Climate Week In New York: Hope Over Pessimism?
As President Obama spoke at the United Nations today and now heads to the G-20, international skepticism is obvious. The United States still has not taken definitive action to reduce greenhouse gas emissions. The lack of movement in the Senate on a climate bill is now cited as the primary reason that the US cannot make the level of concrete commitments necessary to forge a global agreement. This lack of Senate action does not bode well for Obama to position the US as a global leader on climate change. As Politico reported yesterday, the European Union’s ambassador to the US, John Bruton, is not happy about Senate delay stating that “(i)f this were to happen, it would open the United States to the charge that it does not take its international commitments seriously, and that these commitments will always take second place to domestic politics. I submit that asking an international Conference to sit around looking out the window for months, while one chamber of the legislature of one country deals with its other business, is simply not a realistic political position.”
Yet despite the growing gloom in climate policy circles, signs of optimism are there.
First, President Obama signaled some willingness to get out ahead of the Senate. In his speech at the UN Climate Change Summit today he indicated that the US will be “slashing our emissions to reach the targets we set for 2020 and our long-term goal for 2050." While the President still faces the Senate as well as international expectations on the specifics of this goal, the US does appear at least open to an outcome in Copenhagen that includes mid-range targets.
President Obama also expressed a desire to phase out fossil fuel subsidies in the context of the upcoming G-20 negotiation. In a recent New York Times article, Steve Kretzmann of NGO Oil Change International noted that "If the Obama administration is serious about eliminating all fossil fuel subsidies, that is wonderful and would go a long way toward correcting what Nicholas Stern called the greatest market failure of all time, which is climate change.” The details of how these subsidies are defined and what the President could agree upon internationally without requiring domestic political action remains to be seen. Nevertheless, these statements at the UN do suggest some willingness of the Administration to demonstrate positive leadership on the international stage with a view to working with Congress on the details.
With China also making a suite of commitments in New York this week, the pressure for US action continues to grow and the rationales for inaction continue to diminish.
Don't Yank the Tariff Provisions from the House Climate Change Bill
President Obama deserves a share of the credit for the historic vote by the House June 26 to pass the first climate change bill. The bill is far from perfect, but it is an important step in the right direction. In comments following the House vote, however, President Obama took a step in the wrong direction. In urging the Senate to swiftly pass their counterpart to the House bill, President Obama raised questions about a provision that would impose a tariff on the import of goods from countries where the cost of such good benefits from weaker climate change laws:
"At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there….I think we're going to have to do a careful analysis to determine whether the prospects of tariffs are necessary, given all the other stuff that was done and had been negotiated on behalf of energy-intensive industries."
Removing the tariff provision from the bill would give its opponents a strong argument for its defeat. Opponents argue that by imposing what they classify as an exorbitant energy tax on products such as steel, cement and chemicals the climate bill would simply force manufacturers to shift production to foreign countries with more favorable energy costs, resulting in no net reduction of greenhouse gas emissions AND loss of jobs in the US.
This is a potent argument which, if left unanswered, could doom the bill in the Senate. Although President Obama suggested that there may be better alternatives to the "protectionist" provision in the House bill he did not elaborate on them. One alternative that has received some favorable press is the so-called "sectoral approach" in which certain energy-intensive industries seek to reach agreement on a global standard for GHG emissions from facilities in the sector.
Although the sectoral approach is arguably sound in principle, the fear is that in practice the affected sectors would be able to push through weak standards which undermine the battle against global warming. It is almost like begging the fox to guard the henhouse. Another alternative would allow the United States to scrap its cap-and-trade system if China and India do not adopt similar programs. This avoids the fox/henhouse problem, but creates a bigger one: in effect, it cedes to foreign countries the decision of whether WE should combat climate change. The House approach avoids both problems, and should be followed in the Senate.
Chairman Waxman's Climate Bill
To paraphrase German Chancellor Otto von Bismarck, don't ask how legislation or pork pies are made.
Think of the House Energy and Commerce Committee's new compromise on climate legislation as freshly baked pork pie.
Let's first consider the US emissions reductions goals. Did the Committee bake a pie small enough to get the US on the track to meeting scientifically defensible emissions reductions targets? No.
The bill would cap emissions 17 percent below 2005 levels by 2020, instead of the original draft’s 20 percent below. Committee chair/chef Henry Waxman essentially promised (again with some poetic license to your author) to bake a smaller pie -- later. He noted the bill retains its original target reductions in the future: 42 percent by 2030 and 83 percent by 2050. We will see -- later.
Let's consider the allocation of the highly valuable rights to emit. These are akin to slices of the pork pie.
The President campaigned on selling slices to fund clean energy and beleaguered consumers. But the Congress would prefer to get the credit for giving away pieces of pie itself.
In fact, this was Chef Waxman's secret ingredient. He bought support for the climate bill by doling out valuable slices for free. The bill gives 35 percent of the allowances to local electric distribution companies -- over a third of the entire pie in one gulp. Another free slice goes to the auto industry for research on new technology. Another one may go to refineries. Still more slices will be given to ailing manufacturing industries such as steel and cement.
That's a lot of pie.
Indeed, the pie is disappearing fast. It's over halfway eaten already.
Once it seemed likely that free slices might go to leaner, fitter wind, solar, biomass, and other green technologies. But did the committee dole out slices to clean energy when it sliced up the pie? If they did, we missed it.
Chef Waxman surely understands what he is doing. But is this the way the pie-baking was supposed to go? Chancellor Bismarck was right: don't ask how legislation or pork pies are made.
