Today, Sen. Bingaman will preview a proposal for Federal legislation on emissions trading and climate policy at a conference in New York sponsored by Resources for the Future (RFF).  Bingaman is the top Democrat on the Senate Energy Committee and author of a resolution passed by the Senate this year that acknowledges the reality of climate change and calls for mandatory action by the Federal government.

 

 

 

Today’s conference, "European and American Business Perspectives on Emissions Trading and Climate Change,” aims to enhance the understanding of participants from the EU and the on recent developments in emissions trading and climate change policy, on both sides of the Atlantic .  It will explore how companies are dealing with uncertainty surrounding climate policy and how they can engage the policy process to lessen that uncertainty.  For full conference details and agenda, see www.rff.org/businessperspectives.

 

 

Resources for the Future is an independent and nonpartisan think tank that seeks to improve environmental, energy and natural resource policymaking worldwide.  Here are Jeff’s prepared remarks:

 

 

“A Possible Path Forward”

 

Sen. Jeff Bingaman (D-New Mexico)

 

Resources for the Future

 

November 30, 2005

 

 

The Problem

 

 

“Of all the challenges we face and are failing to confront in the , global warming is the most important.  That is so both because the consequences of failing to act are catastrophic and because, unlike most of our other challenges, delaying action to confront the problem makes the implementation of a successful solution much more difficult. 

 

 

“Once greenhouse gases are in the atmosphere, it takes up to centuries for natural processes to remove them.  While there are six major greenhouse gases (methane, nitrous oxide, hydrofluorocarbons or HFCs, perfluorocarbons or PFCs, sulfur hexafluoride and carbon dioxide), by far the most significant in causing global warming is carbon dioxide.  In the , most carbon dioxide is emitted into the atmosphere as the result of two major activities.  About 35 percent of our carbon dioxide emissions results from electricity generation.  Another 35 percent comes from the use of oil and gas, principally in transportation sector.  Today, the accounts for about 25 percent of the greenhouse gases produced worldwide.  We all know, though, that greenhouse gas emissions in the developing world are growing rapidly.  By 2025, the largest global greenhouse gas emissions are expected to be from , and other developing countries.  How to construct a framework to address a problem of this size and complexity is literally a global concern.

 

 

The Question

 

“Is there a path forward for the to begin responsibly meeting this challenge?  At this time in our history, is it politically feasible for us to constrain the amount of carbon being released into the atmosphere, just as we constrain the amount of sulfur dioxide we put in the air or the amount of PCBs we dump in our rivers?

 

 

History of the Effort

 

 

“The progress that has been made to date has been at the international level. 

 

-         1992: The Senate ratified the Framework Convention on Climate Change – in which the and other countries pledged to voluntarily reduce greenhouse emissions to 1990 levels by 2000. 

 

-         1997: Kyoto Protocol

 

o        Set goal of pledging to cut emissions by 5.2 percent by 2012.

 

o        Applies binding commitments only to industrial countries.

 

o        Has been ratified by over 140 nations.

 

o        The European Union has begun to implement a program to meet its commitments under the Protocol, beginning with a trading program in January 2005.

 

 

“The , by comparison, has largely opted out of any real international cooperation on controlling greenhouse gas emissions.  While individual states and regions of the have tried to put in place programs to address this growing problem, and deserve acknowledgement for that good work, as a whole, the has not meaningfully contributed to any real progress.  While President Bush campaigned in 2000 on a promise to act on carbon dioxide emissions, in early 2001, the White House reversed course and announced that the would not continue to participate in negotiations to refine the Kyoto Protocol.

 

 

“Along with abandonment of the Kyoto process, the Administration has opposed any and all efforts to place meaningful limits on carbon dioxide emissions here in this country.  The President proposed a Clear Skies Initiative that covered only three pollutants from electric utilities: sulfur dioxide, nitrogen oxide and mercury – none of which are greenhouse gases.  In our recent deliberations on global warming on the energy bill in the Senate last summer, the Administration was strongly advocating against any approach that would move beyond purely voluntary action by industry.

 

 

At Present in the

 

 

“The first major proposal to be debated in the Senate on global warming was a hard cap on emissions of greenhouse gases, including carbon, proposed by Senators John McCain and Joe Lieberman.  They proposed that by 2010 the reduce its greenhouse gas emissions to year 2000 levels.  This reduction would be accomplished through establishment of a cap-and-trade system.

