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
Hon. Eileen Claussen
Pew Center on Global Climate Change
The U.S. Climate Action Partnership (USCAP)
House Energy & Commerce Committee
United States House of Representatives
January 15, 2009
Mr. Chairman and Members of the Committee:
Thank you for your invitation to testify today as a member of the United States Climate Action Partnership, or USCAP.
My name is Eileen Claussen and I am president of the Pew Center on Global Climate Change. In the ten years since we at the Pew Center began our work, we have issued over 100 reports on critical scientific, technical, and economic issues facing policymakers grappling with the challenges of addressing climate change. In our search for practical, economically feasible and environmentally effective solutions, we work with 44 major companies in our Business Environmental Leadership Council. The companies together employ over 4 million people and represent over $2 trillion in combined revenues and have joined with the Pew Center in support of well-crafted mandatory climate policy.
The Pew Center’s approach is based on respect for what the science tells us needs to be done, and straight talk about ways that this can be accomplished consistent with sustaining economic growth. Above all, we believe that we can and must work together to meet this critically important challenge.
Working together is exactly what the members of USCAP have done over the past two years to craft a comprehensive set of proposals aimed at jumpstarting the legislative process. The unique nature of this group, especially the diverse interests among its members, underscores the desire on all of our parts to find common ground to begin aggressively addressing climate change without further undue delay. We are proud to stand together today with our USCAP partners in urging Congressional action consistent with our proposals.
USCAP launched its landmark report, titled A Call for Action , in January 2007, which lays out a framework for climate protection legislation. Today it includes 31 businesses and leading environmental organizations. USCAP recognizes that the United States faces an urgent need to reinvigorate our nation’s economy, make the country more energy secure, and take meaningful action to slow, stop and reverse GHG emissions to address climate change. Thoughtful and comprehensive national energy and climate policy will help secure our economic prosperity and provide American businesses and the nation’s workforce with the opportunity to innovate and succeed.
We support enactment of an economy-wide, market-driven approach which includes a well-crafted cap-and-trade program that places specified limits on GHG emissions, robust cost-containment measures, complementary policies and measures to supplement the cap-and-trade program, and a fully funded federal technology research, development, demonstration, and deployment program for climate-friendly technologies. Properly designed legislation will encourage innovation, enhance America’s energy security, foster economic growth, improve our balance of trade, and provide critically needed U.S. leadership on this vital global challenge.
I want to specifically address one key element in the design of any cap-and-trade proposal – the allocation of allowance value. Allowances are the currency created under a cap-and-trade system. Defined as the right to emit one ton of carbon dioxide (or its equivalent), allowances are required of regulated entities covered under a cap-and-trade program. The total number of allowances permitted under the program sets the environmental target and would be phased down over time.
Because total emissions are capped and allowances are tradable, the distribution of the allowances does not affect the environmental integrity or the direct costs of a cap-and-trade program, but it does directly impact the distribution of costs among regulated entities, consumers, and others. Allowances represent a considerable source of value—in either the form of freely allocated allowances or auction revenue—which the government can distribute as a way of compensating those affected by climate change, by policies designed to address it, or for other policy objectives.
USCAP strongly supports allocating allowance value in a fair and equitable manner. It believes that allowance value can play a critical role in mitigating the transition costs to workers and consumers, regulated entities, and communities that will be relatively more adversely affected, directly or indirectly, by emission limits. Allowance value should also be used to advance new technologies that will be important building blocks to achieving our future low-carbon economy and to support measures aimed at adapting (both domestically and internationally) to climate change. Finally, USCAP believes that, as these transitional impacts are effectively addressed, free allocation should be phased out over a reasonable period of time.
Decisions about allocating allowance value are just one of many important aspects in designing an effective cap-and-trade program. We recognize the challenge facing this Committee in crafting comprehensive climate change legislation and we very much hope that the Committee will call upon our unique partnership to help sort through these complexities. The need to begin the transformation of our economy to a sustainable, secure, low-carbon future is compelling and timely; indeed, this will only become more difficult, and more costly, if Congress delays action.
