Op-Ed: Moving Forward at Home and Abroad

OPINION EDITORIAL
Climate Change: Moving Forward at Home and Abroad

Eileen Claussen
Joint Center Policy Matters
www.aei.brookings.org

June 2001

There has been much argument in the United States over whether the Kyoto Protocol is an appropriate first step in the effort to find a global solution to the challenge of climate change. But the question of Americas rightful role in the fight against global warming extends far beyond the diplomatic realm. The real hurdles are on the domestic front, for truly addressing climate change will require serious and sustained effort across virtually every sector of the U.S. economy. Ultimately, what the United States can deliver internationally hinges on what it can and is prepared to do at home. For the United States—and hence, the world—to effectively combat climate change, it is critical that our domestic and diplomatic strategies proceed in tandem.

So far, unfortunately, they have not. While the Clinton administration agreed to a tough emissions reduction target in Kyoto, it never put forward anything approaching the kind of domestic strategy that would be required to meet it. In fact, while we have had some discussion in the United States on what other countries should do, we have not had a serious debate about what we ourselves are willing to do. What we need is a national dialogue, with serious arguments about costs, benefits, and fairness. Only if we achieve something approaching a national view, broadly supported by the American people, our legislative representatives and our President, can we successfully address this issue.

In assessing how the United States could or should proceed domestically and, in turn, internationally, it is important to recognize certain defining characteristics of the climate challenge, and what they imply for the effort required to meet it. First, climate change is truly a global challenge: Averting the worst consequences of global warming ultimately requires action by all major emitting nations. Second, it is a long-term challenge. Reducing emissions to the levels necessary to prevent serious climate disruption will take many decades because it essentially requires a new industrial revolution—one enabling the broad introduction of low-carbon technologies to power a growing global economy.

Much as some would like to believe otherwise, it will be extraordinary difficult if not impossible to muster the kind of global, sustained effort that is needed without the force of legally binding commitments. There is little incentive for any country—or any company—to undertake real action unless, ultimately, all do, and are in some manner held accountable. Markets, of course, will be instrumental in mobilizing the necessary resources and know-how; market-based strategies such as emissions trading also can help deliver emissions reductions at the lowest possible cost. But markets can move us in the right direction only if they are given the right signals. In the United States, those signals have been neither fully given nor fully accepted.

So what would constitute an effective domestic program to reduce greenhouse gas emissions? To date, efforts to reduce U.S. emissions have been limited almost exclusively to voluntary activities at the federal, state, local and corporate level. Spurred on by the United Nations Framework Convention on Climate Change, to which the United States is a party, a number of these efforts have resulted in significant emission reductions. Some companies, for example, have cut emissions 10 percent or more from 1990 levels. And while technology has enabled the energy intensity of products and processes to decrease over the last 50 years, the increased efficiency has been outpaced by increased demand driven by economic expansion, population growth, and changing consumer preferences. In the aggregate, voluntary efforts have not ended overall growth in U.S. emissions. Indeed, U.S. emissions grew approximately 12 percent over the past decade. The lesson here is clear: voluntary programs can make a contribution but will not, on their own, be enough.

What would? To effectively address climate change, we need to lower carbon intensity, become more energy efficient, promote carbon sequestration, and find ways to limit emissions of non-CO2 gases. This will require fundamentally new technologies, as well as dramatic improvements in existing ones. New, less carbon-intensive ways of producing, distributing and using energy will be essential. The redesign of industrial processes, consumer products and agricultural technologies and practices will also be critical. These changes can be introduced over decades as we turn over our existing capital stocks and establish new infrastructure. But we must begin making investments, building institutions, and implementing policies now.

Three decades of experience fighting pollution in the United States have taught us a great deal about what works best. In general, the most cost-effective approaches allow emitters flexibility to decide how best to meet a given, binding emissions limit; provide early direction so targets can be anticipated and factored into major capital and investment decisions; and employ market mechanisms, such as emissions trading, to achieve reductions where they cost least. To ease the transition from established ways of doing business, targets should be realistic and achievable. What is important is that they be strong enough to spur real action and to encourage investment in development of the technology and infrastructure needed to achieve the long-term objective.