 

 

“The Senate first voted on the McCain-Lieberman proposal in 2003 and it received 43 votes of support, including mine.

 

 

“In the congressional elections in 2004, though, the makeup of the Senate shifted away from this proposal.  In June of this year, the McCain-Lieberman proposal (slightly changed) received only 38 votes.

 

 

An Alternative Proposal

 

 

“An alternative proposal for an economywide cap-and-trade system has been put forward by the National Commission on Energy Policy, or NCEP.  It differs from McCain-Lieberman in three primary ways:

 

 

1.      It sets less ambitious goals, and

 

2.      It contains a so-called safety valve (which insures that the cost of compliance will not exceed a set amount per ton of carbon put into the atmosphere).  That cost cap would grow slowly each year.

 

3.      It provides for Congress to review the progress of other actions every five years to determine the appropriate level of continued efforts by the .

 

 

“I believe that this alternative proposal is something that can be enacted by Congress in the next year or two.  During the debate on the energy bill in the Senate this past June, 53 Senators voted in support of a resolution that endorsed this alternative in general terms.

 

 

A Path Forward

 

 

“In order for this generically-supported proposal to move forward, we need to take several steps: 

 

·        First, we need to persuade all Senators who voted for the Sense of the Senate resolution to support a detailed and concrete legislative proposal to implement the cap-and-trade system. 

 

·        Second, we need to persuade other Members who did not support the Resolution that they can be comfortable with that legislation.

 

·        Third, and probably most difficult, we need to get general agreement on how the emission credits in the cap and trade system would be issued and allocated. 

 

 

“The NCEP proposals for a safety valve and a Congressional review of developing country engagement have persuaded many Senators that a realistic and responsible legislative approach to the global warming problem is possible.  For too long, the national debate over action on climate change has been stuck over how much emission reductions will ultimately cost and how the should engage the developing countries.

 

 

“The issue of cost has been particularly important here in the .  Some assert that technology will develop quickly once a market-signal is in place, enabling low-cost compliance.  Others take a more pessimistic view of technology progress and assert that any mandatory reduction regime will have devastating economic impacts.  As this is a disagreement about different projections of the future, no side can ever “win” this argument.  To move us beyond this paralyzing debate, the NCEP has proposed to shift this inherent uncertainty to the environmental benefits side of the equation by proposing a cost-cap, usually described as a “safety-valve”.

 

 

“The decision to place a priority on cost-certainty over emissions-certainty reflects our appreciation of strongly held and fundamentally unresolvable disagreements about technological progress and the ultimate costs of emission reductions. Rather than spending several more years paralyzed by differing climate change modeling assumptions, the safety-valve allows us to begin, albeit cautiously, to reduce U.S. greenhouse gas emissions while protecting our economy.  This has been a very useful tool in persuading Members of the Senate that we can begin to take mandatory steps that they won’t regret.

 

 

“Like the issue of costs, competitiveness concerns, especially with developing nations like , are paramount in the minds of many of my colleagues.  I believe that the must take a step to rejoin the community of developed nations in addressing this problem, but I also recognize that there can be no meaningful solution that does not also address the emissions of other major economies.  The NCEP proposal has attracted a lot of interest by linking the rate of emissions reductions and cost caps to a Congressional review every five years of international progress.

 

 

“These two policy proposals -- the safety valve and the Congressional review of international actions -- have been useful tools in persuading Members of the Senate that there is a workable framework for the to begin engaging on the climate issue.  I think they will be important tools moving forward.

 

 

“I recognize that some of these tools, the safety valve in particular, are not a part of the European Union’s trading program.  I commend the EU for its good work and I hope that whatever program we implement in the can one day link up with it.  That may be too much to ask of our political process at this point in time, but it is a direction I would like to see us move.

 

 

“Awareness of different proposals is inherently important as we move forward.  A goal of climate legislation should be to give businesses certainty about the future, but we will do more harm than good if different programs ultimately cannot link up to each other in a consistent manner.  I am concerned that this will happen in the .

 

 

"Many of you may be aware of the Regional Greenhouse Gas Initiative that is under discussion here in the Northeastern states.  It is an attempt to construct a regional, market-based cap-and-trade program for carbon dioxide emissions from the electricity generation sector.  The nine states that are participating in the initiative plan to start by allocating and trading carbon dioxide emissions in the power generation sector only, to be followed by a broadening of the program to allow generation of offset credits in other industrial sectors that can be purchased by the power sector to meet its compliance requirements.  It is different from the NCEP proposal and the McCain-Lieberman proposal in that it does not envision a more economy-wide approach to greenhouse gas emissions.

