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The Center for Climate and Energy Solutions seeks to inform the design and implementation of federal policies that will significantly reduce greenhouse gas emissions. Drawing from its extensive peer-reviewed published works, in-house policy analyses, and tracking of current legislative proposals, the Center provides research, analysis, and recommendations to policymakers in Congress and the Executive Branch. Read More
 

Workshop: Assessing the Benefits of Avoided Climate Change

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Hyatt Regency on Capitol Hill, Washington, D.C.
March 16-17, 2009

The U.S. government is considering a range of near-term actions to address the risks of climate change. The Obama administration and key members of Congress intend to make climate legislation a top priority this year. The earliest action, however, may come from federal agencies being pressured by the courts and states to consider limiting CO2 emissions under existing legislative authority. A key element of federal rulemaking is assessing the costs and benefits of proposed policies. While the costs of reducing greenhouse gas emissions have received much attention from analysts and policymakers, far less attention has been directed at quantifying the benefits of such reductions. In spite of remaining uncertainties, the analytical community should offer practical guidance for informing near-term decisions. Drawing from the environmental economics, impacts, vulnerability, and risk assessment communities, this workshop considers what useful insights can be gleaned now about quantifying the benefits of reducing greenhouse gas emissions. The workshop’s objectives are to develop a set of practical recommendations that decision makers can employ in the near-term and to outline a research path to improve decision making tools over time.

PDF version of Agenda

List of Participants 

Speaker Bios

 

Symposium – Assessing the benefits of avoided climate change in government decision making

Opening Remarks
Eileen Claussen, President, Pew Center on Global Climate Change
Video:  WMV     PDF

Keynote Address
Dina Kruger, Director, Climate Change Division, Office of Air and Radiation, U.S. EPA

Panel 1: Perspectives on Government Decision Making for Climate Change
Moderator: Steve Seidel, Vice President for Policy Analysis, Pew Center

  • Martha Roberts, EDF: Incorporating the benefits of climate protection into federal rulemaking
    Video:  WMV     Slides
  • Christopher Pyke, CTG Energetics: A proposal to consider global warming under NEPA
    Video:  WMV     Slides
  • James Lester/Joel Smith, Stratus Consulting: Case studies on government decisions to limit greenhouse gas emissions – California, Australia, United Kingdom
    Video:  WMV     Slides     Paper
  • Paul Watkiss, Paul Watkiss Associates: Social cost of carbon estimates and their use in UK policy
    Video:  WMV     Slides

Panel 2: Challenges to Quantifying Damages from Climate Change
Moderator: Jeremy Richardson, Senior Fellow for Science Policy, Pew Center

  • Mike MacCracken, Climate Institute: Overview of challenges to quantifying impacts
    Video:  WMV     Slides     Paper
  • Kristie Ebi, ESS, LLC: Social vulnerability and risk
    Video:  WMV     Slides     Paper
  • Tony Janetos, Joint Global Change Research Institute: Ecosystems and species
    Video:  WMV     Slides
  • Jon O’Riordan, University of British Columbia: Valuation of natural capital
    Video:  WMV     Slides


Lunch Speaker

Gary Yohe, Wesleyan University: The long view: developing a new decision making framework based on the IPCC’s ‘iterative risk management’ paradigm
Video:  WMV     Slides     Paper

 

Panel 3: The Role of Uncertainty in Assessing the Benefits of Climate Policy
Moderator: Jay Gulledge, Senior Scientist/Science & Impacts Program Manager, Pew Center

  • Brian O’Neill, NCAR: Uncertainty and learning – implications for climate policy
    Video:  WMV     Slides
  • Joel Smith, Stratus Consulting: Dangerous climate change: an update of the IPCC reasons for concern
    Video:  WMV     Slides
  • Michael Mastrandrea, Stanford University: Assessing damages with integrated assessment models
    Video:  WMV     Slides     Paper
  • Chris Hope, University of Cambridge: Social cost of carbon and optimal timing of emissions reductions under uncertainty
    Video:  WMV     Slides     Paper

 

Panel 4: Advances in the Economic Analysis of the Benefits of Climate Policy
Moderator: Liwayway Adkins, Senior Fellow, Economics, Pew Center

  • Steve Rose, EPRI: Federal decision making on the uncertain impacts of climate change: Working with What You Have
    Video:  WMV     Slides     Paper
  • Richard Howarth, E3 Network: The need for a fresh approach to climate change economics
    Video:  WMV     Slides     Paper
  • David Anthoff, ESRI: National decision making on climate change and international equity weights
    Video:  WMV     Slides
  • Steve Newbold, U.S. EPA: Climate response uncertainty and the expected benefits of GHG emissions reductions
    Video:  WMV     Slides     Paper

 

Click here for more information about the workshop, including expert reports and proceedings.

Ministerial Briefing on European Climate Action

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Ministerial Briefing on European Climate Action
Senate Dirksen Building, Room 562
March 17, 2009, 12 - 1:30 pm

Video Available  Watch a video of this event:  Windows Media Player

As Washington debates new efforts to address climate change, many are looking to the experiences of the European Union for lessons to inform U.S. policymaking.  In this high-level briefing, three EU Ministers outline the bloc's climate and energy policies, including recent revisions to the EU Emissions Trading Scheme, and offer insights on the EU's experiences to date.

The New EU Energy and Climate Package
Martin Bursik
Minister for the Environment, Czech Republic (holds current EU Presidency)

Emissions Trading at the Heart of Effective Climate Policy
Stavros Dimas
EU Commissioner for the Environment

Climate Change as an Opportunity
Andreas Carlgren
Minister for the Environment, Sweden (to hold next EU Presidency)

Chaired by
Eileen Claussen
President, Pew Center on Global Climate Change

 

 


Read the Pew Center's summary: Emissions Trading in the European Union: A Brief History

Cap and Trade vs. Taxes

Climate Policy Memo #1: Cap and Trade vs. Taxes

Download this Policy Memo (PDF)

Cap and trade and a carbon tax are two distinct policies aimed at reducing greenhouse gas (GHG) emissions.  Each approach has its vocal supporters.  Those in favor of cap and trade argue that it is the only approach that can guarantee that an environmental objective will be achieved, has been shown to effectively work to protect the environment at lower than expected costs, and is politically more attractive.  Those supporting a carbon tax argue that it is a better approach because it is transparent, minimizes the involvement of government, and avoids the creation of new markets subject to manipulation. This note explores both the fundamental similarities between cap and trade and tax regimes, but also the important differences between them.

