U.S. Global Climate Change Policy: Evolving Views on Cost, Competitiveness, and Comprehensiveness








Prepared for Members and Committees of Congress



U.S. policy toward global climate change evolved from a “study only” to a more “study and
action” orientation in 1992 with ratification of the U.N. Framework Convention on Climate
Change (UNFCCC). The Convention committed developed countries to aim at returning their
greenhouse gas emissions to their 1990 levels by the year 2000. The U.S. decision to ratify the
UNFCCC reflected both the nonbinding nature of the accord and analyses that suggested that the
United States could achieve the necessary reduction at little or no cost. Under the UNFCCC,
developed countries were to adopt national plans and policies to reduce greenhouse gas
emissions. The United States submitted such plans in 1992, 1994, 1997, 2002, and 2006.
The Energy Policy Act of 1992 (EPACT) has been the principal U.S. statutory response to the
UNFCCC. Primarily an energy policy response to the Iraqi takeover of Kuwait and the U.S.-led
reaction, EPACT’s energy conservation, renewable energy, and other titles were also seen as
having a beneficial effect on global climate change concerns. In addition, the George H.W. Bush
and Clinton Administrations encouraged voluntary reductions by industry through administrative
initiatives, such as EPA’s various “green” programs. This largely voluntary approach to
complying with UNFCCC allowed the two Administrations to implement a climate change policy
without having to ask Congress for new authorities.
However, the subsequent inability of nations, including the United States, to achieve reduction
goals under the UNFCCC led to negotiations on the Kyoto Protocol, which established mandatory
limits on emissions for developed countries. While the United States signed the Protocol, the
Clinton Administration did not submit it to the Senate, which earlier had specified (S.Res. 98) that
any such agreement had to include reductions by developing countries and must “result in no
serious harm to the economy of the United States.” In 2001, the George W. Bush Administration
announced that it was abandoning the Kyoto treaty process because of concerns about cost,
competitiveness, and the comprehensiveness of the treaty with respect to third world countries,
and that it would focus on voluntary programs to reduce the intensity of greenhouse gas
emissions per unit of economic activity. Also, it launched a six-nation Asia-Pacific Partnership to
coordinate voluntary actions to address greenhouse gas emissions and in 2007 convened a
meeting of the major economies to discuss approaches to climate change.
The reluctance to adopt mandatory actions reflects concerns about costs. If one believes that the
costs of greenhouse gas reductions are modest, action to reduce emissions poses little risk.
However, if one perceives substantial costs from reducing carbon emissions, the uncertainty
about any benefits raises serious questions as to the prudence of such action. This clash of
perspectives is likely to ensure that costs remain a pivotal issue, along with scientific uncertainty,
as the climate change policy debate continues. Momentum for action may be accelerating: the
Senate in 2005 passed a Sense of the Senate resolution that Congress should proceed with th
mandatory, market-based limits and incentives on greenhouse gases. In the 110 Congress,
deliberations on comprehensive climate change bills have been initiated.






From Study to Commitment: The UNFCCC...................................................................................1
Developing Programs: EPACT........................................................................................................2
Comparing EPACT and the UNFCCC............................................................................................2
UNFCCC Results: Action Plans......................................................................................................5
The George H. W. Bush Administration’s National Action Plan: “No Regrets”.......................5
The Clinton Administration’s National Action Plans: Industrial Strength “No Regrets”..........7
Kyoto and S.Res. 98........................................................................................................................9
The George W. Bush Administration’s National Action Plan: Abjuring an Emissions
Reduction Goal...........................................................................................................................10
Looking for a New Direction: Senate Amendment 866................................................................12
Addressing the Three-Cs: Emerging Price Versus Quantity Debate.............................................13
Conclusion: Battle of Policy Perspectives.....................................................................................15
Table 1. U.N. Framework Convention on Climate Change and the Energy Policy Act of
1992: Correspondences of Selected Provisions............................................................................3
Table 2. Selected Major Reduction Strategies Listed by the George H. W. Bush
Administration’s Action Plan.......................................................................................................6
Table 3. Selected Major Reduction Strategies Under the 1993 Clinton Action Plan......................8
Table 4. Principles Behind the George H. W. Bush Administration’s and George W. Bush
Administration’s Climate Action Plans.......................................................................................11
Table 5. Comparison of Trading Program With and Without Safety Valve...................................15
Author Contact Information..........................................................................................................17






