Order Code RL30024
U.S. Global Climate Change Policy:
Evolving Views on Cost, Competitiveness, and
Comprehensiveness
Updated January 28, 2008
Larry B. Parker and John E. Blodgett
Specialists in Energy and Environmental Policy
Resources, Science, and Industry Division
U.S. Global Climate Change Policy: Evolving Views on
Cost, Competitiveness, and Comprehensiveness
Summary
U.S. policy toward global climate change evolved from a “study only” to a more
“study and action” orientation in 1992 with ratification of the U.N. Framework
Convention on Climate Change (UNFCCC). The Convention committed developed
countries to aim at returning their greenhouse gas emissions to their 1990 levels by
the year 2000. The U.S. decision to ratify the UNFCCC reflected both the nonbinding
nature of the accord and analyses that suggested that the United States could achieve
the necessary reduction at little or no cost. Under the UNFCCC, developed countries
were to adopt national plans and policies to reduce greenhouse gas emissions. The
United States submitted such plans in 1992, 1994, 1997, 2002, and 2006.
The Energy Policy Act of 1992 (EPACT) has been the principal U.S. statutory
response to the UNFCCC. Primarily an energy policy response to the Iraqi takeover
of Kuwait and the U.S.-led reaction, EPACT’s energy conservation, renewable
energy, and other titles were also seen as having a beneficial effect on global climate
change concerns. In addition, the George H.W. Bush and Clinton Administrations
encouraged voluntary reductions by industry through administrative initiatives, such
as EPA’s various “green” programs. This largely voluntary approach to complying
with UNFCCC allowed the two Administrations to implement a climate change
policy without having to ask Congress for new authorities.
However, the subsequent inability of nations, including the United States, to
achieve reduction goals under the UNFCCC led to negotiations on the Kyoto
Protocol, which established mandatory limits on emissions for developed countries.
While the United States signed the Protocol, the Clinton Administration did not
submit it to the Senate, which earlier had specified (S.Res. 98) that any such
agreement had to include reductions by developing countries and must “result in no
serious harm to the economy of the United States.” In 2001, the George W. Bush
Administration announced that it was abandoning the Kyoto treaty process because
of concerns about cost, competitiveness, and the comprehensiveness of the treaty
with respect to third world countries, and that it would focus on voluntary programs
to reduce the intensity of greenhouse gas emissions per unit of economic activity.
Also, it launched a six-nation Asia-Pacific Partnership to coordinate voluntary
actions to address greenhouse gas emissions and in 2007 convened a meeting of the
major economies to discuss approaches to climate change.
The reluctance to adopt mandatory actions reflects concerns about costs. If one
believes that the costs of greenhouse gas reductions are modest, action to reduce
emissions poses little risk. However, if one perceives substantial costs from reducing
carbon emissions, the uncertainty about any benefits raises serious questions as to the
prudence of such action. This clash of perspectives is likely to ensure that costs
remain a pivotal issue, along with scientific uncertainty, as the climate change policy
debate continues. Momentum for action may be accelerating: the Senate in 2005
passed a Sense of the Senate resolution that Congress should proceed with
mandatory, market-based limits and incentives on greenhouse gases. In the 110th
Congress, deliberations on comprehensive climate change bills have been initiated.
Contents
From Study to Commitment: The UNFCCC . . . . . . . . . . . . . . . . . . . . . . . . . 1
Developing Programs: EPACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Comparing EPACT and the UNFCCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
UNFCCC Results: Action Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The George H. W. Bush Administration’s National Action
Plan: “No Regrets” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Clinton Administration’s National Action Plans: Industrial
Strength “No Regrets” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Kyoto and S.Res. 98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The George W. Bush’s Administration’s National Action Plan:
Abjuring an Emissions Reduction Goal . . . . . . . . . . . . . . . . . . . . . . . 13
Looking for a New Direction: Senate Amendment 866 . . . . . . . . . . . . . . . . 16
Addressing the Three-Cs: Emerging Price Versus Quantity Debate . . . . . 17
Conclusion: Battle of Policy Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . 20
List of Tables
Table 1. U.N. Framework Convention on Climate Change and the Energy
Policy Act of 1992: Correspondences of Selected Provisions . . . . . . . . . . . . 4
Table 2. Selected Major Reduction Strategies Listed by the
George H. W. Bush Administration’s Action Plan . . . . . . . . . . . . . . . . . . . . 9
Table 3. Selected Major Reduction Strategies Under the 1993 Clinton
Action Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Table 4. Principles Behind the George H. W. Bush Administration’s and
George W. Bush Administration’s Climate Action Plans . . . . . . . . . . . . . . 14
Table 5. Comparison of Trading Program With and Without Safety Valve . . . . 19
U.S. Global Climate Change Policy:
Evolving Views on Cost, Competitiveness,
and Comprehensiveness
From Study to Commitment: The UNFCCC
U.S. policy toward global climate change evolved from a “study only” to a more
“study and action” orientation in 1992 with ratification of the U.N. Framework
Convention on Climate Change (UNFCCC). During the protracted deliberations on
the UNFCCC, the National Academy of Sciences (NAS) released an influential
report on global warming. In the report entitled, Policy Implications of Greenhouse
Warming, the NAS stated “The United States could reduce or offset its greenhouse
gas emissions by between 10 and 40 percent of 1990 levels at low cost, or at some
net savings, if proper policies are implemented.”1 The NAS’s energy policy
recommendations focused on increasing energy conservation and efficiency,
incorporating greenhouse warming as a factor in future energy planning, and studying
and eventually implementing “full social cost pricing” of energy.
Although widely publicized and promoted, this premise was not sufficient for
the U.S. to commit to firm targets and time frames for carbon dioxide (CO )
2
reductions, as witnessed by the U.S. negotiation and ratification of the UNFCCC.2
Driven by concerns about scientific uncertainty with respect to global climate, the
George H. W. Bush Administration — against the wishes of most environmentalists
and some vocal Members of Congress — refused to commit to a binding agreement
to reduce the nation’s CO emissions by a specific date. The UNFCCC reflects this
2
negotiating position of the United States and some other countries in that it calls for
voluntary control measures. Senate floor debate on ratification of the treaty brought
out concerns by some Senators about the cost of compliance, its impact on the
country’s competitiveness, and the comprehensiveness with respect to the developing
countries — concerns that were overcome because of the non-binding nature of the
reduction goals.3 Those arguing for more binding commitments argued that
emissions controls could create jobs and enhance economic health, and that
emissions were an indicator of inefficiency.
