-five A, as well as building maintenance and financing services designed to decrease the cost of Energy in operating said building or buildings.

3. UTILITY REGULATION

3.1 DESCRIPTION OF THE ISSUE

3.1.1 Introduction

In the aggregate, U.S. electric utilities are the largest single source of C02 emissions from any sector or country in the world. According to Department of Energy estimates, combustion of fossil fuels for electricity generation contributes about 35 percent of total U.S. C02 emissions, or about eight percent of global emissions. On average, electricity generation in the U.S. produces a kilogram of C02 for every kilowatt hour.[55] Moreover, in contrast with cars and other diffuse sources, utility emissions are relatively concentrated in slightly over 2,000 units owned by approximately 300 utilities.[56]

Planning for future electric power generation is a critical issue for projecting future emissions of greenhouse gases. Fossil-based power plants, particularly conventional coal thermal plants, emit large amounts of C02 per unit of energy, while nuclear power and renewable energy emit essentially none. Currently, most sources expect significant increases in coal-based generation in the near future: "Regardless of which set of projections are used, coal-fired generating plants will continue to be the mainstay of the utility industry for the foreseeable future."[57] Some environmental controls (particularly scrubbers) reduce power plant efficiency and increase C02 emissions. This planning typically is done over a decade or more because of the long periods required to design, site, and build power plants.

While electricity generation is responsible for a large share of greenhouse gas emissions, recent studies have identified enormous opportunities for cost saving investments in improving the efficiency of electricity use and thereby reducing demand. For example, a recent analysis performed with the participation of the industry sponsored Electric Power Research Institute concluded that the expected demand for electricity in the year 2000 could be reduced 24 to 44 percent if the most efficient electric technologies widely available today were to attain complete market penetration.[58] Although not all of this potential is feasible, ongoing improvements in technology imply that the room for improvement may be much larger.

Studies for the Environmental Protection Agency also show that electric utilities could be effected adversely by climate change.[59] Warmer temperatures would increase demand for air conditioning resulting in the need for more power plants, making it that much more difficult to reduce future C02 emissions. Changes in precipitation also could adversely affect generation of electricity from hydropower.

3.1.2 Level of interest/activity

The environmental importance of electricity generation, coupled with evidence of opportunities for cost effective efficiency improvements, has led to a widespread reexamination of utility regulatory reform as a means for promoting state goals for energy, environmental, and economic policy. As discussed further below, several distinct concepts have attracted the most attention. One is "least cost planning," a broad concept that has been defined as "a process of examining all electricity saving and electricity producing options to select a mixture of options that minimizes total consumer cost, often including consideration of environmental concerns and other responsibilities."[60]

The concept of least cost planning has been accomplished in many different ways but typically involves detailed quantification and comparison of supply and demand alternatives in an overall resource plan, with provision for regular updating. As many as three dozen states are working to implement least cost principles, although perhaps only half as many have adopted all of the elements.[61]

One approach to achieving a least cost process is the use of competitive bidding systems.[62] Utilities typically define their "least cost" option and then invite outside bidders to propose alternative projects with lower costs. The criteria for project selection need not be limited to price but often include some consideration of other relevant factors including environmental impact, reliability, and diversity of fuels.[63] Sometimes bidders are allowed to propose investments in improved energy efficiency as an alternative to new supply.[64]

A related idea that has attracted growing interest is to incorporate explicit environmental preferences in the process of evaluating alternative resources.[65] This is done through a variety of methods including the addition of some monetary amount to the projected cost of fossil fuel combustion to account for the environmental impact of unregulated pollutants. For example, if the estimated cost per kilowatt hour is five cents, an environmental charge of one cent might be added to reflect emissions of C02, sulfur oxides, and other pollutants. The additional cost has not been charged or collected in any state, but has been used to compare alternative resource options. In the case described, the coal plant would be compared with alternatives on the basis of a total cost of six cents per kilowatt hour. As of April 1990, 17 states had adopted rules or policies in this area, several assigning an explicit value to emissions of greenhouse gases. Many more states actively are reviewing policies for assigning costs to unregulated emissions, but the methodology and relative weight to be assigned various pollutants remains the subject of considerable discussion.

States are experimenting with many policies to encourage utility efforts to promote energy efficiency improvements. Traditional utility regulatory practices, which reward utilities handsomely if sales increase more than projected, are being restructured so that profits are at least as great if customers reduce their demand.[67] Other policies include increasing the rate of return to reward investments in conservation and using utilities to finance or subsidize conservation investments.

3.1.3 Jurisdictional Issues

States first began issuing monopoly licenses and regulating rates charged by electric utilities in 1907.[68] Federal regulation evolved later in response to abuses by holding companies and following a 1927 Supreme Court decision that prohibited states from regulating the price of electricity sold across state lines. Congress created the Federal Power Commission (now the Federal Energy Regulatory Commission, or FERC) in 1935 and assumed jurisdiction over interstate transmission and the wholesale exchanges of electricity between utilities.

The boundaries between federal and state jurisdiction over electricity have been tested in several areas, particularly with respect to state authority to reconsider the prudence of costs approved by FERC.[69] Under the Public Utility Regulatory Policies Act (PURPA), states are required to establish fair rates for purchase of power generated by small power producers and cogenerators and may not impose regulations applicable to utilities. Some states have adopted provisions that require utilities to wheel power--that is, to move power to a neighboring utility--as part of their bidding programs, but such regulations may violate the Federal Power Act. Recent legislation passed in the Senate significantly expand the incentives for independent power producers by creating a new class of suppliers. These new "exempt wholesale generators" would be freed from many of the corporate and geographic restrictions currently imposed under the Public Utility Holding Company Act (PUCHA), but could sell power only to other utilities and municipalities.[70]

Most state utility regulations concerned with efficiency or renewable energy are not likely to be effected by jurisdictional concerns. Indeed, the Clean Air Act amendments of 1990 rewards states with least cost planning programs by allowing them an opportunity to obtain valuable credits for purposes of the new acid rain emissions trading program.

3.2 ADOPTED LAWS AND REGULATIONS

Most utility conservation programs can be adopted without specific authorizing legislation because of the broad authority vested in public utility commissions. However, many states have adopted legislation to mandate or endorse efforts to undertake least cost planning, or to give preference to conservation as an alternative to new supply.

Nevada has some of the most sophisticated and comprehensive utility legislation, beginning with the Utilities Resource Planning Act in 1983 and subsequently amended several times.[71] This legislation requires utilities to file integrated long range resource plans every three years (originally two years); additions to generation can be approved only if consistent with an approved plan. Specific requirements also apply to evaluation and implementation of demand side measures. In 1988, the legislature enacted requirements for explicit consideration of environmental costs in the resource planning process. An Office of Consumer Advocate has responsibility for representation of consumer concerns. The Nevada Public Service Commission began a proceeding in 1990 to consider whether electric utilities should be required to offer loans to customers for all cost effective energy efficiency improvements.

3.3 OTHER IDEAS OFFERED IN THE POLICY ARENA

Several utilities and investors in fossil fuel power generation[73] voluntarily have examined the feasibility of strategies to reduce their C02 emissions. In 1988, Applied Energy Services, a private developer of power projects, undertook to incorporate a tree planting component as part of a new 183 megawatt coal-fired plant it was building in Connecticut. The project was expected to emit approximately 15 million tons of carbon over its forty year useful life. AES agreed to contribute $2 million to a CARE project in Guatemala as part of a larger program to plant more than 100 million trees, improve agricultural productivity, and support soil conservation practices that will benefit about 40,000 farm families.[74]

In May 1991, two large California utilities also voluntarily made commitments to reduce their C02 emissions. Southern California Edison and the Los Angeles Department of Water and Power announced they would cut their emissions by 20 percent in the next 20 years. Both companies indicated that very small rate increases (on the order of one-tenth of one percent in the case of LADWP) may be necessary to support additional investments in energy efficiency and renewable energy technologies.[75] New England Electric System announced in November 1991 that its plan to reduce "net air emissions" would translate into a 20 percent reduction of C02 from 1990 levels by 2000.

Legislative proposals in Minnesota would tax utilities and other emitters to create a fund for tree planting sufficient to offset the state's C02 emissions. This proposal is discussed in the taxation section of this report.

While not specifically emphasizing carbon emissions, several utilities recently have announced large investments in renewable energy. For example, Northern States Power, a Minnesota utility, included an $8 million investment in a ten MW wind farm in its most recent 15-year resource plan.[76]

Proposed federal legislation drafted by Congressmen Cooper and Synar would establish an emissions trading system for large stationary sources of C02, primarily large coal plants. The legislation, entitled "C02 Offsets Policy Efficiency Act of 1991," anticipates a system of credits and trading along the lines of the recently enacted acid rain program.

3.4 DISCUSSION

Utility regulatory initiatives clearly are among the most promising directions for reducing greenhouse gases. Indeed, it is difficult to conceive of a meaningful approach to the problem in which utilities will not play a central role. Most of the likely policy strategies, including explicit recognition of greenhouse "externalities" and financial incentives for conservation efforts by consumers, can be ordered by public utility commissions without specific authority. However, legislative guidance reduces the potential for legal challenges and may be appropriate to indicate support for basic policy goals.

The most effective combination of planning and incentive approaches must be responsive to variations in state resources and priorities. Nevertheless, certain basic features seem common to successful state utility regulatory conservation programs. First is some formal process for resource planning, whether by statute or regulation. Second are rate structures that assure utilities do not lose profits from successful conservation efforts. A third element increasingly recognized is the need for public review and involvement. Many states are moving toward the adoption of informal "collaboratives" or other nonadjudicatory procedures to build public support and avoid the contentious nature typical of utility regulation.[77] Fourth is some provision for periodic review and updating since needs and options can change considerably in as little as two years.

FLORIDA STATUTES

TITLE XXVII RAILROADS AND OTHER REGULATED UTILITIES

CHAPTER 366 PUBLIC UTILITIES

366.81 Legislative findings and intent

The Legislative finds and declares that it is critical to utilize the most efficient and cost effective energy conservation systems[78] in order to protect the health, prosperity, and general welfare of the state and its citizens. Reduction in, and control of, the growth rates of electric consumption and of weather-sensitive peak demand are of particular importance.

The Legislature further finds that the Florida Public Service Commission is the appropriate agency to adopt goals and approve plans related to the conservation of electric energy and natural gas usage.

The Legislature directs the commission to develop and adopt overall goals and authorizes the commission to require each utility to develop plans and implement programs for increasing energy efficiency and conservation within its service area, subject to the approval of the commission. Since solutions to our energy problems are complex, the Legislature intends that the use of solar energy, renewable energy sources, highly efficient systems, cogeneration and load-control systems be encouraged. Accordingly, in exercising its jurisdiction, the commission shall not approve any rate or rate structure which discriminates against class of customers on account of the use of such facilities, systems, or devices. This expression of legislative intent shall not be construed to preclude experimental rates, rate structures, or programs.

The Legislature further finds and declares that ss. 366.80-366.85 and 403.519 are to be liberally construed in order to meet the complex problems of reducing the growth rates of electric consumption and reducing the growth rates of weather-sensitive peak demand; increasing the overall efficiency and cost-effectiveness of electricity and natural gas production and use; encouraging further development of cogeneration facilities; and conserving expensive resources, particularly petroleum fuels.

