[Congressional Record Volume 151, Number 76 (Thursday, June 9, 2005)]
[House]
[Pages H4328-H4329]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CLIMATE CHANGE--NATIONAL COMMISSION ON ENERGY POLICY
The SPEAKER pro tempore. Under a previous order of the House, the
gentleman from New Mexico (Mr. Udall) is recognized for 5 minutes.
Mr. UDALL of New Mexico. Mr. Speaker, I rise today to discuss climate
change, one of the most important issues facing our planet today.
Thankfully, the issue of climate change has been getting more coverage
in the national media. While I know that there are many Members in
Congress who are committed to taking action, the level of attention
paid to climate change in Congress does not match either the urgency of
the issue or the concern of the American public. Given the enormous
implications for our economy and our environment, this must change.
Climate change is real, and we must act.
The steps we must take to address the issue are a matter of great
debate. There is a consensus that we must reduce greenhouse gas
emissions, but how we do that is not as simple. I applaud my colleagues
in the House as well as the Senate who have introduced or supported
legislation to address climate change. I have, however, great concern
that their proposals, while extremely well-intentioned and well-
crafted, do not have sufficient support in the Congress and do not
adequately address the economic challenges our country will face as we
move toward a less-carbon-intensive economy.
It is my belief that we must take action now to reduce greenhouse gas
emissions, but we must do so in a way that would minimize the impact to
our economy. We must implement an economy-wide, upstream, all
greenhouse gas cap-and-trade emissions reduction program that provides
some flexibility and a measure of certainty to those industries and
businesses affected.
The National Commission on Energy Policy, a bipartisan group of top
experts from energy, government, labor, academia and environmental and
consumer groups, developed a set of sensible policy recommendations for
addressing oil security, climate change, natural gas supply, and other
long-term energy supply challenges. They advocate for a modest, certain
and efficient proposal. Their recommendations have been endorsed by
major U.S. businesses and labor groups.
One of the key components of their proposal is the concept of a
safety valve for the cap-and-trade program. The safety valve
essentially puts a price on carbon but provides for an unlimited number
of allowances to be sold by the government. Since no one would pay more
than what the government charges for allowances, this mechanism
effectively controls the price of allowances.
{time} 1430
When set at the right price, the safety valve would start the country
down the path of slowing the growth of greenhouse gas emissions without
causing economic disruption. While there may be less emissions
reduction with a safety valve than without one, today we are doing
nothing. And the safety valve creates a potential buy-in from those
affected by the legislation.
Another component that I believe is important to integrate into any
climate change policy is setting a prospective baseline on greenhouse
gas emissions. A sound greenhouse gas emissions reduction policy must
recognize that the buildup of greenhouse gas has been taking place over
the last century. Since greenhouse gas concentrations are a cumulative
measure, sharply reducing a particular year's emissions is
substantially less important than the alternative, which is to start
down the long-term path of gradually slowing the growth of greenhouse
gas emissions. This will also allow businesses to plan for a carbon-
constrained world.
Mr. Speaker, I believe any climate change policy we implement must
also tie our country's efforts to reducing greenhouse gas emissions to
those efforts of the major developing countries. We must ensure that
they make a similar commitment to our environment and that the United
States is not unfairly burdened. It is a major concern of American
business and labor that the developing countries participate in slowing
the growth of greenhouse gases to a degree comparable to ours. Any
program that does not link our emissions reductions to those of the
major developing countries would not only be fundamentally unfair but
could also reduce America's competitiveness, resulting in the loss of
businesses and jobs in the United States.
And, lastly, Mr. Speaker, a climate change policy must also encourage
the development of new greenhouse gas emissions reduction technologies.
Mr. Speaker, I submit for the Record two documents to supplement what
I have said here today, an editorial and a letter.
The long-term resolution of the greenhouse gas emissions issues lies
in the research and development of new technology.