U.S. policy toward global climate change evolved from a “study only” to a more “study and
action” orientation in 1992 with ratification of the U.N. Framework Convention on Climate
Change (UNFCCC). During the protracted deliberations on the UNFCCC, the National Academy
of Sciences (NAS) released an influential report on global warming. In the report entitled, Policy
Implications of Greenhouse Warming, the NAS stated “The United States could reduce or offset
its greenhouse gas emissions by between 10 and 40 percent of 1990 levels at low cost, or at some 1
net savings, if proper policies are implemented.” The NAS’s energy policy recommendations
focused on increasing energy conservation and efficiency, incorporating greenhouse warming as a
factor in future energy planning, and studying and eventually implementing “full social cost
pricing” of energy.
Although widely publicized and promoted, this premise was not sufficient for the U.S. to commit
to firm targets and time frames for carbon dioxide (CO2) reductions, as witnessed by the U.S. 2
negotiation and ratification of the UNFCCC. Driven by concerns about scientific uncertainty
with respect to global climate, the George H. W. Bush Administration—against the wishes of
most environmentalists and some vocal Members of Congress—refused to commit to a binding
agreement to reduce the nation’s CO2 emissions by a specific date. The UNFCCC reflects this
negotiating position of the United States and some other countries in that it calls for voluntary
control measures. Senate floor debate on ratification of the treaty brought out concerns by some
Senators about the cost of compliance, its impact on the country’s competitiveness, and the
comprehensiveness with respect to the developing countries—concerns that were overcome 3
because of the non-binding nature of the reduction goals. Those arguing for more binding
commitments argued that emissions controls could create jobs and enhance economic health, and
that emissions were an indicator of inefficiency.
As finally negotiated, the objective of the Convention is to:
... achieve ... stabilization of greenhouse gas concentrations in the atmosphere at a level that
would prevent dangerous anthropogenic interference with the climate system. Such a level
should be achieved with a time frame sufficient to allow ecosystems to adapt naturally to
climate change to ensure that food production is not threatened, and to enable economic 4
development to proceed in a sustainable manner.
Arguing that “the developed country Parties should take the lead” in reducing emissions, the
Convention states that developed countries shall aim toward returning their greenhouse gas
emissions to their 1990 levels by the year 2000. In line with this goal, developed countries were
to adopt national plans and policy options to mitigate climate change by reducing anthropogenic

1 National Academy of Sciences, Policy Implications of Greenhouse Warming, (Washington, D.C.: National Academy
Press, 1991), p. 73.
2 The United States signed the UNFCCC on June 12, 1992, and ratified it on October 15, 1992. The UNFCCC entered
into force on March 21, 1994. For a review of the negotiations, see CRS Report 92-374, Earth Summit Summary:
United Nations Conference on Environment and Development (UNCED), Brazil, 1992, by Susan R. Fletcher.
3 Congressional Record, Vol. 138 (October 7, 1992), 33520-33527.
4 United Nations Framework Convention on Climate Change (UNFCCC), Article 2.





emissions and enhancing sinks. As discussed later, the United States submitted such plans in

1992, 1994, 1997, 2002, and 2006.



The Energy Policy Act of 1992 (EPACT), P.L. 102-486, has been the principal statutory basis for
programs making up the U.S. response to the UNFCCC. Primarily crafted as an energy policy
response to the Iraqi takeover of Kuwait and the U.S.-led response, its energy conservation,
renewable energy, and other titles were also seen as having a beneficial effect on global climate
change concerns being debated at this time in international circles. In its 1992 submission to the
UNFCCC, the George H. W. Bush Administration listed 11 different titles of EPACT as 5
“extremely important” to its overall strategy of reducing greenhouse gases.
The aforementioned recommendations of the NAS were embodied in several sections of EPACT.
These sections included provisions to establish energy-efficiency standards, promote
dissemination of energy-saving information, establish several national research and development
programs related to deployment of energy-efficiency technologies, and authorize the Department
of Energy (DOE) to evaluate cost-effective energy efficiency technologies. In addition to these
activities to improve energy efficiency, EPACT includes a separate title to incorporate global
warming concerns in energy policy planning. Title XVI was designed to assist the government in
making informed decisions on global warming by collecting, analyzing, and reporting
information on climate change through DOE. Activities included a report on the various
economic, energy, social, environmental, and competitive implications of reducing greenhouse
gas emissions; developing a least-cost energy strategy designed to achieve “the stabilization and
eventual reduction in the generation of greenhouse gases”; creating a Director of Climate Change;
and developing an inventory of greenhouse gases and early reductions in such gases.
Indeed, the passage of EPACT was anticipated by its authors to stabilize or even reduce emissions
of greenhouse gases at little cost, in line with the 1991 NAS report. As stated by the House
Report:
The committee expects that, if fully implemented, H.R. 776 will result in a substantial
reduction in U.S. greenhouse gas emissions relative to forecasted levels. The bulk of these
reductions result from the programs that will demonstrate and transfer advanced clean coal
and renewable technologies abroad, and from the domestic energy efficiency and renewable
energy initiatives. The provisions on electric utilities, alternatives fuels and coalbed methane 6
are also significant.

EPACT and the UNFCCC were debated during the same time period. Table 1 compares EPACT,
title XVI, as enacted, and UNFCCC, as signed and ratified by the United States. Essentially, the

5 Department of State, National Action Plan for Global Climate Change (Washington, DC: Department of State, 1992),
p. 73.
6 Committee on Energy and Commerce, Comprehensive National Energy Policy Act, House Rept. 102-474, Part 1,
March 30, 1992, p. 152.





UNFCCC establishes policies, and EPACT establishes program responses. Thus EPACT is silent
on the nature of the problem, on the need for an immediate response, or whether the United States
should take the lead in any such response. But, as Table 1 shows, EPACT’s portfolio of domestic
strategies and program options—technology development/transfer, financial assistance to
developing countries, and least-cost solutions—closely track the provisions of the UNFCCC.
With the authorization of these programs and activities, EPACT effectively constitutes
implementing legislation for the U.S. commitment made in signing and ratifying the UNFCCC. It
should be noted, however, that typically the programs are relatively specific, not broad
authorizations; that for many the benefit of reducing greenhouse gases is a “bonus” in achieving
other goals (e.g., “substantially reduce environmental pollutants, including greenhouse gases...”
[sec. 1608]) ; and that in at least one case the act explicitly denies new authority (i.e., “This
subsection does not provide any new data collection authority” [sec. 1605(a)]). Such an approach
reflects the voluntary nature of the Rio commitments, and the “no regrets” policy position of the
George H. W. Bush Administration, as discussed in the next section.
Table 1. U.N. Framework Convention on Climate Change and the Energy Policy Act
of 1992: Correspondences of Selected Provisions
UNFCCC EPACT
Problem Concerned that human activities have been
substantially increasing the atmospheric
concentrations of greenhouse gases, that
these increases enhance the natural
greenhouse effect, and that this will result on
average in an additional warming of the Earth’s
surface and atmosphere and may adversely
affect natural ecosystems and humankind ...
(preamble)
Planning/Strategy Each of these Parties shall adopt national The ... National Energy Policy Plan ... shall
policies and take corresponding measures on include a least-cost energy strategy ...
the mitigation of climate change, by limiting its designed to achieve [among other goals] ...
anthropogenic emissions of greenhouse gases the stabilization and eventual reduction in the
and protecting and enhancing its greenhouse generation of greenhouse gases ... (sec.
gas sinks and reservoirs ... (Art. 4, 4(a)). 1602(a)).
Precautionary The Parties should take precautionary
measures to anticipate, prevent or minimize
the causes of climate change and mitigate its
adverse effects. Where there are threats of
serious or irreversible damage, lack of full
scientific certainty should not be used as a
reason for postponing such measures ... (Art.
3, 3).
Policy Options All Parties ... shall ... Formulate, implement, ... the Secretary [of Energy] shall transmit a
publish and regularly update national ... report to Congress containing a comparative
programmes containing measures to mitigate assessment of alternative policy mechanisms
climate change by addressing anthropogenic for reducing the generation of greenhouse
emissions by sources and removals by sinks of gases (sec. 1604).


all greenhouse gases... (Art. 4, 1(b)).



UNFCCC EPACT
Least Cost ... policies and measures to deal with climate In developing the least-cost energy strategy,
change should be cost-effective so as to the Secretary [of Energy] shall take into
ensure global benefits at the lowest possible consideration the economic, energy, social,
cost (Art. 3, 3). environmental, and competitive costs and
benefits, including costs and benefits for jobs,
of his choices (sec. 1602(a)).
Developed ... the developed country Parties should take
Nations Take Lead the lead in combating climate change... (Art. 3,
1).
Technology All Parties ... shall ... Promote and cooperate The Secretary [of Energy] ... shall establish a
Development/ in the development, application and diffusion, technology transfer program to carry out the
Transfer including transfer, of technologies, practices [following] purposes [among others]: ...
and processes that control, reduce or prevent encourage the export of United States
anthropogenic emissions of greenhouse gases technologies ... that substantially reduce
... (Art. 4, 1(c)). environmental pollutants, including
greenhouse gases; develop markets for United
States technologies ... that substantially reduce
environmental pollutants, including
greenhouse gases; provide financial assistance
by the Federal Government to foster greater
participation by United States firms in the
financing, ownership, design, construction, or
operation of technologies or services that
substantially reduce environmental pollutants,
including greenhouse gases (sec. 1608).
Financial The developed country Parties ... shall provide The Secretary of the Treasury ... shall
Assistance to new and additional financial resources to meet establish a Global Climate Change Response
Developing ... costs incurred by developing country Fund to act as a mechanism for United States
Nations Parties in complying with their obligations ... contributions to assist global efforts in
and shall take all practicable steps to promote, mitigating and adapting to global climate
facilitate and finance ... the transfer of, or change (sec. 1609(a)).
access to, environment-ally sound
technologies and know-how to other Parties,
particularly developing country Parties ... (Art.
4, 5).
Inventory; All Parties ... shall ... Develop, periodically The Secretary [of Energy] ... shall develop ...
Research and update, publish and make available to the an inventory of the [annual] national aggregate
Monitoring Conference of the Parties, ... national emissions of each greenhouse gas for ... the
inventories of anthropo-genic emissions by baseline period of 1987 through 1990....
sources and removals by sinks of all The Administrator of the Energy Information
greenhouse gases ... (Art. 4, 1(a)). Administration shall annually update and
Promote and cooperate in scientific, analyze such inventory using available data.
technological, technical, socio-economic and This subsection does not provide any new
other research, systematic observation and data collection authority (sec. 1605(a)).


development of data archives related to the
climate system and intended to further the
understanding and to reduce or eliminate the
remaining uncertainties regarding the causes,
effects, magnitude and timing of climate
change and the economic and social
consequences of various response strategies
(Art. 4, 1(g)).



UNFCCC EPACT
Emissions [The developed country] Parties shall The ... National Energy Policy Plan ... shall
Reduction communicate ... information on its policies and include a ... strategy ... designed to achieve ...
measures ... with the aim of returning the stabilization and eventual reduction in the
individually or jointly to their 1990 levels ... generation of greenhouse gases ... (sec.
anthropogenic emissions of carbon dioxide 1602(a)).
and other greenhouse gases (Art. 4, 2(b)).
Education Promote and cooperate in education, training
and public awareness related to climate
change and encourage the widest participation
in this process, including that of non-
governmental organizations (Art. 4, 1(i)).

The notion that the U.S. could meet modest CO2 emission reduction goals at little or no cost
underlay many of the global climate change initiatives during the George H. W. Bush and Clinton
Administrations, including the George H. W. Bush Administration’s “No Regrets” policy and

1992 Climate Action Plan, and the Clinton Administration’s 1994 and 1997 Climate Action 7


Plans. This approach to climate change policy allowed the two Administrations to avoid
requesting regulatory authority from Congress to implement a climate change policy. This left
them with the option of undertaking governmental implementing actions that could be done
administratively, unless Congress legislated otherwise, and creating incentives for private
industry to voluntarily undertake emissions reduction initiatives.
To meet the obligation of the UNFCCC, the George H. W. Bush Administration issued in
December, 1992, the first U.S. plan, National Action Plan for Global Climate Change. This plan
consisted primarily of (1) estimating U.S. emissions of greenhouse gases and (2) describing then-
existing activities affecting them. These activities were dominated by research initiatives 8
supplemented by programs proposed in the National Energy Strategy or anticipated as resulting
from the recent passage of EPACT, along with the Environmental Protection Agency’s (EPA) 9
various pollution prevention, “green” initiatives begun in 1991. These mostly voluntary

7 On theno regrets policy of the George H. W. Bush Administration, see C. Boyden Gray and David B. Rivkin, Jr.,
“A ‘No Regrets’ Environmental Policy,Foreign Policy, summer 1991, pp. 47-65; for the various action plans, see
U.S. Department of State, National Action Plan for Global Climate Change, Department of State Publication 10026,
December 1992; U.S. Department of State, Climate Action Report, Department of State Publication, 1994; and U.S.
Department of State, Climate Action Report, Department of State Publication 10496, July 1997.
8 Department of Energy, National Energy Strategy, Washington, DC: U.S. Govt. Print. Off., February 1991.
9 For a summary of these and other voluntary pollution control programs, see CRS Report 95-817, Voluntary Programs
to Reduce Pollution, by James E. McCarthy. When challenged on the explicit statutory basis for these voluntary
programs, EPA cites several authorities, including the Clean Air Act (section 103), the Pollution Prevention Act of
1990 (sections 6602 and 6606), and the Global Climate Protection Act of 1987 (section 1103). House, Subcommittee
on VA, HUD, and Independent Agencies, Committee on Appropriations, Departments of Veterans Affairs and Housing
and Urban Development, and Independent Agencies Appropriations for 1999, part 7, Environmental Protection Agency thnd
(105 Congress, 2 session), pp. 55-59, 196-206, 1056-1063.





initiatives, led by EPA’s “Green Lights” program, formed the core of the George H. W. Bush
Administration’s “No Regrets” policy and followed the recommendations of the 1991
Intergovernmental Panel on Climate Change (IPCC) report for countries to consider taking
actions on global climate change that were:
• Beneficial for reasons other than climate change and justifiable in their own
right—for example, increased energy efficiency....
• Economically efficient and cost-effective, in particular those that use market-
based mechanisms.
• Able to serve multiple social, economic and environmental purposes.
• Flexible and phased, so that they can be easily modified to respond to increased
understanding of ... climate change.
• Compatible with economic growth and the concept of sustainable development.
• Administratively practical and effective in terms of application, monitoring, and
enforcement.
• Mindful of the obligations of both industrialized and developing countries in
addressing this issue, while aware of the special needs of developing countries, in
particular in the areas of financing and technology.
As codified by the national action plan, the combination of EPA and DOE programs were
forecasted to hold U.S. greenhouse gas emissions at near their 1990 levels in the year 2000.
Emissions were projected to rise by only 1.4%-6% over that time period, compared to a projected 10
rise of 13% under a “business as usual” scenario. Table 2 summarizes the principle actions the
George H. W. Bush Administration envisioned and the anticipated reductions in greenhouse gases
in millions of metric tons of carbon-equivalent (MMTCE)—a common unit for the global
warming potential of different greenhouse gases.
Table 2. Selected Major Reduction Strategies Listed by the George H. W. Bush
Administration’s Action Plan
Program Carbon Reduction (MMTCE) Percentage of Total Gas Reduced
Commercial/industrial “Green Lights,” 17.0-50.1 11.3-25.1% CO2
DSM, standards
Green Building/Standards 8.8 5.9-4.4% CO2
Green Motors/Standards 8.3 5.5-4.2% CO2
Energy Star Computers 5.5 3.7-2.8% CO2
“America the Beautiful” and other forestry 5-9 3.3-4.5% CO2
programs (sequestration)
Landfill standards 39 26.0-19.5% CH4
Livestock Waste Lagoons 7 4.7-3.5% CH4

10 Actual U.S. greenhouse gas emissions exceeded those projected under the George H. W. Bush Administrations plan.
In 2000, emissions were 14.3% higher than 1990 levels. See U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions
and Sinks: 1990-2004 (EPA 430-R-06-002) (April 15, 2006), Table ES-2.





Program Carbon Reduction (MMTCE) Percentage of Total Gas Reduced
Reducing N2O from Nylon Manufacturing 8-12 5.3-6.0% N2O
Totalsa 98.6-139.7 65.7-69.9%
a. Based on a projected reduction of 150-200 MMTCE as presented in Table 12 of George H. W. Bush
National Action Plan (adjusted for CH4 at GWP of 22).
Basically, the George H. W. Bush Administration’s plan was a “compendium” of what was then
known about greenhouse gas emissions and of existing or planned domestic actions that affected
those gases. The primary reason for these actions were to conserve energy and to reduce air
pollution—any global climate change benefits would be a bonus. (Thus exemplifying “no
regrets”—the action is one that is justified for other reasons.) The goal of the George H. W. Bush
plan was to present a baseline that “should assist in measuring and evaluating existing policies
and measures and in establishing a basis for future actions.” The plan expressly “does not seek to
identify or recommend additional policies and measures that might be taken.” Underlying this
approach, it appeared, was the presumption that uncertainties about global climate change were
too great to justify actions beyond research except for so-called “no-regrets” initiatives justifiable
on other grounds, such as selected energy conservation measures. Reflecting this attitude, the
George H. W. Bush plan was explicit about a number of uncertainties, for example, in using two
estimates of the global warming potential (GWP) for methane; additionally, the George H. W.
Bush plan discussed adaptive measures before discussing mitigation measures.
Following a June 1993 White House Conference on Global Climate Change, the Clinton 11
Administration in October 1993 issued a new plan, The Climate Change Action Plan. This plan
explicitly set a goal of reducing U.S. greenhouse gas emissions to 1990 levels in the year 2000;
and laid out of series of nearly 50 program activities to achieve the goal, including both
enhancement of earlier programs and new, mostly voluntary, initiatives. It was not submitted to
the UNFCCC, but was described as the core of a forthcoming submission to meet the obligations
of the convention. In March 1994, the Clinton Administration issued a technical supplement that
documented the assumptions and parameters used in developing the supporting analysis for the 12
plan. Also in 1994 the Clinton Administration submitted its Climate Action Report to the
convention, and a revised version was submitted in 1997.
Philosophically, the Clinton Action Plans were similar to that developed under the George H. W.
Bush Administration. Both were designed to foster market choices that would conserve energy,
increase energy efficiency, and encourage natural gas use. Both were also designed to strengthen
selected regulatory standards that concomitantly also reduced greenhouse gas emissions—such as
landfill regulations that curtail methane releases. As indicated in Table 3, several actions in the
1993 Clinton plan expanded programs listed in the George H. W. Bush Administration’s plan by

11 This plan became the basis for the 1994 submission to the UNFCCC. For a further discussion of the plan, see CRS
Report 94-404, Climate Change Action Plans, by Larry B. Parker and John E. Blodgett.
12 U.S. Department of Energy, The Climate Change Action Plan: Technical Supplement, Washington, D.C.: DOE/PO-
0011. March 1994. As noted in footnote 13, actual U.S. greenhouse emissions for 2000 were 14.2% higher than 1990
levels.





augmenting funding or technical support to increase anticipated reductions. Other Clinton
proposals were new; examples included a “Golden Carrot” program to induce efficiency
improvements of industrial equipment, a renewable energy consortium, a program to encourage
employers to replace parking subsidies with cash incentives for solo commuting, and a program
to promote more efficient nitrogen fertilizer use.
Under the 1993 Clinton plan, total greenhouse gas emissions were projected to return to their

1990 levels by the year 2000, although CO2 emissions alone would rise about 2 percent. By 1997,


the projected greenhouse gas emission reductions of the Clinton plan was revised downward to 76
MMTCE, from 109 MMTCE in the 1993 plan. In addition, the baseline for greenhouse gas
emissions in the year 2000 was increased by 157 MMTCE from that projected in 1993. Thus,
rather than returning emissions to their 1990 levels in the year 2000, the 1997 plan projected a 13

188 MMTCE increase in emissions, or 13% above 1990 levels.


Table 3. Selected Major Reduction Strategies Under the 1993 Clinton Action Plan
Carbon Percent of
Program Reduction Total Gas Reduced
(MMTCE)
Form “Golden Carrot” Market Pull Partnerships/Enhanced 11.8 10.9% CO2
Residential Appliance Standards
Create a “Motor Challenge” Program 8.8 8.1% CO2
Reform Federal Tax Subsidy for Employer-provided 6.6 6.1% CO2
Parking/Adopt a Transportation System Efficiency
Strategy/Promote Greater Use of Telecommuting
Accelerate Source Reduction Pollution Prevention, and 9.2 8.5% CO2 (5.0 by
Recycling sequestration)
Reduce Use of Fertilizers/Reduce Use of Pesticides 7.2 6.6% CO2-2.7
N2O-4.5
Narrow Use of High GWP Chemicals Using the Clean Air 5.0 4.6% HFC, PFC
Act and Production Stewardship to Reduce Emissions
Create Partnerships with Manufacturers of HFC-22 to 5.0 4.6% HFC
Eliminate HCFC-23 Emissions
Totals 53.6 49.4%
The Clinton Administration blamed this failure to reduce emissions in 2000 to the 1990 level 14
primarily on unanticipated economic growth and on Congress not fully funding the programs.
Despite this, the basic rationale of the Clinton plan remained: the plan “combines an array of
public-private partnerships to stimulate the deployment of existing energy-efficient technologies
and accelerate the introduction of innovative technologies. The goal of these programs was to cut 15
CO2 emissions, while enhancing productivity domestically and U.S. competitiveness aboard.”
The echo of the 1991 NAS report was clear: the cost to control greenhouse gas emissions would
net out to zero, or even save money, depending on how the benefits from increased efficiency
were estimated.

13 Climate Action Report (1997), p. 125.
14 Climate Action Report (1997), p. 10.
15 Climate Action Report (1997), p. 90.






A central component of the UNFCCC was its establishment of a conference of parties (COP) to
negotiate further agreements to counter global climate change. The first two COPs were held in
Berlin in 1995 and 1996. At COP-1, several industrialized countries, including the United States,
expressed concern that newly industrializing countries, such as Brazil and China, would continue
to be classified as non-annex 1 countries (i.e., developing countries, exempt from possible future
legally binding reduction requirements) despite their projected large increases in greenhouse gas
emissions in the future. This issue of exempting such countries from future binding reduction
requirements took on heightened importance when ministerial participants at COP-2 signed a
declaration calling for “legally binding mid-term targets.” Such targets were the subject of COP-16

3, held in Kyoto in December 1997.


In anticipation of the Kyoto negotiations, the U.S. Senate debated the appropriate U.S. position
vis a vis any legally binding agreement to reduce greenhouse gas emissions. On July 25, 1997,
the Senate voted 95-0 to approve Senate Resolution 98 (S.Res. 98), expressing the sense of the
Senate regarding the conditions under which the United States should become a signatory to any 17
international agreement on greenhouse gases under the UNFCCC. Specifically, the resolution
states that the U.S. should not sign any agreement limiting developed countries’ greenhouse gas
emission (e.g., the United States) unless that agreement also includes specific schedules to limit
developing countries’ greenhouse gas emissions over the same period. In addition, no agreement
should be signed that would “result in serious harm to the economy of the United States.”
S.Res. 98 also states that any agreement sent to the Senate for advice and consent should include
a detailed discussion of required legislative and regulatory actions to implement the treaty and a
cost analysis of an implementation strategy. These conditions for Senate consideration of a treaty
illustrate the Senate’s concern about the cost of any agreement to the U.S. economy and
consumers, the competitive effects on U.S. trade, and the environmental effectiveness of a treaty
that exempts increasingly important greenhouse emitting developing countries. By requiring re-
analysis of the costs of implementing binding reduction requirements, the Senate was in effect
calling for a reexamination of the NAS report’s argument that greenhouse gas emissions could be
reduced at modest cost.
That the Kyoto Protocol did not meet the conditions of Senate Resolution 98 is not in dispute: it
does not bind developing countries to any schedule of reductions. For many critics, no
commitment may be comprehensive until the developing world’s largest emitters, China and
India, sign on.

16 For further discussion, see CRS Report RL33826, Climate Change: The Kyoto Protocol, Bali “Action Plan,” and
International Actions, by Susan R. Fletcher and Larry Parker.
17 Senate Committee on Foreign Relations, Conditions Regarding U.N. Framework Convention on Climate Change,
S.Rept. 105-54, July 21, 1997.







The George W. Bush Administration has abandoned both the Kyoto Protocol and its negotiation
process. In his June 11, 2001 speech on global climate change, the President stated that the Kyoto
Protocol was “fatally flawed in fundamental ways.” A primary flaw outlined by the President is
the exemption of China and other developing countries from its provisions. This
“comprehensiveness” concern was closely followed by “cost” and “competitiveness” concerns:
Kyoto is, in many ways, unrealistic. Many countries cannot meet their Kyoto targets. The
targets themselves are arbitrary and not based upon science. For America, complying with
those mandates would have a negative economic impact with layoffs of workers and price
increases for consumers. And when you evaluate all these flaws, most reasonable people will 18
understand that its not sound public policy.
To respond to global climate change, President Bush called for a new approach focused on the
science and with flexible control mechanisms that employ market-based incentives. Among the
principles that the President argued should guide such a program were the following:
We must always act to ensure continued economic growth in prosperity for our citizens and
for citizen throughout the world.... And finally, our approach must be based on global
participation, including that of developing countries whose net greenhouse gas emission now
exceed those in the developed countries.
In its 2006 action plan submitted under UNFCCC, the George W. Bush Administration outlines 19
six principles in building a climate change policy:
• be consistent with the long-term goal of stabilizing greenhouse gas
concentrations;
• be measured and continually build on new scientific data;
• ensure continued economic growth and prosperity;
• pursue market-based incentives and spur technological innovation;
• be flexible to adjust to new information and take advantage of new technology;
and
• promote global participation, including developing countries.
Several of these principles mirror those cited as influencing the “no regrets” policy of the George
H. W. Bush Administration. As shown in Table 4 below, the focus on reducing greenhouse gases
without interfering with economic growth is the basis of both policies. In this sense, the
objectives of the George W. Bush Administration’s climate change policy are similar to those of
the George H. W. Bush and Clinton Administrations.

18 President George W. Bush, President Bush’s Speech on Global Climate Change, June 11, 2001.
19 U.S. Department of State, U.S. Climate Action Report 2006, Washington, DC, July 2007, p. 381.





