§ 7. What Should Be Done? § 7. What Should Be Done?

• Jurisdiction: United States

§ 7. What Should Be Done?

In determining an appropriate response to climate change we must attempt to balance the scientific uncertainties concerning climate change against both costs and the costs of delayed response. Even if we accurately understood the dimensions of the problem, uncertainty remains concerning the mitigation costs that will need to be incurred by the United States. Moreover, the costs of reducing both U.S. and the world's GHG emissions will depend on future population size, economic growth, technology development and use, and the mix and quantity of fossil fuels combusted. These factors may be influenced but are not subject to control by the United States. Moreover, costs and benefits to mitigate climate change are not incurred by the same people. Since CO₂ emissions will remain in the atmosphere for a century or more, present expenditures to control emissions will benefit generations not yet born. Because benefits occur in the future, but costs will be incurred in the near term, a benefit/cost analysis will be extremely sensitive to the discount rate selected.¹⁴⁹ Put another way, utilizing traditional economic analysis, it is difficult to justify present expenditures that require a long time to achieve benefits.¹⁵⁰ Furthermore, most

[Page 13-32]

knowledgeable people do not believe that global warming can be prevented, but if we act appropriately we may be able to reduce some of the adverse consequences.

In the United States 83.9 percent of the GHGs released from human sources were CO₂, and 94.44 percent of the CO₂ emissions were from fossil fuel combustion in 2005.¹⁵¹ A program to deal with climate change needs to focus on fossil fuel use and be tailored to the various sectors of the economy. Electric power plants, for example, depend heavily on coal for fuel. Coal combustion not only is responsible for CO₂ emissions but it produces conventional air pollutants that have adverse health and ecosystem effects. Motor vehicles nearly all are petroleum fueled. The use of petroleum leads to substantial conventional air pollution releases as well as having adverse economic, political and military impacts.

In 2005 the U.S. used 25 percent of the world's oil supply but has only two percent of the world's petroleum reserves.¹⁵² The United States imports 59.6 percent of the country's oil, with one fifth of the imports coming from the Persian Gulf states. Twenty-two percent of the world's oil is controlled by states that are under U.S./U.N. sanctions for sponsoring terrorism. Venezuela, although it does not support international terrorism, under President Hugo Chavez it is moving toward an increasingly authoritarian government that is unfriendly to the U.S.¹⁵³ With the United States importing about 4,938 billion barrels of oil each year at prices in early 2008 hovering around $100 a barrel, producers are receiving almost half a trillion dollars for petroleum. However, the U.S. Commerce Department reported a trade deficit for 2006 of $818.1 billion, with only 270.9 billion being the petroleum deficit.¹⁵⁴ Regardless of the apparent discrepancy in these figures, our international relations and diplomacy options are dominated by the nation's dependence on oil. This petroleum dependence requires tremendous public sector expenditures in order to be able to field a military capable of protecting our petroleum supplies and their transport.¹⁵⁵ The costs of petroleum affects the competitiveness of agriculture, manufacturing, and the other major elements of the economy, and increasing worldwide demand is expected to keep upward pressure on oil prices.

Convincing U.S. voters to spend money or accept hardship, however, will be politically difficult. From a political perspective, it is easier to allow a Katrina or a subprime mortgage crisis to occur and then achieve political benefits from giving away federal money than to develop, fund and implement a long-term preventive program. If climate change is to obtain the support of a majority of American voters, GHG controls needs to be justified based on issues of immediate concern to voters such as the concern for conventional air pollution control, energy security, the trade deficit, and national security. A program to save the world that involves the United States

[Page 13-33]

incurring a substantial portion of the costs and receiving a disproportionately small share of the benefits will be difficult to sell to American voters. Concern for biosphere protection is unlikely to motivate either the national political leadership or the American public to modify their behavior, but other national economic and energy security concerns may do so.