Recent debate surrounding the crafting of an economic stimulus package early in the 111th Congress has included discussion of such an energy investment. We agree that such efforts can and should be taken as early as possible. Additionally, a central tenet of our Call for Action is that in order to effect the change needed throughout the economy, an economy-wide cap-and-trade system is essential. When combined with complementary measures, the resulting new vision and policy direction will spur the innovation through which America has always excelled. When given the proper tools, incentives and market signals, the American entrepreneurial spirit will lead to the sustainable solutions required to meet our many economic, energy, environmental and national security challenges.
USCAP has attempted to help inform congressional deliberations over the past two years. Following our Call for Action, we have provided Congress with international principles and more detailed information on the topics of cost containment, energy efficiency, geologic carbon storage technologies and a greenhouse gas registry. Further, our diverse and broad-based coalition has and will continue to serve as a sounding board for policy-makers as they contemplate legislative options.
Over the past six months, USCAP members have worked diligently to refine our policy objectives in order to better advise Congress and the incoming Administration on workable solutions. We have agreed upon a framework for a balanced and integrated approach to key linked issues that must be addressed in any national climate legislation.
USCAP is committed to helping Congress find workable, cost-effective approaches to climate change. We believe that path forward exists and that we must embark on the journey with deliberate speed. Representing many sectors of the economy, we believe we are in the unique position to work with the President-elect, Congress and all other stakeholders to enact an environmentally effective, economically sustainable and fair climate change program. We look forward to working with the Committee in the 111th Congress to ensure prompt enactment of national climate protection legislation.
Click here to access the USCAP recommendations in A Blueprint for Legislative Action.
- This statement was released in response to President-Elect Obama's announcement of several energy and environment appointments to his administration. -
Statement of Eileen Claussen
President, Pew Center on Global Climate Change
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.
Click here and scroll down to read the side event summary in Earth Negotiations Bulletin.
The event featured perspectives from senior U.S. policymakers and business and NGO representatives on the prospects for stronger domestic climate action in the United States and the implications for negotiating a post-2012 agreement.
- Manik Roy, Vice President for Federal Government Outreach, Pew Center
- Doug Scott, Director, Illinois Environmental Protection Agency
- Meg McDonald, Director of Global Issues, Alcoa
- Senior Congressional Staff
- Pew Center Q&A: UN Climate Change Conference in Poznan, Poland
- The Road To Copenhagen: A brief article by Elliot Diringer
- Elliot Diringer discusses the Poznan talks on NPR's Science Friday (December 5, 2008)
- Key Poznan Resources and Links
- Background Briefing on UN Climate Change Conference in Poznan
- Article: Climate Policy & A New US President
- Chapter: Key Elements of a Post-2012 Agreement
Graphical Analysis and Summary of Key Legislation
December 1, 2008
Statement of Eileen Claussen
President, Pew Center on Global Climate Change
Statement of President-Elect Barack Obama
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 Transition: Additional resources on next steps for the new administration.
Pew Perspective: The Obama administration should seek a greenhouse gas cap-and-trade law, argues a new Pew Center article. (November 2008)
Climate Policy & U.S. Election: In an article for the Transatlantic Climate Policy Group, Elliot Diringer discusses prospects for an international climate agreement under a new U.S. president. (October 2008)
By Eileen Claussen and Manik Roy
November 14, 2008
This article originally appeared in Carbon Market North America, a news publication of Point Carbon.
On January 20, 2009, the United States will have, for the first time in its history, a President pledged to enacting steep reductions of U.S. greenhouse gas (GHG) emissions through a cap-and-trade program and other mandatory measures. He will be joined by a Congress whose majority leadership is similarly supportive of mandatory GHG reductions.
The path forward, however, will not be easy. Two factors will have an especially heavy influence on President Obama’s climate agenda.
First, given the state of the economy and the role of high and volatile energy costs in damping economic growth before the financial meltdown, any Obama climate initiative will be framed in the context of building a green energy economy and creating “green jobs.”
