MCCAG Final Report

MCCAG Final Report
Minnesota Climate
Change Advisory Group
Final Report
A Report to the Minnesota Legislature
April 2008
Table of Contents
Acknowledgments........................................................................................................................... ii
Members of the Minnesota Climate Change Advisory Group (MCCAG) .................................... iii
Acronyms.........................................................................................................................................v
Executive Summary ..................................................................................................................EX-1
Chapter 1 – Background and Overview....................................................................................... 1-1
Chapter 2 – Inventory and Forecast of GHG Emissions.............................................................. 2-1
Chapter 3 – Residential, Commercial, and Industrial Sectors ..................................................... 3-1
Chapter 4 – Energy Supply .......................................................................................................... 4-1
Chapter 5 – Transportation and Land Use ................................................................................... 5-1
Chapter 6 – Agriculture, Forestry, and Waste Management ....................................................... 6-1
Chapter 7 – Cross-Cutting Issues................................................................................................. 7-1
Chapter 8 – Cap-and-Trade.......................................................................................................... 8-1
Appendixes
A. Governor Pawlenty’s Letter.................................................................................................. A-1
B. Description of MCCAG Process............................................................................................B-1
C. Members of Technical Work Groups ....................................................................................C-1
D. GHG Emissions Inventory and Reference Case Projections ................................................ D-1
E. Methods for Quantification....................................................................................................E-1
F. Residential, Commercial, and Industrial Sectors – Policy Recommendations...................... F-1
G. Energy Supply – Policy Recommendations.......................................................................... G-1
H. Transportation and Land Use – Policy Recommendations................................................... H-1
I. Agriculture, Forestry, and Waste Management – Policy Recommendations .........................I-1
J. Cross-Cutting Issues – Policy Recommendations ..................................................................J-1
K. Cap-and-Trade – Policy Recommendations ......................................................................... K-1
L. Reference List ........................................................................................................................L-1
i
Acknowledgments
The Minnesota Climate Change Advisory Group (MCCAG) gratefully acknowledges the
following individuals and organizations who contributed significantly to the successful
completion of the MCCAG process and the publication of this Final Report:
Thomas D. Peterson and the Center for Climate Strategies (CCS), with its dedicated team of
professionals that contributed extraordinary amounts of time, energy, and expertise in providing
facilitation services and technical analysis for the MCCAG process. Special thanks to June
Taylor, Laurie Cullen, Joan O’Callaghan, and Randy Strait who coordinated and edited the Final
Report, and to other CCS team members:
Donna Boysen
Kenneth Colburn
Bill Dougherty
Gloria Flora
Frank Gallivan
Tom Looby
Lisa McNally
Katie Pasko
Stephen Roe
Adam Rose
Linda Schade
Will Schroeer
Brad Strode
Julia Vetromile
John Warmerdam
Dan Wei
Jeff Wennberg
Special thanks also go to Edward Garvey of the Minnesota Department of Commerce (DOC) and
David Thornton of the Minnesota Pollution Control Agency (PCA) who coordinated and
supervised all activities associated with the MCCAG process on behalf of the DOC and PCA.
Many thanks also to DOC staff Marya White and PCA staff Dave Richfield, John Seltz, Janet
Streff, and David Thornton who also contributed their time, energy, and expertise as liaisons to
the Technical Work Groups. Valuable coordination assistance and technical expertise were also
provided by Linda Limback of DOC along with Bill Sierks and Rebecca Walter of PCA.
The MCCAG also recognizes the many individuals who participated in the sector-based
Technical Work Groups, all of whom are listed in Appendix C. Even though this report is
intended to represent the results of the MCCAG’s work, the group would be remiss if it did not
recognize and express appreciation for the time and efforts spent in discussion, study, and
deliberation of each fellow member of the group.
Finally, the MCCAG would like to thank the donor organizations that provided the financial
support to CCS that allowed it to serve the MCCAG: the Minnesota Department of Commerce,
the Energy Foundation, the Rockefeller Brothers Fund, and the Kendeda Fund.
ii
Members of the Minnesota
Climate Change Advisory Group
Bishop Jon Anderson, Southwestern Minnesota Synod of the Evangelical Lutheran Church of
America
Dr. Leith Anderson, Wooddale Church
Willis E. Anthony, Minnesota River Agricultural Team
Peter Aube, Potlatch Forest Products Corporation
Daniel Bartholomay, McKnight Foundation
Alexander Bascom, Global Green Energy, LLC
John Brandl, University of Minnesota, Humphrey Institute of Public Affairs
Jan Callison, Mayor, City of Minnetonka
Rick Carter, LHB, Inc.
Mitch Davis, Davisco Foods
Charles Dayton, Minnesota Center for Environmental Advocacy
Joe Duggan, Pheasants Forever
Laura Ekholm, L & M Radiator
Stan Ellison, Shakopee Mdewakanton Sioux Community
Jim Erkel, Minnesota Center for Environmental Advocacy
Barbara E. Freese, Union of Concerned Scientists
Ann Glumac, Glumac Executive Enterprise
Bill Grant, Izaak Walton League of America
J. Drake Hamilton, Fresh Energy
Scott Harrison, Lutsen Resort Company
Andy Hart, Farmer [Elgin, Minnesota]
Bill Heaney, International Brotherhood of Electrical Workers
Jonathan Holmes, Mittal-Minorca
Bill Hunt, USDA Natural Resources Conservation Service
Robert Jagusch, Mora Municipal Utilities
Greg Jason, Cargill, Inc.
Boise Jones, Environmental Justice Advocates of Minnesota
John P. Kelly, Ryan Companies US, Inc.
Julie Ketchum, Waste Management, Inc.
Jeffery Korsmo, Mayo Clinic, Rochester, Minnesota
Scott Lambert, Minnesota Auto Dealers
Greg Langford, Langford, Inc.
William Lee, Chippewa Valley Ethanol
Chuck MacFarlane, Ottertail Power Company
Joe Maher, UPM, Blandin Paper Mill
Jim Marchessault, Business Card Services, Inc.
Tim McGraw, Northwest Airlines
Dave McMillan, ALLETE-Minnesota Power
Greg Miller, American Crystal Sugar
Jeffry Muffat, 3M
iii
Eric Olsen, Great River Energy
Pat Perry, Target Corporation
Doug Peterson, Center Point Energy
Steve Raukar, Commissioner, St. Louis County Board
Mike Robertson, Minnesota Chamber of Commerce
David M. Sparby, Xcel Energy
Will Steger, Polar Explorer [Ely, Minnesota]
Peter J. Sullivan, GE Commercial Finance Fleet Service
Barb Thoman, Transit for Livable Communities
David Tilman, University of Minnesota, Department of Ecology, Evolution, and Behavior
Nirmal A. Traeger, Travelers
Christopher Twomey, Arctic Cat
Jeff Wilkes, Flint Hills Resources
Mark Wolak, Superintendent, Mahtomedi, Minnesota
Bruno Zagar, Fond du Lac Band, Lake Superior Chippewa
iv
Acronyms
$/MWh
$/tCO2e
AE
AEO2007
AFW
AgBMP
ANL
APU
ASDs
ASHRAE
AURI
BAU
BioPET
BLM
BLS
BMPs
BSWR
Btu
BWCAW
C&T
CAFE
CAFO
CARB
CC
CCAG
CCS
CCX
CEE
CGEE
CH4
CHP
CIP
CMAQ
CO2
CREP
CRP
DDGS
D/LCE
DNR
dollars per megawatt-hour
dollars per ton of carbon dioxide equivalent
architect engineer
Annual Energy Outlook 2007 [US DOE Energy Information
Administration]
Agriculture, Forestry, and Waste Management [TWG]
[Minnesota] Agriculture Best Management Practices
Argonne National Laboratory [US DOE]
auxiliary power unit
adjustable speed drives
American Society of Heating, Refrigerating and Air-Conditioning
Engineers
Agricultural Utilization Research Institute
business as usual
BioPower Evaluation Tool
Bureau of Land Management [U.S. Department of the Interior]
Bureau of Labor Statistics [U.S. Department of Labor]
best management practices
[Minnesota] Board of Water and Soil Resources
British thermal unit
Boundary Waters Canoe Area Wilderness
Cap-and-Trade [TWG]
corporate average fuel economy
confined animal feeding operation
California Air Resources Board
Cross-Cutting Issues [TWG]
[Minnesota] Climate Change Advisory Group
Center for Climate Strategies
Chicago Climate Exchange
Center for Energy and Environment
[Hamline University] Center for Global Environmental Education
methane
combined heat and power
Conservation Improvement Program
Congestion Mitigation and Air Quality [Improvement Program]
carbon dioxide
Conservation Reserve Enhancement Program [USDA]
Conservation Reserve Program [USDA]
distiller's dried grains with solubles
discounted/levelized cost-effectiveness
[Minnesota] Department of Natural Resources
iv
DOC
DOE
DOLI
EAW
ECAR
EE
EEAB
EERE
eGRID
EF
EIA
EIS
ELM
EPA
ES
EtOH
EU
FEED
FIA
FRC
FSA
FSC
FTEs
gal
GHG
GIS
GM
GMAC
GPS
GREET
GWP
HDPE
HERS
HEV
HFC
HOT
HOV
HPGHG
HPGWG
HUD
I&F
IAC
[United States] Department of Commerce
[United States] Department of Energy
[Minnesota] Department of Labor and Industry
Environmental Assessment Worksheet
East Central Area Reliability Coordination Agreement
energy efficiency
Environmental Education Advisory Board
Office of Energy Efficiency and Renewable Energy [US DOE]
Emissions & Generation Resource Integrated Database [US EPA]
emission factor
Energy Information Administration [US DOE]
Environmental Impact Statement
Environmental Learning in Minnesota Fund
[United States] Environmental Protection Agency
Energy Supply [TWG]
ethyl alcohol
European Union
front-end engineering and design
Forest Inventory and Analysis [USFS/Minnesota DNR]
[Minnesota] Forest Resources Council
Farm Service Agency [USDA]
[Minnesota] Forest Stewardship Council
full-time equivalents
gallon
greenhouse gas
geographic information system
General Motors
General Motors Acceptance Corporation
generation performance standard
Greenhouse Gases, Regulated Emissions, and Energy Use in
Transportation [model]
global warming potential
high-density polyethylene
Home Energy Rating System
hybridized electric vehicle
hydrofluorocarbon
high-occupancy toll
high-occupancy vehicle
high-potential greenhouse gas
high-potential global warming gas
[United States Department of] Housing and Urban Development
Inventory and Forecast
Industrial Assessment Center
v
ICC
ICLEI
IGCC
ILSR
IPCC
IPPAT
IRP
kWh
LandGEM
LCDA
LCE
LCFS
LDPE
LDV
LEED
LEV
LFG
LFGcost
LFGTE
LGFS
LMOP
LNG
LPG
M&R
MAC
MAEE
MAIN
MAPP
MC
MCCAG
MDA
MDOC
MEA
MEI
MFRC
MGA
MLS
MMBtu
MMGPY
MMtCO2e
MnDOC
MnDOT
International Code Council
Local Governments for Sustainability [formerly International Council for
Local Environmental Initiatives]
integrated gasification combined cycle
Institute for Local Self-Reliance
Intergovernmental Panel on Climate Change
Interagency Pollution Prevention Advisory Team
integrated resource planning
kilowatt-hour
Landfill Gas Emissions Model [US EPA]
Livable Communities Demonstration Account
levelized cost-effectiveness
low-carbon fuel standard
low-density polyethylene
light-duty vehicle
Leadership in Energy and Environmental Design Green Building
Rating System™
low-emission vehicle
landfill gas
landfill gas cost model [US EPA]
landfill gas-to-energy
low-GHG fuel standard
Landfill Methane Outreach Program [US EPA]
liquefied natural gas
liquefied petroleum gas
metering and regulating
[California] Market Advisory Committee
Minnesota Association for Environmental Education
Mid-America Interconnected Network
Mid-Continent Area Power Pool
Metropolitan Council
Minnesota Climate Change Advisory Group
Minnesota Department of Agriculture
[Minnesota] Department of Commerce
monoethanolamine
Minnesota Environmental Initiative
Minnesota Forest Resources Council
Midwestern Governors Association
Multiple Listing Service; Multiple Listing System
million British thermal units
million gallons per year
million metric tons of carbon dioxide equivalent
Minnesota Department of Commerce
Minnesota Department of Transportation
vi
MnTAP
MOU
MPCA
mpg
MPUC
MSW
Mt
MtC/acre
MtCO2/acre
MVST
MW
MWh
N
N2O
NEMA
NG
NGCC
NGEA
NHTSA
NMSU
NOx
NPV
NRCS
NREL
NRI
NSPS/EG
O&M
ODS
ORNL
PATH
PAYD
PAYT
PCA
PC/LDT
PET
PFC
PGF
PHEV
PIRG
PUC
PWA
Minnesota Technical Assistance Program
memorandum of understanding
Minnesota Pollution Control Agency
miles per gallon
Minnesota Public Utilities Commission
municipal solid waste
metric ton
metric tons of carbon per acre
metric tons of carbon dioxide per acre
motor vehicle sales tax
megawatt
megawatt-hours [one thousand kilowatt-hours]
nitrogen
nitrous oxide
National Electrical Manufacturers Association
natural gas
natural gas combined cycle
Next Generation Energy Act
National Highway Traffic Safety Administration [US DOT]
Northern Minnesota State University
nitrogen oxides
net present value
Natural Resource Conservation Service [USDA]
National Renewable Energy Laboratory [US DOE]
National Resources Inventory
New Source Performance Standards/Emission Guidelines [US EPA]
operations and maintenance
ozone-depleting substance
Oak Ridge National Laboratory [US DOE]
Partnership for Advanced Technology in Housing
pay as you drive
pay as you throw
[Minnesota] Pollution Control Agency
passenger car/light-duty truck
polyethylene terephthalate
perfluororocarbon
Project Green Fleet
plug-in hybrid electric vehicle
Public Interest Research Group
Public Utilities Commission
plant-wide assessment
vii
PZEV
R&D
RCI
RDF
RES
RFS
RGGI
RIM
RIM–CE
RPS
SCORE
SEEK
SF6
SOCCR
SPP
SULEV
SWCD
T&D
TAB
TBRA
tCO2/MWh
tC/acre
tCO2/acre
TCRP
TDM
TEAP
TIP
TLU
TWG
ULEV
USDA
US DOE
US DOT
USFS
VMT
VOC
WAP
WARM
WCI
partial zero-emission vehicle
research and development
Residential, Commercial, and Industrial [TWG]
refuse-derived fuel
renewable electricity standard
renewable fuels standard
[Northeast States] Regional Greenhouse Gas Initiative
Reinvest in Minnesota
Reinvest in Minnesota–Clean Energy
renewable portfolio standard
[Minnesota Governor's] Select Committee on Recycling and the
Environment
Sharing Environmental Education Knowledge [Partnership]
sulfur hexafluoride
The First State of the Carbon Cycle Report
Southwest Power Pool
super-ultra-low-emission vehicle
Minnesota Association of Soil and Water Conservation Districts
transmission and distribution
Transportation Advisory Board
Tax Base Revitalization Account
[metric] tons of carbon dioxide emissions per megawatt-hour
[metric] tons of carbon per acre
[metric] tons of carbon dioxide per acre
Transit Cooperative Research Program [Transportation Research
Board]
transportation demand management
Technology and Economic Assessment Panel [IPCC]
Transportation Improvement Plan
Transportation and Land Use [TWG]
Technical Work Group
ultra-low-emission vehicle
United States Department of Agriculture
United States Department of Energy
United States Department of Transportation
United States Forest Service [USDA]
vehicle miles traveled
volatile organic compound
Weatherization Assistance Program [US DOE]
WAste Reduction Model [US EPA]
Western Climate Initiative
viii
WTE
waste to energy
ix
Executive Summary
Background
On December 12, 2006, Minnesota Governor Tim Pawlenty announced the state’s “Next
Generation Energy Initiative,” including “development of a comprehensive plan to reduce
Minnesota’s emissions of greenhouse gases (GHGs).” In this announcement, the Governor
requested assistance from the Center for Climate Strategies (CCS) in the development of a
Minnesota Climate Mitigation Action Plan (Action Plan) and formation of the Minnesota
Climate Change Advisory Group (MCCAG). This broad-based group of Minnesota citizens and
leaders was charged with developing a comprehensive set of state-level policy recommendations
to the Governor through a stakeholder-based consensus building process facilitated by CCS in
coordination with the Minnesota Department of Commerce (DOC) and Minnesota Pollution
Control Agency (PCA). Their work included:
•
Development, prioritization, analysis, and approval of a final collection of existing and
proposed actions that could contribute to GHG emissions reductions;
•
Review and approval of an inventory of historical and forecasted GHG emissions in
Minnesota as a basis against which to gauge priorities and progress; and
•
Consideration of costs and benefits of recommended options.
This report is the culmination of the work of more than 100 Minnesotans who were members of
the MCCAG and the six Technical Work Groups (TWGs) that supported the MCCAG. In order
to complete this monumental effort, the MCCAG and TWG members and CCS were required to
make numerous estimates and assumptions. They did so with the best intentions, using the best
information available in the time given, and using best professional judgment. Many will second
guess parts of this report. That is appropriate and to be expected. Reducing GHG emissions will
be a long-term effort. Most of the analyses completed for this report will be reexamined from
time to time. As that occurs, assumptions should also be reexamined and changed as new
information and understanding warrants.
Inventory of Minnesota’s Greenhouse Gas Emissions
In July 2007, CCS, with assistance from the Minnesota PCA, prepared a preliminary draft GHG
emissions inventory and reference case projection for the MCCAG and its TWGs to assist them
in understanding past, current, and possible future GHG emissions in Minnesota and thereby
inform the policy development process. The preliminary draft Inventory and Projections was
improved by incorporating comments provided by the MCCAG and TWGs. As shown in Figure
EX-1, the Inventory and Projections revealed substantial emissions growth rates and related
mitigation challenges. Minnesota’s gross emissions of GHGs grew by 32% between 1990 and
2005, twice the national average of 16%. Minnesota’s emissions growth was driven largely by
the growth of Minnesota’s population and emissions associated with imported electricity; the
state’s emissions on a per capita basis increased by about 11% between 1990 and 2005, while
U.S. per capita emissions declined slightly (2%) over this period. In the absence of recent
developments that Minnesota has undertaken to control its emissions, Minnesota’s gross GHG
emissions are projected to rise fairly steeply to about 200 million metric tons of carbon dioxide
EX-1
equivalent (MMtCO2e) by 2025, or 68% over 1990 levels. Minnesota’s forests and agricultural
lands have been a net source rather than a sink of carbon emissions largely due to the loss of
these lands to other uses. Consequently, in Minnesota “net emissions” (in which reductions due
to sequestration are subtracted from gross emissions) are equal to gross emissions.
Figure EX-1. Gross GHG emissions by sector, 1990–2020: historical and projected
(consumption-based approach) business as usual/base case
220
Forestry
200
Waste Management
180
Other Ind. Process
160
MMtCO2e
140
ODS Substitutes
Agriculture
Jet Fuel
120
Agriculture
Transport Diesel
Jet Fuel/Other Transport
Transport Onroad Gasoline
100
80
Transport Onroad
Diesel
Transport Onroad
Gasoline
RCI Fuel Use
RCI Fuel Use
60
40
Electricity
Fossil Fuel Industry
20
0
1990
1995
2000
2005
2010
2015
2020
2025
Electricity
(consumption-based)
RCI = direct fuel use in residential, commercial, and industrial sectors; ODS = ozone depleting substance.
The principal sources of Minnesota’s GHG emissions in 2005 are electricity use (including
electricity imports) and transportation, accounting for 34% and 24% of Minnesota’s gross GHG
emissions, respectively, as shown in Figure EX-2. The use of fossil fuels—natural gas, oil
products, coal, and wood—in the residential, commercial, and industrial (RCI) sectors accounted
for another 20% of the state’s emissions in 2005. Minnesota is slightly higher than the nation as a
whole in emissions from electricity production and slightly lower in transportation. Agricultural
activities, such as manure management, fertilizer use, livestock (enteric fermentation), and
changes in soil carbon due to cultivation practices, result in methane (CH4) and nitrous oxide
(N2O) emissions that account for another 14% of state GHG emissions. This is greater than the
U.S. portion of emissions attributable to agriculture (8%). Landfills and wastewater management
facilities produce CH4 and N2O emissions that accounted for 3% of total gross GHG emissions in
Minnesota in 2005. Emissions associated with the transmission and distribution of natural gas
accounted for 1% of the gross GHG emissions in 2005. Industrial process emissions accounted
for about 1% of the state’s GHG emissions in 2005, and these emissions are rising due to the
increasing use of hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) as substitutes for
ozone-depleting chlorofluorocarbons (CFCs).1 Other industrial processes emissions result from
1
CFCs are also potent GHGs; however, they are not included in GHG estimates because of concerns related to
implementation of the Montreal Protocol. See Appendix I in the Inventory and Projections report for Minnesota.
EX-2
taconite, lime, and peat manufacturing; PFC use in semiconductor manufacture; CO2 released
during limestone, dolomite, and peat use; sulfur hexafluoride (SF6) released from transformers
used in electricity transmission and distribution systems; and N2O from medical uses.
Figure EX-2. Gross GHG emissions by sector, 2005: Minnesota and U.S.
Minnesota
Res/Com
Fuel Use
10%
Transport
24%
Industrial
Process
1.0%
US
Res/Com
Fuel Use
8%
Waste
3.2%
Industrial
Fuel Use
10%
Agric.
14%
Fossil Fuel
Ind.
3%
Electricity
34%
Industrial
Process
5%
Waste
3%
Industrial
Fuel Use
13%
Forests
2.1%
Fossil
Fuel Ind.
(CH4) 1.4%
Transport
27%
Agric.
8%
Electricity
33%
Note: At a national level, forests act as a net sink of CO2; therefore, they do not show up in the above graph of gross
U.S. emissions sources.
Recent Developments
On May 25, 2007, Governor Tim Pawlenty signed the Next Generation Energy Act of 2007.2
This state law, coupled with other state initiatives to control GHG emissions, positions
Minnesota as a leader on the way toward our nation’s energy future. The Next Generation
Energy Act of 2007 includes requirements for Minnesotans to increase energy efficiency, expand
community-based energy development, and establish a statewide goal to reduce GHG emissions.
The state law also supplements the aggressive 25x’25 renewable energy standard proposed by
the Governor and signed earlier this year.
The act established aggressive goals for Minnesotans to reduce statewide GHG emissions across
all sectors to a level at least 15% below 2005 levels by 2015, to a level at least 30% below 2005
levels by 2025, and to a level at least 80% below 2005 levels by 2050. This means that to meet
the 2015 emissions goal, Minnesotans will have to reduce their emissions to about 131.8
MMtCO2e (or by about 41.3 MMtCO2e below 2015 levels). To meet the 2025 emissions goal,
Minnesotans will have to reduce their emissions to about 108.5 MMtCO2e (or by about 89
MMtCO2e below 2025 levels).
At the beginning of the MCCAG process, DOC and PCA identified more than 40 different
actions Minnesota has undertaken to control GHG emissions while at the same time conserving
2
Next Generation Energy Act, Minnesota Senate File No. 145, at: https://www.revisor.leg.state.mn.us/bin/
bldbill.php?bill=S0145.2.html&session=ls85
EX-3
energy and promoting the development and use of renewable energy sources.3 These actions also
include assessments of both terrestrial and geologic carbon storage opportunities in Minnesota.
The MCCAG recognized the importance of these recent actions as essential for setting
Minnesota on the path toward meeting its aggressive statewide goals and used these actions to
formulate the baseline from which it considered and developed its wide range of
recommendations to ensure that Minnesota stays the course toward meeting its goals. A total of
nine recent actions were identified for which data were available to estimate the emission
reductions and costs/cost savings of the actions relative to the business-as-usual reference case
projections. Implementation of the recent actions analyzed indicates that emissions reductions
will be about 50% of the total emission reductions needed to meet the state’s 2015 goal and
about 42% of the total emission reductions needed to meet the state’s 2025 goal (see Figure
EX-3). These results underscore the importance of the contributions of the recent actions toward
Minnesota’s ability to meet its statewide reduction goals.4
Figure EX-3. Emission reductions associated with recent actions in Minnesota
(consumption-basis, gross emissions)
MMtCO2e = million metric tons of carbon dioxide equivalent; CIP = Conservation Improvement Program; RCI =
Residential, Commercial, and Industrial [Sectors]; RES = Renewable Energy Standard; ES = Energy Supply.
3
A summary of these actions can be found on the MCCAG’s project Web site under “Background, What MN Is
Already Doing” at: http://www.mnclimatechange.us/background-alreadydoing.cfm
4
Note that actions recently adopted by the state of Minnesota have also been referred to as “existing” actions.
EX-4
It is important to note that the top line in Figure EX-3 represents total emissions associated with
all GHG-emitting activities across all sectors in Minnesota on a consumption basis prior to the
implementation of any existing actions. For the electricity supply sector, this assumes the
installation of the planned Big Stone 2 and Mesaba coal units and an assumed electricity demand
growth rate of 2.04% per year. In making this assumption, the MCCAG is not recommending for
or against the need for or merits of the addition of these units in Minnesota. The forecast also
assumes a backing down of existing units if the Big Stone 2 and Mesaba units come on line in
order to balance the supply of electricity with demand in Minnesota. It is possible that instead of
backing down, the existing units that formerly supplied power in Minnesota could be used to
supply power in other states, which, in turn, could lead to backing down less efficient units in
other states. If built, these two units would have the potential to emit approximately 5.1 million
tons of CO2e per year. Future analyses should reexamine these assumptions.
Minnesota Climate Change Advisory Group Recommendations
The MCCAG recommended 46 policy actions. The MCCAG members present and voting
approved 38 policy actions unanimously, approved 4 by a supermajority (four objections or
fewer), and approved 4 by a majority (less than half objected). Explanations of both individual
objections and qualifications are in the appendixes to this report containing the detailed accounts
of the MCCAG’s recommendations.
Figure EX-4 presents a summary of the policy recommendations for which emission reductions
were quantified. Table EX-1 provides the numeric estimates underlying Figure EX-3. In Figure
EX-3,
•
Actual (for 1990, 2000, and 2005) and projected (for 2015 and 2025) levels of Minnesota’s
gross GHG emissions on a consumption basis are shown by the blue line. (The consumptionbased approach accounts for emissions associated with the generation of electricity in-state
and imported from out-of-state to meet Minnesota’s demand for electricity.)
•
Projected emissions associated with Minnesota’s existing actions that were analyzed
quantitatively are shown by the red line.
•
Projected emissions if all of the MCCAG’s 31 recommendations that were analyzed
quantitatively with respect to their GHG reduction potential are completely implemented and
the estimated reductions are fully achieved are shown by the green line. (Note that other
MCCAG recommendations would have the effects of reducing emissions, but those
reductions were not analyzed quantitatively, and they are not reflected in the green line.)
•
Projected emissions associated with Minnesota’s statewide GHG reduction targets are shown
by the black line.
•
To the extent that the calculations of emission reduction in a particular sector or that
calculations for a particular recommendation are found to be overstated, then the reductions
will be less, and in order to meet the goal, more aggressive action will be needed in other
sectors.
The MCCAG approved 46 recommendations to reduce emissions, of which 31 were analyzed
quantitatively to estimate their effects on emissions and 25 were analyzed quantitatively to
EX-5
estimate their costs/cost savings. The analyzed measures were estimated to have a cumulative
effect of reducing emissions by about 22 MMtCO2e in 2015 and 50 MMtCO2e in 2025.
Together, the estimated emission reductions associated with the MCCAG’s recommendations
and recent actions would be enough to achieve Minnesota’s GHG reduction goal for 2015 and be
within 2.4 MMtCO2e of meeting Minnesota’s goal for 2025. The 25 recommendations analyzed
in terms of their cost-effectiveness were estimated to have a total net cost of about $726 million
between now and 2025, representing the incremental cost to the recent actions. While the
MCCAG’s 15 other recommendations were not readily quantifiable, many of them would likely
achieve additional reductions and net savings (e.g., recommendations for the Transportation and
Land Use [TLU] sector). Should Minnesota implement the MCCAG’s recommendations to
participate in a cap-and-trade program, opportunities exist for reducing the costs associated with
the MCCAG’s policy recommendations for the electricity supply sector. In addition, emerging
technologies may hold the potential to substantially reduce emissions even more.
Figure EX-4. Annual GHG emissions: reference case projections and MCCAG
recommendations (consumption-basis, gross emissions)
MMtCO2e = million metric tons of carbon dioxide equivalent; GHG = greenhouse gas; MCCAG = Minnesota Climate
Change Advisory Group.
EX-6
Table EX-1. Annual emissions: reference case projections and impact of MCCAG
recommendations (consumption-basis, gross emissions)
Annual Emissions
(MMtCO2e)
Reference Case Projections
1990
2000
119.0
143.8
2015
2025
157.1
175.5
200.5
0.0
0.4
0.4
20.8
37.8
156.6
154.7
162.6
133.5
110.0
Total GHG Reductions From MCCAG Recommendations
22.2
50.3
Difference Between MCCAG Reductions and Next Generation
Energy Act Targets
Projected Annual Emissions After Quantified MCCAG Reductions
–1.0
2.4
132.5
112.4
Reductions From Recent Actions
Projected GHG Emissions After Recent Actions
2005
Next Generation Energy Act Targets
MMtCO2e = million metric tons of carbon dioxide equivalent; GHG = greenhouse gas; MCCAG = Minnesota Climate
Change Advisory Group.
Table EX-2 provides a summary by sector of the estimated cumulative impacts of implementing
all of the MCCAG’s recommendations. Table EX-3 shows the estimated GHG reductions, costs,
or savings from each policy recommendation and the cost-effectiveness (cost or savings per ton
of reduction) upon which the cumulative impacts in Table EX-2 are based. Note that the
cumulative impacts shown in Table EX-2 account for overlaps between policies by eliminating
potential double counting of emission reductions and costs or cost savings.
Table EX-2. Summary by sector of estimated impacts of implementing all of the MCCAG
recommendations (cumulative reductions and costs/savings)
GHG Reductions
(MMtCO2e)
Sector
Net
Present
CostEffectiveValue
2008–
ness
($/tCO2e)
2025
(Million $)
2015
2025
Total
2008–
2025
Residential, Commercial and Industrial (RCI, non-electricity)
0.76
0.69
10.41
–$464
–$45
Integrated RCI and ES for electricity
1.56
7.34
51.06
–$1,098
–$22
Energy Supply (ES, including RCI options with impacts on
electricity consumption, and adjusted for RCI and ES electricity
options that overlap)
1.97
3.43
37.55
$462
$12
Transportation and Land Use
4.70
9.30
91.2
–$264
N/A
$2,090
$7
Agriculture, Forestry and Waste Management
13.2
Cross-Cutting Issues
29.5
279
Non-quantified, enabling options
TOTAL (includes all adjustments for overlaps and recent
actions)
20.2
50.3
469.2
$725.8
N/A
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent.
EX-7
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the options. Within each sector, values have been adjusted to eliminate double counting for options or elements
of options that overlap. In addition, values associated with options or elements of options within a sector that overlap
with options or elements of options in another sector have been adjusted to eliminate double counting.
N/A = not available; for TLU policies, an overall cost-effectiveness value is not provided because costs or cost
savings were not estimated for all of the policies (due to the lack of data) for which emission reductions were
estimated. Similarly, an overall cost-effectiveness value for all sectors is not provided for the same reason.
Note that the row in Table EX-2 for the RCI sectors includes only that portion of RCI emissions reductions and net
cost savings that are from RCI options (or elements of options) that affect fuels that are combusted for purposes
other than to generate electricity. RCI emissions reductions and net cost savings that affect electricity use or
generation are included in the “Integrated RCI and ES for electricity” row in Table EX-2, because the benefits and
costs of electricity-sector options are dependent on the electrical load served, which is affected by RCI electricity
savings.
The Agriculture, Forestry, and Waste Management (AFW) sector was found to have substantial
opportunities for GHG reductions through 2025 (279 MMtCO2e through 2025). These reductions
are tied to aggressive (and some would say optimistic) policy recommendations within each
subsector, including biofuel production programs (both liquid and solid fuel from biomass);
forestation, urban forestry and restocking programs; and municipal solid waste source reduction
and recycling programs. Overall, the estimated cumulative costs were also estimated to be higher
in the AFW sector than in the other sectors, although the reductions are delivered at a modest
cost of $7 per metric ton of CO2e ($/tCO2e) reduced. This is largely driven by the methods for
implementing these policy recommendations in the AFW sector, as compared with other sectors.