Mr. Speaker, there is irrefutable scientific evidence to justify
taking action on climate change. The long-term consequences of failing
to act are sufficiently well documented, providing us with every
incentive we need to act. I know many of my colleagues believe that the
United States can and should adopt a greenhouse gas emissions reduction
policy, but I believe that such a policy will only garner support if it
is modest, efficient, and fair. Most importantly Mr. Speaker, we must
begin the process. We must act and we must do so now. Otherwise, we are
simply putting the future of our planet at risk.
[[Page H4329]]
[From the Washington Post, Jan. 28, 2005]
A Warming Climate
For the past four years members of the Bush administration
have cast doubt on the scientific community's consensus on
climate change. But even if they don't like the science,
British Prime Minister Tony Blair, one of their closest
allies in Iraq and elsewhere, has given the administration
another, more realpolitik, reason to rejoin the climate
change debate: ``If America wants the rest of the world to be
part of the agenda it has set, it must be part of their
agenda, too,'' the prime minister said this week.
Mr. Blair's speech came at an interesting moment, both for
the administration's energy and climate change policies and
for the administration's diplomatic agenda. In the next few
weeks, the House will almost certainly vote once again on
last year's energy bill, a mishmash of subsidies and tax
breaks that finally proved too expensive even for a
Republican Senate to stomach. After a House vote, there may
be an attempt to trim the cost of the bill and add measures
to make it acceptable to more senators--including the growing
number of Republicans who have, sometimes behind the scenes,
indicated an interest in climate change legislation.
Indeed, any new discussion of energy policy could allow
Sens. John McCain (R-Ariz.) and Joseph I. Lieberman (D-Conn.)
to seek another vote on their climate change bill, which
would establish a domestic ``cap and trade'' system or
controlling the greenhouse gas emissions that contribute to
global warming.
If domestic politics could prompt the president to look
again at the subject, international politics certainly
should. Administration officials assert that mending fences
with Europe is a primary goal for this year; if so, the
relaunching of a climate change policy--almost any climate
change policy--would be widely interpreted as a sign of
goodwill, as Mr. Blair made clear. Beyond the problematic
Kyoto Protocol, there are ways for the United States to join
the global discussion, not least by setting limits for
domestic carbon emissions.
Although environmentalists and the business lobby sometimes
make it sound as if no climate change compromise is feasible,
several informal coalitions in Washington suggest the
opposite. The Pew Center on Global Climate Change got a
number of large energy companies and consumers--including
Shell, Alcoa, DuPont and American Electric Power--to help
design the McCain-Lieberman legislation. A number of security
hawks have recently joined forces with environmentalists to
promote fuel efficiency as a means of reducing U.S.
dependence on Middle Eastern oil. Most substantively, the
National Commission on Energy Policy, a group that
deliberately brought industry, environmental and government
experts together to hash out a compromise, recently published
its conclusions after two years of debate.
Among other things, it proposed more flexible means of
promoting automobile fuel efficiency and suggested
determining in advance exactly how high the ``price'' for
carbon emissions should be allowed to go, thereby giving
industry some way to predict the ultimate cost of a cap-and-
trade system.
They also point out that legislation limiting carbon
emissions would immediately create incentives for industry to
invent new fuel-efficient technologies, to build new nuclear
power plants (nuclear power produces no carbon) and to find
cleaner ways to burn coal. Technologies to reduce carbon
emissions as well as fossil fuel consumption around the world
are within reach, in other words--if only the United States
government wants them.
____
June 12, 2003.
Hon. John McCain,
Russell Office Building,
Washington, DC.
Hon. Joseph Lieberman,
Hart Senate Office Building,
Washington, DC.
