In January the Bush administration promised bold, eye-popping initiatives on energy and the environment in the State of the Union address. But the White House failed to deliver. Bush proposed reducing U.S. gasoline consumption by 20 percent over ten years, largely by increasing subsidies and mandates for alternative fuels and tightening auto fuel-economy standards. Such proposals are hardly path breaking, and certainly failed to justify the pre-speech predictions. More ethanol is not an inspiring energy future.
In May, by comparison, there was little effort to hype the president’s announcement of a new climate-policy agenda in preparation for the G-8 summit in Heiligendamm. Everyone knew climate change topped host Angela Merkel’s agenda, and that President Bush and the German prime minister were leagues apart on the issues. The big question was not whether Bush would propose something new, but whether he would acquiesce to European demands. So it was a surprise when, at the tail end of a speech outlining his G-8 agenda, President Bush seized the global initiative on climate-change policy.
On May 31, the president announced support for a new international framework on climate change under which the 15 largest emitters of greenhouse gases would adopt their own parallel commitments on climate change on the way to a long-term emission-reduction goal. The president also stressed the need to accelerate the transfer of advanced technologies to other nations by eliminating tariffs and other trade barriers on clean-energy advances and making clean energy a new priority for international financial institutions.
Whereas as the Kyoto Protocol and European proposals sought to establish firm near-term emission-reduction targets that few nations would actually meet, the Bush stressed the development and deployment of efficiency-enhancing and emission-reducing technologies in an effort to reduce carbon intensity. In this regard the president’s plan built upon the preexisting, but little noticed, Asia-Pacific Partnership on Clean Development and Climate, an agreement among the United States, Australia, China, India, Japan, and South Korea to develop and deploy clean energy technologies among member nations.
Environmentalists and some European environmental ministers were quick to dismiss Bush’s plan. Yet others, including British Prime Minister Tony Blair and U.N. Secretary General Ban Ki-Moon praised the president’s initiative. Japan and Australia were downright enthusiastic, and China responded more favorably than it has to Europe’s emission-reduction demands. Within a week, Bush had transformed the climate-policy dialogue. The president’s proposal became the basis for the G-8’s climate resolution and, for the first time, created an opportunity for developing nation participation in a meaningful climate-policy framework. Not bad for a president often accused (sometimes rightly) of obstructionism on environmental issues.
The potential to bring China and India to the negotiation table is particularly important. No climate regime that omits fast-growing developing nations, could ever promise to have a meaningful effect on projected climate changes. The G-8 nations may represent the world’s economic and political powerhouses, but account for only 43 percent of global greenhouse-gas emissions. The U.S. remains the world’s largest emitter of greenhouse gases, but not for long. With Chinese industrialists opening coal-fired power plants at a break-neck pace, China may overtake the United States as early as this year. Other large developing nations, including India and Brazil, are also increasingly important contributors to global emissions.
While developing nation participation has long been a key to any meaningful effort to reduce greenhouse-gas emissions, China and India have made it absolutely clear that they will not accept binding emission-reduction targets or other climate measures that could crimp their plans for continued economic growth. This geopolitical reality created a necessity for alternative climate strategies, and gave the Bush administration an opportunity to reframe the debate.
The Bush approach also has the potential to break the policy gridlock at home. During the Clinton administration a unanimous Senate adopted the Byrd-Hagel resolution, preemptively rejecting any international agreement, such as the Kyoto Protocol, that did not demand anything of China, India, or other less-developed nations. Thus, developing nation participation has also been a political necessity domestically.
Unlike emission caps, the Bush administration’s supply-side approach to reducing carbon intensity and accelerating technological innovation both satisfies domestic constituencies and sidesteps foreign opposition. Because it does not threaten developing nation dreams of economic prosperity, it does not face automatic rejection from developing nations. It also could enlist other countries to adopt commitments they are actually wiling to keep. While it is too early to claim the plan a success, it has far greater potential than the emission-cap approach favored by most European governments.
Speaking of Europe, the E.U. member nations may have agreed to caps in principle, but thus far European governments have proven unwilling to enforce any emission reductions that impose significant costs. The vaunted emission-credit scheme set up for the E.U. has been a farce to date because government agencies have allocated too many credits. Those few European nations to meet their Kyoto targetshave only done so because of a generous baseline and external factors that drove their emission downward. Elsewhere, greenhouse-gas emissions have continued to climb.