MINNESOTA STATUTES

PART I DEPARTMENTS, AGENCIES

CHAPTER 216B PUBLIC UTILITIES

216B.03 Reasonable rate

Every rate made, demanded, or received by any public utility, or by any two or more public utilities jointly, shall be just and reasonable. Rates shall not be unreasonably preferential, unreasonably prejudicial or discriminatory, but shall be sufficient, equitable and consistent in application to a class of consumers.

To the maximum reasonable extent, the commission shall set rates to encourage energy conservation and renewable energy use and to further the goal of sections 216B.164, 216B.241, and 216C.05. Any doubt as to the reasonableness should be resolved in favor of the consumer. For rate making purposes a public utility may treat two or more municipalities served by it as a single class wherever the populations are comparable in size or the conditions or service are similar.

MONTANA CODE

TITLE 69 PUBLIC UTILITIES AND CARRIERS

CHAPTER 3 REGULATION OF UTILITIES

PART 7 CONSERVATION PURCHASES OR INVESTMENTS IN UTILITIES

69-3-712. Commission to include conservation in rate base--rate of return

(1) In order to encourage the purchase of or investment in conservation by a utility, the commission shall include conservation purchases or investments eligible under 69-3-702 and in compliance with criteria adopted under 69-3-711 in a utility's rate base.

(2) In establishing such rate of return the commission may allow an increment of up to 2% added to the rate of return on common equity permitted on the utility's other investments.

(3) The commission shall allow the rate of return increment provided for in subsection (2) for a period not to exceed 30 years after the conservation is first placed in the rate base.

(4) The commission shall prescribe amortization periods for conservation that is included in a utility's rate base.

4. TRANSPORTATION

4.1 DESCRIPTION OF THE ISSUE

4.1.1 Introduction

Emissions from motor vehicle emissions contribute to the greenhouse problem in three ways: direct C02 and CFCs[79]; indirect action of carbon monoxide (CO)[80]; and secondary transformations of nitrous oxide and hydrocarbons, resulting in increased photochemical smog or tropospheric ozone.[81] The U.S. transport sector, dominated by 160 million private passenger vehicles driven more than 1.6 billion miles each year, accounts for just over one third of the nation's fossil fuel consumption, equal to roughly five percent of total worldwide carbon dioxide emissions. Among final users of energy, automobiles and light trucks alone constitute the largest single contributor to U.S. C02 emissions.

Numerous opportunities exist for reducing transport-based emissions because the sector involves an assortment of integrated policy decisions. Transport decisions are linked inextricably to land use decisions, primarily for their effect on urban density and availability of public transportation.[82] In many states, 1990 Clean Air Act provisions to control criteria pollutants will result in aggressive measures to develop alternatives to private transportation, design better traffic and parking management systems, and improve road design.[83] Concern over America's growing reliance on imported oil to fuel its vehicles also has spurred proposals to affect driver behavior, among them plans to raise gasoline taxes.[84]

States also have an opportunity to promote automobile efficiency through the use of point of sale incentives. Consumers are prevented by various factors--lack of information, high consumer discount rates leading to excessive focus on first costs, import restrictions and manufacturer delays in responding to demand--from demanding or obtaining as much efficiency as they might or actually desire.[85] Incentive programs that reward the purchases of cleaner and more fuel efficient vehicles can stimulate consumer demand and induce manufacturer production.[86]

State regulation of fleets--private, commercial and governmental--provides yet a third occasion where states can influence fuel economy and emissions reductions. Because they are centrally maintained, fueled and dispatched, fleet vehicles are an excellent candidate for operating on cleaner, alternative fuels. And fleet management programs provide an ideal testing ground on which alternative fuels can work to overcome barriers to competition, primarily the highly developed technology and infrastructure that exists to support the production, distribution and use of gasoline as the primary fuel.

4.1.2 Level of interest/activity

Concerns over transport-induced emissions find expression in a plethora of bills and regulatory initiatives. Some, however important, are predictable technical measures to tilt development toward areas with existing infrastructure, particularly cities with underutilized mass transportation capabilities. Similarly, technical measures would limit the number of curb accessways permitted on nonlimited access highways to discourage congestion-producing strip development. Regional planning associations, in response to the Clean Air Act of 1990, also are assuming a role as coordinators and innovators.

Recent reforms in federal policy lift what were significant barriers to state control over alternative transit options. The Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991 removes longstanding financial biases favoring highways, for instance by extending broad eligibility for non-highway projects, thereby ensuring that state and local officials have the flexibility to chose projects based on merit, not federal matching funds.[87] The Act also provides significant new sources for transit funding--an increase of nearly 40 percent over recently authorized levels.[88]

4.1.3 Jurisdictional Issues

The number of transportation policy areas preempted by the federal government is surprisingly limited. Land use decisions, discussed in more detail in Section 5 of this report, typically are left to the purview of the states, as are taxes, whether on gasoline, alternative fuels or vehicle sales.

Only CAFE, the federally mandated fuel economy standards for new autos, preempts state involvement. States retain substantial opportunity to slow and reverse the energy intensity of transportation based on authority over vehicle registration fees, criteria pollutant regulations and fleet procurement.

4.2 ADOPTED LAWS, ORDINANCES, AND REGULATIONS

4.2.1 Integrating Land Use and Transportation

Maine voters in 1991 passed a referendum, the "Sensible Transportation Policy Act," best characterized as least cost transportation planning.[89] Motivated by opposition to proposed widening of the state's major artery, the new law mandates evaluation of the full range of transit alternatives and extends preference to system and demand options before increasing capacity through road building. Evaluations are required for "significant" construction only; therefore, ongoing Maine Department of Transportation rulemakings are determining the precise circumstances under which the law is triggered.

4.2.2 Affecting Driver Behavior

In April 1992, Maryland became the first U.S. jurisdiction to adopt a feebate/credit system. As part of a budget-tax package, Maryland's General Assembly approved a modified gas-guzzler/sipper scheme that alters the existing flat five percent registration fee on passenger vehicles.[90] Beginning January 1993 and effective through January 1995, vehicles achieving less than 21 mpg fuel economy rating will be subject to a surcharge of $100, while vehicles with a rating greater than 35 will receive a $50 credit.[91] Beginning January 1995, vehicles rated under 27 mpg will trigger a surcharge, and the calculation of fee or credit will vary to reflect actual mpg ratings.[92] The program was designed to be revenue positive and funds remaining after the payment of credits have been dedicated solely for transit purposes.[93]

Effective August 1991, Ontario, Canada also began levying graduated taxes on cars and sport utility vehicles. The most fuel efficient vehicles (39.2 mpg U.S. or higher) will receive about a $90 credit whereas guzzlers with ratings less than 13 mpg will be hit with approximately a $6,125 fee. In comparison, vehicles rated at exactly the U.S. CAFE standard of 29 mpg will be charged approximately $66. Ontario's regime also will raise revenue; it is expected to reap $45 million Cdn.

4.2.3 Encouraging State Involvement

A number of states have undertaken ambitious programs to promote greater use of alternatively fueled vehicles. Arizona legislation from 1991 calls for replacement fleet vehicles to be the most efficient in their class and increases the use of alternative fuels in state-owned vehicles.[94] In Florida, an executive order mandates all fleet vehicles to use the most efficient, least polluting fuels by 2000.[95] Iowa established a five percent alternative fuel baseline for all new state vehicles, increasing to ten percent in 1994.[96] Missouri also has set a timetable for the conversion of state fleets; by 2002,30 percent must operate solely on alternative fuels. And in Colorado, ten percent of new vehicles leased or purchased by state agencies must operate on clean fuels in 1991, with an additional ten percent increase each year thereafter through 1995. Oregon perhaps has gone furthest with mandating fleet conversion: after July 1, 1994, the state will acquire only alternative fuel vehicles except in areas unable to dispense alternative fuel.[97]

4.2.4 Tax Incentives

States have enacted various tax incentives and exemptions to promote the use of alternative fuels. Colorado, for instance, will rebate $200 to any person acquiring clean fuel vehicles or retrofitting an existing vehicle.[98] State and municipal agencies also are eligible for the rebates, which are capped at five vehicles per person. Arizona partially exempts natural gas vehicles from the state motor fuels tax,[99] and Louisiana provides a 20 percent income tax credit for clean burning alternative fueled vehicles and property relating to the dispensing of such fuel.[100]

Oregon has expanded its energy conservation tax credit programs to include costs associated with acquiring and operating alternatively fueled vehicles. The state is also unique in that it permits investor-owned utilities to offer commercial and industrial customers cash payments to assist in the purchase of vehicle and fueling facilities.[101]

Connecticut is among the most comprehensive in this area: the state grants a ten percent tax credit for any investments or expenditures relating to alternative fueled vehicles and exempts from state sales and use tax vehicles that use alternative fuels, equipment to convert vehicles to use alternative fuels and equipment used in compressed natural gas filling stations.[102]

4.3 INTRODUCED BILLS, ORDINANCES AND REGULATIONS

4.3.1 Affecting Driver Behavior

California Senate Bill No. 1905, also known as DRIVE+, is a revenue neutral proposal to vary the state sales tax on new vehicles in proportion to the amount of pollution each car causes.[103] It was designed to help California reduce emissions of criteria pollutants, but is unique in that it includes C02, the primary greenhouse gas.[104] Since the system requires that vehicles with the highest emissions still comply with current California Air Resource Board (ARB) emissions limits, the intent of the DRIVE+ system is to provide additional, market incentives to favor production and purchase of vehicles having emissions even lower than regulatory limits.[105]

DRIVE+ would have effects similar to those of the federal gas guzzler tax on cars which use much more fuel than average, but differs in that it was designed to be a revenue neutral transfer among new car buyers, rather than a tax.[106] DRIVE+, however, compromises the concept of revenue neutrality in two ways: the state would capture a small amount of revenue (approximately one percent) to cover administrative costs at ARB and the Board of Equalization; and the bill authorizes building a reserve account of 30 percent of the expected revenue collection.[107]

4.4 OTHER IDEAS OFFERED IN THE POLICY ARENA

4.4.1 Internalizing Costs

The notion that activities should reflect their total costs to society is embodied by a range of policy proposals termed "output taxes." The concept is broadly defined as taxing goods and services based on the unit of damage they cause society.

One example is weight-distance taxes, to be assessed on trucks based on payload weight and hauling distance. Such taxes make sense because these vehicles cause the most road damage and generate significant air and noise damage, but are controversial because they are difficult to allocate fairly across different types of heavy duty vehicles. Without them, cars and light trucks not only continue to subsidize heavy trucks, but also enhance the competitiveness of trucks at the expense of more environmentally benign methods of hauling freight.[108]

Energy or carbon taxes would raise the price of gasoline and other motor fuels, and thus reflect the true costs of driving. They are discussed in further detail in Section 6 of this report.

A proposal to restructure the payment of auto insurance at the pump also would internalize costs by tying costs to the amount of driving. Instead of paying for independently arranged contracts with private insurers, a large fraction of the payment could be paid at the gasoline pump, thereby more closely tying costs to actual miles driven. The plan has multiple benefits: the apparent cost of gasoline at the pump would rise substantially, thus encouraging the purchase of fuel efficient vehicles and helping to slow the growth in vehicle miles traveled; the system is not regressive because low income persons who drive less would see a reduction in costs; and uninsured motorists are forcibly incorporated into the system.[109]

California S.B. 1905 (DRIVE+) reads in relevant part:

...43251. The Legislature finds and declares as follows:

(a) The maintenance and improvement of air quality is a primary concern of all Californians. Yet, despite the diligent efforts and progress made by federal state, and local air pollution control programs, California has the worst air pollution in the nation. Today, 35 of the state's 58 counties violate federal standards for ozone that Congress established in 1970. For example, the South Coast Air Basin, which includes Los Angeles, exceeds the federal ozone standard by up to 200 percent on approximately one-half of the days each year. Motor vehicles, account for approximately one-half of hydrocarbon emissions, approximately three-fourths of oxides of nitrogen emissions, and over 90 percent of carbon monoxide emissions.

