Hill Heat

The purpose of the hearing is to explore the fiscal and distributional impacts of limiting greenhouse gas emissions.

Witnesses

• Dr. Peter Orszag, Director, Congressional Budget Office
• Robert Greenstein, Executive Director, Center on Budget and Policy Priorities
• David D. Doniger, Policy Director, Natural Resources Defense Council
• Anne E. Smith, Ph.D., Vice President, CRA International

Witnesses testified that global climate change will have serious effects— Witnesses testified that the atmospheric concentrations of greenhouse gases, particularly carbon dioxide, have gradually increased over the past century and are contributing to the warming of Earth’s climate.

In light of the scientific evidence about the potential damages this could cause, momentum is growing to impose mandatory limits to stabilize and eventually reduce U.S. emissions of greenhouse gases.

exceeding costs, according to the Congressional Budget Office (CBO)— While it is difficult to assign a quantitative value to the benefits of climate change mitigation, CBO testified that “most analyses suggest that a carefully designed program to begin lowering carbon dioxide (CO2) emissions would produce greater benefits than costs.” This hearing examined ways to minimize the cost of climate change policy, apart from the benefits that would be derived from pursuing the policy in the first place.

01/11/2007 at 11:30AM

On October 30, The Hamilton Project at Brookings will host a two-part forum on mitigating climate change through market mechanisms and new technologies. In addition to the release of a new Hamilton Project strategy paper, the forum will highlight two new discussion papers on how to best design market mechanisms to reduce greenhouse gas emissions and will include proposals to expand — and possibly restructure — the federal research and development program to better promote the development of new greenhouse gas reducing technologies.

Former U.S. Treasury Secretary Robert E. Rubin and Hamilton Project Director Jason Furman, also a Brookings senior fellow, will open the event with a special award presentation, followed with opening remarks by former U.S. Treasury Secretary Lawrence H. Summers on economic approaches to energy security and climate change—the subject of the new strategy paper.

The new Hamilton Project strategy paper argues that the best way to address climate change is to give the private sector the right incentives to undertake emissions reductions. At the same time, the strategy calls for policies to protect low- and middle-income families from the consequences of higher energy prices.

The two new discussion papers will feature alternate views on how to best harness market forces to protect the environment. Gilbert E. Metcalf of Tufts University will discuss his proposal for a carbon tax and Robert N. Stavins of Harvard University will present his proposal for a cap-and-trade system. John Deutch of the Massachusetts Institute of Technology and John Podesta of the Center for American Progress will also discuss their recent proposal for a new federal research and development strategy, and Richard Newell of Duke University and Resources for the Future will share his ideas for creating science and technology policies that would enable new technologies to work effectively.

Welcome and Special Presentation

• Robert E. Rubin, Citigroup Inc. and Jason Furman, The Hamilton Project

An Economic Approach to Energy Security and Climate Change

• Lawrence H. Summers, Harvard University

Panel One

Creating a Green Market: How to Best Price Carbon

• Moderator: Sebastian Mallaby, Council on Foreign Relations
• Gilbert E. Metcalf, Tufts University
• Robert N. Stavins, Harvard University
• Jason Furman
• Kathleen McGinty, Pennsylvania Department of Environmental Protection

Panel Two

Warming up to New Technologies: Innovating Our Way To a Stable Climate

• Moderator: Roger C. Altman, Evercore Partners
• John Deutch, Massachusetts Institute of Technology
• John Podesta, Center for American Progress
• Richard Newell, Duke University
• Kelly Sims Gallagher, Harvard University
• David Sandalow, Brookings Institution

Hyatt Regency Regency Ballroom 400 New Jersey Avenue, NW Washington, DC

30/10/2007 at 09:00AM

As Lieberman-Warner has its first hearing, Sierra Club, Audobon, Physicians for Social Responsibility, U.S. PIRG released these seven principles for climate change legislation:

• Reform energy policy: New national energy policies should encourage efficiency, innovation, competition, and fairness. We need more aggressive energy efficiency policies for electricity and buildings, increased CAFE standards like those passed by the Senate, and the renewable electricity standard included in the House energy bill.
• Promote a clean energy future: Invest in energy efficiency and renewable energy to create new industries and good jobs here at home.
• Cap and cut carbon emissions to science-based levels: Science tells us in order to prevent the worst impacts of global warming we must start cutting global warming pollution by 2012, with reductions in total U.S. greenhouse gas emissions of at least 15 to 20 percent below current levels by 2020 and 80 percent by mid-century.
• Use all public assets for public benefit: The value of carbon permits should benefit the public – through auctions or other mechanisms – not generate windfalls for polluting industries. Free allocations, if any, must be limited to a short transition period.
• Ensure a just transition: Allowances should be used to help finance a just transition that keeps and creates jobs, reduces impacts on low-and moderate-income citizens, and mitigates harm to affected workers and communities.
• Provide aid to adapt to an altered climate: Allowances should be used to help distressed and impoverished people around the world, as well as wildlife and ecosystems in the face of global warming’s varied threats.
• Manage costs without breaking the cap. “Safety valves” and other devices that break the cap on emissions must not be allowed. Any offsets must be real, surplus, verifiable, permanent, and enforceable.

