Bush Climate Plan: Ambitious but Achievable

William L. Fang

President Bush's climate plan announced on February 14, 2002, consists of long-term and short- to medium-term components. While most attention has been focused on the nearer term component, it is the long-term component by which we should judge the ultimate success or failure of the program.

Carbon Intensity Approach
The Bush plan introduces a carbon intensity, or greenhouse gas intensity, approach in the short to medium term that it calls "ambitious but achievable." Carbon intensity is essentially an efficiency or productivity measure, which in national terms is expressed as the ratio of carbon dioxide (CO2) emissions to Gross Domestic Product (GDP). The Bush plan calls for reducing U.S. carbon intensity by 18 percent by 2012. This is a stretch goal that goes beyond business as usual. The Energy Information Administration (EIA) projects carbon intensity to decrease by 13.5 percent in the next 10 years (which could be characterized as the business-as-usual scenario); achieving a further 33 percent decrease in carbon intensity will be challenging. Some environmental groups have criticized the 18 percent goal as being business as usual because the decrease in national carbon intensity in the last decade was about 17-18 percent, and even higher reduction rates were achieved in the 1980's. However, this criticism fails to recognize that enormous intensity gains have achieved through improved Corporate Average Fuel Economy standards, construction of nuclear power plants, and wholesale electrification of the economy through computers and the Internet, and that it will become increasingly difficult to improve carbon intensity further on this base. The beauty of the carbon-intensity approach is that it is flexible and responsive to economic growth.

The President's plan also calls for reevaluation of this voluntary approach by 2012, at which point other measures would be considered.

The implementation details of the plan have yet to be determined. For example, it is unclear whether and how the national goal may be applied to particular sectors of the economy. It would appear that the use of carbon "sinks" (tree planting and other forms of carbon sequestration) and other offsets can be used, along with other flexibility measures.

In addition to these flexibility measures, another key to the carbon-intensity approach working well is the plan's package of incentives, which include tax credits of $4.6 billion over the next five years and $7.1 billion over the next 10 years. Other incentives critical to industry participation include the creation of tradable credits and baseline protection (assurance that entities that register voluntary reductions are not penalized under a future climate policy).

The Bush plan is similar to the policy of the previous Administration in its voluntary nature and its short- to medium-term approach.

The Long-term View
President Bush has stated that he supports the U.N. Framework Convention on Climate Change (UNFCCC), the so-called 1994 Rio Treaty, and its objective of "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." The second sentence of UNFCCC Article 2 is often overlooked, which states, "Such a level should be achieved within a time-frame sufficient. . .to enable economic development to proceed in a sustainable manner." The Bush plan is similar to the UNFCCC in that it is nonbinding and takes a long-term view.

The Bush plan recognizes that it is important to slow down the growth of greenhouse gas emissions first, stop further emissions growth, and then ultimately reverse the trend of U.S. emissions. This can only be accomplished in the long run with the introduction of climate and energy technology research and development that transforms the economy, moving to the use of less fossil fuel-intensive energy, more renewables, fuel cells and the like. The Bush plan is a work in progress, as the report of the Department of Energy's National Climate Change Technology Initiative on stabilizing greenhouse gas atmospheric concentrations has yet to be released.

Comparison to Other Countries
The Bush plan is similar to some other developed countries' plans, although not the European Union's. Australia has indicated that it will not ratify the Kyoto Protocol until the United States does so (which President Bush has repeatedly said is a non-starter) and until the Protocol contains commitments for developing countries. Australia is primarily relying on voluntary measures domestically to reduce greenhouse gas emissions. Japan may adopt the Protocol in the near future - albeit leaving itself the option of not taking on binding consequences for noncompliance - but its approach is essentially voluntary.

Conclusion
The Bush plan has advantages of flexibility and accommodation of economic growth. The plan differs from the previous Administration's approach in the introduction of the carbon intensity metric and recognition that incentives will be critical to its short-term success. It is not significantly different from the approach of other international economic competitors such as Australia and Japan. It is deserving of widespread support by all sectors of the economy, including industry, forestry, agriculture, labor and small business.

William L. Fang is the Deputy General Counsel and climate issue director for the Edison Electric Institute, the association of U.S. shareholder-owned electric utilities, international affiliates and industry associates worldwide. He is also a vice chair of the ABA Committee on Climate Change and Sustainable Development. Visit the EEI web site at http://www.eei.org.