 

IMPORTANT SIMILARITIES BETWEEN CAP AND TRADE AND TAXES

Both correct a market failure. Both cap and trade and a tax have as their objective the correction of an existing market failure.  Currently, sources responsible for GHG emissions do not have to pay for the damages they impose on society as a whole. The failure to internalize these costs leads to greater levels of emissions than would be socially optimal.

Both put a price on carbon. By placing a price on carbon, and thus correcting the market failure, both approaches create an incentive to develop and invest in energy-saving technologies.  This will encourage the shift to a lower carbon economy.

Both take advantage of market efficiencies. Unlike direct regulations, both harness market forces to achieve the lowest cost reductions in GHG emissions. 

Both can generate revenue. A tax by definition is designed to raise revenue, but a cap-and-trade system, to the extent that allowances are auctioned, can also raise similar amounts of revenue.  How such revenues are used becomes an important issue in both systems.  Some proposals rebate the revenue directly back to consumers, some use part of the revenues to ease the transition to a low carbon economy (e.g.  for consumers, energy-intensive manufacturers, research development and deployments, etc.) and some combine both approaches. 

Both impose a compliance obligation on a limited number of firms. Depending on who pays the tax or is responsible for holding allowances, the number of firms directly impacted by these systems can be large or small.  Most proposals focus on a limited number of firms with the goal of maximizing emissions coverage and reducing administrative costs.

Both necessitate special provisions to minimize adverse impacts. By putting a price on carbon, both systems raise concerns about adverse impacts on energy-intensive firms and manufacturing states, and on workers and communities that historically have been dependent on fossil fuels.  For example, both could result in large wealth transfers from coal and manufacturing states to other parts of the country.  However, through special tax provisions or the use of allowance value, either can be designed in a way to mitigate adverse impacts on disadvantaged groups. Similarly, both systems would require special provisions to avoid imposing requirements on GHGs that are consumed as feedstocks or to provide credit for reductions that result from capturing and storing carbon or expanding carbon sinks.

Both require monitoring, reporting and verification. Both systems require similar data on emissions, reporting and verification of that data, and enforcement in the event of noncompliance.

 

IMPORTANT DIFFERENCES

Cost certainty v. environmental certainty. By setting a cap and issuing a corresponding number of allowances, a cap-and-trade system achieves a set environmental goal, but the cost of reaching that goal is determined by market forces.  In contrast, a tax provides certainty about the costs of compliance, but the resulting reductions in GHG emissions are not predetermined and would result from market forces. 

Compliance flexibility for firms.  A tax requires a firm each year to decide how much to reduce its emissions and how much tax to pay.  Under a cap-and-trade system, borrowing, banking and extended compliance periods allow firms the flexibility to make compliance planning decisions on a multi-year basis.

Impact of economic conditions. Changes in economic activity impact a firm’s behavior under either system.  Under a cap-and-trade system, reduced economic growth would lower allowance prices.  Under a tax, government action to lower the amount of the tax, not market forces, would be required to reduce the carbon price seen by firms.   In times of economic expansion, the opposite would be true – under cap and trade, allowance prices would rise based on market forces, but taxes would remain the same unless adjusted through government action.  In this sense, cap and trade can be seen as providing a self-adjusting price, high when the economy is doing well and low when the economy is in a downturn.  A tax in contrast is not self-adjusting.

Linkage to other systems. Ideally, a global price for carbon would develop and allow cost efficiencies to be realized across borders. While we are a long way from a global system, several trading regimes are already operating, expanding, or are planned which could allow international linkages across systems in the future.  Far fewer jurisdictions have either instituted or are considering carbon taxes and the notion of an international carbon tax has been considered but generally rejected as not realistic.

Experiences to date:  Cap and trade has become the cornerstone of successful efforts to achieve low-cost reductions in sulfur dioxide emissions in the United States.  For GHGs, this same approach is also being relied upon in the European Union (EU).  The EU has implemented a GHG cap-and-trade program covering thousands of sources and has created a market with millions of transactions producing a market price for carbon determined through supply and demand.  Following a trial period, during which a number of start-up challenges were encountered (e.g., lack of data, different approaches across Member States), the EU has succeeded in establishing the building blocks for a successful trading regime.  Cap and trade is also being used in three regional trading programs in the United States and Canada.  The use of taxes aimed at reducing GHG emissions has initially been used in several countries, including Norway, Sweden and Germany that are now relying increasingly on emissions trading.  Carbon taxes have also been used in a few local governments in the United States and Canada.   A carbon tax was considered by the Clinton Administration in 1992, but quickly became loaded down with special exemptions, was redirected away from carbon to be a BTU tax to avoid burdening coal, and was ultimately enacted as a few pennies tax on gasoline.

This review of cap and trade and taxes suggests that many of the longstanding myths about these approaches fail to recognize advances in design options aimed at addressing earlier concerns.  While a tax regime sounds simpler in theory, history suggests that special provisions would be added, for example, to avoid adversely impacting specific regions, to exempt feedstocks and to mitigate competitiveness concerns.   While a cap-and-trade regime doesn’t directly provide price certainty, recent proposals include temporal flexibility (e.g., banking, borrowing, and multi-year compliance periods) as well as floor prices and offset provisions that would dampen price volatility.  In the end, history suggests that it is unlikely that a tax would result in a simpler system.  The greater flexibility for firms and greater certainty that environmental objectives will be met appear to be the greatest strengths of a cap-and-trade policy.

