EVENTS

Date:	Monday, May 22, 2006
Time:	1:00 PM -- 2:30 PM
Location:	Wohlstetter Conference Center, Twelfth Floor, AEI 1150 Seventeenth Street, N.W., Washington, D.C. 20036

May 2006

Clean Development and Climate

The debate over climate change seems to be stuck in a rut, but in reality there is a lot of movement on the policy front that is unseen by the public. James L. Connaughton, chairman of the Council on Environmental Quality, discussed U.S. policy initiatives and global efforts on climate and energy during a May 22 speech to AEI.

James L. Connaughton
Council on Environmental Quality

There is a remarkable degree of consensus among experts regarding the available scope, location, and type of action available to policymakers in regards to clean development and climate change. The science is no longer being debated, but rather the outcomes.

The actual greenhouse gas (GHG) emissions of the world’s leading economies are roughly equal. Furthermore, the GHG intensity is dropping among these economies, anywhere from 4 to 10 percent. GHG intensity is a better indicator of progress, as it does not reward economic decline or leakage (emissions trading) in the calculation as actual GHG emissions does.

By 2010, the emissions from emerging economies will surpass those of developed economies. The G8 reached a consensus that the best way to address this issue is to reintegrate policy drivers that are complimentary to clean development and GHG intensity reductions. Three main policy drivers for developing nations are economic growth, national security, and air pollution. By focusing on these as a bundle, a reduction in GHG intensity will be a byproduct.

The specific programs which should be focused on are--sensibly enough but often ignored--those which are the most beneficial as opposed to those that are most costly. There are three baskets of available options: private sector activity that produces a profit, programs with quantifiable benefits (such as health benefits) that outweigh the cost, and programs that operate at a loss.

Despite the perception that the current U.S. government is doing nothing to combat climate change, the reality is that much has been done in recent years. The 2005 energy bill was, in essence, a massive climate bill. The bill contains three separate methods for enhancing efficiency: incentives, mandates, and partnerships. Billions of dollars worth of incentives were put in place for clean energy use, including nuclear power, which is now accepted as a necessary component of any clean energy plan. The bill includes sixteen government mandates, such as a renewable fuel standard and new mandatory efficiency standards. Also included was the authority for new international partnerships, such as the Global Nuclear Energy Partnership.

The most significant components of the 2005 energy bill were the new rules on expensing and dividends, which lower the cost of capital. This creates a more rapid capital stock turnover, bringing in more efficient technology more rapidly.

Consumer choice and the market play a more integral role in reducing GHG intensity than any government program. Actions such as installing energy efficient systems in homes and buying fuel-efficient vehicles can have a great impact. Industry is often pinpointed as a primary source of growing emissions, but industrial emissions have remained flat since 1990. It is the increased wealth of consumers that has led to higher emissions.

Internationally, the system of treaty-based emissions reductions involving 189 countries is woefully insufficient. To actually produce a substantial outcome, the focus must be on a much smaller group (fifteen to twenty leading countries). Dubious, low-yield strategies must be done away with, such as emissions trading with failing economies and bad accounting. Partnerships such as the Asia-Pacific Partnership have been formed to create task forces to study and implement efficiency measures in various fields of energy.

AEI intern Tom Rickeman prepared this summary.