Most of the AFW options incur net societal costs, because they are targeting changes in current
practices which require incentives, capital investment, or other cost outlays during the policy
period. A large contributor to the overall AFW sector costs is the forest restocking component of
AFW-5, which has an estimated cost of $2.2 billion through 2025 (see Appendix I for more
details). A number of options within the AFW sectors call for the use of biomass as an energy
feedstock. The MCCAG recognized that the success of these options depends on Minnesota’s
ability to supply that biomass, noting that estimates of Minnesota’s biomass resources vary (see
Appendix I for more details).
In order for the policies recommended by the MCCAG to yield the levels of estimated emission
reductions and cost savings shown in Table EX-2, the policies must be implemented in a timely,
aggressive, and thorough manner. In some cases, the actions recommended by the MCCAG are
precise, concrete steps. In other cases, the recommendations are more general, and work must be
done to develop precise, concrete steps to achieve goals recommended by the MCCAG. In the
latter case, the additional work to identify precise, concrete actions is needed before they can be
implemented. While there are considerable benefits to both the environment and to consumers
from implementation of the policy recommendations, careful, comprehensive, and detailed
planning and implementation, as well as consistent support, of these policies will be required if
these benefits are to be achieved.
Figure EX-5 presents the estimated tons of reductions for each policy recommendation for which
estimates were prepared, expressed as a cumulative figure for the period 2008–2025. Figure
EX-6 presents the estimated dollars per ton cost (or cost savings, depicted as a negative number)
for each policy recommendation for which cost estimates were available. This measure is
calculated by dividing the net present value of the cost of the policy recommendation by the
cumulative GHG reductions, all for the period 2008–2025.
EX-8
Table EX-3. Residential, Commercial, and Industrial Policy Recommendations
Policy
No.
RCI-1
RCI-2
RCI-3
RCI-4
RCI-5
RCI-6
RCI-7
RCI-8
RCI-9
RCI-10
Policy Recommendation
Maximize Savings From the Utility
Conservation Improvement Program
(CIP) *
Improved Uniform Statewide Building
Codes
Green Building Guidelines and
Standards Based on Architecture 2030
Incentives and Resources to Promote
Combined Heat and Power (CHP)
Program to Reduce Emissions of NonFuel, High-Global-Warming-Potential
GHGs
Non-Utility Strategies and Incentives to
Encourage Energy Efficiency and
Reduce GHG Emissions
Conservation Improvement-Type
Program for Propane and Fuel Oil
Efficiency
Energy Performance Disclosure
Promote Technology-Specific
Applications to Reduce GHG Emissions
Support Strong Federal Appliance
Standards and Require High State
Standards in the Absence of Federal
Standards
Sector Total After Adjusting for
Overlaps (RCI, Non-electricity)
Sector Total After Adjusting for
Overlaps (Integrated RCI and ES for
Electricity)
Reductions From Recent Actions
New Commercial Building Code
Sustainability Guidelines
(New State Buildings)
10% Savings in State Buildings
RCI-1: New CIP *
Sector Total Plus Recent Actions
GHG Reductions
(MMtCO2e)
Total
2015 2025
(2008–
2025)
Net
Present
Value
(Million $)
CostEffectiveness
($/tCO2e)
Enacted
Quantified as a “Recent Action”
0.004
0.005
0.62
0.94
0.96
0.077
Level of
Support
–$44
–$576
Unanimous
11.1
–$296
–$27
Unanimous
4.95
33.1
$125
0.02
0.05
0.5
–$2
–$5
Unanimous
0.25
1.30
8.3
–$307
–$37
Unanimous
0.05
0.05
0.7
–$21
–$28
Unanimous
$3.8
Unanimous
Not quantified
Unanimous
Not quantified
Unanimous
0.8
1.4
15.3
–$1,895
–$124
0.76
0.69
10.41
–$464
–$44.6
1.56
7.34
51.06
–$1,098
–$21.5
6.50
0.18
15.50
0.21
143.4
3.16
–$8,454
–$1.8
–$59.0
–$0.6
0.22
0.46
4.72
–$1.7
–$0.4
0.09
6.01
8.82
0.11
14.72
23.5
1.75
133.8
204.9
–$0.9
–$8,449
–$10,016
–$0.5
–$63.2
–$48.9
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent; ES = Energy Supply.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
Only the results of recommendations included in the final tabulation of GHG reductions and costs are shown in this
table. For discussion of any sensitivity analyses undertaken, please see the discussion in the RCI annex.
* The CIP considered here is based on the CIP requirements (i.e., 1.5% energy savings goal) included in the Next
Generation Energy Act of 2007; therefore, the emission reductions and cost savings estimated are included under
“recent actions.”
EX-9
Table EX-3 (continued). Energy Supply Policy Recommendations
Policy
No.
ES-1
ES-3
ES-4
ES-5
ES-6
ES-8
ES-10
ES-12
ES-13
Policy Recommendation
Generation Performance Standard
GHG Reductions
Net
Cost(MMtCO2e)
Present
EffectiveValue
Total
ness
2015 2025 (2008– 2008–2025 ($/tCO2e)
2025) (Million $)
0.0
Efficiency Improvements, Re-powering
1.8
and other Upgrades to Existing Plants
Transmission System Upgrading,
0.2
Including Reducing Transmission Line
and Distribution System Loss
Renewable and/or Environmental
Portfolio Standard*
Nuclear Power Support and Incentives
Advanced Fossil Fuel Technology
Incentives, Support or Requirements,
Including Carbon Capture and Storage
Voluntary GHG targets
Distributed Renewable Energy
0.021
Incentives and/or Barrier Removal
Technology-Based Approaches,
Including Research and Development,
Fuel Cells, Energy Storage, Distributed
Renewable Energy Technologies, etc.
Sector Total After Adjusting for
2.0
Overlaps
Reductions From Recent Actions
12.8
Biomass for Electricity 0.60
Metro Emissions Reduction Project 4.52
ES-5: Renewable Energy Standard * 7.72
Sector Total Plus Recent Actions
14.8
Level of
Support
0.0
0.0
$0.0
$0.0
Majority (16
objections)
3.0
33.3
$554.4
$16.7
Unanimous
0.4
3.9
–$92.2
–$26.1
Unanimous
Quantified as a “Recent Action”
Enacted
Recommended for further study.
Unanimous
Recommended for further study.
Unanimous
Not quantified
Unanimous
0.023
0.37
$29.1
$78.1
Unanimous
Unanimous
Not quantified
3.4
37.5
$462.2
$12.3
20.8
0.60
4.52
15.7
24.2
225
11.4
80.4
133.1
262.5
$10,116
$285.3
$2,330
$7,502
$10,578
$45.0
$25.0
$29.0
$56.4
$40.3
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
All totals are relative to the underlying assumption that electricity expansion in Minnesota proceeds with the recently
legislated Conservation Improvement Program (CIP), Renewable Energy Standard (RES), and all planned additions
including the Mesaba and Big Stone 2 stations.
* The RES considered here is based on the RES requirements included in the Next Generation Energy Act of 2007;
therefore, the emission reductions and costs estimated are included under “recent actions.”
Note: A number of MCCAG members have raised concerns about the cost assumptions associated with wind power
and believe the costs are too high. A lower wind cost assumption would lower the cost estimates for the Renewable
Energy Standard (ES-5) and for the Cap-and-Trade analyses. Future analyses should reexamine the wind cost
estimates.
EX-10
Table EX-3 (continued). Transportation and Land Use Policy Recommendations
GHG Reductions
(MMtCO2e)
Policy
No.
Policy Recommendation
2015
2025
Net
Present
CostValue
EffectiveTotal
ness
2008–
2008–
2025
($/tCO2e)
2025 (Million $)
Level of
Support
TLU Area 1: Reduce VMT (VMT goal to be established based on VMT implied by selected strategies)
TLU-1
Improved Land-Use Planning and
Development Strategies
0.7
1.9
14.9
TLU-2
Expand Transit, Bicycle, and Pedestrian
Infrastructure
0.1
0.3
3.0
TLU-5
Climate-Friendly Transportation Pricing/Payas-You-Drive
1.1
2.1
20.9
TLU-7
“Fix-it-First” Transportation Investment Policy
and Practice
TLU-9
Workplace Tools To Encourage Carpooling,
Bicycling, and Transit Ridership
TLU-14
Freight Mode Shifts: Intermodal and Rail
Net
savings
Net
savings
Unanimous
$0
$0
Unanimous
–$1
–$1
Not quantified
Supermajority (3
objections)
Supermajority (2
objections)
Large net Large net
Unanimous
savings
savings
Supermajority
N/A
(1 objection)
0.3
0.4
4.5
1.7
3.6
36.2
0.1
TLU Area 2: Reduce Carbon per Unit of Fuel
TLU-3
Low-GHG Fuel Standard
Not quantified
Unanimous
Not quantified
Unanimous
TLU Area 3: Reduce Carbon per Mile and/or per Hour
TLU-4
Infrastructure Management
0.04
TLU-6
Adopt California Clean Car Standards
0.74
1.16 13.1
TLU-12
Voluntary Fleet Emission Reductions
0.4
0.4
TLU-13
0.4
0.7
6.1
Reduce Maximum Speed Limits
0.4
Sector Total After Adjusting for Overlaps
4.7
9.3
91.2
Reductions From Recent Actions
Biodiesel
Ethanol
1.4
0.64
0.78
1.5
0.75
0.79
20.2
8.1
12.1
Sector Total Plus Recent Actions
6.1
10.8
–$39
Majority (16
objections)
Not quantified
Unanimous
–$263
6.1
111.4
$50 at
$2.40/gal Majority (16
N/A
objections)
–$19 at
$3.40/gal
Not
–$264
quantified
Not quantified
–$264
Not
quantified
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent, VMT = vehicle miles traveled; N/A = not available.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
EX-11
Table EX-3 (continued). Agriculture, Forestry, and Waste Management Policy
Recommendations
Policy
No.
GHG Reductions
(MMtCO2e)
Policy Recommendation
Net
CostPresent
EffectiveValue
ness
2008–2025
($/tCO2e)
(Million $)
2015
2025
Total
2008–
2025
A. Soil Carbon Management
0.72
1.3
15
–$34
–$2
B. Nutrient Management
0.79
1.3
15
–$543
–$37
A. Preserve Land
0.15
0.44
3.7
$120
$33
B. Reinvest in Minnesota–Clean Energy
(RIM-CE)
0.09
0.19
1.8
$59
$34
–$242
–$9
Level of
Support
Agricultural Crop Management
AFW-1
AFW-2
Land Use Management Approaches for
Protection and Enrichment of Soil Carbon
C. Protection of Peatlands & Wetlands
AFW-3
Unanimous
Not Quantified
In-State Liquid Biofuels Production
A. Ethanol Carbon Content
B. Fossil Diesel Displacement
C. Gasoline 35% Displacement
AFW-4
Unanimous
Expanded Use of Biomass Feedstocks for
Electricity, Heat, or Steam Production
1.8
2.2
0.03
0.19
27
1.4
$74
$55
$5
2.8
9.1
73
$336
1.3
3.8
31
$102
$3
0.55
2.2
17
$218
$13
1.2
2.7
26
–$295
–$12
Supermajority (4
objections)
Unanimous
Forestry Management Programs to Enhance
GHG Benefits
A. Forestation
AFW-5
B. Urban Forestry
C. Wildfire Reduction
D. Restocking
2.1
8.4
E. Forest Health and Enhanced
Sequestration
AFW-6
Forest Protection—Reduced Clearing and
Conversion to Non-Forest Cover
Unanimous
Not Quantified
65
$2,187
$33
Not Quantified
2.2
2.7
34
$101
$3
A. Source Reduction
0
3.6
20
$59
$3
B. Recycling
3.1
3.4
45
–$207
–$5
0.29
0.41
4.9
$137
$28
A. Landfill Methane Recovery
0.07
0.73
4.4
B. Residuals Management
0.52
0.63
8.1
$650
$80
C. WTE Preprocessing
0.37
0.84
7.9
$257
$32
Unanimous
Front-End Waste Management Technologies
AFW-7
C. Composting
Unanimous
End-of-Life Waste Management Practices
AFW-8
Sector Total After Adjusting for Overlaps*
13.2
29.5
Reductions From Recent Actions
0.0
0.0
Sector Total Plus Recent Actions
13.2
29.5
279
0.0
279
$5.7
$2,090
0.0
$2,090
$1
Unanimous
$7
0.0
$7
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton of carbon
dioxide equivalent; WTE = waste-to-energy.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated with the
recommendations. Totals in some columns may not add to the totals shown due to rounding.
*Overlaps include an assumed 100% overlap of AFW-3b&3c with TLU-3 (reductions excluded from AFW totals); an assumed 100%
overlap of AFW-4 with ES-5 (reductions and costs excluded from AFW totals); overlap of AFW-7&8 (incremental benefits and costs
of AFW-8 included in the AFW totals).
EX-12
Table EX-3 (continued). Cross-Cutting Issues Policy Recommendations
Policy Recommendation
GHG Reductions
Net Present
Cost(MMtCO2e)
Value
EffectiveTotal 2008–2025
ness
2015 2025 2008- (Million $)
($/tCO2e)
2025
Level of
Support
CC-1
GHG Inventories, Forecasting, Reporting, and
Registry
Not quantified
Unanimous
CC-2
Statewide GHG Reduction Goals and Targets
Not quantified
Unanimous
CC-3
State and Local Government GHG Emissions
(Lead-by-Example)
Not quantified
Unanimous
CC-4
Public Education and Outreach
Not quantified
Unanimous
CC-7
Participate in Regional and Multistate GHG
Reduction Efforts
Not quantified
Unanimous
CC-8
Encourage the Creation of a BusinessOriented Organization to Share Information
and Strategies, Recognize Successes, and
Support Aggressive GHG Reduction Goals
Not quantified
Unanimous
CC-9
Dedicate Greater Public Investment to
Climate Data and Analysis
Not quantified
Unanimous
Sector Total After Adjusting for Overlaps
Not quantified
Reductions From Recent Actions
Not quantified
Sector Total Plus Recent Actions
Not quantified
Policy
No.
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent.
EX-13
Table EX-3 (continued). Cap-and-Trade (C&T) Policy Recommendations
Policy
No.
C&T-1
C&T-2
C&T-3
C&T-5
C&T-6
Policy Recommendation
Cap-and-Trade Program
MGA Partners C&T
—no RES/CIP in the baseline
MGA Partners C&T
—with both RES/CIP in the
baseline
MGA Partners C&T
—with only RES in the baseline
MGA Partners+Observers C&T
—no RES/CIP in the baseline
MGA Partners+Observers C&T
—with both RES/CIP in the
baseline
MGA Partners+Observers C&T
—with only RES in the baseline
MGA plus WCI Partners C&T
—no RES/CIP in the baseline
MGA plus WCI Partners C&T
—with both RES/CIP in the
baseline
MGA plus WCI Partners C&T
—with only RES in the baseline
MGA and WCI
Partners+Observers C&T
—no RES/CIP in the baseline
MGA and WCI
Partners+Observers C&T
—with both RES/CIP in the
baseline
MGA and WCI
Partners+Observers C&T
—with only RES in the baseline
MN-Only C&T
—no RES/CIP in the baseline
GHG Reductions
CostNet
Permit
(MMtCO2e)
EffectivePresent
Price†
Level of
ness*
Total
Value
($/tCO2e) Support
2015 2025 (2008– (Million $) ($/tCO2e) 2025
2025
2025)
79.82
–$12.17
$48.45
52.94
$2.65
$45.95
67.35
–$15.42
$46.64
81.97
–$10.52
$52.44
55.45
$4.71
$50.72
69.45
–$13.48
$51.27
72.64
–$17.52
$35.69
46.93
–$2.19
$34.95
61.92
–$20.36
$35.07
76.17
–$14.92
$41.87
50.41
$0.59
$41.25
64.92
–$17.65
$41.39
89.18
–$2.39
$65.48
National C&T
Not quantified
Market Advisory Group
(Formerly CC-11)
Regional and Multistate GHG
Reduction Efforts (Formerly CC-7)
Majority (9
objections)
Merged into
C&T-1
Merged into
C&T-1
Not quantified
Unanimous
Not quantified
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton of carbon
dioxide equivalent; MGA = Midwestern Governors Association; C&T = cap-and-trade; RES = renewable electricity standard; CIP =
Conservation Improvement Program; WCI = Western Climate Initiative; CC = Cost-Cutting Issues.
Negative numbers represent cost savings.
MGA C&T Partners include Illinois, Iowa, Kansas, Michigan, Minnesota, Wisconsin, and Manitoba; MGA C&T Observers include
Indiana, Ohio, and South Dakota; WCI Partners include Arizona, California, New Mexico, Oregon, Utah, Washington, British
Columbia, and Manitoba; WCI Observers include Colorado, Idaho, Montana, Nevada, and Wyoming. To run simulations including
both MGA and WCI states in 2025, the C&T Technical Work Group (TWG) used 2020 marginal cost curves for WCI states for 2025.
The emission cap for both MGA and WCI states (or provinces) is assumed to be 30% below the 2005 level in 2025.
* This represents the average $/tCO2e mitigated/sequestered for Minnesota.
† This represents the marginal cost of the last tCO2e mitigated/sequestered; it applies to all states involved in trading arrangements.
Note: Some MCCAG members have raised concerns about the cost assumptions associated with high cost estimates for wind
power. A lower wind cost assumption would lower the cost estimates for the Renewable Energy Standard (ES-5) and for the Capand-Trade analyses. Future analyses should reexamine the wind cost estimates.
EX-14
Figure EX-5. MCCAG policy recommendations ranked by 2025 annual GHG reduction
potential
MMtCO2e = million metric tons of carbon dioxide equivalent; AFW = Agriculture, Forestry, and Waste Management;
RCI = Residential, Commercial, and Industrial; TLU = Transportation and Land Use; ES = Energy Supply.
EX-15
Figure EX-6. MCCAG policy recommendations ranked by cost / cost savings per ton GHG
removed
RCI-2 = –$576/ton
RCI = Residential, Commercial, and Industrial; TLU = Transportation and Land Use; ES = Energy Supply; AFW =
Agriculture, Forestry, and Waste Management.
Note: Negative values represent net cost savings and positive values represent net costs associated with the policy
recommendation.
EX-16
Chapter 1
Background and Overview
The Governor’s Initiative
On December 12, 2006, Minnesota Governor Tim Pawlenty announced the state’s “Next
Generation Energy Initiative,” including “development of a comprehensive plan to reduce
Minnesota’s emissions of greenhouse gases (GHGs).” In this announcement, the Governor
requested assistance from the Center for Climate Strategies (CCS) in the development of a
Minnesota Climate Mitigation Action Plan (Action Plan) and formation of the Minnesota
Climate Change Advisory Group (MCCAG). This broad-based group of Minnesota citizens and
leaders was charged with developing a comprehensive set of state-level policy recommendations
to the Governor through a stakeholder-based consensus building process facilitated by CCS in
coordination with the Minnesota Department of Commerce (DOC) and Minnesota Pollution
Control Agency (PCA).
This report documents the results of the MCCAG’s work. This chapter provides an overview of
what Minnesota is already doing to control GHG emissions, lists the MCCAG’s
recommendations for additional action to control GHG emissions, and evaluates the potential
effects of the MCCAG’s recommendations (coupled with progress under way) toward meeting
Minnesota’s statewide GHG reduction goals. Chapter 2 provides a summary of Minnesota’s
historic and forecasted GHG emissions. Chapters 3 through 8 summarize the MCCAG’s
recommendations that are documented in detail in Appendixes E through K. Appendix A of the
report contains Governor Pawlenty’s invitation to CCS to facilitate and provide technical support
to Minnesota’s process for developing its Action Plan. Appendix B provides a copy of the
memorandum that outlines the process. Appendix C provides the list of Technical Work Group
(TWG) members, and Appendix D provides the reference to the final report for Minnesota’s
GHG emissions inventory and reference case projections.
Recent Developments
Next Generation Energy Act of 2007 and Statewide GHG Reduction Goals
On May 25, 2007, Governor Tim Pawlenty signed the Next Generation Energy Act of 2007.1
This state law, coupled with other state initiatives to control GHG emissions, positions
Minnesota as a leader on the way toward our nation’s energy future. The Next Generation
Energy Act of 2007 includes requirements for Minnesotans to increase energy efficiency and
expand community-based energy development. In addition, it established a statewide goal to
reduce GHG emissions. The state law also supplements the aggressive 25x’25 renewable energy
standard proposed by the Governor and signed earlier this year.
The Act established aggressive goals for Minnesotans to reduce statewide GHG emissions across
all sectors to a level at least 15% below 2005 levels by 2015, to a level at least 30% below 2005
levels by 2025, and to a level at least 80% below 2005 levels by 2050. In 2005, Minnesota’s
1
Minnesota Session Laws 2007, Chapter 136, S.F. (Senate File) No. 145, http://www.revisor.leg.state.mn.us/bin/
getbill.php?number=SF145&session=ls85&version=list&session_number=0&session_year=2007
1-1
GHG emissions were 152 million metric tons (MMt) of carbon dioxide equivalent (CO2e) and, if
no reducing actions were taken, the state’s GHG emissions would be almost 198 MMtCO2e in
2025.
This means that to meet the 2015 emissions goal, Minnesotans will have to reduce their
emissions to about 131.8 MMtCO2e (or by about 41.3 MMtCO2e below 2015 levels). To meet
the 2025 emissions goal, Minnesotans will have to reduce their emissions to about 108.5
MMtCO2e (or by about 89 MMtCO2e below 2025 levels).
Note that MCCAG chose to focus its quantitative analyses on achieving the 2015 and 2025 GHG
reduction goals. The MCCAG felt that extending the emissions forecast and estimating the
effects of its policy recommendations in 2050 is just too speculative at this time. It is expected
that full and complete implementation of all of the recent actions and MCCAG’s
recommendations will set Minnesota on course to meet the 2050 goal, which will require a
transformation in how Minnesotans generate and use energy and identify ways to sequester
carbon.
GHG Reductions Associated With Recent Actions2
At the beginning of the MCCAG process, DOC and PCA identified more than 40 different
actions Minnesota has undertaken to control GHG emissions while at the same time conserving
energy and promoting the development and use of renewable energy sources.3 These actions also
include assessments of both terrestrial and geologic carbon storage opportunities in Minnesota.
The MCCAG recognized the importance of these recent actions as essential for setting
Minnesota on the path toward meeting its aggressive statewide goals and used these actions to
formulate the baseline from which it considered and developed its wide range of
recommendations to ensure that Minnesota stays the course toward meeting its goals.
A total of nine recent actions were identified for which data were available to estimate the
emission reductions and costs/cost savings of the actions relative to the business-as-usual
reference case projections. Other actions were not analyzed because they were enabling policies
(e.g., studies, technical assistance, loan programs, or program funding), their emission reductions
would be double-counted with the emission reductions quantified for one of the nine actions, or
because data were not readily available to quantify their reductions. Figure 1-1 illustrates the
emission reductions associated with each of the nine recent actions analyzed. Table 1-1 provides
the numeric estimates underlying Figure 1-1 and shows the costs or cost savings estimated for
each of the actions.
Implementation of the recent actions analyzed indicates that emissions reductions will be about
50% of the total emission reductions needed to meet the state’s 2015 goal and about 42% of the
total emission reductions needed to meet the state’s 2025 goal. These results underscore the
importance of the contribution of these recent actions toward Minnesota’s ability to meet its
statewide reduction goals. Note that the MCCAG selected two of the recent actions as priorities
for analysis during its process in order to develop detailed emission reduction and cost/cost
2
Note that actions recently adopted by the state of Minnesota have also been referred to as “existing” actions.
3
A summary of these actions can be found on the MCCAG’s project Web site under “Background, What MN Is
Already Doing?” at: http://www.mnclimatechange.us/background-alreadydoing.cfm
1-2
savings estimates for these actions, as well as to consider the possibility of increasing the
stringency of the recent actions. These two actions include the Conservation Improvement
Program (CIP) and the Renewable Energy Standard (RES). The CIP and RES together account
for more than 66% and 80% of the total reductions for all of the recent actions together in 2015
and 2025, respectively. The costs associated with the RES are significantly (but not completely)
offset by the cost savings associated with the CIP. The following provides a brief summary of
each of the nine recent actions.
Figure 1-1. Emission reductions associated with recent actions in Minnesota
(consumption-basis, gross emissions)
CIP = Conservation Improvement Program; RCI = Residential, Commercial, and Industrial [sectors]; RES =
Renewable Energy Standard; ES = Energy Supply.
It is important to note that the top line in Figure 1-1 represents total emissions associated with all
GHG-emitting activities across all sectors in Minnesota on a consumption basis prior to the
implementation of any existing actions. For the electricity supply sector, this assumes the
installation of the planned Big Stone 2 and Mesaba coal units and an assumed electricity demand
growth rate of 2.04% per year.
New Commercial Building Code: Beginning in 2009, Minnesota will implement one of the
most stringent commercial building codes in the country. It will combine best construction
practices with acceptance testing to ensure that systems are working properly. Minnesota’s new
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commercial building code will achieve a 30% better energy performance over a typical
commercial building.4
Sustainable Building Guidelines for New State Buildings: New buildings developed using
state bonds must adhere to the State’s sustainable design guidelines. These guidelines ensure that
all new state buildings initially exceed existing energy code by at least 30%. The guidelines
focus on achieving the lowest possible lifetime cost for new buildings and encourage continual
energy conservation improvements as well as use of renewable energy systems.5
Table 1-1. Emission reductions and costs/cost savings associated with recent actions in
Minnesota (consumption-basis, gross emissions)
GHG Reductions
(MMtCO2e)
Sector / Recent Action
Net Present
CostValue
Effective2008–2025
ness
(Million $) ($/tCO2e)
2015
2025
Total
2008–
2025
New Commercial Building Code
0.18
0.21
3.16
–$1.8
–$0.6
Sustainability Guidelines (New State Buildings)
0.22
0.46
4.72
–$1.7
–$0.4
10% Savings in State Buildings
0.09
0.11
1.75
–$0.9
–$0.5
Conservation Improvement Program (CIP)
6.01
14.72
133.8
–$8,449
–$63.2
RCI Totals
6.50
15.50
143.4
–$8,454
–$59.0
Biomass for Electricity
0.60
0.60
11.4
Metro Emissions Reduction Project
4.52
4.52
80.4
$2,330
$29.0
Renewable Energy Standard (RES)
7.72
15.7
133.1
$7,502
$56.4
20.8
225
$10,116
$45.0
Residential, Commercial, and Industrial (RCI)
Energy Supply (ES)
ES Totals
12.8
$285.3
$25.0
Transportation and Land Use (TLU)
Biodiesel
0.64
0.75
8.1
Ethanol
0.78
0.79
12.1
TLU Totals
1.4
1.5
20.2
20.7
37.8
385.7
TOTAL (includes all adjustments for overlaps with MCCAG
recommendations)
Not
quantified
Not
quantified
$995.5
Not
quantified
Not
quantified
$0.4
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric
ton of carbon dioxide equivalent.
Negative values represent net cost savings and positive values represent net costs associated with the policy
recommendation.
4
See the following website for additional information: http://www.doli.state.mn.us/buildingcodes.html
5
For additional information, see http://www.msbg.umn.edu/
1-4
Reduce Energy Use by 10% in State-Owned Buildings: On November 10, 2005, Governor
Pawlenty signed Executive Order 05-16 instructing all State agencies to undertake measures
including, but not limited to, the measures set forth in this order to reduce energy usage in stateowned buildings by 10% over calendar year 2006 compared with calendar year 2005.6
Energy Conservation Improvement Program: The Next Generation Energy Act of 2007
establishes an energy policy goal for Minnesota to achieve annual savings equal to 1.5% of
annual retail energy sales of electricity and natural gas. At least 1% of these sales should come
directly through energy conservation improvement programs and rate design. The additional
0.5% of savings can come indirectly through energy codes and appliance efficiency standards,
programs designed to transform the market or change consumer behavior, energy savings
resulting from efficiency improvements to the utility infrastructure and system, and other
activities to promote energy efficiency and energy conservation. These savings are based on the
average of the last 3 years of sales for the utility.
Biomass for Electricity: District Energy St. Paul operates a new combined heat and power plant
that uses clean waste wood to generate steam heat and electricity for downtown St. Paul,
reducing its dependence on coal by 80%. In addition, the Hibbing and Virginia [MN] Public
Utilities created an energy authority, Laurentian Energy, to re-power their coal-fired district
heating boilers in Hibbing and Virginia that produce steam and electricity. Laurentian Energy
produces 35 megawatts (MW) of power fueled by renewable biomass and closed-loop hybrid
poplars. The PCA is working with an energy-intensive industry in St. Paul—Rock-Tenn—and
District Energy St. Paul to build a power plant that relies on renewable energy. Rock-Tenn
processes half of all recycled paper in the state. Refuse-derived fuel is being explored as a fuel
source.7
Metro Emissions Reduction Project: Xcel Energy is in the process of replacing three coal-fired
power plants in Minnesota with cleaner solutions such as new natural gas-fired plants or
retrofitted technology.8
Renewable Energy Standard: The Minnesota legislature overwhelmingly passed a bill on
February 2007 requiring the state’s utilities to generate at least 25% of their electricity from
renewables by 2025. Under the new law, Minnesota will add between 5,000 and 6,000 MW of
new renewable energy. The law also establishes a renewable energy trading program for utilities
by 2008. This legislation is expected to reduce carbon dioxide (CO2) emissions by about 16%
over what they would otherwise have been.
6
For additional information, see http://www.governor.state.mn.us/priorities/governorsorders/executiveorders/2005/
PROD005605.html
7
For additional information see “Minnesota Biomass - Hydrogen and Electricity Generation Potential, A study by
the National Renewable Energy Laboratory,” Golden, Colorado, for the Minnesota Department of Commerce and
the Minnesota Office of Environmental Assistance, February 2005, at: http://www.pca.state.mn.us/oea/p2/
forum/MNbiomass-NREL.pdf
8
For additional information, see http://www.xcelenergy.com/XLWEB/CDA/0,3080,1-1-1_11824_22655-8770_0_0-0,00.html and http://www.pca.state.mn.us/hot/xcel.html
1-5
Biodiesel: As of September 29, 2005, Minnesota requires nearly all diesel fuel sold in the state to
contain at least a 2% biodiesel blend. It is estimated that the 2% fuel use requirement for
Minnesota will replace 16 million gallons of diesel fuel.9
Ethanol: Minnesota established an ethanol production incentive to provide payment to
producers to help develop a new market for Minnesota’s agricultural products. On the market
side, Minnesota requires that all gasoline sold in the state be blended with a 10% ethanol mix. In
addition, Minnesota began efforts in 1997 to develop a network of fueling stations for flex-fuel
vehicles that could run on an 85% ethanol blend. As of 2007, Minnesota has more than 300 E85
fueling stations around the state that together sold a total of 18,160,000 gallons of E85 blended
gasoline during 2006.10
The MCCAG Process
The MCCAG first met on April 20, 2007, and met a total of eight times, with the final decisional
meeting held on January 24, 2008, and a final meeting for review of this report. In all, more than
80 meetings and teleconference calls of the MCCAG and the six supporting TWGs were held to
identify and analyze various potential policy actions in advance of the MCCAG’s January 24,
2008, final decisional meeting.
The six TWGs considered information and potential recommendations in the following sectors:
•
Energy Supply (ES);
•
Residential, Commercial, and Industrial (RCI);
•
Transportation and Land Use (TLU);
•
Agriculture, Forestry, and Waste Management (AFW);
•
Cross-Cutting Issues (CC); and
•
Cap-and-Trade (C&T).
CCS provided facilitation and technical assistance to each of the TWGs and the MCCAG. The
TWGs consisted of MCCAG members as well as individuals who were not on the MCCAG but
who did have an interest in and expertise regarding the issues being addressed by each TWG (see
Appendix C for a listing of the members of each TWG). The TWGs served as advisers to the
MCCAG and helped generate initial recommendations on priority policy recommendations for
analysis. They then developed draft proposals on the design characteristics and quantification of
the proposed policy recommendations. Where members of a TWG did not fully agree on
recommendations to the MCCAG, the summary of their efforts was reported to the MCCAG for
further consideration and actions. The MCCAG then made its decisions after reviewing the
TWGs’ proposals.
