The nations of the world came together in Copenhagen this past December to continue a process begun in 1992 at the Rio Summit to address the causes and consequences of climate change. The ultimate goal of that process is to reach an international agreement that will limit global greenhouse gas (GHG) emissions to “safe” levels while at the same time ensuring the nations most vulnerable to the impacts of climate change are provided the financial and technical means to adapt to a changed climate.
There are many who believe the Copenhagen process was a complete failure. Others believe it was less than a great success, but a step in the right direction. Whether you see Copenhagen as an abject failure or a moderate success has a great deal to do with prior expectations. If you hoped for and expected Copenhagen to produce a successor to the Kyoto Protocol, you were very disappointed and rightly view the process as a grand failure. If, on the other hand, you viewed Copenhagen as an opportunity to begin crafting an emissions limitation agreement that is inclusive of the world’s largest emitters and one that sets up funding and technology transfers to aid the adaptation of the most vulnerable, you found Copenhagen as progress toward that goal.
The outcome of Copenhagen and the international process that now follows is shaped largely by the domestic politics of all the major emitting countries with U.S. domestic politics playing a particularly large role.
This series of Weathervane posts will provide a view of Copenhagen from a distinctly American perspective, blending global economics with domestic U.S. politics. In this post, I’ll focus on the evolution of current U.S. domestic policy and begin to examine the influence recent political developments may have on future policy in the U.S. and worldwide.
A Framework for Debate from the House of Representatives
The U.S. Congress has been considering policies to limit greenhouse gases (GHGs) for at least two decades. But it wasn’t until this past June that the U.S. House of Representatives passed comprehensive GHG legislation under the leadership of Congressmen Henry Waxman, D-Calif., and Edward Markey, D-Mass., (for whom the legislation is named) that the nation begun to take emission limitations seriously. While there is much to dislike in Waxman-Markey (W-M), there is no denying the breadth and depth of the legislation.
The regulations outlined in W-M cover 85 percent of all U.S. GHG emissions. The law requires the adoption of a cap-and-trade approach to GHG regulation with caps that would lower U.S. emissions 17 percent below 2005 levels in 2020 and 83 percent below 2005 levels in 2050.
The breadth and the depth of the covered emissions mean the total dollar value of the emission allowances will be very large. The U.S. Energy Information Agency (EIA) estimates allowance prices in 2020 at $31.7/ton CO2e (in 2007 dollars) and the annual value of allowances in 2020 to be in excess of $160 billion (2007 dollars). The bulk of the allowances are used diminish the cost impacts on consumers, aid trade-exposed and energy-intensive industries and support technology development and deployment.
W-M allows up to 2 billion tons of offsets to be used for emission reduction compliance systemwide—1 billion from domestic sources and 1 billion from international sources. If domestic sources cannot generate the full 1 billion tons, international sources can fill the gap up to an additional 500 million tons for a maximum of 1.5 billion tons. EIA estimates 1.2 billion tons of offsets entering the U.S. market in 2020 (900 billion from international sources) and 1.8 billion entering in 2030 (1.3 billion from international sources).
The legislation also includes unlimited banking and some borrowing that would allow regulated entities to borrow up to five years in advance to meet 15 percent of its obligation. W-M also has a mechanism to limit allowance price spikes. The mechanism, termed the “Strategic Reserve”, is a bank of allowances established by skimming a small amount of allowances off each year’s allocation from 2012 to 2050. These allowances would then enter the allowance market through a minimum price auction if the price of allowances rose above a prespecified level.
W-M passed the House of Representatives with 211 Democrats in favor, 44 against and 8 Republicans in favor and 168 against.
A Different Body, a Different Landscape in the Senate
In the U.S., both houses of Congress—the House of Representatives and the Senate—must pass comparable legislation in order to enact law. The U.S. Senate produced a bill similar to W-M this past fall under the leadership of Sens. Barbara Boxer, D-Calif., and John Kerry, D-Mass., (B-K). However, unlike the House of Representatives, the Senate did not pass the legislation.
Unlike the House of Representatives where legislation can pass with a simple majority, in the Senate it takes 60 percent of the 100 senators to overcome a procedural hurdle before a vote can be taken on legislation, effectively requiring 60 senators to support any bill. At the current time there are 59 Democratic Senators and 41 Republicans. No Republicans are supporting the B-K legislation and likely no more that 40 Democrats.
Why so little support in the Senate for efforts to limit GHG emissions? Unlike the House where representatives have comparably-sized constituencies, meaning most come from densely-populated states, each state gets the same representation in the Senate. So, a state with vast urban population of say 15 million residents gets two senators, but so does a rural state with ½ million total residents. Many low population rural states rely heavily on fossil fuels—predominately coal—for their electricity generation. They fear cutting GHG emissions will lead to significant energy price increases and negative impacts on local business and employment. In these states where the fear of GHG regulation is high, it doesn’t matter if their senator is a Democrat or Republican; if a vote were held to today a good many senators from both parties would vote no on B-K.
The current economic recession makes matters worse and while there is support among the American people to address climate change, it has a very low priority when compared to bread and butter economic issues.
Raymond J. Kopp is a senior fellow and director of Resources for the Future’s Center for Climate and Electricity Policy.
