Less than a week after President Obama's Inauguration, he issued a Presidential Memorandum Monday that reversed course on one aspect of the federal government's climate policy.

In December, 2007, then-President Bush signed into law a bill on energy security that also directed the U.S. Department of Transportation to increase the corporate average fuel economy (CAFE) standards for new motor vehicle emission exhaust.  Immediately thereafter, Stephen Johnson, then administrator of the U.S. Environmental Protection Agency, issued a decision denying California's long-standing request for a waiver that would have allowed the state to mandate that automobile manufacturers comply with greenhouse gas (GHG) emission standards for new automobiles that are more-stringent than existing federal standards.  Johnson and Bush argued then that the federal government needed to coordinate climate policy and that a patchwork of state actions would be harmful to U.S. interests.

While California is the only state pursuant to federal law that, with a waiver, can regulate new vehicle emissions more stringently than the federal government, federal law also allows other states to adopt the California standard.  Thirteen other states, including New York, New Jersey, and Connecticut, are among the states that have for years been poised to adopt the California standard for GHGs once California obtains a waiver. 

Environmentalists and California state officials had hoped that the April, 2007 decision of the U.S. Supreme Court in the case of Massachusetts v. EPA (which held that the EPA was required under the Clean Air Act to regulate GHGs emissions from new automobiles unless it can determine that GHGs pose no danger to human health and the environment) would pave the way for the EPA to approve California's waiver request.  The December, 2007, action of the Bush Administration, however, blocked the state's initiative.

Obama announced the opposite view Monday: "The federal government must work with, not against, states to reduce [GHG] emissions. California has shown bold and bipartisan leadership through its effort to forge 21st century standards, and over a dozen states have followed its lead. But instead of serving as a partner, Washington stood in their way. This refusal to lead risks the creation of a confusing and patchwork set of standards that hurts the environment and the auto industry.

"The days of Washington dragging its heels are over.  My administration will not deny facts, we will be guided by them.  We cannot afford to pass the buck or push the burden onto the states.  And that's why I'm directing the [EPA] to immediately review the denial of the California waiver request and determine the best way forward.  This will help us create incentives to develop new energy that will make us less dependent on oil that endangers our security, our economy, and our planet."

Obama explained that his administration's goal is not to further burden an already struggling auto industry, but rather to help America's automakers prepare for the future, and that the federal government is now committed to helping the auto industry to thrive by "building the cars of tomorrow, and galvanizing a dynamic and viable industry for decades to come."

For a copy of Obama's full statement on the California waiver issue and his separate directive to the DOT to move more quickly in updating the CAFE standards, click on this link to the White House web site: http://www.whitehouse.gov/blog_post/Fromperiltoprogress/

Well, we have a new President and a new Congress.  Mr. Obama mentioned climate change a few times in his inaugural address.  When he gets down to the nitty-gritty, let’s hope he can get something done.  Like fix the National Flood Insurance Program (NFIP). 

The National Flood Insurance Program is mired in debt to the tune of more than $17 billion.  A bill that would have forgiven that debt and provided for future solvency of the NFIP passed through both houses of Congress with bipartisan support in 2008, but died in conference when the 110^th Congress adjourned for the last time.  The Flood Insurance Reform and Modernization Act of 2007 would have ended federal subsidization of many flood insurance policies by phasing in risk-based premiums.  The bill would also require more homeowners to purchase flood insurance.

The bill was first proposed in the wake of the catastrophic 2005 Gulf hurricanes, and its most recent version hung on in Congress for more than a year while the NFIP’s debt continued to rise.  Interest payments alone on the NFIP’s debt amount to more than $1 billion annually.  Neither Midwestern flooding nor Hurricane Ike, however, were sufficient to motivate the House and Senate to reach an agreement on the future of federal flood insurance.  The new Congress will have tough choices to make about how flood insurance premiums should be calculated, who should be required to purchase coverage, and whether optional insurance products should be offered through the NFIP.

Current NFIP rates are set based on national averages.  Both the House and Senate versions of the flood insurance bill would have eliminated federal subsidies for many flood insurance policies by phasing in actuarial risk-based policy premiums.  Because many of these policies are heavily subsidized, the phase-in would result in steep premium increases for affected homeowners and businesses.  The pace of these increases was a point of contention in debate over the bill, with the House voting for a modest, gradual phase-in of actuarial rates and the Senate voting for a more aggressive phase-in designed to quickly generate premiums sufficient to cover claims.

While risk-based premium pricing is likely to lead to flood insurance rate increases for many of the NFIP’s 5.5 million customers, some homeowners and businesses will see a decrease in their flood insurance premiums.  A recent Government Accountability Office (GAO) audit of the last thirty years of NFIP data shows that Florida residents have paid almost $10 billion more in flood insurance premiums than they have collected in flood insurance benefits.  Other Gulf-state residents have collected more in flood insurance benefits than they have paid into the program.  Recent heavy river flooding has led to more benefits being paid than premiums collected in states like West Virginia and Missouri.  Risk-based NFIP premium pricing would address these regional disparities.