The first step should be to create an accurate emissions inventory of CO₂ emissions that is publicly disclosed in a useful form such as facility specific, company wide and source category aggregation of data. The DOE's section 1605(b) program tracks GHG emissions, but it has weak reporting standards, no verification, and no penalties for companies that do not report their data. This lack of accurate data makes it very difficult to have baseline protection for companies that take steps to reduce their GHG emissions. The voluntary reporting program permits three different types of reporting: 1) project-level reporting, defined as the reporting of the emission reductions or carbon sequestration achieved as a result of a specific action or group of actions; 2) entity-level reporting, defined as the reporting of emissions, emission reductions, and carbon sequestration for an entire organization, usually defined as a corporation, and 3) commitment reporting, defined as the reporting of pledges to take action to reduce emissions in the future.¹⁵⁶ At present, electric generators are the primary sources reporting CO₂ emission data and their data is not readily available in a useful form. EPA has a mandatory reporting program under CAA section 412, applicable primarily to electric utilities, that requires reporting of sulfur dioxide, nitrogen oxides, opacity and volumetric flow at each unit subject to CAA Subchapter IV. The FY2008 omnibus spending bill enacted on December 26, 2007, required EPA to finalize an economy-wide GHG registry within eighteen months that was expected to be integrated into the section 412 reporting program. The bill instructed EPA to adopt the quality controls mandated by the Regional Greenhouse Gas Initiative (RGGI) that is applicable to electric power plants in the Northeastern states. Congress appropriated $3.4 million for EPA to develop and publish a rule for mandatory reporting of GHG emissions.¹⁵⁷ It is unclear what will happen to DOE's section 1605(b) registry. However, in the FY2009 budget request, EPA is requesting no funding to develop a national GHG registry.¹⁵⁸

To stabilize atmospheric concentrations of CO₂ at even twice the pre-industrial level will be very difficult in the context of a growing world population and a growing demand for useable energy. To achieve stabilization will require that growth in primary power consumption come from non-CO₂ emitting sources. These include renewable sources (solar, wind, hydroelectric, biofuels), nuclear, and fossil fuel combustion that includes carbon capture and sequestration. A transition to a low-carbon economy could take half a century and will be expensive. However, a low-carbon society would be healthier and may be more economically competitive. More than 2500 economists, including eight Nobel Prize winners, have stated that GHG emissions can be cut

[Page 13-34]

without harming American living standards.¹⁵⁹ No one technology will provide a "silver bullet" solution to global warming; a long-term strategy needs to evolve using many approaches. In the short-term, however, energy conservation measures may provide the best opportunity for meaningful reductions in CO₂ emissions.

§ 7(a). Taxing Fossil Fuels

The Congressional Budget Office has evaluated the pervasive uncertainty concerning both the risks from climate change and the uncertainty involved in evaluating the costs and effectiveness of the three options for limiting climate change effects: research and development, mitigation of GHGs, and adaptation. Because of the uncertainty concerning both the benefits and costs of responses, the best policy is to select responses likely to minimize the costs of choosing an inappropriate level of control. The CBO advocates pricing controls rather than emission caps in order to control costs.¹⁶⁰ If prices are set at a level close to the projected benefits of a measure the risk to the economy is minimized. However, choosing the appropriate level of costs that should be incurred today to obtain benefits many years in the future is difficult. If standard economic evaluation approaches to discounting are used, benefits that are obtained a hundred years from now have almost no present value. Benefits are keenly influenced by the values assigned to ecosystem protection, which are not easy to quantify. Imposing caps on emissions also is a questionable policy choice when there is no known threshold for significant damage; price-based controls are the better way to proceed. Prices can be increased over time, if necessary, when better information concerning costs and benefits is obtained.¹⁶¹

The use of taxes to control energy utilization is a policy option that has resulted in various types of energy taxes being proposed including taxes on gasoline, oil imports, carbon, or the energy content of a fuel (Btu tax).¹⁶² A carbon tax would tax each unit of fuel based on its carbon content, which determines the amount of carbon dioxide that will be emitted when the fuel is burned.¹⁶³ Not all fossil fuels produce the same quantity of CO₂ per molecule of fuel combusted. The heat value comes from the formation of CO₂ and H₂O after breaking the hydrogen bonds of the fuel. Thus, the more hydrogen atoms for each carbon atom in a molecule of fuel the greater the energy that...