The MCCAG process involved a model of informed self-determination through a facilitated,
stepwise, consensus-building approach. With oversight by DOC and PCA, the process was
9
For additional information, see http://www.mda.state.mn.us/renewable/biodiesel/default.htm
10
For additional information, see http://www.mda.state.mn.us/renewable/ethanol/default.htm
1-6
conducted by CCS, an independent, expert facilitation and technical analysis team. It was based
on procedures that CCS consultants have used in a number of other state climate change
planning initiatives since 2000 but was adapted specifically for Minnesota. The MCCAG process
sought but did not mandate consensus, and it explicitly documented the level of MCCAG
support for some policies and key findings established through a voting process established in
advance.
The 46 policy recommendations (out of more than 300 potential options considered) adopted by
the MCCAG and presented in this report underwent two levels of screening by the MCCAG.
First, a potential policy recommendation being considered by a TWG was not accepted as a
“priority for analysis” and fleshed out for full analysis unless it had a supermajority of support
from MCCAG members present at the decisional meetings (with “supermajority” defined as four
objections or fewer by MCCAG members attending a meeting). Second, after the analyses were
conducted, only policy recommendations that received at least majority support (defined as less
than half of those present objecting) from MCCAG members present at the decisional meetings
were adopted by the MCCAG and included in this report.
Of the 46 policy recommendations adopted by the MCCAG, 38 were approved unanimously,
4 were approved by a supermajority, and 4 were approved by a simple majority.
The TWGs’ recommendations to the MCCAG were documented and presented to the MCCAG
at each MCCAG meeting. All of the MCCAG and TWG meetings were open to the public and
all materials for and summaries of the MCCAG and TWG meetings were posted on the MCCAG
Web site.
Analysis of Policy Recommendations
With CCS providing facilitation and technical analysis, the six TWGs submitted
recommendations for policies for MCCAG consideration using a “policy option template”
conveying the following key information:
Policy Description
Policy Design (Goals, Timing, Parties Involved)
Implementation Mechanisms
Related Policies/Programs in Place
Type(s) of GHG Reductions
Estimated GHG Reductions and Net Costs or Cost Savings
Key Uncertainties
Additional Benefits and Costs
Feasibility Issues
Status of Group Approval
Level of Group Support
Barriers to Consensus
In its deliberations, the MCCAG modified and embraced various policy recommendations. The
final versions for each sector, conforming to the policy option templates, appear in Appendixes E
through K and constitute the most detailed record of decisions of the MCCAG. Appendix E
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describes the methods used for quantification of the 31 policy recommendations that were
analyzed quantitatively. Three key methods are summarized below.
Estimates of GHG Reductions: Using the projection of future GHG emissions (see below) as a
starting point, 31 policy recommendations were analyzed by CCS to estimate GHG reductions
attributable to each policy in the individual years of 2015 and 2025 and cumulative reductions
over the time period 2008–2025.11 The CCS estimates were prepared in accordance with
guidance by the appropriate TWG and the MCCAG, which later reviewed the estimates and, in
some cases, directed that they be revised with respect to such elements as goals, data sources,
and methodology. Many policies were estimated to affect the quantity or type of fossil fuel
combusted; others affected methane (CH4) or CO2 sequestered. Among the many assumptions
involved in this task was selection of the appropriate GHG accounting framework, namely, the
choice between taking a “production-based” approach versus a “consumption-based” approach to
various sectors of the economy.12 The MCCAG took a “production-based” approach in all
sectors except the electricity sector, in both forecasting emissions and in estimating the GHG
impacts of policies. This issue, along with other GHG estimation issues (e.g., analysis of
overlapping or interacting policy impacts), is discussed in detail in Appendix E (Methods for
Quantification).
Estimates of Costs/Cost Savings: The analyses of 25 policy recommendations included
estimates of the cost of those policies, both in terms of net costs or cost savings during 2008–
2025 and a dollars-per-ton cost (i.e., cost-effectiveness).13 (The other 6 policy recommendations
that were analyzed with respect to their GHG reductions were such that their costs or cost
savings could not be readily estimated.) While the cap-and-trade policy (C&T-1) was analyzed
and resulted in cost savings, those savings are not included in the aggregate results. This is
because the analysis was limited to a single year, 2025, which prevented the calculation of a
levelized dollars-per-ton cost-effectiveness number consistent with the other options.)14 The
approach used for the 46 policy recommendations was similar to a conventional cost-benefit
framework but had some important differences:
11
Since the policies recommended by the MCCAG fully satisfy the GHG reduction goals for 2015 and are within 1
MMtCO2e of meeting the goal for 2025, the cap-and-trade policy (C&T-1) did not generate ‘reductions’ of its own
(i.e., the ‘cap’ was met). Instead, C&T-1 enabled the achievement of the projected reductions (within the covered
sectors) at a lower cost than would have been possible without the cap-and trade-program.
12
A production-based approach estimates GHG emissions associated with goods and services produced within the
state, and a consumption-based approach estimates GHG emissions associated with goods and services consumed
within the state. In some sectors of the economy, these two approaches may not result in significantly different
numbers, however, the power sector is notable in that it is responsible for large quantities of GHG emissions, and
states often produce more or less electricity than they consume (with the remainder attributable to power exports or
imports). Minnesota imports electric power and must account for the emissions this consumption creates, even
though they are not produced in-state.
13
The analysis addressed the costs / cost savings of each policy recommendation and, with the exception of a few
recommendations that address rate structures, did not attempt to estimate specific price changes or utility rate
changes that might result from implementation of a policy.
14
The analysis of a regional cap-and-trade program required the development of marginal cost curves for Minnesota
and any other jurisdiction participating in the program, which ultimately totaled 22 states and Canadian provinces.
The limitations of time and the demands on the model to provide results of multiple scenarios limited the model’s
results to the single ‘snapshot’ year of 2025.
1-8
•
Discounted and “levelized” costs—Fairly standard approaches were taken here. The “net
present value” of costs was calculated by applying a real discount rate of 5%. Dollars-per-ton
estimates were derived as a “levelized” cost per ton, dividing the “present value cost” by the
cumulative GHG reduction measured in tons. As was the case with GHG reductions, the
period 2008–2025 was analyzed.
•
Benefits vs. costs—The principal benefit of the MCCAG policy recommendations is reduced
GHG emissions and these were quantified simply as metric tons. There was no attempt to
monetize the benefit of these reductions in atmospheric concentration (e.g., health benefits).
Many policies did create easily monetized non-GHG benefits (e.g., fuel savings and
electricity savings). In these cases, monetized benefits were subtracted from monetized costs,
resulting in net costs. These net costs could be positive or negative; negative costs indicated
that the policy saved money or produced “cost savings.”
•
Direct vs. indirect effects—Cost estimates were based on “direct effects” (i.e., those borne by
the entities implementing the policy).15 Implementing entities could be individuals,
companies, and/or government agencies. In contrast, conventional cost-benefit analysis takes
the “societal perspective” and tallies every conceivable impact on every entity in society (and
quantifies these wherever possible).
Contributing Issues: The MCCAG recommendations were guided in part by the GHG
reductions and monetized costs and benefits of various options, but members also felt that other
considerations (e.g., social, economic, and environmental) should also have weight. The TWGs
were asked to examine these qualitative terms where deemed important and quantify them on a
case-by-case, as needed, depending on need and where data were readily available.
Minnesota GHG Emissions Inventory and Reference Case Projections
The CCS, with assistance from the Minnesota PCA, prepared a draft of Minnesota’s GHG
emissions inventory and reference case projections for the MCCAG.16 The draft inventory and
reference case projections, completed in July 2007, provided the MCCAG with an initial,
comprehensive understanding of current and possible future GHG emissions. The draft report
was provided to the MCCAG and the TWGs to assist the MCCAG in understanding past,
current, and possible future GHG emissions in Minnesota and thereby inform the policy
recommendation development process. The MCCAG and TWGs have reviewed, discussed, and
evaluated the draft inventory and methodologies as well as alternative data and approaches for
improving the draft GHG inventory and forecast. The inventory and forecast was revised to
address the comments approved by the MCCAG and was subsequently approved by the
MCCAG at its seventh meeting.
The inventory and reference case projections included detailed coverage of all economic sectors
and GHGs in Minnesota, including future emissions trends and assessment issues related to
15
“Additional benefits and costs” were defined as those borne by entities other than those implementing the policy
recommendation. These indirect effects were quantified on a case-by-case basis depending on magnitude,
importance, need, and availability of data.
16
Draft Minnesota Greenhouse Gas Inventory and Reference Case Projections, 1990–2020, prepared by the Center
for Climate Strategies for the Minnesota Pollution Control Agency, July 2007.
1-9
energy, economic, and population growth. The assessment included estimates of total statewide
“gross emissions” (leaving aside carbon sequestration17) on a production basis for all sources and
a consumption basis for the electricity sector (see prior discussion under “Analysis of Policy
Recommendations” in this chapter for an explanation of the production versus consumption
approach). The assessment found that forests and agricultural lands in Minnesota have been a net
source rather than a sink of carbon emissions largely due to the loss of these lands to other uses.
Consequently, in Minnesota “net emissions” (in which reductions due to sequestration are
subtracted from gross emissions) are equal to gross emissions. Further discussion of the issues
involved in developing the inventory and reference case projections is summarized in Chapter 2
(Inventory and Projections of GHG Emissions) and discussed in detail in the final report for the
inventory and reference case projections.
The inventory and reference case projections revealed substantial emissions growth rates and
related mitigation challenges. Figure 1-2 shows the reference case projections for Minnesota’s
gross GHG emissions as rising fairly steeply to 200 MMtCO2e by 2025, growing by 68% over
1990 levels. Figure 1-2 also provides the sectoral breakdown of forecasted GHG emissions.
The inventory and projection of Minnesota’s GHG emissions provided the following critical
findings:
•
As is common in many states, the production and consumption of electricity and
transportation are the sectors with the largest emissions, and they are expected to continue to
grow faster than other sectors.
•
Emissions associated with electricity generation and imports to meet in-state demand is
projected to be the largest contributor to future emissions growth, followed by emissions
associated with the RCI fuel use sectors. Other sources of emissions growth include
agriculture, primarily from agricultural soils; transportation fuel use, primarily from on-road
diesel; the transmission and distribution of natural gas; and the increasing use of
hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) as substitutes for ozone-depleting
substances (ODSs) in refrigeration, air conditioning, and other applications.
While Minnesota’s emissions estimated growth rate (68% from 1990 to 2025 on a gross
emissions, consumption basis) presents challenges, it also provides major opportunities. Key
choices regarding technologies and infrastructure can have a significant impact on the emissions
of a fast growing state. The MCCAG’s recommendations document the opportunities for the
state to reduce its GHG emissions while continuing its strong economic growth by being more
energy efficient, using more renewable energy sources, and increasing the use of cleaner
transportation modes, technologies, and fuels.
17
Sequestration refers to the storing of carbon in mines, brine strata, oceans, plants and soil. As trees and other
plants grow they remove CO2, the principal GHG, from the atmosphere transforming the carbon (C) through
photosynthesis into cellulose, starch and sugars, thus sequestering it in their structures and roots. The oxygen (O2) is
released back into the atmosphere. Minnesota’s forests and agricultural lands are capable of sequestering much CO2,
as described in Chapter 6 (Agriculture, Forestry, and Waste Management).
1-10
Figure 1-2. Gross GHG emissions by sector, 1990–2020: historical and projected
(consumption-based approach) business as usual/base case
Electricity (consumption-based)
Fossil Fuel Industry
RCI Fuel Use
Transport Onroad Gasoline
Transport Onroad Diesel
Jet Fuel/Other Transport
Agriculture
ODS Substitutes
Other Ind. Process
Waste Management
Forestry
220
200
180
160
MMtCO2e
140
120
100
80
60
40
20
0
1990
1995
2000
2005
2010
2015
2020
2025
RCI = direct fuel use in residential, commercial, and industrial sectors; ODS = ozone depleting substance.
MCCAG Policy Recommendations (Beyond Recent Actions)
The MCCAG recommended 46 policy actions. The MCCAG members present and voting
approved 38 policy actions unanimously, approved 4 by a supermajority (four objections or
fewer), and approved 4 by a majority (less than half object). Explanations of both individual
objections and qualifications are in the appendixes to this report, which contain detailed accounts
of the MCCAG’s recommendations.
Figure 1-3 presents a summary of the policy recommendations for which emission reductions
were quantified. Table 1-2 provides the numeric estimates underlying Figure 1-3. In Figure 1-3,
•
Actual (for 1990, 2000, and 2005) and projected (for 2015 and 2025) levels of Minnesota’s
gross GHG emissions on a consumption basis are shown by the blue line. (The consumptionbased approach accounts for emissions associated with the generation of electricity in-state
and imported from out-of-state to meet Minnesota’s demand for electricity.)
•
Projected emissions associated with Minnesota’s existing actions that were analyzed
quantitatively are shown by the red line.
•
Projected emissions if all of the MCCAG’s 31 recommendations that were analyzed
quantitatively with respect to their GHG reduction potential are completely implemented and
the estimated reductions are fully achieved are shown by the green line. (Note that other
MCCAG recommendations would have the effects of reducing emissions, but those
reductions were not analyzed quantitatively and they are not reflected in the green line.)
1-11
•
Projected emissions associated with Minnesota’s statewide GHG reduction targets are shown
by the black line.
Figure 1-3. Annual GHG emissions: reference case projections and MCCAG
recommendations (consumption-basis, gross emissions)
MMtCO2e = million metric tons of carbon dioxide equivalent; GHG = greenhouse gas; MCCAG = Minnesota Climate
Change Advisory Group.
1-12
Table 1-2. Annual emissions: reference case projections and impact of MCCAG
recommendations (consumption-basis, gross emissions)
Annual Emissions
(MMtCO2e)
Reference Case Projections
2015
2025
157.1
175.5
200.5
0.4
20.8
37.8
156.6
154.7
162.6
133.5
110.0
Total GHG Reductions From MCCAG Recommendations
22.2
50.3
Difference Between MCCAG Reductions and Next Generation
Energy Act Targets
Projected Annual Emissions After Quantified MCCAG Reductions
–1.0
2.4
132.5
112.4
Reductions From Recent Actions
Projected GHG Emissions After Recent Actions
Next Generation Energy Act Targets
1990
2000
119.0
143.8
0.0
0.4
2005
MMtCO2e = million metric tons of carbon dioxide equivalent; GHG = greenhouse gas; MCCAG = Minnesota Climate
Change Advisory Group.
The MCCAG approved 46 recommendations to reduce emissions, of which 31 were analyzed
quantitatively to estimate their effects on emissions and 25 were analyzed quantitatively to
estimate their costs/cost savings. The analyzed measures were estimated to have a cumulative
effect of reducing emissions by about 22 MMtCO2e in 2015 and 50 MMtCO2e in 2025.
Together, the estimated emission reductions associated with the MCCAG’s recommendations
and recent actions would be enough to achieve Minnesota’s GHG reduction goal for 2015 and be
within 2.4 MMtCO2e of meeting Minnesota’s goal for 2025. The 25 recommendations analyzed
in terms of their cost-effectiveness were estimated to have a total net cost of about $726 million
between now and 2025, representing the incremental cost to the recent actions. While the
MCCAG’s 15 other recommendations were not readily quantifiable, many of them would likely
achieve additional reductions and net savings (e.g., recommendations for the TLU sector).
Should Minnesota implement the MCCAG’s recommendations to participate in a cap-and-trade
program, opportunities exist for reducing the costs associated with the MCCAG’s policy
recommendations for the electricity supply sector. In addition, emerging technologies may hold
the potential to reduce emissions even more.
Table 1-3 provides a summary by sector of the estimated cumulative impacts of implementing all
of the MCCAG’s recommendations. Table 1-4 shows the estimated GHG reductions, costs, or
savings from each policy recommendation and the recommendation’s cost-effectiveness (cost or
savings per ton of reduction) upon which the cumulative impacts in Table 1-3 are based. Note
that the cumulative impacts shown in Table 1-3 account for overlaps between policies by
eliminating potential double counting of emission reductions and costs or cost savings. Chapters
3 through 8 and the Appendixes provide detailed descriptions and analysis of GHG reductions,
costs or cost savings, additional impacts, and feasibility for each policy developed by the six
TWGs for each sector.
In order for the policies recommended by the MCCAG to yield the levels of estimated emission
reductions and cost savings shown in Table 1-3, the policies must be implemented in a timely,
aggressive, and thorough manner. In some cases, the actions recommended by the MCCAG are
1-13
precise, concrete steps. In other cases, the recommendations are more general, and work must be
done to develop precise, concrete steps to achieve goals recommended by the MCCAG. In the
latter case, the additional work to identify precise, concrete actions is needed before they can be
implemented. While there are considerable benefits to both the environment and to consumers
from implementation of the policy recommendations, careful, comprehensive, and detailed
planning and implementation as well as consistent support of these policies will be required if
these benefits are to be achieved. It should be noted that the MCCAG’s policy recommendations
complement the numerous other climate-related efforts underway in Minnesota outlined at the
beginning of this chapter, underscoring the potential co-benefits of their implementation.
Table 1-3. Summary by sector of estimated impacts of implementing all of the MCCAG
recommendations (cumulative reductions and costs/savings)
GHG Reductions
(MMtCO2e)
Sector
Net
CostPresent
Value
Effectiveness
2008–
2025
($/tCO2e)
(Million $)
2015
2025
Total
2008–
2025
Residential, Commercial, and Industrial (RCI, non-electricity)
0.76
0.69
10.41
–$464
–$44.6
Integrated RCI and ES for electricity
1.56
7.34
51.06
–$1,098
–$21.5
Energy Supply (ES, including RCI options with impacts on
electricity consumption, and adjusted for RCI and ES electricity
options that overlap)
1.97
3.43
37.55
Transportation and Land Use
4.70
9.30
91.2
Agriculture, Forestry, and Waste Management
13.2
Cross-Cutting Issues
29.5
279
$462.2
–$12.3
–$264
N/A
$2,090
$7
Non-quantified, enabling options
TOTAL (includes all adjustments for overlaps and recent
actions)*
20.2
50.3
469.2
$725.8
N/A
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the options. Within each sector, values have been adjusted to eliminate double counting for options or elements
of options that overlap. In addition, values associated with options or elements of options within a sector that overlap
with options or elements of options in another sector have been adjusted to eliminate double counting.
N/A = not available; for TLU policies, an overall cost-effectiveness value is not provided because costs or cost
savings were not estimated for all of the policies (due to the lack of data) for which emission reductions were
estimated. Similarly, an overall cost-effectiveness value for all sectors is not provided for the same reason.
Note that the row in Table 1-3 for the RCI sectors includes only that portion of RCI emissions reductions and net cost
savings that are from RCI options (or elements of options) that affect fuels combusted for purposes other than
generating electricity. RCI emissions reductions and net cost savings that affect electricity use or generation are
included in the “Integrated RCI and ES for electricity” row in Table 1-3 because the benefits and costs of electricitysector options are dependent on the electrical load served, which is affected by RCI electricity savings.
1-14
Table 1-4. Residential, Commercial, and Industrial Policy Recommendations
Policy
No.
RCI-1
RCI-2
RCI-3
RCI-4
RCI-5
RCI-6
RCI-7
RCI-8
RCI-9
RCI-10
Policy Recommendation
Maximize Savings From the Utility
Conservation Improvement Program
(CIP) *
Improved Uniform Statewide Building
Codes
Green Building Guidelines and
Standards Based on Architecture 2030
Incentives and Resources to Promote
Combined Heat and Power (CHP)
Program to Reduce Emissions of NonFuel, High-Global-Warming-Potential
GHGs
Non-Utility Strategies and Incentives to
Encourage Energy Efficiency and
Reduce GHG Emissions
Conservation Improvement-Type
Program for Propane and Fuel Oil
Efficiency
Energy Performance Disclosure
Promote Technology-Specific
Applications to Reduce GHG Emissions
Support Strong Federal Appliance
Standards and Require High State
Standards in the Absence of Federal
Standards
Sector Total After Adjusting for
Overlaps (RCI, Non-Electricity)
Sector Total After Adjusting for
Overlaps (Integrated RCI and ES for
Electricity)
Reductions From Recent Actions
New Commercial Building Code
Sustainability Guidelines
(New State Buildings)
10% Savings in State Buildings
RCI-1: New CIP*
Sector Total Plus Recent Actions
GHG Reductions
Cost(MMtCO2e)
Net Present
EffectiveValue
Total
ness
2015 2025
(2008– (Million $) ($/tCO e)
2
2025)
Level of
Support
Quantified as a “Recent Action”
Enacted
0.004
0.005
0.62
0.94
0.96
0.077
–$44
–$576
Unanimous
11.1
–$296
–$27
Unanimous
4.95
33.1
$125
0.02
0.05
0.5
–$2
–$5
Unanimous
0.25
1.30
8.3
–$307
–$37
Unanimous
0.05
0.05
0.7
–$21
–$28
Unanimous
$3.8
Unanimous
Not quantified
Unanimous
Not quantified
Unanimous
0.8
1.4
15.3
–$1,895
–$124
0.76
0.69
10.41
–$464
–$44.6
1.56
7.34
51.06
–$1,098
–$21.5
6.50
0.18
15.50
0.21
143.4
3.16
–$8,454
–$1.8
–$59.0
–$0.6
0.22
0.46
4.72
–$1.7
–$0.4
0.09
6.01
8.82
0.11
14.72
23.5
1.75
133.8
204.9
–$0.9
–$8,449
–$10,016
–$0.5
–$63.2
–$48.9
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent; ES = Energy Supply.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
Only the results of recommendations included in the final tabulation of GHG reductions and costs are shown in this
table. For discussion of any sensitivity analyses undertaken, please see the discussion in RCI Appendix F, Annex 1.
* The CIP considered here is based on the CIP requirements (i.e., 1.5% energy savings goal) included in the Next
Generation Energy Act of 2007; therefore, the emission reductions and cost savings estimated are included under
“recent actions.”
1-15
Table 1-4 (continued). Energy Supply Policy Recommendations
Policy
No.
ES-1
ES-3
ES-4
ES-5
ES-6
ES-8
ES-10
ES-12
ES-13
Policy Recommendation
Generation Performance Standard
GHG Reductions
Net
Cost(MMtCO2e)
Present
EffectiveValue
Total
ness
2015 2025 (2008– 2008–2025 ($/tCO2e)
2025) (Million $)
0.0
0.0
0.0
$0
$0.0
Efficiency Improvements, Re-powering
1.8
3.0
33.3
$554.4
$16.7
and other Upgrades to Existing Plants
Transmission System Upgrading,
0.2
0.4
3.9
–$92.2
–$26.1
Including Reducing Transmission Line
and Distribution System Loss
Renewable and/or Environmental
Quantified as a “Recent Action”
Portfolio Standard *
Nuclear Power Support and Incentives
0
0
0
$0
$0
Advanced Fossil Fuel Technology
0.0
0.0
0.0
$0
$0.0
Incentives, Support or Requirements,
Including Carbon Capture and Storage
Voluntary GHG targets
Not quantified
Distributed Renewable Energy
0.021 0.023
0.37
$29.1
$78.1
Incentives and/or Barrier Removal
Technology-Based Approaches,
Including Research and Development,
Not quantified
Fuel Cells, Energy Storage, Distributed
Renewable Energy Technologies, etc.
Sector Total After Adjusting for
2.0
3.4
37.5
$462.2
$12.3
Overlaps
Reductions From Recent Actions
12.8
20.8
225
$10,116
$45.0
0.60
11.4
$285.3
$25.0
Biomass for Electricity 0.60
4.52
80.4
$2,330
$29.0
Metro Emissions Reduction Project 4.52
133.1
$7,502
$56.4
ES-5: Renewable Energy Standard* 7.72 15.7
Sector Total Plus Recent Actions
14.8
24.2
262.5 $10,578
$40.3
Level of
Support
Majority (16
objections)
Unanimous
Unanimous
Enacted
Unanimous
Unanimous
Unanimous
Unanimous
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
All totals are relative to the underlying assumption that electricity expansion in Minnesota proceeds with the recently
legislated Conservation Improvement Program (CIP), Renewable Energy Standard (RES), and all planned additions
including the Mesaba and Big Stone 2 stations.
* The RES considered here is based on the RES requirements included in the Next Generation Energy Act of 2007;
therefore, the emission reductions and cost s estimated are included under “recent actions.”
1-16
Table 1-4 (continued). Transportation and Land Use Policy Recommendations
GHG Reductions
(MMtCO2e)
Policy
No.
Policy Recommendation
2015
2025
Net
Present
CostValue
EffectiveTotal
ness
2008–
2008–
2025
($/tCO2e)
2025 (Million $)
Level of
Support
TLU Area 1: Reduce VMT (VMT goal to be established based on VMT implied by selected strategies)
TLU-1
Improved Land-Use Planning and
Development Strategies
0.7
1.9
14.9
TLU-2
Expand Transit, Bicycle, and Pedestrian
Infrastructure
0.1
0.3
3.0
TLU-5
Climate-Friendly Transportation Pricing/Pay
as You Drive
1.1
2.1
20.9
TLU-7
“Fix-it-First” Transportation Investment Policy
and Practice
TLU-9
Workplace Tools To Encourage Carpooling,
Bicycling, and Transit Ridership
TLU-14
Freight Mode Shifts: Intermodal and Rail
Net
savings
Net
savings
Unanimous
$0
$0
Unanimous
–$1
–$1
Not quantified
Supermajority (3
objections)
Super majority (2
objections)
Large net Large net
Unanimous
savings
savings
Super majority
N/A
(1 objection)
0.3
0.4
4.5
1.7
3.6
36.2
0.1
TLU Area 2: Reduce Carbon per Unit of Fuel
TLU-3
Low-GHG Fuel Standard
Not quantified
Unanimous
Not quantified
Unanimous
TLU Area 3: Reduce Carbon per Mile and/or per Hour
TLU-4
Infrastructure Management
0.04
TLU-6
Adopt California Clean Car Standards
0.74
1.16 13.1
TLU-12
Voluntary Fleet Emission Reductions
0.4
0.4
TLU-13
0.4
0.7
6.1
Reduce Maximum Speed Limits
0.4
Sector Total After Adjusting for Overlaps
4.7
9.3
91.2
Reductions From Recent Actions
Biodiesel
Ethanol
1.4
0.64
0.78
1.5
0.75
0.79
20.2
8.1
12.1
Sector Total Plus Recent Actions
6.1
10.8
–$39
Majority (16
objections)
Not quantified
Unanimous
–$263
6.1
111.4
$50 at
$2.40/gal Majority (16
N/A
objections)
–$19 at
$3.40/gal
Not
–$264
quantified
Not quantified
–$264
Not
quantified
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent, VMT = vehicle miles traveled; N/A = not available.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
1-17
Table 1-4 (continued). Agriculture, Forestry, and Waste Management Policy
Recommendations
Policy
No.
GHG Reductions
(MMtCO2e)
Policy Recommendation
Net
CostPresent
EffectiveValue
ness
2008–2025
($/tCO2e)
(Million $)
2015
2025
Total
2008–
2025
A. Soil Carbon Management
0.72
1.3
15
–$34
–$2
B. Nutrient Management
0.79
1.3
15
–$543
–$37
A. Preserve Land
0.15
0.44
3.7
$120
$33
B. Reinvest in Minnesota–Clean
Energy (RIM-CE)
0.09
0.19
1.8
$59
$34
–$242
–$9
$74
$55
Level of
Support
Agricultural Crop Management
AFW-1
AFW-2
Land Use Management Approaches for
Protection and Enrichment of Soil
Carbon
C. Protection of Peatlands &
Wetlands
AFW-3
Unanimous
Not Quantified
In-State Liquid Biofuels Production
A. Ethanol Carbon Content
AFW-4
Unanimous
1.8
2.2
B. Fossil Diesel Displacement
0.03
0.19
C. Gasoline 35% Displacement
2.8
9.1
73
$336
$5
1.3
3.8
31
$102
$3
0.55
2.2
17
$218
$13
1.2
2.7
26
–$295
–$12
Expanded Use of Biomass Feedstocks
for Electricity, Heat, or Steam Production
27
1.4
Super
Majority (4
objections)
Unanimous
Forestry Management Programs to
Enhance GHG Benefits
A. Forestation
AFW-5
B. Urban Forestry
C. Wildfire Reduction
D. Restocking
Not Quantified
2.1
8.4
E. Forest Health and Enhanced
Sequestration
AFW-6
Forest Protection—Reduced Clearing
and Conversion to Non-Forest Cover
65
$2,187
Unanimous
$33
Not Quantified
2.2
2.7
34
$101
$3
Unanimous
A. Source Reduction
0
3.6
20
$59
$3
Unanimous
B. Recycling
3.1
3.4
45
–$207
–$5
0.29
0.41
4.9
$137
$28
A. Landfill Methane Recovery
0.07
0.73
4.4
$5.7
$1
B. Residuals Management
0.52
0.63
8.1
$650
$80
C. WTE Preprocessing
0.37
0.84
7.9
$257
$32
Front-End Waste Management
Technologies
AFW-7
C. Composting
End-of-Life Waste Management
Practices
AFW-8
Sector Total After Adjusting for
Overlaps*
13.2
29.5
Reductions From Recent Actions
0.0
0.0
Sector Total Plus Recent Actions
13.2
29.5
1-18
279
0.0
279
$2,090
0.0
$2,090
$7
0.0
$7
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent; WTE = waste-to-energy.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
*Overlaps include an assumed 100% overlap of AFW-3b&3c with TLU-3 (reductions excluded from AFW totals); an
assumed 100% overlap of AFW-4 with ES-5 (reductions and costs excluded from AFW totals); overlap of AFW-7&8
(incremental benefits and costs of AFW-8 included in the AFW totals).
Table 1-4 (continued) Cross-Cutting Issues Policy Recommendations
Policy
No.
Policy Recommendation
GHG Reductions
Net Present
(MMtCO2e)
CostValue
EffectiveTotal 2008–2025
ness
2015 2025 2008- (Million $)
($/tCO2e)
2025
Level of
Support
CC-1
GHG Inventories, Forecasting, Reporting, and
Registry
Not quantified
Unanimous
CC-2
Statewide GHG Reduction Goals and Targets
Not quantified
Unanimous
CC-3
State and Local Government GHG Emissions
(Lead-by-Example)
Not quantified
Unanimous
CC-4
Public Education and Outreach
Not quantified
Unanimous
CC-7
Participate in Regional and Multistate GHG
Reduction Efforts
Not quantified
Unanimous
CC-8
Encourage the Creation of a BusinessOriented Organization to Share Information
and Strategies, Recognize Successes, and
Support Aggressive GHG Reduction Goals
Not quantified
Unanimous
CC-9
Dedicate Greater Public Investment to Climate
Data and Analysis
Not quantified
Unanimous
Sector Total After Adjusting for Overlaps
Not quantified
Reductions From Recent Actions
Not quantified
Sector Total Plus Recent Actions
Not quantified
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent.
1-19
Table 1-4 (continued) Cap-and-Trade (C&T) Policy Recommendations
Policy
No.
C&T-1
C&T-2
C&T-3
C&T-5
C&T-6
Policy Recommendation
Cap-and-Trade Program
MGA Partners C&T
—no RES/CIP in the baseline
MGA Partners C&T
—with both RES/CIP in the
baseline
MGA Partners C&T
—with only RES in the baseline
MGA Partners+Observers C&T
—no RES/CIP in the baseline
MGA Partners+Observers C&T
—with both RES/CIP in the
baseline
MGA Partners+Observers C&T
—with only RES in the baseline
MGA plus WCI Partners C&T
—no RES/CIP in the baseline
MGA plus WCI Partners C&T
—with both RES/CIP in the
baseline
MGA plus WCI Partners C&T
—with only RES in the baseline
MGA and WCI
Partners+Observers C&T
—no RES/CIP in the baseline
MGA and WCI
Partners+Observers C&T
—with both RES/CIP in the
baseline
MGA and WCI
Partners+Observers C&T
—with only RES in the baseline
MN-Only C&T
—no RES/CIP in the baseline
GHG Reductions
CostNet
Permit
(MMtCO2e)
EffectivePresent
Price†
Level of
ness*
Total
Value
($/tCO2e) Support
2015 2025 (2008– (Million $) ($/tCO2e) 2025
2025
2025)
79.82
–$12.17
$48.45
52.94
$2.65
$45.95
67.35
–$15.42
$46.64
81.97
–$10.52
$52.44
55.45
$4.71
$50.72
69.45
–$13.48
$51.27
72.64
–$17.52
$35.69
46.93
–$2.19
$34.95
61.92
–$20.36
$35.07
76.17
–$14.92
$41.87
50.41
$0.59
$41.25
64.92
–$17.65
$41.39
89.18
–$2.39
$65.48
National C&T
Not quantified
Market Advisory Group
(Formerly CC-11)
Regional and Multistate GHG
Reduction Efforts (Formerly CC-7)
Majority (9
objections)
Merged into
C&T-1
Merged into
C&T-1
Not quantified
Unanimous
Not quantified
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton of carbon
dioxide equivalent; MGA = Midwestern Governors Association; C&T = cap-and-trade; RES = renewable electricity standard; CIP =
Conservation Improvement Program; WCI = Western Climate Initiative; CC = Cost-Cutting Issues.