Congressional Policy Brief Series
 

This series was made possible through a generous grant from the Doris Duke Charitable Foundation, but the views expressed herein are solely those of the Pew Center on Global Climate Change and its staff.

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Statement: EPA's Proposed National Greenhouse Gas Reporting Rule

-On the occasion of the EPA’s announcement of a proposed rule for a federal greenhouse gas registry-

Statement of Eileen Claussen
President, Pew Center on Global Climate Change


March 10, 2009

Today, the EPA demonstrated its leadership and commitment to take strong, swift action on climate change.  A greenhouse gas (GHG) registry provides the foundation for building a successful and transparent federal program to reduce emissions and protect the climate.

Congress and the Obama Administration have made clear their intentions to push forward with robust action to address climate change. A critical step to successfully reducing U.S. GHG emissions is to have accurate measurements, consistent reporting, and a publicly available database of our emissions. Just as the European Union learned in the trial period of its emissions trading system, accurate and comprehensive emissions accounting is key to the successful start-up of a cap-and-trade program. A well-designed national GHG registry will ensure comprehensive emissions reporting and put the U.S. on the right path toward an effective climate policy. 


Read more about the EPA’s proposed rule for a federal GHG registry.

Climate Policy Hill Briefing on Domestic Offsets

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This Congressional briefing outlines the role and function of domestic offsets in a mandatory GHG cap-and-trade system.

Briefing on Domestic Offsets in a Greenhouse Gas (GHG) Cap-and-Trade System

March 6, 2009


Video  Watch a video of this briefing:  Windows Media Player

Audio Only


The Pew Center held a Congressional briefing on the role and function of domestic offsets in a mandatory GHG cap-and-trade system. Given the importance of offsets as a cost-containment measure in cap-and-trade system design, the intent of this briefing was to show that domestic offsets can be a viable and reliable way of acheiving low-cost GHG emissions reductions.    

Speakers (and topics):

  • Nikki Roy, Vice President for Federal Government Outreach, Pew Center on Global Climate Change (introduction)
  • Janet Peace, Vice President for Markets and Business Strategy, Pew Center on Global Climate Change (moderator; offsets issues and options)
    Presentation
  • Wiley Barbour, Executive Director, Environmental Resources Trust/Winrock (quality offsets)
    Presentation
  • Garth Boyd PhD, PAS; Senior Vice President, Agriculture, Camco (anatomy of an agricultural offsets project)
    Presentation
  • Bill Irving, Chief of the Program Integration Branch, Climate Change Division, Office of Atmospheric Programs, EPA (EPA's analysis of offsets)
    Presentation
     

Briefing Highlights

  • Offsets can significantly reduce the costs of a cap-and-trade program.
  • Offsets standards have proliferated in the absence of guidance from the Federal government. 

Related Materials

Brief on Offsets in a Domestic Cap and Trade Program

More climate change policy briefs

Back to list of Briefing Videos

 

 

-This series was made possible through a generous grant from the Doris Duke Charitable Foundation, but the opinions expressed herein are solely those of the presenters.-

CCS Public Workshops

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The Pew Center co-sponsored two East Coast workshops exploring issues related to Carbon Capture and Storage (CCS).

CARBON CAPTURE & SEQUESTRATION PUBLIC WORKSHOPS  

New York City: March 5, 2009
Bloomberg National Headquarters
731 Lexington Avenue, 7th Floor Auditorium
Click for Agenda.

Washington D.C.: March 6, 2009
Rayburn House Office Building, Room 2322
Click for Agenda.

The Pew Center co-sponsored two East Coast workshops exploring issues related to Carbon Capture and Storage (CCS). The events, organized by the Natural Resources Defense Council and Environmental Defense Fund, contributed to the public understanding of and dialogue regarding the important role of CCS in lowering greenhouse gas (GHG) emissions.

CCS is a key technology in the portfolio of low-carbon technologies necessary to achieve significant reductions in global GHG emissions. The process of CCS entails capturing carbon dioxide (CO2) from large stationary sources, such as power plants and refineries, and injecting the captured CO2 into deep underground formations for permanent retention, thereby keeping it out of the atmosphere.

The workshops featured speakers who are leading experts on CCS from academia, industry, finance, government, and the environmental policy field. The speakers provided a comprehensive overview of CCS, including:

  • An explanation of what CCS is and how it works
  • The potential for CCS to provide significant, cost-effective GHG emission reductions
  • The technology behind CCS, real-world experience with this technology, and the scientific/engineering challenges that remain
  • The regulatory framework and economic incentives necessary to facilitate CCS deployment

Click here for event presentations.

Statement: President Obama’s FY 2010 Proposed Budget

- This statement was issued in response to President Obama’s FY 2010 budget proposal. -

Statement of Eileen Claussen
President, Pew Center on Global Climate Change

February 26, 2009

President Obama’s budget contains the key building blocks for creating the clean energy economy we so badly need. It re-emphasizes the President’s support for an economy-wide greenhouse gas cap-and-trade program, sets aggressive but achievable targets for reducing emissions, invests in new low-carbon technologies and helps those families, communities, and businesses that need assistance in transitioning to a low-carbon economy. Most importantly, the budget also recognizes that now is the time to act and calls for a trading system to be up and operating by 2012.

 

Excerpt from the President's budget.

The Administration is developing a comprehensive energy and climate change plan to invest in clean energy, end our addiction to oil, address the global climate crisis, and create new American jobs that cannot be outsourced. After enactment of the Budget, the Administration will work expeditiously with key stakeholders and the Congress to develop an economy-wide emissions reduction program to reduce greenhouse gas emissions approximately 14 percent below 2005 levels by 2020, and approximately 83 percent below 2005 levels by 2050. This program will be implemented through a cap-and-trade system, a policy approach that dramatically reduced acid rain at much lower costs than the traditional government regulations and mandates of the past. Through a 100 percent auction to ensure that the biggest polluters do not enjoy windfall profits, this program will fund vital investments in a clean energy future totaling $150 billion over 10 years, starting in FY 2012. The balance of the auction revenues will be returned to the people, especially vulnerable families, communities, and businesses to help the transition to a clean energy economy.