1 National Academy of Sciences, Policy Implications of Greenhouse Warming, (Washington,
D.C.: National Academy Press, 1991), p. 73.
2 The United States signed the UNFCCC on June 12, 1992, and ratified it on October 15,
1992. The UNFCCC entered into force on March 21, 1994. For a review of the
negotiations, see CRS Report 92-374, Earth Summit Summary: United Nations Conference
on Environment and Development (UNCED), Brazil, 1992, by Susan R. Fletcher.
3 Congressional Record, Vol. 138 (October 7, 1992), 33520-33527
CRS-2
As finally negotiated, the objective of the Convention is to:
... achieve ... stabilization of greenhouse gas concentrations in the atmosphere at
a level that would prevent dangerous anthropogenic interference with the climate
system. Such a level should be achieved with a time frame sufficient to allow
ecosystems to adapt naturally to climate change to ensure that food production
is not threatened, and to enable economic development to proceed in a
sustainable manner.4
Arguing that “the developed country Parties should take the lead” in reducing
emissions, the Convention states that developed countries shall aim toward returning
their greenhouse gas emissions to their 1990 levels by the year 2000. In line with this
goal, developed countries were to adopt national plans and policy options to mitigate
climate change by reducing anthropogenic emissions and enhancing sinks. As
discussed later, the United States submitted such plans in 1992, 1994, 1997, 2002,
and 2006.
Developing Programs: EPACT
The Energy Policy Act of 1992 (EPACT), P.L. 102-486, has been the principal
statutory basis for programs making up the U.S. response to the UNFCCC. Primarily
crafted as an energy policy response to the Iraqi takeover of Kuwait and the U.S.-led
response, its energy conservation, renewable energy, and other titles were also seen
as having a beneficial effect on global climate change concerns being debated at this
time in international circles. In its 1992 submission to the UNFCCC, the George H.
W. Bush Administration listed 11 different titles of EPACT as “extremely important”
to its overall strategy of reducing greenhouse gases.5
The aforementioned recommendations of the NAS were embodied in several
sections of EPACT. These sections included provisions to establish energy-
efficiency standards, promote dissemination of energy-saving information, establish
several national research and development programs related to deployment of energy-
efficiency technologies, and authorize the Department of Energy (DOE) to evaluate
cost-effective energy efficiency technologies. In addition to these activities to
improve energy efficiency, EPACT includes a separate title to incorporate global
warming concerns in energy policy planning. Title XVI was designed to assist the
government in making informed decisions on global warming by collecting,
analyzing, and reporting information on climate change through DOE. Activities
included a report on the various economic, energy, social, environmental, and
competitive implications of reducing greenhouse gas emissions; developing a least-
cost energy strategy designed to achieve “the stabilization and eventual reduction in
the generation of greenhouse gases”; creating a Director of Climate Change; and
developing an inventory of greenhouse gases and early reductions in such gases.
4 United Nations Framework Convention on Climate Change (UNFCCC), Article 2.
5 Department of State, National Action Plan for Global Climate Change (Washington, DC:
Department of State, 1992), p. 73.
CRS-3
Indeed, the passage of EPACT was anticipated by its authors to stabilize or even
reduce emissions of greenhouse gases at little cost, in line with the 1991 NAS report.
As stated by the House Report:
The committee expects that, if fully implemented, H.R. 776 will result in a
substantial reduction in U.S. greenhouse gas emissions relative to forecasted
levels. The bulk of these reductions result from the programs that will
demonstrate and transfer advanced clean coal and renewable technologies
abroad, and from the domestic energy efficiency and renewable energy
initiatives. The provisions on electric utilities, alternatives fuels and coalbed
methane are also significant.6
Comparing EPACT and the UNFCCC
EPACT and the UNFCCC were debated during the same time period. Table
1 compares EPACT, title XVI, as enacted, and UNFCCC, as signed and ratified by
the United States. Essentially, the UNFCCC establishes policies, and EPACT
establishes program responses. Thus EPACT is silent on the nature of the problem,
on the need for an immediate response, or whether the United States should take the
lead in any such response. But, as Table 1 shows, EPACT’s portfolio of domestic
strategies and program options — technology development/transfer, financial
assistance to developing countries, and least-cost solutions — closely track the
provisions of the UNFCCC. With the authorization of these programs and activities,
EPACT effectively constitutes implementing legislation for the U.S. commitment
made in signing and ratifying the UNFCCC. It should be noted, however, that
typically the programs are relatively specific, not broad authorizations; that for many
the benefit of reducing greenhouse gases is a “bonus” in achieving other goals (e.g.,
“substantially reduce environmental pollutants, including greenhouse gases...” [sec.
1608]) ; and that in at least one case the act explicitly denies new authority (i.e.,
“This subsection does not provide any new data collection authority” [sec. 1605(a)]).
Such an approach reflects the voluntary nature of the Rio commitments, and the “no
regrets” policy position of the George H. W. Bush Administration, as discussed in
the next section.
6 Committee on Energy and Commerce, Comprehensive National Energy Policy Act, House
Rept. 102-474, Part 1, March 30, 1992, p. 152.
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Table 1. U.N. Framework Convention on Climate Change and
the Energy Policy Act of 1992: Correspondences of Selected
Provisions
UNFCCC
EPACT
Problem
Concerned that human
activities have been
substantially increasing the
atmospheric concentrations of
greenhouse gases, that these
increases enhance the natural
greenhouse effect, and that
this will result on average in
an additional warming of the
Earth’s surface and
atmosphere and may
adversely affect natural
ecosystems and humankind ...
(preamble)
Planning/Strategy
Each of these Parties shall
The ... National Energy Policy
adopt national policies and
Plan ... shall include a least-
take corresponding measures
cost energy strategy ...
on the mitigation of climate
designed to achieve [among
change, by limiting its
other goals] ... the stabilization
anthropogenic emissions of
and eventual reduction in the
greenhouse gases and
generation of greenhouse
protecting and enhancing its
gases ... (sec. 1602(a)).
greenhouse gas sinks and
reservoirs ... (Art. 4, 4(a)).
Precautionary
The Parties should take
precautionary measures to
anticipate, prevent or
minimize the causes of
climate change and mitigate
its adverse effects. Where
there are threats of serious or
irreversible damage, lack of
full scientific certainty should
not be used as a reason for
postponing such measures ...