Negative numbers represent cost savings.
MGA C&T Partners include Illinois, Iowa, Kansas, Michigan, Minnesota, Wisconsin, and Manitoba; MGA C&T Observers include
Indiana, Ohio, and South Dakota; WCI Partners include Arizona, California, New Mexico, Oregon, Utah, Washington, British
Columbia, and Manitoba; WCI Observers include Colorado, Idaho, Montana, Nevada, and Wyoming. To run simulations including
both MGA and WCI states in 2025, the C&T Technical Work Group (TWG) used 2020 marginal cost curves for WCI states for 2025.
The emission cap for both MGA and WCI states (or provinces) is assumed to be 30% below the 2005 level in 2025.
* This represents the average $/tCO2e mitigated/sequestered for Minnesota.
†
This represents the marginal cost of the last tCO2e mitigated/sequestered and applies to all states involved in a trading
arrangement.
1-20
Perspectives on Policy Recommendations
As explained above, the MCCAG considered the estimates of the GHG reductions that could be
achieved by 31 of its recommendations, and the costs (or cost savings) of 25 of those 31. Having
these analyses was very helpful to the MCCAG, but the MCCAG was mindful that these are
estimates. There can be considerable imprecision in the GHG reductions associated with various
policy recommendations. Figure 1-4 presents the estimated tons of reductions for each policy
recommendation for which estimates were available, expressed as a cumulative figure for the
period 2008–2025. In addition to the imprecision in GHG reductions achieved by each policy
recommendation, there are also uncertainties in the exact cost (or cost savings) per ton of
reduction achieved. Figure 1-5 presents the estimated dollars per ton cost (or cost savings,
depicted as a negative number) for each policy recommendation for which cost estimates were
available. This measure is calculated by dividing the net present value of the cost of the policy
recommendation by the cumulative GHG reductions, all for the period 2008–2025. In some
cases, there is a wide variation in the cost-effectiveness of the policy recommendations,
depending on the assumptions used in the analysis.
Figure 1-4. MCCAG policy recommendations ranked by 2025 annual GHG reduction
potential
MMtCO2e = million metric tons of carbon dioxide equivalent; AFW = Agriculture, Forestry, and Waste Management;
RCI = Residential, Commercial, and Industrial; TLU = Transportation and Land Use; ES = Energy Supply.
1-21
Figure 1-5. MCCAG policy recommendations ranked by cost/cost savings per ton of GHG
removed
RCI-2 = –$576/ton
RCI = Residential, Commercial, and Industrial; TLU = Transportation and Land Use; ES = Energy Supply; AFW =
Agriculture, Forestry, and Waste Management.
Note: Negative values represent net cost savings and positive values represent net costs associated with the policy
recommendation.
The MCCAG recognizes that actions to address climate change have the potential to create
unintentional yet significant adverse financial, pollutant exposure, and cultural impacts on lowincome populations, communities of color, and/or diverse cultural communities. As Minnesota
begins the process of refinement and implementation of actions to reduce GHG emissions, the
Office of Energy Security, the Minnesota Pollution Control Agency, the Department of
Commerce and other relevant state agencies and partners should actively engage meaningful
representation from these communities to better understand the nature of their concerns and to
facilitate their effective participation.
1-22
Chapter 2
Inventory and Projections of GHG Emissions
Introduction
This chapter presents a summary of Minnesota’s greenhouse gas (GHG) emissions and sinks
(carbon storage) from 1990 to 2025. The Center for Climate Strategies (CCS) prepared a draft of
Minnesota’s GHG emissions inventory and reference case projections for the Minnesota Climate
Change Advisory Group (MCCAG) of the Office of the Governor of Minnesota.1 The draft
inventory and reference case projections, completed in July 2007, provided the MCCAG with an
initial, comprehensive understanding of current and possible future GHG emissions. The draft
report was provided to the MCCAG and its Technical Work Groups (TWGs) to assist the
MCCAG in understanding past, current, and possible future GHG emissions in Minnesota and
thereby inform the policy recommendation development process. The MCCAG and TWGs have
reviewed, discussed, and evaluated the draft inventory and methodologies as well as alternative
data and approaches for improving the draft GHG inventory and forecast. The inventory and
forecast have since been revised to address the comments provided by the MCCAG. In addition,
the forecast has been extended to the year 2025 to comport with the Next Generation Energy Act
of 2007 recently adopted by the State legislature and signed into law by the Governor of
Minnesota.2 The information in this chapter reflects the information presented in the final
inventory and reference case projections report (hereafter referred to as the Inventory and
Projections).3
Historical GHG emissions estimates (1990 through 2005)4 were developed using a set of
generally accepted principles and guidelines for state GHG emissions inventories, relying to the
extent possible on Minnesota-specific data and inputs. The Minnesota Pollution Control
Agency’s (MPCA’s) GHG inventory for 1990 through 2004 provides state-specific estimates for
all the source sectors located within Minnesota. Therefore, historical emissions are based on the
MPCA inventory. The reference case projections (2006–2025) are based on a compilation of
various existing projections of electricity generation, fuel use, and other GHG-emitting activities,
along with a set of simple, transparent assumptions described in the final Inventory and
Projections report.
The Inventory and Projections report covers the six types of gases included in the U.S.
Greenhouse Gas Inventory: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O),
hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). Emissions
of these GHGs are presented using a common metric, CO2 equivalence (CO2e), which indicates
1
Draft Minnesota Greenhouse Gas Inventory and Reference Case Projections, 1990–2020, prepared by the Center
for Climate Strategies for the Minnesota Pollution Control Agency, July 2007.
2
Minnesota Session Laws 2007, Chapter 136, S.F. No. 145, available at: https://www.revisor.leg.state.mn.us/
laws/?id=136&year=2007&type=0
3
Final Minnesota Greenhouse Gas Inventory and Reference Case Projections, 1990–2025, prepared by the Center
for Climate Strategies for the Minnesota Pollution Control Agency, February 2008.
4
The last year of available historical data for each sector varies between 2000 and 2005.
2-1
the relative contribution of each gas, per unit mass, to global average radiative forcing on a
global warming potential– (GWP–)weighted basis.5
It is important to note that the emissions estimates reflect the GHG emissions associated with the
electricity sources used to meet Minnesota’s demands, corresponding to a consumption-based
approach to emissions accounting. Another way to look at electricity emissions is to consider the
GHG emissions produced by electricity generation facilities in the State —a production-based
method. The study covers both methods of accounting for emissions, but for consistency, all total
results are reported as consumption-based.
Minnesota GHG Emissions: Sources and Trends
Table 2-1 provides a summary of GHG emissions estimated for Minnesota by sector for the
years 1990, 2000, 2005, 2010, 2020, and 2025. As shown in this table, Minnesota is estimated to
be a net source of GHG emissions (positive, or gross, emissions). No sinks of GHG emissions
(removal of emissions, or negative emissions) were identified for Minnesota. As a result,
Minnesota’s gross GHG emissions are the same as the net emissions. The following sections
discuss GHG emission sources, trends, projections, and uncertainties.
Table 2-1. Minnesota historical and reference case GHG emissions, by sector*
MMtCO2e
Energy Use (CO2, CH4, N2O)
Electricity Use (Consumption)
Electricity production (in-state)
Coal
1990
90.3
34.7
2000
112.5
43.6
2005
125.5
54.1
2010
131.2
57.0
2020
152.1
71.2
2025
163.7
79.3
29.6
35.2
37.2
38.4
43.5
43.4
28.1
33.0
34.5
34.5
39.3
39.2
Natural gas
0.48
0.65
1.59
2.77
2.93
3.03
Oil
0.50
0.86
0.63
0.63
0.63
0.63
MSW/landfill gas
0.52
0.69
0.53
0.54
0.57
0.59
Biomass, nuclear (CH4 and N2O)
0.003
0.008
5.03
8.41
16.8
18.6
27.7
35.9
31.32
32.0
35.0
38.6
40.5
Net imported electricity
Residential/Commercial/Industrial
(RCI) Fuel Use
Coal
Natural gas
25.6
1.97
14.3
Petroleum
9.17
Wood (CH4 and N2O)
0.21
Transportation
On-road gasoline
3.34
0.000
2.54
0.001
2.71
0.001
2.87
0.001
3.00
17.6
17.5
19.9
22.7
23.8
10.2
11.7
12.2
12.9
13.4
0.18
0.20
0.21
0.23
0.24
28.7
35.4
37.2
36.6
38.8
39.8
17.3
21.7
22.7
22.3
22.7
22.7
On-road diesel
4.46
5.85
6.67
7.11
8.49
9.18
Marine vessels
2.69
1.97
1.86
1.79
1.76
1.74
5
Changes in the atmospheric concentrations of GHGs can alter the balance of energy transfers between the
atmosphere, space, land, and the oceans. A gauge of these changes is called radiative forcing, which is a simple
measure of changes in the energy available to the Earth-atmosphere system (IPCC, 1996). Holding everything else
constant, increases in GHG concentrations in the atmosphere will produce positive radiative forcing (i.e., a net
increase in the absorption of energy by the Earth), http://www.ipcc-nggip.iges.or.jp/public/2006gl/index.htm
2-2
MMtCO2e
Jet fuel and aviation gasoline
Rail, natural gas, other
Fossil Fuel Industry
Natural gas industry
Industrial Non-Fuel Use Processes
1990
3.45
2000
5.03
2005
4.95
2010
4.61
2020
5.19
2025
5.49
0.77
0.85
0.99
0.75
0.67
0.63
1.37
2.12
2.25
2.60
3.50
4.07
1.37
2.12
2.25
2.60
3.50
4.07
0.61
1.37
1.56
1.80
2.46
2.95
Lime manufacture (CO2)
0.000
0.04
0.02
0.02
0.02
0.02
Limestone use (CO2)
0.01
0.02
0.02
0.02
0.02
0.02
Taconite production (CO2)
0.31
0.58
0.58
0.61
0.67
0.70
Peat mining and use (CO2)
0.04
0.07
0.06
0.06
0.06
0.06
Ammonia manufacture (CO2)
0.03
0.000
0.000
0.000
0.000
0.000
ODS substitutes (HFC, PFC, and
SF6)
Semiconductor manufacturing (HFC,
PFC)
Electric power T&D (SF6)
0.000
0.41
0.65
0.93
1.60
2.06
0.000
0.032
0.021
0.015
0.008
0.007
0.21
0.21
0.20
0.14
0.08
0.07
Medical (N2O)
Agriculture
0.008
19.2
0.008
21.7
1.96
Agricultural soils
9.15
Rice cultivation
0.10
0.09
0.11
0.14
0.20
0.24
Residential fertilizer
0.09
0.10
0.12
0.13
0.15
0.16
Agricultural burning
0.00
0.00
0.00
0.00
0.00
0.00
Urea application and liming
0.33
0.50
0.59
0.63
0.73
0.77
Changes in cultivation practices†
4.06
4.06
4.06
4.06
4.06
4.06
2.91
10.7
5.55
4.97
4.64
4.62
4.48
4.23
4.11
Wastewater management
0.28
0.33
0.35
0.37
0.43
0.47
3.3
3.3
3.3
3.3
3.3
3.3
119.0
143.8
157.1
163.8
187.4
200.5
21%
32%
38%
4.66
3.16
14.9
5.27
Total Gross (and Net) Emissions
(Consumption Basis)†
Increase relative to 1990
4.85
3.09
13.8
2.68
Solid waste management
Forestry and Land Use
4.96
2.96
11.7
2.80
0.010
26.0
Manure management
2.80
3.08
0.009
24.9
3.49
10.7
3.25
0.009
22.7
Enteric fermentation
Waste Management
3.39
0.008
21.7
57%
4.58
68%
MMtCO2e = million metric tons of carbon dioxide equivalent; CH4 = methane; N2O = nitrous oxide; MSW = municipal
solid waste; ODS = ozone-depleting substance; HFC = hydrofluorocarbon; PFC = perfluorocarbon; SF6 = sulfur
hexafluoride; T&D = transmission and distribution
* Totals may not equal exact sum of subtotals shown in this table due to independent rounding.
†
Forest lands and changes in cultivation practices related to agricultural soils are net sources rather than sinks of
emissions; therefore, gross and net emissions are the same.
Historical Emissions
Overview
In 2005, on a gross emissions consumption basis (i.e., excluding carbon sinks), Minnesota
accounted for approximately 157 million metric tons (MMt) of CO2e emissions, an amount equal
2-3
to 2.2% of total U.S. gross GHG emissions. On a net emissions basis (i.e., including carbon
sinks), Minnesotans also accounted for approximately 157 MMtCO2e of emissions in 2005 (the
same as gross emissions since no emission sinks were identified in Minnesota), an amount equal
to 2.4% of total U.S. net GHG emissions.6 Minnesota’s GHG emissions are rising more quickly
than those of the nation as a whole. From 1990 to 2005, Minnesota’s gross and net GHG
emissions increased by 32% while national gross emissions rose by 16% during this period.7
On a per capita basis, Minnesotans emitted about 30 metric tons (t) of gross CO2e in 2005,
greater than the national average of about 24 tCO2e. Figure 2-1 illustrates the State’s emissions
per capita and per unit of economic output. It also shows that in Minnesota per capita emissions
have increased from 1990 to 2005, while per capita emissions remained fairly flat for the nation
as a whole. In both Minnesota and the nation as a whole, economic growth exceeded emissions
growth throughout the 1990–2005 period. From 1990 to 2005, emissions per unit of gross
product dropped by 26% nationally, and by 23% in Minnesota.8
The principal sources of Minnesota’s GHG emissions in 2005 are electricity use (including
electricity imports) and transportation, accounting for 34% and 24% of Minnesota’s gross GHG
emissions, respectively, as shown in Figure 2-2. The use of fossil fuels—natural gas, oil
products, coal, and wood—in the residential, commercial, and industrial (RCI) sectors accounts
for another 20% of the state’s emissions in 2005.
Agricultural activities, such as manure management, fertilizer use, livestock (enteric
fermentation), and changes in soil carbon due to cultivation practices, result in CH4 and N2O
emissions that account for another 14% of state GHG emissions. This is greater than the U.S.
portion of emissions attributable to agriculture (8%). Landfills and wastewater management
facilities produce CH4 and N2O emissions that accounted for 3% of total gross GHG emissions in
Minnesota in 2005. Emissions associated with the transmission and distribution of natural gas
accounted for 1% of the gross GHG emissions in 2005. Industrial process emissions accounted
for about 1% of the state’s GHG emissions in 2005, and these emissions are rising due to the
increasing use of hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) as substitutes for
ozone-depleting chlorofluorocarbons (CFCs).9 Other industrial processes emissions result from
taconite, lime, and peat manufacturing; PFC use in semiconductor manufacture; CO2 released
during limestone, dolomite, and peat use; SF6 released from transformers used in electricity
transmission and distribution systems; and N2O from medical uses.
6
National emissions from Inventory of US Greenhouse Gas Emissions and Sinks:1990–2005, April 2007, US EPA
#430-R-07-002, http://www.epa.gov/climatechange/emissions/usinventoryreport.html
7
During this period, population grew by 19% in Minnesota, which is the same as the national increase in population.
However, Minnesota’s economy grew at a faster rate on a per capita basis (up 71% vs. 57% nationally).
8
Based on real gross domestic product (millions of chained 2000 dollars), that excludes the effects of inflation,
available from the US Bureau of Economic Analysis, http://www.bea.gov/regional/gsp/
9
CFCs are also potent GHGs; however, they are not included in GHG estimates because of concerns related to
implementation of the Montreal Protocol. See Appendix I in the Inventory and Projections report for Minnesota,
http://www.mnclimatechange.us/ewebeditpro/items/O3F16231.pdf
2-4
Figure 2-1. Minnesota and U.S. gross GHG emissions, per capita and per unit gross
product
35
30
MN GHG/Capita
(tCO2e)
25
US GHG/Capita
(tCO2e)
20
15
MN GHG/$ GSP
(100gCO2e)
10
US GHG/$ GDP
(100gCO2e)
5
0
1990
1995
2000
2005
GSP = gross state product; GDP = gross domestic product; g = grams: tCO2e = tons carbon dioxide equivalent
Forestry emissions refer to the net CO2 flux10 from forested lands in Minnesota, which account
for about 32% of the state’s land area.11 Minnesota’s forests are estimated to be net sources of
CO2 emissions in Minnesota, accounting for about 2% of total gross GHG emissions in 2005.
Forestry emissions are estimated to be a net source in Minnesota primarily due to a decrease in
forested area over the period used to estimate the CO2 flux for Minnesota (1990 to 2003), based
on U.S. Forest Service (USFS) Forest Inventory Analysis data.
10
“Flux” refers to both emissions of CO2 to the atmosphere and removal (sinks) of CO2 from the atmosphere.
11
Total forested acreage is 16.2 million acres in 2003; J. Smith, USFS, personal communication with S. Roe, CCS,
April 2007. Acreage by forest type is available from the USFS at: http://nrs.fs.fed.us/pubs/rb/rb_nrs006.pdf. The
total land area in Minnesota is 51 million acres, http://www.50states.com/minnesot.htm
2-5
Figure 2-2. Gross GHG emissions by sector, 2005: Minnesota and U.S.
Minnesota
Res/Com
Fuel Use
10%
Transport
24%
US
Industrial
Process
1.0%
Res/Com
Fuel Use
8%
Waste
3.2%
Industrial
Fuel Use
10%
Forests
2.1%
Fossil Fuel
Ind.
3%
Electricity
34%
Industrial
Process
5%
Waste
3%
Industrial
Fuel Use
13%
Agric.
14%
Fossil
Fuel Ind.
(CH4) 1.4%
Transport
27%
Agric.
8%
Electricity
33%
Note: At a national level, forests act as a net sink of CO2; therefore, they do not show up in the above graph of gross
US emissions sources.
Reference Case Projections
Relying on a variety of sources for projections, as noted in the Inventory and Projections report,
a simple reference case projection of GHG emissions through 2025 was developed. As illustrated
in Figure 2-3 and shown numerically in Table 2-1, under the reference case projections,
Minnesota’s gross GHG emissions continue to grow steadily, climbing to about 200 MMtCO2e
by 2025, 68% above 1990 levels. This equates to an annual rate of growth of 1.2% per year. By
2025, the share of emissions associated with electricity consumptions grows to 40% of total
gross and net GHG emissions. The share of emissions from the RCI fuel use sector increase
slightly to 21% of Minnesota’s gross and net GHG emissions in 2025, while the share of
emissions from the transportation sectors declines somewhat to 20% by 2025, with slightly lower
emissions than the RCI fuel use sector.
Emissions associated with electricity generation and imports to meet in-state demand is projected
to be the largest contributor to future emissions growth, followed by emissions associated with
the RCI fuel use, as shown in Figure 2-4. Other sources of emissions growth include agriculture,
primarily from agricultural soils; transportation fuel use, primarily from on-road diesel; the
transmission and distribution of natural gas; and the increasing use of HFCs and PFCs as
substitutes for ozone-depleting substances (ODSs) in refrigeration, air conditioning, and other
applications. Table 2-2 summarizes the growth rates that drive the growth in the Minnesota
reference case projections as well as the sources of these data.
2-6
Figure 2-3. Minnesota gross GHG emissions by sector, 1990–2025: historical and
projected
Electricity (consumption-based)
Fossil Fuel Industry
RCI Fuel Use
Transport Onroad Gasoline
Transport Onroad Diesel
Jet Fuel/Other Transport
Agriculture
ODS Substitutes
Other Ind. Process
Waste Management
Forestry
220
200
180
160
MMtCO2e
140
120
100
80
60
40
20
0
1990
1995
2000
2005
2010
2015
2020
2025
RCI = direct fuel use in residential, commercial, and industrial sectors; ODS = ozone depleting substance.
Figure 2-4. Sector contributions to gross emissions growth in Minnesota, 1990–2025:
reference case projections (MMtCO2e basis)
Forestry
2005 - 2025
Waste Management
1990 - 2005
Agriculture
Industrial Processes
ODS Substitutes (HFCs)
Transportation
Fossil Fuel Industry
RCI Fuel Use
Electricity (consumption-based)
-5.0
0.0
5.0
10.0
15.0
MMtCO2e
20.0
25.0
30.0
ODS = ozone depleting substance; HFCs = hydrofluorocarbons; RCI = direct fuel use in residential, commercial, and
industrial sectors.
2-7
Table 2-2. Key annual growth rates for Minnesota, historical and projected
1990–2005 2005–2025
Population*
1.2%
0.8%
Employment*
Goods
Services
Electricity sales
N/A†
N/A
2.3%
0.4%
1.5%
2.04%
2.5%
0.8%
Vehicle miles
traveled
Sources
Minnesota Department of Administration, Office of Geographic and
Demographic Analysis, State Demographic Center
Minnesota Department of Employment and Economic Development
Inventory: The US DOE Energy Information Administration’s (EIA’s)
Electric Utility Sales data, available at:
http://www.eia.doe.gov/cneaf/electricity/esr/esr_sum.html. As approved
by the MCCAG, the average annual growth in electricity sales for 2005–
2025 was assumed to be equal to the 2.04% per year, which
corresponds to the average annual growth rate for the preceding 10year period in Minnesota. This represents the business-as-usual
forecast and does not include the effects of Minnesota’s Conservation
Improvement Program (CIP), which is addressed in Chapter 3 of this
report.
Minnesota Department of Transportation
* For the residential, commercial, and industrial (RCI) fuel consumption sectors, population and employment
projections for Minnesota were used together with US DOE EIA’s Annual Energy Outlook 2006 (AEO2006)
projections of changes in fuel use for the EIA’s U.S. West North Central region on a per capita basis for the
residential sector, and on a per employee basis for the commercial and industrial sectors. For instance, growth in
Minnesota’s residential natural gas use is calculated as the Minnesota population growth times the change in per
capita natural gas use for the West North Central region.
†
N/A = not available; historical employment data for Minnesota for the goods producing and services providing
sectors could not be identified during development of this report.
A Closer Look at the Two Major Sources: Electricity Supply and Transportation
As shown in Figure 2-2, electricity use in 2005 accounted for 34% of Minnesota’s gross GHG
emissions (about 54 MMtCO2e), which is slightly higher than the national share of emissions
from electricity production (33%). On a per capita basis, Minnesota’s GHG emissions from
electricity consumption are higher than the national average (in 2005, 10.4 MMtCO2e per capita
in Minnesota vs. 8.1 MMtCO2e per capita nationally). From 1990 through 2005, electricity
generated by coal-fired power plants in Minnesota accounted for 64% to 68% of total in-state
generation. Nuclear power accounted for 25% to 30% of total in-state generation from 1990
through 2005. The remaining in-state generation came from a mix of natural gas, oil, refusederived fuel, and hydroelectric facilities. The consumption of imported electricity has increased
from 12% of total Minnesota demand in 1990 to 27% of total Minnesota demand in 2005.12
As noted above, these electricity emissions estimates reflect the GHG emissions associated with
the electricity sources used to meet Minnesota demands, corresponding to a consumption-based
approach to emissions accounting. For many years, Minnesota power plants have tended to
produce less electricity than is consumed in the State. In the year 2005, for example, emissions
associated with Minnesota’s electricity consumption (54 MMtCO2e) were higher than those
associated with electricity production (37 MMtCO2e). The higher level for consumption-based
emissions reflects GHG emissions associated with net imports of electricity to meet the State’s
12
Percentages are based on gross generation (including plant fuel use and line losses) associated with imports
relative to total gross generation to meet Minnesota demand.
2-8
electricity demand.13 Estimates of electricity sales for 2005 through 2025 indicate that Minnesota
will remain a net importer of electricity. For the period covering 2005 through 2025, the
reference case projection assumes that production-based emissions associated with electricity
generated in-state will increase by about 6 MMtCO2e, while emissions associated with imported
electricity will increase by about 19 MMtCO2e.
While estimates are provided for emissions from both electricity production and consumption,
unless otherwise indicated, tables, figures, and totals in this report reflect electricity consumption
emissions. The consumption-based approach can better reflect the emissions (and emissions
reductions) associated with activities occurring in the state, particularly with respect to electricity
use (and efficiency improvements), and is particularly useful for decision making. Under this
approach, emissions associated with electricity exported to other states would need to be covered
in those states’ accounts in order to avoid double counting or exclusions.
Like electricity emissions, GHG emissions from transportation fuel use have risen steadily—
from 1990 to 2005 transportation GHG emissions have increased at an average rate of 1.7%
annually. Gasoline-powered on-road vehicles accounted for about 61% of transportation GHG
emissions in 2005, on-road diesel vehicles accounted for another 18%, and aviation fuels for
roughly 13%. Marine vessels accounted for 5% of transportation emissions in 2005. Rail and
other sources (natural gas- and liquefied petroleum gas- [LPG-] fueled vehicles used in transport
applications) accounted for the remaining 3% of transportation emissions. As a result of
Minnesota’s population and economic growth and an increase in total vehicle miles traveled
(VMT), emissions from on-road gasoline use grew at a rate of 1.8% annually between 1990 and
2005. Meanwhile, emissions from on-road diesel use rose 2.7% per year during that period,
suggesting an even more rapid growth in freight movement within or across the state. However,
the Minnesota Department of Transportation projects a slowing in the VMT growth rate. Given
this, emissions from on-road gasoline vehicles are projected to remain nearly the same in 2025 as
in 2005, and emissions from on-road diesel vehicles are projected to increase at an annual rate of
1.6% per year from 2005 to 2025.
MCCAG Revisions
The following identifies the revisions that the MCCAG made to the inventory and reference case
projections thus explaining the differences between this report and the initial assessment
completed during July 2007:
•
Forecast for all sectors: Extended the reference case projections for all sectors from 2020 to
2025 to align the forecast with Minnesota’s GHG reduction goal for 2025.
•
Energy Supply: Revised the electricity sales forecast for 2005 through 2025 for the businessas-usual reference case projections from 1.72% per year to 2.04% per year based on
information compiled by the Energy Supply TWG. This revision increased emissions by
2.1MMtCO2e in 2015 and by 12.4 MMtCO2e in 2025 relative to the initial forecast presented
in the July 2007 draft inventory and forecast report.
13
Estimating the emissions associated with electricity use requires an understanding of the electricity sources (both
in-state and out-of-state) used by utilities to meet consumer demand. The current estimates reflect some very simple
assumptions, as described in Appendix A in the Inventory and Projections report.
2-9
•
Transportation: Revised the VMT forecast for 2005 through 2025 for the business-as-usual
reference case projections from 1.9% per year to 0.8% per year based on updated modeling
results provided by the Minnesota Department of Transportation. This revision lowered
emissions by 2.7 MMtCO2e in 2015 and by 4.9 MMtCO2e in 2025 relative to the initial
forecast presented in the July 2007 draft inventory and forecast report.
•
Agriculture: Revised the inventory and reference case projections for all agriculture sectors
(except for enteric fermentation, manure management, and changes in soil cultivation
practices).
Key Uncertainties
Some data uncertainties exist in this inventory, and particularly in the reference case projections.
Key tasks for future refinement of this inventory and projection include review and revision of
key drivers, such as the growth rate assumptions for electricity generation and consumption,
transportation fuel use, and the use of renewable versus fossil fuels that will be major
determinants of Minnesota’s future GHG emissions (see Table 2-2). These growth rates are
driven by uncertain economic, demographic, and land-use trends (including growth patterns and
transportation system impacts), all of which deserve closer review and discussion. For the
agriculture sector, significant uncertainty exists in the agricultural soil carbon levels, as these are
based on a single year (1997) of data. Additionally, growth in many of the agriculture categories
is assumed to follow historic emission trends. Significant uncertainties also exist in the forestry
sector due to methodological changes in inventory methods over time. All of these issues warrant
further investigation and considerable Minnesota-specific research.
2-10
Chapter 3
Residential, Commercial, and Industrial Sectors
Overview of Sectoral Greenhouse Gas Emissions
The residential, commercial, and industrial (RCI) sectors were responsible for 23% of
Minnesota’s greenhouse gas (GHG) emissions of carbon dioxide equivalent (CO2e) in 2005.
Direct emissions of GHGs from the RCI sectors result principally from the on-site combustion of
natural gas, oil, and coal plus non-energy sources of GHG emissions, the release of CO2 and
fluorinated gases (e.g., perfluorocarbons [PFCs]) during industrial processing, the use of sulfur
hexafluoride (SF6) in the utility industry, and the leakage of hydrofluorocarbons (HFCs) from
refrigeration and related equipment.
Considering only the direct emissions that occur within buildings and industries, however,
ignores the fact that virtually all electricity sold in Minnesota is consumed as the result of
activities in the residential, commercial, and industrial sectors. If the emissions associated with
producing the electricity consumed in Minnesota are considered, RCI activities are associated
with 58% of the state’s gross GHG emissions in 2005. The state’s future GHG emissions
therefore will depend heavily on future trends in the consumption of electricity and other fuels in
the RCI sectors.
Figure 3-1 shows projected RCI GHG emissions by fuel type, and illustrates the large fraction of
RCI emissions associated with electricity use. RCI emissions associated with electricity and
natural gas use are expected to remain relatively stable between 2005 and 2020, thanks in large
part to aggressive conservation and renewable energy policies enacted in 2007. Though reduced
from a level of 63% in 2005, the GHG emissions share associated with electricity use is still
projected to account for over 50% of total RCI GHG emissions in 2025.
Figure 3-1. Projected RCI GHG emissions by fuel type in Minnesota, 2005 to 2025
150
Coal
Natural Gas
Other
Petroleum
Wood
Electricity
MMt CO2e
120
90
60
30
0
2005
2010
2015
2020
2025
MMtCO2e – million metric tons carbon dioxide equivalents
3-1
Key Challenges and Opportunities
The principal means to reduce RCI emissions in Minnesota include improving energy efficiency,
substituting for electricity and natural gas with lower-emission energy resources (such as wind,
solar water heating, photovoltaics, and biomass), reducing industrial-sector process (non-energy)
emissions, increasing distributed (consumer-sited) electricity generation based on combined heat
and power, and various strategies to decrease the emissions associated with electricity production
(see Chapter 4, Energy Supply, for the latter).
The state’s aggressive Conservation Improvement Program enacted in 2007, relative to some
other states, tempers this challenge but also retains strong opportunities to reduce emissions
through programs and initiatives to improve the efficiency of buildings, appliances, and
industrial practices. Minnesota’s robust population and economic growth, and its evident and
growing commitment to carry out significant GHG emissions reductions, places pressure on
communities and businesses in Minnesota to make urgent decisions to put in motion changes that
will continue to lead to GHG emission reductions. A key challenge lies in the design and
implementation of strategies that address State goals and thus ensure that new buildings and
industries take full advantage of opportunities to reduce emissions.
Overview of Policy Recommendations and Estimated Impacts
The MCCAG recommends a set of nine new policies and three existing actions for the RCI
sector offering the potential for significant GHG emission reductions. A summary of results is
shown in Table 3-1. All policy recommendation totals are relative to the underlying assumption
that electricity use in Minnesota proceeds with the recently legislated Conservation Improvement
Program (CIP).
3-2
Table 3-1. Summary results for energy supply policy recommendations and existing
actions
Policy
No.
