ACESA 2009 and the U.S. National Strategy for Dealing with Climate Change

ACESA 2009 and the U.S. National Strategy for Dealing with Climate Change. By Lee Lane
Testimony, House Subcommittee on Energy and the Environment
AEI, April 23, 2009

The current draft of the American Clean Energy and Security Act of 2009, while correct to stress adaptation measures and technological advances, exhibits some crucial flaws. The costs of the steep, short-term greenhouse gas (GHG) emissions reductions will likely exceed their benefits, and many of the regulatory mandates within the bill are redundant to its cap-and-trade provisions. Furthermore, the United States is limited in its ability to bring about an effective global agreement on GHG controls and should therefore focus on the realistic opportunities for progress that are actually available.

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Unilateral Action and Moral Suasion

First, the U.S. could enact go-it-alone GHG controls and trust the moral appeal of its example to sway other nations.[8] While it is clearly true that the U.S. could not expect China and India to bear the costs of curtailing their GHG discharges unless it were willing to do the same, it is quite another thing to leap from that statement to the assertion that the U.S. should act without firm pledges that other states will respond in kind.

The audacity of this leap has often been missed, but it merits real scrutiny. Does the United States conduct any other negotiation in this way? Did Congress, for example, as a prelude to the Uruguay or Doha Rounds, drop all U.S. tariffs and farm subsidies to zero? Did the U.S. win the withdrawal of Soviet conventional forces from Europe by first pulling its own troops out of Germany? Why, then, would we consider taking the functional equivalent of these steps in the area of GHG control? Or, to pose the same question in another way, how would ACESA's GHG reductions differ from the just-mentioned bargaining moves in trade or arms control?

No one can claim that the answer is that the Chinese and Indian governments have signaled their readiness to respond in kind to U.S. GHG curbs. To the contrary, they continue to insist that the developed countries must commit to pay them for any control costs that they incur.[9] The Chinese and Indian governments' statements are consistent with their behavior. These countries are clearly more interested in dodging the costs of GHG curbs than in capturing the gains from a global control regime.

ACESA could only harden their resolve. As other countries adopt GHG limits, China and India will make competitive gains by simply standing pat against controls. Over time, energy-intensive industries will migrate to the nations that reject controls. The growth in these states of energy-intensive capital and jobs will add to the political costs of any future move toward controls.[10] This outcome is the very opposite of the one that the U.S. should be seeking.


Trade Sanctions

Second, many proponents of U.S. GHG controls have proposed to allow the U.S. government to clap trade sanctions on countries that fail to cap their GHG discharges. ACESA also follows this strategy, albeit somewhat hesitantly. There are better grounds for the bill's hesitancy than there are for believing that trade sanctions will change Chinese and Indian policy.

One country adopting trade sanctions, or a few countries doing so, will merely change the geographic pattern of trade flows. It would do little net harm to China and India. As GHG controls raised U.S. production and transport costs, countries like Japan with low-carbon processes for producing steel, aluminum, or other energy-intensive goods would raise their exports to the U.S. At the same time, these countries could boost their own imports from China and India to fill the gap left by their higher exports. The Chinese and Indians would be largely indifferent to the change. The threat of U.S. action will, therefore, put little pressure on them.[11]


Paying China and India for GHG Abatement

Third, the U.S. could offer to pay for China's GHG reductions as well as its own. Although some ACESA provisions amount to paying other nations to reduce GHG emissions, the bill does not appear to envision the kind of very large transfer payments that the China/G-77 group is demanding. In their view, past U.S. emissions are a kind of historical guilt, and contemporary Americans should pay to expiate our ancestors' sins.[12]

The case for this demand is hollow. It rests, in part, on the false proposition that developing countries have added almost nothing to current atmospheric GHG stocks. The reality is quite different. The group of currently poor countries and the group of currently rich countries have each placed about the same amount of GHGs in the atmosphere.[13]

Confusion about this point stems from three mistakes. First, many studies consider only industrial sector emissions. Most of the poorer countries' emissions stem from land use changes, agriculture, and animal husbandry, so they are not counted. Second, studies often look only at CO2. Poorer countries tend to have large methane emissions; again their contribution is missed. Third, many studies have lumped those poor countries with high emissions with the many poor countries that have virtually none. The regional averages mask the true state of affairs. Cumulatively, these errors have created a badly distorted impression of the origins of today's atmospheric GHG stocks.[14] Furthermore, the situation is changing rapidly. The balance ten years from now will be much different than that which prevails today. The latter is simply irrelevant to decisions about who should pay to reduce future emissions. To the contrary, attempting to interject claims about the historical record is more likely to lead to stalemate and endless wrangling than it is to build consensus. It is hard to see why the U.S. would want to give credence to this approach.


Exaggerating the Extent of Other Nations' GHG Reductions

Fourth, some may be tempted simply to pretend to believe that a mix of Chinese or Indian "no-regrets" policies constitutes serious action on GHG controls. (No-regrets policies are those that would be rational to adopt even in the absence of concerns about climate change.) China and India, for reasons unrelated to climate, are very likely to adopt such policies. Their economies exhibit very low energy efficiency. They enjoy many options for making energy savings that will be cost-beneficial quite independently of concerns about climate.[15] Chinese and Indian actions to reduce this waste are, therefore, properly regarded as corrections to the estimates of their baseline GHG growth; as such, they are welcome. They are, however, not done in response to U.S. action, and they will affect GHG growth paths only at the margin.


An Effective Global Deal on GHG Control Is Unlikely

The conclusion seems inescapable. The U.S. can have little impact on when China and India become willing to bear the costs required to control GHG discharges. This limit on America's options reflects a basic reality: Conditions are not yet ripe for forging an effective global accord on GHG controls. To understand why this might be so, we might want to consider the economic roots of the GHG control issue.

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Lee Lane is resident fellow and codirector of the AEI Geoengineering Project.