- What actions is the U.S. Congress Taking Regarding Climate Change?
- What is the McCain/Lieberman bill?
- What is the Carper bill?
- What are the differences between these bills?
- What are the goals of these bills?
- Who supports these bills?
- What is the true significance of these bills?
- How might these bills affect my business?
- How do these actions differ from the Kyoto Protocol?
- Who can I contact for further information on these congressional actions?
Congressional Actions on Climate Change
A series of legislative initiatives have been introduced in the US Congress aimed at managing GHG emissions. This action represents a shift in thinking in the Congress, which has been hesitant to address global climate change due to the potential economic costs associated with emissions reduction. These legislative actions are also an early indicator of a potential carbon constrained future in the United States.
The McCain/Lieberman and Carper bills are two separate pieces of legislation, proposed in Congress to address greenhouse gas emissions in the United States. Senator Carper’s bill proposes caps on a variety of pollutants, including the greenhouse gas carbon dioxide for the electricity sector. In contrast, the McCain/Lieberman bill focuses on six greenhouse gases, one of which is carbon dioxide, for the electricity, transportation, industrial, and commercial sectors.
What actions is the U.S. Congress taking regarding climate change?
A series of legislative initiatives have been introduced in the US Congress aimed at managing GHG emissions. This action represents a shift in thinking in the Congress, which has been hesitant to address global climate change due to the potential economic costs associated with emissions reduction. These bills include a range of policy options such as mandatory emission reduction targets, greenhouse gas emissions trading, R&D for climate-friendly technologies and emissions reporting requirements for large sources of emissions in the US. Two notable bills focus on emission reduction targets and establish "cap and trade" programs to assist with compliance. These are: 1) The Climate Stewardship Act, introduced by Senators John McCain (R-AZ) and Joseph Lieberman (D-CT); and 2) The Clean Air Planning Act, introduced by Senator Thomas Carper (D-DE). Further, the national energy bill that passed in the Senate last year contained a climate change strategy that included mandatory emissions reporting for large sources in the US and technology R&D programs, among other provisions.
What is the McCain/Lieberman bill?
The McCain Lieberman bill proposed the establishment of an emissions cap for the electricity, transportation, industrial and commercial sectors. The cap would consist of emission reduction targets for these sectors to reach by 2010 and 2016. The 2010 target would be emissions equivalent to year 2000 levels. The 2016 target would be emissions equivalent to year 1990 levels.
Entities in the target sectors that emit more that 10,000 metric tons of GHG per year would need to submit allowances equal to its emissions for a given reporting period. An emission allowance-trading program would be established to assist entities with meeting their targets. Entities not meeting their targets would be fined three times the market value of a ton of GHGs for each ton over their limit.
The McCain Lieberman bill also establishes a comprehensive system of GHG inventory, reporting and reduction registrations. It would also include provisions for climate change research.
House Representatives Wayne Gilchrest (R-MD) and John W. Olver introduced a companion bill to the McCain Lieberman bill in April 2004. This bill would require some sectors of the U.S. economy to enact mandatory reductions of CO2 emissions.
Senator Thomas Carper’s bill is a proposed amendment to the Clean Air Act for reductions in air emissions from fossil fuel power plants.
The bill proposes to tighten an existing cap on utility emissions of sulfur dioxide (SO2) and impose new caps on nitrogen oxides (NOx), mercury and carbon dioxide (CO2). Utilities would also be required to reduce releases of mercury. Carper’s bill requires utilities to return their CO2 emissions to 2005 levels by 2008, and to 2001 levels by 2012. The bill also adds cost considerations to the new source review process and establishes an emissions allowance trading system (cap and trade).
Carper's bill is viewed as a compromise between several multi-pollutant approaches under consideration in Congress. The Bush Administration's Clear Skies initiative adopts a multipollutant strategy, with weaker targets for NOX, SO2 and mercury and does not address CO2. On the opposite side of the spectrum, Senator James Jeffords (I-VT) introduced a multipollutant bill with more aggressive targets than Carper -- and it includes CO2.
What are the differences between these bills?
While both bills follow the cap-and trade approach to emissions, the bills’ differences lie in the specific pollutants and emission sources that they target. The Carper Bill addresses multiple emissions from power production plants, including sulfur dioxide, nitrogen oxides, carbon dioxide and mercury. The McCain/Lieberman bill addresses not only carbon dioxide emissions from the electricity generation, transportation, industrial and commercial sectors, but also all other greenhouse gases (methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulphur hexafluoride). Another distinction between the two bills is the proposed reduction target year. The Carper bill calls for a reduction of carbon dioxide emissions to 2001 levels by 2013, whereas McCain/Lieberman calls for a reduction to 2000 levels by 2010 and a further reduction to 1990 levels of carbon dioxide emissions by 2016.
What are the goals of these bills?
In general the goals of the proposed legislation by Carper and McCain/Lieberman are to provide cost-effective flexible mechanisms to reduce air emissions, including the emission of greenhouse gases. More specifically, these new pieces of legislation are intended to:
- provide protection to the environment and public health,
- enable industry facilities to achieve emission reductions in a cost effective, market-based manner,
- encourage the use of energy-efficient technologies and renewable energy, and
- reduce our dependence on foreign oil.
According to a Lieberman press release, addressing GHG emissions now will help ensure that U.S businesses will not suffer from inaction in comparison with the global community, address the risks that climate change poses to long-term investments, and create a regulatory framework enabling businesses to prepare and plan for future capital expenditures.
