Climate Compass Blog

One Piece of the Senate Puzzle

Yesterday morning, the Senate Environment and Public Works Committee passed S. 1733 – The Clean Energy Jobs and American Power Act.  The bill would create a strong cap-and-trade program with aggressive emission reductions targets through 2050. The bill now becomes one piece of a puzzle that will include the energy bill passed by the Senate Energy and Natural Resources Committee earlier this year, contributions from as many as four other major Senate committees, and contributions from Senators acting outside the committee process.

The importance of the latter is suggested by the announcement Wednesday by Senators Kerry, Graham, and Lieberman that they will be working together to craft a climate bill that incorporates provisions of the EPW bill with other provisions in line with Kerry and Graham’s New York Times op-ed.

Pulling these disparate pieces together into a coherent whole and garnering the 60 votes necessary for passage of a bill through the Senate will surely require strong leadership in the legislative process by the Obama administration.

Michael Tubman is the Congressional Affairs Fellow

One Regulatory Program Per Customer, Please

The menu of policy options for reducing greenhouse gas emissions and tackling climate change is pretty lengthy, and the portions offered are quite substantial. Congress now has to make the choice of which regulatory option to order, and as we saw in last week’s hearings at the Senate Environment and Public Works Committee, they are open to recommendations. One interaction on Thursday between Senator Arlen Specter (D-PA) and Fred Krupp, President of the Environmental Defense Fund, highlighted the need to pick a single, effective strategy to tackle climate change and not overstuff our economy with duplicative regulations. The exchange focused on whether the EPA should continue to proceed with regulations through the Clean Air Act’s New Source Review (NSR) program even if a comprehensive climate change program is enacted.

Given existing requirements, regulation of greenhouse gases under any provisions of the Clean Air Act will trigger NSR. Under NSR rules, the construction of new stationary sources and major modifications of existing ones must be permitted to ensure that they will not contribute to significant deterioration of air quality. While NSR has long been used to regulate traditional air pollutants, when it comes to feeding an appetite for climate change regulation, NSR doesn’t really hit the spot.  NSR is rather inflexible, costly to implement, and results in relatively limited emission reductions. Given the difficulty in developing standards for the large number of sources that emit greenhouse gases and the need to provide incentives for technological change in order to achieve deep reductions over time, new source review simply isn't the right recipe for our current needs. 

This chef’s recommendation: a well-designed cap-and-trade program that is aggressive enough to yield needed reductions in greenhouse gas emissions while spurring the technological innovations we need to make those reductions and grow our economy. Enactment of a cap-and-trade program means we can send back duplicative programs like NSR and still be satisfied.

Sure, we’ll need complementary policies that work in a coordinated fashion with a cap-and-trade program. These side dishes of the cap-and-trade meal are targeted programs that are designed to enhance cap-and-trade’s impacts without getting in the way of the functioning of the primary program. A comprehensive climate bill can work just fine without NSR.

 

Michael Tubman is the Congressional Affairs Fellow

Will the U.S. Bring Numbers to Copenhagen?

BARCELONA -- Will the U.S. bring numbers to Copenhagen?

That is the question most on the minds of negotiators here in Barcelona as they struggle to chart a path toward success at the upcoming climate summit in Copenhagen.  And with good reason – what can be achieved next month in the Danish capital will depend in large measure on what the United States brings to the table.

Every developed country except the U.S. already has formally adopted or proposed emission targets for 2020.  (According to a compilation by the U.N. climate secretariat, these numbers amount to a collective reduction of 16 to 23 percent below 1990 levels.)  U.S. negotiators are being very coy about whether they will be able to add theirs by the time of Copenhagen.

While a host of other issues bedevil these talks, there is no question that the lack of U.S. numbers severely constrains the range of possible outcomes.  Indeed, it’s difficult to imagine even a solid political deal coming together in Copenhagen if the U.S. is unwilling to, at least provisionally, lay out its intentions on the emissions front.

At the same time, it’s understandable why the U.S. might hold back.  It would be pointless, and potentially disastrous, for the administration to put forward numbers that Congress would not in the end support.  And while the House of Representatives has passed a comprehensive climate bill, the Senate process is just now beginning and won’t conclude before Copenhagen.  So it’s hard to say just where Congress will come out.

