By Eileen Claussen and Manik Roy
November 14, 2008
This article originally appeared in Carbon Market North America, a news publication of Point Carbon.
On January 20, 2009, the United States will have, for the first time in its history, a President pledged to enacting steep reductions of U.S. greenhouse gas (GHG) emissions through a cap-and-trade program and other mandatory measures. He will be joined by a Congress whose majority leadership is similarly supportive of mandatory GHG reductions.
The path forward, however, will not be easy. Two factors will have an especially heavy influence on President Obama’s climate agenda.
First, given the state of the economy and the role of high and volatile energy costs in damping economic growth before the financial meltdown, any Obama climate initiative will be framed in the context of building a green energy economy and creating “green jobs.”
Second, the U.S. Environmental Protection Agency (EPA) has been effectively directed by the U.S. Supreme Court to regulate GHG emissions under the regulatory provisions of the Clean Air Act (CAA). EPA must proceed quickly with the development of GHG regulations or risk facing court-ordered deadlines to do so. This can only change if the CAA is amended – an amendment highly unlikely to pass Congress unless as part of a package that includes an alternative means of reducing GHG emissions, such as a cap-and-trade program.
It is too soon to predict President Obama’s climate action agenda. It is our sense, however, that successfully threading his way between a heightened sensitivity to economic impacts and the threat of a court-ordered regulatory schedule would involve several steps.
First, President Obama should reaffirm early in 2009 his intention to enact by the end of 2010 an aggressive climate policy, including a GHG cap-and-trade law. This could be part of a larger energy economy package, or could be a separate initiative.
We would recommend that the cap-and-trade program cover the economy as a whole. Current Congressional proposals, for example, cover as much as 88% of US emissions. A program covering electricity generators only, or all large stationary sources of GHG emissions, would be a step forward as well. Furthermore, we would recommend that a cap-and-trade program:
- begin in 2012;
- begin to sharply reduce GHG emissions by 2020;
- use ample supplies of domestic and international offsets to protect against high initial allowance prices;
- use allowance value to level the playing field between energy intensive manufacturers and their competitors in countries not taking climate action; and
- use allowance value to provide an adequate transition for other affected sectors of the economy, and to hasten the development and deployment of low- and zero-emitting technologies.
To meet the steep reductions that have been pledged, sources not under the cap should face complementary measures, such as standards or tax incentives.
Second, the President should convene a working group that includes the EPA, the Departments of Energy, State and Treasury, and others to draft his administration’s legislative proposal, drawing from existing proposals (e.g., Dingell-Boucher, Boxer-Lieberman-Warner, Bingaman-Specter), as well as from the experience of the U.S. states and Europe. Such a process would take at least six months.
Third, the administration should work closely throughout the development and enactment of its policy with Congressional leaders in both parties.
Fourth, the administration should consult closely with the many stakeholders, including with groups trying to identify the common ground between diverse stakeholders, such as the U.S. Climate Action Partnership (USCAP).
Fifth, and perhaps most importantly, the President should communicate constantly with the American public about the dangers of climate change and how a climate action program will help the economy in the short term – by rewarding and stimulating innovation in the energy and other sectors – and in the longer term – by transforming our economy to attain global leadership in sustainable technologies and by avoiding the worst impacts of climate change.
Eileen Claussen is President of the Pew Center on Global Climate Change. Manik Roy is the Center’s Vice President for Federal Government Outreach.