While the United States has steadfastly opposed any greenhouse-gas caps or controls, the rate of emission increases has slowed, and may be turning around. Last year U.S. greenhouse-gas emissions declined — the first such drop in a non-recessionary year. Mild weather played a role in the emissions decrease, but so did the rapidly declining carbon intensity of the U.S. economy. Since 1990, U.S. carbon intensity, measured by carbon-dioxide emissions per unit of GDP, has declined over 25 percent. If the new Bush agenda is successful at encouraging further technological development and efficiency improvements, this could be a sign to come.
The president’s political opponents do not yet know what to make of this new policy initiative. It was easy for congressional Democrats to carp about Bush inaction when they were in the minority. Now that they are in charge, however, they have shown themselves no more willing to impose costly emission-reduction measures. Draft climate and energy legislation prepared by Democrats on the House Energy and Commerce Committee would do little to reduce carbon emissions, though it would benefit favored sectors of the energy industry (including coal), prevent states from adopting emission control strategies, and blunt the impact of the Supreme Court’s Massachusetts v. EPA decision. Even the New York Times has concluded that the draft bill is worse than that which would have been drafted by Republicans. House Speaker Nancy Pelosi still promises to pass a bill creating a national cap-and-trade system for carbon-dioxide emissions, but the prospects for such legislation are appearing to dim. Senate Environment Committee Chairman Barbara Boxer, on the other hand, must like the Bush approach because she issued a release taking credit for it, claiming Bush’s proposal was based upon an idea she had recommended to him.
Congressional Democrats’ lack of seriousness on these issues is evident by their obsession with gasoline prices, and alleged oil-industry “price gouging” and “profiteering.” If climate change is that urgent a concern, they should applaud industry actions that increase energy prices, as this is the surest way to reduce consumption and carbon-dioxide emissions. Yet they will have nothing of it. Unless ethanol producers or some other interest group stands to benefit, legislators in neither party will endorse policies that increase energy prices.
Environmental activists can scream about the urgent need for dramatic emission cuts all they like. The fact remains that there is no political will — here or anywhere else — to adopt such policies in the near term. The only viable policies on the table (at least for now) are those that will help spur the technological innovation and diffusion necessary to make serious emission reductions in the future. Equally important, such policies will not sacrifice the economic development and wealth accumulation necessary for nations to adapt to those climatic changes which are unavoidable. Though societal resiliency and adaptation get little attention, they are necessary components of any climate-change policy that is actually focused on maximizing human welfare.
The primary virtue of the Bush administration proposal is that it seeks to expand the range of possibilities for energy use and emissions without sacrificing economic growth. This is a welcome addition to the climate-policy debate, but if the president is serious, he can still do more. For instance, if the administration wants to spur technological innovation, it should end government programs that subsidize inefficient energy and resource use, replace energy subsidies (particularly those for corn-based ethanol) with prizes for major emission-reducing advances, and eliminate regulatory barriers to the development and proliferation of alternative energy sources. The president has called for eliminating trade barriers for clean energy technologies abroad. Now it is time to eliminate regulatory barriers for clean-energy technologies at home, so that Cape Wind and other innovative, carbon-reducing energy projects can go forward even when opposed by home-state Senators.
If the President really wants the nation to get serious about reducing gasoline and other fossil-fuel consumption, he also has better options than tightening CAFE standards on new automobiles. Federal fuel economy standards may sound nice in theory, but in practice they distort manufacturing decisions and lead automakers to produce smaller, less-safe vehicles than those desired by the public. A better — albeit more controversial — approach would be to replace corporate income taxes and excises with taxes on the carbon content of fuels. So long as such a tax shift does not increase the overall tax burden on the economy — and this is an essential condition — it could encourage innovation and conservation without costly mandates or wasteful subsidies.
If someone had predicted a month ago that President Bush would lead the way toward a meaningful global climate-change policy, they would have been labeled a loon, or worse. In the days leading up to the GU summit, policy mavens predicted the likelihood of a policy breakthrough was slim. But something funny happened on the way to Heiligendamm: The president proposed an alternative way to generate international agreement on climate policy, and now other nations are listening. If we see a climate policy breakthrough in the years ahead, it is possible President Bush will deserve much of the credit.
– Jonathan H. Adler is professor of law and director of the Center for Business Law & Regulation at the Case Western Reserve University School of Law.