The question of who will be required to purchase flood insurance is a sticking point on which lawmakers will continue to struggle as they move forward with flood insurance reform.  Both the House and Senate versions of the flood insurance bill would have mandated flood insurance coverage in the 100-year flood plain and in areas located behind levees and dams, even those certified by the Army Corps of Engineers.  Several members of Congress expressed concern about imposing a blanket coverage requirement without factoring in the actual risk of individual levees and dams failing.

Another major point of contention in debate over the flood insurance bill stems from a proposal to add optional, actuarially-priced multiperil coverage to the NFIP.  Proponents of the measure argued that increasingly severe storms call for policies that cover damage caused by either windstorm or flooding, without requiring a determination as to whether wind or flooding caused the damage.  These multiperil policies would alleviate the problem faced by many policyholders after Hurricane Katrina when their claims were denied on the basis of anti-concurrent causation clauses that worked to exclude claims for a covered event (wind) when a non-covered event (flooding) occurred concurrently.  See Tuepker v. State Farm Fire & Cas. Co., 507 F.3d 346 (5th Cir. 2007) (reversing trial court and upholding anti-concurrent causation clause).  Given the proposed risk-based policy pricing, proponents of adding multiperil coverage to the NFIP argue that these optional policies won’t increase the program’s cost.  Opponents argue that adding coverage to a program currently operating more than $17 billion in the red would be financially irresponsible.

One aspect of NFIP modernization that lawmakers appear to agree on is the need for the Federal Emergency Management Agency (FEMA) to revise the floodplain maps used to determine NFIP policy pricing and coverage requirements.  Both the House and Senate versions of the flood insurance bill appropriated funding to update floodplain maps.  FEMA lags behind private insurers in that it has not yet begun to factor climate change into its mapping process.  The House version of the flood insurance bill was passed with an amendment that would have required FEMA to use the latest climate science in updating its floodplain maps. 

This mapping issue, and the questions of how to set rates, for whom to mandate coverage and what types of coverage to offer, are all waiting for the 111th Congress and the 44th President.  They need to hurry, the Tropical Meteorology Project at Colorado State University predicts an above-average Atlantic hurricane season.

Small Business Energy Efficiency Grants

by Frances Ruml Beckley

Last year, Maryland offered grants to promote renewable energy business projects.  It was sold out within days.  Pennsylvania has just stepped onto the same path.  It is likely that the Commonwealth’s largess will be tapped just as quickly.

On January 12, the Pennsylvania Department of Environmental Protection announced that it is accepting applications for Small Business Energy Efficiency Grants, which were authorized as part of Pennsylvania’s Alternative Energy Investment Act passed last summer.  The applications will be accepted on a first-come-first-served basis until May 1, 2009 or until the three million dollars available in this grant round is exhausted.

The Grants are available to independent small businesses in the Commonwealth to purchase and install energy efficient equipment or processes.  Examples of eligible businesses include manufacturers, retailers, service providers, and agricultural concerns.  The business must be a for-profit entity with at least one full-time employee at the facility receiving the grant and no more than one hundred total employees.

Grants are available up to the lesser of $25,000 or 25% of an eligible project’s costs.  The project must save the small business at least 20% of its annual energy cost or result in a 20% cost saving for the system being replaced.  The project also must save the small business at least $1000 annually.  Residential rental units and dwellings are not eligible; neither are many air conditioning units, many wood heaters, waste oil fired furnaces, solar power systems, vehicle related upgrades for transportation equipment, or vending or coin-operated machines.

Examples of eligible projects include energy efficient lighting, high efficiency furnaces, boilers and air conditioners, geothermal heat pumps, windows and insulation, and energy efficient process equipment.  Some projects -- such as windows, doors and insulation -- require a professional energy assessment of the proposed improvements.  If the type of equipment being replaced is covered by the Energy Star program, then the equipment being installed must be Energy Star rated.  Costs cannot have been incurred before the January 12, 2009 grant opening date and projects must be completed by the earlier of 180 days after the grant agreement is executed or October 30, 2009.

The forms are available at http://www.depweb.state.pa.us/energindependent/cwp/view.asp?a=3&q=543714. 

Good luck with your application.  Let us know how it goes.

With the inauguration today of President Barack Obama, the likelihood of looming federal climate change regulation increased, as expected, but even Mr. Obama’s Inaugural Address left little doubt that his list of near-term priority issues includes energy and climate change, as he referenced these issues three times in his speech.

Mr. Obama said that the ways the nation uses energy “strengthens our adversaries and threaten our planet.”  He then said: “For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act - not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do.”

After canvassing other domestic and foreign policy issues and striding through his theme, Mr. Obama touched on the climate issue again as he neared the conclusion of his speech: “With old friends and former foes, we will work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet.”

And so if there was any doubt that the issue of climate change regulation was still foremost on the mind of Mr. Obama, today’s Inaugural Address provides strong evidence to the contrary, suggesting that his administration intends to hit the ground running with this issue in mind.