Under these circumstances, venturing forward with numbers carries certain risks.  First, there are risks to the domestic climate process:  If too many on Capitol Hill feel the President is getting out ahead of Congress, that could make it harder to build the bipartisan support needed to get legislation done.  Second, there are risks to the international process:  If the U.S. dangles numbers it can’t ultimately sign on to, any interim deal in Copenhagen will unravel, and the negotiations could wind up back at square one.  Finally, if the U.S. puts forward numbers yet no agreement is reached, both the domestic and the international processes could suffer.

Beyond these questions of risk, there are some serious substantive issues:

  • What numbers?  Clearly, any numbers would have to reflect those now under discussion in Washington.  The most obvious are the proposed cap-and-trade targets, ranging from President Obama’s initial proposal (14 percent below 2005; or 1990 levels), to the House-passed bill (17 percent below 2005; 4 percent below 1990), to the Kerry-Boxer bill proposed in the Senate (20 percent below 2005; 6 percent below 1990).  The House bill and Senate proposal contain provisions that would deliver additional reductions, but there is no saying now how they will ultimately fare.
  • In what form?  As we have argued before, and as prominent voices now concur, any likely outcome in Copenhagen would be a political, not a binding, deal – as a basis for then negotiating a legal instrument with binding commitments.  In that event, any numbers agreed in Copenhagen would be provisional.  And without final U.S. legislation, presenting a range would be far wiser than presenting a single number (though the aim in a final legal agreement should certainly be a specific target).
  • What’s the framework?  There are significant differences between the U.S. and other parties on the nature of a future international framework – for instance, would developed country targets be verified according to national or international accounting rules?  If it’s not possible to bridge those differences by Copenhagen, there will be some ambiguity around any targets on the table there.


What’s more, the prospects for a Copenhagen deal hinge as well on a second set of numbers: financial contributions to support developing country efforts.  At this point, there are huge estimates of need but no firm offers from any developed countries.  A deal presumably would require clear numbers from all, including the United States.

Whether the U.S. comes to Copenhagen with numbers is a political judgment that can be made only by President Obama.  In our view, he should send numbers only if he is confident that he will be in a position to convert them into a binding commitment (pending ratification) within the timeframe agreed in Copenhagen for reaching a final legal agreement.  His ability to deliver on that will depend on when Congress completes its job; that, in turn, depends at least in part on how vigorously the President chooses to engage in the legislative process.  (His engagement is a necessary condition for – but by no means a guarantee of – legislative success.)

So in the end, the President’s call on numbers for Copenhagen will rest on his judgment of where Congress is, where other parties are, and whether his active engagement can get the job done in 2010.

A Realistic Take on Copenhagen

BARCELONA -- The two men perhaps best qualified to judge have now openly declared that they do not expect next month’s Copenhagen climate summit to produce a legally binding agreement.

That is the sober assessment offered in separate briefings over the past couple of days by Yvo de Boer, executive secretary of the U.N. climate secretariat, and Michael Zammit Cutajar of Malta, who for the past year has chaired the negotiations leading up to Copenhagen. (There are two negotiating tracks: one under the Kyoto Protocol, the other under the UN Framework Convention on Climate Change, which includes the United States. Zammit Cutajar chairs the latter.)

Both were speaking to NGOs tracking the final week of pre-Copenhagen talks underway here in Barcelona.  And both cited similar reasons: a lack of time, and a lack of consensus among parties that a new legal instrument is necessary or desirable.

To those who believe nothing short of a final legal deal in Copenhagen is acceptable, their pronouncements are a betrayal.  But to those of us who have previously offered similar assessments, the two men’s courageous candor injects a badly needed sense of realism into a process that has been plagued by – and could ultimately be doomed by – unreal expectations.

Neither de Boer nor Zammit Cutajar is calling for decisions to be put off.  Both emphasized that they see Copenhagen as a critical moment when governments must seal the best deal they possibly can.  In their estimation, that would be a political deal laying out government’s intentions and the elements of a new international climate architecture.  It would be a prelude to – and emphatically not a substitute for – a legally binding agreement sometime in 2010.

Both envision a Copenhagen outcome comprised of a set of “decisions” by parties – well more than a political declaration or communiqué, but without the binding character of a treaty.  De Boer believes the package should include a mandate to translate its content into a legally binding instrument; Zammit Cutajar agrees, but said he doesn’t yet see a consensus for that among parties.

