While the rest of the world is struggling to figure out how to meet its Kyoto commitments, the United States is taking a different approach toward controlling greenhouse gases (GHGs). Against a backdrop of an existing voluntary, technology-driven response, proposals have arisen at the national and regional levels that either seek to strengthen the current technology approach or contemplate mandatory emissions programs.
The current energy bill, which passed in the House of Representatives and is now being debated in the Senate, falls into the first category: support for current technologies. While not directly addressing climate change, there are a number of provisions that have potential climate change consequences. Nuclear power, clean coal (with eventual capture and sequestration), renewable energy, and ethanol all have the potential to reduce emissions. Yet, none represents dramatic changes from the status quo, and the renewable energy and ethanol provisions, which were passed last fall as part of a bill to amend the tax code, would simply continue existing subsidy programs. Sizeable incentives exist to expand conventional fossil energy supplies—potentially increasing emissions. Still, there are elements that can and should be viewed as supporting climate-friendly technologies.
Senator Hagel's recent proposal also belongs in this group. While it might put more money on the table to encourage specifically climate-friendly technologies, the mechanisms are not significantly different—tax incentives for emissions-reducing technologies. Climate provisions from earlier energy bills that would create various programs and offices for climate change, as well as some provisions that would have created emissions registries—lists of what companies release what emissions—similarly fall into this group. None of these would place a requirement, burden, or economic incentive directly on emissions or energy use itself.
The second category, involving mandatory programs, prominently includes the McCain-Lieberman bill as well as multipollutant bills targeting power plant emissions of carbon dioxide (CO2) and bills aimed at tightening corporate average fuel economy (CAFE) requirements for light-duty vehicles. The McCain-Lieberman proposal would require power plants, industrial sources, and large commercial facilities, along with producers of transportation fuels, to obtain permits for each ton of gas they emit in 2010 and thereafter. A fixed number of permits—equal to a source's emissions in 2000—would be given out, or auctioned, and sources could freely trade those permits, such that those who really needed them could always buy more in a market. McCain-Lieberman would also allow sources to gain additional credits for emissions-reduction projects in developing countries.
Economists generally like this kind of approach because it (a) applies the incentive directly to the thing we care about—emissions; and (b) is flexible, allowing the market, rather than a regulator, to find the cheapest emissions reductions.
Other mandatory proposals include those by Carper and Jeffords-Lieberman that would address GHGs from just the power sector in the context of a multipollutant program—simultaneously establishing trading programs for sulfur dioxide, nitrogen oxides, and mercury, as well as CO2. (This is in contrast to President Bush's Clear Skies proposal, which does not include CO2.) Proposals to tighten the CAFE standards, such as S794 in the last Congress, fit here because while they target oil use and are often motivated by security concerns, they would also have a substantial impact on emissions.
While it is not formally included in legislation right now, the National Commission on Energy Policy, a nongovernmental, bipartisan group that I was involved with, recently published a major report, Ending the Energy Stalemate: A Bipartisan Strategy to Meet America's Energy Challenges. The commission wants to encourage lawmakers to consider blending elements of both technology and emissions-focused policy. Specifically, the commission recommendations include not only a mandatory emissions trading program, but also incentives to develop and deploy carbon-friendly technologies. In fact, the policies are actually linked in that a small auction of allowances in the trading program finances the technology incentives. Another somewhat innovative element, compared to the McCain-Lieberman proposal, is that the allowance price—and indeed the overall cost—is capped.
Finally, the climate policy landscape in the United States is not exclusively federal. A number of actions are occurring at the state and local levels that bear mentioning. One is the effort in California to establish GHG emissions standards for cars and light trucks. Should they succeed, it would effectively establish tighter fuel economy standards. Another is an effort by nine northeastern states, initiated by New York Gov. George Pataki, to establish a CO2 emissions trading program for power plants in those states. Such a program, if successful, could provide a blueprint for a national policy. Most recently, mayors from across the country have declared their commitment to see their cities abide by the Kyoto rules, but the impact of this effort remains to be seen.
Despite the variety of federal climate change policies on the table and their very uncertain future, and despite the ap-parent zest of states to fill the policy vacuum at the federal level, I think most people believe that climate change must and eventually will be dealt with by the federal government, in ways that are both comprehensive and mandatory. It is hard to see how state policies can succeed against a problem that is fundamentally global and requires international negotiation. Similarly, technology can be, at best, just one element in a GHG-reduction effort—some draw the analogy to pushing a rope; it can only take you so far. For these reasons, the relevant question for meaningful federal policy is probably how, what, and when, not so much if.
Technology can, at best, be just one element in a GHG-reduction effort—some draw the analogy to pushing a rope; it can only take you so far.
A version of this article appeared in print in the Spring 2005 issue of Resources magazine.
