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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
 

Analysis of President Bush's Climate Change Plan

A new climate change strategy for the United States announced by President George W. Bush on February 14, 2002, sets a voluntary "greenhouse gas intensity" target for the nation, expands existing programs encouraging companies to voluntarily report and reduce their greenhouse gas emissions, and proposes increased federal funding for climate change science and technology development. Some elements of the Administration's strategy may provide additional incentive to companies to voluntarily reduce greenhouse gas emissions. However, the Administration's target - an 18 percent reduction in emissions intensity between now and 2012 - will allow actual emissions to increase 12 percent over the same period. Emissions will continue to grow at nearly the same rate as at present.

Greenhouse Gas Intensity Target

Different types of targets can be used to limit or reduce emissions. One approach is an "absolute" target requiring that emissions be reduced by a specified amount. This is the approach taken by both the United Nations Framework Convention on Climate Change (UNFCCC), which set non-binding emissions targets for developed countries and was ratified by the U.S. Senate; and by the Kyoto Protocol, which sets binding targets but was rejected by the Administration.

The Administration's strategy instead sets a target for greenhouse gas intensity: the ratio of greenhouse gas emissions (GHGs) to economic output expressed in gross domestic product (GDP). This approach minimizes economic impact by allowing emissions to rise or fall with economic output; however, it provides no assurance that a given level of environmental protection will be achieved since the degree of environmental protection is measured in relation to GDP. Theoretically a GHG intensity target can lead to a net reduction in emissions, but only if it is sufficiently stringent. The Administration's target - an 18 percent improvement in GHG intensity over the next decade - allows a substantial increase in net emissions.

In 1990, total U.S. GHG emissions were 1,671 million metric tons in carbon equivalents (MMTCE) or 6,128 million metric tons in carbon dioxide equivalents (MMTCO2E). As of 2000, total U.S. GHG emissions were 14.1 percent above 1990 levels, or 1,907 MMTCE (6,994 MMTCO2E).

Although total emissions continued to rise, greenhouse gas intensity in fact fell over the last two decades. Contributing factors include energy efficiency improvements, the introduction of new information technologies, and the continued transition from heavy industry to less energy-intensive, service-oriented industries. In the 1980s greenhouse gas intensity fell by 21 percent. During the 1990s greenhouse gas intensity fell by 16 percent. The Administration's strategy aims to cut greenhouse gas intensity to a level of 151 metric tons carbon equivalent per million dollars of GDP by 2012, 18 percent below its present level. While this would represent a very modest improvement over the "business as usual" emissions projections for 2012 used by the Administration, it appears to continue the same trend of GHG-intensity reductions and GHG emissions increases experienced over the last two decades.

In terms of actual emissions, total U.S. GHG emissions would grow 12 percent by 2012, resulting in GHG emissions of 2,155 MMTCE (7,900 MMTCO2E). Emissions in 2012 would be 30 percent above 1990 levels (1990 is often used as a "base year" because the Framework Convention on Climate Change called for industrialized countries to return to their 1990 levels by 2000). The Administration proposes to achieve its GHG intensity target entirely through voluntary measures. Prior experience has shown that despite the existence of a range of voluntary government programs to encourage early reductions, despite significant actions by individual companies, and despite improvements in greenhouse gas intensity, emissions continue to rise as these gains are outpaced by economic expansion, changing consumer preferences, and population growth. Further, because the target (1) is voluntary, (2) represents only a slight change from the "business as usual" path, and (3) does not appear to advance specific policy solutions, it is unclear how this goal will be translated into actual reductions in GHG intensity across various sectors of the economy. Previous voluntary GHG targets, including the UNFCCC's target of returning to 1990 levels of GHG emissions by 2000, have not been met by the United States.

Voluntary Reporting Programs

The Administration's program calls for expansion of an existing Department of Energy voluntary reporting program, and also calls for the provision of "baseline protection" for those companies making voluntary reductions in advance of potential future requirements. "Baseline protection" would ensure that companies acting to reduce their emissions will have those emission reductions counted towards requirements to limit GHG emissions that may be put in place in the future. In addition, the President directed the Secretary of Energy to recommend reforms to allow the transfer of registered reductions across firms (i.e., trading).

The existing "Voluntary Reporting of Greenhouse Gases Program" is managed by the Energy Information Administration of the Department of Energy under section 1605(b) of the Energy Policy Act of 1992. The 1605(b) program records the company-reported results of voluntary measures to reduce, avoid, or sequester carbon.

Under the current program, organizations voluntarily submit information on their GHG reduction efforts, and the information is entered into a public database. The program allows companies broad discretion in determining the basis for calculating their emissions reductions. Companies must self-certify that their claims are accurate, and outside verification is not necessary. Emissions reduction claims submitted to the program are reviewed for arithmetic accuracy and the clarity of the information presented, but no verification of supporting documentation is required.

For 2000, 222 U.S. companies and other organizations reported to the program that they had undertaken 1,882 projects to reduce or sequester greenhouse gases. Reported emission reductions included 187 MMTCO2E in direct emission reductions, 61 MMTCO2E in indirect emission reductions, 9 MMTCO2E of reductions from carbon sequestration, and 12 MMTCO2E of reductions reported under the EIA 1605EZ form, which does not specify whether reported reductions are direct reductions or indirect reductions.

Reported direct emission reductions under this program represented 2.7 percent of total U.S. GHG emissions in 2000, while reported indirect reductions were 0.9 percent, unspecified reductions were 0.2 percent, and carbon sequestration represented 0.1 percent.

Concerns exist that the current 1605(b) program has limited credibility and scope because companies are allowed broad discretion in calculating emissions reductions, there are no verification requirements, and the vast majority of GHG emitters choose not to report. It is also possible that some of the same reported reductions are reported by more than one entity and are thus double-counted.

The President's program directs the Secretary of Energy to work with other key Cabinet officials to propose improvements to the program to enhance measurement accuracy, reliability, and verifiability.

In addition to 1605(b), a number of other government initiatives had been aimed at getting companies to reduce their GHG emissions voluntarily - efforts largely spurred by the UNFCCC's non-binding target. Some companies that have reduced their emissions voluntarily have participated in these programs. Though voluntary efforts have resulted in significant emissions reductions by some firms, in the aggregate, they have not succeeded at curbing the overall growth in U.S. emissions. In fact, U.S. GHG emissions increased 14.1 percent between 1990 and 2000.

Budget Priorities

The President announced that his FY 2003 budget provides $4.5 billion for global climate change-related activities, including the first year of funding for a five-year, $4.6 billion commitment to tax credits for renewable energy sources. These numbers are consistent with the Administration's previous FY 2003 budget request, and do not reflect additions to it.

Of this $4.5 billion, $700 million represents an increase relative to last year's budget. Most of the increase ($555 million) is for tax credits, including extending some tax credits that would have expired, expanding the applicability of others, and adding new ones. For example, the Administration proposed to extend the production tax credit for wind energy, expand the applicability of the credit for biomass power, and initiate tax credits for the purchase of hybrid, electric, and fuel cell cars. The budget also includes $150 million for the development of a hydrogen fuel-cell-powered automobile.

The President's FY 2003 budget proposal also appears to continue spending for research on science and technologies relating to climate change, and expands research in some areas (e.g., geological storage of GHGs and understanding of the carbon cycle). The budget also funds climate observation systems, international conservation efforts, and bilateral research initiatives.

Our Domestic Policy Recommendations

A number of potential U.S. domestic policy options are discussed in a policy brief published by the Center, entitled The U.S. Domestic Response to Climate Change: Key Elements of a Prospective Program. That policy brief outlines elements of a domestic climate change program that would: (1) require the tracking and reporting of GHG emissions, (2) promote new technologies and practices, and (3) secure long-term emissions reductions through a flexible mandatory program, such as a mandated cap on GHG emissions with market-based trading of emissions credits.

Bush on Climate Change

Bush on Climate Change

February 15, 2002

Copyright © 2002 by World Media Foundation. No portion of this transcript may be copied, sold, or transmitted without the written authority of World Media Foundation.

