Weathervane: A Climate Policy Blog from Resources for the Future

Apr21

Emissions Leakage vs. Reshuffling: The Case of State and Federal Climate Policies

With a new climate bill expected to be released any day now, there is likely to be a renewed interest in U.S. climate policy. While federal action on climate change has been in limbo, movement in California is still discernable (at least for the moment) as officials continue their consideration of the economic impacts of a cap on carbon today. A recent report from California’s Air and Resources Board (ARB) examined the impacts of California’s proposed cap-and-trade program created by Assembly Bill 32 (AB 32). While the general results of the study have been highlighted elsewhere (and a detailed breakdown of the underlying study and it’s comparability to earlier models of Waxman-Markey is the subject of a future post) an interesting issue has gone largely unnoticed.

Establishing a cap-and-trade program at the national level requires the examination of an important and varied set of issues. Two prominent examples concern U.S. competiveness impacts and the related issue of emissions leakage that might result under a given policy regime. Emissions leakage refers to the policy-induced emissions reductions in a country enacting a unilateral or near unilateral carbon pricing policy that are offset by an increase in emissions abroad. This increase in emissions is, in part, the result of firms shifting production to countries that have less stringent or non-existent environmental regulations, in particular carbon pricing policies. An earlier post highlighted some of the work being done by researchers at RFF and other organizations to consider the effectiveness of policies designed mitigate adverse leakage and competition impacts of a carbon pricing policy.

In considering unilateral policies, broadly speaking, one should be able conceive of California enacting a climate policy a lot like a single country (albeit smaller depending on your country of comparison) enacting a carbon pricing policy when other countries do not act. While for the most part this is the case, there is one distinct difference that was highlighted in a short report released by the Economic and Allocation Advisory Committee when examining an earlier draft of the ARB’s assessment of the impacts of AB 32 (see full document here).

When a country enacts a unilateral policy, there is the potential—and to some extent inevitable outcome—that a certain amount of emissions reductions will be offset by increases abroad. When a country enacts a unilateral policy there is no other legal jurisdiction with which the policy must interact. This, of course, ignores international law, which is fine because international law doesn’t, for example, govern fuel economy standards in the U.S. or other similar policies. However, when a state unilaterally enacts a carbon pricing policy, the requirements it sets for firms and households within the state must also interact with laws decided at the federal level. In the context of an emissions cap, this gives rise to what the authors refer to as reshuffling.

At its most basic level, reshuffling is a form of leakage. More specifically, reshuffling refers to policy-induced increases in emissions elsewhere in the U.S. arising from the interaction of two different but related regulatory requirements. One regulatory requirement that arises at the state-level and another that would arise at the federal level. In the case of California, the Low Carbon Fuel Standard (LCFS) is one component on the climate policy table that would be used to meet the state’s emission reduction targets established under AB 32. The potential for reshuffling would arise due to interaction of the LCFS and the EPA’s Renewable Fuel Standard. As the report by the EAAC highlights:

“…the Low Carbon Fuel Standard in California would require the consumption, in California, of fuels that the national Renewable Fuels Standard will itself require be consumed somewhere in the U.S. If both regulations remain in place, it is very plausible that the effect of the California regulation will be to divert some low-carbon fuel to California that otherwise would be consumed in other parts of the U.S. The implication of this diversionary effect (often referred to as reshuffling) is that a regulation that reduces local emissions achieves much smaller reductions at a broader level.”

Essentially there is the possibility that state-level requirements diminish the stringency of complying with another environmental regulation at the national level. It should be noted here that the issue of reshuffling in this context would not result in a net increase in emissions at the U.S. level; it would, however, result in part of the emission reductions undertaken in California to be offset by increases in emissions from other states.

It’s an interesting case in which the actions taken to internalize the costs of a negative externality, namely the emissions of CO₂in California, generate a new externality in compliance. Since reducing emissions is costly and the effects of CO₂are global in nature, costs imposed in meeting part of the emissions reductions under AB 32 would have the effect of lowering compliance costs for the Renewable Fuel Standard in the U.S. at large (not including CA). The size of emissions we are talking about here is not exactly clear, primarily since both standards have yet to come into full force. California has a reputation for more stringent environmental regulations than the U.S. at large (as AB 32 attests to), which would make it interesting to examine the prevalence of this sort of issue (e.g. reshuffling) that arises with differing levels of stringency and overlapping regulatory requirements.

Eric M. Moore is a research assistant with Resources for the Future.