 

 

“ California is seeking to implement its own carbon standards as well.  In June of this year, California Governor Schwarzenegger announced emission reduction goals for the state, and the governors of California, Oregon and Washington have committed to act individually and regionally to reduce greenhouse gas emissions below the current levels through strategies that promote long-term economic growth, protect public health and the environment, consider social equity, and expand public awareness.

 

 

“In my own state of New Mexico, Governor Richardson has formed a Climate Change Action Council within the state government and statewide stakeholder group to develop a report over the next year to include, among other things:

 

• Proposals to reduce  New Mexico 's total greenhouse gas emissions to 2000 levels by the year 2012, 10 percent below 2000 levels by 2020 and 75 percent below 2000 levels by 2050.        

   

• An inventory of existing and planned actions that contribute to greenhouse gas emissions reductions.      

   

• Consideration of costs and benefits of proposals.       

   

• Findings on initiatives to create meaningful regional and national policy to address climate change.

   

“The governors of these states deserve tremendous credit for taking initiative and providing leadership on climate issues, but I see the development of these State and regional approaches as a wakeup call for Congress and businesses to take a more accelerated look at a national program so that we can find a consistent way to regulate carbon in the United States.

 

“In order to do this, there are many questions to ask that we don’t have the answers to yet.  We need to know how companies will maximize efficiency if they have facilities under different carbon programs across the country and across the world.  We need to know how different programs can link to each other and how to avoid creating competitive concerns because different programs create incentives for technologies and fuels that others may not.

 

 

“It seems to me that we can talk about different targets and timetables, here in the and in international negotiations, but what we need to do is get a clear understanding of all of the different policy frameworks and how they would work together.

 

“By and large, the greatest question that we have about the design of a framework is how the allowance allocation process will be worked out – that is, determining how the free credits are distributed throughout the economy.  This is a very difficult task on our hands.  Unlike previous efforts to reach consensus on broad legislation, like the Acid Rain Trading Program, there is no leadership from the Administration to signal the need to work these issues out.  Despite engagement from select companies and leaders, business and industry have been slow to engage on the design of a mandatory carbon policy in the – mindful that contradicting the Administration’s position can damage their ability to influence other important matters.

 

 

“Today’s conference illustrates the constructive role that the business community has played in the design and implementation of carbon policy in the EU.  We need that same engagement by the business community here in the .  Business and industry will never have such a good opportunity to influence the design of mandatory climate legislation as they do today.

 

 

“Many businesses are continuing their opposition to anything but voluntary limits on carbon, but we have seen a shift in the willingness of companies to at least begin discussing what mandatory policies will look like.  The recent Resolution in the Senate and the approaching end to the current Administration’s term have signaled that it is no longer possible for the business community to afford disengagement.  Many companies realize that they may not support mandatory actions on climate, but there are great risks to remaining on the sidelines.  We welcome their input and open dialogue and my office has not made political support of this proposal a prerequisite for open discussion.  If we are to do this right, we acknowledge that we need input and expert analysis from the private sector. 

 

 

Conclusion

 

 

“I don’t want to leave either the impression that I think this is easily doable or the impression that if we meet these challenges, we will have solved the global warming problem.  If the can move forward with a program like the one I have mentioned, it will be a small step, but a very important step nonetheless.

 

 

“We will continue to face difficulty on the path forward for a proposal, but the Resolution we passed in the Senate shows we have come a long way from where we were just a year ago.

 

 

“It is important to recognize that many of my colleagues in the Senate are interested in doing something meaningful on climate.  They have genuine concerns about economic growth and global participation, but I believe this is true of everyone involved in this issue, including the developing countries.  Given that there is genuine interest in doing something, I think the next step for the , and potentially the world, is to move beyond Kyoto and discuss solutions that include all of the key players.  The solution may have to be modest at first, but I will emphasize that I think it is beneficial to build a big tent and do something mandatory, even if modest, with all of the key players than to delay further action.

 

 

“In closing, thank you for having me speak before you today.  I understand that many of you are going to the Conference in Montreal .  I know there will be difficulties, including difficulties negotiating with the and others.  In the face of this difficulty, I hope that you will continue to recognize that there is genuine interest in moving forward here in the and that modesty and inclusiveness are two important principles that helped move this issue in the Senate this spring.”