HOST: Steve Curwood
REPORTERS: Robin White, Bruce Barcott, Allison Dean
GUESTS: Eileen Claussen, Eric Holdsworth, Lynda Mapes
UPDATES: Diane Toomey, Cynthia Graber

CURWOOD: From National Public Radio, it's Living On Earth. I'm Steve Curwood. The long awaited U.S. response to the Kyoto climate treaty, rejected by the White House last year, was unveiled on the 14th. Its blend of voluntary measures and tax incentives to reduce greenhouse gas emissions is drawing both praise and criticism.

HOLDSWORTH: We think the plan is a welcome change and in fact reflects a far more realistic way of addressing the climate issue.

CLAUSSEN: I think the energy intensity target the president talks about is really just business as usual.

CURWOOD: Also some museums are offering audio surrealism. Put on the headphones and let yourself be swept away.

CARDIFF: Sometimes I think there are so many choices in life, that sometimes it's nice to just give it up and say, "Okay, for 15 minutes now, I'm just going to listen to this woman's voice and follow her footsteps."

CURWOOD: Those stories and more this week, on Living on Earth, right after this.

[NEWS]

Bush on Climate Change

CURWOOD: Welcome to Living on Earth, I'm Steve Curwood. When the Bush administration rejected the Kyoto treaty on global climate change last year, it said it would offer an alternative. On February 14th, the president finally unveiled his plan to address greenhouse gas emissions. He said the problem with the agreement that almost every other nation has endorsed is the economy.

BUSH: The approach taken under the Kyoto protocol would have required the United States to make deep and immediate cuts in our economy to meet an arbitrary target. It would have cost our economy up to 400 billion dollars, and we would have lost 4.9 million jobs.

CURWOOD: The president said his plan will use a voluntary system of greenhouse gas reductions by industry and nearly five billion dollars in tax incentives for industry and consumers.
BUSH: Our immediate goal is to reduce America's greenhouse gas emissions relative to the size of our economy. My administration is committed to cutting our nation's greenhouse gas intensity - how much we emit per unit of economic activity - by 18 percent over the next ten years. This will set America on a path to slow the growth of our greenhouse gas emissions. And as science justifies, to stop and then reverse the growth of emissions.

CURWOOD: With me now to discuss President Bush's remarks are Eileen Claussen, the Executive Director of the Pew Center on Global Climate Change and the former assistant secretary of state for President Clinton. And Eric Holdsworth, who is Director of Climate Change with the Edison Electric Institute, an association of investor-owned companies that represents the majority of power generators in the US. Thank for joining me.

CLAUSSEN: It's a pleasure to be here.

HOLDSWORTH: Thank you.

CURWOOD: Now from your perspective, Ms. Claussen, what's the good news here in the president's announcement?

CLAUSSEN: Actually I think you have to look long and hard to find very much good news. I think the energy intensity target the president talks about is really just business as usual. Greenhouse gas emissions have been declining per unit of economic output for the last two decades, and his proposed objective would continue that same trend.

CURWOOD: Mr. Holdsworth?

HOLDSWORTH: Well, we think the plan is a welcome change and in fact reflects a far more realistic way of addressing the climate issue: allowing for flexibility and continued economic growth which will help spur and continue the flow of capital, which will lead to the investment and development of the next generation technologies, which are really in the long term perspective one of the most critical areas to address in looking at the issue of climate change.

CURWOOD: Ms. Claussen, tell me how does the president's proposal compare to the targets set by the Kyoto agreement, which would have meant cutting greenhouse gas emissions to seven percent less than what they were in 1990, over the next ten years?

CLAUSSEN: Well, when we calculated what it might mean in terms of actual emissions, we believe that by 2012, which is the end of the first budget period in Kyoto, rather than being seven percent below 1990 levels, which I agree was probably not achievable, we would be about 30 percent above 1990 levels. Which, as I said, is really just business as usual.

CURWOOD: By the way, the president said Kyoto would have cost America nearly five million jobs and 400 billion dollars. How accurate is that, Ms. Claussen?

CLAUSSEN: Actually, that's totally off the charts, in my view. And I say that because he really used the economic models with the assumptions and policies modeled that were totally unrealistic and not reflective of Kyoto at all. That said, I think that the economic analyses that said implementing Kyoto would be free or would even be a profit are equally off the mark.

HOLDSWORTH: While I would agree on the analyses that say Kyoto would be free are off the mark, I think there's a wide range of economic analysis that would back up the president's assertion. Certainly that's been our view of this issue for quite a long time, particularly since the protocol was negotiated, that it would have these massive economic impacts. Which is one reason why we have been so resistant to that type of approach and find the president's approach a refreshing change of pace and perhaps a way that we can get at the issue and start reducing greenhouse gases.

CURWOOD: Now, Mr. Holdsworth, ten year's ago President Bush's father initiated a program that was voluntary, like the one that he's talking about now, that asks companies to monitor their greenhouse gas emissions and think about ways to reduce them, what's different in this plan?

HOLDSWORTH: First of all, the numbers that will be reported will be tighter, there'll be stricter methodology applied, which I think will make those numbers more credible to many people. There's a few other important differences. This voluntary program now actually has a goal attached to it. The earlier one was really a way of encouraging companies to go about reporting emissions reductions, here we have a goal of this 18 percent reduction in emissions intensity over the next ten years, that's a different step. And this voluntary program, the reporting program the president has talked about, will also include baseline protection and what's called credit for early action. In other words, making sure that companies that take action now won't be penalized if there is some other type of regime down the road, perhaps a regulatory approach or even a more aggressive voluntary approach. You'd hate to be penalized for taking actions now and perhaps lowering what your emissions base is down the road. You're being a good actor; you should get credit for that. What the president is talking about would do that, we think that's going to really help encourage and spur action.

CURWOOD: Ms. Claussen, I'll come back to you in just a moment, but let me follow up on Mr. Holdsworth here. Eric, I'm a little puzzled here about the signal that the White House is sending to domestic industry by acknowledging the possibility of mandatory emissions cuts in the future. Why not just face this issue right now?

HOLDSWORTH: Well, I don't think they're acknowledging that mandatory approaches are forthcoming. They've indicated future, perhaps reviewing in 2012 where the situation stands and perhaps taking on additional voluntary measures, additional programs. We certainly would never advocate a mandatory approach as is enshrined in the Kyoto protocol. We don't think that's the right way. We feel this is the right approach and the president's sending a clear signal that voluntary initiatives can work and here's a chance for industry to go and show what it can do.

CURWOOD: Ms. Claussen?

CLAUSSEN: Well, I actually think you need to put some of this in perspective. My colleague here from Edison Electric said that the president's program is different because there is a goal. Perhaps he's forgotten that the 1992 Rio Convention, which was negotiated by the first President Bush, actually had a non-binding goal in it as well, which was to reduce emissions in the year 2000 to 1990 levels. And the bottom line of that with all of the voluntary programs that were initiated over the last decade was that our emissions grew by roughly 15 percent over 1990 levels. So we didn't do a very good job of reducing our emissions or meeting our non-binding goal.

HOLDSWORTH: That is correct that the framework connection contains that aim. That wasn't of course linked to the voluntary program here in the US, the way the president has made this link. But it was a goal, but unfortunately it was again looking at an absolute sort of reduction, returning to a certain year by a certain level. This is an approach that looks at the intensity of the emissions, or your amount of carbon per unit of output, which we think is a better metric, and will allow for continued growth while also helping to slow the growth of greenhouse gas emissions.

CURWOOD: Ms. Claussen, you work with a number of Fortune 500 companies at the Pew Center, you might mention a couple of those for us, and my understanding is that some companies are already significantly reducing emissions on their own initiative. What are they saying about the White House policy now, and how do they think this will affect their business over seas?

