January 15, 2009
US Climate Action Partnership climate change plan launched -- behind the times
The US Climate Action Partnership (USCAP), a coalition of business, environmental and other interests, unveiled its "Blueprint for Legislative Action" climate change program today, which features a cap-and-trade approach to reducing GHG emissions. USCAP link to 28 page Blueprint USCAP Executive Overview The cap-and-trade proposal is, of course, by now mainstream thinking -- and unsurprising given the Environmental Defense economic incentive approach to environmental problems. The USCAP plan is based upon an 80% reduction of 2005 GHG emissions by 2050. Note that this goal falls far short of more ambitious proposals already made in Congress and is woefully inadequate to meet the 350 ppm, 1 degree C criterion for climate change mitigation policy proferred by James Hanson, et al. to avoid dangerous global warming impacts.
The Blueprint apparently represents two years of work by USCAP members building on their January 2007 Call for Action, which articulated principles for climate change mitigation efforts and made recommendations urging “prompt enactment of national legislation in the United States to slow, stop and reverse the growth of greenhouse gas (GHG) emissions over the shortest time reasonably achievable.”
The Blueprint responds to requests by federal policymakers for a detailed consensus to help inform climate change legislation. USCAP acknowledges that it does not include all stakeholders and interests. It characterizes the Blueprint as an "integrated package of policies [providing] a pragmatic pathway to achieve aggressive environmental goals in a responsible and economically sustainable manner." 4 page
Excerpts from Executive Overview:
The United States faces an urgent need to reinvigorate our nation’s
economy, enhance energy security and take meaningful action to slow,
stop and reverse GHG emissions to address climate change.
USCAP agrees that the science is sufficiently clear to justify
prompt action to protect our environment. Each year of delayed action
to control emissions increases the risk of unavoidable consequences
that could necessitate even steeper reductions in the future, with
potentially greater economic cost and social disruption.
To address these challenges successfully will require a fundamental
shift in the way energy is produced, delivered and consumed in the US
and around the globe. Thoughtful, comprehensive and tightly linked
national energy and climate policy will help secure our economic
prosperity and provide American businesses and the nation’s workforce
with the opportunity to innovate and succeed.
While we recognize that achieving the needed emission reductions is not free of costs, we also believe well-crafted legislation can spur innovation in new technologies, help to create jobs, and increase investment and provide a foundation for a vibrant, low-carbon economy.
Climate change presents a global problem that requires global solutions. USCAP believes that international action is essential to meeting the climate challenge. U.S. leadership is essential for establishing an equitable and effective international policy framework for robust action by all major emitting countries. For this reason, action by the U.S. should not be contingent on simultaneous action by other countries. In our Blueprint we offer a set of principles to guide Congress and the Administration to address the global dimension of this problem.
Cap-and-Trade System Design
We believe the strongest way to achieve our emission reduction goals is a federal cap-and-trade program coupled with cost containment measures and complementary policies for technology research, development and deployment, clean coal technology deployment, lower-carbon transportation technologies and systems, and improved energy efficiency in buildings, industry and appliances. In a cap-and-trade system, one allowance would be created for each ton of GHG emissions allowed under the declining economy-wide emission reduction targets (the “cap”). Emitters would be required to turn in one allowance for each ton of GHG they emit. Those emitters who can reduce their emissions at the lowest cost would have to buy fewer allowances and may have extra allowances to sell to remaining emitters for whom purchasing allowances is their most cost-effective way of meeting their compliance obligation. This allows the economy-wide emission reduction target to be achieved at the lowest possible cost.
Targets and a Timetable for Action
Emission Reduction Targets
USCAP believes the legislation should establish a mandatory, national economy-wide climate protection program that includes aggressive emission reduction targets for total U.S. emissions and for capped sectors (see sidebar). Equally important, it is imperative that the costs of the program be manageable. USCAP believes the recommended targets are achievable at manageable costs to the economy provided that a robust offsets program and other cost containment measures, along with other critically important policies as recommended in the Blueprint are enacted. In addition, Congress should require periodic assessment of emerging climate science and U.S. progress towards achieving emission reduction targets, and social, environmental and economic impacts in order to determine if legislative revisions are necessary to improve the nation’s climate protection program.
Scope of Coverage and Point of Regulation
USCAP recommends the cap-and-trade program cover as much of the economy’s GHG emissions as politically and administratively possible. This includes large stationary sources and the fossil-based CO2 emitted by fuels used by remaining sources. The point of regulation for large stationary sources should be the point of emission. The point of regulation for transportation fuels should be at the refinery gate or with importers. Congress should establish policies to ensure carbon-based price signals are transparent to transportation fuel consumers and other end users, thereby encouraging them to make informed GHG-reduction choices. Emissions from the use of natural gas by residential and small commercial end users can be covered, for example, by regulating the utilities that distribute natural gas, often referred to as local distribution companies (LDCs).