De Boer’s more detailed vision includes a “functioning architecture” and annexes listing: individual emission targets for all developed countries; actions to be undertaken by major developing countries (quantifying how much they will reduce emissions below business as usual); individual contributions by developed countries of “prompt-start” (immediate) funding for developing countries; and a cost-sharing formula for future developed country financial contributions.

Though still short of legally binding, getting even this far is a monumental undertaking in the mere month remaining.  Although other developed countries have put emission numbers on the table, the United States has not; none have tabled numbers on finance.  And while developing countries are showing a greater willingness to act, none have shown a readiness to reflect their actions in a form that would ultimately translate into an international commitment.

In broad stroke, the proposals by de Boer and Zammit Cutajar correspond to the type of outcome we recommended.  They also echo the types of ideas now being floated by the Danish government, which will host the Copenhagen summit.  One difference is that the Danes have taken to characterizing their preferred outcome as “politically binding,” a novel term that appears intended to convey more than is really there.

It’s understandable, now that the Danes have enticed a growing number of heads of state to attend, that they might be tempted to inflate the significance of whatever agreement is reached.  Better, we think, to be realistic about the best that can be achieved and, when it’s achieved, to call it what it is.  A binding agreement must remain the ultimate goal.  A solid political agreement in Copenhagen would put that within reach.  

Staying Ahead of the Curve with Climate Legislation

Throughout testimony presented by several witnesses before the Senate Environment and Public Works Committee (EPW) last week, one theme consistently resurfaced – cap and trade will spur investments in clean technology and increase jobs in certain sectors by putting a price on carbon. It is a simple formula: a price on carbon will create certainty, certainty will lead to increased investments in clean energy technology, and increased investments will lead to a larger share of the clean technology market.

As Kate Gordon, Senior Policy Advisor of the Apollo Alliance, testified, the United States is already losing ground on the international front. Clean energy investments are the key to our new economy and have been growing even in the face of inconsistent federal incentives, but without true federal commitment, clean energy technologies will not reach their full potential.   According to the UN Environment Program, investments in renewable energy technologies in 2008 increased by 2 percent in Europe to $49.7 billion, decreased in North America by 8 percent to $30.1 billion, and grew by 27 percent in developing countries to $36.6 billion. Specifically, investments in China grew by 18 percent to $15.6 billion and in India by 12 percent to $4.1 billion.   

Members of the business community also stressed how important federal regulation is in creating price certainty for carbon, which would increase clean technology investments domestically and therefore clean energy jobs. J. Stephan Dolezalek, Managing Director of VantagePoint Venture Partners, testified “a growing number of the Fortune 500 community has signaled that establishing a price certainty with respect to carbon is far better for business than a continued uncertainty in the face of certainty elsewhere in the globe.”  As the percentage of global capital invested in clean energy industries continues to increase, the United States will need price certainty to attract investment and thereby create jobs.

How does this clean economy market affect the domestic job market? The truth of the matter is that given the size of the U.S. economy, new jobs are constantly created while existing jobs are lost. Even though sentiments from both sides were reflected in the testimonies, this process will continue regardless of the specific legislation that will be passed. This is little consolation for those losing their jobs, but legislation can be written to include transitional assistance and training to adversely affected workers, as is done in both the Waxman-Markey bill passed by the House in June and the recently introduced Kerry-Boxer bill in the Senate. In the case of clean energy jobs, if the U.S. creates a favorable investment environment at home, American jobs using existing as well as new skills will be created, no matter where a given company is headquartered. The value chains for many clean energy technologies and products are extensive, and even a Chinese wind manufacturer will have to hire American workers if it wants to market turbines in the United States. Philadelphia’s mayor, the Honorable Michael Nutter, summed it up well: “These new, green collar jobs require building science, carpentry, electrical, plumbing, sales, and communications skills. These jobs include: insulators, carpenters, heating technicians, energy auditors, and educators, as well as support services, sales, and manufacturing. The good news is that these jobs are a perfect fit for Philadelphia’s workforce, and are not transferable overseas.”
 
The potential for job growth is welcome news as the U.S. economy continues to climb out of the recession. In opening statements of the final day of hearings, the Senators happily noted the Commerce Department’s announcement of the first increase in real GDP since the third quarter of 2007. Testimony on behalf of businesses and workers at the EPW hearings last week took this welcome news a step further by explaining how comprehensive climate legislation could further expand the economy and increase jobs.