CLAUSSEN: Well, we work with 37 major companies, they range from Alcoa and Boeing and Weyerhaeuser on the one hand to United Technologies to American Electric Power, and we cover almost all sectors, mostly big multinational companies. All of them are engaged in some forms of emission reductions. Twenty of them have real targets and programs in place to meet those targets and some of those targets are really ambitious. I mean much more ambitious than the Kyoto targets. I mean you could look at a company like DuPont who's going to be reducing their emissions 60 percent below 1990 levels by the year 2010 and is well on its way to achieving that goal. Alcoa which is going to reduce its emissions by a minimum of 25 percent below 1990 levels by 2010. So there are companies that are doing really serious things to reduce emissions. I think the problem is having 27 or 37 or 50 companies that are reducing emissions is just not enough. And I think that's why we look to some kind of a mandatory program as a way to level the playing field and to actually get all of the actors doing what needs to be done if we are actually going to change the trajectory of emissions.

CURWOOD: How does this effect your multinational members of your association as they operate elsewhere around the world which will be under the Kyoto accord if things go as people say?

CLAUSSEN: All of them will have to comply with whatever domestic programs are implemented in countries in Europe or in Asia to reduce emissions. What it really means I think in a negative way is we're not a party to Kyoto and we're not playing in the same game. They won't be able to look company-wide and decide where the efficiencies could be greatest for emissions reductions. They'll have to look only at plants in countries with hard and fast regulations. So for them, it's an inefficiency and like in many other kinds of cases beyond environment, they are going to have one set of rules in one place and a different set of rules in another place. I think from their perspective they'd much rather have a uniform set of rules.

CURWOOD: Ms. Claussen, you're a former Assistant Secretary of State. Japan and the E.U. have been waiting more than a year to hear a concrete climate policy from the Bush administration. How are they responding to this plan?

CLAUSSEN: I think everyone was slightly confused when it was first announced, because they couldn't understand what a greenhouse gas intensity target meant or what an 18 percent reduction in greenhouse gas intensity actually meant. The reports that I've seen and the conversations I've had suggest that not only is this not a substitute for Kyoto, but it's not an ambitious program and it's barely a program at all. I think that's the reaction abroad.

HOLDSWORTH: I wouldn't think that's going to be the case. I think a number of companies are going to welcome this initiative. The president is obviously on his way to Asia to talk to various Asian nations about it. They've already signed some bilateral cooperation agreements with both the Japanese and the Italians, the Central Americans. In fact, I think that as this moves forward he may find a number of companies getting very interested in this kind of approach. A number of the developed countries I think are very fearful of the Kyoto targets and what's that going to mean to their economy and are frankly looking for an approach that perhaps makes more sense in the face of economic growth.

CURWOOD: Eric Holdsworth is director of climate programs with the Edison Electric Institute and Eileen Claussen is the executive director of the Pew Center on Global Climate Change. Thank you both for joining me today.

HOLDSWORTH: Thank you.

CLAUSSEN: Thank you.

Living on Earth

Press Release: Climate Change Threatens Health of America's Lakes, Streams, Rivers and Wetlands

For Immediate Release:  
January 29, 2002

Contact: Katie Mandes
703-516-4146

Climate Change Threatens Health of America's Lakes, Streams, Rivers and Wetlands
 

Washington, DC - Global climate change poses a serious threat to lakes, streams, rivers, and wetlands throughout the United States, according to a new report from the Pew Center on Global Climate Change. The temperature increases and variations in weather patterns projected for the next 100 years will result in changes in the geographic distribution of freshwater fish, interfere with the reproduction of many aquatic species, reduce water quality, and impose added stresses on wetlands and other sensitive aquatic ecosystems.

"The United States' freshwater and wetland ecosystems face multiple threats to their health and stability, including changes in land use, environmental pollution, and the diversion of water for drinking, irrigation, and other uses," said Eileen Claussen, President of the Pew Center on Global Climate Change. "To these threats we must now add the very real and very serious effects of global climate change and its potential to transform the essential character of our lakes, rivers, streams, and wetlands."

The Pew Center report, Aquatic Ecosystems and Climate Change: Potential Impacts on Inland Freshwater and Coastal Wetland Ecosystems in the United States, draws on a variety of sources to summarize researchers' current understanding of the potential impacts of climate change on U.S. aquatic ecosystems. Among the report's key conclusions:

  • Increases in water temperatures as a result of climate change will alter the geographic distribution of aquatic plant and animal species. The severity of these impacts may be limited if species can migrate to new areas as climate changes. However, the ability of species to migrate may be compromised by human activities that block migration corridors, potentially causing reductions in biodiversity.
  • Changes in precipitation will alter river and streamflows affecting ecosystem productivity and reducing water quality. Populations of aquatic organisms are sensitive to the effects of floods, droughts and other extreme weather events, which are likely to increase as a result of climate change.
  • Climate change is likely to further stress sensitive freshwater and coastal wetlands. Wetlands throughout the United States already are adversely affected by a variety of human impacts. Climate change will add to the existing stresses on these fragile ecosystems in a variety of ways-most notably by causing global sea levels to rise and inundate coastal wetlands. Rising global temperatures also will cause the wetland areas of Alaska and Canada to release additional carbon dioxide and other greenhouse gases into the atmosphere.
  • Aquatic ecosystems have a limited ability to adapt to climate change. Governments, communities, businesses, and individual citizens can take a number of steps to reduce the likelihood of significant impacts to these systems while improving their ability to adapt to climate change. These include: maintaining riparian forests; reducing pollution from a variety of sources; restoring damaged ecosystems; minimizing groundwater withdrawal; and strategically placing new reservoirs to minimize their ecological impacts.

"Our rivers, lakes, streams, and wetlands support economically important fisheries and provide Americans with clean drinking water, water for irrigation, recreational opportunities, and more," said Claussen. "This report shows that climate change puts all of these services at risk, but it also shows there are things we can do to reduce that risk."

Part of "Environmental Impacts" Series

Aquatic Ecosystems and Global Climate Change was prepared for the Pew Center by N. LeRoy Poff, Mark M Brinson, and John W. Day, Jr. It is the seventh in a series of Pew Center reports examining the potential impacts of climate change on the U.S. environment. Other Pew Center series focus on domestic and international policy issues, climate change solutions, and the economics of climate change. A complete copy of this report -- and previous Pew Center reports -- is available on the Pew Center's web site, www.c2es.org.

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The Pew Center was established in May 1998 by the Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is conducting studies, launching public education efforts and working with businesses to develop market-oriented solutions to reduce greenhouse gases. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs. The Pew Center includes the Business Environmental Leadership Council, which is composed of 36 major, largely Fortune 500 corporations all working with the Pew Center to address issues related to climate change. The companies do not contribute financially to the Pew Center - it is solely supported by contributions from charitable foundations.

Press Release: New Report on Discounting the Benefits of Future Climate Change Mitigation

For Immediate Release:  
December 20, 2001

Contact: Katie Mandes
703-516-4146

New Report on Discounting the Benefits of Future Climate Change Mitigation

Washington, DC - How do we compare the costs of greenhouse gas reduction measures taken today with the future benefits of these actions? How do we calculate the value of investments when benefits will continue to accrue over centuries? These are important questions, because the way we value the benefits of greenhouse gas emission reductions will guide the development of cost-effective solutions to the threat of global climate change. A report released today by the Pew Center on Global Climate Change addresses these crucial questions.

The report, Discounting the Benefits of Future Climate Change Mitigation: How Much Do Uncertain Rates Increase Valuations?, by Richard Newell and William Pizer of the independent nonprofit research institute Resources for the Future, highlights an important variable that often goes unexamined in current climate change models-uncertainty in future interest rates. Climate models incorporate discount rates to compare costs and benefits over time-in essence, they tell us how high future benefits need to be to justify spending a dollar today. Most climate models choose one rate and hold it constant over the time horizon of the model.

This study questions that conventional approach, arguing that future rates are uncertain. The authors demonstrate that acknowledging uncertainty about future interest rates leads to a higher valuation of the future benefits of reducing greenhouse gas emissions today - regardless of the initial rate one chooses. The authors conclude that, by ignoring uncertainty, current approaches used in economic modelling may be consistently undervaluing the future benefits of current climate change mitigation efforts. The report shows that including the effect of interest rate uncertainty in climate models could raise valuations of mitigation efforts by as much as 95 percent relative to conventional discounting at a constant rate.