 

Statement: President Obama's Address to Congress

- This statement was issued in response to President Obama’s address to Congress on February 24, 2009. -

Statement of Eileen Claussen
President, Pew Center on Global Climate Change

February 25, 2009

President Obama understands that our economic recovery and our energy future are inextricably linked.  By calling upon Congress to send him market-based global warming legislation, the President has clearly signaled that he understands the risks we face from unmitigated climate change.  His talent for explaining tough problems and motivating us to work together to solve them is reason to feel incredibly positive about our ability to succeed in these critically important areas, despite the tough economic challenges we face.

 

This statement also appears in the National Journal's annotated version of the President's address.

 

Excerpt from the President's Address to Congress

But to truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy.  So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America.  And to support that innovation, we will invest fifteen billion dollars a year to develop technologies like wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient cars and trucks built right here in America.

 

President Obama and Climate Change

Remarks of President Barack Obama
Massachusetts Institute of Technology

October 23, 2009

Excerpt from President Obama’s speech at MIT:

“Everybody in America should have a stake in legislation that can transform our energy system into one that's far more efficient, far cleaner, and provide energy independence for America -- making the best use of resources we have in abundance, everything from figuring out how to use the fossil fuels that inevitably we are going to be using for several decades, things like coal and oil and natural gas; figuring out how we use those as cleanly and efficiently as possible; creating safe nuclear power; sustainable -- sustainably grown biofuels; and then the energy that we can harness from wind and the waves and the sun.  It is a transformation that will be made as swiftly and as carefully as possible, to ensure that we are doing what it takes to grow this economy in the short, medium, and long term.  And I do believe that a consensus is growing to achieve exactly that.”

For text of the speech, click here.

For video of the address, click here.

Related blog post: The Clean Energy Economy of Tomorrow

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Remarks of President Barack Obama
Weekly Address

May 16, 2009

Excerpt from President Obama’s weekly address:

Chairman Henry Waxman and members of the Energy and Commerce Committee brought together stakeholders from all corners of the country – and every sector of our economy – to reach an historic agreement on comprehensive energy legislation.  It’s another promising sign of progress, as longtime opponents are sitting together, at the same table, to help solve one of America’s most serious challenges.

For the first time, utility companies and corporate leaders are joining, not opposing, environmental advocates and labor leaders to create a new system of clean energy initiatives that will help unleash a new era of growth and prosperity.

It’s a plan that will finally reduce our dangerous dependence on foreign oil and cap the carbon pollution that threatens our health and our climate.  Most important, it’s a plan that will trigger the creation of millions of new jobs for Americans, who will produce the wind turbines and solar panels and develop the alternative fuels to power the future.  Because this we know: the nation that leads in 21st century clean energy is the nation that will lead the 21st century global economy. America can and must be that nation – and this agreement is a major step toward this goal.

 


For full audio of the address, click here.
For video of the address, click here.

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Statement of Eileen Claussen
President, Pew Center on Global Climate Change
on the President's FY 2010 proposed budget

February 26, 2009

President Obama’s budget contains the key building blocks for creating the clean energy economy we so badly need. It re-emphasizes the President’s support for an economy-wide greenhouse gas cap-and-trade program, sets aggressive but achievable targets for reducing emissions, invests in new low-carbon technologies and helps those families, communities, and businesses that need assistance in transitioning to a low-carbon economy. Most importantly, the budget also recognizes that now is the time to act and calls for a trading system to be up and operating by 2012.

 

Excerpt from the President's budget.

The Administration is developing a comprehensive energy and climate change plan to invest in clean energy, end our addiction to oil, address the global climate crisis, and create new American jobs that cannot be outsourced. After enactment of the Budget, the Administration will work expeditiously with key stakeholders and the Congress to develop an economy-wide emissions reduction program to reduce greenhouse gas emissions approximately 14 percent below 2005 levels by 2020, and approximately 83 percent below 2005 levels by 2050. This program will be implemented through a cap-and-trade system, a policy approach that dramatically reduced acid rain at much lower costs than the traditional government regulations and mandates of the past. Through a 100 percent auction to ensure that the biggest polluters do not enjoy windfall profits, this program will fund vital investments in a clean energy future totaling $150 billion over 10 years, starting in FY 2012. The balance of the auction revenues will be returned to the people, especially vulnerable families, communities, and businesses to help the transition to a clean energy economy.

### 

Statement of Eileen Claussen
President, Pew Center on Global Climate Change
on the President's address to Congress 

February 25, 2009

President Obama understands that our economic recovery and our energy future are inextricably linked.  By calling upon Congress to send him market-based global warming legislation, the President has clearly signaled that he understands the risks we face from unmitigated climate change.  His talent for explaining tough problems and motivating us to work together to solve them is reason to feel incredibly positive about our ability to succeed in these critically important areas, despite the tough economic challenges we face.

 

Excerpt from the President's Address to Congress
February 24, 2009

But to truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy.  So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America.  And to support that innovation, we will invest fifteen billion dollars a year to develop technologies like wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient cars and trucks built right here in America.

###  

Statement of Eileen Claussen
President, Pew Center on Global Climate Change
on appointment of Todd Stern, Special Envoy on Climate Change

January 26, 2009

Secretary Clinton’s appointment of America’s first special envoy on climate change is another clear and early signal that the Obama administration is determined to address this issue head on.  This new position can help ensure strong and focused engagement at the highest levels as the United States works with other countries to forge a new international climate agreement.  As special envoy, Todd Stern brings the expertise, insight and judgment needed to represent renewed U.S. leadership in the global effort against climate change.  