(Art. 3, 3).
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UNFCCC
EPACT
Policy Options
All Parties ... shall ...
... the Secretary [of Energy]
Formulate, implement,
shall transmit a report to
publish and regularly update
Congress containing a
national ... programmes
comparative assessment of
containing measures to
alternative policy mechanisms
mitigate climate change by
for reducing the generation of
addressing anthropogenic
greenhouse gases (sec. 1604).
emissions by sources and
removals by sinks of all
greenhouse gases... (Art. 4,
1(b)).
Least Cost
... policies and measures to
In developing the least-cost
deal with climate change
energy strategy, the Secretary
should be cost-effective so as
[of Energy] shall take into
to ensure global benefits at
consideration the economic,
the lowest possible cost (Art.
energy, social, environmental,
3, 3).
and competitive costs and
benefits, including costs and
benefits for jobs, of his
choices (sec. 1602(a)).
Developed Nations
... the developed country
Take Lead
Parties should take the lead in
combating climate change...
(Art. 3, 1).
Technology
All Parties ... shall ... Promote
The Secretary [of Energy] ...
Development/
and cooperate in the
shall establish a technology
Transfer
development, application and
transfer program to carry out
diffusion, including transfer,
the [following] purposes
of technologies, practices and
[among others]: ... encourage
processes that control, reduce
the export of United States
or prevent anthropogenic
technologies ... that
emissions of greenhouse
substantially reduce
gases ... (Art. 4, 1(c)).
environmental pollutants,
including greenhouse gases;
develop markets for United
States technologies ... that
substantially reduce
environmental pollutants,
including greenhouse gases;
provide financial assistance by
the Federal Government to
foster greater participation by
United States firms in the
financing, ownership, design,
construction, or operation of
technologies or services that
substantially reduce
environmental pollutants,
including greenhouse gases
(sec. 1608).
CRS-6
UNFCCC
EPACT
Financial
The developed country Parties
The Secretary of the Treasury
Assistance to
... shall provide new and
... shall establish a Global
Developing
additional financial resources
Climate Change Response
Nations
to meet ... costs incurred by
Fund to act as a mechanism
developing country Parties in
for United States contributions
complying with their
to assist global efforts in
obligations ... and shall take
mitigating and adapting to
all practicable steps to
global climate change (sec.
promote, facilitate and
1609(a)).
finance ... the transfer of, or
access to, environment-ally
sound technologies and
know-how to other Parties,
particularly developing
country Parties ... (Art. 4, 5).
Inventory;
All Parties ... shall ...
The Secretary [of Energy] ...
Research and
Develop, periodically update,
shall develop ... an inventory
Monitoring
publish and make available to
of the [annual] national
the Conference of the Parties,
aggregate emissions of each
... national inventories of
greenhouse gas for ... the
anthropo-genic emissions by
baseline period of 1987
sources and removals by sinks
through 1990....
of all greenhouse gases ...
(Art. 4, 1(a)).
The Administrator of the
Energy Information
Promote and cooperate in
Administration shall annually
scientific, technological,
update and analyze such
technical, socio-economic and
inventory using available data.
other research, systematic
This subsection does not
observation and development
provide any new data
of data archives related to the
collection authority (sec.
climate system and intended
1605(a)).
to further the understanding
and to reduce or eliminate the
remaining uncertainties
regarding the causes, effects,
magnitude and timing of
climate change and the
economic and social
consequences
of various response strategies
(Art. 4, 1(g)).
CRS-7
UNFCCC
EPACT
Emissions
[The developed country]
The ... National Energy Policy
Reduction
Parties shall communicate ...
Plan ... shall include a ...
information on its policies
strategy ... designed to achieve
and measures ... with the aim
... the stabilization and
of returning individually or
eventual reduction in the
jointly to their 1990 levels ...
generation of greenhouse
anthropogenic emissions of
gases ... (sec. 1602(a)).
carbon dioxide and other
greenhouse gases (Art. 4,
2(b)).
Education
Promote and cooperate in
education, training and public
awareness related to climate
change and encourage the
widest participation in this
process, including that of
non-governmental
organizations (Art. 4, 1(i)).
UNFCCC Results: Action Plans
The notion that the U.S. could meet modest CO emission reduction goals at
2
little or no cost underlay many of the global climate change initiatives during the
George H. W. Bush and Clinton Administrations, including the George H. W. Bush
Administration’s “No Regrets” policy and 1992 Climate Action Plan, and the Clinton
Administration’s 1994 and 1997 Climate Action Plans.7 This approach to climate
change policy allowed the two Administrations to avoid requesting regulatory
authority from Congress to implement a climate change policy. This left them with
the option of undertaking governmental implementing actions that could be done
administratively, unless Congress legislated otherwise, and creating incentives for
private industry to voluntarily undertake emissions reduction initiatives.
The George H. W. Bush Administration’s National Action Plan: “No
Regrets”. To meet the obligation of the UNFCCC, the George H. W. Bush
Administration issued in December, 1992, the first U.S. plan, National Action Plan
for Global Climate Change. This plan consisted primarily of (1) estimating U.S.
emissions of greenhouse gases and (2) describing then-existing activities affecting
them. These activities were dominated by research initiatives supplemented by
7 On the “no regrets” policy of the George H. W. Bush Administration, see C. Boyden Gray
and David B. Rivkin, Jr., “A ‘No Regrets’ Environmental Policy,” Foreign Policy, summer
1991, pp. 47-65; for the various action plans, see U.S. Department of State, National Action
Plan for Global Climate Change, Department of State Publication 10026, December 1992;
U.S. Department of State, Climate Action Report, Department of State Publication, 1994;
and U.S. Department of State, Climate Action Report, Department of State Publication
10496, July 1997.
CRS-8
programs proposed in the National Energy Strategy8 or anticipated as resulting from
the recent passage of EPACT, along with the Environmental Protection Agency’s
(EPA) various pollution prevention, “green” initiatives begun in 1991.9 These
mostly voluntary initiatives, led by EPA’s “Green Lights” program, formed the core
of the George H. W. Bush Administration’s “No Regrets” policy and followed the
recommendations of the 1991 Intergovernmental Panel on Climate Change (IPCC)
report for countries to consider taking actions on global climate change that were:
! Beneficial for reasons other than climate change and justifiable in
their own right — for example, increased energy efficiency....