"This report indicates that immediate action to address global climate change could yield significantly greater benefits in the long-run than conventional economic models have estimated," said Eileen Claussen, President of the Pew Center. "This information will be especially useful for policymakers as they seek to balance near-term mitigation costs with long-term economic and environmental benefits."

This report is the first to be published as a technical report in the Pew Center's economics series. The results of this work - and additional ongoing Pew Center analyses - will be incorporated into a dynamic general equilibrium model in order to better capture the full complexity of the climate change issue.

A complete copy of this report and other Pew Center reports can be accessed from the Pew Center's web site, www.c2es.org.

The full text of this report is accessible on the Internet:
Discounting the Benefits of Future Climate Change Mitigation: How Much Do Uncertain Rates Increase Valuations? Report.

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The Pew Center was established in May 1998 by the Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is conducting studies, launching public education efforts and working with businesses to develop market-oriented solutions to reduce greenhouse gases. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs. The Pew Center includes the Business Environmental Leadership Council, which is composed of 37 major, largely Fortune 500 corporations all working with the Pew Center to address issues related to climate change. The companies do not contribute financially to the Pew Center - it is solely supported by contributions from charitable foundations.

Community Adjustment to Climate Change Policy

Download Report

Community Adjustment to Climate Change Policy

Prepared for the Pew Center on Global Climate Change
December 2001

By:
Judith M. Greenwald, Pew Center on Global Climate Change
Brandon Roberts, Brandon Roberts & Associates
Andrew D. Reamer, Andrew Reamer & Associates

Press Release

Download Entire Report (pdf)

Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

A Pew Center report series on the economics of climate change has identified many ways in which economic modeling can be improved to more reliably project the costs of greenhouse gas reduction policies. These studies show that better model design – for instance, more realistically portraying technological progress and flexibility in the economy – can yield substantially lower projections for the costs of addressing climate change. They provide strong evidence that a rational climate policy that sets realistic short-, medium-, and long-term goals can achieve significant environmental gains while minimizing economic costs.

At the same time, it is important to recognize that the costs of addressing climate change are likely to fall disproportionately on certain industries, communities, and workers, and to explore ways to minimize these adverse impacts. This report is one of three focusing of these critical transition issues. It draws from past community assistance efforts to recommend ways the government can best assist communities that may suffer economic disruption as a result of climate change policies. A report released simultaneously looks at potential impacts on American workers and a future Pew Center report will evaluate competitiveness issues.

In the case of community assistance, the government has considerable experience assisting communities adversely affected by policies such as trade agreements, defense downsizing, and forest protection. For this report, authors Judith Greenwald, Brandon Roberts, and Andrew Reamer apply lessons learned from previous adjustment programs to the challenges posed by addressing climate change. Specifically, the report examines the risks faced by communities whose economies rely heavily on energy production and energy-intensive industries. The authors conclude that a new federal adjustment program for at-risk communities should be part of U.S. climate change policy. The report recommends that the U.S. government take the following actions:

  • Designate and fund the Economic Development Administration (E.D.A.) of the U.S. Department of Commerce to design and implement an economic adjustment program for communities;
  • Identify and assist communities that are particularly dependent on energy-producing and energy-intensive sectors before dislocations occur;
  • Leverage and integrate additional resources by involving multiple federal agencies and state and local governments through federal and regional task forces; and
  • Be flexible in addressing community needs by supporting locally determined, comprehensive strategies for five to seven years after the implementation of new climate policies.

C learly, some steps recommended in these reports will require funding. As policies to address climate change are developed, revenue streams from related fees (e.g., from permit fees or auction revenues) could be used to assist with these programs. Addressing climate change through sound policy will make it possible to achieve our environmental objectives while shielding workers and communities from potential economic harm. The authors and the Pew Center are indebted to Robert Atkinson, Ev Ehrlich, and Phil Singerman for their comments on previous drafts of this report.

Executive Summary

The world is becoming increasingly concerned about the risks of global warming from the buildup of greenhouse gases in the atmosphere, but many American decision-makers are worried about the economic impacts of policies that may be needed to reduce U.S. greenhouse gas emissions. The overall size and distribution of the impacts of such policies are uncertain, and depend greatly upon how governments, businesses, consumers, and workers respond to the challenge. Efforts to avert global warming would put some American businesses, workers, and communities at risk of economic dislocation. This paper focuses on how the federal government can best assist at-risk communities. Since the burning of fossil fuels such as coal, oil, and natural gas to produce energy is a major source of greenhouse gas emissions, such communities include those with high reliance on jobs in energy production — say, coal mining in Wyoming, or oil and gas production in Louisiana — and in energy-intensive industries such as steel manufacturing in Pennsylvania.

This is not the first time that important national policies have forced economic change on particular communities. The same story has been told for trade agreements, defense downsizing, and forest protection, for example. In each case, the U.S. government helped affected communities through various forms of economic adjustment assistance. In addition, in the last 20 years, numerous U.S. communities have sought to adapt to wrenching economic change brought about by global competition and recession, both with and without federal assistance.

The United States has substantial infrastructure and experience at the federal, state, and local levels in community economic adjustment. Thus, a foundation is in place for creating a new government program to help communities adversely affected by global climate change policy. Experience in the United States and elsewhere suggests that, although economic adjustment programs do not usually remove the pain of economic disruption, appropriately designed programs can lessen that pain considerably. At the same time, there is substantial room for improvement in existing adjustment efforts.

This paper recommends a new federal adjustment program for communities as part of global climate change policy. Specifically, the United States should do the following: (1) commit to address the problem by designating a single agency, the Economic Development Administration (EDA) of the U.S. Department of Commerce, and authorizing about $550 million dedicated dollars, to design and implement an economic adjustment program; (2) be proactive by identifying communities that are particularly dependent on energy-producing and energy-intensive sectors, and by helping communities to take action before dislocations occur; (3) leverage and integrate additional resources by involving multiple federal agencies and state and local governments through federal and regional task forces; and (4) be flexible in addressing community needs by supporting locally determined, comprehensive strategies for five to seven years.

Such a program would take advantage of available experience and expertise at all levels of government, and would take into account the wide variability in local circumstances and opportunities. By doing so, it would minimize economic dislocation and maximize opportunities to create jobs and protect the environment.

About the Authors

Judith M. Greenwald
Pew Center on Global Climate Change

Brandon Roberts
Brandon Roberts & Associates

Brandon Roberts, president of Brandon Roberts & Associates since 1990, is a public policy consultant specializing in economic and workforce development matters. He works primarily with state- and local-level organizations to develop and implement effective policies and program activities, and to evaluate the benefits of past efforts. He has worked in California, Delaware, Florida, Massachusetts, Michigan, Minnesota, Iowa, Ohio, Oregon, and Washington; in large cities such as Baltimore, Cincinnati, Cleveland, Miami, and Portland; and on a number of projects involving community-based organizations.

Before starting his own consulting firm, Mr. Roberts served as Deputy Director of the Council of State Community Development Agencies in Washington, D.C., where he worked extensively with state economic and community development agencies and helped develop policies and strategies to address the employment needs of low-income individuals. He also has held positions in the U.S. Economic Development Administration and the Executive Office of the President. Mr. Roberts has a BS in government (1975) and a MSP in urban and regional planning (1977) from Florida State University.

Andrew D. Reamer
Andrew Reamer & Associates

Andrew Reamer, Ph.D., is Principal of Andrew Reamer & Associates, a Boston-based consulting firm specializing in economic development and public policy. Dr. Reamer received a Ph.D. in Economic Development and Public Policy (1987) and a Masters in City Planning (1981) from the Department of Urban Studies and Planning, Massachusetts Institute of Technology.