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Statement of Eileen Claussen
President, Pew Center on Global Climate Change
on President-Elect Obama's New Energy and Environment Appointments

December 11, 2008

This is a team with a keen interest in addressing climate change, and the talent and skills to get the job done.  With Steven Chu, Carol Browner, Lisa Jackson and Nancy Sutley at the helm, President-Elect Obama's Administration will be well-equipped to tackle the challenge of building a new clean energy future that preserves the climate while revitalizing our economy.   We look forward to working with the new Administration to achieve these goals.

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On the occasion of President-Elect Barack Obama's Statement to Bi-Partisan Governors' Global Climate Summit

 

November 18, 2008

This is exactly the kind of leadership the country and the world have been waiting for. President-elect Obama's statement makes clear that he's ready to roll up his sleeves and deliver the action that is needed to protect our climate, our economy, and our national security. He is setting the right goals and choosing the right policies. We urge the bipartisan leadership in Congress to work closely with the new president to quickly enact an economy-wide cap-and-trade system.  Doing so will ensure significant reductions in U.S. emissions at the lowest possible cost, and help set the stage for a new international agreement ensuring that all other major economies contribute their fair share as well.

Obama's Remarks

### 

On the occasion of Senator Barack Obama's election to the presidency, the Center released the following statement of Eileen Claussen, President, Pew Center on Global Climate Change

November 5, 2008

President-elect Obama faces an array of urgent challenges when he assumes the Presidency on January 20, but I am confident that he will provide the leadership needed to enact a comprehensive climate policy that significantly reduces U.S. greenhouse gas emissions.  I am equally optimistic that new leadership will provide the impetus we need to forge a strong green energy economy and restore America's standing in the world community, and I look forward with great anticipation to working with the Obama administration to achieve these critical goals.

Climate Change: Renewing U.S. Leadership in Challenging Times

Speech delivered to the 2009 Camden Conference

Watch a video of the speech.

Camden, Maine
February 21, 2009

Thank you very much.  It is a pleasure to be here in Maine, and I am honored to be a part of the program for the 22nd annual Camden Conference. 

I usually like to begin my remarks with a bit of humor. But quite frankly, there’s nothing funny about today’s news. And this is certainly true when it comes to climate change. New scientific findings are coming out every day about the risks of global warming.  For example, just yesterday scientists confirmed that M&Ms now melt in your hand, not your mouth.

In all seriousness, I want to commend the organizers of this conference for putting together such a stimulating program.   My role this afternoon is to talk about climate change – and more specifically, I want to talk about the need for renewed leadership on the part of the United States in addressing this global problem. 

The fact is that the world has been waiting for the U.S. to lead on this issue.  Not only is our nation the largest economy in the world but we produce fully one-fourth of global emissions of carbon dioxide, the principal greenhouse gas that is causing climate change.  Without our active involvement, there is little chance of arriving at an effective international agreement to reduce emissions of these gases worldwide. 

So the real questions are: What can the U.S. do to exert the kind of leadership that is both wanted and needed on this issue?  What are the opportunities for U.S. leadership?  And what are the challenges we face as we try to step up to this leadership role? 

Let me begin by saying clearly, and up front, that I do not believe the United States can play a productive role in addressing this issue, and in influencing the international negotiations, unless we first do some important work here at home.  I will spend some time talking about that today.  But first, I want to provide a little history on the international negotiations; and reflect briefly on the science of climate change and why swift action is necessary.  Then I want to talk about the parameters and possibilities for U.S. domestic action; the challenges for the world in moving forward and the role the U.S. could play in catalyzing and supporting that movement; and end with some red herrings that I believe we must cast aside as we strive to reach agreement on a forward path.

INTERNATIONAL – A BRIEF HISTORY
So first a little history … because in order to understand where the world is right now in its response to climate change, it is important to look back briefly at where we’ve been. 

Back in 1992, the United States and other nations gathered in Rio to sign the United Nations Framework Convention on Climate Change.  This agreement, signed by President George H.W. Bush and ratified by the U.S. Senate, established a voluntary goal for developed countries, all of whom agreed to reduce their greenhouse gas emissions to 1990 levels by the year 2000.  An important principle of the agreement was that the developed world has a special responsibility for reducing its emissions first. 

But within a few years of the Rio meeting, it became clear that not all developed countries would meet their voluntary targets – and even if they could, it would not be sufficient to meet what the science demanded.  It was time to consider mandatory targets, while allowing countries some flexibility in how to meet them. 

And so the United States (under President Bill Clinton) joined other countries in Kyoto, Japan to negotiate the Kyoto Protocol in 1997.  But Kyoto was never submitted to the Senate for ratification.  And upon taking office, President George W. Bush officially rejected the Protocol citing concerns about its economic impact, and about the lack of commitments on the part of economic competitors like India and China.  

But even without the United States involved, other nations engaged in a great deal of additional work and negotiations that resulted in the Protocol going into effect in February 2005.  Kyoto requires the developed nations participating in the agreement to reduce their emissions of greenhouse gases by an average of 5 percent below 1990 levels by the year 2012. 

Today, we are fast approaching that 2012 deadline, and there will be decidedly mixed results.  Some developed countries will fall short of their targets.  Many developing countries, meanwhile, have seen their emissions grow much faster than predicted due to rapid industrialization.   And the United States, not a party to the Kyoto Protocol, has seen its emissions rise to approximately 15% above 1990 levels.  As the world works toward an international agreement to go beyond 2012, important priorities will be to ensure that the United States is fully engaged; that the commitments agreed can actually be met; and that developing countries with high levels of emissions take on commitments to curb their emissions. 
In anticipation of new U.S. leadership, governments in December agreed to enter into “full negotiating mode” on a new agreement.  Their aim: having a comprehensive climate pact ready to sign at the next climate talks late this year in Copenhagen.  Whether this is possible is a very open question, as I will discuss later in my remarks.  There are still many major issues to address, and many questions that need to be answered.  But there is no denying that we have reached a critical juncture in the international effort to address this issue – and that we need to take advantage of the current political moment to bring an effective global agreement within reach. 