! Economically efficient and cost-effective, in particular those that use
market-based mechanisms.
! Able to serve multiple social, economic and environmental
purposes.
! Flexible and phased, so that they can be easily modified to respond
to increased understanding of ... climate change.
! Compatible with economic growth and the concept of sustainable
development.
! Administratively practical and effective in terms of application,
monitoring, and enforcement.
! Mindful of the obligations of both industrialized and developing
countries in addressing this issue, while aware of the special needs
of developing countries, in particular in the areas of financing and
technology.
As codified by the national action plan, the combination of EPA and DOE
programs were forecasted to hold U.S. greenhouse gas emissions at near their 1990
levels in the year 2000. Emissions were projected to rise by only 1.4%-6% over that
time period, compared to a projected rise of 13% under a “business as usual”
8 Department of Energy, National Energy Strategy, Washington, DC: U.S. Govt. Print. Off.,
February 1991.
9 For a summary of these and other voluntary pollution control programs, see CRS Report
95-817, Voluntary Programs to Reduce Pollution, by James E. McCarthy. When challenged
on the explicit statutory basis for these voluntary programs, EPA cites several authorities,
including the Clean Air Act (section 103), the Pollution Prevention Act of 1990 (sections
6602 and 6606), and the Global Climate Protection Act of 1987 (section 1103). House,
Subcommittee on VA, HUD, and Independent Agencies, Committee on Appropriations,
Departments of Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations for 1999, part 7, Environmental Protection Agency (105th
Congress, 2nd session), pp. 55-59, 196-206, 1056-1063.
CRS-9
scenario.10 Table 2 summarizes the principle actions the George H. W. Bush
Administration envisioned and the anticipated reductions in greenhouse gases in
millions of metric tons of carbon-equivalent (MMTCE) — a common unit for the
global warming potential of different greenhouse gases.
Table 2. Selected Major Reduction Strategies Listed by the
George H. W. Bush Administration’s Action Plan
Carbon
Percentage
Program
Reduction
Gas Reduced
of Total
(MMTCE)
Commercial/industrial “Green
17.0-50.1
11.3-25.1%
CO2
Lights,” DSM, standards
Green Building/Standards
8.8
5.9-4.4%
CO2
Green Motors/Standards
8.3
5.5-4.2%
CO2
Energy Star Computers
5.5
3.7-2.8%
CO2
“America the Beautiful” and
5-9
3.3-4.5%
CO2
other forestry programs
(sequestration)
Landfill standards
39
26.0-19.5%
CH4
Livestock Waste Lagoons
7
4.7-3.5%
CH4
Reducing N O from Nylon
8-12
5.3-6.0%
N O
2
2
Manufacturing
Totalsa
98.6-139.7
65.7- 69.9%
a. Based on a projected reduction of 150-200 MMTCE as presented in Table 12 of George H. W.
Bush National Action Plan (adjusted for CH at GWP of 22).
4
Basically, the George H. W. Bush Administration’s plan was a “compendium”
of what was then known about greenhouse gas emissions and of existing or planned
domestic actions that affected those gases. The primary reason for these actions were
to conserve energy and to reduce air pollution — any global climate change benefits
would be a bonus. (Thus exemplifying “no regrets” — the action is one that is
justified for other reasons.) The goal of the George H. W. Bush plan was to present
a baseline that “should assist in measuring and evaluating existing policies and
measures and in establishing a basis for future actions.” The plan expressly “does not
seek to identify or recommend additional policies and measures that might be taken.”
Underlying this approach, it appeared, was the presumption that uncertainties about
global climate change were too great to justify actions beyond research except for so-
called “no-regrets” initiatives justifiable on other grounds, such as selected energy
10 Actual U.S. greenhouse gas emissions exceeded those projected under the George H. W.
Bush Administration’s plan. In 2000, emissions were 14.3% higher than 1990 levels. See
U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2004 (EPA 430-
R-06-002) (April 15, 2006), Table ES-2.
CRS-10
conservation measures. Reflecting this attitude, the George H. W. Bush plan was
explicit about a number of uncertainties, for example, in using two estimates of the
global warming potential (GWP) for methane; additionally, the George H. W. Bush
plan discussed adaptive measures before discussing mitigation measures.
The Clinton Administration’s National Action Plans: Industrial
Strength “No Regrets”. Following a June 1993 White House Conference on
Global Climate Change, the Clinton Administration in October 1993 issued a new
plan, The Climate Change Action Plan.11 This plan explicitly set a goal of reducing
U.S. greenhouse gas emissions to 1990 levels in the year 2000; and laid out of series
of nearly 50 program activities to achieve the goal, including both enhancement of
earlier programs and new, mostly voluntary, initiatives. It was not submitted to the
UNFCCC, but was described as the core of a forthcoming submission to meet the
obligations of the convention. In March 1994, the Clinton Administration issued a
technical supplement that documented the assumptions and parameters used in
developing the supporting analysis for the plan.12 Also in 1994 the Clinton
Administration submitted its Climate Action Report to the convention, and a revised
version was submitted in 1997.
Philosophically, the Clinton Action Plans were similar to that developed under
the George H. W. Bush Administration. Both were designed to foster market choices
that would conserve energy, increase energy efficiency, and encourage natural gas
use. Both were also designed to strengthen selected regulatory standards that
concomitantly also reduced greenhouse gas emissions — such as landfill regulations
that curtail methane releases. As indicated in table 3, several actions in the 1993
Clinton plan expanded programs listed in the George H. W. Bush Administration’s
plan by augmenting funding or technical support to increase anticipated reductions.
Other Clinton proposals were new; examples included a “Golden Carrot” program
to induce efficiency improvements of industrial equipment, a renewable energy
consortium, a program to encourage employers to replace parking subsidies with cash
incentives for solo commuting, and a program to promote more efficient nitrogen
fertilizer use.
Under the 1993 Clinton plan, total greenhouse gas emissions were projected to
return to their 1990 levels by the year 2000, although CO emissions alone would rise
2
about 2 percent. By 1997, the projected greenhouse gas emission reductions of the
Clinton plan was revised downward to 76 MMTCE, from 109 MMTCE in the 1993
plan. In addition, the baseline for greenhouse gas emissions in the year 2000 was
increased by 157 MMTCE from that projected in 1993. Thus, rather than returning
11 This plan became the basis for the 1994 submission to the UNFCCC. For a further
discussion of the plan, see CRS Report 94-404, Climate Change Action Plans, by Larry B.