...43255. The state board shall develop, with the cooperation of the State Board of Equalization, a program of DRIVE+ sales tax credits[109] and DRIVE+ sales tax surcharges to be applied at the time any new automobile, new light-duty truck, or new medium-duty truck is sold, leased, or rented in California. Beginning on May 1, 1993, and at least annually thereafter, the state board shall publish a schedule of sales tax credits and sales tax surcharges for each model of new automobile and light- and medium-duty truck. The state board shall determine the DRIVE+ credits and surcharges based on the level of hydrocarbon, oxides of nitrogen, carbon monoxide, and particulate emissions for each model as certified by the manufacturer pursuant to state board regulations. Hydrocarbon emission reduction shall take into account ozone, reactivity factors as determined by the state board. The state board shall base the credits and surcharges, additionally, on the level of CO2 emissions for each model as estimated by the board. The state board shall use the following methodology in creating DRIVE+ sales tax credit and surcharge schedules:

(b) The state board shall estimate the sales weighted average certified level of hydrocarbons, oxides of nitrogen, carbon monoxide, particulates, and carbon dioxide emissions for all new automobile models, for all new, light-duty truck models, and for all new medium-duty truck models that the state board projects will be sold in the state in the ensuing year. The level of hydrocarbons, oxides of nitrogen, and carbon monoxide, or particulates the state board uses in this calculation shall be the level as certified by the manufacturer in the state's emissions certification process...

(c) The state board shall calculate the base DRIVE+ credit and DRIVE+ surcharge for each new automobile, new light-duty truck, and new medium-duty truck to be sold or leased in California, by comparing the certified levels of hydrocarbons, oxides of nitrogen, carbon monoxide, and particulates for each model of new automobile and light- and medium-duty truck certified for sale in the state to the sales weighted average of certified emission levels for all such models within the three groupings of new automobiles, new light-duty trucks, and new medium duty-trucks that the board estimates will be sold in the state during the year.

...(g) At the direction of the Department of Finance, the state board shall reduce the base DRIVE+ sales tax credit applicable to each model eligible for a credit by a factor termed the "administrative overhead factor" so that the DRIVE+ program will result in a net sales tax revenue increase sufficient to do both of the following:

(1) Fund all state administrative costs associated with the DRIVE+ program.

(2) Provide for a reserve within the DRIVE+ Account equal to 30 percent of estimated DRIVE+ credits to ensure that the DRIVE + Account will have a positive balance at the end of each fiscal year.

CALIFORNIA

1990 REGULAR SESSION

CHAPTER 791

Senate Bill No. 2103; effective January 1, 1991

This bill would require the commission, in cooperation with the State Energy Resources Conservation and Development Commission, the State Air Resources Board, air quality management districts and air pollution control districts, electrical and gas corporations, and the motor vehicle industry, to evaluate and implement policies to promote the development of equipment and infrastructure needed to facilitate the use of electric power and natural gas to fuel low-emission vehicles.

The people of the State of California do enact as follows:

[*1] SECTION 1. The Legislature finds and declares all of the following:

(a) In response to concerns about air quality in California, in 1987 the Legislature enacted a law creating the Advisory Board on Air Quality and Fuels to evaluate and make recommendations regarding the necessity and feasibility for using mandates or incentives to facilitate the introduction of clean transportation fuels in California.

(b) In October 1989, the board issued a report to the Legislature which concluded that the use of alternative fuels will provide improvements in air quality beyond what is achievable from conventionally fueled vehicles using the most advanced emissions controls.

(c) The board also concluded that the current state of vehicle technology looks promising for electric-powered and compressed natural gas-fueled vehicles, along with other alternative fuel technologies.

(e) It is in the interest of the State of California to provide incentives for the development and market penetration of clean fuel vehicles, including electric-powered and compressed natural gas-fueled vehicles, to assist in the attainment and maintenance of healthful air quality, and to provide transportation fuel security through a diversity of alternative fuels.

(f) State policies to encourage electric and gas utilities to enter into ventures to promote the commercialization of electric-powered and compressed natural gas-fueled vehicles should ensure that the costs and expenses of implementing commercialization programs are not passed through to electric or gas ratepayers unless the Public Utilities Commission finds and determines that those programs are in the ratepayers' interest. State policies should also ensure that utilities do not unfairly compete with nonutility enterprises.

[*2] SECTION 2. Section 740.3 is added to the Public Utilities Code, to read:

(a) The commission, in cooperation with the State Energy Conservation and Development Commission, the State Air Resources Board, air quality management districts and air pollution control districts, regulated electrical and gas corporations, and the motor vehicle industry, shall evaluate and implement policies to promote the development of equipment and infrastructure needed to facilitate the use of electric power and natural gas to fuel low-emission vehicles. Policies to be considered shall include both of the following

(1) The sale-for-resale and the rate-basing of low-emission vehicles and supporting equipment such as batteries for electric vehicles and compressor stations for natural gas fueled vehicles.

(2) The development of statewide standards for electric vehicle charger connections and compressed natural gas vehicle fueling connections, including installation procedures and technical assistance to installers.

5. LAND USE PLANNING

5.1 DESCRIPTION OF THE ISSUE

5.1.1 Introduction

States and local governments can employ land use controls to address climate change in three ways: 1) to reduce carbon emissions; 2) to sequester carbon through the preservation of trees and ecologically valuable open space; and 3) to assist with adapting to potentially damaging effects of climate change such as drought or flooding due to sea level rise. Direct C02 reductions are achievable by shaping development patterns to discourage and/or reduce inefficient private transportation and by applying energy conserving principles to conventional landscaping standards.

5.1.2 Level of Interest or Activity

In most American cities, the concept of incompatible land uses is absurdly apparent. Vast tracks of suburban housing, largely abandoned each day are situated far from commercial districts that witness mass exodus each evening. In addition to excessively long, expensive commutes and unattractive urban sprawl, these inefficient land use policies are responsible for immense transport-related emissions.[110]

Zoning statutes enable municipalities and counties to improve this condition by authorizing the adoption of master plans that include mixed use development. Mixed use development, also called cluster or planned unit development (PUDs), authorizes combined residential and nonresidential uses in the same area. The development is characterized by a unified site design, but includes a variety of housing types and densities, clustering of buildings, common open space, and a mix of building types and land uses. Project planning and density calculation are performed for the entire development rather than on an individual lot basis. Zoning enabling acts also may grant municipalities the power to discourage private auto use and to encourage alternative modes of transportation such as bicycling.

In addition to land use regulations that facilitate more efficient use of carbon emitting fossil fuels for transportation, many jurisdictions have adopted measures to promote renewable energy sources. Responses to the successive energy crises of the 1970s--policies designed to reduce use of carbon-based fossil fuels--are potentially effective measures against the global climate change problem. Solar access ordinances which extend general authority to local governments are perhaps the most common type of land use regulation promoting alternative energy use.

Similarly, land use controls enacted to protect ecologically valuable green space have the subsidiary benefit of protecting trees and other natural systems capable of sequestering carbon. Flood plain regulations, rediscovered in the 1970s as a tool for protecting ecologically valuable and sensitive lands, are now proffered as one technique communities can use to adapt to negative effects of global climate change, particularly sea level rise.

5.1.3 Jurisdictional Issues

State and local governments have used police power to regulate land use and control development patterns since the beginning of this century, when the U.S. Supreme Court upheld comprehensive zoning.[111] Initially, land use controls were adopted to protect public safety. For instance, density and building height restrictions were used to control crowding in urban areas, prevent hazardous vehicle traffic, and ensure adequate access for the fire department. Similarly, flood plain regulations were designed to protect people and building structures from high water.

Early open space regulation also was justified on public safety grounds--for example, to create buffers between incompatible land uses such as residential development and the sounds, smells and other impacts associated with heavy industry or agriculture. During the early seventies, the rationale for preserving open space was expanded to include protection of ecologically valuable areas such as wetlands and various wildlife habitats. By the end of that decade, many jurisdictions also were beginning to use land use controls to discourage inefficient transportation patterns; to encourage energy efficient building and landscaping practices; and to foster conditions for the use of solar, wind or other renewable energy technologies.

Except for limited provisions in the Coastal Zone Management Act, 16 U.S.C. 1451 et seq; wetlands protections contained in section 404 of the Clean Water Act, 33 U.S.C. 1344; and the failed National Land Use Policy Act, the federal government has not attempted to play a major role in the regulation of private land use. Historically, most land use controls have been enacted by municipalities or counties pursuant to state enabling statutes. In some parts of the country, however, regional and statewide planning efforts partially preempt local control.

5.2 ADOPTED LAWS, ORDINANCES AND REGULATIONS

5.2.1 Reducing C02 Emissions Through Integrated Planning

Portland, Oregon provides a model for successful zoning reformation. In response to air pollution and traffic congestion, the city in 1974 developed a comprehensive plan that mixed guided growth and mass transit. The city encircled itself in an urban growth boundary beyond which no new development is allowed, and imposed restrictions on the amount of parking that can accompany new office space. While no actual measurements have been made of C02 reductions, the benefits are clear: Portland did not violate air quality standards once in 1989.[112]

Only a few states have attempted comprehensive land use planning and even where authorized, implementation and enforcement has been uneven. More typical are provisions in general land use enabling statutes that encourage but do not mandate transportation policies that would result in reduced emissions. Arizona's statute, for instance, clearly specifies consideration of bicycle routes. Municipalities also are authorized to set policies on offstreet parking--policies which can be designed to increase the cost of parking, thereby discouraging use of private autos. Connecticut is among those states which have included provisions explicitly encouraging energy efficient patterns of transportation development within PUDs.

The Transportation Planning Rule recently adopted by Oregon's Land Conservation and Development Commission mandates rather than encourages integration of land use and transportation policy.[113] The Rule's principal requirement is development and adoption of multimodal transportation system plans (TSPs) by all cities and counties with primary emphasis on reduced reliance on the automobile. Local governments must adopt land use and subdivision regulations that require bicycle parking facilities; park and ride lots; and safe, convenient pedestrian and bicycle access. In metropolitan areas, measures to accomplish reduced auto reliance and increased average occupancy are more stringent. Cities must adopt regulations that give preferential access to mass transit at new retail and office buildings, and must implement parking plans that achieve a ten percent per capita reduction in spaces.

One variation on the PUD scheme is the Traditional Neighborhood Ordinance (TND), a model ordinance developed by two Florida architects. Like the original PUD format, adoption of TND will result in reduced automobile trips, lessened traffic congestion and limited land waste. TND has been adopted in several jurisdictions in Florida and by the City of Gaithersburg, Maryland.