Published: Apr-21-10 | 0 Comments

Apr14

Output-Based Rebates and Border Adjustments: Easing the Burden of Carbon Pricing

Border Adjustments, Competitiveness

As recent events have shown, putting a price on carbon is no easy task. A host of issues must be addressed to ensure the viability of a comprehensive climate bill, including competitiveness and leakage concerns. Competitiveness questions primarily concern the impact that a carbon pricing policy has on industry output, employment, and profits. Leakage concerns tend to reflect two main components, the first being the desire to keep firms (and hence jobs) from shifting production to countries with less stringent carbon pricing policies. The second is the desire to prevent negative impacts on the environmental integrity of a cap-and-trade program that would result from carbon emissions increasing abroad from this shift in production.

There are two primary tools for dealing with these issues: output-based rebates and a border carbon adjustment. While the general idea of either is fairly simple, how effective each is at preventing adverse competitiveness and leakage impacts is not as straightforward. Fortunately, there are a number of researchers around the world examining these policies and their interplay with the cap-and-trade policies that could develop in the coming years around the world.

RFF recently gathered researchers from the United States, Canada, the EU, and Japan who are currently studying these policies. The goal was to provide a forum for discussing research results and for exploring some further topics for consideration. With the conference spanning several days, many issues were covered but in the course of the dialogue a few interesting themes cropped up:

Allocation design has important economic consequences. Not a surprise right? Of course, but for some more specifics, it was generally found that full auctioning is the most efficient way of allocating permits provided revenues are used to lower distortionary tax rates (here ignoring the political feasibility of full auctioning). Grandfathering was generally found to be the least efficient approach.

Output-based rebates help to mitigate short-run adverse impacts of a carbon pricing policy. The idea here is that setting a price on carbon is going to have the most adverse impacts at the inception of the policy because it is more difficult for firms to adjust production processes to reflect this new higher-cost reality. By establishing output-based rebates you can help mitigate some of the early shock to industrial output that could occur in the U.S. at the start of the program.

Time horizons matter for assessing the impacts of carbon pricing policies. In the near term the effects are likely to be more severe than the medium and long term, as firms change production processes and new technologies are developed.

Emissions leakage can occur from two main sources. The first is through the direct reallocation of production abroad. The second occurs when a country that is large enough to influence the world price of an energy commodity enacts a policy that will lower demand for the fuel in question. Here the lower demand that results from the carbon pricing policy lowers the world price and, as a result, raises the quantity demanded abroad.

And effectively dealing with these two different sources of emissions leakage requires two different approaches. To deal with firms leaving the country, some form of output-based rebating or a border carbon adjustment is necessary. In order to deal with the increase in emissions that could result from lower world fuel prices, the only real way to effectively deal with that is to get the world on board in establishing carbon prices.

Find a full summary of the workshop here.

Eric M. Moore is a research assistant with Resources for the Future.

Published: Apr-14-10 | 0 Comments

Mar08

Prospects for Energy-Intensive Industries Under Cantwell-Collins: It’s Not Quite CLEAR

Cap and Trade, Congress, Competitiveness

With domestic climate change legislation making its way glacially through the Senate, it seems everyone is looking for that sweet mix of proposals that might, when combined, garner 60 senate votes. Indeed Sens. Kerry, Lieberman, and Graham are trying to do just that. Whether what they are cooking up at the moment will prove successful remains to be seen. One thing that is clear, though, is that with U.S. unemployment at 9.7 percent (and the corresponding mantra of ‘jobs jobs jobs’ guiding congressional action) any successful climate plan will have to convince U.S. senators that the proposed measures do not place a disproportionate burden on the U.S. economy and, in particular, their respective constituencies.

One group in the U.S., energy-intensive and trade exposed industries (EITE), is widely considered the most vulnerable to the adverse impacts of any climate change bill. EITE industries are defined (in H.R. 2454) by their high reliance on energy as a production input and/or face significant competition from importers of comparable products. Firms in these industries are the most likely to move production from the U.S. to other countries without comparable emissions caps. A quick examination of how these firms might fare would be a first point to focus on when examining the how well any piece of legislation mitigates the adverse and disproportionate burdens a carbon price creates in its initial phases.

So how do these EITE industries fare under the Cantwell-Collins CLEAR (Carbon Limits and Energy for America's Renewal) bill?