A CRITICAL JUNCTURE
Which brings me to the question of why.  Why is it so important and so urgent that the nations of the world come together on this issue right now?    Briefly, the science has developed to a point where there is no longer any doubt that climate change is real, impacts are already being felt across the globe, and there is a strong sense in the scientific community that further delay risks catastrophe.    The Nobel Prize-winning Intergovernmental Panel on Climate Change has said that the warming of the climate system is – I quote – “unequivocal.” This group of hundreds of scientists from throughout the world represents the most comprehensive source of science-based information on climate change. Its 2007 report projected that global average temperature will increase between 2.0 and 11.5 degrees Fahrenheit by 2100.  Sea levels will rise by a foot to a foot-and-a-half or more.  Many species will be lost.  In addition, the IPCC said there is a 90-percent chance or greater that the world will see more hot extremes, heat waves and heavy precipitation events.  And it is likely we will see both more droughts and an increase in the intensity of tropical cyclones. 

And here’s the truly frightening part: in just the two years since the IPCC issued that report, it has become increasingly clear that the impacts of climate change are happening much sooner than scientists had projected.  There is growing concern among scientists that the 2007 IPCC estimates understate the potential level and pace of climate change. Last September, for instance, a team of American glaciologists estimated that sea level would rise by roughly three to six feet. 

Importantly, instead of experiencing gradual climate shifts, many of the changes are likely to happen in fits and starts that will give the world far less time to adapt. Three feet of sea level rise occurring over the span of a century may sound somewhat manageable, at least for a rich country like the United States. But what if the bulk of this rise occurs in one or two rapid pulses?  And what if we experience six feet rather than three?  In a recent interview, Robert Bindschadler, chief scientist at NASA’s Hydrospheric and Biospheric Sciences Laboratory, noted that the massive Pine Island Glacier in West Antarctica is sliding into the sea at the astonishing rate of more than two miles a year.   Should Pine Island and a neighboring glacier continue to flow rapidly into the Southern Ocean, Bindschadler said they will be a major contributor to a global sea-level rise of as much as six feet this century. 

And from the South Pole let’s go north to the Arctic, where summer sea ice reached its second lowest point ever observed last year.  The dramatic decline in ice coverage in the Arctic Ocean has stunned scientists, who had not expected to see this level of ice loss for decades.  But these sorts of changes are happening right now, they are happening faster than anyone predicted, and they are creating their own feedback loops that could make the problem even worse.  Consider, for example , what happens when we lose snow and ice cover in the Arctic.  That ice cover, which at one time reflected sunlight back into space, is replaced by open water and bare soil that absorb the sunlight and convert it to heat – amplifying global warming. And consider what happens when warming causes frozen Arctic soils, or permafrost, to thaw out. Those soils contain roughly twice as much carbon as currently exists in the atmosphere. As the soils thaw, they will release more greenhouse gases into the atmosphere, which will increase the rate and degree of warming.

These kinds of things are not fully accounted for in the climate models that scientists have used – not because anyone is trying to skirt the issue but because feedback mechanisms like these are hard to account for, hard to predict.  But more and more scientists are saying they are very real, and that we need to accept the fact that climate change could be much worse – and it could happen at a much faster rate -- than we were thinking just a couple of years ago. 

The bottom line is that we have no choice but to take action on this issue.  This is a global problem – and every country that is contributing to the problem needs to play a part in the solution.

U.S. ACTION ESSENTIAL
But the fact remains that U.S. leadership is essential.  However, the United States cannot lead effectively until we make it absolutely clear that we are willing to take on this issue and reduce our emissions right here at home.  Only then will we have the credibility, the respect and the influence we need to make this a global priority.  

Taking on this issue at home, in my view, means taking action on three priorities – we could call them three legs of the stool that represent effective U.S. action.  The first leg is investment in clean energy and other climate-friendly technologies.  The economic stimulus package signed by President Obama this week includes $70 billion for everything from smart-grid technologies to renewable energy development to energy efficiency improvements and mass transit.  This funding represented a relatively small share of the overall stimulus, but it is a start – a down payment on building the green energy infrastructure that we need to keep our economy strong for decades to come.

The second leg of the stool is energy policy.  Beyond what is in the stimulus, we need wide-ranging policies to drive private and public investment in new, cleaner energy technologies that can help us address climate change and limit our dependence on foreign energy supplies. We need to do more to promote conservation and efficiency.  And we need to do whatever we can to make use of existing cleaner, greener technologies, whether that’s  mounting a crash effort to demonstrate carbon capture and sequestration for coal-burning power plants, or expanding our supplies of wind energy.  All of this has to be a part of our energy policy looking forward – an energy policy that seeks to meet present and future energy needs while achieving real reductions in carbon emissions. 

And then there is the third leg of the stool: cap and trade.  We need to put a price on carbon in this country in a way that provides industry with the flexibility to reduce emissions as cost-effectively as possible, but that also provides certainty that we will achieve the level of economy-wide reductions that are needed.  This is what cap and trade does – it sets a cap on overall emissions and allows industry to trade emission allowances to meet the cap at the lowest cost.  In addition to providing both environmental certainty and flexibility for industry, cap and trade also can become a source of revenues for new investment in clean energy – through the auctioning of emission allowances. 

Investment in clean energy.  An energy policy that helps America build a 21st century energy economy.  And cap and trade.  These are the three legs of the stool that represent strong domestic action on climate change in the United States.  And I am pleased to say that many in Washington now appear to understand what needs to happen. 

In one of his first major policy statements after the election, President Obama reaffirmed his commitment to achieving substantial reductions in U.S. emissions of greenhouse gases.   The President also pledged to enact a cap-and-trade law as the primary means for reducing U.S. emissions.  And he has since that time appointed an environment and energy team with tremendous expertise and commitment to climate action – and fortunately for them, no unpaid tax liabilities.