Parker and John E. Blodgett.
12 U.S. Department of Energy, The Climate Change Action Plan: Technical Supplement,
Washington, D.C.: DOE/PO-0011. March 1994. As noted in footnote 13, actual U.S.
greenhouse emissions for 2000 were 14.2% higher than 1990 levels.
CRS-11
emissions to their 1990 levels in the year 2000, the 1997 plan projected a 188
MMTCE increase in emissions, or 13% above 1990 levels.13
Table 3. Selected Major Reduction Strategies Under the 1993
Clinton Action Plan
Carbon
Percent of
Program
Reduction
Gas Reduced
Total
(MMTCE)
Form “Golden Carrot” Market Pull
11.8
10.9%
CO2
Partnerships/Enhanced Residential
Appliance Standards
Create a “Motor Challenge”
8.8
8.1%
CO2
Program
Reform Federal Tax Subsidy for
6.6
6.1%
CO2
Employer-provided Parking/Adopt
a Transportation System
Efficiency Strategy/Promote
Greater Use of Telecommuting
Accelerate Source Reduction
9.2
8.5%
CO (5.0 by
2
Pollution Prevention, and
sequestration)
Recycling
Reduce Use of Fertilizers/Reduce
7.2
6.6%
CO - 2.7
2
Use of Pesticides
N O - 4.5
2
Narrow Use of High GWP
5.0
4.6%
HFC, PFC
Chemicals Using the Clean Air
Act and Production Stewardship to
Reduce Emissions
Create Partnerships with
5.0
4.6%
HFC
Manufacturers of HFC-22 to
Eliminate HCFC-23 Emissions
Totals
53.6
49.4%
The Clinton Administration blamed this failure to reduce emissions in 2000 to
the 1990 level primarily on unanticipated economic growth and on Congress not fully
funding the programs.14 Despite this, the basic rationale of the Clinton plan
remained: the plan “combines an array of public-private partnerships to stimulate the
deployment of existing energy-efficient technologies and accelerate the introduction
of innovative technologies. The goal of these programs was to cut CO emissions,
2
13 Climate Action Report (1997), p. 125.
14 Climate Action Report (1997), p. 10.
CRS-12
while enhancing productivity domestically and U.S. competitiveness aboard.”15 The
echo of the 1991 NAS report was clear: the cost to control greenhouse gas emissions
would net out to zero, or even save money, depending on how the benefits from
increased efficiency were estimated.
Kyoto and S.Res. 98
A central component of the UNFCCC was its establishment of a conference of
parties (COP) to negotiate further agreements to counter global climate change. The
first two COPs were held in Berlin in 1995 and 1996. At COP-1, several
industrialized countries, including the United States, expressed concern that newly
industrializing countries, such as Brazil and China, would continue to be classified
as non-annex 1 countries (i.e., developing countries, exempt from possible future
legally binding reduction requirements) despite their projected large increases in
greenhouse gas emissions in the future. This issue of exempting such countries from
future binding reduction requirements took on heightened importance when
ministerial participants at COP-2 signed a declaration calling for “legally binding
mid-term targets.” Such targets were the subject of COP-3, held in Kyoto in
December 1997.16
In anticipation of the Kyoto negotiations, the U.S. Senate debated the
appropriate U.S. position vis a vis any legally binding agreement to reduce
greenhouse gas emissions. On July 25, 1997, the Senate voted 95-0 to approve
Senate Resolution 98 (S.Res. 98), expressing the sense of the Senate regarding the
conditions under which the United States should become a signatory to any
international agreement on greenhouse gases under the UNFCCC.17 Specifically, the
resolution states that the U.S. should not sign any agreement limiting developed
countries’ greenhouse gas emission (e.g., the United States) unless that agreement
also includes specific schedules to limit developing countries’ greenhouse gas
emissions over the same period. In addition, no agreement should be signed that
would “result in serious harm to the economy of the United States.”
S.Res. 98 also states that any agreement sent to the Senate for advice and
consent should include a detailed discussion of required legislative and regulatory
actions to implement the treaty and a cost analysis of an implementation strategy.
These conditions for Senate consideration of a treaty illustrate the Senate’s concern
about the cost of any agreement to the U.S. economy and consumers, the competitive
effects on U.S. trade, and the environmental effectiveness of a treaty that exempts
increasingly important greenhouse emitting developing countries. By requiring re-
analysis of the costs of implementing binding reduction requirements, the Senate was
in effect calling for a reexamination of the NAS report’s argument that greenhouse
gas emissions could be reduced at modest cost.
15 Climate Action Report (1997), p. 90.
16 For further discussion, see CRS Report RL33826, Climate Change: The Kyoto Protocol,
Bali “Action Plan,” and International Actions, by Susan R. Fletcher and Larry Parker.
17 Senate Committee on Foreign Relations, Conditions Regarding U.N. Framework
Convention on Climate Change, S.Rept. 105-54, July 21, 1997.
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That the Kyoto Protocol did not meet the conditions of Senate Resolution 98 is
not in dispute: it does not bind developing countries to any schedule of reductions.
For many critics, no commitment may be comprehensive until the developing world’s
largest emitters, China and India, sign on.
The George W. Bush’s Administration’s National Action Plan:
Abjuring an Emissions Reduction Goal
The George W. Bush Administration has abandoned both the Kyoto Protocol
and its negotiation process. In his June 11, 2001 speech on global climate change,
the President stated that the Kyoto Protocol was “fatally flawed in fundamental
ways.” A primary flaw outlined by the President is the exemption of China and other
developing countries from its provisions. This “comprehensiveness” concern was
closely followed by “cost” and “competitiveness” concerns:
Kyoto is, in many ways, unrealistic. Many countries cannot meet their Kyoto
targets. The targets themselves are arbitrary and not based upon science. For
America, complying with those mandates would have a negative economic
impact with layoffs of workers and price increases for consumers. And when
you evaluate all these flaws, most reasonable people will understand that it’s not
sound public policy.18
To respond to global climate change, President Bush called for a new approach
focused on the science and with flexible control mechanisms that employ market-
based incentives. Among the principles that the President argued should guide such
a program were the following:
We must always act to ensure continued economic growth in prosperity for
our citizens and for citizen throughout the world.... And finally, our
approach must be based on global participation, including that of
developing countries whose net greenhouse gas emission now exceed those
in the developed countries.