Andrew D. Reamer
Brandon Roberts
Judith Greenwald
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Remarks of Eileen Claussen at City Club of Portland

Remarks of Eileen Claussen
President, Pew Center On Global Climate Change

City Club of Portland
Portland, Oregon

December 14, 2001

Greetings and thank you very much. It is wonderful to be here in Portland, and I want to thank the people at the City Club for inviting me to be a part of your Friday Forum. I noticed on the club's schedule that next week's Friday Forum presenters will be the Oregon Repertory singers. I sincerely hope that none of you got the dates mixed up. I always try to be somewhat entertaining in my speeches, but singing a few holiday favorites definitely crosses the line.

Seriously, I'm glad to have the chance to be here today to talk to you about one of the most profound challenges of the 21st century. That, of course, is the challenge of global climate change. I'd like to tell you where we stand right now in the effort to deal with climate change, both here in the United States and internationally. And I'd like to tell you where we are headed - the kind of world we will leave our children and grandchildren if we stick to business as usual. But most importantly, I'd like to tell you where we need to be headed - the path that instead will allow us to pass to future generations a safer, healthier, more prosperous planet. It is not a simple path. For what is needed, I believe, is a second industrial revolution - one that takes us beyond oil and beyond coal to cleaner, more secure ways to power our global economy. Government must have a hand, a strong hand, in launching this revolution. But it can succeed only if our corporate leaders rise to the challenge as well. For while government can set the goals, only the marketplace can spur the innovation and mobilize the resources needed to achieve them. Fortunately, a growing number of forward-thinking companies already are leading the way.

First, though, I'd like to tell you why the state of Oregon holds such a special place in my heart. Some of you, I'm sure, remember back in the 70' s when Oregon became the first state in the nation to require a deposit on bottles and cans. At the time, I was a young staffer in EPA's office of solid waste. And I thought: Hey, they've got a great idea out there in Oregon. We should let other people know about it. So I put together a nifty little pamphlet describing Oregon's groundbreaking program and EPA started distributing it. Well, not everyone agreed that bottle bills were such a grand idea. The beverage industry was, shall I say, unhappy. And they let my bosses know it. I'm told, in fact, that the chairman of Pepsi raised the matter directly with the president. Soon thereafter EPA decided to "loan" me to an obscure office in Congress where I couldn't cause any more trouble. And when I was finally allowed to return, I was assigned a new area of responsibility: sewage sludge.

I'm pleased to say I was eventually able to rise above sewage sludge. I'm also pleased to note that, all these years later, Oregon is still leading the way on the environment. In fact, I know of no state that is doing more to meet the challenge of global warming. Oregon was the first state to enact mandatory controls on carbon dioxide - requiring that all new power plants meet a tough new emissions standard. The city of Portland and Multnomah County were the first local governments in the United States to adopt a plan for reducing greenhouse gas emissions. And through your commitment to light rail and other smart growth strategies, you are demonstrating that protecting the climate goes hand in hand with preserving Oregon's enviable quality of life. These efforts really do reflect the spirit behind the Oregon state motto, "She flies with her own wings." May you soar higher and higher.

But are others joining you in flight? Climate change is by definition a global challenge. And the best efforts of any one city, state or nation will come to naught unless, ultimately, we all act together. We're by no means there yet - not even close. But it might surprise you to learn that we are in fact making headway. The reason this might surprise you is that the one thing most people heard about climate change over the past year was that President Bush rejected the Kyoto Protocol. His decision indeed was a setback. But let's look at what's happened since.

First, let's look at the international picture. For those of you new to this topic, the Kyoto Protocol is an agreement negotiated in 1997 that does two things: it sets targets for reducing greenhouse gas emissions from industrialized countries; and it allows them to meet those targets through market-based strategies like emissions trading. Don't worry. I'm not going to get too far into this. But it's worth taking a minute to understand why these market-based strategies are so important. Basically, they put the market to work to cut emissions as cost-effectively as possible. In other words, they deliver the greatest environmental benefit at the lowest possible cost. And they create market incentives that drive companies to keep coming up with better and cheaper ways to cut emissions. This is how we've tackled acid rain faster and cheaper than anyone ever imagined. Emissions trading is a concept born here in America, and it was the United States that insisted it be part of the Kyoto Protocol.

While Kyoto established a broad framework, the nitty-gritty rules still had to be negotiated before countries could ratify it. A year ago, those negotiations were at a standstill. Then President Bush rejected the Protocol. Suddenly, the rest of the world was rallying to its defense. In negotiations last July in Bonn, and then last month in Marrakech, nations made the tough compromises and worked out the rules. They're not perfect, but they do establish a workable international system for beginning to tackle this problem. The agreements in Bonn and Marrakech have been rightly declared a triumph of multilateralism. They represent a triumph as well for the principle of harnessing the global market to protect our global environment. It's true, Kyoto's targets take us only a decade into the future, and provide only a small fraction of the emissions reductions we must ultimately achieve. But the bottom line is that we have to start somewhere, and much of the world has now established that starting point. The priority now is to ensure the Protocol's swift ratification and entry into force so we can, at long last, begin to deliver on Kyoto's promise and achieve real progress.

What, then, of the United States? With just 4 percent of the world's population, we generate 25 percent of the world's greenhouse gas emissions. Each year, our emissions grow higher. We've rejected Kyoto, yet we have no real strategy of our own. I'm afraid I have little expectation that the Bush administration is prepared to put forward the kind of proposals needed to launch a serious effort, at least not at the moment. Nor, for that matter, was the previous administration. But just as President Bush's rejection of Kyoto helped rally international support for the Protocol, it has stimulated a very interesting and encouraging bipartisan response on Capitol Hill. Suddenly, both Democrats and Republicans seem eager to demonstrate their commitment to tackling climate change.

For instance, Senator Robert Byrd, a leading Democrat from coal-producing West Virginia, and Senator Ted Stevens, a leading Republican from oil-producing Alaska, are teaming up on a bill that would devote billions to researching and developing climate-friendly technology. It also would establish a climate change office in the White House and give the President one year to develop a comprehensive strategy aimed at stabilizing greenhouse gas concentrations in the atmosphere. A first step, but an important one.

Other bills would require companies to track and disclose their emissions of greenhouse gases, an essential step toward building a comprehensive emissions reduction strategy. This is an idea that the White House seems at least open to considering. In the Senate, there's a serious debate brewing over new pollution standards for power plants - in fact, the first real debate at the federal level over the kind of mandatory controls on carbon dioxide that Oregon already has in place. Finally, another bipartisan duo, Senators John McCain and Joe Lieberman, have said they plan to introduce legislation establishing an emissions trading system covering major sources of greenhouse gases throughout the economy. It's hard to imagine a bill like that moving through Congress anytime soon. But the very idea that two such prominent lawmakers would be advocating such a far-reaching strategy was virtually unthinkable just a year ago.

To be certain, there are many in Congress and elsewhere who remain adamantly opposed to concrete action against climate change. Perhaps they assume, in the greatest tradition of laissez-faire economics, that a rising sea level lifts all boats. There are even those who continue to question whether global warming is real. President Bush expressed his own doubts about the science when he first took office. He asked the National Academy of Sciences to undertake a special review. The NAS came back and said, yes, there are some uncertainties in the science. There always will be, I'm sure. But the NAS went on to say that, despite those uncertainties, the evidence for global warming is strong and growing stronger.

Here's what the science tells us. First, the earth is indeed getting warmer. The 1990s were the hottest decade of the entire millennium, and 1997, '98, and '99 were three of the hottest years ever. Second, this warming trend is almost certain to continue. Projections of future warming suggest an average global increase of two to ten degrees Fahrenheit over the next century. Third, and perhaps most importantly, the evidence strongly suggests that human activities, in particular the burning of fossil fuels, are largely to blame.

What will the impacts of this warming be? How will all this affect our children and grandchildren? Some people like to see the bright side of global warming. Lower heating bills in winter, for instance, and longer growing seasons in the Midwest. But there's good reason to believe that any potential benefits will be far outweighed by the costs.

