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.