Waxman-Markey's International Reach

Last Friday’s passage of the American Clean Energy and Security Act of 2009 by the House represents a significant step forward for U.S. domestic energy and climate policy—the first time either house of Congress has agreed to a cap on greenhouse gas emissions. In addition, the bill’s supplemental reductions and financing provisions give it a powerful international reach that will support United States participation in global climate talks as the world gathers at key summits over the next six months—including next week’s G8 meetings in Italy.

Protecting these international provisions is even more essential as legislation moves to the Senate, since without them it will be much more difficult—perhaps impossible—for the U.S. climate negotiating team to convince all major emitters to agree to a global deal in Copenhagen in December. Indeed, if U.S. senators truly want China and other emerging economies take on international greenhouse gas pledges and maintain a level playing field for U.S. manufacturers, preserving these two provisions of domestic legislation will be absolutely critical.

The U.S. negotiating team is realistically using President Obama’s proposed 14 percent cut below 2005 levels—a return to 1990 levels—as the basis for its current negotiating position. However, it is clear that other nations—including the members of the European Union and China—are closely watching the U.S. with the hope that domestic policy will raise the level of effort the U.S. can agree to internationally to a number closer to the 25 to 40 percent cuts below 1990 levels they expect. As others have argued, the supplemental emissions reductions from international forest conservation included in Waxman-Markey could allow the United States to increase its international pledge by 10 percent—up to 23 percent below 1990 levels by some estimates. Although perhaps unfairly, since even agreeing to return to 1990 levels would be a huge lift for U.S. domestic policy, this critical provision could spell the difference between the international community accepting and rejecting the United States’ mid-term level of effort in a new climate agreement.

Reps. Waxman and Markey have also correctly identified that the next global climate deal is as much about financing as it is about targets. Financing is the critical incentive developing countries need to participate in the agreement, which in their minds could present a substantial threat to their development goals for a problem they did not cause. However, as time goes on and their emissions continue to grow, they also know that international pressure will increase for them to curb emissions, and thus would prefer to get started as soon as possible.

The Waxman-Markey bill would allocate $5 billion a year by 2020 for direct climate change assistance from the U.S. government to developing nations ($740 million for technology, $3.7 billion for tropical forest conservation, and $740 million for adaptation). This financing serves dual purposes by helping to create U.S. clean energy export jobs and supporting the supplemental reductions discussed above. The bill would also mobilize an estimated additional $3.5 to $15 billion a year by 2020 from private companies for emissions mitigation in developing nations—depending on the actual cost and supply of international emission reductions compared to domestic action—reducing U.S. domestic costs of complying with new climate regulations. Combined, international investments in climate change under Waxman-Markey would range from $8.5 to $20 billion a year in 2020. This is less than is probably required—especially in the areas of adaptation and technology transfer—but certainly a significant start. Removing these incentives would substantially weaken the U.S. negotiating position in Italy and Copenhagen.

International Funding Provisions in the American Clean Energy and Security Act of 2009 (Waxman-Markey)

Fact Sheet

International Allowance Set-Aside Percentages and Approximate Dollar Values [1](in millions)

[1] Estimates of dollar values derived from EPA analysis of Waxman-Markey draft legislation, based on IGEM model projections of cap level and allowance value.

[2] The EPA Administrator is required by H.R. 2454 to increase the allowance set-aside for supplemental reductions from international forest conservation if necessary to ensure the purchase 720 million tons of verified emissions reductions each year from 2020-2025, and a total of 6,000 million tons from 2012-2025.