World waits on Washington’s climate bill
— Laura Zizzo is a partner at Zizzo Allan Climate Law LLP. Any views expressed here are her own. —
There is an important race occurring in capitals, factories and research facilities across the globe.
It’s a high-stakes race that will determine two very important things: whether we will be able to respond to climate change in time to avoid catastrophe, and which economies will be the clean energy/low-carbon superpowers.
Because this race — let’s call it a climate-friendly cycling race — is long and we had a delayed start, many racers are hesitant to pull out from the pack and risk an uncompetitive burn out.
We can all get further and go faster by sticking together. We generally agree that more speed is necessary, but the best cyclist, the United States, the one with the strongest legs and the most first-place victories seems confused.
Others want to speed up, but they cannot do it without her. Additionally, it seems that the pack is reordering and it looks like the U.S. is falling farther and farther behind.
Those of us with our eyes on climate issues and world wide carbon markets were not exactly holding our breath as we waited for draft climate legislation to come out of the Senate this week, but we were hopeful.
The bi-partisan bill referred to as KGL (Kerry Graham Lieberman) is heavily supported by industry. Although imperfect, it would help to establish a long-term price on carbon emissions and provide some certainty to investors.
The release of any legislation on climate from the Senate has been delayed and one of the key drafters, Senator Lindsey Graham, pulled out of negotiations, citing leadership priorities.
In particular, he is miffed that Senate Democratic leader Harry Reid decided to push immigration reform before the KGL bill, even though there is no immigration bill ready to support. So we continue to wait, and hope.
If the KGL bill can be reinvigorated, we might expect a focus on the electricity sector and limited emissions caps across other selected sectors. There will be additional work to do in its wake. If the bill fails, a more piecemeal approach to the issues it attempts to legislate is still possible.
The Offset Bill proposed by Senator Debbie Stabenow and the Energy-Only Bill approved by Senator Jeff Bingaman’s Natural Resources Committee last year are possible alternatives to the more comprehensive approach of climate/energy/jobs found in the KGL bill, and may provide a starting point from which to build.
Even if a climate-related bill is released in time to be passed before the mid-term elections in November, a prospect that looks less likely with every passing day, it will likely leave many holes to be filled in the future.
More delays in the Senate mean more delays for industry, carbon market participants and policy-makers around the globe. The only way for the pack to start speeding up is for the U.S. to acknowledge its unique position as the world’s largest economy and largest historical emitter of greenhouse gases and display leadership.
Legislation on energy and climate in the U.S. is vital to the global response to climate change. Whether it embraces this or not, the U.S. response will drive action (or inaction) around the world.
The benefits aren’t strictly environmental. If the U.S. can find a way to get back in front, it can determine the course and take the role it has historically been most comfortable with; that of a system-builder and leader, not merely a middle-of-the-pack follower.
The failure of the government to act is slowing down innovators and companies with confused signals and delayed responses. Market participants understand how to deal with risk and change, and they will respond if given parameters within which to do so. But the lack of even the most basic framework for dealing with climate issues in the United States is making it very difficult to develop a worldwide market that values innovative technologies and actions that reduce emissions.
It is also wreaking havoc on the global carbon market, and allowing the market to proliferate with low-value, unregulated credits – a development that could erode any confidence that remains in market-based mechanism. Clear laws and rules will drive cost effective action towards a low-carbon economy.
It appears world leaders are interested in acting under joint rules, but hesitant to get far out front alone. There is no viable alternative waiting in the wings and the trend is blatant. A lack of meaningful U.S. legislation results in uncertainty for industry and a stalled and ineffective global response.
In Copenhagen at the U.N. Climate Change negotiations last December, it was clear that the world would not embrace a global deal without U.S. participation. However, without legislation from Congress, the Obama administration could do little but consent to soft targets and agreements in principle.
It was clear that the U.S. has learned from its Kyoto Protocol experience, where the executive signed on to a treaty that the U.S. Congress never accepted, resulting in the abandonment of Kyoto , inaction and increased domestic tension on this issue. This time, U.S. legislation undoubtedly needs to be in place before the international community feels secure enough to develop any significant international treaty. At present, the international treaty-making process is at a standstill, and the recent Copenhagen Accord is insufficient.
From the desks of a climate law firm in Toronto, the effects of the U.S. Congress’ inaction are evident. The Canadian Government has indicated that it will not move forward on a national climate change strategy without some explicit action by the U.S., arguing it needs to act in concert with the U.S. on these matters (in large part due to trade competitiveness concerns).
In Australia, the Rudd government has indicated its Emissions Trading System (ETS) is indefinitely delayed. Australia’s Climate Change Minister, Penny Wong suggested that the ETS will not start in 2013, as planned, unless there is credible action by the end of 2012 from other major emitters, notably the U.S.
New Zealand’s ETS has already passed into law, but the government recently indicated that it will not expand the scheme beyond 2013 unless major trading partners have similar efforts.
Even the EU, which has led the pack thus far, is showing signs of fatigue. The EU ETS has been in operation since 2005 and has steadily increased in scope. It now covers more than 10,000 installations and close to half of the EU’s CO2 emissions (40 per cent of its total greenhouse gases). Yet despite the scope of the EU ETS and statements by some EU government leaders advocating for unilaterally increasing emissions reductions targets, there is disagreement as to whether the EU can or should go it alone.
Recently Chancellor Angela Merkel expressed uncertainty about Germany’s ability to proceed with its planned climate leadership and signaled she no longer thinks that the EU can stay out in front by itself.
Regardless of the setbacks and delays in a coordinated global response, the science tells us unequivocally that we need innovation. That is why the incentives going to companies in regions that have made progress on greenhouse gasses are so important.
As the global response to climate change slows, some participants, notably the EU and China, blaze ahead in terms of their market dominance in sectors such as renewable energy and energy efficiency.
These actors are forging ahead and taking control of the new clean energy/low-carbon economy that will undoubtedly transform the world economy.
We are currently at a crossroads, with huge risks and opportunity ahead.
The strongest must get back in the race and create meaningful legislation that will help set the pace going forward. It may feel risky, but the true risk is making no decision at all.
File photo shows a line of spectators waits to get into the Capitol Building in Washington February 12, 2001, for the final day of the Senate impeachment trial. REUTERS/Mark Wilson