And the fact is, President Obama is not waiting to act on this issue.  Within his first week in office, the President directed the EPA to reconsider a long-stalled waiver for California and 13 other states to begin regulating greenhouse gas emissions from cars and trucks.  And climate and energy issues are high on the agenda for Secretary of State Hillary Clinton’s visit to Asia this week.

The signs from Congress are equally encouraging.  The Democratic leadership is made up of some of Capitol Hill’s staunchest advocates of climate action, and key Republicans like Sen. John McCain are continuing to work on the climate issue as well.  Earlier this month, Senator Barbara Boxer issued guiding principles for climate legislation. In the House, Chairman Henry Waxman has pledged to report a bill out of the Energy and Commerce Committee by Memorial Day. 

An important reason why Washington is moving forward so quickly on these issues, I believe, is because of support in the business community.  Even in the middle of a severe economic downturn, 25 of America’s top business leaders are standing firm in their support for climate solutions.  And they have come together with 5 key NGOs including the Pew Center under the auspices of an organization called the U.S. Climate Action Partnership (or USCAP). 

Just days before President Obama’s inauguration, this unique coalition released a detailed plan to achieve steep reductions in U.S. emissions in an economically sustainable manner.  I encourage you to visit the website, www.us-cap.org for more information on USCAP’s Blueprint for Legislative Action. 

The bottom line is that the combination of business leadership and strong support for action in the White House and Congress means the chances of real action on climate and energy issues in the months ahead are very good.  And that bodes well for active U.S. engagement and leadership in the international climate talks.

CHALLENGES TO REACHING A POST-2012 AGREEMENT
But, of course, simply showing up at the table as the world tries to hash out an international agreement, even with a strong commitment and perhaps even a legislative mandate, is not enough.  We need to come to the table with a commitment to resolving the key challenges standing in the way of an effective global agreement.   And I want to use this portion of my remarks to very briefly address four of those challenges:

The first is how we decide on comparability of emission targets for developed countries. In the United States, President Obama has called for a domestic cap-and-trade system with the mid-term goal of reducing U.S. emissions to 1990 levels by 2020. The EU, by contrast, has set a goal of reducing emissions to 20 percent below 1990 levels over the same period.

Now, at first glance, the EU target and the one proposed by President Obama appear very much at odds.  Circumstances, however, have changed considerably since 1990. U.S. population has grown 19 percent, for instance, while Europe’s has held steady. And U.S. emissions have grown, while those of the EU have declined.  For the United States, a target of 20 percent below 1990 levels would translate into a reduction of almost 35 percent from current levels. 

Measured against a more recent baseline, the EU target and the one proposed by President Obama appear considerably more comparable – each would reduce emissions roughly 15 percent below 2005 levels.

Negotiating comparable targets isn’t simply a matter of setting one country’s number beside another’s.  Rather, it requires a clear-headed assessment by all parties of factors like population trends, emissions in relation to GDP, marginal costs of abatement, and more.  Agreement on a quantified formula to determine respective targets for developed countries seems unlikely. Rather, targets will likely be determined through a political negotiation in which parties take factors such as these into account.  It is important that this issue be approached pragmatically, and with an eye toward settling on targets that, with significant effort, can actually be achieved.  

The second challenge to a new, post-2012 agreement is the type and level of commitments made by developing countries.  There are many, particularly in the United States, who argue that the major emitters in the developing world must agree to absolute reduction targets.   But this is impractical, unrealistic and unfair given the rapid industrialization and increasing energy demand in much of the developing world. This is not to suggest that we do not need more ambitious action than we have seen to date from this group of countries, nor is it to suggest that we do not need commitments of some sort.  Rather, we believe that any new international agreement should include not targets but policy-based commitments for developing countries.  These would be commitments to implement nationally defined policies – such as energy efficiency standards, renewable energy targets, sustainable forestry plans, and other sectoral policies.  Whatever form these commitments take, what’s essential is that they be measurable, reportable, and verifiable.  And they must – they must -- put us on the path to stopping and reversing the growth in global emissions.

A third challenge to a new agreement?  Managing expectations.  With President Obama in office, sending all these positive signals about his commitment to climate solutions, and with other countries literally champing at the bit to see progress in the global talks after so many years of dashed hopes and delay, there is an understandable optimism in the world that this might be the year when we accomplish something remarkable – and something big. 

It could well be, but I believe we need to be realistic in our expectations for the conference in Copenhagen in December.  Considering the range of issues that need to be resolved, the Pew Center believes the Copenhagen conference should be considered a major success if it produces a strong interim agreement that puts a full, final and ratifiable treaty within reach. Such an agreement would establish the basic architecture of a post-2012 framework; indicate the range of emission reductions and the level of support that developed countries are prepared to commit to; and initiate a process to determine the specific actions that developing countries will undertake.
 
Next, the fourth and final major challenge: show me the money.  This is, in fact, the most difficult of all of the challenges I have mentioned, and the one that poses the greatest risk to serious international action on climate change.  We can talk all we want about the need for technology and new investments in developing countries’ capacity to reduce emissions and adapt to climate change … but the money has to come from somewhere.  And, right now, given the state of the global economy, as well as the increasing portion of public monies dedicated to economic stimulus in the United States and many other countries, it is hard to see from whence these funds shall come.

Most people who have looked at the financing issues involved in responding to climate change agree that the majority of investment for mitigation will come from private flows – and a lot of these private flows will come from the creation of greenhouse gas markets. But we cannot deny that additional public monies will be needed to supplement private flows for mitigation and to address the adaptation question.  To date, the level of public funding for this work has been modest and unpredictable – the result of voluntary pledges by donor countries. 

Developing countries have been clear that their ability to be more ambitious and agree to verifiable commitments is dependent upon adequate and predictable funding.  Whether the developed world, in 2009, will be able or willing to agree to mechanisms for providing that funding, or for specific financial commitment levels is unclear at best.    And so money is “the” major challenge we will face as we move into serious negotiations on a post-2012 global agreement.  