GHG Reductions
(MMtCO2e)
Policy Recommendation
2015
2025
CostNet Present
EffectiveValue
Total
ness
(2008– (Million $) ($/tCO2e)
2025)
RCI-1
Maximize Savings From the Utility
Conservation Improvement Program (CIP)*
Quantified as a “Recent Action”
RCI-2
Improved Uniform Statewide Building Codes 0.004
0.005
RCI-3
Green Building Guidelines and Standards
Based on Architecture 2030
0.62
0.94
RCI-4
Incentives and Resources to Promote
Combined Heat and Power (CHP)
0.96
RCI-5
Program to Reduce Emissions of Non-Fuel,
High-Global-Warming-Potential GHGs
RCI-6
Enacted
–$44
–$576
Unanimous
11.1
–$296
–$27
Unanimous
4.95
33.1
$125
0.02
0.05
0.5
–$2
–$5
Unanimous
Non-Utility Strategies and Incentives to
Encourage Energy Efficiency and Reduce
GHG Emissions
0.25
1.30
8.3
–$307
–$37
Unanimous
RCI-7
Conservation Improvement-Type Program
for Propane and Fuel Oil Efficiency
0.05
0.05
0.7
–$21
–$28
Unanimous
RCI-8
Energy Performance Disclosure
Not quantified
Unanimous
RCI-9
Promote Technology-Specific Applications
to Reduce GHG Emissions
Not quantified
Unanimous
Support Strong Federal Appliance
Standards and Require High State
RCI-10
Standards in the Absence of Federal
Standards
15.3
Sector Total After Adjusting for Overlaps
0.76
(RCI, Non-Electricity)
0.69
10.41
–$464
–$44.6
Sector Total After Adjusting for Overlaps
1.56
(Integrated RCI and ES for Electricity)
7.34
51.06
–$1,098
–$21.5
–$8,454
–$59.0
–$124
6.50
15.50
New Commercial Building Code 0.18
0.21
3.16
–$1.8
–$0.6
Sustainability Guidelines
0.22
(New State Buildings)
0.46
4.72
–$1.7
–$0.4
10% Savings in State Buildings 0.09
0.11
1.75
–$0.9
–$0.5
RCI-1: New CIP*
Sector Total Plus Recent Actions
143.4
–$1,895
$3.8
1.4
Reductions From Recent Actions
0.8
0.077
Level of
Support
6.01
14.72
133.8
–$8,449
–$63.2
8.82
23.53
204.9
–$10,016
–$48.9
Unanimous
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons carbon dioxide equivalent; $/tCO2e = dollars per metric ton of
carbon dioxide equivalent; ES = Energy Supply.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
Only the results of options included in the final tabulation of GHG reductions and costs are shown in this table. For
discussion of any sensitivity analyses undertaken, please see the discussion in the RCI Appendix F, Annex 1.
* The CIP considered here is based on the CIP requirements (i.e., 1.5% energy savings goal) included in the Next
Generation Energy Act of 2007; therefore, the emission reductions and cost savings estimated are included under
“recent actions.”
3-3
These options include efforts to improve the energy and GHG profile of buildings (RCI-2,
RCI-3), increase the penetration of combined heat and power (RCI-4), reduce emissions from
industrial process of strong heat-trapping gases (RCI-5), efficiency/conservation improvement of
selected industries (RCI-6, RCI-7), strengthened appliance efficiency standards (RCI-10) and
support for energy disclosure and new GHG-reducing technologies (RCI-8, RCI-9). All but the
last set of options have been able to be quantified, resulting in substantial reductions from the
RCI sectors.
After accounting for overlaps, the RCI mitigation option recommendations, combining fuel and
electricity results, yield an annual GHG emission reduction from reference case projections of
about 8.7 MMtCO2e in 2025 and cumulative reductions of 61.5 MMtCO2e from 2007 through
2025, at a net savings of approximately –$1.6 billion through the year 2025 on an NPV basis.
The weighted average cost of saved carbon for all RCI measures is –$25.4/tCO2e avoided.
The MCCAG has also analyzed a set of three existing actions for the RCI sectors that will
contribute to achieving long-term GHG emission reductions in the State. These include a new
commercial building code, sustainability guidelines for new state buildings, achieving energy
savings of 10%, and, of course, the recently enacted Conservation Improvement Program that
calls for annual savings equal to 1.5% of annual retail energy sales of electricity. Starting with
the CIP, each of these existing actions contribute to substantial GHG emission reductions over
the period through 2025, totaling just nearly 134 MMtCO2e. Notably, Minnesota’s existing
actions lead to cumulative GHG reductions that are over double those achieved by the
recommendation mitigation options.
Overall, the RCI existing actions yield an annual GHG emission reduction from reference case
projections of about 15.5 MMtCO2e in 2025 and cumulative reductions of about 143 MMtCO2e
through 2025, at a net cost of approximately –$8.5 billion through the year 2025 on an NPV
basis. The weighted average cost of saved carbon for the energy supply measures is –$59/tCO2e,
a net savings.
Residential, Commercial, and Industrial (RCI)
Policy Descriptions
RCI-1
Maximize Savings From the Utility Conservation Improvement Program (CIP)
The Next Generation Energy Act establishes an energy policy goal for the State of Minnesota to
achieve annual savings equal to 1.5% of annual retail energy sales of electricity and natural gas.
At least 1% of these sales should come directly through energy conservation improvement
programs and rate design. The additional 0.5% of savings can come indirectly through energy
codes and appliance efficiency standards, programs designed to transform the market or change
consumer behavior, energy savings resulting from efficiency improvements to the utility
infrastructure and system, and other activities to promote energy efficiency and energy
conservation. These savings are based on the average of the last 3 years of sales for the utility.
3-4
RCI-2
Improved Uniform Statewide Building Codes
Building energy codes specify minimum energy efficiency requirements for new buildings or for
existing buildings undergoing a renovation. Given the long lifetime of most buildings, amending
state building codes to include minimum energy efficiency requirements and periodically
updating energy efficiency codes will provide long-term GHG emission reductions.
RCI-3
Green Building Guidelines and Standards Based on Architecture 2030
This option seeks to promote, incentivize, or adopt green building guidelines and standards for
the reduction of carbon emissions for all commercial and residential buildings consistent with
Architecture 2030 targets. The option would require state and local government agencies
including school districts to adopt required building guidelines and standards for the reduction of
carbon emissions for all new public buildings consistent with Architecture 2030 targets, leading
to 90% reduction by 2025.
RCI-4
Incentives and Resources to Promote Combined Heat and Power (CHP)
Combined heat and power (CHP) systems reduce fossil fuel use and GHG emissions, both
through the improved efficiency of the CHP systems, relative to separate heat and power
technologies, and by avoiding transmission and distribution losses associated with moving power
from central power stations that are located far away from where the electricity is used.
RCI-5
Program to Reduce Emissions of Non-Fuel, High-Global-Warming-Potential GHGs
High-global-warming-potential greenhouse gases (HGWP GHGs) are classes of chemicals, some
of which have a global warming impact thousands of times that of CO2. They have a number of
commercial and industrial uses. Often substitutes are available. This option recommends that the
Minnesota Pollution Control Agency undertake a rulemaking process to identify uses and
emission sources of HGWP GHGs and to eliminate the use or escape of such gases where that
can be done at a reasonable cost, defined as less than or equal to $15/tCO2e.
RCI-6
Non-Utility Strategies and Incentives to Encourage Energy Efficiency and Reduce GHG
Emissions
This option calls for the implementation of cost-effective non-utility strategies and incentives for
industrial processes in manufacturing and commercial facilities that complement (but not
duplicate) utility-based programs to reduce greenhouse gas (GHG) emissions through energy
efficiency (E2) and adoption of renewable energy technologies.
3-5
RCI-7
Conservation Improvement-Type Program for Propane and Fuel Oil Efficiency
This option calls for the implementation of cost-effective programs to reduce propane and fueloil use; target rebates to overcome market barriers; maximize convenience to program
participants; capture overall system efficiencies, not just equipment efficiencies; joint efforts to
achieve market transformation; ongoing research, evaluation and analysis; complement
government, utility and non-utility efficiency programs; and seek to remove any disincentives or
regulatory barriers to energy efficiency.
RCI-8
Energy Performance Disclosure
This option calls for utilities to provide an energy performance disclosure to parties owning any
public, commercial or residential property, preferably in an electronic format. It is recommended
that this information be made available by the property owner to the prospective buyer or renter
to allow for energy efficiency and environmental impacts to be an integral part of the decision to
buy or rent.
RCI-9
Promote Technology-Specific Applications to Reduce GHG Emissions
This option calls for promotion through incentives, technology-specific applications that reduce
GHG emissions in categories such as space heating, lighting, water heating, and plug loads. The
option includes a recommendation for a process to determine and clarify which applications
work best in reducing GHG emissions, and to clearly communicate the fact that reducing energy
use does not always proportionally reduce emissions.
RCI-10
Support Strong Federal Appliance Standards and Require High State Standards in the
Absence of Federal Standards
This option calls for the implementation of State appliance efficiency standards for appliances
not covered by federal standards or where higher-than-federal standard efficiency requirements
are appropriate. Appliance efficiency standards reduce the market cost of energy efficiency
improvements by incorporating technological advances into base appliance models, thereby,
thereby creating economies of scale. Minnesota should adopt appliance efficiency standards at
the state level not covered by federal standards.
3-6
Chapter 4
Energy Supply
Overview of GHG Emissions
Greenhouse gas (GHG) emissions from Minnesota’s energy supply sector include emissions
from electricity generation and represent a substantial portion of the state’s overall GHG
emissions (approximately 35% of gross emissions in 2005). A significant portion of Minnesota’s
gross GHG emissions is associated with electricity imports: roughly 31% of the state’s
electricity-related fossil fuel emissions were associated with imports in 2005. This percentage is
expected to be relatively stable through 2025 based on the reference case forecast.
Overall, emissions from Minnesota’s energy supply sector are expected to decrease from 2005
base year levels of 54 million metric tons (MMt) of carbon dioxide equivalent (CO2e) to about
45 MMtCO2e by 2025, or by approximately 16% on a consumption basis. It is important to note
that these GHG reduction trends are evident prior to the implementation of any of the energy
supply mitigation measures discussed in this chapter, thanks in large part to recent actions taken
by the state, such as the Renewable Energy Standard (RES) and the Conservation Improvement
Program (CIP), both enacted in 2007. These trends are summarized in Figure 4-1a and 4-1b.
Figure 4-1. Recent and projected GHG emissions from the Electricity Sector, Minnesota,
2005–2025 (consumption basis)
4-1b. In-state and imports broken out
60
60
50
50
40
40
MMt CO2e
MMt CO2e
4-1a. In-state and imports
30
20
20
10
30
Coal
Other Renewables
Natural Gas
Petroleum
10
Coal
Natural Gas
Other Renewables
Petroleum
Imports
0
2005
0
2005
2010
2015
2020
2025
2010
2015
2020
2025
MMtCO2e = million metric tons carbon dioxide equivalent
Key Challenges and Opportunities
The key challenge in addressing GHG emissions from Minnesota’s energy supply sector is the
state’s continued reliance on coal-fired generation from both inside and outside Minnesota.
Despite significant additions of renewable energy in Minnesota resulting from an aggressive
RES, the share of GHG emissions from coal-fired generation will drop only slightly—from 94%
in 2005 to about 90% in 2025.
4-1
Unlike many other states, large growth in electricity sales is not the primary driver for
Minnesota’s GHG emissions. The projected average annual growth rate of electricity sales in
Minnesota between 2005 and 2025 is modest—about 0.82%. This reflects the impact of the
newly enacted CIP, one of the most aggressive conservation improvement programs in the
nation.1
Minnesota has several opportunities for reducing the growth in GHG emissions attributable to
energy production and supply. For example, the carbon intensity of existing coal-fired electricity
generation could be decreased through biomass co-firing and carbon capture and storage
technologies for new and existing (through retrofits) coal-fired stations in the state. Significant
opportunities to reduce GHG emissions through options to further reduce electricity consumption
also exist, and can often provide net cost savings to Minnesota consumers and the state. The
Minnesota Climate Change Advisory Group (MCCAG) has identified several demand-side
management, energy efficiency, and conservation measures in the residential, commercial, and
industrial sector; these are detailed in Chapter 3 of this report.
Overview of Policy Recommendations and Estimated Impacts
The MCCAG analyzed and is recommending six policy options and three existing actions for the
energy supply (ES) sector that offer the potential for significant GHG emission reductions, as
summarized in Table 4-1. All policy recommendation totals are relative to the underlying
assumption that electricity expansion in Minnesota proceeds with the recently legislated CIP,
RES, and all planned additions, including the Mesaba and Big Stone 2 stations. As noted in the
Executive Summary and Chapter 2, in making this assumption, the MCCAG is not
recommending for or against the need for or merits of the addition of these units in Minnesota.
The forecast also assumes a backing down of existing units if the Big Stone 2 and Mesaba units
come on line in order to balance the supply of electricity with demand in Minnesota. It is
possible that instead of backing down, the existing units that formerly supplied power in
Minnesota could be used to supply power in other states which, in turn, could lead to backing
down less efficient units in other states. If built, these two units would have the potential to emit
approximately 5.1 million tons of CO2e per year. (MCCAG has recommended that future
analyses reexamine these assumptions.)
1
An accurate estimate of the electricity sales growth rate was a subject of much discussion, with some members of
the Minnesota Climate Change Advisory Group (MCCAG) advocating a higher rate (i.e., 1.0%–1.5% per year), and
others advocating a lower rate (i.e., about 0.5% per year). The final value used in the analysis of options represents a
central estimate, though it may be still objectionable to some MCCAG members.
4-2
Table 4-1. Summary results for energy supply policy recommendations and existing
actions
Policy
No.
ES-1
ES-3
ES-4
ES-5
ES-6
ES-8
ES-10
ES-12
ES-13
Policy Recommendations
Generation Performance Standard
Efficiency Improvements, RePowering and Other Upgrades to
Existing Plants
Transmission System Upgrading,
Including Reducing Transmission Line
and Distribution System Loss
Renewable and/or Environmental
Portfolio Standard*
Nuclear Power Support and
Incentives
Advanced Fossil Fuel Technology
Incentives, Support, or Requirements,
Including Carbon Capture and
Storage
Voluntary GHG targets
Distributed Renewable Energy
Incentives and/or Barrier Removal
Technology-Based Approaches,
Including Research and
Development, Fuel Cells, Energy
Storage, Distributed Renewable
Energy Technologies, etc.
Sector Total After Adjusting for
Overlaps
GHG Reductions
Net
(MMtCO2e)
Present
Value
Total
2015
2025 (2008– 2008–2025
2025) (Million $)
CostEffectiveness
($/tCO2e)
Level of
Support
0.0
0.0
0.0
$0.0
$0.0
Majority (16
objections)
1.8
3.0
33.3
$554.4
$16.7
Unanimous
0.2
0.4
3.9
–$92.2
–$26.1
Unanimous
0.021
Quantified as a “Recent Action”
Enacted
Recommended for further study.
Unanimous
Recommended for further study.
Unanimous
Not quantified
Unanimous
0.023
0.37
$29.1
$78.1
Unanimous
Not quantified
2.0
Reductions From Recent Actions
12.8
Biomass for Electricity 0.60
Metro Emissions Reduction
4.52
Project
ES-5: Renewable Energy
7.72
Standard*
Sector Total Plus Recent Actions
14.8
Unanimous
3.4
37.5
$462.2
$12.3
20.8
0.60
225
11.4
$10,116
$285.3
$45.0
$25.0
4.52
80.4
$2,330
$29.0
15.7
133.1
$7,502
$56.4
24.2
262.5
$10,578.8
$40.3
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent. (ES Policy Options 2, 7, 9 and 11 were either dropped or merged during the process.)
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
All totals are relative to the underlying assumption that electricity expansion in Minnesota proceeds with the recently
legislated Conservation Improvement Program (CIP), Renewable Energy Standard (RES), and all planned additions,
including the Mesaba and Big Stone 2 stations.
* The RES considered here is based on the RES requirements included in the Next Generation Energy Act of 2007;
therefore, the emission reductions and costs estimated are included under “recent actions.”
Note: A number of MCCAG members have raised concerns about the cost assumptions associated with wind power
and believe the costs are too high. A lower wind cost assumption would lower the cost estimates for the Renewable
Energy Standard (ES-5) and for the Cap-and-Trade analyses. Future analyses should reexamine the wind cost
estimates.
4-3
These options include efforts to limit new coal-fired generation in Minnesota (ES-1), encourage
efficiency improvements at existing coal-fired generating stations (ES-3), upgrade electricity and
natural gas transmission facilities (ES-4), explore the role of nuclear energy (ES-6), implement
carbon capture and storage technology on new coal-fired generation (ES-8), promote voluntary
GHG reductions (ES-10), encourage distributed renewable generation through incentives and
barrier removal (ES-12), and encourage the development and eventual deployment of advanced
technologies (ES-13). Not all of these policy recommendations contribute to GHG emission
reductions during 2007–2025—the period for which recent Minnesota actions and the MCCAG
recommendations were estimated—as outlined below.
•
Generation Performance Standard (ES-1): A strict application of this option would have
eliminated any new power stations being built in Minnesota, unless they could meet a
stringent GHG emission-intensity threshold. If applied to Minnesota’s new coal-fired stations
(i.e., Big Stone 2 and Mesaba), the option would have yielded substantial GHG emissions.
However, after a close vote, the MCCAG decided to exempt these new power stations,
because they are currently undergoing regulatory review. At its final meeting MCCAG voted
to recommend further study of this option. Therefore, the quantifications developed by the
technical work group throughout the process are not included in the table above.
•
Nuclear Power Support and Incentives (ES-6): The possibility of a new nuclear power
station in Minnesota, though clearly advantageous from the perspective of comparing its
GHG emissions to those from coal-fired generation, was an option that the MCCAG believed
required more study. Hence, the MCCAG is recommending that the state commission a study
on the costs and risks of installing a nuclear power station in Minnesota in the post-2025
period. Therefore, neither the GHG emission reductions achieved by this option over the
period ending in 2025 nor the estimated costs for this option are not included here.
•
Advanced Fossil Fuel Technology (ES-8): The possibility of a new coal-fired power station
in Minnesota using carbon capture and storage technology was an option that the MCCAG
believed required more study. Hence, the MCCAG is recommending that the state
commission and facilitate a study on the viability of implementing this (as yet commercially
unavailable) technology, including the use of biomass with carbon capture and storage. Since
the MCCAG assumed this technology would not be implemented before 2025, no GHG
emission reductions are achieved by this option over the planning period.
Overall, the ES mitigation option recommendations yield an annual GHG emission reductions
from reference case projections of about 0.8 MMtCO2e in 2025 and cumulative reductions of
8.4 MMtCO2e from 2007 through 2025, at a net savings of approximately $44 million through
2025 on a net present value (NPV) basis. The weighted-average cost of saved carbon for the ES
measures is –$5.2/tCO2e avoided.
The MCCAG has also analyzed a set of three existing state actions for the ES sector that will
contribute to achieving long-term GHG emission reductions in Minnesota. These actions include
a program for increasing biomass use for electricity generation, Xcel’s metro reduction project,
and the recently enacted RES that calls for 25% of electricity sales in 2025 being met by
renewable sources of energy. Starting with the RES, each of these existing actions contributes to
substantial GHG emission reductions over the period through 2025, totaling just over 200
MMtCO2e. In fact, the existing action that achieves the smallest level of cumulative GHG
4-4
reductions (i.e., 11.4 MMtCO2e for biomass for electricity) exceeds the cumulative GHG
reductions from all mitigation options (i.e., 8.4 MMtCO2e).
Overall, the ES existing actions yield an annual GHG emission reduction from reference case
projections of about 19.4 MMtCO2e in 2025 and cumulative reductions of nearly 202 MMtCO2e
through 2025, at a net cost of approximately $9.5 billion through 2025 on an NPV basis. The
weighted-average cost of saved carbon for the ES measures is $46.8/tCO2e avoided.
Energy Supply Sector Policy Descriptions
The ES sector has several opportunities for mitigating GHG emissions from electricity
generation, including mitigation activities associated with the generation, transmission, and
distribution of electricity—whether generated through the combustion of fossil fuels, renewable
energy sources in a centralized power station supplying the grid, distributed generation facilities,
or imported into the state.
ES-1
Generation Performance Standard
The generation performance standard (GPS) is a mandate that requires entities that deliver
electricity to acquire electricity or power plant developers to build and operate new base-load
generation, with a per-unit emission rate below 1,100 pounds of CO2 per megawatt-hour (MWh).
For base-load projects that are part of a combined-heat-and-power project, the GPS would be
raised to 1,300 pounds of CO2/MWh. By MCCAG vote, the two proposed new coal stations for
meeting Minnesota base-load demand—Big Stone 2 and Mesaba—were exempted from the
GPS. At its final meeting, MCCAG decided that this policy required further study.
ES-3
Efficiency Improvements, Re-Powering and Other Upgrades to Existing Plants
This policy would promote the identification and pursuit of cost-effective emission reductions
from existing generating units by improving their operating efficiency, adding biomass or other
fuel changes, or adding carbon capture technology. This policy complements ES-1 (Generation
Performance Standard), which applies to new plants and new units, by applying to existing units.
The results reported for this option correspond to increasing the biomass share at existing coal
power stations to 1% by 2025 on an energy/Btu basis.
ES-4
Transmission System Upgrading, Including Reducing Transmission Line and
Distribution System Loss
This policy includes energy efficiency measures that can be implemented to reduce the
transmission- and distribution-line losses of electricity; leaks during production, processing, and
distribution of natural gas; methane and other GHG emissions to the atmosphere; and the waste
of a valuable commodity. Regulations, incentives, and/or support programs can be applied to
achieve greater efficiency of transmission and distribution system components. While the option
4-5
covers both electricity transmission/distribution and natural gas transmission/distribution, only
the latter was quantified.
ES-5
Renewable and/or Environmental Portfolio Standard
The renewable portfolio standard requires utilities and other load-serving entities to supply a
certain, generally fixed, percentage of electricity from eligible (i.e., low-GHG-emitting)
renewable energy sources. Prior to this MCCAG process, Minnesota had adopted an RES of 25%
of electricity sales by 2025.
ES-6
Nuclear Power Support and Incentives
The role of nuclear power in a GHG-constrained energy supply system is both important and
controversial. Today, nuclear power plants provide about 20% of electric power both nationally
and in Minnesota. The role of both existing and new nuclear units needs to be considered for a
comprehensive climate change policy process. By MCCAG decision, this policy calls for a study
on the role of new nuclear power in Minnesota as a GHG reduction option in the post-2025 time
period.
ES-8
Advanced Fossil Fuel Technology Incentives, Support, or Requirements, Including
Carbon Capture and Storage
For coal to play a significant role in Minnesota’s future energy system, its overall environmental
profile must improve and must come as close as possible to producing zero CO2 emissions, while
producing energy that is both affordable and reliable. MCCAG calls for a further study of the
role of carbon capture and storage technology for new coal stations as a GHG reduction option in
the post-2025 time period and also calls for examining the role of carbon capture and storage
technology with biomass.
ES-12
Distributed Renewable Energy Incentives and/or Barrier Removal
Distributed renewable energy should be encouraged, as it plays a part in Minnesota’s overall
goal of reducing carbon emissions. This policy includes subsidies and incentives that encourage
investment in small-scale distributed renewable energy resources.”
4-6
Chapter 5
Transportation and Land Use
Overview of GHG Emissions
The transportation sector accounted for about 25% of Minnesota’s gross greenhouse gas (GHG)
emissions in 2005 (about 37.2 million metric tons of carbon dioxide equivalent [MMtCO2e]).
The GHG emissions associated with Minnesota’s transportation sector increased by 8.5
MMtCO2e between 1990 and 2005, accounting for about 22% of the state’s net growth in gross
GHG emissions in this period.
From 1990 through 2005, GHG emissions from transportation fuel use have risen steadily at an
average rate of about 1.7% annually. Table 5-1 shows historic and projected transportation and
land use (TLU) GHG emissions by fuel and source. Figure 5-1 graphically illustrates their
growth. In 2005, on-road gasoline vehicles accounted for about 61% of transportation GHG
emissions. On-road diesel vehicles accounted for another 18% of emissions, aviation fuels for
roughly 13%, and marine vessels for 5%. Rail and other sources (natural gas- and liquefied
petroleum gas [LPG]-fueled vehicles used in transport applications) accounted for the remaining
3% of transportation emissions. As a result of Minnesota’s population and economic growth and
an increase in total vehicle miles traveled (VMT) during the 1990s, on-road gasoline use grew
31% between 1990 and 2005. Meanwhile, on-road diesel use rose 49% during that period,
suggesting an even more rapid growth in freight movement within or across the state. Aviation
fuel use grew by about 30% from 1990 to 2005.
Table 5-1. Historic and projected emissions for the transportation sector (MMtCO2e)
Fuel Source
1990
1995
On-Road Gasoline Vehicles
17.3
19.4
21.7
2000
22.7
2005
22.3
2010
2015
2020
22.5
22.7
2025
On-Road Diesel Vehicles
4.5
5.0
5.9
6.7
7.1
7.8
8.5
9.2
Aviation Fuels
3.5
3.7
5.0
5.0
4.6
4.9
5.2
5.5
Marine Vessels, Offshore
2.5
2.0
1.9
1.8
1.7
1.7
1.7
1.7
Marine Vessels, Port and Inshore
0.16
0.14
0.13
0.11
0.11
0.10
0.10
0.10
22.8
Rail
0.71
1.3
0.70
0.83
0.58
0.53
0.49
0.44
Other
0.08
0.12
0.16
0.16
0.17
0.17
0.18
0.18
Total
28.7
31.7
35.4
37.2
36.6
37.6
38.8
39.8
MMtCO2e = million metric tons of carbon dioxide equivalent.
On-road gasoline consumption accounts for the largest share of transportation GHG emissions.
Emissions from on-road gasoline vehicles increased by about 31% from 1990 to 2005 and
contributed 61% of total transportation emissions in 2005. GHG emissions from on-road diesel
fuel consumption increased by 49% from 1990 to 2005 and, by 2005, accounted for 18% of
GHG emissions from the transportation sector. Emissions from aviation grew by 44% between
1990 and 2005 to account for 13% of transportation emissions in 2005, and emissions from boats
and ships decreased by 31% during that period, to account for 5% of transportation emissions in
2005. Emissions from all other categories combined (locomotives, natural gas, LPG, and
oxidation of lubricants) contributed less than 3% of total transportation emissions in 2005.
5-1
Figure 5-1. Transportation GHG emissions by fuel source, 1990–2025
Onroad Gasoline
Aviation
Marine Vessels - Port and Inshore
Other
Onroad Diesel
Marine Vessels - Offshore
Rail
40
MMtCO2e
30
20
10
0
1990
1995
2000
2005
2010
2015
2020
2025
VMT since 1990 have increased statewide by 45%. This is one of the fastest growth rates in the
nation, far outpacing the state population growth of 19% in the same period. The regions outside
the seven-county metro area are responsible for much of the increase in VMT. While the metro
area held 52% of the state population in 1990, it produced only 45% of the annual state VMT. In
2005, the metro area had 54% of the statewide population and 40% of the state VMT. These
percentages will continue to diverge.
After years of essentially unbroken growth that outpaced both population and employment
growth, VMT was essentially flat during 2004–2006. As a result, the Metropolitan Council and
Minnesota Department of Transportation (MnDOT) traffic modelers recently adopted a forecast
of statewide VMT growth of 0.9% annually, which is a substantial decrease from historic rates.
If this slower rate of growth continues, it will substantially slow the rate of increase in GHG
emissions from Minnesota transportation.
However, other sources of transportation GHG emissions will continue to grow rapidly. Historic
growth for diesel fuel has been stronger than for gasoline. This trend is expected to continue for
the 2005–2030 period, with gasoline and diesel fuel consumption projected to increase by 0.6%
and 51.2%, respectively. Jet fuel and aviation gasoline consumption is projected to increase by
17% between 2005 and 2030. The historic negative growth for marine vessels is projected to
continue, with a decline of 7% from 2005 to 2030. Figure 5-1 summarizes historic and projected
transportation GHG emissions by fuel source.
Key Challenges and Opportunities
Minnesota has substantial opportunities to reduce transportation emissions. In the state, and in
the nation as a whole, vehicle fuel efficiency has improved little since the late 1980s, yet many
studies have documented the potential for substantial increases consistent with maintaining
5-2
vehicle size and performance. The use of fuels with lower GHG emissions is growing, and larger
market penetration is possible. Minnesota has taken steps to increase transit options and plan for
growth that reduces emissions, and the state can absorb growth in development patterns that will
produce far lower emissions than forecast.
The Transportation Land Use (TLU) Framework organized these opportunities into three groups:
•
TLU Area 1: Reduce the number of miles driven.
•
TLU Area 2: Reduce carbon per unit of fuel (cleaner fuels).
•
TLU Area 3: Reduce carbon per mile and/or per hour (improved vehicle efficiency).1
Taken together, this three-legged stool of TLU policy recommendations can substantially reduce
Minnesota’s transportation GHG emissions.
Overview of Policy Recommendations and Estimated Impacts
The 12 policy options recommended for the TLU sector offer major economic benefits and
emissions savings.
1
Transportation carbon emissions = miles driven × carbon per mile; carbon per mile = vehicle emissions per unit ×
carbon per unit of fuel.
5-3
Table 5-2. Summary list of policy recommendations
GHG Reductions
(MMtCO2e)
Policy
No.
Policy Recommendation
2015
2025
Net
CostPresent
EffectiveValue
Total
ness
2008–2025
2008–
($/tCO2e)
2025 (Million $)
Level of
Support
TLU Area 1: Reduce VMT (VMT goal to be established based on VMT implied by selected strategies)
TLU-1
Improved Land-Use Planning and
Development Strategies
0.7
1.9
14.9
TLU-2
Expand Transit, Bicycle, and Pedestrian
Infrastructure
0.1
0.3
3.0
$0
$0
TLU-5
Climate-Friendly Transportation Pricing/Payas-You- Drive
1.1
2.1
20.9
–$1
–$1
TLU-7
“Fix-it-First” Transportation Investment Policy
and Practice
TLU-9
Workplace Tools To Encourage Carpooling,
Bicycling, and Transit Ridership
TLU-14
Freight Mode Shifts: Intermodal and Rail
Net
savings
Net
savings
Not quantified
Unanimous
Unanimous
Super majority (3
objections)
Supermajority (2
objections)
Large net Large net
Unanimous
savings
savings
Super N/A
majority
(1 objection)
0.3
0.4
4.5
1.7
3.6
36.2
Not quantified
Unanimous
0.7
Not quantified
Unanimous
TLU Area 2: Reduce Carbon per Unit of Fuel
TLU-3
Low-GHG Fuel Standard
TLU Area 3: Reduce Carbon per Mile and/or per Hour
TLU-4
Infrastructure Management
0.04
0.1
TLU-6
Adopt California Clean Car Standards
0.74
1.16
13.1
TLU-12
Voluntary Fleet Emission Reductions
0.4
0.4
6.1
Not quantified
TLU-13
Reduce Maximum Speed Limits
0.4
0.4
6.1
N/A
Sector Total After Adjusting for Overlaps
4.7
9.3
91.2
Reductions From Recent Actions
Biodiesel
Ethanol
1.4
0.64
0.78
1.5
0.75
0.79
8.1
12.1
Sector Total Plus Recent Actions
6.1
10.8
–$263
–$39
$50 at
$2.40/gal
–$19 at
$3.40/gal
Majority (16
objections)
Unanimous
Majority (16
objections)
Not
Not
quantified quantified
Not quantified
20.2
111.4
Not
Not
quantified quantified
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton
of carbon dioxide equivalent; VMT = vehicle miles traveled; N/A = not available.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
The policy recommendations described briefly here not only result in significant emissions and
costs savings but also offer a host of additional benefits, such as reduced local air pollution, more
livable, healthier communities, and increased transportation choices.
5-4
Transportation and Land Use
Policy Descriptions
TLU Area 1: Reduce VMT
The statewide per capita VMT reduction from strategies TLU-1, -2, -5, -7, -9, and -14 taken
together would be 15% from 2005 levels by 2025. Despite an 18% increase in Minnesota’s
population from 2005 to 2025, overall statewide VMT would not increase during this time
period.. (This flat VMT is from MDOT projections assuming that higher fuel prices and other
factors dampen VMT growth.)
The TLU Area 1 Overall VMT reduction goal is roughly 10.3 billion VMT in 2025, for a 2025
VMT of 56,530,900,000.
TLU-1
Improved Land-Use Planning and Development Strategies
This policy improves land-use planning and development practices to target growth in ways that
reduce the number and length of vehicle trips, thus reducing GHG emissions. (It accounts for
part of the VMT reduction goal, along with TLU-2, -5, -7, -9, and -14.)
TLU-2
Expand Transit, Bicycle, and Pedestrian Infrastructure
This strategy expands infrastructure and programs to increase transit ridership, carpooling,
bicycling, and walking. It will reduce GHG emissions by reducing VMT (fewer vehicle trips and
shorter trip distances). (It accounts for part of the VMT reduction goal, along with TLU-1, -5, -7,
-9, and -14.)