Second, the U.S. Environmental Protection Agency (EPA) has been effectively directed by the U.S. Supreme Court to regulate GHG emissions under the regulatory provisions of the Clean Air Act (CAA). EPA must proceed quickly with the development of GHG regulations or risk facing court-ordered deadlines to do so. This can only change if the CAA is amended – an amendment highly unlikely to pass Congress unless as part of a package that includes an alternative means of reducing GHG emissions, such as a cap-and-trade program.
It is too soon to predict President Obama’s climate action agenda. It is our sense, however, that successfully threading his way between a heightened sensitivity to economic impacts and the threat of a court-ordered regulatory schedule would involve several steps.
First, President Obama should reaffirm early in 2009 his intention to enact by the end of 2010 an aggressive climate policy, including a GHG cap-and-trade law. This could be part of a larger energy economy package, or could be a separate initiative.
We would recommend that the cap-and-trade program cover the economy as a whole. Current Congressional proposals, for example, cover as much as 88% of US emissions. A program covering electricity generators only, or all large stationary sources of GHG emissions, would be a step forward as well. Furthermore, we would recommend that a cap-and-trade program:
- begin in 2012;
- begin to sharply reduce GHG emissions by 2020;
- use ample supplies of domestic and international offsets to protect against high initial allowance prices;
- use allowance value to level the playing field between energy intensive manufacturers and their competitors in countries not taking climate action; and
- use allowance value to provide an adequate transition for other affected sectors of the economy, and to hasten the development and deployment of low- and zero-emitting technologies.
To meet the steep reductions that have been pledged, sources not under the cap should face complementary measures, such as standards or tax incentives.
Second, the President should convene a working group that includes the EPA, the Departments of Energy, State and Treasury, and others to draft his administration’s legislative proposal, drawing from existing proposals (e.g., Dingell-Boucher, Boxer-Lieberman-Warner, Bingaman-Specter), as well as from the experience of the U.S. states and Europe. Such a process would take at least six months.
Third, the administration should work closely throughout the development and enactment of its policy with Congressional leaders in both parties.
Fourth, the administration should consult closely with the many stakeholders, including with groups trying to identify the common ground between diverse stakeholders, such as the U.S. Climate Action Partnership (USCAP).
Fifth, and perhaps most importantly, the President should communicate constantly with the American public about the dangers of climate change and how a climate action program will help the economy in the short term – by rewarding and stimulating innovation in the energy and other sectors – and in the longer term – by transforming our economy to attain global leadership in sustainable technologies and by avoiding the worst impacts of climate change.
Eileen Claussen is President of the Pew Center on Global Climate Change. Manik Roy is the Center’s Vice President for Federal Government Outreach.
November 13, 2008
Pew Center Contact: Tom Steinfeldt, (703) 516-4146
Implications, Options and Complementary Policies Examined in Ten Briefs
Washington, DC – As President-elect Obama and a new Congress prepare to assume office in January, expectations for climate and energy legislation in the U.S. are arguably the highest in recent memory. And within the confines of the current economic climate, careful crafting of these policies has never been more important.
To advance this effort and inform the climate change debate in Washington, the Pew Center is releasing a Congressional Policy Brief Series that will serve as a primer for the 111th Congress and the new Administration. The series addresses key cap-and-trade design elements and critical complementary policies that policymakers must grapple with to deliver cost-effective, environmentally-stringent plans to significantly reduce greenhouse gas (GHG) emissions and grow the economy.
The new series is presented in two Congressional briefing books focused on key design questions regarding U.S. climate policy. The first book discusses the elements of a cap-and-trade system, including the main considerations for crafting the system and the implications of various design approaches. The briefs address the controversial issues in the climate change debate, such as the allocation of allowances, the use of cost containment mechanisms, and the role of domestic and international offsets. The second briefing book outlines key complementary policies, including those related to coal use, transportation, carbon taxes, and technology.
The materials do not recommend specific design choices or support any particular legislation. Instead, the books emphasize the implications of different policy approaches.