The honest answer is it’s not clear. While that may seem a weak way to start developing a perspective on the issue, the fact that it isn’t clear how they will fare—and perhaps more importantly who will fit into the category—is exactly the important point.

Energy Intensive and Trade Exposed: To Be or Not to Be?

In Cantwell-Collins, “targeted relief funds” are established to help industries most vulnerable to a carbon pricing policy’s adverse impacts. These resources, pulled from a fund created with 25 percent of auction revenues, are to be allocated “to individuals and entities that are unable to compete due to unfair market prices arise from disparate fossil carbon limits or fees among countries.”

The most obvious thing missing here is any clear set of industries that qualify for free emission shares. In addition to several points of qualification, the funds apply to an industry or economic sector if “domestic producers would be demonstrably disadvantaged economically and competitively by the program in the absence of funds.” If you don’t enjoy the company of lobbyists then you might not enjoy this statement as a part of your U.S. Code. This qualification leaves open anyone who has modest cost/profit impacts to be included, simply because “modest” is a vague term. This sort of wording leaves qualification an open question before the bill is enacted. In fact, the legislation states that the Treasury, Energy, and Commerce Secretaries, in addition to the U.S. trade representative have basically a half of a year after enactment to figure it out. Perhaps the Treasury and others would adopt a hard-and-fast rule but if not one would expect some sort of a de minimis standard to be applied by the courts after enactment.

Contrast this sort of wording with that found in H.R. 2454 (namely an industry is EITE if it has an energy intensity greater than five percent and a trade intensity greater than fifteen percent or simply and energy intensity greater than twenty percent. [1] The latter approach makes it pretty clear who’s who in the EITE world (see Table 1). While one could argue that the discretion given to the president under Waxman-Markey in determining other industries that should qualify and are not listed above is equivalent, it seems likely that the hard rules for initial inclusion in H.R. 2454 will set the tone for any discretion made thereafter. With the Cantwell-Collins bill, there is not a baseline standard unless you assume the Department of the Treasury and others will simply adopt the H.R. 2454 criteria.

With one of the main criticisms of stalled climate change legislation being it generates uncertainty for business, the lack of a clear rule of inclusion (prior to legislative enactment) for targeted relief funds would generate something of a comparable business uncertainty (or even something worse). In the normal course of our daily lives we don’t expect people support a proposal if they don’t have a very clear understanding of how it directly impacts them (just think of the fact that the emission rebate program created under Waxman-Markey has clear rules about what industries qualify and how much they receive and yet at the firm-level decision makers still are uncertain about its ultimate effects on them). Take the uncertainty for EITE industries at the firm level and then move one step back—i.e. adding a lack of clarity at the allocation provisions at the industry level. Perhaps this is something that will be amended within a committee; however, given the language about post enactment decisions about the funds, that seems unlikely.

^[1] Energy intensity is calculated as the total expenditures on energy consumption (fuel and electricity) divided by the industry’s output (note that I am ignoring the GHG intensity for the simple example – for the full equation, see full House text). Trade intensity is defined as (the sum of imports and exports) divided by (the sum of industry output plus imports).

Eric M. Moore is a research assistant with Resources for the Future.

Published: Mar-08-10 | 0 Comments

Dec15

Assessing the Implications of Border Adjustments

Competitiveness, COP-15, International

COPENHAGEN -- As an economist who sees the leakage/competiveness provisions of pending U.S. climate legislation as imperfect, albeit necessary, elements of a domestic carbon pricing mechanism adopted in advance of a true global regime, I was pleased to attend an event on trade and climate sponsored by the Geneva-based International Centre for Trade and Sustainable Development (ICTSD). Early on, Carolyn Fischer noted that while the overall goal is to efficiently mitigate climate change by introducing carbon pricing in the developed world, the reality is that these countries will not take on such policies without adoption of some complementary measures in developed nations such as the U.S.

Thereafter, the discussion turned to the potential legal pitfalls associated with the key trade-related elements contained in H.R. 2454: freely distributed output-based allowance allocations for energy intensive, import exposed (EITE) industries in the near term, and possible border carbon adjustments to be imposed after 2020. Several legal scholars noted that the most basic legal pitfall may be in the design of the bill’s trade-related provisions themselves. A determination by a World Trade Organization (WTO) panel that competitiveness issues were the driving force in the design, as opposed to strict environmental concerns, could doom the provisions. It was even suggested that too much emphasis on competitiveness in the legislative history could be problematic.