TLU-5
Climate-Friendly Transportation Pricing/Pay-as-You-Drive
This policy recommends that the state of Minnesota institute requirements and policies ensuring
that drivers more fully pay the costs of driving. By doing so, the policy would encourage drivers
to choose transportation alternatives, purchase more efficient vehicles, drive less, and/or drive
more efficiently (combining trips). This option generally reduces VMT and GHG emissions.
(This strategy accounts for part of the VMT reduction goal, along with TLU-1, -2, -7, -9, and
-14.)
TLU-7
“Fix-it-First” Transportation Investment Policy and Practice
This policy option recommends that the state legislature require that state and federal
transportation investments be prioritized in the following order: (1) maintain existing roads, and
(2) design new and expanded roads to serve higher-density, more compact, pedestrian-friendly
development in priority growth areas, such as downtowns, town centers, main streets,
neighborhood hubs, regional centers, transit corridors, and transit station areas. It also
5-5
recommends that the state significantly reduce investment in new roads and roadway expansion
that accommodate and encourage both low-density development and more and longer vehicle
trips.
This strategy will reduce GHGs emissions by increasing bicycling and walking and reducing the
number and length of vehicle trips. (It accounts for part of the VMT reduction goal, along with
TLU-1, -2, -5, -9, and -14.)
TLU-9
Procurement of Efficient Fleet Vehicles
This strategy reduces emissions by requiring certain employers and encouraging other employers
to offer a Commuter Benefits program at the workplace to increase the use of transit, ridesharing,
and non-motorized transportation. Commuter Benefits can include reducing the amount of free
or subsidized parking, providing paid or pre-tax transit passes or mode-neutral transportation
allowances, guaranteeing rides home for non-drive-alones, providing bicycle parking and
employee lockers, providing telecommuting programs, and/or having employee ID cards serve as
transit passes. The strategy also reduces emissions by requiring large employers (more than 200
employees) to develop and implement transit demand management plans that customize
commuter benefits and transit-supportive building design to specific building locations. (It
accounts for part of the VMT reduction goal, along with TLU-1, -2, -5, -7, and -14.)
TLU-14
Freight Mode Shift: Intermodal and Rail
Transportation of freight by railroad generally results in less fuel use and GHG emissions than
transportation by truck. This strategy recommends that a MnDOT statewide freight study
currently underway examine support for expanding intermodal rail service for Minnesota
shippers through public–private partnerships; increasing the competitiveness of rail rates for all
Minnesota shippers; and developing public–private partnerships to support mode shifts to rail
and decrease truck VMT relative to the baseline.
TLU Area 2: Reduce carbon per unit of fuel
TLU-3
Low-GHG Fuel Standard (Overlap with AFW-7)
Under this policy, the state of Minnesota would adopt a low-GHG fuel standard (LGFS), create a
market-based program to reduce the GHG emissions from transportation fuels, and diversify
transport fuel options for consumers. The LGFS would be designed to require fuel providers to
reduce the GHG intensity of the fuels they sell in Minnesota. Fuel providers are identified as
producers, importers, refiners, and blenders. The GHG intensity is specified as a CO2e2 per
2
Each GHG has a global warming potential (GWP) that allows it to be expressed in terms of CO2. This notation is
referred to as carbon dioxide equivalent (CO2e). For example, methane has a GWP of 23. Therefore, 1 metric ton
(Mt) of CH4 can be expressed as 23 MtCO2e.
5-6
British thermal unit (Btu). The LGFS would not be designed to encourage the use of any
particular fuel. Instead, it would include fossil and renewable fuels.3
The LGFS is not a tailpipe standard for GHGs, because it considers GHG emissions on a fullfuel-life-cycle basis, which includes not only tailpipe emissions but also emissions associated
with the production and distribution of fuels. This will result in varying carbon impact values for
fuels that would ostensibly be the same to customers.4
TLU Area 3: Reduce carbon per mile and/or per hour
TLU-4
Infrastructure Management
With the state as a coordinator, this strategy will build on current efforts to create a seamless
multimodal system to serve all modes, improve traffic flow, and decrease vehicle idling and
congestion (where it will not negatively affect bicycling and walking or induce additional vehicle
trips). This strategy will also reduce carbon emissions by reducing the number and length of
motor vehicle trips; increasing walking, bicycling, and transit use; and supporting development
patterns that use these modes.
TLU-6
Adopt California Clean Car Standards
This policy option reduces GHG emissions from new motor vehicles (cars and light-duty trucks)
sold in Minnesota by adopting legislation equivalent to the California Clean Car standards
(Assembly Bill 1493 [Pavley], named after the California lawmaker who sponsored the
legislation).
California adopted legislation in 2002 (and regulations in 2004) requiring a reduction in GHG
emissions from new cars and light-duty trucks sold in that state beginning with model year 2009.
California plans an 8-year phase-in. The California standards incorporate the main global
warming gases—CO2, methane, and nitrous oxide—resulting directly from vehicle operation
(tailpipe emissions), as well as hydrofluorocarbon emissions resulting from leakage from or
operation of vehicle air conditioning systems.
TLU-12
Voluntary Fleet Emission Reductions
Under this policy, Minnesota would create new services and provide additional support to
existing voluntary and incentive-based programs that help fleets reduce their GHG emissions.
3
Alternative fuels, which are defined in the Energy Policy Act of 1992, include biodiesel, electricity, ethanol,
hydrogen, natural gas, and propane.
4
For example, E10 in which the ethanol is derived from cellulose has the potential to reduce the full-fuel-life-cycle
carbon impacts, compared with E10 in which the ethanol is derived from corn. How the ethanol is made affects its
life-cycle GHG profile, and not all corn ethanol is the same. Cellulosic E10, while potentially better in its GHG
profile than sugar-based (corn) ethanol, will also vary depending on feedstock(s) and thermal heat input source(s).
5-7
Approximately 10% of cars and trucks in Minnesota are in fleets. There are many ways for
businesses to reduce GHG emissions from their fleets. Typically, fleets will determine a
methodology to measure their GHG impact, review their current vehicle mix and vehicle
operation parameters, and then analyze options to see where efficiencies can be gained.
Efficiencies generally come through improved driver behavior, more efficient vehicles (either
new models or technology enhancements to existing models), and/or improved operating
processes (e.g., more efficient routing systems).
This current state in fleet efficiency programs points to certain challenges. First, there is no
centralized support to help fleets manage these initiatives. Fleets have little support in the
selection and implementation of metrics. Second, funding resources for retrofits and other
technology-based efficiency solutions are limited and may be restricted to specific vehicle types.
Part of this challenge is necessary because some solutions for heavy-duty trucks are inherently
different from what a fleet of sedans would be facing. Third, there is no centralized Minnesotabased registry for businesses to post, track, and share fleet-based GHG improvements.
TLU-13
Reduce Maximum Speed Limits
Reduce maximum speed limits on highways in Minnesota to improve fuel economy and reduce
GHG emissions per mile traveled.
5-8
Chapter 6
Agriculture, Forestry, and Waste Management
Overview of GHG Emissions
The agriculture, forestry, and waste management (AFW) sectors are directly responsible for
moderate amounts of Minnesota’s current greenhouse gas (GHG) emissions. The total AFW
contribution to carbon dioxide equivalent (CO2e) net emissions in 2005 was 30 million metric
tons (MMt) or about 19% of the State’s total. Agricultural emissions include methane (CH4) and
nitrous oxide (N2O) emissions from enteric fermentation, manure management, agriculture soils,
and agriculture residue burning. These emissions were estimated to be about 22 MMtCO2e in
2005. As shown in Figure 6-1, emissions from soil carbon losses from agricultural soils, manure
management, fertilizer application, and crop residues all make significant contributions to the
sector totals. Emissions include CO2 emissions from oxidized soil carbon, application of urea,
and application of lime. Sector emissions also include N2O emissions resulting from activities
that increase nitrogen in the soil, including fertilizer (synthetic, organic, and livestock)
application and production of nitrogen-fixing crops (legumes). There is no significant
agricultural burning activity in Minnesota, and so the emissions were estimated to be zero.
Note that, in keeping with EPA methods and international reporting conventions, the inventory
and forecast covers anthropogenic sources of GHGs. There could be some natural sources of
GHGs that are not represented in the inventory and forecast; however these are not addressed in
the CAPAG process. In the forestry sector, all emissions are treated as anthropogenic; since all
of the State’s forests are managed in some way (GHG reporting conventions are to treat all
managed forests as anthropogenic sources). Sources such as carbon dioxide from forest fires and
decomposing biomass are captured within the inventory and forecast (as part of the carbon stock
modeling performed by the U.S. Forest Service [USFS]). However, methane emissions from
anaerobic decomposition of biomass in forests are not currently captured due to a lack of data.
The contributions from agricultural soils and manure management have grown significantly
since 1990, and they are projected to contribute 90% of agricultural emissions by 2020.
Emissions from enteric fermentation have stayed the same since 1990 and are projected to stay
relatively constant until 2020.
Forestland emissions refer to the net carbon dioxide (CO2) flux1 from forested lands in
Minnesota, which account for about 32% of the state’s land area. As shown in Table 6-1, USFS
data suggest that Minnesota forests emitted an average of 3.3 MMtCO2e per year from 1990 to
2003 (based on recommendations from the USFS). Hence, during this period, forest carbon
losses due to forest conversion, wildfire, and disease was estimated to be larger than the CO2
sequestered in forest carbon pools such as live trees, debris on the forest floor, and forest soils, as
well as in harvested wood products (e.g., furniture and lumber) and the landfilling of forest
products. It is important to note that on a per acre basis, forests are a net sink for carbon, not a
source. A significant fraction of the carbon losses attributed to forests are likely the result of
conversion of forest land to non-forest land between 1990 and 2003. The data show an
1
“Flux” refers to both emissions of CO2 to the atmosphere and removal (sinks) of CO2 from the atmosphere.
6-1
accumulation of carbon in harvested wood products, but losses in the each of the other forest
carbon pools.2 These rates of sequestration are assumed to remain constant through 2025.
Figure 6-1. Historical and projected net GHG emissions from the Agriculture Sector,
Minnesota, 1990–2020
28
24
MMtCO2e
20
16
12
8
4
0
1990
1995
2000
Enteric Fermentation
Manure Soil Applications
Atmospheric Deposition
Rice Cultivation
Urea Application (CO2)
2005
2010
Manure Management
Legumes
Cultivated Histosols
Residential Fertilizer
Liming of Fields (CO2)
2015
2020
2025
Mineral Fertilizer
Crop Residues
Leaching and Runoff
Agricultural Burning
Soil Carbon Flux
Table 6-1. GHG emissions (sinks) from the Forestry Sector
1990–2003 Flux
(MMtC/year)
1.5
5.9
–0.6
6.8
0.9
Forest Pool
Forest carbon pools (non-soil)
Soil organic carbon
Harvested wood products
Totals
Totals (excluding soil carbon)
1990–2003 Flux
(MMtCO2/year)
5.5
21.6
–2.2
24.9
3.3
*
Positive numbers indicate net emission. Based on USFS input, emissions from soil organic carbon are left out of the
forestry sector summary due to a high level of uncertainty.
Figure 6-2 shows estimated historical and projected emissions from the management and
treatment of solid waste and wastewater. Emissions from waste management consist largely of
2
This is not to say that the dead carbon pools (e.g., standing dead, forest floor) are sequestering carbon directly from
the atmosphere. These pools accumulate carbon from trees/biomass that transition from a live carbon pool to a dead
carbon pool.
6-2
CH4 emitted from landfills, while emissions from wastewater treatment include both CH4 and
N2O. Emissions are also included for municipal solid waste (MSW) combustion. Overall, the
waste management sector accounts for less than 4% of Minnesota’s total gross emissions per
year from 1990 through 2020.
Figure 6-2. Estimated historical and projected emissions from waste and wastewater
management in Minnesota
MMtCO2e
6.00
4.00
2.00
Municipal LFs
MSW Combustion
Industrial LFs
Municipal WW
1990
1995
2000
2005
2010
2015
2020
2025
MMtCO2e = million metric tons carbon dioxide equivalent; LFs = landfills; WW = wastewater.
The MCCAG acknowledges that there are higher levels of uncertainty in the GHG emissions and
forecasts in the AFW sectors compared with those in other GHG sectors (e.g., those where
emissions are tied directly to energy consumption). There is a need for continuing investment in
research and measurement to refine the AFW I&F (details on key uncertainties are presented in
the appendixes of the I&F report).
Opportunities for GHG mitigation in the AFW sector involve measures that can reduce
emissions within the sector or reduce emissions in other sectors. Within the sector, changes in
crop management practices can reduce GHG emissions by building soil carbon (indirectly
sequestering carbon from the atmosphere) or through more efficient nutrient application
(reducing N2O emissions, embedded GHG emissions within the nutrients, and fossil fuel
consumption). Reforestation projects can achieve GHG reductions by increasing the carbon
sequestration capacity of the State’s forests.
For GHG reductions outside of the AFW sector, actions taken within the sector such as
production of liquid biofuels can offset emissions in the transportation sector, while biomass
energy can reduce emissions in the energy supply (ES) or residential, commercial, and industrial
(RCI) sectors. Similarly, actions that promote solid waste reduction or recycling can reduce
emissions within the sector (future landfill CH4), as well as emissions associated with the
production of recycled products (recycled products often require less energy to produce than
similar products from raw materials). Finally, urban forestry projects can reduce energy
consumption within buildings through shading and wind protection.
6-3
The following are primary opportunities for GHG mitigation identified by the MCCAG.
•
Agricultural crop management: Implement programs that incentivize growers to utilize
cultivation practices that build soil carbon and reduce nutrient consumption. By building soil
carbon, CO2 is indirectly sequestered from the atmosphere. New technologies in the area of
precision agriculture offer opportunities to reduce nutrient application and fossil fuel
consumption.
•
Agricultural land use management approaches to protect/enrich soil carbon: Incentive
programs are needed to protect crop lands from conversion to developed use or the
conversion of lands in conservation programs to conventional tillage. By protecting these
areas from development, the carbon in above-ground biomass and below-ground soil organic
carbon can be maintained and additional emissions of CO2e to the atmosphere can be
avoided. Indirectly, these measures also support the objectives of “smart” development by
helping to direct more efficient development patterns (see TLU-1). Also, incentive programs
could be used to convert lands with a recent history of annual crop production to perennial
crops in order to build additional soil carbon. Peatlands and wetlands are recognized to have
large stores of soil carbon. After additional study to gain a full understanding of overall
carbon dynamics, peatland/wetland protection and enhancement programs should be initiated
to protect this stored carbon and to sequester additional carbon in the future.
•
Production of liquid biofuels: Production of renewable fuels, such as ethanol from crops,
crop residue, forestry residue, or municipal solid waste, and biodiesel from crop seed oils can
produce significant reductions when they are used to offset consumption of fossil fuels (e.g.,
gasoline and diesel in the TLU and RCI sectors). This is particularly true when these fuels
are produced using processes and/or feedstocks that emit much lower GHG emissions than
those from conventional sources. Significant GHG reductions could also be realized by
converting existing in-state ethanol production processes to run on renewable fuels (thereby
lowering the embedded GHG content and positioning the State’s industry to supply states
with low carbon fuels standards; including potentially Minnesota; see TLU-3).
•
Expanded use of forest and agricultural biomass: Expanded use of biomass energy from
residue removed from forested areas during treatments to reduce fire risk, crop residues, or
purpose-grown crops can achieve GHG benefits by offsetting fossil fuel consumption (to
produce either electricity or heat/steam). Programs to expand sustainably procured biomass
fuel production will likely be needed to supply a portion of the fuel mix for the renewable
energy goals of ES-5.
•
Enhancement/protection of forest carbon sinks: Through a variety of programs, enhanced
levels of CO2 sequestration can be achieved and carbon stored in the State’s forest biomass.
These include reforestation programs, restocking of poorly stocked forests, urban tree
programs, wildfire risk reduction, and other forest health programs. Programs aimed at
reducing the conversion of forested lands to non-forest cover will also be important to turn
what is currently a net forest CO2 source into a net CO2 sink.
•
Changes in municipal solid waste management practices: By concentrating on enhancing
the source reduction, recycling, and composting practices in the State, significant GHG
emission reductions can be achieved. Also, for waste remaining after full implementation of
these “front-end” practices, appropriate GHG-beneficial “end-of-life” practices should be
6-4
implemented including enhanced landfill gas collection & utilization and pre-processing of
waste being sent to waste to energy recovery facilities.
Key Challenges and Opportunities
In the agricultural sector, the MCCAG found significant opportunity in promoting biofuels
production using feedstocks and production methods with superior GHG benefits (superior to
conventional starch-based ethanol and soybean oil–based biodiesel). It should be noted that the
GHG benefits did not include any indirect impacts associated with emissions resulting from land
use change.3 Along with programs to promote the conversion of the existing Minnesota ethanol
industry to the use of more renewable fuels, additional biofuels production programs were found
to offer substantial GHG reduction potential with an estimated reduction of more than
11 MMtCO2e by 2025 (see AFW-3). A large fraction of these reductions is provided by the
gasoline displacement element of AFW-3 (35% displaced using ethanol or other biofuels by
2025).4
MCCAG members were concerned that a 35% gasoline displacement goal (based on energy
content) would stretch the state’s agronomic and biomass resources and noted that additional and
potentially significant impacts should be evaluated regarding availability of land, biomass, and
water, consequences for food production, economic feasibility, and changes in overall fuel costs.
The MCCAG recommends that the University of Minnesota and other experts, through the
Initiative for Renewable Energy, study the biofuels goals and the low-carbon fuel standard
(LCFS) contained in AFW-3 and TLU-3, respectively. The study should analyze the feasibility
of the proposals for reducing CO2 emissions, as well as their impacts on land and water use, food
production, fuel costs and availability, and the economic impacts on consumers and businesses.
It should be noted that there is significant overlap in benefits with the TLU-3 LCFS
recommendation. However, the MCCAG recognizes the need for programs to promote in-state
biofuels production. Examples of biofuels that could be produced with much better GHG impacts
are ethanol from cellulosic hydrolysis of biomass fiber. Feedstocks for the fiber needed for this
recommendation could come from crop residue, energy crops, or forestry residue. A major
challenge for the success of AFW-3 is the production of a viable commercial-scale cellulosic
ethanol or other biofuels industry by 2015.
MCCAG recommendation AFW-4 promotes the expanded use of biomass as an energy source
for producing electricity, heat or steam. Use of biomass to supplant fossil fuels was estimated to
reduce about 4 MMtCO2e by 2025. The MCCAG conducted a limited assessment of the
available biomass resources in the state which indicated that sufficient resources were available
through 2025 to achieve the goals for both the liquid biofuels recommendation above and this
biomass for energy option. However, the MCCAG also recognized the need for additional
research into this issue and noted that there are potentially other biomass resources that were not
3
Recent research (e.g., Searchinger, T., et al., “Use of U.S. Croplands for Biofuels Increases Greenhouse Gases
Through Emissions from Land Use Change,” Sciencexpress, February 2008) has indicated that incorporating land
conversion impacts into GHG analysis may remove any GHG benefits.
4
The state’s current plan for gasoline displacement is to have 20% gasoline displacement by 2013. The goal for
petroleum diesel fuel is 20% by 2015.
6-5
assessed (e.g., fiber in the municipal solid waste stream). Research on sustainable harvest
standards is also needed with resulting yields potentially impacting available quantities. It was
noted that although the initial assessments show sufficient resources to meet the MCCAG’s
biomass policies, there are a number of variables that are not taken into consideration, including
the assumption that all land that is currently available for biomass will still be available in 2015
and 2025; that all available biomass is actually collected; the technology and process to harvest,
and the transportation and storage logistics associated with corn stalk usage for biomass are still
in the developmental stages; restrictions regarding haying and grazing on CRP; and weather
conditions. It will also be necessary to analyze the impact of biomass harvest on plant nutrient
removal.
Within the agriculture sector, the MCCAG also recommends programs to promote soil
management programs the increase soil carbon levels, thereby indirectly sequestering carbon
from the atmosphere. These programs, combined with additional measure to promote more
efficient nutrient application, were estimated to achieve reduction of over 2.5 MMtCO2e per year
by 2025. Programs that would assist farmers in reaching the goals of these recommendations
include: the Agricultural Best Management Loan Program administered by the Minnesota
Department of Agriculture; carbon credit trading programs coordinated by various farm
organizations; and new and existing conservation such as the Reinvest in Minnesota Clean
Energy Program (RIM-CE), which provide environmental benefits in addition to new
opportunities for farmers in developing feedstock bioenergy production.
Land use management approaches to carbon management in the agriculture and forestry sectors
are also recommended to protect existing above and below ground carbon stocks and potentially
enhance terrestrial sequestration in the future. These include recommendations for additional
study on the benefits of peatlands and wetlands conservation (areas that store substantial soil
carbon). By preserving agricultural and forested lands (AFW-2a and 6), the MCCAG estimates
GHG savings in 2025 of 3.1 MMtCO2e. To achieve these reductions, the state will need to work
closely with local planning agencies, land owners, and nongovernmental organizations to
identify lands suitable for acquisition/conservation easements and funding mechanisms. Some of
the support could come through the Forest Legacy Easements Program, which would minimize
forest fragmentation and conversion as industrial land owners divest themselves of forest land
holdings. Another benefit to these options, which was not quantified, is the reduction in vehiclemiles traveled due to more efficient development patterns (see TLU-1).
Within the forestry sector, forest management programs (AFW-5) have the potential to deliver
over 13 MMtCO2e/year of GHG reductions in 2025. These programs include forestation, urban
forestry, wildfire reduction, restocking, and forest health approaches to minimizing terrestrial
carbon losses, while enhancing carbon sequestration. The urban forestry component also has the
potential to reduce fossil fuel consumption through shading and wind protection of homes and
commercial buildings. The overall goal for the forestation option calls for reestablishing forest
on one million acres by 2025. For the wildfire risk reduction element, the goals are to identify
and prioritize areas where wildfire fuel reduction would substantially reduce the risk of standreplacing fires and to conduct fuel reduction on 50% of the identified areas by 2015 and 100%
by 2025. The MCCAG recommends directing the biomass to the most beneficial uses, including
biomass fuel production, where appropriate. For the restocking element, the MCCAG
6-6
recommends identifying understocked stands on state and county lands by 2010. Then, where
appropriate, optimally stock 25% of identified stands by 2015, and all such stands by 2025.
For the forest health and carbon sequestration element of AFW-5, the MCCAG recommends
examining the carbon sequestration effects of shifting to desired future forest conditions using
carbon-friendly management methods. Further, the state should develop scientific information on
forest management options and harvest methods to increase the amount of carbon sequestered in
forests. This information should be incorporated into forest management plans for all publicly
administered forests by 2015. Also, Minnesota should identify and increase incentives for the
durable wood products industry by 2010. Finally, a monitoring program should be established to
document the long-term impacts of climate change on Minnesota forests by 2010. While the
GHG benefits and costs of this element have not been quantified, GHG benefits over the longterm could be significant.
For urban forestry, the goals are to increase canopy cover in Minnesota communities by 25% by
2025. The costs of tree planting programs can vary substantially depending on whether the labor
is paid or unpaid. Hence, strong relationships between all of the related parties are needed (State
Department of Forestry, utilities, communities, non-government organizations). Also, the ability
to implement these programs in smaller and newer communities on previously cleared land may
be limited by the administrative capacity of these communities.
AFW-7 and AFW-8 provide an integrated set of recommendations for future management of
municipal solid waste in Minnesota. AFW-7 focuses on “front-end” waste management
technologies: source reduction, recycling, and composting, while AFW-8 focuses on “end-oflife” waste management approaches. The recommendations for AFW-7 represent a significant
change from BAU waste management in the State: for source reduction, the goal is to achieve
0% increase in waste generation per capita by 2020 and a reduction of 3% in waste generation
per capita by 2025;5 for recycling, a 50% recycling rate should be achieved by 2011 and a 60%
recycling rate by 2025;6 and for composting, a rate of 10% by 2012 and 15% by 2020.7 The
recycling and composting elements achieve a total of 75% diversion of waste from landfilling or
waste to energy (WTE) by 2025. The combined “front-end” waste management elements
produce substantial GHG savings of 7.4 MMtCO2e in 2025. These include avoided landfill GHG
emissions, as well as avoided product/packaging lifecycle GHG emissions from source reduction
and recycling.
Although AFW-7 is estimated in net societal cost savings, successful implementation will
require waste management infrastructure investment by communities in the form of material
recovery facilities and composting operations. State and local agency costs will also be incurred
to develop and implement source reduction programs. Cost savings result from avoided landfill
fees and the addition of the value of recycled or composted materials.
5
Currently, waste generation per capita is increasing by a little less than 1% per year (as shown in the AFW-7
analysis of Appendix I).
6
This recycling rate includes waste re-use (e.g. use of food waste in livestock feeding programs). The 2005 rate was
41%.
7
While a full accounting of current composting levels in the State is not available, available data from MPCA
suggest that it is no more than one or two percent of total generation (see Appendix I, AFW-7 analysis).
6-7
The recommendations provided in AFW-8 are expected to deliver another 0.6 MMtCO2e by
2025 (after accounting for the overlap with AFW-7). The important incremental “end-of-use”
elements of AFW-8 are more stringent landfill gas collection and control requirements in the
post-2020 time-frame and a requirement for all waste sent to WTE facilities to be pre-processed
prior to combustion to remove non-combustible materials (e.g., metal and glass). This results in
higher efficiencies for the WTE plant and lower GHG emissions.
In order to gain a sense of the importance of these two waste management options, the MCCAG
also performed an assessment to compare the GHG benefits of current MPCA goals to the goals8
of AFW-7&8. The following are the results of this comparison: the combined 2025 benefit of
AFW-7&8 was 8.0 MMtCO2e compared with 0.57 MMtCO2e for the current MPCA waste
management goals; the cumulative 2008–2025 benefit was 75 MMtCO2e for AFW-7&8
compared with 7.4 MMtCO2e for the current MPCA goals; and there was a cost-effectiveness of
–$4/tCO2e for AFW-7&8 compared with $117/tCO2e for the current MPCA waste management
goals.
Overview of Policy Recommendations and Estimated Impacts
As noted above, the 12 policy recommendation for the AFW sector address a diverse array of
activities. Taken as a whole, they offer significant cost-effective emission reductions, as shown
in Table 6-2.
Table 6-2. Summary list of policy recommendations
GHG Reductions
(MMtCO2e)
Policy
No.
AFW-1
AFW-2
AFW-3
AFW-4
Policy Recommendation
Agricultural Crop Management
A. Soil Carbon Management
B. Nutrient Management
Land Use Management Approaches for
Protection and Enrichment of Soil Carbon
A. Preserve Land
B. Reinvest in Minnesota–Clean Energy
(RIM-CE)
C. Protection of Peatlands & Wetlands
Total
2008
2025
Net
CostPresent
EffectiveValue
ness
2008–2025
($/tCO2e)
(Million $)
2015
2025
0.72
1.3
15
–$34
–$2
0.79
1.3
15
–$543
–$37
0.15
0.44
3.7
$120
$33
0.09
0.19
1.8
$59
$34
Level of
Support
Unanimous
Unanimous
Not Quantified
In-State Liquid Biofuels Production
A. Ethanol Carbon Content
1.8
2.2
B. Fossil Diesel Displacement
0.03
0.19
2.8
9.1
1.3
3.8
C. Gasoline 35% Displacement
Expanded Use of Biomass Feedstocks for
Electricity, Heat, or Steam Production
8
–$242
–$9
$74
$55
73
$336
$5
31
$102
$3
27
1.4
Supermajority
(4 objections)
Unanimous
As documented in Appendix I (AFW-8, Feasibility Issues), the assumptions of current MPCA waste management
goals are: BAU waste generation, as shown in Table 35 of Appendix I, (i.e., no source reduction); recycling rates
remain on a BAU track of 41% (38% conventional recycling and 3% organics reuse); and 30% of total waste
generation is directed to WTE in 2011 (as shown in Table 35 of Appendix I, current BAU waste management is
estimated to direct about 20% of waste generation to WTE in 2011).
6-8
GHG Reductions
(MMtCO2e)
Policy
No.
Policy Recommendation
Forestry Management Programs to Enhance
GHG Benefits
A. Forestation
AFW-5
AFW-6
B. Urban Forestry
2015
2025
0.55
2.2
17
$218
$13
1.2
2.7
26
–$295
–$12
C. Wildfire Reduction
D. Restocking
E. Forest Health and Enhanced
Sequestration
Forest Protection—Reduced Clearing and
Conversion to Non-Forest Cover
Total
2008
2025
Net
CostPresent
EffectiveValue
ness
2008–2025
($/tCO2e)
(Million $)
Not quantified
2.1
8.4
65
$2,187
Level of
Support
Unanimous
$33
Not quantified
2.2
2.7
34
$101
$3
Unanimous
Unanimous
Front-End Waste Management Technologies
AFW-7
A. Source Reduction
0
3.6
20
$59
$3
B. Recycling
3.1
3.4
45
–$207
–$5
C. Composting
0.29
0.41
4.9
$137
$28
A. Landfilled Waste Methane
0.07
0.73
4.4
B. Residuals Management
0.52
0.63
8.1
$650
$80
C. WTE Preprocessing
0.37
0.84
7.9
$257
$32
End-of-Life Waste Management Practices
AFW-8
Sector Total After Adjusting for
Overlaps*
Reductions From Recent Actions
Sector Total Plus Recent Actions
$5.7
$1
13.2
29.5
279
$2,090
$7
0.0
13.2
0.0
29.5
0.0
279
0.0
$2,090
0.0
$7
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons carbon dioxide equivalent; $/tCO2e = dollars per ton of
carbon dioxide equivalent; WTE = waste to energy.
Negative values in the Net Present Value and the Cost-Effectiveness columns represent net cost savings associated
with the recommendations. Totals in some columns may not add to the totals shown due to rounding.
*Overlaps include an assumed 100% overlap of AFW-3b&3c with TLU-3 (reductions excluded from AFW totals); an
assumed 100% overlap of AFW-4 with ES-5 (reductions and costs excluded from AFW totals); overlap of AFW-7&8
(incremental benefits and costs of AFW-8 included in the AFW totals).
Agriculture, Forestry, and Waste Management Sector
Policy Descriptions
The Agriculture, Forestry, and Waste Management Sectors include emissions mitigation
opportunities related to the use of biomass energy, protection and enhancement of forest and
agricultural carbon sinks, control of agricultural N2O emissions, production of renewable liquid
fuels, production of additional biomass energy, forestation on non-forested lands, and an increase
in municipal solid waste source reduction, recycling, composting, landfill gas collection, and
waste to energy pre-processing.
6-9
AFW-1
Agricultural Crop Management
This policy recommendation addresses both agricultural soil carbon management, as well as
nutrient management to achieve greenhouse gas (GHG) benefits. For soil carbon management,
conservation-oriented management of agricultural lands, cropping systems, crop management,
and agricultural practices may regulate the net flux of carbon dioxide (CO2) from soil. Each farm
operation and each field management unit has unique traits that may allow management practices
to influence nutrient, water, and carbon cycling and sequestration. Defining GHG outcomes
based upon management indices may allow farmers to incorporate management practices within
their specific operational needs to meet desired GHG goals. Providing cropping and management
flexibility within each field or tract management unit allows both production and resource
management goals to be transparent and readily valued.
The efficient use of agricultural fertilizer, both commercial and animal-based, can be improved
through certain management practices and systems. An example is over-application of nitrogen,
which can result in plants not fully metabolizing the nitrogen, allowing the nitrogen to leach into
groundwater and/or be emitted to the atmosphere as nitrous oxide (N2O). Better nutrient
utilization can lead to lower N2O emissions from runoff. An example is tile drainage systems that
use the latest technology and design models to reduce nitrates leaching into surface water and
groundwater.
AFW-2
Land Use Management Approaches for Protection and Enrichment of Soil Carbon
This policy converts marginal or sensitive agricultural land with an immediate history of use for
annual crop production to permanent cover, such as grassland/rangeland, orchard, or forest on
land that was formerly forested, where the soil carbon and/or carbon in biomass is substantially
higher under the new land use. This includes opportunities to keep CRP, Conservation Reserve
Enhancement Program (CREP), and Reinvest in Minnesota (RIM) lands in well-managed,
continual cover, while also providing opportunities for working lands to increase carbon
sequestration through biomass production that can provide feedstocks for in-state bioenergy
production.