As reported at Gristmill, Sens. Lieberman and Warner intend to submit the draft of their cap-and-trade legislation, America’s Climate Security Act (S. 2191), today. The legislation incorporated suggestions from stakeholders to adjust some figures from the draft outline released at the beginning of August. Notably, the 2020 reduction from 2005 emissions levels is increased from 10% to 15% (the Sanders-Boxer target), and the peak auction percentage (reached in 2036) is increased from 52% to 73%. There are numerous other components, adjustments, and details.

How does Lieberman-Warner stack up to the Sanders-Lautenberg principles or the Step It Up 2 provisions?

Sanders-Lautenberg

• CAP: The 2020 target is as strong as Sanders-Boxer, but the 2050 target is much weaker (67% by 2050 instead of 80%) and only 75% of emissions are regulated; there are numerous explicit provisions to loosen controls to protect the economy but none to change them to stabilize atmospheric concentrations of GHG; however, it calls for a report every three years looks at both economic and environmental impacts
• POLLUTER PAYS: The bill does not transition quickly to a full auction. Spending of auction revenues is generally in line with Sanders-Lautenberg, though large amounts go to CCS development
• ENCOURAGE STATE LEADERSHIP: The bill explicitly rewards states with stricter standards than the federal cap
• ADDITIONAL PROVISIONS: The bill includes green building standards and low-carbon fuel provisions, among others, but does not require new coal plants to have CCS
• NO LOOPHOLES AND LIMITED OFFSETS: The annual caps may be temporarily increased by as much as 20% if later caps are tightened and companies pay interest on “borrowed” allowances; offsets are limited to 15% of allowances and are held to the Sanders-Lautenberg standard

Step It Up 2

• GREEN JOBS: There is some funding for green jobs, but not 5 million by 2015
• EFFICIENCY: There is not a federal efficiency standard of 20% greater efficiency by 2015
• CAP: As decribed above, the cap is not economy-wide, and is 15% by 2020 and 67% by 2050, not 30% by 2020 and 80% by 2050
• NO NEW COAL: There is not a moratorium on new coal plants without CCS

Full comparison of October release with the original August draft below the jump.

Sens. Bernie Sanders (I-Vt.) and Frank Lautenberg (D-NJ) yesterday released a statement of principles for judging climate change legislation. Both are members of the Senate Environment and Public Works Committee’s Subcommittee on Private Sector and Consumer Solutions to Global Warming and Wildlife Protection, representing the majority with Sen. Lieberman and Sen. Baucus; Lieberman and Warner plan to submit cap-and-trade legislation to the subcommittee today.

Earlier in the month, a group of liberal Democratic senators outlined their goals for climate change legislation, praising the Lieberman-Warner effort.

Here are the Sanders-Lautenberg principles in short:

• Targets must be set to cap atmospheric concentration of greenhouse gases at a max of 450 PPM CO2 equivalent, latest science continually taken into acount
• Quick transition to polluter-pays auction, with monies providing economic relief and significant investment in renewables and energy efficiency
• No federal pre-emption of state efforts
• Additional policies such as building and fuel standards and CCS requirements that ensure rapid deployment of clean energy technology
• Offsets should be limited, real, verifiable, additional, permanent and enforceable

Democratic Senators Bob Menendez (NJ), Jack Reed (RI), John Kerry (MA), Russ Feingold (WI), Chris Dodd (CT) and Dick Durbin (IL) wrote last week to Sens. Joe Lieberman (I-CT) and John Warner (R-VA), the Chairman and Ranking Member of the Environment and Public Works Subcommittee, to weigh in on the draft plan of the legislation the two are developing.

They mirror the previous praise by Democrats on the subcommittee in their letter:

We write today to congratulate you on your leadership in addressing global warming. The outline of proposed legislation that you distributed last month is an important start and your efforts to forge a bipartisan bill and attempt to pass a meaningful climate change bill this Congress deserve praise and recognition.

They go on to express some concerns, though without the vehemence of the Kit Bond’s conservative criticism:

• Calling for a 80% reduction by 2050 with specific and aggressive interim targets, as opposed to the 70% target in the draft
• Reiterating opposition to “safety valve” legislation like that in Bingaman-Specter
• Criticizing the degree to which free allocations of emissions credits are given to the fossil fuel sector
• Calling for more emphasis on energy efficiency and renewable energy: “take some of the considerable resources generated by the auction process and devote them to further research and incentives for renewable energy . . . make the bill more balanced by devoting a larger share of the allowance value to public purposes, including support for energy efficiency and renewables”

As he previously announced he would, Energy and Commerce’s Energy and Air Quality Subcommittee chair Rep. Rick Boucher (D-Va.) released the first of a series of white papers on climate legislation today, Scope of a Cap-and-Trade Program.