Rising sea levels will flood coastal areas - a very real worry along portions of the U.S. coastline but a much greater worry for low-lying countries like the Netherlands and Bangladesh. Higher temperatures mean an increase in extreme weather-more flooding, more drought, and more severe storms. Historic patterns of rain and snowfall will be disrupted, putting water supplies at risk. Here in the Pacific Northwest, for instance, warmer winters will mean less snow pack in the mountains and an earlier springtime melt. Water shortages are likely to grow worse. Many of our most threatened species and ecosystems will face even greater risk. Declines in river flow, for instance, could destroy any chance of saving this region's precious salmon runs. And hotter, drier summers will stress the forests and pose an ever greater threat of wildfire.

One of the tremendous inequities of climate change is that the people facing the greatest risks are those least able to bear them. Wealthy nations like the United States can find ways to lessen the impact. We can build sea walls to protect our coasts. Our farmers can switch to other crops better suited to a warmer climate. We can strengthen our public health system to guard against diseases like malaria and dengue fever. But poorer nations struggling to feed and house their people cannot so easily adapt. And, scientists predict, they will be the ones hardest hit. For them, prolonged drought doesn't mean parched lawns and water rationing. It means starvation. Rising sea levels won't just be an inconvenience for those with beachfront property. They'll mean mass migrations and increased competition for scarce land. Lest you think this is all conjecture, it's worth noting that the people of Tuvalu, a small island nation in the Pacific, recently decided to abandon their homeland before it's swallowed by rising seas. All 11,000 residents will be relocating to New Zealand beginning next year.

So this is the kind of world that awaits us if we continue on our present course. What is the alternative? What will it take to keep our planet from overheating? Well, quite obviously, it requires dramatically reducing emissions of carbon dioxide and other greenhouse gases that trap heat in our atmosphere. What is the primary source of these gases? The combustion of fossil fuels. So our goal, over time, must be to end our reliance on coal and oil and to develop new sources of energy that can power our growing economy without endangering our climate. Yes, it is a tall order. As I said earlier, it will take nothing short of a second industrial revolution.

Let me be clear: This revolution cannot take place overnight. It will, in fact, take decades. But there are important steps we should take right now to begin the transition. First, we need to be more energy efficient, so we use less energy to achieve the same results. The United States has made significant improvements in energy efficiency over the last decade. But countries such as the United Kingdom, Germany, Japan and Brazil are all far less energy intensive than we are, and we have clearly have much further to go. Some of this could be as simple as turning off the lights, buying a compact fluorescent next time you need a new light bulb, or carefully checking the energy efficiency ratings the next time you buy a new washer or dryer. We also should be insisting on more energy-efficient cars. The technology exists. The new Toyota Prius, a hybrid car that uses both an electric motor and an internal combustion engine, can go more than 50 miles on a gallon of gas. It's proven so popular you have to wait months to get one. If everyone in America drove a hybrid, we would save about 1.6 billion gallons of oil a year - far more than we import from the Middle East.

Improving efficiency is not enough, though. To address climate change, we will also have to emit much less carbon, and this means switching to less carbon intensive fuels. Some fuel switching can be done now, but we need a serious effort to begin laying the groundwork for the fuels of the future. We've been through energy transitions before. In the 18th century, we still relied largely on wood. In the 19th century, the steam engine took over. In the 20th century, we turned to oil. Now we must develop new fuels to meet the needs of the 21st century.

I can't tell you what the fuel of choice should be a hundred years from now. That will depend on the ingenuity of our scientists and engineers; investment decisions made in boardrooms; the unpredictable course of technological development; and the whims of the marketplace. Solar, wind and geothermal power all hold tremendous promise. But one technology that is generating real interest right now is the hydrogen fuel cell.

Fuel cells are what NASA puts on board rockets to generate power in space. They can run on different kinds of fuels. But whatever the fuel source, the only byproduct is heat and water - pure water. In other words, no smog-forming pollutants and no carbon dioxide. Fuel cells could be used to power cars, and many automakers are now engaged in efforts to make fuel cell cars a reality. They could be used to power businesses or homes. Instead of buying electricity from a coal-burning utility, a fuel cell in your basement no bigger than a central air conditioner could generate all the clean power you need. The use of hydrogen to power fuel cells is appealing because there are so many different ways to produce it. Hydrogen can be extracted from coal, oil or natural gas - or, preferably, produced from renewable energy sources. And it can take different forms. Some energy experts envision the day when, instead of filling your car at the gas pump, you'll pick up "fuel in a box" from the convenience store or a vending machine. You could go about 250 miles on a six-pack.

That's just one possibility, and there are many, many more. The point is that if we are to realize them - if we are to discover and pursue the most promising options - we must get started. This second industrial revolution requires technological and economic transformation on an unprecedented scale. And we must begin making investments now to ensure its success.

There are those who say we can't afford to address climate change, particularly when our economy is slowing. I believe they are wrong, for a host of reasons. I could tell you how the economic models they rely on exaggerate the costs of cutting emissions and fail to take into account the full range of benefits. But instead, let me tell you about the concrete experiences of the companies we work with at the Pew Center on Global Climate Change. Thirty-seven major companies are now members of our Business Environmental Leadership Council. These are primarily Fortune 500 companies - names you'd recognize, like Weyerhauser, Intel, Boeing, DuPont, Shell and Alcoa. Together these companies employ more than 2 million people and generate revenues of nearly $900 billion. And through their investments in emissions-cutting and climate-friendly technologies, they are demonstrating that what is good for the climate can be good, too, for the bottom line.

Many of these companies have adopted voluntary targets for reducing their greenhouse gas emissions. We recently released a report that took a close look at six of them. It looked at the reasons why they took on targets, and what the results have been. The companies said one of the motivations for taking on a target was to improve their competitive positioning in the marketplace. And that, in fact, has been the result. Each of the companies is on track to meeting or exceeding its greenhouse gas goal. Together, they've delivered reductions equal to the annual emissions of three million cars. And all the companies are finding that their efforts are helping to reduce production costs and enhance product sales today.

So, yes, I am confident that with smart strategies that tap the power of the marketplace instead of squelching it, that do not expect more than can be delivered, and that take into account capital stock turnover cycles, we can afford to address climate change. In fact, we can strengthen the long-term health of our economy. Whatever the economic indicators for the latest quarter, over the long haul, increased efficiencies can only improve the bottom line. There are real economic opportunities that come with taking action on climate change. It would be a mistake not to seize them.

Before closing, I'd like to say a word about the new concerns now dominating our national agenda. I refer, of course, to the horrible, haunting events of September 11. The security of our nation is now, and will for some time remain, the overriding concern in Washington, and with good reason. As a result, a host of other vital issues - climate change among them - will for now take a lower profile. But I believe those of us working on climate change can still make an important contribution. We can help show how, with the right strategies, we can both protect our nation and advance the fight against global warming. This is most obvious in the case of "energy security." We all know that continuing to rely so heavily on imported oil is a costly mistake. To some the answer is drilling in the Arctic refuge. But whatever your views on the Arctic, it is clear that no amount of domestic drilling will significantly reduce our reliance on foreign oil. If we are serious about energy security - whether or not we're serious about addressing climate change - we must move beyond oil.

So, where are we in the effort against climate change? Internationally, after a decade of difficult negotiations, we are for the first time on the verge of enacting binding emissions limits for all industrialized countries but one. In the United States, despite our refusal to join the rest of the world in the Kyoto Protocol, there is a growing bipartisan recognition that we cannot continue to blithely ignore our responsibilities as the world's largest greenhouse gas polluter. In a growing number of boardrooms, corporate leaders are seeing climate change not only as a challenge but as an opportunity. And in communities like Portland, ordinary citizens are acting locally to meet what is truly a global challenge. We have a long, long way to go. But we have begun. And that is good. Thank you very much.