“Designing a U.S. domestic carbon market that is both environmentally effective and economically viable is an enormous undertaking, and as we know too well, the devil is in the details. We hope this series of briefs will serve as a credible and accessible resource for policy-makers as they grapple with a multitude of design decisions next year.” said Eileen Claussen, President of the Pew Center on Global Climate Change.
The work of the Pew Center was supported by a generous grant from the Doris Duke Charitable Foundation (DDCF). Through its Climate Change Initiative, DDCF supports work to evaluate and develop policies that put a price on greenhouse gas emissions and address other aspects of the regulatory frameworks needed to reduce the threat of global warming.
“The insight and analysis found in this series will help policymakers assess the different ways to address our climate and energy problems,” said Andrew Bowman, director of the Climate Change Initiative at the Doris Duke Charitable Foundation. “This work is critical, and the Doris Duke Charitable Foundation is pleased to support it.”
For more information about global climate change and the activities of the Pew Center, visit www.c2es.org.
The Pew Center was established in May 1998 as a non-profit, non-partisan, and independent organization dedicated to providing credible information, straight answers, and innovative solutions in the effort to address global climate change. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.
Cap-and-Trade Design Elements for a Greenhouse Gas Reduction Program
- Greenhouse Gas Emission Reduction Timetables
- Scope of a Greenhouse Gas Cap-and-Trade Program
- Greenhouse Gas Emissions Allowance Allocation
- Containing the Costs of Climate Policy
- Greenhouse Gas Offsets in a Domestic Cap-and-Trade Program
- Addressing Competitiveness in U.S. Climate Change Policy
Complementary Policies to Reduce Greenhouse Gas Emissions
This policy brief outlines various options for containing costs under a cap-and-trade program to reduce greenhouse gas (GHG) emissions. Although cap and trade is generally considered a more cost-effective approach than traditional regulation, excessive allowance prices are a concern, particularly in the early years of a program when some low carbon technologies are not likely to be commercially available. High allowance prices could mean high compliance costs for regulated firms and high energy prices for consumers. A number of the design elements of a cap-and-trade policy—including the stringency of the emission reduction targets and the distribution of allowance value—will influence the cost of the policy. However, uncertainty regarding allowances prices, and in particular short-term price volatility and persistently high prices, are of concern to stakeholders. Policy options to address these concerns include allowing facilities to bank allowances, permitting firms or the government to borrow allowances from future allocations, allowing (or expanding) the use of offsets, allowing the use of multi-year compliance periods, setting a ceiling on allowance prices, or even relaxing the cap or emission targets associated with the policy. Each of these options has strengths and weaknesses and their desired results must often be weighed against the reduced certainty of meeting the environmental objective. A number of these polices, such as banking, could be established as part of the overall policy from the beginning of the program. Others could be set to be triggered automatically if allowance prices reach a certain level or at the discretion of a market oversight entity. It is likely that any viable cap-and-trade proposal will include a variety of cost containment mechanisms.
Download the brief (PDF)
This brief examines policy options for addressing competitiveness concerns arising from the establishment of a mandatory domestic program to limit greenhouse gas emissions. These concerns center on energy-intensive industries that compete globally and could face higher costs under a domestic climate program while key competitors do not. Studies find little evidence of significant competitiveness impacts on U.S. firms from past environmental regulation, and forecast relatively modest impacts on a narrow set of industries under a U.S. cap-and-trade program with modest emission allowance prices. In the long run, international agreements offer the best recourse against competitiveness concerns. As an interim measure, a domestic climate program could mitigate competitiveness impacts through options such as: excluding trade-exposed firms from regulation; compensating firms for regulatory costs through free allocation of emission allowances; compensating firms, while providing incentive for production and emission reduction, through output-based allocations; and placing taxes or other requirements on goods imported from countries with weaker emission controls. These approaches vary in their effectiveness in reducing competitiveness impacts, in their impact on the environmental integrity and economic efficiency of a domestic climate program, and in their influence on international relations and prospects for an effective international climate framework.
Download the brief (PDF)