In its 2006 action plan submitted under UNFCCC, the George W. Bush
Administration outlines six principles in building a climate change policy:19
! be consistent with the long-term goal of stabilizing greenhouse gas
concentrations;
! be measured and continually build on new scientific data;
! ensure continued economic growth and prosperity;
! pursue market-based incentives and spur technological innovation;
! be flexible to adjust to new information and take advantage of new
technology; and
! promote global participation, including developing countries.
18 President George W. Bush, President Bush’s Speech on Global Climate Change, June 11,
2001.
19 U.S. Department of State, U.S. Climate Action Report 2006, Washington, DC, July 2007,
p. 381.
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Several of these principles mirror those cited as influencing the “no regrets” policy
of the George H. W. Bush Administration. As shown in Table 4 below, the focus on
reducing greenhouse gases without interfering with economic growth is the basis of
both policies. In this sense, the objectives of the George W. Bush Administration’s
climate change policy are similar to those of the George H. W. Bush and Clinton
Administrations.
Table 4. Principles Behind the George H. W. Bush
Administration’s and George W. Bush Administration’s Climate
Action Plans
George H. W. Bush Administration
George W. Bush Administration
Beneficial for reasons other than climate
Be consistent with the long-term goal of
change and justifiable in their own right stabilizing greenhouse gas concentrations
— for example, increased energy
efficiency....
Economically efficient and cost-effective,
Pursue market-based incentives and spur
in particular those that use market-based
technological innovation;
mechanisms.
Take advantage of new technology
Able to serve multiple social, economic
and environmental purposes.
Flexible and phased, so that they can be
Be measured and continually build on
easily modified to respond to increased
new scientific data
understanding of ... climate change.
Compatible with economic growth and
Ensure continued economic growth and
the concept of sustainable development
prosperity
Administratively practical and effective
in terms of application, monitoring, and
enforcement
Mindful of the obligations of both
Promote global participation, including
industrialized and developing countries in
developing countries
addressing this issue, while aware of the
special needs of developing countries, in
particular in the areas of financing and
technology
However, unlike the action plans developed by the George H.W. Bush and the
Clinton Administrations, the George W. Bush Administration’s plan makes no
attempt to suggest that it will achieve the UNFCCC goal of returning greenhouse gas
emissions to their 1990 levels. In fact, the Administration’s voluntary program shifts
the focus from reducing greenhouse gas emissions per se to reducing the intensity of
CRS-15
emissions per unit of economic activity.20 As announced by President George W.
Bush in February 2002,21 his voluntary plan would reduce greenhouse gas intensity
in the U.S. by 18% in 2012 (three-quarters of which would occur from projected
business-as-usual trends); concomitantly, greenhouse gas emissions were projected
to increase from 14.2% above 1990 levels in 2000 to 28.3% above 1990 levels in
2010 — some 4.5% below projected business-as-usual levels.22
In addition, on July 27, 2005, the Bush Administration announced formation of
a six-nation Asia-Pacific Partnership on Clean Development and Climate (APP).
The members are the United States, China, India, Japan, Australia, and South Korea.
The purposes of the Partnership are to
create a voluntary, non-legally binding framework for international cooperation
to facilitate the development, diffusion, deployment, and transfer of existing,
emerging and longer term cost- effective, cleaner, more efficient technologies
and practices among the Partners through concrete and substantial cooperation
so as to achieve practical results.23
It has the goal of meeting “national pollution reduction, energy security and climate
change concerns, consistent with the principles of the U.N. Framework Convention
on Climate Change (UNFCCC).”24
Notably, unlike the Kyoto Protocol requirements, the partnership engages both
developed and developing nations as equals. Also notably, consistent with the Bush
Administration’s rejection of the Kyoto Protocol’s mandatory reduction
requirements, the Partnership’s initiatives are voluntary.
This international initiative was followed in May 2007 by the President’s
announcement that the United States would convene a meeting of the world’s “major
economies” that are responsible for most greenhouse gas emissions. Held in
September 2007 the final statements of the “Major Economies Meeting on Energy
Security and Climate Change” emphasized the need to integrate such meetings into
the overall UNFCCC negotiations. The U.S. summary of the meeting focused on the
“aspirational” nature of reduction goals, reflecting the Administration’s rejection of
mandatory reduction targets.
20 While the U.S. is the world’s largest emitter of greenhouse gases, the carbon efficiency
of its economy is better than many.
21 See [http://www.whitehouse.gov/news/releases/2002/02/climatechange.html].
22 See CRS Report RL31779, Air Quality: Multi-Pollutant Legislation in the 108th
Congress, by Larry Parker and John Blodgett. (The 2010 and 2012 projections have been
conflated.)
23 Charter for the Asia-Pacific Partnership on Clean Development and Climate (January 12,
2 0 0 6 ) , “ P u r p o s e s , ” 2 . 1 . 1 . F o r a d d i t i o n a l i n f o r m a t i o n , s e e
[http://www.asiapacificpartnership.org/]
24 “Asia-Pacific Partnership on Clean Development and Climate: New Vision Statement of
Australia, China, India, Japan, the Republic of Korea, and the United States of America”
[http://www.state.gov/g/oes/climate/app/75320.htm]
CRS-16
Looking for a New Direction: Senate Amendment 866
While global climate change was an important element in the legislative drafting
and debates that led to Energy Policy Act of 1992, global climate change was largely
peripheral during the drafting of and deliberating on the bills (predominately, H.R.
6 in both the 108th and 109th Congresses) that ultimately became the Energy Policy
Act of 2005 (P.L. 109-58) — indeed, the drafters and managers of the legislation
focused on energy security and energy supply and preferred to avoid engaging in
debate on climate implications. However, energy policy inevitably has greenhouse
gas implications (e.g., P.L. 109-58 includes provisions to foster nuclear power and
to encourage alternative fuels); at the same time, other provisions encourage coal use.
Some Members did seek to inject explicit consideration of climate change into
the debate on energy policy, however, and as a result, the issue of mandatory versus
voluntary efforts to address global climate change was again debated. In the 108th
Congress, in the Senate a bill (S. 139) that would have imposed a mandatory cap-
and-trade greenhouse gas reduction program failed in 2003 on a 43-55 vote. In 2005,
a similar initiative was considered as an amendment during the Senate debate on the
Energy Policy Act of 2005 and defeated on a 38-60 vote. These proposals would
have placed a cap on U.S. greenhouse gas emission based on a 2001 baseline. The
cap would have been implemented through a tradeable permit program to encourage
efficient reductions.