5.2.2 Reducing C02 Emissions Through Energy Conservation

Land use planning also can reduce energy use and C02 emissions by promoting tree planting and preservation near houses to provide windshielding and shading benefits. While no ordinances have been adopted specifically for this purpose, research demonstrates the feasibility and benefits of using trees for energy conservation. A recent report from the University of California's Lawrence Berkeley Laboratory with support from U.S. EPA indicates that well placed vegetation around residences and small commercial buildings can reduce energy consumption between 15 and 35 percent.[114] Benefits, however, vary with climate. Seasonal variations and local weather conditions are important for determining the benefits of shading and wind reduction. Since the direct effects of planting include both shading and windshielding, it is important to evaluate the net impact on a building's heating and cooling energy usage.[115]

5.2 3 Promoting Carbon Sequestration

Statutes authorizing conservation of natural resources typically promote aesthetic or habitat preservation in forests. A few jurisdictions, such as Fairfax County, Virginia, have adopted tree preservation laws that explicitly recognize carbon dioxide related benefits.[116] Although the Fairfax statute was not motivated primarily by concerns over climate change, each tree planted or preserved nonetheless yields the same carbon sequestration benefits as trees protected under more general ordinances.

5 2.3 Adapting to the effects of global climate change

Land use regulations designed to prevent hazards due to flooding are ubiquitous in coastal states. Expansion of longstanding regulations that proscribe building in a floodplain suggest one way in which coastal areas can protect landowners from sea level rise--one of the negative effects of climate change. Special attention may be appropriate for hazardous waste sites and other activities which could create a public health hazard if located in areas subject to flooding.

New Jersey's Climate Change Initiative, signed by former Governor Kean in 1989, launched a research program to study sea level rise and other coastal changes. State agencies with responsibility for property are required to ascertain the degree to which facilities might be affected by predicted changes. Although new shoreline construction is already prohibited, the Initiative aims to develop policies that will reduce if not eliminate the potentially enormous costs of protecting coastal developments.

5.3 DISCUSSION

Control over land use and development patterns is among a state's most effective means of reducing emissions of greenhouse gases. Attractive too, is the multitude of attendant benefits of more sensible land use: reduction of congestion; improvements in air quality and consequently, human health; and preservation of open space and valuable coastal areas.

ARIZONA REVISED STATUTES

TITLE 9. CITIES AND TOWNS

CHAPTER 4. GENERAL POWERS

ARTICLE 6. MUNICIPAL PLANNING

@ 9-461.05. General plans; authority; scope

...C. The general plan shall consist of a statement of community goals and development policies. It shall include a diagram or diagrams and text setting forth objectives, principles, standards and plan proposals. The plan shall include the following elements:

1. A land-use element which designates the proposed general distribution and location and extent of such uses of the land for housing, business, industry, agriculture, recreation, education, public buildings and grounds, open space and such other categories of public and private uses of land as may be appropriate to the municipality. The land-use element shall include a statement of the standards of population density and building intensity recommended for the various land-use categories covered by the plan. The land use element shall include consideration of air quality and access to incident solar energy for all general categories of land use.[117]

2. A circulation element-consisting of the general location and extent of existing and proposed freeways, arterial and collector streets, bicycle routes and any other modes of transportation as may be appropriate, all correlated with the land-use element of the plan.

D. The general plan shall include for cities of over fifty thousand population and may include for cities of less than fifty thousand population the following elements or any part or phase thereof:

1. A conservation element for the conservation, development and utilization of natural resources, including forests, soils, rivers and other waters, harbors, fisheries, wildlife, minerals and other natural resources. The conservation element may also cover:

(a) The reclamation of land; (b) Flood control; (c) Prevention and control of the pollution of streams and other waters; (d) Regulation of the use of land in stream channels and other areas required for the accomplishment of the conservation plan; (e) Prevention, control and correction of the erosion of soils, beaches and shores; (f) Protection of watersheds.

...3. The circulation element provided for in subsection C, paragraph 2 shall also include for cities of over fifty thousand population and may include for cities of less than fifty thousand population recommendations concerning parking facilities, building setback requirements and the delineations of such systems on the land, a system of street naming, house and building numbering and such other matters as may be related to the improvement of circulation of traffic. The circulation element may also include:

...9. A bicycling element consisting of proposed bicycle facilities such as bicycle routes, bicycle parking areas and designated bicycle street crossing areas.

GENERAL STATUTES OF CONNECTICUT

TITLE 8. ZONING, PLANNING, HOUSING, ECONOMIC DEVELOPMENT AND HUMAN RESOURCES CHAPTER 124. ZONING

Sec. 8-2. Regulations.

The zoning commission of each city, town or borough is authorized to regulate, within the limits of such municipality, the height, number of stories and size of buildings and other structures; the percentage of the area of the lot that may be occupied; the size of yards, courts and other open spaces; the density of population and the location and use of buildings, structures and land for trade, industry, residence or other purposes, including water-dependent uses as defined in section 22a-93, and the height, size and location of advertising signs and billboards.

Such regulations shall be made in accordance with a comprehensive plan and shall be designed to lessen congestion in the streets; to secure safety from fire, panic, flood and other dangers; to promote health and the general welfare; to provide adequate light and air; to prevent the overcrowding of land; to avoid undue concentration of population and to facilitate the adequate provision for transportation, water, sewerage, schools, parks and other public requirements.

Such regulations may also encourage energy efficient patterns of development, the use of solar and other renewable forms of energy, and energy conservation. The regulations may also provide for incentives for developers who use passive solar energy techniques, as defined in subsection (b) of section 8-25, in planning a residential subdivision development. The incentives may include, but not be limited to, cluster development, higher density development and performance standards for roads, sidewalks and underground facilities in the subdivision.

OREGON REVISED STATUTES

TITLE 20.

COUNTIES AND COUNTY OFFICERS

CHAPTER 215. COUNTY PLANNING; ZONING; HOUSING CODES

215.044. Solar access ordinances; purpose; standards.

(1) County governing bodies may adopt and implement solar access ordinances. The ordinances shall provide and protect to the extent feasible solar access to the south face of buildings during solar heating hours, taking into account latitude, topography, microclimate, existing development, existing vegetation and planned uses and densities. The county governing body shall consider for inclusion in any solar access ordinance, but not be limited to, standards for:

(a) The orientation of new streets, lots and parcels;

(b) The placement, height, bulk and orientation of new buildings;

(c) The type and placement of new trees on public street rights of way and other public property, and

(d) Planned uses and densities to conserve energy, facilitate the use of solar energy, or both.

(2) The Department of Energy shall actively encourage and assist county governing bodies' efforts to protect and provide for solar access.

(3) As used in this section, "solar heating hours" means those hours between three hours before and three hours after the sun is at its highest point above the horizon on December 21.

PENNSYLVANIA STATUTES

TITLE 53. MUNICIPAL AND QUASI-MUNICIPAL CORPORATIONS

PART 1. GENERAL MUNICIPAL LAW

CHAPTER 30. PLANNING AND DEVELOPMENT

ARTICLE VII. PLANNED RESIDENTIAL DEVELOPMENT

@ 10705. Standards and conditions for planned residential development

(a) All provisions adopted pursuant to this article shall set forth all the standards, conditions and regulations by which a proposed planned residential development shall be evaluated, and said standards, conditions and regulations shall be consistent with the following subsections.

(b) The provisions adopted pursuant to this article shall set forth the uses permitted in a planned residential development, which uses may include but shall not be limited to:

(1) Dwelling units of any dwelling type or configuration, or any combination thereof

(2) Those nonresidential uses deemed to be appropriate for incorporation in the design of the planned residential development.

...(e) In the case of a planned residential development proposed to be developed over a period of years, standards established in provisions adopted pursuant to this article may, to encourage the flexibility of housing density, design and type intended by this article:

(1) Permit a variation in each section to be developed from the density, or intensity of use, established for the entire planned residential development.

(2) Allow for a greater concentration of density or intensity of land use, within some section or sections of development, whether it be earlier or later in the development than upon others.

...(g) Provisions adopted pursuant to this article may require that a planned residential development contain a minimum number of dwelling units.

(h) The authority granted a municipality by Article V to establish standards for the location, width, course and surfacing of streets, walkways, curbs, gutters, street lights, shade trees, water, sewage and drainage facilities, easements or rights-of-way for drainage and utilities, reservations of public grounds, other improvements, regulations for the height and setback as they relate to renewable energy systems and energy-conserving building design, regulations for the height and location of vegetation with respect to boundary lines, as they relate to renewable energy systems and energy-conserving building design, regulations for the type and location of renewable energy systems or their components and regulations for the design and construction of structures to encourage the use of renewable energy systems, shall be vested in the governing body or the planning agency for the purposes of this article. The standards applicable to a particular planned residential development may be different than or modifications of, the standards and requirements otherwise required of subdivisions authorized under an ordinance adopted pursuant to Article V, provided, however, that provisions adopted pursuant to this article shall set forth the limits and extent of any modifications or changes in such standards and requirements in order that a landowner shall know the limits and extent of permissible modifications from the standards otherwise applicable to subdivisions.

UTAH CODE

TITLE 17. COUNTIES

CHAPTER 27. ZONING AND PLANNING

@ 17-27-4. Commission to adopt proposed master plan for development--Contents.

(1) Each county planning commission shall make and adopt a proposed master plan for the physical development of the unincorporated territory of the county.

(2)(a) The plan may include planning for incorporated areas to the extent to which, in the commission's judgment, they are related to the planning of the unincorporated territory or of the county as a whole.

(b) The plan may not be considered an official plan, or part of the official plan, of any municipality unless adopted by the muniapal planning commission and the governing body of the muniapality.

(3) The master plan of a county, with the accompanying maps, plats, charts, and descriptive and explanatory matter, shall show the county planning commission's recommendations for the development of the territory covered by the plan, and may include, among other things:

(a) the general location, character and extent of streets or roads, viaducts, bridges, parkways, playgrounds, forests, reservations, parks, airports, and other public ways, grounds, places, and spaces;

...(d) methods to encourage energy-efficient patterns of development, the use of energy conservation, solar and renewable energy sources, and assure access to sunlight for solar energy

(e) the general character, location, and extent of community centers, town sites, or housing developments;

(f) the general location and extent of forest, and open development areas for purposes of conservation, water supply, sanitary and drainage facilities, or the protection of urban development.

6. ENERGY TAXES

6.1 DESCRIPTION OF THE ISSUE

6.1.1 Introduction

Burning fossil fuels imposes costs on society including smog, acid rain, and the risk of global warming. But these costs are not reflected fully in the prices paid by consumers. This distorts spending and investment decisions which determine, for example, how much energy and what fuels we use and how much effort is put into developing cleaner technologies.

Economists often recommend imposing taxes to ensure that market prices account for social costs such as pollution. Recently, interest in this approach has grown because the public continues to demand tougher environmental standards while, at the same time, traditional pollution controls are approaching the limits of their effectiveness. Indeed, opinion polls suggest voters increasingly are willing to accept specific taxes and price increases if they contribute to improving environmental quality.

Traditional tailpipe and chimney stack controls and other point source strategies are not well suited for dealing with carbon dioxide because it is an inherent result of combustion, not a by-product. Moreover, a myriad of different sources--from automobiles to lawnmowers to utility plants--must be regulated. For this reason, taxation is often favored as a policy tool for dealing with global warming.

Instead of taxing emissions directly, a carbon tax is levied on fossil fuels (at some point in the production/distribution chain) at rates proportional to the carbon content of each fuel. Coal has the highest carbon content and natural gas the lowest, with petroleum products in between. Therefore, the tax is proportional to the emissions of carbon dioxide associated with burning each fuel, but it also broadly correlates with emissions of pollutants regulated by the Clean Air Act. These pollutants are responsible for smog, acid rain and other air quality problems.