A good first step is to get our house in order by immediately requiring accurate measurement, tracking and reporting of greenhouse gas emissions. Current efforts lack rigorous reporting standards and verification requirements. Public disclosure of the reported data, similar to what is required for certain pollutants under the federal Toxic Release Inventory (TRI) program, would encourage companies to hunt for ways to reduce their greenhouse emissions.

There are other ways we can and should spur companies to act ahead of any mandatory requirements. One is for the government to enter into voluntary enforceable agreements with companies or sectors willing to commit to significant reductions—either in process emissions, or those from the use of products they make (e.g. automobiles or washing machines). In exchange for its commitment to cut emissions, a company or sector should be guaranteed that it would not be bound by subsequent mandates for greenhouse gas controls over the same time period. A similar approach could encourage companies, particularly in the electric utility sector, to cut carbon emissions as they undertake air pollution reductions required by existing law––a more cost-effective way to achieve multiple environmental objectives.

While such efforts can help get the United States on track, the long-term emission reductions needed can be achieved only with a far more comprehensive—and binding—strategy. Alternative approaches should be closely studied, and the results publicly debated. But much of the analysis thus far suggests that a “cap-and-trade” system—which sets an overall cap on emissions and establishes a market in carbon credits—can provide the private sector the flexibility and incentive to achieve emission reductions at the least possible cost. As yet, no economic model can accurately account for factors such as the rate of technological change that are key to assessing the long-term costs and benefits of a serious climate strategy. However, the best analyses to date suggest that the costs are reasonable, particularly when weighed against the serious and significant costs of not acting.

Ideally, a domestic climate strategy, particularly one employing emissions trading, would be coordinated with those of other countries under the aegis of a binding global framework. And this brings us back to the question of a constructive, credible U.S. position in the international negotiations set to resume in July in Bonn.

In broad terms, an international climate agreement must meet three fundamental criteria if it is to be effective: It must be environmentally sound; it must be cost-effective; and it must be fair. To be environmentally sound, an agreement must ensure that emissions actually are reduced over time to levels that achieve safe, stable atmospheric concentrations of greenhouse gases. This, again, will require economically achievable binding targets. And any agreement should include a strong compliance mechanism to ensure that the targets are met.

To be cost-effective, an agreement must allow nations to meet their targets flexibly and at the least possible cost. International emissions trading and other market-based mechanisms can help direct capital toward least-cost reductions. Other flexible approaches—such as allowing credit for sequestration of carbon in trees and soils, and measuring all greenhouse gases, not just carbon dioxide—also can help achieve reductions where they are most cost-effective. While the Kyoto Protocol includes all these provisions, there is still no agreement on the rules for implementing them. Bad rules—for instance, an arbitrary cap on the portion of a nation’s target that could be met through emissions trading—could drive up cost, with no environmental benefit.

Fairness could prove the trickiest of the three criteria. An international agreement will not work unless, in time, it entails binding commitments by all major emitting countries. The Framework Convention, signed by Bush the elder and ratified by the U.S. Senate, rightly commits developed countries to taking the lead. And as a practical matter, developing countries will not (and as a matter of principle, they should not be asked to) make binding commitments until the developed countries demonstrate real progress in reducing their own emissions. Ultimately, the parties must decide when—and in what manner—developing countries will be required to act. But for the moment, the best that can be hoped for is some formal acknowledgement by all parties that those issues will be squarely faced by a date certain.

We stand at a critical juncture, and whether nations can agree on a common path forward depends heavily on decisions now being weighed at the White House. The United States bears a special responsibility here, because we account for roughly a quarter of global greenhouse gas emissions and also because our economy is the largest and most vibrant in the world. If the United State wishes to be a leader in this global effort—rather than sit on the sidelines as other nations push ahead with the Kyoto Protocol—it must come forward with a credible proposal that provides a basis for further negotiation. To be credible, though, the United States must demonstrate that it is prepared to back up commitments abroad with real action at home. This requires a comprehensive climate policy that moves us forward, in a coordinated fashion, on both the domestic and the international fronts. We must close the gap between what we promise and what we can deliver.