However, concern that global climate change should be addressed explicitly
during the debate on energy policy in the 109th Congress led 13 Senators to introduce
S.Amdt. 866 — a Sense of the Senate resolution on climate change. The resolution
finds that (1) greenhouse gases are accumulating in the atmosphere, increasing
average temperatures; (2) there is a growing scientific consensus that human activity
is a substantial cause of this accumulation; and (3) mandatory steps will be required
to slow or stop the growth of greenhouse gas emissions. Based on these findings, the
resolution states it is the Sense of the Senate that the Congress should enact a
comprehensive and effective national program of mandatory, market-based limits and
incentives on greenhouse gases that slow, stop, and reverse the growth of such
emissions. This should be done in a manner that will not significantly harm the U.S.
economy and will encourage comparable action by other countries that are our major
trading partners and contributors to global emissions. The resolution passed by voice
vote after a motion to table it failed on a 43-54 vote.
As with the Energy Policy Act of 2005, the Energy Independence and Security
Act of 2007 (P.L. 110-140) included floor debates about climate change. But also
as with the earlier enactment, direct climate change initiatives were omitted in the
final bill, although such provisions as those promoting energy conservation and more
stringent auto efficiency standards were seen as consistent with climate change
initiatives.
Explicit climate change legislation has progressed in the 110th Congress,
however: consistent with Senate Amendment 866, the Committee on Environment
and Public Works reported out a revised version of S. 2191 — America’s Climate
Security Act of 2007 — by an 11 to 8 vote on December 5, 2007. As reported, S.
2191 is estimated to reduce greenhouse gas emissions 19% below 2005 levels by
CRS-17
2020 (up from 15% as introduced) and 63% below 2005 levels by 2050. The bill
would cap greenhouse gas emissions from the electric generation, industrial,
transportation, and natural gas sectors. The program would be implemented through
an expansive allowance trading program to maximize opportunities for cost-effective
reductions. Credits obtained from increases in carbon sequestration and acquisition
of allowances from foreign sources could be used to comply with 30% of reduction
requirements. The bill also establishes a Carbon Market Efficiency Board to observe
the allowance market and implement cost-relief measures if necessary.
Addressing the Three-Cs: Emerging Price Versus
Quantity Debate
In the face of scientific uncertainty, congressional debate with respect to
beginning a mandatory CO reduction program can be categorized by the three-Cs:
2
Cost, Competitiveness, and Comprehensiveness. These concerns, as indicated
earlier, can be traced throughout the debate on global climate change.
The fundamental policy assumption that changed between the U.S. ratification
of the 1992 UNFCCC and the current Bush Administration’s decision to abandon
the Kyoto Protocol process concerns costs. The ratification of the UNFCCC was
based at least partially on the premise that significant reductions could be achieved
at little or no cost. This assumption helped to reduce concern some had (including
those of the former Bush Administration) that the treaty could have deleterious
effects on U.S. competitiveness — a significant consideration because developing
countries are treated differently from developed countries under the UNFCCC.
Further ameliorating this concern, compliance with the treaty was voluntary. While
the United States could “aim” to reduce its emissions in line with the UNFCCC’s
goal, if the effort indeed involved substantial costs, the United States could fail to
reach the goal (as has happened) without incurring any penalty under the treaty.
This flexibility would have been eliminated under the Kyoto Protocol with its
mandatory reduction requirements. The possibility of failure to comply with a
binding commitment intensifies one’s perspective on potential costs: How confident
can one be in the claim that carbon reductions can be achieved at little or no costs?25
Compliance cost estimates ranging from $5.5 billion to $200 billion annually cause
some to pause.26 The current Bush Administration was sufficiently concerned about
potential CO control costs to reverse a campaign pledge to seek CO emissions
2
2
reductions from power plants, in addition to its decision to abandon the Kyoto
Protocol process.27
25 For a further discussion of the foundations for such divergent cost estimates, see CRS
Report 98-738, Global Climate Change: Three Policy Perspectives, by Larry Parker and
John Blodgett.
26 For a review of several cost analyses, see Energy Information Administration, Impacts of
the Kyoto Protocol on U.S. Energy Markets and Economic Activity, DOE Report
SR/OIAF/98-03, October 1998, pp. 137-151.
27 President George W. Bush, Letter to Senators Hagel, Helms, Craig, and Roberts, Office
(continued...)
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As a stalemate has continued on mandatory strategies to control CO emissions,
2
particularly because of costs fears, attention increasingly focuses on the cost-limiting
benefit of a carbon tax, either as the primary strategy or as a component blending a
carbon tax with the reduction certainty of the tradeable permit system. The object is
to create a safety valve to avert unacceptable control costs, particularly in the short-
term. These safety valves limit unit (per ton) costs of reducing emissions.
A safety valve bounds the costs of any climate change control program (price)
at the expense of reductions achieved (quantity).28 In general, market-based
mechanisms to reduce CO emissions focus on specifying either the acceptable
2
emissions level (quantity), or compliance costs (price), and allowing the marketplace
to determine the economically efficient solution for the other variable. For example,
a tradeable permit program sets the amount of emissions allowable under the
program (i.e., the number of permits available caps allowable emissions), while
letting the marketplace determine what each permit will be worth. Likewise, a
carbon tax (or safety valve) sets the maximum unit (per ton of CO ) cost that one
2
should pay for reducing emissions, while the marketplace determines how much
actually gets reduced. In one sense, preference for a pure tradeable permit system or
inclusion of a safety valve depends on how one views the uncertainty of costs
involved and benefits to be received.
An impetus for this new debate is a report by the National Commission on
Energy Policy (NCEP).29 The NCEP report called for a mandatory, economy-wide
tradeable permit program to begin limiting greenhouse gases. The mechanism for
limiting such emissions involves a progressively lower limit on greenhouse gas
intensity over time tied to the projected increase in GDP. Thus, the target is not
fixed, but increases to the degree that projected economic growth exceeds the
mandated reduction in greenhouse gas intensity. The NCEP recommends the
reduction rate for greenhouse gas intensity be set at 2.4% annually beginning in 2010,
increasing to 2.8% beginning in 2020.