Dear Senators McCain and Lieberman: As Congress takes up
the issue of market-based systems to reduce emissions of
carbon dioxide and other greenhouse gases, we are writing to
encourage you to incorporate an allowance price cap sometimes
referred to as a ``safety valve.'' In the context of a cap-
and-trade system for emission allowances, a safety valve
would specify a maximum market price at which the government
would step in and sell additional allowances to prevent the
price from rising any further. Much like the Federal Reserve
intervenes in bond and currency markets to protect the
economy from adverse macroeconomic shocks, this intervention
is designed to protect the economy automatically from adverse
energy demand and technology shocks. While we disagree on
what steps are necessary in the short run, we both agree it
is particularly important to pursue them in a manner that
limits economic risk.
Our support for the safety valve stems from the underlying
science and economics surrounding the problem of global
climate change, and is something that virtually all
economists--even two with as politically diverse views as
ourselves--can agree upon. It is based on three important
facts.
First, unexpected events can easily make the cost of a cap-
and-trade program that includes carbon dioxide quite high,
even with a modest cap. For example, consider an effort to
reduce domestic carbon dioxide emissions by 5% below future
forecast levels over the next ten years--to about 1.8 billion
tons of carbon. This is in the ballpark of the domestic
reductions in the first phase of McCain-Lieberman allowing
for offsets, the targets in the Bush climate plan, and the
level of domestic emission reductions described by the
Clinton administration under its vision of Kyoto
implementation. Based on central estimates, the required
reductions would amount to about 90 million tons of carbon
emissions, and might cost the economy as a whole around $1.5
billion per year. However, reaching the target could instead
require 180 million tons of reductions because of otherwise
higher emissions related to a warm summer, a cold winter, or
unexpected economic growth. Based on alternative model
estimates, it could also cost twice as much to reduce each
ton of carbon. The result could be costs that are eight times
higher than the best guess.
Second and equally important, the benefits from reduced
greenhouse gas emissions have little to do with mission
levels in a particular year. Benefits stem from eventual
changes in atmospheric concentrations of these gases that
accumulate over very long periods of time. Strict adherence
to a short-term emission cap is therefore less important from
an environmental perspective than the long-term effort to
reduce emissions more substantially. Without a safety valve,
cap-and-trade risks diverting resources away from those long-
term efforts in order to meet a less important short-term
target.
Finally, few approaches can protect the economy from the
unexpected outcome of higher energy demand and inadequate
technology as effectively as a safety valve. For example,
opportunities to seek offsets outside a trading program can
effectively reduce the expected cost to a particular emission
goal--which is beneficial--but that does not address concerns
about unexpected events. In fact, if the system becomes
dependent on these offsets, their inclusion can increase
uncertainty about program costs if the availability and cost
of the offsets themselves is not certain. Another proposal, a
``circuit breaker,'' would halt future declines in the cap
when the allowance price exceeds a specified threshold, but
would do little to relax the current cap if shortages arise.
Features that do provide additional allowances when shortages
arise, such as the possibility of banking and borrowing extra
allowances, are helpful, but only to the extent they can
ameliorate sizeable, immediate, and persistent adverse
events.
To summarize, the climate change problem is a marathon, not
a sprint, and there is little environmental justification for
heroic efforts to meet a short-term target. Such heroic
efforts might not only waste resources, they risk souring our
appetite to confront the more serious long-term problem.
Absent a safety valve, a cap-and-trade program risks exactly
that outcome in the face of surprisingly high demand for
energy or the failure of inexpensive mitigation opportunities
to arise as planned. A safety valve is the simplest, most
transparent way to signal the market about the appropriate
effort to meet short-term mitigation goals in the face of
adverse events.
While trained economists hold divergent views on many
topics--as our own views demonstrate--economic theory
occasionally delivers a relatively crisp message that
virtually everyone can agree on. We believe this is one of
those occasions, and hope you will consider these points as
Congress addresses various climate change policies in the
coming months.
Sincerely,
R. Glenn Hubbard,
Professor, Columbia University, Chairman, Council of
Economic Advisers, 2001-2003.
Joseph E. Stiglitz,
Professor, Columbia University, Chairman, Council of
Economic Advisers 1995-1997.
____________________