A carbon tax is not imposed on energy sources such as hydro, nuclear, solar, wind and sustainably harvested wood. Its impact on electricity prices therefore depends on the mix of energy resources used by each utility.

A carbon tax reduces carbon dioxide emissions: by increasing fossil fuel prices, it encourages more efficient use of energy and stimulates development of renewable technologies; and by changing relative prices, it encourages a shift in consumption from coal and oil to cleaner-burning natural gas. By the same logic a carbon tax reduces emissions of criteria pollutants like sulfur dioxide and hydrocarbons and so contributes towards meeting federal Clean Air Act requirements.

Using energy and economic models analysts seek to estimate the tax rate needed to reduce emissions significantly. The results of these studies vary widely but many suggest that a tax of $100 per ton of carbon would be needed to reduce emissions early next century by 30 to 40 percent from the levels expected under a business-as-usual scenario. Such modelling studies have been criticized: for overlooking recent advances in renewable energy technologies; for their treatment of technological innovation; and for their assumptions about future economic behavior based on past trends.

A very different picture emerges from studies which investigate the costs of implementing well-known carbon dioxide reduction technologies. For example, a recent study by the National Academy of Sciences reported that a 10 to 40 percent reduction in total greenhouse gas emissions from 1990 levels can be achieved at relatively low cost[118]. This includes significant reductions in carbon dioxide emissions which can be achieved at negative cost through less wasteful use of energy. On the basis of these studies, even a very low carbon tax (e.g. less than $10 per ton) could "buy" significant emission reductions or offsets, if the revenue was dedicated to specific measures such as energy efficiency or tree planting programs.

6.1.2 Level of interest/activity

Much of the discussion at the federal level has focused on a carbon tax as the preferred policy tool. For example, the Congressional Budget Office (CBO) investigated the effects of a tax at $100 per ton of carbon to be introduced over ten years. Reflecting the Administration's position on global warming, the National Energy Strategy considered but rejected a tax of $135 per ton of carbon. Congress is yet to reach a position, but a bill introduced in February 1991 by Representative Stark proposes a $30 per ton tax introduced over five years (HR 1086).

Although energy taxes and prices are already substantially higher in Europe than in the United States, the European Community is considering a proposal for a community-wide energy and carbon tax to be phased in, reaching $10 per barrel of oil by the end of the decade[119]. The tax is a critical element of a strategy, developed by the European Commission, for achieving the carbon dioxide emission reduction targets adopted by the Community. Opponents of the tax, however, point to the failure of Europe's major trading partners, particularly the United States, to consider similar tax increases as a reason for dropping the proposal. Several European countries have already unilaterally introduced more limited carbon taxes at a national level and Japan also is considering introduction of a carbon tax.

To date, no U.S. state has introduced a carbon tax. However, proposals were advanced in several states during 1991 and are outlined below in Section 6.2.

6.13 Jurisdictional Issues

State and local governments already levy a wide range of taxes on energy. These include motor fuels taxes, sales and use taxes, utility gross receipts taxes, and environmental surcharges on electricity. A carbon tax is simply a different type of energy tax and should present no special jurisdictional problems.

However a carbon tax at a rate similar to that examined by CBO and being considered in Europe would be better introduced at the national level. A tax at this rate would have strong cross border effects, encouraging fossil fuel intensive industries to relocate to tax-free states, risking damage to the economies of states imposing the tax.

Carbon taxes at a lower rate are a different matter. A carbon tax has many advantages over the energy taxes currently levied in most states. Generally these taxes do not discriminate between clean and dirty fuels or technologies. Most would tax clean renewable energy projects at the same rate as a dirty coal plant. Even a small carbon tax providing just a weak price signal would be preferable on environmental grounds. Moreover, because carbon taxes are broadly based, they easily can raise sufficient revenue to augment or replace existing taxes. At equivalent rates, a carbon tax will raise more revenue than most existing state energy taxes. Many states, faced with extreme budgetary pressures, are reviewing their tax systems, including energy taxes. A carbon tax offers both fiscal and environmental benefits over the traditional options being considered in these reviews.

6.2 SPECIFIC PROPOSALS

6.2.1 California

In mid-1991, as part of the budget cycle, the California Legislature considered a new tax on gas and electric utility bills which would raise $700 million per year. The Natural Resources Defense Council (NRDC) proposed instead a carbon tax of $5.25 per ton of carbon which would raise the same revenue. The proposal was not taken up but remains on the table for future consideration.

6.2.2 Maryland

In mid-1991, the Maryland General Assembly established a joint House-Senate study group to review the state's revenue system. The study group solicited ideas for environmental and energy taxes from the Center for Global Change at the University of Maryland. One of several ideas proposed by the Center was a small carbon tax designed to both provide environmental benefits and help solve the budget crisis facing the state. Without making specific recommendations, the joint study group presented a long list of options to the General Assembly including an "air pollution tax" on fossil fuel consumption at $7.50 per ton of carbon. In January 1992, a bill was introduced into the state senate by Senators Blount (senate majority leader) and Winegrad for an air pollution tax at $3.75 per ton of carbon (SB 665). The House Ways and Means Committee subsequently prepared a draft bill for a tax at $7.50 per ton and held hearings on this proposal. The state's legislative leadership seriously considered including this tax in the budget for fiscal year 1993. Even though the more conventional option of an increase in the gasoline tax ultimately was chosen, the concept of an air pollution tax is now firmly on the agenda for future years in Maryland.

The Maryland proposals provided for the air pollution tax to be collected from electric and gas utilities, petroleum distributors and industrial consumers of coal. The tax rates in the draft House bill were 2.25 cents per gallon of petroleum product, 1.2 cents per therm of natural gas and $5.30 per ton of coal. The rate for electricity was set on the basis of each utility's fuel mix and would have been between 1.1 and 2.0 mills per kilowatt hour. The rates in the Senate bill were half those set for each fuel in the House version. To protect energy intensive industries facing interstate and international competition, both versions capped the amount of tax payable by an individual manufacturer. With these caps, revenue was estimated to be about $184 million for the House proposal and $92 million for the Senate version.

Both proposals dedicated air pollution tax revenue raised from motor fuels to the state's transportation trust fund, but only to be used for public transit projects and traffic reduction measures. The Senate bill earmarked another $21 million for low income energy assistance and weatherization programs, and energy efficiency measures in state buildings. Otherwise revenues were directed to the state's general fund. The Center for Global Change proposed that some of these revenues be dedicated to pollution control and prevention programs currently supported through the general fund.

6.2.3 Minnesota

In 1990, the Minnesota Legislature requested a report from the Pollution Control Agency and Department of Natural Resources on carbon dioxide emissions in Minnesota and incentives to reduce them (Laws of Minnesota 1990, Chapter 587, Sec. 2). A report was prepared proposing a tree planting program to be funded by a fee on carbon dioxide emissions within the state[120]. In 1991, the Legislature formally established the tree planting program, Minnesota Releaf, and requested an implementation plan from the Pollution Control Agency including recommendations on a fee structure (Laws of Minnesota 1991, Chapter 88, Sections 20-22). This report, released in December 1991, recommends introduction of a carbon content fee (essentially a carbon tax) on fossil fuels at a rate of 54 cents per ton of carbon[121]. The report discusses implementation issues and includes draft legislation for the proposed fee.

6.2.4 New York

The New York State Energy Office investigated a range of broad-based environmental and energy taxes as part of the 1991 biennial update of the state's Energy Plan. The Draft Plan, released in July, argues that a carbon tax is preferable to other energy taxes and supports enactment of a phased-in federal carbon tax with revenues earmarked for state environmental remediation and pollution programs.[122] The draft plan focuses on a federal tax because of concerns that a state tax would affect the state's competitive position. However, no analysis is provided of these effects at a low tax rate.

6.3 DISCUSSION

6.3.1 Revenue

The air pollution tax proposed in Senate Bill 665 in Maryland would raise about $92 million per annum, taking into account revenue loss resulting from the cap for energy intensive industries. Two costs to the state slightly reduce net revenue: tax payments on state energy use ($1.2m) and administration of the tax ($0.3m). At the higher rate of $7.50 per ton, the tax would raise about $184 million. Such a tax would add 2.25 cents per gallon to gasoline and fuel oil prices and at most 2 mills (or 2/10 cent) per kilowatt-hour to electricity prices. By comparison, the existing Maryland motor gasoline tax of 18.5 cents per gallon raises $440 million and an additional five cents per gallon would raise approximately $140 million. The state's franchise tax on electric utilities (two percent of gross receipts) raises about $60 million.

NRDC's analysis suggests that a tax of $5.25 per ton would raise $700 million in California. The New York study estimates that a tax of $8 per ton (levied by the Federal Government) would raise $590 million from New York State.

As the Maryland example shows, even quite low carbon taxes can raise very substantial revenues compared with existing state energy taxes. This is because the tax is distributed over a much broader base than are most of the existing taxes.

6.3.2 Competitiveness

Before enacting a carbon tax, state legislators will want to be satisfied that the tax will not adversely affect the state's economic competitiveness. Each proposal should be examined on its own merits, having regard for the state's economy and fuel mix, the existing state tax structure and the fiscal alternatives available to the legislature. The relevant question is not how a carbon tax looks by itself but how it compares with existing energy taxes and with other available options to enhance revenue or reduce spending. Sales taxes, income taxes and cutbacks in the provision of services or infrastructure also can adversely affect a state's competitive position.

There is growing evidence that a carbon tax has a less distorting effect on the economy than various existing taxes. For example, preliminary studies at a national level suggest that introduction of a carbon tax offset by reductions in the corporate income tax or employer payroll tax can lead to an increase in gross national product.[123]

The New York State Energy Office study estimated that a $5 per ton carbon tax would increase the average price of coal in New York by about nine percent, the prices of oil and natural gas by about three percent, the price of gasoline by about one percent and the price of electricity by about 0.8 percent. In Maryland a $7.50 carbon tax adds only 2.25 cents per gallon to gasoline prices and at most 0.2 cents per kilowatt-hour to electricity. These are relatively modest price increases for the revenues generated; their impact should be evaluated in the context of existing inter-state variations in energy prices and taxes. Only large energy-intensive industries operating in an international market, like aluminum, steel and paper mills, would be likely to experience competitive pressures as a result of such energy price increases. As proposed in Maryland, these industries can be protected by a cap.

For energy importing states, a carbon tax combined with other energy efficiency policies may lead to long term economic and employment benefits by reducing dependence on out-of-state energy purchases.

6.3.3 Distributional Issues

Like other energy taxes, a carbon tax is regressive because poorer families tend to spend a greater share of their budgets on energy than do wealthier families. However, options are available to mitigate this effect. The Maryland Senate bill benefits low income households by funding energy assistance programs which have been subject to federal cutbacks over recent years. These programs help families reduce their energy bills through weatherization measures they could not afford otherwise and assist those in greatest need to meet the costs of home heating. Although not as well targeted, another approach is to exempt from the tax residential consumption of electricity and natural gas up to a specified "baseline" amount per household. Of course, a carbon tax can be introduced as just one part of a broader fiscal package which might include a progressive restructuring of existing sales and income taxes. However, it should be noted that a low carbon tax results in only a modest increase in household energy expenditures. At $7.50 per ton, the proposed Maryland tax would increase the average annual household energy bill (including gasoline) by around $50.