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Worker Transition & Global Climate Change

Download Report

Worker Transition & Global Climate Change

Prepared for the Pew Center on Global Climate Change
December 2001

By:
Jim Barrett, Economic Policy Institute

Press Release

Download Entire Report (pdf)

Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

A Pew Center report series on the economics of climate change has identified ways in which economic modeling can more reliably project the costs of greenhouse gas reduction policies. These studies show that better model design — for instance, more realistically portraying technological progress and flexibility in the economy — can yield substantially lower projections for the costs of addressing climate change. They provide strong evidence that a rational climate policy that sets realistic short-, medium-, and long-term goals can achieve significant environmental gains while minimizing economic costs.

At the same time, it is important to recognize that the costs of addressing climate change are likely to fall disproportionately on certain industries, communities, and workers, and to explore ways to minimize these adverse impacts. This report draws from past worker transition efforts to recommend ways the government can best assist workers who may suffer economic dislocation as a result of climate change policies. A Pew Center report released simultaneously examines potential impacts on U.S. communities, and a future Pew Center report will evaluate competitiveness issues.

In the case of worker transition, the government has considerable experience assisting workers adversely affected by policy choices and market forces. Author Jim Barrett draws lessons from these government programs and outlines the building blocks of a worker transition program that could assist workers adversely affected by climate change policies. The report recommends that such a program include:

  • Substantial retraining and/or education for laid-off workers;
  • Substantial income support for program participants;
  • A bridge to retirement for workers nearing retirement age that maintains their standards of living and retirement benefit levels;
  • Maintenance of laid-off workers’ health and pension benefits until they find suitable employment;
  • Rapid response programs to ensure prompt service provision, and avoidance of detailed eligibility requirements;
  • Advance notice of layoffs when possible;
  • Work with unions to inform workers about program availability and to administer services;
  • Performance standards that avoid the unintended consequences of the overly simplistic standards used in the past; and
  • Requirements and funding for assessments of the program’s effectiveness by comparing outcomes for participants and non-participants, and allowing for mid-course corrections.

Clearly, some steps recommended in these reports will require funding. As policies to address climate change are developed, revenue streams from related fees (e.g., permit fees or auction revenues) could be used to assist with these programs. Addressing climate change through sound policy will make it possible to achieve our environmental objectives while shielding workers and communities from potential economic harm. Pew Center and the author wish to thank Susan Teegarden, Andrew Hoerner, Robert Ginsburg, Ev Ehrlich, Yolanda Kodryzycki, and Les Leopold, who offered helpful comments on previous drafts of this report. The author also would like to thank Brigit O’Brien and Terrel Hale for their research assistance.

Executive Summary

With most scientists and politicians agreeing that human-induced climate change is a potentially serious problem, the question of how nations respond to it, if at all, now seems to hinge on the perceived costs of action and inaction. Several attempts have been made to estimate the cost to the U.S. economy of reducing carbon and other greenhouse gas emissions. While there remains substantial debate over the net costs (or benefits) of various policy alternatives, there is little debate over the fact that reducing emissions will have potentially negative impacts for certain sectors of the economy and their workers. Any major reduction in carbon emissions in the United States will almost certainly require a decline in demand for fossil fuels, and, therefore, will result in employment losses in the coal, petroleum, and electricity industries, and possibly other sectors as well.

The question often arises: What policy options are available to address the needs of impacted workers?

The United States has substantial experience with programs aimed at helping workers dislocated both by policy choices, such as trade agreements and environmental regulations, and by market forces, such as the ongoing shift away from manufacturing and toward a service-based economy. The Trade Adjustment Assistance (TAA) program established in the 1960s was designed to aid workers displaced by the effects of international trade, while the Job Training Partnership Act (JTPA) was aimed at workers displaced for any reason. The experiences of these programs can provide valuable guidance for the design of policies aimed at dealing with workers displaced by climate change policies. In 2000, both programs were subsumed by the Workforce Investment Act (WIA), which would serve workers dislocated by climate policies if they were to be laid off today.

Examinations of TAA and JTPA raised important questions about the effectiveness of their training components. Studies have found that the majority of participants who subsequently found jobs were employed in occupations unrelated to their training programs. A closer look at the evidence shows that there can be sizable gains from retraining displaced workers, with some studies finding significant benefits through higher wages at reemployment. The evidence also appears to indicate that the quality of training may be as important as the quantity.

In addition to training and education, another important aspect of worker displacement programs has been income support for participants. Both TAA and JTPA are meant to provide support for their participants, although many, including the vast majority of JTPA participants, received little or no support. Aside from the obvious hardships this can impose on workers and their families, it also had substantial impacts on the ability of the programs to move workers successfully into new jobs. A study of one JTPA program found that over the first year following layoff, program participants earned about 20 percent less than displaced workers who did not join a program. While participants’ earnings recovered substantially over time, the cost of participating in the program, in terms of lost earnings over the first year, represents a substantial barrier to participation.

While some workers likely opted out of programs due to lack of income support or other reasons, some may have been discouraged from participating. The use of performance-based contracts, which pay service providers based on reemployment and wage replacement rates, can give providers the incentive to filter out the workers who are more difficult to place and who might bring averages and compensation down. TAA had substantial problems in serving its intended population as well. One audit found that the eligibility determination process arrived at an incorrect conclusion in over 60 percent of cases.

There are a wide range of lessons that can be drawn from previous programs to help inform the design and administration of a successful program to assist workers affected by climate change policies. A critical, if broad, lesson is that numerous tradeoffs exist that can make designing an effective program difficult. At the same time, some tradeoffs that are assumed to exist may not. Continuing to assume that they do can be equally limiting.

Both TAA and JTPA have tried to strike a balance between providing compensation to workers and providing incentives to leave programs as quickly as possible. For JTPA, those incentives appear to have been too strong. A large majority of eligible workers (as many as 93 percent) never entered programs in the first place. Under JTPA and now WIA, the goal of compensation has been sacrificed in the name of efficiency. However, income compensation and training appear to be complementary, so that increasing compensation can enhance training outcomes and program success. With limited resources, unfortunately, training and compensation appear to be substitutes at least in the budgetary sense.

While providing for substantial retraining is an essential element of a successful transition program, it is no guarantee of success. Despite the relatively long training programs in TAA projects, reemployment outcomes have been disappointing, due largely to inadequate job search and placement services and to mismatches between training programs and labor market demand. Careful design of training programs and the provision of job search and placement services will be critical to the success of a climate change transition program, particularly given the long tenure and deteriorated labor market skills likely to characterize many of the program’s participants.

In addition to some of the larger issues like income support, there are numerous factors in the administration of transition programs that can help determine their success or failure. Some of these issues have already been addressed in WIA. The continuous operation of WIA offices and rapid response teams can help keep the lag time between layoff and program entry low. Addressing layoffs at the earliest possible stage can increase the legitimacy of the program and help workers face the reality of permanent separation from their jobs. This approach increases participation rates and reduces the lag time between layoff and program entry.

To ensure that these workers have access to training options, two conditions must exist. First, training programs must be offered that can serve their needs. Second, training providers must have a limited ability to exclude or discourage clients who are difficult to place. If these conditions are met, it may be possible to employ performance-based standards successfully. To ensure that programs suitable for the hard to place are available, a successful program needs to offer sufficient incentive to trainers to offer such programs. One approach is to offer higher payments for placements of the difficult to place. Rather than offer payment based on the number of people placed, a system could offer payment based on the expected intensity of training required. This approach would offer increased incentives for training providers to design programs for workers who need the most help.

A more fundamental issue is the appropriateness of a program explicitly designed to serve one type of worker and not another. To a laid-off worker, and possibly to society as a whole, it may seem arbitrary to deny or approve benefits based on whether it can be proven that climate change policies contributed to the layoff. Climate change policies may be only one of a combination of causes leading to a layoff, particularly for industries already in decline. Any eligibility restriction based on climate change policies will thus be difficult to implement.