More fundamentally, questions were raised in a number of areas:

Would trade measures embraced in the name of leakage spark a major trade war?
Would it be possible to reconcile application of trade measures with the broadly-adopted notion of common but differentiated responsibilities of UNFCCC signatories?
If a country did not impose restrictions on specific EITE industries but, nonetheless, was deemed to be in compliance by the climate regime, would a WTO panel likely accept trade-related measures adopted by the injured country?
Were the trade measures consistent with long-established WTO processes regarding transparency, advance notice, efforts to broker a settlement, lack of arbitrariness, administrative simplicity, etc?

Most of the discussion focused on border carbon adjustments, with the trade lawyers generally expressing the greatest skepticism. It was noted that while no less eminent a trade expert than Nobel Prize winning economist Paul Krugman had embraced such adjustments as WTO legal, the situation was still considered to be wide open, since the organization’s decisions are driven by the still unwritten case law, not the findings of WTO reports cited by Krugman.

Interestingly, concerns were also expressed that freely distributed allowances might be construed as subsidies under current WTO definitions. This would apply to both the output-based allocations proposed in the US, Australia and New Zealand, as well as the grandfathered EU allocations which must be forfeited if a firm shuts down. While the group was divided on this latter point, it is clear that the issue is also far from settled.

Many participants thought that a binding legal agreement on climate commitments might go a long way toward resolving conflicts. Others noted that even with a binding global agreement, significant differences among countries would continue to exist. Notwithstanding, there was widespread interest in adopting a pause, or peace clause, between the climate and trade camps, giving nations more time to sort out the complexities, especially since even the most significant trade measures wouldn’t kick in for a number of years. ICTSD reported on a project designed to develop principles of good practice for border carbon adjustments.

The session began and ended with stimulating and somewhat optimistic comments by Vanderbilt Law Professor James Bacchus, former US Congressman and former Chairman of the WTO Appellate Body. Noting that fears of leakage may be overstated but nonetheless real, he pointed to the recent shrimp turtle and other WTO decisions which have supported environmental values as consistent with trade rules. He discounted differences between the trade and environmental communities, noting that WTO members are the same ones negotiating the climate treaty. Thus, he believes the parties have both the incentives and the opportunities to work out their differences. Overall, while he recognized the temptation to use border measures as real, and acknowledged at least a theoretical possibility that some measures might be legally permissible, Professor Bacchus saw them as politically nonsensical. In the best of all worlds, he believed that the threat of such measures would lead to greater international comparability of climate policies, thus reducing the prospect that disputes would be brought before the WTO.

Richard Morgenstern is a senior fellow at Resources for the Future. His research focuses on the economic analysis of environmental issues with an emphasis on the costs, benefits, evaluation, and design of environmental policies, especially economic incentive measures.

Published: Dec-15-09 | 0 Comments

Sep16

Wednesday's Reads

Renewables, Obama Administration, EPA, COP-15, Competitiveness, Morning Reads

NYT: Obama administration officials announced a new plan to tie auto fuel efficiency standards and the environmental impact of auto emissions. The proposal, which is open for a 60-day public comment period, would set a fuel efficiency standard of 35 MPG for cars and light trucks by 2016 and, officials project, would reduce carbon dioxide emissions by nearly a billion tons.

NYT: Senate Majority Leader Harry Reid muddied timeline waters, implying yesterday cap and trade may end up on the legislative backburner as Congress works on health care and finance reform. The delay could have far-reaching implications leading up to international talks in Copenhagen.

Grist: A look at how the EPA could step in and regulate greenhouse gas emissions under the Clean Air Act if Congress can’t get the job done.

FT: Top U.S. Climate Negotiator Todd Stern turns protectionist rhetoric up a click, warning nations like China and India that a failure to agree on a comparable emissions reductions effort could lead to border-adjustment measures from the U.S.

NYT: Tom Friedman on a Silicon Valley company that has been quietly building solar panel factories seemingly everywhere but here. Friedman says a better policy could help bring some of those factories to the U.S.

NYT: Editorial praises the EPA/DOT initiative to get moving on GHG regulation but warns against celebrating too soon, as climate seems to be stalling out in Congress ahead of international climate talks. (Weathervane thinks NYT reporters may be pretty bummed when they show up in Stockholm to cover the talks and learn they’re being held in Copenhagen.)

And EIA projections for energy use in 2009 put the U.S. on track to be halfway to the 2020 emissions reductions goals in the House climate bill. Joe Romm explains further here.

Did we miss something today? Let us know, leave a comment or email clements@rff.org.

Published: Sep-16-09 | 0 Comments

Aug12

Climate Bill Success Can Equal Treaty Success, Even With Border Measures

Competitiveness, COP-15, Congress, International, Obama Administration, Waxman-Markey, Border Adjustments

President Obama and leaders of the U.S. Chamber of Commerce have spoken out against incorporating border adjustment measures in U.S. climate policy. Though there is great uncertainty about the economic and diplomatic value of leveling fees against nations who may not price carbon, 10 conservative Senate Democrats recently told the president such measures will be integral to their support of climate legislation. The challenge now is walking the fine line between the objective of these senators—not just maintaining, but strengthening the House measures—while respecting the concerns of the administration and Chamber about potential trade wars and international ill-will threatening the success of global climate cooperation. It will be a delicate balance, but one that can be achieved with a few key modifications.

The House bill (H.R. 2454) takes a three-fold approach to ensuring the global environmental integrity of U.S. climate policy by preventing emissions leakage. It exempts vulnerable industries from the first two years of the cap-and-trade program, provides output-based rebates until 2035, and introduces a border adjustment system in 2020 only if a multilateral agreement that meets certain conditions is not in place by 2018 and Congress and the president concur that border adjustments are necessary (with Congress given final authority).

The border adjustments are also intended to create leverage, by encouraging major-exporting and emitting developing nations to join an international agreement. Although the primary targets of the adjustments—China and India—have spoken out against this goal, South Korea actually cited it as one reason for being the first non-Annex I Kyoto country to announce a national target. Some have taken an optimistic view of the relationship between these measures and international agreements, while others are more skeptical.

While the House bill represents a compromise on border measures that most people could live with despite not being truly satisfied, the Senate is likely to push for stronger measures. In light of this political reality, the following changes could be introduced to both strengthen the measures and ensure they still reinforce, and are reinforced by, international agreements:

Provide incentives for a real negotiation. Large, developing countries are much more likely to accept the “sticks” (border measures) of U.S. climate legislation if they come with real “carrots” (financing and mitigation commitments) attached. Funding for adaptation and technology transfer in the House bill is well below what most estimates say is truly needed to solve the global climate problem. Although it is clearly concerned about upsetting domestic support, increasing recognition of the necessity for a global solution in Congress indicates the administration may be able to push further on these incentives, if they are properly structured and conditioned.

Improve the likelihood of World Trade Organization consistency. Border adjustments are likely to survive challenge in the WTO if they only enter into force after serious multilateral negotiations have failed, are targeted as clearly as possible at an environmental objective, and/or are backed by an agreement among several nations. Therefore, providing greater incentives for a real negotiation to take place—as discussed above—would likely improve the prospects in this area. Ensuring there are no references to specific countries or competitiveness concerns are also essential in the Senate bill. Finally, support from the nations of the European Union and other developed nations to adopt similar measures would also be helpful when standing before the WTO. These modifications should be in the interest of both those who want to see the measures implemented and those looking to avoid a trade war.

Make negotiating objectives flexible. From a global cooperation perspective, the worst thing Congress could do is to provide negotiating instructions that would be impossible to achieve, thereby ensuring a repeat of Kyoto. This means making them general enough—as the House bill does—that U.S. negotiators have flexibility about how, under what body, and with what conditions they will negotiate an international agreement on trade and climate, as long as it meets certain minimum requirements. Since the primary thing 100 Senators can agree upon is that they do not like the House bill, it is likely that some will want to make these objectives stronger. Instead of inserting additional specifics or calling for an explicit deal on border measures in Copenhagen, a more effective approach could be greater conditioning for U.S. financing and technology transfer on participation in an international agreement.

Adopt a “do no harm” approach on border measures in Copenhagen. From the perspective of U.S. domestic climate policy and global cooperation, the best possible outcome from Copenhagen on border measures is likely that nations do not condemn or even move to prevent them. In the unlikely event that a trade and climate agreement is struck within the UNFCCC or the UN, the issue is contentious enough that it will not come until the final stages of negotiations a few years off. The U.S.’ primary objectives for Copenhagen are likely to be gaining agreement on a long-term global goal, a broad framework for international financing, and potentially a recognition that all major emitters need to take legally binding actions if not now by a date certain. Throwing border measures into the mix will seriously threaten those already tenuous objectives.