Carbon taxes disproportionately effect coal producing regions. But in many cases, the economies of these regions already face adjustment pressures as a result of the federal Clean Air Act. Some of the revenues from a carbon tax could be earmarked for programs or transferred directly to county governments to assist with this adjustment process. In this way, a tax can provide for more equitable outcomes than do other policy approaches.

6.3.4 Impact on Emissions

Two options are available to states. Carbon tax revenues can be dedicated to a trust fund to finance carbon dioxide abatement initiatives (e.g. energy conservation or tree planting programs). Alternatively, revenues can provide for general purpose expenditures or be used to offset other state taxes.

A detailed analysis undertaken by the New York State Energy Office concludes that a modest carbon tax can achieve significant emission reductions if revenues are used to fund carbon abatement measures. The analysis found that a tax of $8 per ton of carbon would reduce New York's emissions by five percent from 1988 levels by the year 2008 and a $20 tax would reduce emissions by ten percent[124].

If revenues are not specifically dedicated, the price effect of the tax alone (at the tax rates likely to be adopted by states) will not have a very significant impact on carbon dioxide emissions in the short term. However, perceptions could matter more than actual tax rates. The medium- to long-term price effect will be magnified to the extent that the tax is perceived to be part of a national and international trend to address the problem of global warming, through carbon taxes and related policies. This is because investment decisions will begin to anticipate future increases in the tax rate and introduction of carbon taxes in other jurisdictions.

6.4 SUMMARY

A carbon tax, levied at a low rate, is an attractive policy tool for addressing global warming and regional air quality problems at a state level. A carbon tax is just another type of energy tax and could be introduced to augment or replace existing state energy taxes. Unlike most of the energy taxes currently levied by states, a carbon tax discriminates between clean and dirty energy sources and technologies. Various options are available to states for the use of carbon tax revenues, including earmarking for carbon abatement programs, economic adjustment assistance for coal regions, and energy assistance for low and fixed income groups.

1 On December 13, 1991, the EC Ministers requested the EC Council (in effect, the bureaucracy of the European Community) to prepare proposals for "higher energy pricing through the use of fiscal instruments." Ministers will choose a set of specific reduction policies in May 1992 from among the full set of instruments, including conservation, efficiency and renewable options.

2 At the Fifth Session of the Intergovernmental Negotiating Committee on a Framework Convention on Climate Change, the U.S. pledged $75M to assist developing countries in addressing climate change. "New U.S. Measures to Mitigate Climate Change," attachment to "U.S. Statement on Commitments," delivered by Robert Reinstein to the Fifth Negotiating Session of the Intergovernmental Negotiating Committee on a Framework Convention on Climate Change (February 27, 1992).

3 See, for example: Morandi, Global Climate Change: State Policy Among Scientific Uncertainty (National Conference of State Legislatures: November 1990); Totten, Energywise Options for State and Local Government: A Policy Compendium (Center for Policy Alternatives: September 1990); Lashof and Washburn, The Statehouse Effect: State Policies to Cool the Greenhouse (Natural Resources Defense Council: July 26, 1990); A World of Difference: Report of the Task Force on Global Climate Change (National Governor's Association: July 1990); Driver and Nixon, State Options for Addressing Global Warming (Center for Clean Air Policy: August 1989).

4 Excerpted from Changing By Degrees (Office of Technology Assessment: 1991). Total C02 emissions from all three sectors totaled about 1.3 billion metric tons in 1987. Of the 36 percent of total C02 emissions from the building sector, one-third is from fossil fuels (i.e. oil and gas) burned directly within residential and commercial buildings; two-thirds is the result of electricity used in the building but generated elsewhere.

5 In November 1991, the Canadian cities of Vancouver, Ottowa, Edmonton and Regina announced their intention to join Toronto in meeting a 20 percent reduction target by 2005. Report to the Ministers (Clean Air Strategy for Alberta: November 1991).

6 Benedick, "A Case of Deja Vu" (Scientific American: April 1992).

7 Just after the dramatic findings prompted NASA scientists to release their 1992 findings one month early, President Bush announced an accelerated phaseout schedule for many ozone depleting substances. "Statement by the Press Secretary" (The White House: February 11, 1992).

8 Better Building Codes for Energy Efficiency (Alliance to Save Energy: September 1991).

9 Residential energy conservation ordinances, also known as "RECOs", call for the installation of conservation measures that are cost effective for the type of housing stock (single or multi family) and for the particular locality (based on climate and energy needs), and set cost ceilings on expenditures and time limits for compliance after date of sale or major renovation.

10 The challenge to develop energy conservation standards in response to the federal mandate presents an example. Because there is such variety of requirements among building types, policymakers have been pressed to generate a national standard. Perhaps these factors provide a basis for Congressional tendency to make states--and through the states, localities--the primary implementers of federal policy in many areas, particularly energy and environment.

11 For example, see Mills and Rosenfeld, Managed Versus Unmanaged 7-Year Electric Growth: Californians Needed 3 New Plants. Texans Needed 11 (Lawrence Berkeley Laboratory: February 1987).

13 Johnson, "But They Still Need Washington," Washington Post, July 14, 1991 p.C3. For further information on state tax and fiscal policy, see also The States and the Poor: How Budget Decisions in 1991 Affected Low Income People (Center on Budget and Policy Priorities and Center for Study of the States: December 1991).

14 Porter, "America's Green Strategy," Scientific American (April 1991).

15 Policy Implications of Global Warming (National Academy of Sciences: 1991).

16 Miller, "Economic Models and Policies on Global Warming," Environment (July/August 1991).

17 Changing By Degrees: Steps To Reduce Greenhouse Gases (Office of Technology Assessment: February 1991).

18 See generally Project 88: Harnessing Market Forces to Protect Our Environment (A Public Policy Project sponsored by U.S. Senators Wirth and Heinz: December 1988).

19 Gahran, "Maryland, California Sign On as Green Lights Partners," Energy User News (July 1991).

20 "Honeywell Survey Finds School Energy Programs Sorely Lacking," Alliance Update (Alliance to Save Energy: Winter 1992).

21 Flavin and Lenssen, "Beyond the Petroleum Age: Designing a Solar Economy (Worldwatch Paper #100: December 1990). And states are growing more sophisticated in analyzing the economic and competitive differences among energy supply options. Testimony solicited in a recent Wisconsin Public Service Commission proceeding found efficiency improvements could generate about 5,400 more jobs for state residents in 2010 than other available options. (Prepared Testimony of Skip Laitner, Advance Plan 6, Docket 05-EP-6, December 30, 1991).

22 Vine et al., Energy Efficiency and the Environment: Forging the Link (American Council for an Energy Efficient Economy 1991).

23 From "The Economic Impact of Global Warming: Competitiveness Is At Stake," delivered by Roger Gale, President, Washington International Energy Group, to Energy Daily's 17th Annual Electric Utility Conference (October 10, 1991).

24 From Gale, "The Economic Impact of Global Warming: Competitiveness is at Stake.

25 Assembly Bill 4420 (1988).

26 Substitute House Bill No. 5696, Public Act No. 90-219 (1990).

27 House Bill 6620, effective July 1, 1991.

28 Senate File 2403 (1990).

29 House Concurrent Resolution No. 12.

30 Report of the Missouri Commission on Global Climate Change and Ozone Depletion (September 24, 1991).

31 Minnesota Statutes, Chapter 587, Section 2.

32 Carbon Dioxide Budgets in Minnesota and Recommendations on Reducing Net Emissions with Trees, Report to the Minnesota Legislature (Minnesota Department of Natural Resources: January 1991).

33 Minnesota Session Laws 1991, Chapter 254, Article 2, Section 21. Carbon Fees to Support Minnesota Releaf: Implementation Recommendations was released by the Minnesota Pollution Control Agency in December 1991.

34 The ability to request energy resource information is critical because a lack of statewide analysis of potential energy and cost savings often constrains the planning process. Analyses performed by a state energy or environment office also can serve as a basis for forecasting and planning on state energy issues.

35 A lack of direct incentives plagues energy efficiency programs. Utility accounts, even when separate budget items, are treated as an expense which, when reduced from realized energy savings, simply are deducted from the next year's budget, rather than retained.

36 A World of Difference: Report of the Task Force on Global Climate Change (National Governor's Association: July 1990). At least one city has attempted to address the issue. In 1982, Columbus, Ohio produced an analysis of administrative structures that focused on effective conservation programs for buildings and automobile fleets. The study, however, did not address the overall functions of offices with authority over energy use. Elements of Successful Energy Management: A Comparative Study of Six Local Governments: A Project Report (Columbus, OH: 1982; DG/82-304).

37 California's Energy Plan (California Energy Commission: 1991).

38 Executive Order No. 118 (December 28, 1988).

39 Senate File 2403 (1990).

40 Arkansas Revised Statutes, Section 15-10-202.

41 Oregon Revised Statutes, Section 469.030.

42 Senate File 2403 (1990).

43 Bold indicates Center for Global Change emphasis.

44 Of the 12.6 billion square feet of total government-occupied floor space in the U.S., state and local governments occupy 91%; the federal government occupies only 1.1 billion square feet, or just nine percent of the total. 1986 electricity expenditures in 1986 totaled $70B, only $2B of which was spent by the federal government. NonResidential Buildings Energy Consumption Survey: Characteristics of Commercial Buildings (Department of Energy; EIA-0246; September 1988) and Energy Efficiency in the Federal Government: Government by Good Example? (Office of Technology Assessment; May 14, 1991).

45 Energy Efficiency in the Federal Government: Government by Good Example? (Office of Technology Assessment: May 1991).

46 Energy Use in Federal Facilities: Squandering Taxpayer Dollars and Needlessly Polluting Our Environment (Alliance to Save Energy: 1991).

47 The items reviewed in this analysis are limited to consideration of buildings owned or leased by public authorities; no efforts to mandate life cycle costing by the private sector have been initiated. The U.S. Department of Energy has developed standards to reduce energy use in new commercial and multifamily residential buildings that serve as voluntary guidelines for the private sector.

48 For example, see Connecticut General Statutes, Title 16A, Chapter 298.

49 See, for example, Massachusetts General Laws, Part I, Title VII, Chapter 40, Section 4. Minnesota on the other hand, limits shared savings agreements of up to ten years duration. Minnesota Code, Part I, Chapter 16B.16.

50 Gerberer, "Honeywell Pact Guarantees County $500K Savings/Yr," Energy User News (July 1991). Note that Honeywell has guaranteed a specific dollar amount of energy savings; should the company's projections fall short, Honeywell will cover losses.

51 As of September 1991, 34 states were using building codes less stringent than the Model Energy Code developed by the Council of American Building Officials, a widely accepted model energy standard. Better Building Codes for Energy Efficiency (Alliance to Save Energy: September 1991).

52 Oregon prescribes that its Department of Energy shall review life cycle cost analyses, but shall be reimbursed up to 0.2% of the capital cost of the project for this service, an explicit mechanism lacking in most other statutes. Oregon Revised Statutes 276.915 at 3(c).

53 Oregon Revised Statutes, Title 26, Chapter 276.900 - 915.

54 Bold indicates Center for Global Change emphasis.

55 Expressed in every day terms, on average, using a 100 watt light bulb in the United States for 10 hours is responsible for 2.2 pounds of C02 being released into the atmosphere.

56 Compendium of Options for Government Policy to Encourage Private Sector Responses to Potential Climate Change, Volume 2, Section 7-7 (U.S. Department of Energy: 1989). 57 Compendium of Options at section 7-13.