The following elements appear critical to the success of a transition program aimed at helping workers dislocated by climate change policies or other causes:

  • Substantial retraining and/or education should be available for laid-off workers.
  • The program should provide substantial income support for program participants.
  • For those workers nearing retirement age, the program should provide a bridge to retirement that maintains their standard of living as well as their retirement benefit levels.
  • The program should maintain health and pension benefits of laid-off workers until they find suitable reemployment.
  • To help ensure that services can be provided as quickly as possible, rapid response programs should continue to be employed, and detailed eligibility requirements should be avoided whenever possible.
  • The program should encourage advance notice of layoffs when possible.
  • The program should work with unions to inform workers about the availability of programs and to administer services.
  • The program should establish performance standards that avoid the unintended consequences of the overly simplistic performance standards used in the past.
  • The program should require, and provide funding for, assessments of the program’s effectiveness by comparing outcomes for participants and non-participants, and allow for mid-course corrections.
Jim Barrett
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Press Release: Easing the Burden: Two New Reports Identify Steps for Reducing the Economic Impacts of Climate Action

For Immediate Release:  
December 5, 2001

Contact: Katie Mandes
703-516-4146

Easing the Burden: Two New Reports Identify Steps for Reducing the Economic Impacts of Climate Action on Affected Communities and Workers

Washington, DC - Policymakers can do a great deal to ease the economic burden of addressing climate change by taking specific steps to assist affected workers and communities. This according to two new reports released today by the Pew Center on Global Climate Change.

"Responding to climate change means reducing greenhouse gas emissions, and that means making a shift from the current carbon-intensive economy to an economy that relies less on fossil fuels," said Pew Center President Eileen Claussen. "This shift is in everybody's interest, but it will not affect everybody equally. As a result, we need to be thinking now about how to assist those workers and communities that will be affected by the policy choices we make. Rather than leave them behind in our quest for a new economy, we must give them the tools and the resources they need to play their rightful role in our future success."

Focusing on the workers and communities that are likely to be most affected by efforts to address climate change, the Pew Center reports recommend worker retraining programs, economic adjustment initiatives for affected communities, and other steps. According to Claussen, the cost of these and other initiatives would amount to a small fraction of the overall bill for dealing with climate change. She added that permit fees and other revenues related to the implementation of new climate policies could provide an important source of funding for the transition efforts.

Worker Transition & Global Climate Change

Any major reduction in greenhouse gas emissions in the United States will almost certainly cause a decline in demand for fossil fuels. The result could be employment losses in the coal, petroleum, and electricity industries, and possibly in other sectors as well.

Worker Transition & Global Climate Change is a Pew Center report written by Jim Barrett of the Economic Policy Institute. The report draws lessons from the government's experience assisting workers who were adversely affected by policy choices and market forces in the past. The author also outlines the building blocks of a worker transition program that could assist workers adversely affected by government efforts to address climate change.

This report recommends that a worker transition program include:

  • Substantial retraining and/or education for laid-off workers, as well as income support for program participants;
  • A bridge to retirement for workers nearing retirement age that maintains their standards of living and retirement benefit levels;
  • Maintenance of laid-off workers' health and pension benefits until they find suitable employment; and
  • Advance notice of layoffs whenever possible.

Community Adjustment to Climate Change Policy

Efforts to avert global climate change are also likely to place certain communities at risk of economic dislocation. Affected communities could include those with large numbers of jobs in energy production, such as coal mining communities in Wyoming or oil producing areas of Louisiana. Also affected could be communities with energy-intensive industries-for example, parts of Pennsylvania with steel manufacturing operations.

Community Adjustment to Climate Change Policy was authored by Judith M. Greenwald of the Pew Center on Global Climate Change, Brandon Roberts of Brandon Roberts & Associates, and Andrew D. Reamer of Andrew Reamer & Associates. Based on a survey of how policymakers in the United States and elsewhere have responded to similar challenges in the past, the report suggests that appropriately designed programs can lessen the pain of economic adjustment considerably.

The report recommends a new federal adjustment program for communities as part of global climate change policy, and calls on U.S. policymakers to take the following steps:

  • Designate and fund the Economic Development Administration (EDA) of the U.S. Department of Commerce to design and implement an economic adjustment program for communities;
  • Identify and assist communities that are particularly dependent on energy-producing and energy-intensive sectors before dislocations occur;
  • Leverage and integrate additional resources by involving multiple federal agencies and state and local governments through regional task forces; and
  • Support the development and implementation of locally determined, comprehensive adjustment strategies.

A future Pew Center report will address the issue of competitiveness for those industries affected by climate change policy.

The full text of both reports is accessible on the Internet:

Community Adjustment to Climate Change Policy  Report.

Worker Transition & Global Climate Change Report.

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The Pew Center was established in May 1998 by the Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is conducting studies, launching public education efforts and working with businesses to develop market-oriented solutions to reduce greenhouse gases. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs. The Pew Center includes the Business Environmental Leadership Council, which is composed of 36 major, largely Fortune 500 corporations all working with the Pew Center to address issues related to climate change. The companies do not contribute financially to the Pew Center - it is solely supported by contributions from charitable foundations.

Press Release: Nobel Prize Recipient Dr. Joseph E. Stiglitz Calls for Immediate Action Against Climate Change

For Immediate Release:  
October 11, 2001

Contact: Katie Mandes
703-516-4146

Nobel Prize Recipient Dr. Joseph E. Stiglitz Calls for Immediate Action Against Climate Change

Dr. Joseph E. Stiglitz, co-recipient of the 2001 Nobel Prize in economics, called on governments today to join in a comprehensive global strategy to address the long-term threat of global climate change.

In a keynote address at a workshop sponsored by the Pew Center on Global Climate Change, Dr. Stiglitz said that despite uncertainties over the pace and precise impacts of climate change, governments can and should take immediate cost-effective steps to begin reducing emissions of greenhouse gases.

"Climate change is probably the most important environmental problem we face in the world," Dr. Stiglitz told 40 scientists, economists and other experts at the Pew Center's Workshop on the Timing of Climate Change Policies. "We need a framework for collective action."

Dr. Stiglitz, a professor of economics at Columbia University, was one of three U.S. economists awarded the Nobel Memorial Prize in Economic Science on Wednesday for their seminal work on the role of "asymmetric information" in markets. He previously served as chairman of the President's Council of Economic Advisers and as chief economist at the World Bank.

"We congratulate Dr. Stiglitz on his prestigious award and are delighted that he could share with us his keen insights on the challenge of climate change - particularly on what is such a remarkable day for him," said Eileen Claussen, president of the Pew Center on Global Climate Change.

In a paper presented at the workshop, Dr. Stiglitz and his co-authors explored the challenges of crafting a global strategy to address climate change given uncertainties in the science and economics and the diverse and conflicting interests of nations.

The paper states, "A global consensus now exists that climate change represents a significant potential threat to the world's well-being&Put simply, we favor immediate action," the authors state. "Although policymakers are forced to make decisions under uncertainty, they can undertake actions that help reduce this uncertainty. In particular, pursuing some emissions abatement policies now allows policy-makers to learn more about the costs of emission reduction."

The full text of his paper, co-authored with Peter R. Orszag of the Brookings Institution and Joseph E. Aldy of Harvard University, is available on the Pew Center website, www.c2es.org.

Dr. Stiglitz was introduced at the workshop by Dr. Kenneth J. Arrow of Stanford University, a previous recipient of the Nobel Prize in economics and a member of the Pew Center's board of directors.

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The Pew Center was established in May 1998 by The Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is an independent, nonprofit, and non-partisan 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.

Timing of Climate Change Policies Workshop Summary

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The Pew Center on Global Climate Change held a Workshop on the Timing of Climate Change Policies in Washington, D.C.

Pew Center Workshop on the Timing of Climate Change Policies

October 10-12, 2001
The Westin Grand Hotel, Washington, DC

On October 10-12, 2001, The Pew Center on Global Climate Change held a Workshop on the Timing of Climate Change Policies in Washington, D.C. This workshop brought together leading economists, scientists, policy-makers, business leaders, and others interested in climate change science and policy. The purpose of the workshop was to investigate the appropriate timing of the world's policy response to the challenge of global climate change. The workshop produced a consensus that action on climate change needs to begin now to satisfy a variety of concerns. This volume includes a summary of the workshop proceedings, final texts of peer-reviewed papers commissioned for the workshop, and other presentation materials.
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