Overall, by strengthening the House bill with more robust incentives, targeted framing, effective negotiating objectives, and realistic expectations the “hammer” of border measures desired by conservative Democrats can be compatible with the prospects for a new global agreement in Copenhagen.

Andrew Stevenson is a research assistant at Resources for the Future and regular contributor to Common Tragedies.

Published: Aug-12-09 | 0 Comments

Jul30

U.S. Climate Legislation Impact Marginal without Global Consensus

Cap and Trade, Competitiveness, International, Obama Administration, United States, Waxman-Markey

The ultimate success of any domestic legislation addressing climate change rests on reaching an international agreement that limits greenhouse gas emissions from all major emitting nations. No matter how stringent or costly the requirements of the H.R. 2454 (commonly known as the Waxman-Markey energy bill), this legislation will have only a trivial effect on greenhouse gas concentrations and global temperatures out to the year 2100 and beyond unless there are significant corresponding national actions to limit greenhouse gases by all the major emitting nations—including China and India.

Over the next four months leading up to the December meeting in Copenhagen, the U.S. and the other major-emitting nations will work to fashion an international agreement limiting greenhouse gas emissions. These negotiations are going to be very difficult—the stakes for each of the nations involved are huge. An agreement unfavorable to any of the countries involved could have a profound effect on that country’s economic growth and development as well as the economic well-being of its citizens.

The discussions at the recent G-8 Summit reflect the tensions associated with this negotiation. Several members of the European Union, China, and India have expressed the view that the U.S. should commit to even larger reductions in greenhouse gases (GHGs) than required by the first phase of Waxman-Markey. In addition, the leaders of the world’s largest economies, including President Obama, recently agreed to an aspirational goal of reducing their carbon emissions by 80 percent by 2050. Finally, the U.S. position—and that of the other developed countries—is that China and other developing countries need to take significant national actions to limit their greenhouse gas emissions in the context of an international agreement. In a show of good faith, Chinese officials signed a memorandum of understanding with the U.S. this week, committing to cooperation on climate. Still, China and India are concerned that they will end up with an unfair share of the reductions burden.

This highlights the importance of carefully considering our international negotiating posture as we develop domestic legislation to address climate change. Given the difficulty of reaching an international, multilateral agreement, is it to the advantage of the United States to have adopted unilaterally domestic legislation requiring specific annual reductions in GHG emissions to reach a required 83 percent reduction by 2050? In my view, Congress should incorporate in any climate change legislation an amendment that would provide an off ramp from any more stringent requirements for GHG emissions beyond those required by 2020. This amendment would require the president to certify that all of the major emitting nations have reached an international agreement assuring significant corresponding national actions to limit their greenhouse gas emissions and submit the agreement for congressional action.

Any further reductions beyond the phase 1 reductions—like the 83 percent reduction by 2050 as required by phase 2 of Waxman-Markey—would be contingent on specific congressional action accepting the international agreement. This amendment would set up an incremental, iterative process in which the U.S. would make an initial cut upfront in its GHG emissions by 2020, but condition any further action to limit GHG emissions on an agreement by the other major emitting nations to make meaningful, long-term reductions in their GHG emissions.

Supporters of the current House bill argue that its provisions—additional allowances for energy intensive industries and tariffs on imports from countries that fail to address greenhouse gas emissions—provide sufficient protection to the U.S. economy. However, additional allowances only provide assistance to a select set of industries and do little to protect the economy as a whole. Moreover, President Obama has already expressed concerns with the tariff provision in the bill because of the protectionist signals it sends out and said he hopes that Congress will strike that language.

Finally, these provisions offer only a Band-Aid of protection to the U.S. economy. They fail to address the fundamental fact that the U.S. will only realize any climate change benefits from the tens of billions in expenditures required by this legislation if all of the major emitting nations take corresponding actions to limit their greenhouse gas emissions.

By establishing the principles and objectives for the U.S. negotiation of an international climate change agreement, this proposed amendment would assure a full public and transparent discussion of what the U.S. expects to get in such an agreement and a public understanding of what is at stake in undertaking the extraordinary measures required by the current legislation.

Any such action—taken either unilaterally through domestic legislation or through an international climate change agreement—will impose tens of billions of dollars in costs and involve a substantial wealth transfer from the U.S. to other nations. Only an international agreement will assure that the U.S. will realize any significant benefits from its effort to address climate change.

Arthur Fraas is a Visiting Scholar at Resources for the Future and a long-time official at the Office of Management and Budget.

Published: Jul-30-09 | 1 Comment