tackling climate change
Finally: Action in Washington!
But can a climate bill with teeth make it through Congress?
By CHUCK KUTSCHER
Chuck Kutscher is a
principal engineer and
manager of the Thermal
Systems Group at the
National Renewable
Energy Laboratory.
He is a past ASES chair
and was chair of the
SOLAR 2006 conference, which resulted in
the ASES report, “
Tackling Climate Change in
the U.S.” (Free download at ases.org/
climatechange.) He
taught a course at the
University of Colorado entitled “Climate
Change Solutions.”
For years, U.S. climate change activity has been limited
to the state and local levels. But now all eyes are on
Washington. Never have the signs for climate change
action looked so hopeful. Already, the stimulus package —
the American Recovery and Reinvestment Act — has provided $16.8 billion to the Department of Energy’s Energy
Efficiency and Renewable Energy Office, or 10 times the
2008 funding. This includes considerable new support for
biomass and advanced geothermal power, both of which
have the capability to displace baseload coal plants.
Meanwhile, numerous members of Congress in both
houses have advanced legislation to support renewable
energy and tackle climate change.
The best-known legislation is the American Clean
Energy and Security Act, or the Waxman-Markey Bill. Both
Henry Waxman (D-Calif.), who hosted the 2007 Capitol
Hill press conference announcing the American Solar Energy Society’s (ASES) “Tackling Climate Change” report,
and Edward Markey (D-Mass.) are longtime champions
of energy efficiency and renewable energy.
Pricing carbon will be an easier sell
if revenues are returned to the
public, either as dividends or as
reductions in other taxes.
The opinions expressed
here are solely those of
the author.
The draft bill initially proposed a nationwide renewable
energy standard requiring 25 percent of our electricity to
come from renewable sources by 2025 (one-fifth of which
could be met by efficiency measures). While this fell well
short of the potential deployment described in the “
Tackling Climate Change” study (which corresponded to about
50 percent of our electricity coming from renewables by
2030, after efficiency measures), it was certainly a good
start. Continued negotiations have whittled that down, but
history has shown that goals can later be revised upward,
as they were in Colorado after a renewable standard of 10
percent by 2015 for investor-owned utilities was met seven
years ahead of schedule.
Waxman-Markey recognizes the direct connection
between energy and climate change. It originally set reasonably aggressive goals for carbon emissions reductions
below the 2005 levels: 20 percent by 2020, 42 percent by
2030 and 83 percent by 2050, which is similar to the recom-
mendations made in the ASES study, but again, concessions
have been made. The bill has called for new coal plants to
utilize carbon capture and storage (CCS). But it makes this
contingent upon progress with CCS and so would likely
give the coal industry an excuse to delay climate mitigation.
What we really need is a provision that permits no new coal
plants without operational CCS.
The portion of Waxman-Markey that has generated the
most debate is its cap-and-trade system, which would set a
declining cap on carbon emissions and create a market of
tradable carbon emissions allowances, similar to what has
been used to reduce sulfur dioxide emissions. Selling allowances at auction generates revenue and avoids windfall profits for polluters, but industry has fought to have a significant
fraction of the emissions permits handed out for free.
The main advantages touted for a cap-and-trade system
are that it is a free-market mechanism that allows reductions to be made by those who can do so at the lowest cost,
and it specifically targets the emissions-reduction objective (which also allows for easier international verification).
However, cap-and-trade can result in significant price volatility and administrative complexity even with upstream
caps to limit the number of control points. The European
system worked poorly at the outset for a number of reasons,
including that the emissions cap was set too high.
Waxman-Markey has provisions intended to improve
on the European approach, but many people feel a carbon
tax would be a simpler and more reliable mechanism. Such
a tax sets a firm cost on carbon, avoiding price volatility. It
would need to be adjusted with time to achieve the desired
effect on carbon emissions. The Economist, columnist Tom
Friedman, NASA climate scientist James Hansen, the Congressional Budget Office and many others have argued that
a carbon tax is superior.
Among the concerns about cap-and-trade are that a market in allowances can be manipulated. Provisions for safety
valves and offsets could be used to avoid real emissions
reductions. We have already seen plenty of maneuvering
in congressional negotiations. After the recent Wall Street
shenanigans with derivatives, many people would prefer a
simple and transparent tax. Nevertheless, cap-and-trade
clearly has the political momentum.
Whether we ultimately have auctioned allowances
under cap-and-trade or a carbon tax or both, there is also
the debate about what to do with the revenues. Either
mechanism will increase most consumer energy prices,
although efficiency measures will reduce overall energy
consumption, providing downward pressure on energy