The Carper bill may be well positioned to pass in the closely divided senate. It has won considerable support from segments of the power sector, though several environmental groups prefer more aggressive target and timetables. The loudest voices in support of the Carper bill are those attached to clean energy advocacy organizations. For example, some northeastern utility companies that use clean-burning natural gas or nuclear power – and do not produce large amounts of carbon dioxide – favor Carper's approach over the Bush administration’s Clear Skies Act.
Even though in 2003 the Climate Stewardship Act introduced by McCain-Lieberman was defeated in the Senate by a narrow margin of 43-55, its support has been growing steadily. According to the Lieberman/McCain team, their legislation has gained the support of a bipartisan group of 155 mayors across the country, the National Farmers Union, 23 senior climate economists, the ski industry, the leading insurance underwriter in North America, and an industry coalition that includes corporations such as Maytag and American Gas Association. Religious leaders, Wall Street fund managers and most recently defense experts have also expressed their support for immediate action on climate change.
What is the true significance of these bills?
These bills and the support they are garnering indicate a shifting balance with regard to the need for mandatory greenhouse gas reductions and are an early indicator that it is more likely that some carbon constraints will be a reality in the future in the US.
Though the most recent version of the McCain Lieberman Climate Stewardship Act was rejected by a vote of 43-55, the closeness of the vote was a positive signal of where Congress stands on the issue. After the vote, Senator McCain noted that it took multiple versions of the campaign finance bill before it was finally passed.
Though it may take time for either of these bills to be adopted, public opinion and congressional support seem to indicate that a mandatory approach to dealing with climate change is an inevitability, rather than a possibility.
For organizations with a potential carbon risk, understanding carbon exposure and planning for this potential exposure becomes more important. Organizations may also want to identify and consider opportunities potentially available in a carbon-constrained world.
How might these bills affect my business?
Both bills introduce restrictions on greenhouse gas emissions in the U.S., and as such will have an effect on the cost of doing business. More importantly, each will require that companies and industries are aware and take steps to address the issue of climate change.
Unlike many other environmental issues, restrictions on greenhouse gas emissions will affect all industries, and this change in constraints may require re-evaluation of how business is done in many sectors. While the economic cost of implementing either of these bills is not known, the cap-and-trade approach provides flexibility that will offer some companies different and more cost effective options for managing their emissions.
The McCain Lieberman bill will have positive effects on the economy as well as some direct costs – the cap-and-trade program will encourage investment in renewable energy and spur innovation that will help reduce the cost of compliance. In addition, companies that take steps now may receive credit for early action, when the cost of addressing this issue is less.
How do these actions differ from the Kyoto Protocol?
The most significant difference between these bills and the Kyoto Protocol is that both of these actions would produce domestic legislation as compared to the Kyoto Protocol which is an international treaty. Therefore any actions taken would only be recognized domestically and other countries would have no requirements under this legislation.
Beyond this general distinction, specific differences between the McCain Lieberman bill and the Kyoto Protocol are the methods by which entities can meet their target. Entities under the McCain Lieberman bill , though able to submit allowances from another nation’s GHG market, would not have access to flexible mechanisms of the Kyoto Protocol such as Joint Implementation or the Clean Development Mechanism.
Regarding the Carper bill and the Kyoto Protocol, the Kyoto Protocol does not address the pollutants of SOx, NOx, and Mercury as the Carper bill includes.
The following table shows the main characteristics of the climate change legislations in brief:
|
|
Kyoto |
McCain / Lieberman |
Carper |
|
Scope |
International |
United States |
United States |
|
What is the current status? |
121 Parties have ratified or acceded; The protocol is not in force at this time |
In Committee (Environment and Public Works) |
In Committee (Environment and Public Works) |
|
What GHGs /other emissions are regulated? |
6 Kyoto gases (CO2, CH4, SF6, N2O, HFCs, PFCs) |
6 Kyoto gases |
CO2 SO2, NOx, Mercury |
|
What industries or parts of the economy are regulated? |
Country-wide emissions |
Entities which emit more than 10,000 metric tons of GHGs a year; Residential and agriculture not covered |
US Electric generation |
|
What are the targets? |
Country specific – for U.S – 7% reduction of 1990 levels by 2008-2012 |
By 2010 – 2000 levels By 2016 – 1990 levels |
By 2013 – 2001 levels |
|
What kind of trading scheme is allowed? |
Cap and trade (project based trading and emissions trading) |
Cap and trade, International offset purchases |
Cap and trade |
|
What are the penalties for non-compliance? |
Increased reductions required for future dates; Loss of ability to sell credits |
3x market rate for each metric ton |
Not specified |
Who can I contact for further information on these congressional actions?
Further information on these bills and other pending emissions reduction legislation can be obtained from the following sources:
Jay Wintergreen
First Environment Inc.
770 L Street, Suite 950
Sacramento, CA 95814
Tel: 916-492-6080
Fax: 916-492-6089
Business Council for Sustainable Energy
The Business Council for Sustainable Energy is a Washington-based industry association, which works with its members on issues of international financing, clean energy tax equity, global market development as well as climate change.
Tel: 202-785-0507
Contact: Lisa Jacobson
ljacobson@bcse.org
Senator McCain’s Office
Senator Lieberman’s Office
Senator Carper’s Office
These bills include a range of policy options such as mandatory emission reduction targets, greenhouse gas emissions trading, R&D for climate-friendly technologies and emissions reporting requirements for large sources of emissions in the US. Consequently, industry groups, insurance companies, farmers, economists and NGOs, have been following these bills very closely. We have included some of the more frequently asked questions below:
