Saturday, May 9, 2009

Getting Serious on Climate: the American Clean Energy and Security Act of 2009

Early last month, the US House of Representatives released a public summary of the American Clean Energy and Security Act of 2009 (CGS is a little behind on this, but better late than never!). The Act, abbreviated ACESA, is important to US-China climate cooperation for several reasons. The first of these is obvious: with wide-ranging provisions to ramp up energy efficiency and introduce a domestic cap-and-trade system for carbon dioxide, it's America's first serious attempt to reduce its national greenhouse gas emissions to responsible levels. Second, the Act includes several far-sighted provisions for international cooperation, several of which bear specifically on China.

First, a survey of the Act's most revolutionary and hard-hitting provisions. For starters, the Act requires that retail electricity providers obtain 25% of their energy from renewable sources, a far higher share than at present. It also envisions the creation of a "smart grid" to efficiently distribute electricity, which would represent the largest investment in America's energy infrastructure since rural electrification programs in the 1930s. A provision to enable federal agencies to negotiate purchases of renewable energy could potentially have far-reaching impacts; if, for example, the Department of Interior were to do so, it could stimulate rural renewable sources, since many Interior facilities are located in America's heartland.

By far the most eye-catching part of ACESA, however, is its cap and trade system:

The draft establishes a market-based program for reducing global warming pollution from electric utilities, oil companies, large industrial sources, and other covered entities that collectively are responsible for 85% of U.S. global warming emissions. Under this program, covered entities must have tradable federal permits, called “allowances,” for each ton of pollution emitted into the atmosphere. Entities that emit less than 25,000 tons per year of CO2 equivalent are not covered by this program. The program reduces the number of available allowances issued each year to ensure that aggregate emissions from the covered entities are reduced by 3% below 2005 levels in 2012, 20% below 2005 levels in 2020, 42% below 2005 levels in 2030, and 83% below 2005 levels in 2050.
The biggest implication of this provision is that, if adopted, there will be no major industrialized country without serious legislation in place to dramatically reduce carbon dioxide emissions. This will inevitably shift the focus towards the world's emerging emissions superpowers, India and China.

Some smaller provisions, if taken to scale, may also have implications for China: ACESA suggests that substantial resources will be devoted to investing in carbon capture and storage (CCS), improving building and appliance energy efficiency, and greening the transport sector. All of these are areas in which American technical knowledge can be profitably employed in China. One provision though is certain to anger China: a stipulation that

To ensure that U.S. manufacturers are not put at a disadvantage relative to overseas competitors, the draft authorizes companies in certain industrial sectors to receive “rebates” to compensate for additional costs incurred under the program. Sectors that use large amounts of energy, and produce commodities that are traded globally, would be eligible for the rebates. If the President finds that the rebate provisions do not sufficiently correct competitive imbalances, the President is directed to establish a “border adjustment” program. Under that program, foreign manufacturers and importers would be required to pay for and hold special allowances to “cover” the carbon contained in U.S.-bound products.

Apart from these articles, though, are specific provisions that address international cooperation. At the international level, experts (and the Bali Roadmap) have long stressed addressing both mitigation and adaptation. ACESA has learned this lesson, and includes a section directing the National Oceanographic and Atmospheric Administration to create a National Climate Service, and each federal agency to conduct a review of climate adaptation issues. Even more importantly, however, it also "creates an International Climate Change Adaptation Program within USAID to provide U.S. assistance to the most vulnerable developing countries for adaptation to climate change."

Finally, and most significantly for China, ACESA also includes a provision

to provide U.S. assistance to encourage widespread deployment of clean technologies to developing countries. The draft specifies that only developing countries that have ratified an international treaty and undertaken nationally appropriate mitigation activities that achieve substantial greenhouse gas reductions are eligible for funding.
This language, with its stipulation that recipients of clean technology assistance ratify an emissions-mitigation treaty, seems aimed directly at India and China.

In sum, then, ACESA represents a great leap forward for the US on climate change issues. First, if adopted and implemented fully, it promises to shift the political burden for reducing emissions more resolutely on the developing world, within which China is the biggest target. The adaptation fund provision, if (and it's a big if) fully funded, could help the US to diplomatically isolate China and other big-country emitters from their allies in the more impoverished developing world, thereby increasing leverage for China and India to agree to concrete measures to reduce their emissions. Second, it includes several provisions that lay the groundwork for effective US-China cooperation on the development and deployment of clean technologies at a large scale.

Sadly, there are also significant pitfalls for ACESA acting as a catalyst for greater US-China climate cooperation. First, the "climate protectionist" provision of the bill will almost certainly raise China's ire, and will probably provoke retaliatory measures if it is passed by Congress. In the long run, such protectionism will damage technology cooperation efforts, to the benefit of no one. Second, and most damagingly, it looks like ACESA will require significant watering-down to secure passage through Congress. As The New York Times has reported, the bill faces significant opposition from conservative Democrats and Republicans, especially in these jobs-hemorrhaging times.

Nonetheless, ACESA demonstrates that the pendulum is swinging towards action on climate in America, and that means it will be a bigger issue for China, too. The future for US-China climate cooperation remains brighter than it has ever been. What remains unclear is if it will actually outshine the many dark clouds that the threat of climate change continue to cast over China, America, and the world at large.

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