Incentives need to be created to convert annual row-crop acres to perennial crops that prevent
these acres from either returning to conventionally tilled production or to suburban/urban
development. Incentives also need to be created for promoting carbon sequestration goals on
public lands and lands enrolled in existing conservation programs. Finally, research should be
conducted and programs adopted to identify and eliminate threats to the vast carbon pools
currently stored in lands that hold high levels of soil organic carbon, such as peatlands and
wetlands.
Wetlands have among the highest potential carbon-sequestration capacities for any type of land
cover in Minnesota. Peatlands are likely Minnesota’s largest single carbon sink, containing 37%
of all carbon stored in the state, compared with 3% stored in the state’s forests. Protecting these
enormous carbon reservoirs from the impacts of warmer and drier conditions and increased fire
risk is critical. Early attention should be given to identifying degraded peatlands at risk of reemitting sequestered CO2 and CH4. Additional study is needed to understand GHG dynamics in
6-10
the full range of wetland types in Minnesota and to apply this understanding to the state’s
wetland conservation policies to reduce the risk of releases of stored GHGs from these systems.
AFW-3
In-State Liquid Biofuels Production
This policy promotes sustainable in-state production and consumption of transportation biofuels
from agriculture and/or agroforestry feedstocks to displace the use of gasoline and diesel. It
decreases the use of fossil fuel in the production of these biofuels, which will improve the GHG
profile of in-state liquid biofuels production and consumption. Sustainability standards also
needed to be developed for low-carbon biofuels, so that producers are rewarded accordingly.
This policy also promotes the in-state development of feedstocks, such as cellulosic material and
perennials that are able to be utilized. Recognizing that conversion technologies, such as thermochemical Fischer-Tropsch processes and enzymatic conversion, are developing fast in this sector,
the policy recommends facilitating, but not requiring, their development.
AFW-3 also promotes multiple biofuel (ethanol, biodiesel, biobutanol) production systems that
improve the embedded energy content, life cycle, and carbon profile of biofuels. It focuses on
plant material feedstocks that favor energy production, that are carbon neutral or negative, and
that have multiple other positive environmental benefits, such as maintaining carbonsequestration potential and soil productivity, and decreasing water and fossil fuel inputs in their
production.
To achieve true gains in reducing GHGs, promoting biofuel production must be coupled with
strong policies to reduce overall transportation fuel consumption. Upon successful
implementation of this policy, Minnesota consumption of biofuels produced in-state will produce
better GHG benefits than these same fuels obtained from a national market due to lower
embedded CO2 (resulting from out-of-state fuels produced using feedstocks/production methods
with lower GHG benefits, and from transportation of biodiesel, ethanol, other fuels, or their
feedstocks from distant sources).
Note: This recommendation is linked with the Transportation and Land Use recommendation
TLU-3, a Low-Carbon Fuels Standard. It seeks to achieve incremental GHG benefits beyond the
TLU recommendation by promoting in-state production of biofuels using feedstocks with greater
GHG benefits than the likely BAU national production methods. Further, AFW-3 focuses on the
supply elements of the implementation of a biofuels program while TLU-3 focuses on the demand
side (e.g., vehicle technology requirements, E10, E85).
AFW-4
Expanded Use of Biomass Feedstocks for Electricity, Heat, or Steam Production
This policy dedicates a sustainable quantity of biomass from agricultural lands, land restoration
activity, agricultural industry residues, wood industry process residues, those normally unused
forestry residues, and agroforestry resources for efficient conversion to energy and economical
production of heat, steam, or electricity. This biomass should be used in an environmentally
acceptable manner, considering proper facility siting and feedstock use (e.g., proximity of users
to biomass, impacts on water supply and quality, control of air emissions, solid waste
6-11
management, cropping management, nutrient management, soil and non-soil carbon
management, and impacts on biodiversity and wildlife habitat). The objective is to create
concurrent reduction of CO2 due to displacement of fossil fuel considering life cycle GHG
emissions associated with viable collection, hauling, and energy conversion and distribution
systems.
The potential feedstocks associated with this policy are biomass normally unused under any
existing program, meaning:
•
Any organic material grown for the purpose of being converted to energy.
•
Any organic by-product of agriculture that can be converted into energy.
•
Any material that can be converted into energy and is non-merchantable for other purposes,
that is segregated from other non-merchantable material, and that is:
A forest-related organic resource, including mill residues, pre-commercial thinnings,
slash, brush, or by-product from conversion of trees to merchantable material; or
○ A wood material, including pallets, crates, dunnage, manufacturing and construction
materials (other than pressure-treated, chemically treated, or painted wood products), and
landscape or right-of-way tree trimmings.
Expanded biomass resources can be developed from agricultural industry process residues and
agro-forestry products as new industrial facilities are built and through conversion of existing
facilities. Analyses project that Minnesota theoretically has enough residual biomass and energy
crops that, if collected and fed to the most efficient conversion technologies available, could
produce up to 99% of the total electricity currently used in the state. Actual results are highly
dependent on economically attractive methods for collection of materials, hauling, and energy
conversion and distribution systems, as well as sustainable harvest methods. Current research
and increasing numbers of demonstration projects occurring nationally are available to determine
which system components are most functional and cost-effective for given locations.
○
AFW-5
Forestry Management Programs to Enhance GHG Benefits
Forests—public, private, urban, managed, and wild—provide many GHG benefits. The
following actions are recommended:
•
Protect and enhance the carbon stored in tree biomass by maintaining and improving the
health, longevity, and number of trees in urban and residential areas. Emission reductions
from reduced heating and cooling as a result of planting shade trees are a significant cobenefit.
•
Promote forest cover and associated carbon stocks by establishing forests on former
forestland. Additional benefits include public recreation, water quality, wildlife habitat, and
enhanced biodiversity. Implement such practices as soil preparation, erosion control, and
stand stocking to ensure conditions that support forest growth.
•
Encourage activities that promote forest productivity and increase the amount of carbon
sequestered in forest biomass and soils and in long-lived wood products. Practices may
6-12
include adjusting rotation ages to increase carbon sequestration, increasing the stocking of
poorly stocked lands, managing thinning and density, and increasing the acreage of shortrotation woody crops (for fiber and energy) on agricultural lands previously converted from
forestland.
Reduce the severity of wildfires to reduce GHG emissions by lowering the forest carbon lost
during a fire and by maintaining carbon sequestration potential. Similarly, reducing damage from
insects, disease, and invasive plants decreases GHG emissions by maintaining the carbon
sequestration potential of healthy forests.
AFW-6
Forest Protection—Reduced Clearing and Conversion to Non-Forest Cover
In the mid- to late 1800s, forests covered 31 million acres in Minnesota. Over the subsequent
100-plus years, 15 million acres of this forestland were converted to other uses, mainly to
farmland, but also to developed areas. Between 1990 and 2003, Minnesota forestland acreage
was reduced by nearly one-half million acres, from 16.7 million acres to 16.2 million acres.9
Because forestland captures and stores CO2 in trees, soil, and other forest biomass at a much
higher rate than developed areas and other areas without forest cover, priority should be placed
on reducing conversion of forested lands to land uses with lower carbon sequestration potential.
AFW-7
Front-End Waste Management Technologies
Front-end waste management technologies promote the reduction of the sheer volume of waste
produced, as well as reduction in consumption through incentives, awareness, and increased
efficiency. Three major areas of focus in Minnesota are source reduction, organic waste
management, and advanced recycling. Source reduction and recycling provide GHG benefits not
only from avoided disposal emissions, but also from product life cycle emission reductions
(associated with the manufacture and transport of new packaging and products). Redirecting
organic wastes (such as food, yard, and paper) from landfills into composting programs is very
effective at reducing GHG emissions.
AFW-8
End-of-Life Waste Management Practices
This policy promotes activities that further reduce GHG production by encouraging the use of
energy recovery technologies for materials not managed by AFW-7 (Front-End Waste
Management Technologies). It also encourages the use of energy recovery technologies for
waste materials for which more desirable front-end waste management alternatives are not
available or feasible. These technologies will help reduce GHG emissions from waste
management, while producing cleaner energy. They make a two-fold contribution to climate
protection, by reducing the discharge of methane and other GHGs into the atmosphere, and
replacing fossil fuel burning with recovered energy. For example, the energy created by landfills
(methane) can be used to make electric power, space heat, or liquefied natural gas. WTE
9
Minnesota Pollution Control Agency and Center for Climate Strategies. Appendix H: Forestry, p. H-3, Table H1,
“USFS Carbon Pool Data for Minnesota.” June 7, 2007. See http://www.mnclimatechange.us/ewebeditpro/items/
O3F12645.pdf
6-13
facilities already in existence in Minnesota generate 100 MW of electricity and 150,000 lb/hour
of steam for heating and cooling and use by other industries.
6-14
Chapter 7
Cross-Cutting Issues
Overview of Cross-Cutting Issues
Some issues relating to climate policy cut across multiple or all sectors. The Minnesota Climate
Change Advisory Group (MCCAG) addressed such issues explicitly in a separate Technical
Work Group (TWG) as “cross-cutting” issues rather than assigning them to any individual
sector. Cross-cutting recommendations typically encourage, enable, or otherwise support
emissions mitigation activities and/or other climate actions. The types of policies considered for
this sector are not readily quantifiable in terms of greenhouse gas (GHG) reductions and costeffectiveness calculations. Nonetheless, if successfully implemented, they would likely
contribute to GHG emission reductions and enhance the economic benefits described for each of
the other policy recommendations that were quantified. Those recommendations are described in
Chapters 3–6.
The Cross-Cutting Issues (CC) TWG developed recommendations for each of seven policies (see
Table 7-1) that were then reviewed, revised, and ultimately adopted by the MCCAG. All of the
recommendations are focused on supporting GHG emissions reduction efforts.
The statewide goals and targets recommendation (CC-2) is the overarching MCCAG
recommendation, and it is based on the goals established in the Minnesota Next Generation Act
of 2007 (S.F. 145). The GHG reduction goals contained in the Act and endorsed by the MCCAG
are to reduce statewide GHG emissions across all sectors producing those emissions to levels at
least 15% below 2005 levels by 2015, at least 30% below 2005 levels by 2025, and at least 80%
below 2005 levels by 2050. MCCAG projects that implementation of the policies contained in
this Plan will achieve these levels of reductions.
All of the seven policy recommendations were adopted unanimously by the MCCAG members
present and voting.
7-1
Table 7-1 Summary List of Cross-Cutting Policy Recommendations
Policy
No.
GHG Reductions
(MMtCO2e)
Policy Recommendation
Net Present
CostValue
EffectiveTotal 2008–2025
ness
2015 2025 2008– (Million $) ($/MtCO2e)
2025
Level of
Support
GHG Inventories, Forecasting, Reporting, and
Registry
Not quantified
Unanimous
Consent
CC-2 Statewide GHG Reduction Goals and Targets
Not quantified
Unanimous
Consent
State and Local Government GHG Emissions
(Lead by Example)
Not quantified
Unanimous
Consent
Not quantified
Unanimous
Consent
Not quantified
Unanimous
Consent
Not quantified
Unanimous
Consent
Not quantified
Unanimous
Consent
CC-1
CC-3
CC-4 Public Education and Outreach
CC-7
Participate in Regional and Multistate GHG
Reduction Efforts
Encourage the Creation of a Business-Oriented
Organization To Share Information and
CC-8
Strategies, Recognize Successes, and Support
Aggressive GHG Reduction Goals
CC-9
Dedicate Greater Public Investment to Climate
Data and Analysis
Sector Total After Adjusting for Overlaps
Not quantified
Reductions From Recent Actions
Not quantified
Sector Total Plus Recent Actions
Not quantified
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/MtCO2e = dollars per metric
ton of carbon dioxide equivalent.
Key Challenges and Opportunities
One of the key challenges facing Minnesota and other states is the lack of clear federal climate
change goals, policies and programs. Recent enactment of the federal energy act will provide
some direction on auto mileage and energy efficiency requirements but there are many other
facets of the climate change problem that may need to wait over a year for federal policy to
become more apparent.
In the meantime the state is one of the partners in the Midwestern Governors GHG Reduction
Accord and the Energy Security Platform. Participation in these important regional ventures
offers the state the clear opportunity to help develop regional goals and collaborative initiatives
that will have broader applicability than just within Minnesota borders.
The state has begun to implement a number of activities recognized in the lead by example
section of this chapter. The state will need to build on these efforts and take such initiatives to
the next level. Additionally, the state will need to organize efforts across state agency boundaries
in order to realize some of the reductions anticipated from state government.
Implementation of many elements of the MN Climate Action Plan may entail additional costs to
state government that the state will need to determine how to finance. For instance the Plan calls
7-2
on the state to make greater investments in Climate Data and Analysis upon which the ongoing
climate program will depend. Determining how to finance implementation of the Plan will
remain an ongoing challenge.
Another opportunity for the state is in the arena of building more business and economic
opportunities associated with reducing GHG emissions. The Plan calls for the creation of a
business oriented entity to promote such efforts.
The state also needs to make efficient use of many existing programs, particularly in the
monitoring arena. The state should be striving to integrate GHG emissions monitoring and
tracking into the existing monitoring infrastructure to the extent feasible.
Cross-Cutting Issues
Policy Descriptions
CC-1
GHG Inventories, Forecasting, Reporting, and Registry
GHG emission inventories are essential for understanding the magnitude of all emission sources
and sinks (both natural and those resulting from human activities), for estimating the relative
contribution of various types of emission sources and sinks to total emissions, for informing state
leaders and the public on statewide trends, and for assisting with verifying GHG reductions
associated with implementation of action plan initiatives.
GHG forecasts, built on solid inventories, help to predict likely impact scenarios, identify the
factors that affect trends over time, and highlight opportunities for mitigating emissions or
enhancing sinks.
GHG reporting reflects the measurement and reporting of GHG emissions to support tracking
and management of emissions. GHG reporting can help sources identify emission reduction
opportunities and reduce risks associated with possible future GHG mandates by moving up the
learning curve. Tracking and reporting of GHG emissions can also help in the construction of
periodic state GHG inventories. GHG reporting is a precursor for sources to participate in GHG
reduction programs, opportunities for recognition, and a GHG emission reduction registry, as
well as to secure “baseline protection” (i.e., credit for early reductions).
A GHG registry enables recording of GHG emission reductions in a central repository with
transaction ledger capacity to support tracking, management, and ownership of emission
reductions; establish baseline protection; enable recognition opportunities; and provide a
mechanism for regional, multistate, and cross-border cooperation. Properly designed registry
structures also provide a foundation for possible future trading programs.
The state should institute formal GHG inventory and forecast and GHG reporting functions
within the Minnesota Pollution Control Agency (MPCA), to be assisted by other state agencies
as needed.
7-3
Goals:
• Develop a periodic, consistent, and complete inventory of emission sources and sinks at least
once every 2 years. To the degree that data and methods allow, the inventory should include
all natural and man-made emissions generated within the boundaries of the state (i.e., a
production-based inventory approach), as well as emissions associated with energy imported
and consumed in the state (i.e., a consumption-based inventory approach). Through
performance metrics and differences in year-to-year emissions, the inventory should provide
a way of documenting and illuminating trends in state GHG emissions.
•
Develop a protocol for use in preparing the statewide emission and sink inventory. This
should include a consistent protocol for evaluating the state’s progress in meeting the goals
of the Next Generation Energy Act of 2007, which should logically form the basis for
inventory reporting of electricity sector emissions under a consumption-based approach.
•
Biennially provide a summary of statewide emission and sink trends and progress toward the
goals of the 2007 Next Generation Energy Act to the legislature.
•
Develop a periodic, consistent, and complete forecast of future GHG emissions in at least 5and 10-year increments extending at least 20 years into the future. MPCA should periodically
assemble the GHG forecasts, which should reflect projected growth as well as the
implementation of scheduled mitigation projects. In the forecasting of future GHG emissions,
the treatment of uncertainties should be transparent, should be as consistent as possible
across sectors and time and, to the extent possible, should reflect multiple scenarios. The
estimation methods should be consistent with those used to develop the emission inventory
and should reflect best practice.
•
Develop a standardized protocol for the periodic forecasting of statewide GHG emissions.
CC-2
Statewide GHG Reduction Goals and Targets
Article 5 of the Next Generation Energy Act of 2007 (S.F. No. 145) establishes goals for
Minnesota to reduce statewide GHG emissions across all sectors producing those emissions, to
levels at least 15% below 2005 levels by 2015, at least 30% below 2005 levels by 2025, and at
least 80% below 2005 levels by 2050. The levels will be reviewed based on the Minnesota
Climate Action Plan. In addition, Article 1 of the act establishes that Minnesota’s energy policy
requires (1) that the per capita use of fossil fuel as an energy input be reduced by 15% by 2015
through increased reliance on energy efficiency and renewable energy alternatives, and (2) that
25% of the total energy used in the state be derived from renewable energy resources by 2025.
The MCCAG endorses these goals as part of this Plan.
CC-3
State and Local Government GHG Emissions (Lead-by-Example)
In many areas, the Minnesota state government is already leading by example to obtain GHG
emission reductions. State and local governments are responsible for providing a multitude of
services for the public that are delivered through very diverse operations and result in wideranging GHG emission activities. State and local governments can take the lead in demonstrating
7-4
that reductions in GHG emissions can be achieved through analysis of current operations,
identification of significant GHG sources, and implementation of changes in technology,
procedures, behavior, operations, and services provided. State and local governments can also
encourage and provide incentives for reducing GHG emissions by others in a variety of ways.
The support of broad-ranging goals for GHG reductions for state government through the goals
established below and those that already exist through the Interagency Pollution Prevention
Advisory Team (IPPAT) will be helpful for setting an example and building expectations, with
actual reductions realized at the state agency level. Disaggregating the state’s own GHG
emissions to the agency level and showing the results in the annual IPPAT report on GHG
reduction progress is an effective way to measure and manage the state’s emissions.
State and local governments should establish reduction targets for their own GHG emissions.
The establishment of broad-ranging goals for reducing governments’ GHG emissions will be
helpful both in setting an example and in building expectations. Because actual reductions will
typically be realized at the individual agency level, disaggregating individual governments’ GHG
emissions to the agency or department level and requiring annual agency- or department-specific
reports on GHG reduction progress can be effective ways to measure and manage each agency’s
progress toward reducing its emissions. Government agencies or departments first developed
agency- or department-specific GHG emissions inventory data. These data became the baseline
data for ongoing emission reduction activities and measurements, which are summarized in
annual IPPAT reports by each agency or department. IPPAT oversees the ongoing climate efforts
of the state government’s agencies and departments; reviews their performance; and provides
direction, guidance, resources, shared approaches, and recognition to agencies or departments
and their employees who are working to reduce the state government’s GHG emissions.
Goals:
• Each state agency will, in consideration of its current and projected building stock,
Determine and quantify its current and projected energy consumption and associated
GHG emissions from such consumption,
○ Develop and propose a plan to reduce the statewide GHG emissions associated with its
building stock commensurate with its pro rata share of the statewide GHG reduction
goals established in the 2007 Next Generation Energy Act,
○ Provide the plan to IPPAT, and
○ Report annually to IPPAT on its progress toward its GHG reduction goals in buildings.
Each state agency will, in consideration of its current and projected transportation stock,
○
•
Quantify and establish the same goals for its transportation stock described above for its
building stock,
○ Provide the plan to IPPAT, and
○ Report annually to IPPAT on its progress toward its GHG reduction goals in
transportation.
○
The state should develop appropriate guidelines and tools for utilizing the environmental impact
assessment processes to assess and promote reductions of GHG emissions. Environmental
7-5
Assessment Worksheets (EAWs) and Environmental Impact Statements (EISs) are written
analyses of the potential environmental impacts of a proposed action or project in Minnesota.
Including consideration of GHG emissions as part of EAW and EIS processes and documents
would enable comparison of reference case GHG emission levels to future GHG emission levels
as a result of proposed projects. Such information could be helpful in targeting development
decisions that minimize GHG emissions or in pointing out the need for authority to regulate
GHG emissions. Agencies should utilize state-developed guidelines and tools in EAW and EIS
documents comparing reference case and estimated future GHG emissions. This information will
guide officials and developers in choosing technologies and activities that result in development
that protects the environment and reduces additional contributions of GHGs.
Additionally, the existing directives of IPPAT, along with the following Executive Orders,
should be continued and enhanced:
04-02, Providing Direction to State Agencies Regarding State Contracting Procedures
04-08, Providing for State Departments To Take Actions To Reduce Air Pollution in Daily
Operations (Clean Air Minnesota provisions)
04-10, Providing for State Departments To Improve Fleet and Travel Management
05-16, Providing for Energy Conservation Measures for State-Owned Buildings
06-03, Requiring State Agencies To Increase the Use of Renewable Fuels
CC-4
Public Education and Outreach
Explicitly articulated public education and outreach can support GHG emission reduction efforts
at all levels in the context of emission reduction programs, policies, or goals by fostering a broad
awareness of climate change issues and effects (including co-benefits, such as clean air and
public health) and engaging citizens, businesses, and institutions in actions to reduce GHG
emissions. Public education and outreach efforts should integrate with and build upon existing
outreach efforts involving climate change and related issues in the state and should make the
public aware of GHG emissions associated with products produced outside of Minnesota and the
United States. Ultimately, public education and outreach will be the foundation for the long-term
success of the policy actions proposed by the MCCAG as well as those that may evolve in the
future.
The state should build upon current educational efforts and action campaigns of state agencies,
utilities, and nonprofit organizations that understand each other’s offerings and should use these
enhanced resources to educate and encourage all sectors within Minnesota—such as residential,
commercial, and educational—to take action.
Minnesota has a long history of environmental education. The state should work through existing
organizations by encouraging them to incorporate education about climate change and the role of
GHG emissions into their existing educational efforts. The states initiatives should focus on
7-6
being the primary mechanism for providing mitigation, awareness, and understanding of climate
change and the role humans play in causing it.
Some of the highlights of these current actions include The Environmental Education Advisory
Board, the Environmental Learning in Minnesota Fund, the Minnesota Environmental Literacy
Scope and Sequence, and the Sharing Environmental Education Knowledge Partnership.
Additional educational initiatives by the utilities and nonprofit sectors are also recommended.
Goals: The overarching goal is to raise awareness about global warming and promote individual
action to reduce the Minnesota’s overall GHG emissions.
CC-7
Participate in Regional and Multistate GHG Reduction Efforts
Regional approaches undertaken in collaboration with partner states or other organizations can
offer broader and more economically efficient opportunities to reduce GHG emissions across
Minnesota’s economy. Several options for regional, market-based GHG reduction strategies
should be considered in Minnesota, such as joining the Western Climate Initiative (WCI)or the
Northeast States Regional Greenhouse Gas Initiative (RGGI), instituting a new midwestern states
GHG initiative, considering the California vehicle standards, and encouraging cost-sharing on
multistate initiatives.
Goals: Ensure the cost-effective reduction of GHG emissions to at least the reduction levels set
forth in the Next Generation Energy Act in a manner that maximizes public benefits and induces
innovation in energy efficiency and sustainable energy technologies and avoids inequitable
impacts.
Near the end of the MCCAG process, Governor Pawlenty signed the state on to the Midwestern
Regional Greenhouse Gas Reduction Accord and the Midwestern Energy Security and Climate
Stewardship Platform adopted by nine midwestern states and one Canadian province.
CC-8
Encourage the Creation of a Business-Oriented Organization To Share Information and
Strategies, Recognize Successes, and Support Aggressive GHG Reduction Goals
Successful state GHG reduction efforts are highly dependent on the active participation of the
business community, particularly in the energy, agriculture, transportation, development, and
manufacturing sectors. In Minnesota, there are many progressive corporations that are eager to
participate in broad-scale efforts to reduce GHG emissions. To facilitate a strategic approach that
has a significant impact, a statewide proactive business organization should be formed to
promote energy efficiency and GHG reduction opportunities.
Goals: The Next Generation Energy Act of 2007 established general goals for GHG emission
reductions and an aggressive specific annual goal of reducing energy consumption by 1.5%. A
new business strategy that aggressively promotes options to improve energy efficiency by
Minnesota’s businesses will help achieve these goals.
7-7
CC-9
Dedicate Greater Public Investment to Climate Data and Analysis
To calibrate GHG mitigation policies, it is critical that decision makers and Minnesota citizens
understand how climate change is currently affecting and will in the future affect the state’s
natural resources and economy. Much of the data and information needed to make such an
assessment is being collected by various departments and entities in the state. MPCA and the
Minnesota Departments of Natural Resources, Agriculture, and Employment and Economic
Development should assess and identify the gaps in ongoing data collection that would need to
be filled to monitor, track, and assess climate change impacts in Minnesota. The departments
should develop recommendations for filling these data gaps and suggest the best approach
(possibly by coordinating with the University of Minnesota) for periodically assessing how
intensely Minnesota is being and is likely to be affected by climate change.
Goals: Develop a plan for periodically assessing the recent and projected impacts of climate
change on Minnesota natural resources and economic activity. The assessment would focus on
(but not be limited to) impacts on water resources and quality, air quality, landscape change,
forest resources and health, ecosystem health, species diversity, fish and wildlife and their
habitats, agricultural productivity, recreation and other amenities, human disease, and settlement.
The assessment should treat impacts arising from climate change in the present and recent past
and impacts that are likely or possible 30–50 years into the future and should rely on the best
available regional climate data and assessments.
7-8
Chapter 8
Cap-and-Trade
Overview of Cap-and-Trade
The Cap-and-Trade Technical Work Group (TWG) was formed about midway through the
Minnesota Climate Change Advisory Group (MCCAG) process when the Energy Supply TWG
observed that the complexity of the issue demanded the full-time attention of a special
committee. The first meeting of the Cap-and-Trade TWG was held on October 10, 2007; in total,
11 meetings were held between then and January 18, 2008, including a 6-hour in-person meeting
on December 14, 2007. Several policy options were referred to and considered by the Cap-andTrade TWG, but most of the committee’s effort was devoted to the cap-and-trade option itself,
C&T-1.
Unlike most of the policies studied by the other TWGs, cap-and-trade is not tied to a specific
sector or emissions reduction measure. It is a system by which the sources within covered sectors
find and achieve the lowest-cost emissions reduction investments. Cap-and-trade also provides a
means of ensuring that total emissions from all covered sources will not exceed the governmentset limit, or cap.
Cap-and-trade programs limit emissions by first placing a “cap,” or limit, on the total number of
tons of pollutants that will be permitted to be released from regulated, or “covered,” sources of
greenhouse gas (GHG) emissions within a specified geographic area and interval of time. The
cap is enforced by the issuance of permits, or “allowances,” which must be surrendered by each
covered source in an amount equal to its emissions. By setting the total number of allowances
equal to the overall cap, total emissions are limited. Moreover, the number of allowances issued
over time can be decreased, thereby further reducing total emissions.
Since the government regulates only the total emissions, the means by which the reductions are
achieved is left to the individual covered sources (although many reduction activities may be
covered by other policies). Sources would individually identify their least-cost options, but
creating a market gives these allowances a financial value, which encourages the covered sources
to collectively implement the least-cost measures at different levels of mitigation to achieve the
capped emission reductions. Through trading, participants with lower costs of compliance can
choose to over comply and sell their additional reductions to participants for whom compliance
costs are higher. In this fashion, the overall costs of compliance are lower than would otherwise
be the case.
The Cap-and-Trade TWG also studied the use of a carbon tax as a substitute for, or in addition
to, the cap-and-trade policy, as well as several policies related to regional (interstate) actions. In
addition, the TWG considered the creation of a carbon credit system to encourage and enable
carbon mitigation and sequestration projects in Minnesota to qualify for offset or other credits
from state, regional, national, or international cap-and-trade programs. Unfortunately, the time
demands of the cap-and-trade policy analysis prevented the committee from fully examining this
option. The MCCAG encourages further study of this policy, especially in the context of the
governor’s announced intention to pursue a similar program.
8-1
Key Challenges and Opportunities
The State of Minnesota, has joined the Midwestern Greenhouse Gas Reduction Accord(MGA),
which calls for a number of interstate actions, including the design and implementation of a
regional cap-and-trade program covering Minnesota, Michigan, Wisconsin, Iowa, Illinois,
Kansas, and the Canadian Province of Manitoba. Three additional states are participating in the
project as observers. Two other regions are pursuing cap-and-trade programs to limit GHG
emissions: the 10-state northeast Regional Greenhouse Gas Initiative (RGGI) and the 7-state,
2-province Western Climate Initiative (WCI). In addition, there are numerous bills before
Congress to create a national cap-and-trade program for this purpose. Minnesota will almost
certainly become a participant in a regional, super-regional or national cap-and-trade program to
limit and then reduce GHG emissions. The MCCAG’s investigation of this issue should offer
valuable early guidance to state and regional policy makers who will need to confront the
complex policy choices demanded of these programs.
The benefits of the approach, especially when applied on a regional basis, are tangible. First of
all, the very basis of a cap-and-trade program is the cap—a specific, numerical limit on the
number of tons of GHGs that may legally be released to the atmosphere over a specified period
of time. The environmental integrity of a well-designed and operated cap-and-trade program is
therefore compelling. The second tangible benefit is the ability to achieve those emission
reductions at a reduced cost, even after considering the cost of the program itself. For the
recommended configuration of region, sectors, and program design, modeling of the program
indicates that in 2025 Minnesota can achieve a 32% reduction in GHG emissions versus a
business-as-usual projection at a net cost of $5 million below that which would be possible
without the cap-and-trade program.
While many key cap-and-trade program design questions have been addressed through this
process, the MCCAG did not have sufficient time to develop policy recommendations regarding
all of the major program design alternatives. The MCCAG recommends that a panel of experts
be convened by the partners in the Midwestern Greenhouse Gas Reduction Accord (hereafter,
Midwestern Accord Partners) to study in greater depth and make recommendations on the
multitude of program design features that must be addressed.
Overview of Policy Recommendations
The MCCAG recommends three policy options relating to the use of market-based programs to
help achieve emission reductions goals. The creation of a Market Advisory Group (C&T-5) to
help the Midwestern Accord Partners sort out the hundreds of complex program design issues
addresses the challenge that lies ahead and draws from California’s experience with their Market
Advisory Committee. This option was not quantified because, in and of itself, it does not reduce
emissions. Likewise, the recommendation to seek additional cooperative emission reductions
through regional initiatives and agreements (C&T-6) was not quantified, but concern for private
sector competitive issues and a desire to maximize emissions reductions through joint action
achieved the unanimous endorsement of the MCCAG.
The cap-and-trade policy (C&T-1) was examined with several assumptions regarding design
alternatives. Many of these were geographic (e.g., Minnesota-only, MGA Partners, MGA
Partners and Observers, MGA Partners and WCI Partners), some were programmatic (e.g., free
8-2
distribution of allowances to sources, 100% auction of allowances), and some examined the
effect of changing assumptions for analysis (whether the Renewable/Environmental Portfolio
Standard is an active policy option or assumed to be in the baseline). The result was hundreds of
numbers and dozens of graphs, all of which helped guide the C&T TWG to their
recommendations. What are presented here are the results as they describe the final
recommended configuration for the cap-and-trade program . All of the details of each scenario
are presented in full in Appendix K.
The MCCAG recommends that Minnesota join with its regional Midwestern Accord Partners to
create a multi-sector cap-and-trade program as soon as possible. MCCAG recommends that
sector coverage include power generation, industrial boilers and processes, transportation fuels,
fossil fuels used in residential and commercial buildings, municipal waste incinerators, landfills,
large confined animal feeding operations, and other large agricultural operations where it is
possible to measure emissions with a reasonable degree of precision.
The policies and measures that achieve the required emission reductions under the cap-and-trade
program are essentially those recommended by the MCCAG within the covered sectors, plus any
measures that the regulated entities choose to undertake at a cost less than that of an allowance.
“The permit price of the MGA partner trading in 2025 is in the range of $45–$48 per metric ton
of CO2 equivalent ($/tCO2e) across the three baseline scenarios. In all three of the baseline
scenarios, the total cost of achieving the carbon emissions reductions is negative for many states.
Minnesota’s total cost is negative in two of the three scenarios, but positive in the recommended
policy scenario (in which a renewable electricity standard [RES] and Conservation Improvement
Program [CIP] are assumed to be in the baseline). This is because in the recommended baseline
scenario, the substantial cost savings associated with CIP have been incorporated into the
baseline condition of Minnesota. States with negative total costs will realize an overall cost
savings, due to the extensive range of cost-saving options to reduce emissions (such as
improvements in energy efficiency). Notwithstanding the positive total cost result for Minnesota,
the cap-and-trade program allows Minnesota to achieve its cap at a lower cost than would be the
case without the program.”