Offsets and Other Cost Containment Measures
Adequate amounts of offsets are a critical component of the USCAP Blueprint. Emissions offsets are activities that reduce GHG emissions that are not otherwise included in the cap. USCAP recommends all offsets meet strong environmental quality standards (i.e., they must be environmentally additional, verifiable, permanent, measurable, and enforceable). We recommend that Congress should establish a Carbon Market Board (CMB) to set an overall annual upper limit for offsets starting at 2 billion metric tons with authority to increase offsets up to 3 billion metric tons, with domestic and international offsets each limited to no more than 1.5 billion metric tons in a given year.
In addition, the CMB should oversee a system-wide strategic offset
and allowance reserve pool that contains a sufficiently large set of
additional offsets and, as a measure of last resort, allowances
borrowed from future compliance periods that could be released into the
market in to prevent undue economic harm in the event of excessively
high allowance prices, especially in the early years of the program.
USCAP recommends other measures to limit allowance price spikes and
volatility including unlimited banking of allowances and effective
multi-year compliance periods.
Allocation of Allowance Value
Emission allowances in an economy-wide cap-and-trade system will represent trillions of dollars in value over the life of the program. USCAP believes the distribution of allowance value should facilitate the transition to a low-carbon economy for consumers and businesses; provide capital to support new low- and zero-GHG-emitting technologies; and address the need for humans and the environment to adapt to climate change.
USCAP recommends that a significant portion of allowances should be
initially distributed free to capped entities and economic sectors
particularly disadvantaged by the secondary price effects of a cap and
that free distribution of allowances be phased out over time.
The Blueprint identifies principles to guide the fair and
equitable allocation of allowances to: end-use consumers of
electricity, natural gas, and transportation fuels; energy intensive
industries that face international competition; trade-exposed commodity
products; competitive power generators and other non-utility large
stationary sources; low-income consumers and workers in transition;
programs to achieve technology transformation; and adaptation needs of
vulnerable people and ecosystems at home and abroad. A significant
portion of emission allowance value should also be allocated to
electric and natural gas LDCs, which are cost regulated, to dampen the
price impact of climate policy on electricity and small natural gas
customers, particularly in the early years of the emission constraint.
Credit for Early Action
USCAP recommends a robust program to provide credit for early action for those who have or will take early actions to reduce emissions. This is an important cost-containment mechanism for early actors to ensure they will not be at a relative disadvantage compared with those who wait to take action.
USCAP believes that policies and measures that are complementary to a cap-and-trade program are needed to create incentives for rapid technology transformation and to ensure that actual reductions in emissions occur in capped sectors where market barriers and imperfections exist that prevent the price signal from achieving significant reductions.
A robust technology transformation program that results in substantial investment in new technologies is a critical complementary measure to a national strategy to cap and reduce GHG emissions. USCAP recommends a program that features federal support for emerging technology research and early demonstration and deployment of new technologies.
USCAP recommends that Congress provide needed regulatory certainty and substantial financial incentives to facilitate and accelerate the early deployment of carbon capture and storage (CCS) technology, including addressing financial and regulatory barriers that could delay wide-spread deployment. USCAP recommends implementing CO2 emissions standards for coal plants initially permitted after January 1, 2015, subject to Congress providing adequate funding for CCS and needed regulatory certainty being in place; and retrofit requirements for coal plants initially permitted after January 1, 2009 and prior to January 1, 2015, subject to deployment thresholds being met.
Achieving the USCAP economy-wide emission reduction targets and timetable will require a systematic approach that involves fuel providers, vehicle and equipment manufacturers, consumers and other end users, and public officials who set policy direction and plan and manage transportation and related infrastructure and land use. The systematic approach recommended by USCAP includes improving both fuel and vehicle GHG performance standards, as well as improving the efficiency of the transportation system.
Buildings and Energy Efficiency
USCAP believes one of the most immediate steps Congress can take to begin to address climate change is to enact policies and measures that improve the energy efficiency of the U.S. economy. We recommend aggressive promotion and implementation of GHG reduction programs including state- or utility-sponsored conservation and efficiency programs, tightened building codes and standards, and appliance efficiency standards. Collectively, these programs will help drive investment in cost-effective energy efficiency by encouraging utilities and consumers to improve efficiency when the cost of doing so is lower than the cost of an equivalent amount of energy in the form of electricity or natural gas.
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