RED HERRINGS
From challenges, I want to move briefly to red herrings.  Because as important as it is to address the key challenges I have mentioned, achieving an effective international agreement on climate change also requires us to navigate past the shoals that get us stuck in roundabout and unproductive conversations. 

The first of these is what I will call the competitiveness question.  How often have we heard that addressing climate change will threaten U.S. competitiveness, and cause our economy to crater?  But the fact of the matter, as I have said, is that responding to climate change in a serious way, coupled with an equally serious effort to transform how we produce and use energy, can, if we do it right, provide a significant and lasting boost to the U.S. economy.  I honestly believe that the nations that figure out how to do this will be leaders in the global economy of the 21st century. 

Will some industries be put at competitive risk?  Yes.  Most at risk will be those energy-intensive industries that manufacture globally traded commodities.    This makes it even more important that we work toward a new multilateral agreement that establishes verifiable commitments for all major economies, perhaps with some sectoral agreements that cover those sectors where competition is an issue. 

The good news is competitiveness impacts are likely to be both modest and manageable. Recent findings suggest that at a price of $15 per ton of carbon dioxide there is not likely to be a significant competitiveness impact on U.S. manufacturing as a whole. In fact, carbon-intensive industries that could be negatively impacted by a cost on emissions account for 3 percent of U.S. economic output and less than 2 percent of employment. While a limited number of energy-intensive and trade-exposed industries may face competitive pressures, these modest impacts can be alleviated with emissions allowance revenue generated from a cap-and-trade program instead of, or until, we are able to negotiate global sectoral agreements.   

Next up on the red herring list is the question of fairness as it relates to commitments for developed vs. developing countries.  As I have said, the Pew Center strongly supports efforts to secure real, verifiable policy commitments from developing countries like China and India.  It is important for all major emitting countries to contribute to the global effort to reduce emissions; without all the major emitting countries we cannot make a dent in this problem, let alone solve it.

However, U.S. opponents of serious climate action regularly argue that it’s just not fair to subject our industries and our economy to new regulations when our competitors in China and India get off either scot-free, or with lesser requirements.  But what is fair?  Is it fair that developed countries are, in fact, developed because we have been able to produce these greenhouse gases at will for decades – and now we are saying that developing countries should not be able to follow our lead and improve their standards of living?  Is it fair that we produce more than 4 times the per capita greenhouse gas emissions of China, and more than 10 times the per capita emissions of India?   

The question of fairness has in many respects become a delaying tactic in the debate on climate change.  And it is used on both sides – by developed and developing countries alike.  As the world looks ahead to the Copenhagen meeting and a new international agreement, it is going to be crucial to respond decisively to unsubstantiated claims of unfairness.  We need to remind people that fairness (or unfairness) is in the eye of the beholder, and that the fairest thing is to design a framework that secures verifiable commitments from all major emitting countries to do their part to address this global problem.

The third and final red herring I want to bring up touches on a question that you hear more and more these days from people who otherwise seem perfectly knowledgeable and reasonable.  They ask, “If climate change is already under way and we’re already locked into some of this, then why not just focus on adaptation?  Why go to all of this trouble trying to reduce the risk through reducing emissions?”

The answer is because if we act now to reduce emissions, we have the capacity to dramatically reduce the level of climate change that the world will see in the decades to come.   And we therefore can reduce the ultimate costs of adapting to climate change.  This isn’t just coming from me; this is the consensus of the world’s scientific community.  Adaptation is crucial, yes.  We have already bought a significant amount of climate change, and despite our best efforts to reduce and limit emissions, we will be buying even more.  But an adaptation-only approach runs the unacceptable risk of creating a situation where climate change becomes unmanageable, where the impacts are catastrophic, where the costs to adapt are enormous, and where the costs to then begin undertaking efforts to reduce emissions are more costly still.  In the same way, an approach that says we should concentrate our resources on mitigation ignores the fact that many developing nations already are dealing with adverse impacts from climate change – and they will only join in a global response to the extent that they see a commitment from all nations to support efforts to deal with the consequences of climate change.

There are also those who hold out hope for a geo-engineering solution to climate change.  Such a solution, they say, would allow us to continue to produce emissions on a business-as-usual basis – and these emissions would somehow magically disappear into the ether.  It sounds great, and while ultimately geo-engineering may indeed be part of the solution, it is by no means a substitute for strong action now. So while I favor continued funding for research into this area - we cannot wait to take serious action in hopes of a geo-miracle.

WE CAN, WE MUST
I have talked this afternoon about a number of red herrings we need to get past, and a number of challenges we need to meet, in order to achieve an international agreement that effectively addresses the climate problem.   Add to these the fact that we are facing a global recession the likes of which we haven’t seen in decades, and it would be easy to give up hope that the world can finally chart a productive path forward on this issue. 

But in challenge lies opportunity.  And we have an opportunity, right now, to begin building a stronger economy and a better, safer world.  All of you are familiar with Tom Friedman, the New York Times columnist.  Well, Tom has made the intersection where climate change, energy security and economic growth come together the focus of his latest book, Hot, Flat and Crowded.  And here is what he says in that book:

“The ability to develop clean power and energy-efficient technologies is going to become the defining measure of a country’s economic standing, environmental health, economic security and national security over the next 50 years.”  (end quote)

At the Pew Center, we could not agree more.  And, while some may try to use the current economic situation to obfuscate and delay on the climate issue, I do not believe they will succeed. 

Yes, it may be a challenge getting some people to pay attention to this issue in today’s economic climate. But the bottom line is we have to.  We don’t have any other choice.  And to the extent that we can make the connection between protecting the climate, decreasing our nation’s dependence on foreign energy supplies, and advancing the U.S. economy, I believe we will be successful.  And we can then rightfully assume our leadership role in the global effort to reduce the threat to all nations from climate change. 

Thank you very much.  I welcome your questions. 

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