Modeling of the recommended program design indicates that in 2025, Minnesota will achieve
nearly 53 million metric tons of carbon dioxide (MMtCO2) mitigation at a net cost of $245
million. This is $5 million less than the cost of achieving the same reductions without the capand-trade program. To realize those savings, in-state regulated entities would purchase a
projected 2.27 million allowances from outside Minnesota at a price of $45.95 per allowance.
It is important to distinguish the difference between the expected cap-and-trade allowance price
and the expected cost of mitigating one ton of CO2e. The allowance price will be equal to the
cost associated with mitigating the last ton of CO2 necessary to achieve the cap. This is the
marginal, or most expensive, ton mitigated. The expected unit cost would be the total expended
to mitigate all the CO2 to meet the cap divided by the number of tons mitigated. This is the
average cost per ton mitigated, and for many scenarios, it turned out to be a negative cost
(savings), even while the allowance price was expected to exceed $40 per ton.
8-3
The actual cost of the program to emitters will depend on the allowance allocation mechanism,
because under an auction, all tons will be priced at the market price (marginal cost). This cost is
simply the price—marginal cost per ton—times the quantity—the total tons auctioned. In any
market system, it is the market price, not the production cost, that is the main determinant of
initial cash flows. In the auction case, it determines the permit expenditures and government
revenues, while cost or cost savings to emitters will be realized during implementation of
mitigation and through the application of auction revenues (reduced taxes, rebates, grants or
other financial incentives to encourage innovation). For the case where permits are freely
granted, the market price will determine the expenditures by permit buyers and revenues by
permit sellers, while cost savings will again be realized during implementation. The net costs
after auction revenue is expended have not been analyzed for the MCCAG.
Across the MGA region, total emission reductions in 2025 are projected to reach 459 million
tons at a total cost savings of $5.7 billion. The region-wide net savings resulting directly from the
cap-and-trade program is $520 million.
The MCCAG also studied the implications of a Minnesota-only program, as well as variations of
the Midwestern program merged with the WCI region. In every modeling run, the Minnesotaonly scenarios proved to be more costly and less effective than the regional configurations. And
while results varied, depending on the particular configuration chosen, there is evidence that
Minnesota’s costs would be further reduced if the WCI region were merged into the MGA
program. Cost-effectiveness across the various geographical configurations ranged from $4.71 to
–$2.19 per ton of CO2 that Minnesota mitigated in 2025.
Table 8-1 summarizes the modeling results from the various configurations and assumptions.
The first row (MGA Partners C&T—with both RES/CIP in the baseline) gives the results from
the geographic configuration that reflects the programmatic assumptions preferred by the
MCCAG.
The MCCAG also recommends that the cap-and-trade program include, or give credit to,
emission reductions achieved by non–cap-and-trade policies and measures within the capped
sectors. In addition to keeping the cost of the program low, this approach allows the cap-andtrade program to serve as a backstop to the expected reductions from these other policies and
measures. For example, if the non–cap-and-trade policies and measures do not achieve the
expected reductions, the cap-and-trade program emissions limit would guarantee that the goals
are achieved through additional reductions either in Minnesota or elsewhere in the region.
8-4
Table 8-1. Summary list of cap-and-trade policy recommendations
Policy
No.
C&T-1
C&T-2
C&T-3
C&T-5
C&T-6
Policy Recommendation
GHG Reductions
CostNet
(MMtCO2e)
EffectivePresent
ness*
Total
Value
2015 2025 (2008– (Million $) ($/tCO2e)
2025
2025)
Permit
Price†
($/tCO2e)
2025
Cap-and-Trade Program
MGA Partners C&T
—with both RES/CIP in the baseline
MGA Partners C&T
—no RES/CIP in the baseline
MGA Partners C&T
—with only RES in the baseline
MGA Partners+Observers C&T
—no RES/CIP in the baseline
MGA Partners+Observers C&T
—with both RES/CIP in the baseline
MGA Partners+Observers C&T
—with only RES in the baseline
MGA plus WCI Partners C&T
—no RES/CIP in the baseline
MGA plus WCI Partners C&T
—with both RES/CIP in the baseline
MGA plus WCI Partners C&T
—with only RES in the baseline
MGA and WCI Partners+Observers
C&T
—no RES/CIP in the baseline
MGA and WCI Partners+Observers
C&T
—with both RES/CIP in the baseline
MGA and WCI Partners+Observers
C&T
—with only RES in the baseline
Minnesota-only C&T
—no RES/CIP in the baseline
52.94
$2.65
$45.95
79.82
–$12.17
$48.45
67.35
–$15.42
$46.64
81.97
–$10.52
$52.44
55.45
$4.71
$50.72
69.45
–$13.48
$51.27
72.64
–$17.52
$35.69
46.93
–$2.19
$34.95
61.92
–$20.36
$35.07
76.17
–$14.92
$41.87
50.41
$0.59
$41.25
64.92
–$17.65
$41.39
89.18
–$2.39
$65.48
National C&T
Not quantified
Market Advisory Group
(Formerly CC-11)
Regional and Multistate GHG Reduction
Efforts
(Formerly CC-7)
Level of
Support
Majority
(9
objections)
Merged into
C&T-1
Merged into
C&T-1
Not quantified
Unanimous
Not quantified
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton of carbon
dioxide equivalent; MGA = Midwestern Governors Association; C&T = cap-and-trade; RES = renewable electricity standard; CIP =
Conservation Improvement Program; WCI = Western Climate Initiative; CC = Cost-Cutting Issues.
Negative numbers represent cost savings.
MGA C&T partners include Illinois, Iowa, Kansas, Michigan, Minnesota, Wisconsin, and Manitoba; MGA C&T observers include
Indiana, Ohio, and South Dakota; WCI partners include Arizona, California, New Mexico, Oregon, Utah, Washington, British
Columbia, and Manitoba; WCI observers include Colorado, Idaho, Montana, Nevada, and Wyoming. To run simulations including
both MGA and WCI states in 2025, the C&T Technical Work Group (TWG) used 2020 marginal cost curves for WCI states for 2025.
The emission cap for both MGA and WCI states (or provinces) is assumed to be 30% below the 2005 level in 2025.
* This represents the average $/tCO2e mitigated/sequestered for Minnesota.
† This represents the marginal cost of the last tCO2e mitigated/sequestered and applies to all states involved in a trading
arrangement.
Note: A number of MCCAG members raised concerns about the cost assumptions associated with wind power and believe the costs
are too high. A lower wind cost assumption would lower the cost estimates for the Renewable Energy Standard (see Energy Supply)
and for this Cap-and-Trade analysis. Future analyses should reexamine the wind cost estimates.
8-5
Cap-and-Trade
Policy Descriptions
The Cap-and-Trade policy measures look at opportunities to use market-based mechanisms and
regional actions to limit and reduce GHG emissions through the collective independent actions
of covered sources seeking lowest-cost emissions reduction measures.
C&T-1
Cap-and-Trade Program
The MCCAG recommends by majority vote (with 9 objections) of those present and voting that
the state of Minnesota work with its MGA Partners to design and implement a multi-sector,
regional cap-and-trade GHG emission trading program. The MCCAG recommends that the
MGA investigate linking or combining the midwestern program with the WCI, the Northeastern
RGGI or other proposed regional programs that may arise in the future.
The MCCAG does not recommend the creation of a Minnesota-only cap-and-trade program.
Modeling has confirmed that, as a general rule, larger programs broaden access to lower-cost
emission reduction opportunities, thereby reducing the overall cost of achieving the targeted
reductions.
The cap-and-trade program should set an initial cap at 2007 emission levels, with gradual annual
reductions to achieve the statutory goals of at least 15% below 2005 levels by 2015, 30% below
2005 levels by 2025, and 80% below 2005 levels by 2050. The cap-and-trade program should be
implemented as soon as possible to prevent significant increases above current emissions in the
meantime and to maximize the time available to meet the 2015 target.
The MCCAG recommends that the electric power sector, large industrial boilers and processes,
transportation fuels, and landfills be included in the cap-and-trade program. The MCCAG also
recommends that the program include municipal waste incinerators, large confined animal
feeding operations, and other large agricultural operations where it is practical to measure
emissions beyond some de minimis level. The MCCAG favors the inclusion of fossil fuel for
residential and commercial use.
The cap-and-trade program should include emissions from all six GHGs listed in the statute
(Minn. Stat. 216H.02)—CO2, methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs), and sulfur hexafluoride (SF6)—from the covered sectors.
The cap-and-trade program should include incentives to encourage “early actions,” or GHGreduction investments within capped sectors prior to the start of the program. Qualifying earlyaction projects should be subject to stringent standards to ensure their environmental integrity.
The cap-and-trade program should allow unlimited banking of allowances. Banking permits
enables holders to withhold their allowances from the market or from surrender for emissions
8-6
compliance without expiration and to use an allowance issued in any compliance period beyond
that period without penalty. Banking is seen as a means of mitigating market volatility.
The cap-and-trade program should vary the point of regulation with the sector covered. The point
of regulation is the entity responsible for acquiring and surrendering allowances for emissions. In
some sectors, such as major industrial emissions, this is simply the entity operating the facility
from which the emissions are released. But for other sectors, it is either impractical or
undesirable to use this approach. The MCCAG recommends the following point of regulation for
each covered sector:
•
Electric Power Sector: A load-based system that aligns with current energy planning
regulatory requirements is recommended in order to capture the substantial emissions
resulting from in-state consumption of imported electricity and to maximize cost-effective
emission reductions.
•
Large Industrial Boilers and Processes, Waste Incinerators, Large Agricultural
Operations, and Landfills: A production-based system regulating direct emissions from
each source is recommended.
•
Transportation Fuels and Fossil Fuels for Residential and Commercial Buildings: An
indirect or “upstream” system is recommended, requiring allowances from the entities
importing or distributing the fuel into the Minnesota market. If a fuel used by a facility that is
regulated on a production basis has been covered upstream, the program should be designed
to eliminate double counting.
There are several methods through which the program may distribute allowances for use by
covered entities, including free distribution to covered sources on some basis (such as historical
emissions [grandfathering]) and auction at the market, thus requiring covered sources to
purchase the allowances. The MCCAG makes no recommendation on the issue of allowance
distribution but recommends further study of five distribution alternatives:
•
Partial auction–partial free distribution,
•
Shift from free distribution to auction over time,
•
Auction for unregulated entities and free distribution for regulated entities,
•
Sector-specific distribution systems, and
•
Performance-based market systems.
The MCCAG strongly recommends that emission reductions resulting from complementary
policies and measures (non–cap-and-trade) within capped sectors be credited toward the
achievement of the cap and that the cap be set accordingly.
CC-5
Market Advisory Group (Formerly CC-11)
The MCCAG recommends by unanimous consent of those present and voting that MGA partners
create a Market Advisory Group consisting of experts to provide guidance to the region on the
design of market-based compliance programs to manage GHG emissions. California has formed
a Market Advisory Committee (MAC) to help formulate a GHG cap-and-trade system in the
8-7
state. The California MAC has proposed a set of guiding principles and has developed an initial
set of recommendations for a California cap-and-trade program. The MCCAG recommends that
the MGA convene a similar Market Advisory Group to receive the policy recommendations of
the MCCAG and provide expert guidance to the partners on the design of a midwestern regional
cap-and-trade program to manage GHG emissions.
The Market Advisory Group could be created by agreement among the MGA partners and
should serve for a limited time. The product of the Market Advisory Group’s deliberations
should be a report or reports recommending in some detail the scope, design, and plan for
implementation of the MGA regional cap-and-trade program.
CC-6
Regional and Multistate GHG Reduction Efforts (Formerly CC-7)
The MCCAG recommends by unanimous consent of those present and voting exploration of
opportunities for regional market-based approaches to reduce GHG emissions. The MCCAG
believes that this recommendation is met through the implementation of a regional multi-sector
cap-and-trade program as proposed in C&T-1. However, there may be additional opportunities
for enhanced GHG reductions through coordinated regional action. The MCCAG through its
C&T TWG has not had sufficient time to fully explore regional opportunities beyond the
proposal under C&T-1.
Regional approaches undertaken in collaboration with partner states or other organizations can
offer broader and more economically efficient opportunities to reduce GHG emissions across
Minnesota’s economy. An additional example might be to include cost sharing on multistate
initiatives.
Minnesota’s participation in a regional GHG emission reduction initiative that meets the state’s
goals will result in additional environmental and economic co-benefits, including the opportunity
to reduce GHG emissions in an economically efficient manner, the identification of additional
areas for cooperation within specific sectors, the reduction of interstate competitive challenges,
and the reduction of other non-GHG pollutants associated with the production and use of energy.
8-8
Chapter 8
Cap-and-Trade
Overview of Cap-and-Trade
The Cap-and-Trade Technical Work Group (TWG) was formed about midway through the
Minnesota Climate Change Advisory Group (MCCAG) process when the Energy Supply TWG
observed that the complexity of the issue demanded the full-time attention of a special
committee. The first meeting of the Cap-and-Trade TWG was held on October 10, 2007; in total,
11 meetings were held between then and January 18, 2008, including a 6-hour in-person meeting
on December 14, 2007. Several policy options were referred to and considered by the Cap-andTrade TWG, but most of the committee’s effort was devoted to the cap-and-trade option itself,
C&T-1.
Unlike most of the policies studied by the other TWGs, cap-and-trade is not tied to a specific
sector or emissions reduction measure. It is a system by which the sources within covered sectors
find and achieve the lowest-cost emissions reduction investments. Cap-and-trade also provides a
means of ensuring that total emissions from all covered sources will not exceed the governmentset limit, or cap.
Cap-and-trade programs limit emissions by first placing a “cap,” or limit, on the total number of
tons of pollutants that will be permitted to be released from regulated, or “covered,” sources of
greenhouse gas (GHG) emissions within a specified geographic area and interval of time. The
cap is enforced by the issuance of permits, or “allowances,” which must be surrendered by each
covered source in an amount equal to its emissions. By setting the total number of allowances
equal to the overall cap, total emissions are limited. Moreover, the number of allowances issued
over time can be decreased, thereby further reducing total emissions.
Since the government regulates only the total emissions, the means by which the reductions are
achieved is left to the individual covered sources (although many reduction activities may be
covered by other policies). Sources would individually identify their least-cost options, but
creating a market gives these allowances a financial value, which encourages the covered sources
to collectively implement the least-cost measures at different levels of mitigation to achieve the
capped emission reductions. Through trading, participants with lower costs of compliance can
choose to over comply and sell their additional reductions to participants for whom compliance
costs are higher. In this fashion, the overall costs of compliance are lower than would otherwise
be the case.
The Cap-and-Trade TWG also studied the use of a carbon tax as a substitute for, or in addition
to, the cap-and-trade policy, as well as several policies related to regional (interstate) actions. In
addition, the TWG considered the creation of a carbon credit system to encourage and enable
carbon mitigation and sequestration projects in Minnesota to qualify for offset or other credits
from state, regional, national, or international cap-and-trade programs. Unfortunately, the time
demands of the cap-and-trade policy analysis prevented the committee from fully examining this
option. The MCCAG encourages further study of this policy, especially in the context of the
governor’s announced intention to pursue a similar program.
8-1
Key Challenges and Opportunities
The State of Minnesota, has joined the Midwestern Greenhouse Gas Reduction Accord(MGA),
which calls for a number of interstate actions, including the design and implementation of a
regional cap-and-trade program covering Minnesota, Michigan, Wisconsin, Iowa, Illinois,
Kansas, and the Canadian Province of Manitoba. Three additional states are participating in the
project as observers. Two other regions are pursuing cap-and-trade programs to limit GHG
emissions: the 10-state northeast Regional Greenhouse Gas Initiative (RGGI) and the 7-state,
2-province Western Climate Initiative (WCI). In addition, there are numerous bills before
Congress to create a national cap-and-trade program for this purpose. Minnesota will almost
certainly become a participant in a regional, super-regional or national cap-and-trade program to
limit and then reduce GHG emissions. The MCCAG’s investigation of this issue should offer
valuable early guidance to state and regional policy makers who will need to confront the
complex policy choices demanded of these programs.
The benefits of the approach, especially when applied on a regional basis, are tangible. First of
all, the very basis of a cap-and-trade program is the cap—a specific, numerical limit on the
number of tons of GHGs that may legally be released to the atmosphere over a specified period
of time. The environmental integrity of a well-designed and operated cap-and-trade program is
therefore compelling. The second tangible benefit is the ability to achieve those emission
reductions at a reduced cost, even after considering the cost of the program itself. For the
recommended configuration of region, sectors, and program design, modeling of the program
indicates that in 2025 Minnesota can achieve a 32% reduction in GHG emissions versus a
business-as-usual projection at a net cost of $5 million below that which would be possible
without the cap-and-trade program.
While many key cap-and-trade program design questions have been addressed through this
process, the MCCAG did not have sufficient time to develop policy recommendations regarding
all of the major program design alternatives. The MCCAG recommends that a panel of experts
be convened by the partners in the Midwestern Greenhouse Gas Reduction Accord (hereafter,
Midwestern Accord Partners) to study in greater depth and make recommendations on the
multitude of program design features that must be addressed.
Overview of Policy Recommendations
The MCCAG recommends three policy options relating to the use of market-based programs to
help achieve emission reductions goals. The creation of a Market Advisory Group (C&T-5) to
help the Midwestern Accord Partners sort out the hundreds of complex program design issues
addresses the challenge that lies ahead and draws from California’s experience with their Market
Advisory Committee. This option was not quantified because, in and of itself, it does not reduce
emissions. Likewise, the recommendation to seek additional cooperative emission reductions
through regional initiatives and agreements (C&T-6) was not quantified, but concern for private
sector competitive issues and a desire to maximize emissions reductions through joint action
achieved the unanimous endorsement of the MCCAG.
The cap-and-trade policy (C&T-1) was examined with several assumptions regarding design
alternatives. Many of these were geographic (e.g., Minnesota-only, MGA Partners, MGA
Partners and Observers, MGA Partners and WCI Partners), some were programmatic (e.g., free
8-2
distribution of allowances to sources, 100% auction of allowances), and some examined the
effect of changing assumptions for analysis (whether the Renewable/Environmental Portfolio
Standard is an active policy option or assumed to be in the baseline). The result was hundreds of
numbers and dozens of graphs, all of which helped guide the C&T TWG to their
recommendations. What are presented here are the results as they describe the final
recommended configuration for the cap-and-trade program . All of the details of each scenario
are presented in full in Appendix K.
The MCCAG recommends that Minnesota join with its regional Midwestern Accord Partners to
create a multi-sector cap-and-trade program as soon as possible. MCCAG recommends that
sector coverage include power generation, industrial boilers and processes, transportation fuels,
fossil fuels used in residential and commercial buildings, municipal waste incinerators, landfills,
large confined animal feeding operations, and other large agricultural operations where it is
possible to measure emissions with a reasonable degree of precision.
The policies and measures that achieve the required emission reductions under the cap-and-trade
program are essentially those recommended by the MCCAG within the covered sectors, plus any
measures that the regulated entities choose to undertake at a cost less than that of an allowance.
“The permit price of the MGA partner trading in 2025 is in the range of $45–$48 per metric ton
of CO2 equivalent ($/tCO2e) across the three baseline scenarios. In all three of the baseline
scenarios, the total cost of achieving the carbon emissions reductions is negative for many states.
Minnesota’s total cost is negative in two of the three scenarios, but positive in the recommended
policy scenario (in which a renewable electricity standard [RES] and Conservation Improvement
Program [CIP] are assumed to be in the baseline). This is because in the recommended baseline
scenario, the substantial cost savings associated with CIP have been incorporated into the
baseline condition of Minnesota. States with negative total costs will realize an overall cost
savings, due to the extensive range of cost-saving options to reduce emissions (such as
improvements in energy efficiency). Notwithstanding the positive total cost result for Minnesota,
the cap-and-trade program allows Minnesota to achieve its cap at a lower cost than would be the
case without the program.”
Modeling of the recommended program design indicates that in 2025, Minnesota will achieve
nearly 53 million metric tons of carbon dioxide (MMtCO2) mitigation at a net cost of $245
million. This is $5 million less than the cost of achieving the same reductions without the capand-trade program. To realize those savings, in-state regulated entities would purchase a
projected 2.27 million allowances from outside Minnesota at a price of $45.95 per allowance.
It is important to distinguish the difference between the expected cap-and-trade allowance price
and the expected cost of mitigating one ton of CO2e. The allowance price will be equal to the
cost associated with mitigating the last ton of CO2 necessary to achieve the cap. This is the
marginal, or most expensive, ton mitigated. The expected unit cost would be the total expended
to mitigate all the CO2 to meet the cap divided by the number of tons mitigated. This is the
average cost per ton mitigated, and for many scenarios, it turned out to be a negative cost
(savings), even while the allowance price was expected to exceed $40 per ton.
8-3
The actual cost of the program to emitters will depend on the allowance allocation mechanism,
because under an auction, all tons will be priced at the market price (marginal cost). This cost is
simply the price—marginal cost per ton—times the quantity—the total tons auctioned. In any
market system, it is the market price, not the production cost, that is the main determinant of
initial cash flows. In the auction case, it determines the permit expenditures and government
revenues, while cost or cost savings to emitters will be realized during implementation of
mitigation and through the application of auction revenues (reduced taxes, rebates, grants or
other financial incentives to encourage innovation). For the case where permits are freely
granted, the market price will determine the expenditures by permit buyers and revenues by
permit sellers, while cost savings will again be realized during implementation. The net costs
after auction revenue is expended have not been analyzed for the MCCAG.
Across the MGA region, total emission reductions in 2025 are projected to reach 459 million
tons at a total cost savings of $5.7 billion. The region-wide net savings resulting directly from the
cap-and-trade program is $520 million.
The MCCAG also studied the implications of a Minnesota-only program, as well as variations of
the Midwestern program merged with the WCI region. In every modeling run, the Minnesotaonly scenarios proved to be more costly and less effective than the regional configurations. And
while results varied, depending on the particular configuration chosen, there is evidence that
Minnesota’s costs would be further reduced if the WCI region were merged into the MGA
program. Cost-effectiveness across the various geographical configurations ranged from $4.71 to
–$2.19 per ton of CO2 that Minnesota mitigated in 2025.
Table 8-1 summarizes the modeling results from the various configurations and assumptions.
The first row (MGA Partners C&T—with both RES/CIP in the baseline) gives the results from
the geographic configuration that reflects the programmatic assumptions preferred by the
MCCAG.
The MCCAG also recommends that the cap-and-trade program include, or give credit to,
emission reductions achieved by non–cap-and-trade policies and measures within the capped
sectors. In addition to keeping the cost of the program low, this approach allows the cap-andtrade program to serve as a backstop to the expected reductions from these other policies and
measures. For example, if the non–cap-and-trade policies and measures do not achieve the
expected reductions, the cap-and-trade program emissions limit would guarantee that the goals
are achieved through additional reductions either in Minnesota or elsewhere in the region.
8-4
Table 8-1. Summary list of cap-and-trade policy recommendations
Policy
No.
C&T-1
C&T-2
C&T-3
C&T-5
C&T-6
Policy Recommendation
GHG Reductions
CostNet
(MMtCO2e)
EffectivePresent
ness*
Total
Value
2015 2025 (2008– (Million $) ($/tCO2e)
2025
2025)
Permit
Price†
($/tCO2e)
2025
Cap-and-Trade Program
MGA Partners C&T
—with both RES/CIP in the baseline
MGA Partners C&T
—no RES/CIP in the baseline
MGA Partners C&T
—with only RES in the baseline
MGA Partners+Observers C&T
—no RES/CIP in the baseline
MGA Partners+Observers C&T
—with both RES/CIP in the baseline
MGA Partners+Observers C&T
—with only RES in the baseline
MGA plus WCI Partners C&T
—no RES/CIP in the baseline
MGA plus WCI Partners C&T
—with both RES/CIP in the baseline
MGA plus WCI Partners C&T
—with only RES in the baseline
MGA and WCI Partners+Observers
C&T
—no RES/CIP in the baseline
MGA and WCI Partners+Observers
C&T
—with both RES/CIP in the baseline
MGA and WCI Partners+Observers
C&T
—with only RES in the baseline
Minnesota-only C&T
—no RES/CIP in the baseline
52.94
$2.65
$45.95
79.82
–$12.17
$48.45
67.35
–$15.42
$46.64
81.97
–$10.52
$52.44
55.45
$4.71
$50.72
69.45
–$13.48
$51.27
72.64
–$17.52
$35.69
46.93
–$2.19
$34.95
61.92
–$20.36
$35.07
76.17
–$14.92
$41.87
50.41
$0.59
$41.25
64.92
–$17.65
$41.39
89.18
–$2.39
$65.48
National C&T
Not quantified
Market Advisory Group
(Formerly CC-11)
Regional and Multistate GHG Reduction
Efforts
(Formerly CC-7)
Level of
Support
Majority
(9
objections)
Merged into
C&T-1
Merged into
C&T-1
Not quantified
Unanimous
Not quantified
Unanimous
GHG = greenhouse gas; MMtCO2e = million metric tons of carbon dioxide equivalent; $/tCO2e = dollars per metric ton of carbon
dioxide equivalent; MGA = Midwestern Governors Association; C&T = cap-and-trade; RES = renewable electricity standard; CIP =
Conservation Improvement Program; WCI = Western Climate Initiative; CC = Cost-Cutting Issues.
Negative numbers represent cost savings.
MGA C&T partners include Illinois, Iowa, Kansas, Michigan, Minnesota, Wisconsin, and Manitoba; MGA C&T observers include
Indiana, Ohio, and South Dakota; WCI partners include Arizona, California, New Mexico, Oregon, Utah, Washington, British
Columbia, and Manitoba; WCI observers include Colorado, Idaho, Montana, Nevada, and Wyoming. To run simulations including
both MGA and WCI states in 2025, the C&T Technical Work Group (TWG) used 2020 marginal cost curves for WCI states for 2025.
The emission cap for both MGA and WCI states (or provinces) is assumed to be 30% below the 2005 level in 2025.
* This represents the average $/tCO2e mitigated/sequestered for Minnesota.
† This represents the marginal cost of the last tCO2e mitigated/sequestered and applies to all states involved in a trading
arrangement.
Note: A number of MCCAG members raised concerns about the cost assumptions associated with wind power and believe the costs
are too high. A lower wind cost assumption would lower the cost estimates for the Renewable Energy Standard (see Energy Supply)
and for this Cap-and-Trade analysis. Future analyses should reexamine the wind cost estimates.
8-5
Cap-and-Trade
Policy Descriptions
The Cap-and-Trade policy measures look at opportunities to use market-based mechanisms and
regional actions to limit and reduce GHG emissions through the collective independent actions
of covered sources seeking lowest-cost emissions reduction measures.
C&T-1
Cap-and-Trade Program
The MCCAG recommends by majority vote (with 9 objections) of those present and voting that
the state of Minnesota work with its MGA Partners to design and implement a multi-sector,
regional cap-and-trade GHG emission trading program. The MCCAG recommends that the
MGA investigate linking or combining the midwestern program with the WCI, the Northeastern
RGGI or other proposed regional programs that may arise in the future.
The MCCAG does not recommend the creation of a Minnesota-only cap-and-trade program.
Modeling has confirmed that, as a general rule, larger programs broaden access to lower-cost
emission reduction opportunities, thereby reducing the overall cost of achieving the targeted
reductions.
The cap-and-trade program should set an initial cap at 2007 emission levels, with gradual annual
reductions to achieve the statutory goals of at least 15% below 2005 levels by 2015, 30% below
2005 levels by 2025, and 80% below 2005 levels by 2050. The cap-and-trade program should be
implemented as soon as possible to prevent significant increases above current emissions in the
meantime and to maximize the time available to meet the 2015 target.
The MCCAG recommends that the electric power sector, large industrial boilers and processes,
transportation fuels, and landfills be included in the cap-and-trade program. The MCCAG also
recommends that the program include municipal waste incinerators, large confined animal
feeding operations, and other large agricultural operations where it is practical to measure
emissions beyond some de minimis level. The MCCAG favors the inclusion of fossil fuel for
residential and commercial use.
The cap-and-trade program should include emissions from all six GHGs listed in the statute
(Minn. Stat. 216H.02)—CO2, methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs), and sulfur hexafluoride (SF6)—from the covered sectors.
The cap-and-trade program should include incentives to encourage “early actions,” or GHGreduction investments within capped sectors prior to the start of the program. Qualifying earlyaction projects should be subject to stringent standards to ensure their environmental integrity.
The cap-and-trade program should allow unlimited banking of allowances. Banking permits
enables holders to withhold their allowances from the market or from surrender for emissions
8-6
compliance without expiration and to use an allowance issued in any compliance period beyond
that period without penalty. Banking is seen as a means of mitigating market volatility.
The cap-and-trade program should vary the point of regulation with the sector covered. The point
of regulation is the entity responsible for acquiring and surrendering allowances for emissions. In
some sectors, such as major industrial emissions, this is simply the entity operating the facility
from which the emissions are released. But for other sectors, it is either impractical or
undesirable to use this approach. The MCCAG recommends the following point of regulation for
each covered sector:
•
Electric Power Sector: A load-based system that aligns with current energy planning
regulatory requirements is recommended in order to capture the substantial emissions
resulting from in-state consumption of imported electricity and to maximize cost-effective
emission reductions.
•
Large Industrial Boilers and Processes, Waste Incinerators, Large Agricultural
Operations, and Landfills: A production-based system regulating direct emissions from
each source is recommended.
•
Transportation Fuels and Fossil Fuels for Residential and Commercial Buildings: An
indirect or “upstream” system is recommended, requiring allowances from the entities
importing or distributing the fuel into the Minnesota market. If a fuel used by a facility that is
regulated on a production basis has been covered upstream, the program should be designed
to eliminate double counting.
There are several methods through which the program may distribute allowances for use by
covered entities, including free distribution to covered sources on some basis (such as historical
emissions [grandfathering]) and auction at the market, thus requiring covered sources to
purchase the allowances. The MCCAG makes no recommendation on the issue of allowance
distribution but recommends further study of five distribution alternatives:
•
Partial auction–partial free distribution,
•
Shift from free distribution to auction over time,
•
Auction for unregulated entities and free distribution for regulated entities,
•
Sector-specific distribution systems, and
•
Performance-based market systems.
The MCCAG strongly recommends that emission reductions resulting from complementary
policies and measures (non–cap-and-trade) within capped sectors be credited toward the
achievement of the cap and that the cap be set accordingly.
CC-5
Market Advisory Group (Formerly CC-11)
The MCCAG recommends by unanimous consent of those present and voting that MGA partners
create a Market Advisory Group consisting of experts to provide guidance to the region on the
design of market-based compliance programs to manage GHG emissions. California has formed
a Market Advisory Committee (MAC) to help formulate a GHG cap-and-trade system in the
8-7
state. The California MAC has proposed a set of guiding principles and has developed an initial
set of recommendations for a California cap-and-trade program. The MCCAG recommends that
the MGA convene a similar Market Advisory Group to receive the policy recommendations of
the MCCAG and provide expert guidance to the partners on the design of a midwestern regional
cap-and-trade program to manage GHG emissions.
The Market Advisory Group could be created by agreement among the MGA partners and
should serve for a limited time. The product of the Market Advisory Group’s deliberations
should be a report or reports recommending in some detail the scope, design, and plan for
implementation of the MGA regional cap-and-trade program.
CC-6
Regional and Multistate GHG Reduction Efforts (Formerly CC-7)
The MCCAG recommends by unanimous consent of those present and voting exploration of
opportunities for regional market-based approaches to reduce GHG emissions. The MCCAG
believes that this recommendation is met through the implementation of a regional multi-sector
cap-and-trade program as proposed in C&T-1. However, there may be additional opportunities
for enhanced GHG reductions through coordinated regional action. The MCCAG through its
C&T TWG has not had sufficient time to fully explore regional opportunities beyond the
proposal under C&T-1.
Regional approaches undertaken in collaboration with partner states or other organizations can
offer broader and more economically efficient opportunities to reduce GHG emissions across
Minnesota’s economy. An additional example might be to include cost sharing on multistate
initiatives.
Minnesota’s participation in a regional GHG emission reduction initiative that meets the state’s
goals will result in additional environmental and economic co-benefits, including the opportunity
to reduce GHG emissions in an economically efficient manner, the identification of additional
areas for cooperation within specific sectors, the reduction of interstate competitive challenges,
and the reduction of other non-GHG pollutants associated with the production and use of energy.
8-8
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