Based on the hearings earlier this year, the Committee and Subcommittee Chairmen have reached the following conclusions: The United States should reduce its greenhouse gas emissions by between 60 and 80 percent by 2050 to contribute to global efforts to address climate change. To do so, the United States should adopt an economy-wide, mandatory greenhouse gas reduction program. The central component of this program should be a cap-and-trade program. Given the breadth of the economy that will be affected by a national climate change program and the significant environmental consequences at stake, it is important to design a fair program that obtains the maximum emission reductions at the lowest cost and with the least economic disruption. The Subcommittee and full Committee will draft legislation to establish such a program.

Oddly, the white paper fails to mention a baseline for emissions reductions; the scientific consensus for the 80 percent reduction is from 1990 emissions levels.

The white paper makes no recommendations on how credits should be allocated, though Boucher has stated his resistance to auctions in the past. Nor does it discuss interaction with foreign carbon markets or how to deal with imports from unregulated entities.

The white paper argues that complementary measures are necessary:

“Even with a broad-based cap-and-trade program, complementary measures (such as a carbon tax or other tax-based incentives, efficiency or other performance standards, or research and development programs) will also be needed. For example, funding for research, development, and deployment of new technologies would assist industries that will need to adopt new technologies. In addition, efficiency or other performance standards might be appropriate for some economic actors that would be inappropriate to include directly in a cap-and-trade program, but that should contribute to an economy-wide reduction program in some other way.

Proposed measures range from Dingell’s carbon tax, increased CAFE standards, appliance and lighting efficiency standards, a federal renewable energy standard, to carbon sequestration funding.

Further notes are below.

U.S. PIRG today announced the release of “Cleaner, Cheaper, Smarter”, a report which makes the case that any greenhouse gas emissions cap-and-trade program have a full auction of emissions credits.

In a supporting statement, numerous environmental and progressive organizations and individuals state:

It is critical that any cap-and-trade program require the auctioning of pollution allowances, rather than giving those allowances away for free to polluters.

By auctioning pollution allowances, we affirm that no one has a “right” to pollute. Instead, we claim the atmosphere as a common resource, to be managed for the benefit of the public, which no polluter may foul without due compensation.

By auctioning pollution allowances, we reduce the societal cost of achieving emission reductions, enabling America to achieve its climate protection goals with less disruption to our economy and the lives of individual Americans.

And by auctioning pollution allowances, we prevent the accumulation of billions of dollars in windfall profits by polluters, and instead put those revenues to work on behalf of the public. Allowance revenues can support efforts to transform America into a clean energy economy and to provide a regular dividend or rebate to American consumers.

We call on state and federal lawmakers to limit global warming emissions to the levels demanded by the science and to auction all pollution allowances in any cap-and-trade program.

The list of signatories is after the jump.

From the Politico, at today’s PPI forum Joe Lieberman said he and John Warner are open to changing their bill from a proposed 76% give-away of pollution credits to 100% auction, following the polluter pays principle:

We’ve heard [calls for a 100 percent auction] from some stakeholders and heard that from some of our members. We’re thinking about it. Warner and I haven’t closed our minds to that. It’s on the table.

From E&E News (subscription required), at an event in Washington hosted by the Council on Foreign Relations, Rep. Rick Boucher (Va.), chair of the Energy and Air Quality Subcommittee of John Dingell’s Energy and Commerce Committee, said he planned to draft a cap-and-trade bill that distributes tens of billions in pollution credits to U.S. industries for free:

I’m disinclined at the moment to do auctioning, at least in the early years to give it very much prominence, if any at all. The best we can do is give the allowances to the emitters according to their needs. We’re going to have enough problems as it is with coal-fired utilities, for example, and other carbon-intensive industries meeting our production schedules. I think perhaps, at least for the early years, it’s better not to compound these problems by imposing a cost on these emitters of having to go out and pay for these allowances. It will be the least painful, most politically attractive way to do it.

In other comments, Boucher asked Pelosi to delay the conference committee negotiations on the energy bill until he produced his draft cap-and-trade bill, but he said she probably won’t. He agrees with the 80% by 2050 target but is unsure of the path to there: “The schedule that takes us to that very aggressive target will be perhaps the most difficult thing we have to negotiate.” He will be releasing a series of position papers over the coming weeks.

In contrast, Nat Keohane, Ph.D., the Director of Economic Policy and Analysis at Environmental Defense offers support for full auctions in a blog post countering Greg Mankiw’s recent NYT op-ed favoring a carbon tax over a cap-and-trade system (in line with Robert Shapiro’s argument):

Mankiw assumes that allowances in a cap-and-trade system would be handed out for free rather than auctioned, thus generating no federal revenue. Now, I admit that this has been the modus operandi in the past. Virtually all allowances were handed out for free under the wildly successful sulfur dioxide trading program in the U.S., set up by the 1990 Clean Air Act Amendments. But that doesn’t mean it has to be that way.

The alternative, full auctioning, would raise exactly the same amount of money as a carbon tax, and there are signs that it’s gaining ground. Earlier this year, several states participating in the Regional Greenhouse Gas Initiative, including New York and New Jersey, announced plans to auction off 100 percent of their allowances. Plus there are calls to phase in auctioning in the European Union’s Emissions Trading System.