US climate bill: Implications for Copenhagen

Kyoto & climate politics
Wednesday, 5 August 2009
Backgrounder: US climate bill on uncertain Senate roadThe reality of US political processes probably puts the final shape of US climate policy beyond the global climate treaty deadline set for Copenhagen in December, to which the US action is key to a successful outcome. This complicates global negotiations and places further question marks over the chances of a new post-Kyoto accord by the agreed deadline. But perhaps not as much as some commentators are saying. By December much of the shape and approach of US climate laws should be apparent. Of all those outstanding areas of contention in the current bill, there are three of critical importance to a global deal. And it may well be that the writing is on the wall by December in regard to at least two and maybe all three of them.First, is the overall emissions reduction target set for 2020; second, provisions for trade penalties against countries exporting to the US that don’t have emissions limits in place; and third, the extent and nature of international offsets that will be allowed under the scheme from developing countries, already at significant levels in the House bill. Direct financing commitments by the US and other developed nations to developing countries to help them mitigate and adapt to climate change are also crucial to a global deal but, as far as the US is concerned, lie outside the scope of the proposed cap-and-trade bill.As UNFCCC chief Yvo de Boer said last week, once a country’s overarching emission reduction commitments are apparent, that’s what’s important for global negotiations - the detail of measures to reach that target are more a domestic issue. It is already fairly certain that a US 2020 emissions target will be no less than 14 per cent below 2005 levels, and no more than 20 per cent. By December this range will have probably narrowed further to between the House bill’s 17 per cent target and whatever emerges in a Senate bill. Even if a final bill is not passed, the world will have a solid idea of the crucial US mid-term target within a few percentage points. (Whether that ballpark is then enough to satisfy China, India and others at the UN negotiating table is another question, of course.) Remember that on the longer term target, the US is already on course to meet international expectations. The House bill’s 83 per cent reduction by 2050 appears not in great contention.Trade penalties, or carbon tariffs, are proposed in the House bill to apply from 2020 on emissions-intensive products imported to the US from countries with no emission curbs. This has sent the alarm bells ringing in both international trade and climate negotiating circles. Included to appease US industry, which believes its trade competitiveness would be undermined by the cost of carbon caps, these penalties have already seen China and India take offence. There are warnings of the potential for a “green trade war” and the further undermining of chances for a new climate treaty. This is an issue the US will have to see dealt with by Copenhagen and there are enough indications already of strong domestic opposition against these provisions, from President Obama down, that it is hard to see the “border adjustment” or "international reserve allowance" provisions surviving in their current form in a Senate bill. But it is also hard to see currently how getting the required 60 Senators to support a cap and trade bill is possible without industrial-state Democrats who are likely to stand firm on protection for their constituents.The generous allocations for foreign-sourced carbon offsets in the House bill don’t look to be under any great challenge in the Senate. The detail may well change but the numbers are unlikely to change much. The ability to buy up to one billion tonnes every year of cheaper emissions reductions secured in developing countries to lower the cost of cap-and-trade compliance has broad Congressional support, if not all environment groups. It’s intended most of these offsets would come from rainforest preservation in tropical countries, a welcome financial stimulus to those countries now trying to position themselves to reap the benefits of the emerging international ‘REDD’ avoided deforestation payment mechanism.Assuming some compromise on international competitiveness safeguards can be found to avoid carbon tariffs, it may just be that a not-quite-final US climate bill come December – representing as it does enormous US climate policy progress since the end of 2008 – is enough to swing a deal with China and the rest of world. Ian HamiltonCarbon PositiveSources: Reuters, Politico, Van Ness Feldman