58 Gellings, Faruqui and Seiden, "Potential Energy Savings from Efficient Electric Technologies," Energy Policy, pp. 217-30 (April 1991).

59 Smith and Tirpak, The Potential Effects of Global Climate Change on the United States, pp. 187-97 (U.S. EPA: December 1989).

60 Moskovitz, Profits and Progress Through Least Cost Planning, p. vi (a report to the National Association of Regulatory Commissioners: 1989). See also Least-Cost Utility Planning Handbook for Public Utility Commissioners (National Association of Regulatory Commissioners: 1988).

61 Mitchell, "Lagging in Least-Cost Planning--Not as Far Along As We Thought," pp. 24-31 (Electricity Journal: 1989); Totten, Energywise Options for State and Local Governments, pp. 10-14 (Center for Policy Alternatives: 1989); Hirsh, "Building a Brighter Future: State Experiences in Least-Cost Electrical Planning" (Energy Conservation Coalition and Environmental Action Foundation: 1990).

62 Ferry, The Law of Independent Power (Section 9: 1990).

63 Kahn and Goldman, "Alternative Approaches to Competitive Bidding for Power Supply," pp. 28-41 (Electricity Journal: March 1990).

64 Esteves, "Fact and Fiction in Integrated Bidding Processes--Let's Look at the Record!" pp.32-39 (Electricity Journal: December 1989).

65 This concept and the status of state implementation is extensively reviewed in a study by the Pace University Center for Environmental Legal Studies under the direction of Professor Richard Ottinger, Environmental Costs of Electricity (1990).

66 Foley and Lee, "Scratching the Surface of the New Planning: A Selective Look," pp. 48-55 (Electricity Journal: July 1990); Cohen et al., "Environmental Externalities: What State Regulators Are Doing," pp. 24-30 (Electricity Journal: July 1990). The four states that so far have assigned explicit monetary values to emissions are New York, Massachusetts, California and Nevada. The former two do so for purposes of bidding systems, the latter two in the resource planning and evaluation process. The value assigned to C02 emissions (in 1989 $/lb) is 0.001 in New York, 0.011 in Massachusetts and Nevada, and 0.013 in California. Massachusetts and Nevada also assign a value of 0.11 to emissions of methane, and 1.98 and 2.07 to N20. New York assigns a mitigation cost of 0.1 cents per kilowatt hour to C02 emissions. Nevada assigns a greenhouse cost to both C02 and carbon monoxide. Wiel, "Nevada Adopts Clean Power Rule" (unpublished paper on file with the Center for Global Change: 1991).

67 See discussion in Moskovitz.

68 At the turn of the century, it was common to find nonexclusive, competitive franchises for the generation of electricity. The return to a more competitive power system is in some ways, therefore, an ironic return to the early days of the industry.

69 Electric Power Wheeling and Dealing, pp. 56-58 (Office of Technology Assessment: 1989).

70 S 2166 - "National Security Energy Act of 1992" (Title XV, Electric Utilities: passed February 19, 1992).

71 See discussion in Hirsh.

72 Weil, "The Electric Utility as Investment Bank for Energy Efficiency," pp. 30-37 (Electricity Journal: May 1991).

73 Under a 1978 federal law, the Public Utility Regulatory Policies Act (PURPA), private investors may build cogeneration and renewable energy power systems and sell electricity to electric utilities without becoming subject to regulation as a utility company. Electric utilities are obligated to buy the electricity offered at a price based on their avoided costs. Nonutility generation has grown rapidly and is expected to provide a significant percentage of new power in the years ahead. See generally, Electric Power Wheeling and Dealing, pp. 46-47 (Office of Technology Assessment: 1989).

74 Trexler, Minding the Carbon Store: Weighing U.S. Forestry Strategies to Slow Global Warming, p.48 (World Resources Institute: 1991).

75 Wald, "Two Big California Utilities Plan to Cut C02 Emissions," New York Times, May 21, 1991, p. D1.

76 Wind Energy Weekly, Oct. 7, 1991.

77 Harrison, "Northwest Energy All-Stars Huddle, Then Score for Conservation," pp. 9-12 (Northwest Energy News: September/October 1991).

78 Bold indicates Center for Global Change emphasis.

79 Transport's contribution to climate change derives principally from the combustion of gasoline, a fossil fuel. When burned, a single tank of gasoline produces between 150 and 200 kg of C02. Walsh, "Global Trends in Motor Vehicle Use and Emissions," in Annual Review of Energy, Volume 15 (Annual Reviews, Inc., Palo Alto CA: 1990). Contributions from CFCs, used for instance in air conditioning fluids, foam padding and insulation, are much smaller and do not vary proportionally with the energy consumption of the vehicle. The impact is not inconsequential, however: approximately one out of every five pounds of CFCs manufactured in the U.S., just over 19 percent, is used in motor vehicle air conditioners. Regulatory Impact Analysis: Protection of Stratospheric Ozone (U.S. EPA: December 1987).

80 Although carbon monoxide (CO) does not trap heat directly, it may be indirectly increasing greenhouse warming by as much as 20 - 40 percent by raising the levels of methane and ozone, other potent greenhouse gases. Increased presence of CO tends to decrease the presence of hydroxyl radicals (OH), compounds which normally react with and remove methane from the atmosphere. For a further description of these processes, see Walsh, "Global Trends" at p. 224.

81 Tropospheric or "ground level" ozone (O3) also is a potent greenhouse gas. While responsible for only eight percent of total greenhouse warming, the significance of ozone may be somewhat greater because of its short lifetime as compared to other greenhouse gases. Once formed, tropospheric ozone has an atmospheric lifetime of only hours to days, as compared to decades or a century for most other gases. Therefore, eliminating the precursors of ozone may have more immediate short-term effects than eliminating similar amounts of other gases. Walsh, "Global Trends" at p. 217.

82 These two factors--urban density and availability of public transportation--account for most of the variations in fuel use among U.S. cities. Estimates are that low density cities like Houston and Phoenix could save 20-30 percent of their fuel use through modest increases in density and transit improvements. Parson, The Transport Sector and Global Warming (Global Environmental Policy Project, Harvard University: 1991). Other effects of land use policy on emission reductions are discussed in Section 5 of this report.

83 Most transportation options to reduce criteria pollutants are designed to achieve greater energy efficiency and conservation and to increase the use of alternative fuels. Their principal aim may be to reduce conventional air pollutants--carbon monoxide, nitrogen oxide, ozone and sulfur dioxide--but in doing so, they contribute to stabilizing greenhouse gases in the atmosphere.

84 The U.S. is moving rapidly toward importing more than half of its petroleum. In 1990, as compared to 1986, the U.S. imported 1.8 million more barrels of oil per day, an increase of 15 percent in just four years. Imported oil is also the single largest component of the U.S. trade deficit. America's Energy Choices (Natural Resources Defense Council et. al.: 1991). Increased fuel taxes are expected to decrease driving by affecting the marginal cost of driving an extra mile.

85 Parson, The Transport Sector and Global Warming, at p. 88.

86 The magnitude of the environmental effects cannot be estimated at this time, since neither demand elasticity nor manufacturer responses are well understood. Still it is expected that customers will tend to prefer cleaner cars if prices rise for relatively dirty cars due to the sales tax variability.

87 HR 2950, codified at 23 USC Section 133 - "Surface Transportation Program" (passed December 18, 1991). The Act also sets aside monies for "transportation enhancement activities," including pedestrian and bicycle facilities and scenic and historic preservation.

88 Gallagher, Bulletin (Surface Transportation Policy Project: January 14, 1992). The Act already is influencing conventional transportation wisdom. Backed by $5.65 million of federal funds from a six-year, $151 billion transportation bill, New Jersey has canceled $1.2 billion in new highway projects and doubled the state's investments on mass transit. Machalaba, "States Try New Tactic to Curb Auto Traffic: Cut Highway Spending," Wall Street Journal, April 8, 1992, p. 1.

89 23 Maine Revised Statutes Annotated, Section 73.

90 Senate No. 3 - "An Act Concerning Transportation Revenues and Financing" (Special Session 1992).

91 For the first two years, surcharges and credits will apply to new and used passenger cars with model years of 1993 or 1994. Beginning January 1995, the scheme will apply to new or used passenger cars with a model year of 1995 and thereafter.

92 Surcharges will be calculated at $50 for each mile per gallon that the fuel economy rating is less than 27; credits $11 be determined by multiplying $50 for each mile per gallon over 35. The amount of surcharge or credit are both capped at one percent of the vehicle purchase price.

93 In June 1992, the U.S. National Highway Traffic Safety Administration (NHTSA) notified the state of Maryland that its feebate system violates the federal Motor Vehicle and Cost Savings Act. NHTSA believes Maryland's law is preempted by two provisions of the federal law: the prohibition against states adopting or enforcing any law or regulation "relating to" fuel economy standards, and the bar of regulations regarding disclosures of fuel economy unless identical to the federal requirements. In response, Maryland's Attorney General agreed that the label is preempted, but vowed to challenge NHSTA's determination that the feebate program "relates to" fuel economy standards.

94 House Bill 2433 (1991).

95 Executive Order 91-253 (October 1991).

96 Senate File 508 (1991).

97 Senate Bill 765 (1991).

98 Colorado Revised Statutes 25-7-106.9 (1989).

99 House Bill 2433 (1991).

100 Senate Bill 537 (1991) .

10l House Bill 2130 (1991).

102 Public Law 91-79 (1991).

103 DRIVE+, sponsored by State Senators Hart and Kopp, was passed by both houses of the California legislature in 1990 but was vetoed by outgoing Governor Deukmejian. Governor Pete Wilson announced he would sign the bill if passed in 1991, but the bill was held in committee. A 1992 version with minor adjustments has been reintroduced and is expected widely to pass the Transportation Committee as it has twice before. From there, the bill will go the Revenue and Taxation Committee. Contact Joe Caves of Senator Hart's staff at 916.445.5405 for further information.

104 In practice, the ARB would determine the sales tax level for each car type sold, based on the manufacturer's certification of its emissions. Sales tax levels would be set based on the sales weighted emissions levels of each model sold in the state.

105 For gasoline and diesel vehicles, emissions of C02, are readily computed from U.S. EPA certified mileage figures for each class of car. To this extent, DRIVE+ also provides incentives for more efficient cars. It is also true that reducing pollutants is technically easier for more efficient vehicles, so DRIVE+ may stimulate sale of high mpg vehicles at the expense of gas guzzlers.

106 The present federal gas guzler tax applies to cars achieving below 22.5 mpg.

107 Because of uncertainty, DRIVE+ includes provisions that require ARB to reduce sales tax credits by 30 percent to establish a reserve fund to guard against inadequate revenue if the market share shift among models is greater than anticipated.

108 From Gordon, Steering A New Course: Transportation, Energy and the Environment (Union of Concerned Scientists: 1991).

109 Similar results could be achieved by having motorists pay insurance premiums based on odometer readings. From Ledbetter and Ross, "Light Vehicles: Policies for Reducing Their Energy Use and Environmental Impacts" (American Council for an Energy Efficient Economy: 1991).

109 Bold indicates Center for Global Change emphasis.

110 Transport accounts for approximately two-thirds of oil use in the U.S. and one-third of U.S. C02 emissions. Roughly half the people in the U.S. live in urban areas that do not meet urban air quality standards, largely because of automobile use. Global Warming and Energy Choices (Concern, Inc.: January 1991).