In addition, to limiting potential costs, the scheme includes a safety valve. The
NCEP recommends this safety valve be set at $7 a ton of carbon dioxide equivalent
in 2010 dollars. This would be equivalent to about $5.90 a ton in 2001 dollars. This
safety valve puts an upper limit on the marginal cost that an affected entity should
pay for greenhouse gas reductions. If control costs exceed $7 a ton, the entity could
pay the safety value price instead.
The effects of the safety valve on the price vs. quantity equation can be seen in
Table 5 below. The safety valve increases uncertainty with respect to emission
reductions achieved while increasing certainty with respect to price. Allowing some
27 (...continued)
of the Press Secretary, March 13, 2001
28 See CRS Report RS21067, Global Climate Change: Controlling CO Emissions — Cost-
2
Limiting Safety Valves, by Larry Parker.
29 The National Commission on Energy Policy, Ending the Energy Stalemate: A Bipartisan
Strategy to Meet America’s Energy Challenges (December 2004).
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flexibility in the quantity of emissions reduced is a concession to the three-C that
have prevented legislative movement on mandatory greenhouse gas emissions.
Whether it represents the start of a new dialogue on reducing greenhouse gas
emissions remains to be seen.
Table 5. Comparison of Trading Program With and Without
Safety Valve
Impact on Emissions
Impact on Cost (Price)
(Quantity)
Variable
Tradeable
Tradeable
Tradeable
Tradeable
Permits with
Permits with
Permits with
Permits with
fixed cap
safety valve
fixed cap
safety valve
GDP Growth
No impact on
Potentially
Increases costs
Increases costs
emissions cap
increases
as more
only to the
emissions
emissions have
level of the
target and
to be reduced
safety valve
possibility of
to maintain
safety valve
cap
being used
Availability
No impact on
Lack of cost-
Lack of cost-
Lack of cost-
of Cost-
emissions cap
effective
effective
effective
effective
control
control
control
Control
technologies
technologies
technologies
Technologies
increases the
increases costs
increases costs
or Natural
possibility of
only to the
Gas
the safety
level of the
valve being
safety valve
used
Effectiveness
No impact on
Lack of
Lack of
Lack of
of trading
emissions cap
effective
effective
effective
system
permit market
permit market
permit market
may increase
will increase
will increase
the possibility
costs; an
cost only to
of the safety
effective
the level of the
valve being
permit market
safety valve;
used
will reduce
an effective
cost
permit market
will reduce
cost
Source: Congressional Research Service.
CRS-20
Conclusion: Battle of Policy Perspectives30
Up to the Kyoto Protocol, the thrust of U.S. climate change policy, as
represented by its national action plans, focused on technological and efficiency
improvements31 — improvements that promised to reduce carbon emissions at little
or no cost, and with “no regrets.” The Clinton Administration’s 1997 Climate
Change Action Plan continued to base the Administration’s climate change policy on
technology development and efficiency improvement as a means of reducing
emissions at little or no cost. This position was reiterated in President Clinton’s 1998
$6 billion Climate Change Technology Initiative. As summarized by National
Economic Council Chairman Gene Sperling on the introduction of the President
Clinton’s initiative:
We think that this package is a very good example of what we spoke about when
we said that there were win-win opportunities for positive incentives that would
clearly show how we can address the issue of climate change and strengthen our
economy at the same time.32
For those who hold to this technological perspective, a global agreement to
reduce greenhouse gas emissions — such as the Kyoto Protocol — would improve
the possibilities for improved efficiency and technology by creating a stronger market
for such innovations. They see concerns that increased costs would destroy U.S.
competitiveness as unfounded; indeed, they see increased efficiency and innovation
as improving U.S. competitiveness. They contend that United States not only can
afford to take the lead in carbon reductions (negating the comprehensiveness
concern), but should do so in order to increase its technological leadership as well as
to provide an example to the third world.
To those who are skeptical of this perspective but who may have been willing
to accept it when it was part of a voluntary framework, the scenario appears too risky
and overly optimistic in the context of a mandatory scheme. Looking at economic
analyses from various sources, these skeptics do not see the potential economic costs
of mandatory schemes resulting in commensurate environmental benefits,
particularly in the case of the Kyoto Protocol where developing nations are excluded
from controls. From their perspective, the reward does not appear to be worth the
risk, and until it does, the country would be better off keeping its options open rather
than moving down an unsure and potentially very expensive track. This appears to
be the position of the George W. Bush Administration, which is prepared to
encourage technological development — as through the Asia-Pacific Partnership —
but is not prepared to commit to a binding reduction target such as that embodied in
the Kyoto Protocol.
30 For an analysis of the impacts of policy perspectives on costs, see CRS Report 98-738,
Global Climate Change: Three Policy Perspectives, by Larry Parker and John Blodgett.
31 See CRS Report 98-738, Global Climate Change: Three Policy Perspectives, by Larry
Parker and John E. Blodgett.
32 As reported in Daily Environment Report, “Administration Announces $6.3 Billion Plan
of Spending, Tax Credits to Curb Emissions,” February 2, 1998, p. AA-1.
CRS-21
With the Bush Administration having rejected the Kyoto Protocol in 2001, what
does the Senate passage in 2005 of a Sense of the Senate resolution calling for
mandatory steps to reduce climate change mean for the future direction of U.S.
climate change policy? The Sense of the Senate resolution has spurred renewed
discussion on directly incorporating cost considerations (e.g., a safety valve or a
Carbon Market Efficiency Board) into any mandatory greenhouse gas reduction
program.
From a policy perspective, the debate on incorporating a safety valve into a
mandatory reduction scheme represents an attempt to quantify the risks involved in
addressing global climate change. As a safety valve has the effect of allowing
emissions that otherwise would be reduced, those who see great risk in climate
change will want to see a substantial price attached to the safety valve — so emitters
would invest in more reductions before it would be cheaper for them to pay for
releasing greenhouse gases instead. In contrast, those more concerned about the costs
will want to set the safety valve at a lower price level — accepting more emissions.
A second approach beginning debate would create a board to observe the
allowance market and implement cost-relief measures if necessary. Seen as a more
flexible response with the potential for avoiding or mitigating the environmental
impacts of a safety valve, a Carbon Market Efficiency Board would not provide the
certainty of a safety valve. The price versus quantity debate is likely to continue.