[Congressional Record (Bound Edition), Volume 151 (2005), Part 9]
[House]
[Pages 12035-12036]
[From the U.S. 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.

               [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

[[Page 12036]]

     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.

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