111 Euclid v. Ambler Realty Co., 272 U.S. 363 (1926).

112 Lowe, "Shaping Cities" in State of the World 1992 (Worldwatch Institute: 1991).

113 Oregon Administrative Rules 660, Division 12 (adopted April 26, 1991).

114 Huang, Akbari and Taha, "The Wind-Shielding and Shading Effects of Trees on Residential Heating and Cooling Requirements" (Lawrence Berkeley Laboratory: January 1990).

115 Cooling Our Communities: A Guidebook on Tree Planting and Light-Colored Surfaces (U.S. EPA: January 1992).

116 See Code of the County of Fairfax, Virginia, Chapter 112, Article 13, Section 101, Purpose and Intent.

117 Bold indicates Center for Global Change emphasis.

118 Policy Implications of Global Warming Report of the Mitigation Panel (National Academy of Sciences: 1991).

119 Under the proposal, 50 percent of the tax would apply uniformly to all energy sources except renewables and the other 50 percent would vary according to carbon content. As applied to oil, the proposed European tax is equivalent to a carbon tax of $75 per ton of carbon.

120 Carbon Dioxide Budgets in Minnesota and Recommendation on Reducing Net Emissions with Trees: Report to the Minnesota Legislature (Minnesota Department of Natural Resources: January 1991).

121 Carbon Fees to Support Minnesota Releaf: Implementation Recommendations - Report to the Minnesota Department of Natural Resources (Minnesota Pollution Control Agency: December 1991).

122 Draft New York State Energy Plan - Staff Report (New York State Energy Office: 1991).

123 Brinner, Shelby, Yanchar, Cristofaro and Novak, "Carbon Tax Recycling: Converting Costs into Benefits" (presented to the Stanford Energy Modeling Forum: September 1991).

124 Analysis of Carbon Reduction in New York State (New York State Energy Office: 1991).

LIST OF SOURCES

BOOKS

Brest, Paul and Sanford Levinson. Processes of Constitutional Decisionmaking. (Little Brown & Co.: 1983).

Ferry, Steven. The Law of Independent Power. (Clark Boardman Company 1990).

Gordon, Deborah. Steering A New Course: Transportation Energy and the Environment. (Union of Concerned Scientists: 1991).

Harwood, Corbin. Using Land to Save Energy. An Environmental Law Institute Book (Ballinger Publishing Company 1977).

Hayes, Gail. Solar Access Law. An Environmental Law Institute Book (Ballinger Publishing Company 1979).

Ottinger, Richard. Environmental Costs of Electricity. (Pace University Center For Environmental Legal Studies: 1990).

Percival, Robert, Alan Miller, et al. Environmental Regulation: Law. Science and Policy. (Little Brown & Co.: revised version expected Fall 1992).

Thompson, Grant. Building To Save Energy Legal and Regulatory Approaches. An Environmental Law Institute Book (Ballinger Publishing Company 1980).

Vine, Edward. Energy Efficiency and the Environment: Forging the Link. (American Council for an Energy Efficient Economy 1991).

ARTICLES AND REPORTS

"A Case of Deja Vu." Richard Benedick. Scientific American April 1992.

"All Politics is Local." Clifford Gladstein. Environmental Forum, January/February 1990.

"Alternative Approaches to Competitive Bidding for Power Supply." Edward Kahn and Charles Goldman. Electricity Journal, March 1990.

America's Energy Choices. Natural Resources Defense Council et. al, 1991.

"America's Green Strategy." Michael Porter. Scientific American, April 1991.

Analysis of Carbon Reduction in New York State. New York State Energy Office, 1991.

A World of Difference: Report of the Task Force on Global Climate Change. National Governor's Association, July 1990.

Better Building Codes for Energy Efficiency Alliance to Save Energy, September 1991.

Beyond the Petroleum Age: Designing a Solar Economy. Christopher Flavin and Nicholas Lenssen. Worldwatch Paper #100, December 1990.

Bulletin. Eileen Gallagher. Surface Transportation Policy Project, January 14, 1992.

"Building a Brighter Future: State Experiences in Least-Cost Electrical Planning." Nancy Hirsh. Energy Conservation Coalition and Environmental Action Foundation, August 1990.

"But They Still Need Washington." Brad Johnson. Washington Post, July 14, 1991, p. C3.

Carbon Dioxide Budgets in Minnesota and Recommendations on Reducing Net Emissions with Trees. Minnesota Department of Natural Resources, January 1991.

Carbon Fees to Support Minnesota Releaf: Implementation Recommendations. Minnesota Pollution Control Agency, December 1991.

"Carbon Tax Recycling: Converting Costs into Benefits." R.E. Brinner, M. Shelby, J.M. Yanchar, A. Cristofaro and M.H. Novak. Paper presented to the Stanford Energy Modeling Forum, September 1991.

Changing By Degrees: Steps To Reduce Greenhouse Gases. Office of Technology Assessment, 1991.

Cooling Our Communities: A Guidebook on Tree Planting and Light-Colored Surfaces. U.S. Environmental Protection Agency, January 1992.

Compendium of Options for Government Policy to Encourage Private Sector Responses to Potential Climate Change. U.S. Department of Energy, 1989.

"Economic Models and Policies on Global Warming." Alan S. Miller. Environment, July/August 1991.

"Efficiency Standards for Lamps, Motors, Commercial HVAC Equipment and Showerheads: Recommendations for State Action." Steve Nadel and Howard Geller. American Council for an Energy Efficient Economy, July 1991.

Electric Power Wheeling and Dealing. Office of Technology Assessment, 1989.

Elements of Successful Energy Management: A Comparative Study of Six Local Governments: A Project Report. Columbus, OH, 1982.

Energy Efficiency and the Environment: Forging the Link. Edward Vine et al. American Council for an Energy Efficient Economy, 1991.

Energy Efficiency in the Federal Government: Government by Good Example? Office of Technology Assessment, May 1991.

Energy Use in Federal Facilities: Squandering Taxpayer Dollars and Needlessly Polluting Our Environment. Alliance to Save Energy, 1991.

Energywise Options for State and Local Government: A Policy Compendium. Michael Totten. Center for Policy Alternatives, September 1990.

"Environmental Externalities: What State Regulators Are Doing." Sam Cohen et al. Electricity Journal July 1990.

"Fact and Fiction in Integrated Bidding Processes--Let's Look at the Record!" Richard Esteves. Electricity Journal December 1989.

"Global Climate Change: State Policy Among Scientific Uncertainty." Larry Morandi. National Conference of State Legislatures, November 1990.

"Global Trends in Motor Vehicle Use and Emissions." Michael Walsh. Annual Review of Energy, 1990.

Global Warming and Energy Choices. Concern, Inc., January 1991.

"Honeywell Pact Guarantees County $500K Savings/Yr." Raanan Gerberer. Energy User News. July 1991.

"Honeywell Survey Finds School Energy Programs Sorely Lacking." Alliance Update, Alliance to Save Energy, Winter 1992.

"Lagging in Least-Cost Planning--Not as Far Along As We Thought." Cynthia Mitchell. Electricity Journal December 1989.

Least-Cost Utility Planning Handbook for Public Utility Commissioners. National Association of Regulatory Commissioners, 1988.

"Light Vehicles: Policies for Reducing Their Energy Use and Environmental Impacts." Mark Ledbetter and Marc Ross. American Council for an Energy Efficient Economy, 1991.

Managed Versus Unmanaged 7-Year Electric Growth: Californians Needed 3 New Plants. Texans Needed 11. Evan Mills and Arthur Rosenfeld. Lawrence Berkeley Laboratory, February 1987.

"Maryland, California Sign On as Green Lights Partners." Amy Gahran. Energy User News, July 1991.

Minding the Carbon Store: Weighing U.S. Forestry Strategies to Slow Global Warming. Mark Trexer. World Resources Institute, 1991.

"Nevada Adopts Clean Power Rule." Hon. Stephen Wiel. Unpublished paper on file with the Center for Global Change, 1991.

New York State Energy Plan. New York State Energy Office, February 1992.

NonResidential Buildings Energy Consumption Survey: Characteristics of Commercial Buildings. Department of Energy, September 1988.

"Northwest Energy All-Stars Huddle, Then Score for Conservation." Wind Energy Weekly, October 7, 1991.

Policy Implications of Global Warming. National Academy of Sciences, 1991.

"Potential Energy Savings from Efficient Electric Technologies." Clark Gellings et al. Energy Policy, April 1991.

Profits and Progress Through Least Cost Planning. David Moskovitz. National Association of Regulatory Commissioners, 1989.

Project 88: Harnessing Market Forces to Protect Our Environment. U.S. Senators Wirth and Heinz, December 1988.

Regulatory Impact Analysis: Protection of Stratospheric Ozone. U.S. EPA, December 1987.

Report to the Ministers. Clean Air Strategy for Alberta, November 1991.

"Scratching the Surface of the New Planning: A Selective Look." Lonnie Foley and Allen Lee. Electricity Journal July 1990.

"Shaping Cities." Marcia Lowe. State of the World, Worldwatch Institute, 1992.

State of the States. Renew America, 1989.

"States Offer a Way out of Oil Dependency." Neal Pierce. National Journal September 8, 1990.

State Options for Addressing Global Warming. Center for Clean Air Policy, August 1989.

"States Try New Tactic to Curb Auto Traffic: Cut Highway Spending." Daniel Machalaba. Wall Street Journal April 8, 1992.

"The Electric Utility as Investment Bank for Energy Efficiency." Hon. Stephen Weil. Electricity Journal May 1991.

The Potential Effects of Global Climate Change on the United States. Joel Smith and Dennis Tirpak. U.S. Environmental Protection Agency, December 1989.

The States and the Poor: How Budget Decisions in 1991 Affected Low Income People. Center on Budget and Policy Priorities and Center for Study of the States, December 1991.

"The States are Becoming the New Big Government." Virginia Postel. Washington Post, July 14, 1991, p. C3.

"The States at Bat." Washington Post, August 26, 1991, p. A17.

The Statehouse Effect: State Policies to Cool the Greenhouse. Daniel Lashof and Eric Washburn. Natural Resources Defense Council July 1990.

The Transport Sector and Global Warming. Edward Parson. Harvard University Global Environmental Policy Project, 1991.

The Wind-Shielding and Shading Effects of Trees on Residential Heating and Cooling Requirements. Y. Huang, H. Akbari and H. Taha. Lawrence Berkeley Laboratory, January 1990.

"Two Big California Utilities Plan to Cut C02 Emissions." Matthew Wald. New York Times, May 21, 1991, p. D1.

"Warning From the Stratosphere." Washington Post, October 11, 1991, p. A26.

MISCELLANEOUS

"New U.S. Measures to Mitigate Climate Change." From U.S. Statement on Commitments. Delivered by Robert Reinstein to the Fifth Negotiating Session of the Intergovernmental Negotiating Committee on a Framework Convention on Climate Change, New York City, February 27, 1992.

Prepared Testimony of Skip Laitner. Wisconsin Public Service Commission, Docket 05-EP-6, Advance Plan 6, December 30, 1991.

"Statement by the Press Secretary," (The White House: February 11, 1992).

"Study Shows Upgraded State Building Codes Could Save Enough Energy to Serve up to 70,000 Households." Press Release of the Alliance to Save Energy, July 1991.

"The Economic Impact of Global Warming: Competitiveness Is At Stake." Speech by Roger Gale, President, Washington International Energy Group, to the 17th Annual Electric Utility Conference, October 10, 1991.