Table 4. Principles Behind the George H. W. Bush Administration’s and George W.
Bush Administration’s Climate Action Plans
George H. W. Bush Administration George W. Bush Administration
Beneficial for reasons other than climate Be consistent with the long-term goal of
change and justifiable in their own right stabilizing greenhouse gas concentrations
—for example, increased energy
efficiency....
Economically efficient and cost-effective, Pursue market-based incentives and spur
in particular those that use market-based technological innovation;
mechanisms. Take advantage of new technology
Able to serve multiple social, economic
and environmental purposes.
Flexible and phased, so that they can be Be measured and continually build on
easily modified to respond to increased new scientific data
understanding of ... climate change.
Compatible with economic growth and Ensure continued economic growth and
the concept of sustainable development prosperity
Administratively practical and effective
in terms of application, monitoring, and
enforcement
Mindful of the obligations of both Promote global participation, including
industrialized and developing countries in developing countries
addressing this issue, while aware of the
special needs of developing countries, in
particular in the areas of financing and technology
However, unlike the action plans developed by the George H.W. Bush and the Clinton
Administrations, the George W. Bush Administration’s plan makes no attempt to suggest that it
will achieve the UNFCCC goal of returning greenhouse gas emissions to their 1990 levels. In
fact, the Administration’s voluntary program shifts the focus from reducing greenhouse gas 20
emissions per se to reducing the intensity of emissions per unit of economic activity. As 21
announced by President George W. Bush in February 2002, his voluntary plan would reduce
greenhouse gas intensity in the U.S. by 18% in 2012 (three-quarters of which would occur from
projected business-as-usual trends); concomitantly, greenhouse gas emissions were projected to
increase from 14.2% above 1990 levels in 2000 to 28.3% above 1990 levels in 2010—some 4.5% 22
below projected business-as-usual levels.
In addition, on July 27, 2005, the Bush Administration announced formation of a six-nation Asia-
Pacific Partnership on Clean Development and Climate (APP). The members are the United
States, China, India, Japan, Australia, and South Korea. The purposes of the Partnership are to
create a voluntary, non-legally binding framework for international cooperation to facilitate
the development, diffusion, deployment, and transfer of existing, emerging and longer term

20 While the U.S. is the world’s largest emitter of greenhouse gases, the carbon efficiency of its economy is better than
many.
21 See http://www.whitehouse.gov/news/releases/2002/02/climatechange.html.
22 See CRS Report RL31779, Air Quality: Multi-Pollutant Legislation in the 108th Congress, by Larry Parker and John
Blodgett. (The 2010 and 2012 projections have been conflated.)





cost-effective, cleaner, more efficient technologies and practices among the Partners through 23
concrete and substantial cooperation so as to achieve practical results.
It has the goal of meeting “national pollution reduction, energy security and climate change
concerns, consistent with the principles of the U.N. Framework Convention on Climate Change 24
( UNFCCC) .”
Notably, unlike the Kyoto Protocol requirements, the partnership engages both developed and
developing nations as equals. Also notably, consistent with the Bush Administration’s rejection of
the Kyoto Protocol’s mandatory reduction requirements, the Partnership’s initiatives are
voluntary.
This international initiative was followed in May 2007 by the President’s announcement that the
United States would convene a meeting of the world’s “major economies” that are responsible for
most greenhouse gas emissions. Held in September 2007 the final statements of the “Major
Economies Meeting on Energy Security and Climate Change” emphasized the need to integrate
such meetings into the overall UNFCCC negotiations. The U.S. summary of the meeting focused
on the “aspirational” nature of reduction goals, reflecting the Administration’s rejection of
mandatory reduction targets.


While global climate change was an important element in the legislative drafting and debates that
led to Energy Policy Act of 1992, global climate change was largely peripheral during the thth
drafting of and deliberating on the bills (predominately, H.R. 6 in both the 108 and 109
Congresses) that ultimately became the Energy Policy Act of 2005 (P.L. 109-58)—indeed, the
drafters and managers of the legislation focused on energy security and energy supply and
preferred to avoid engaging in debate on climate implications. However, energy policy inevitably
has greenhouse gas implications (e.g., P.L. 109-58 includes provisions to foster nuclear power and
to encourage alternative fuels); at the same time, other provisions encourage coal use.
Some Members did seek to inject explicit consideration of climate change into the debate on
energy policy, however, and as a result, the issue of mandatory versus voluntary efforts to address th
global climate change was again debated. In the 108 Congress, in the Senate a bill (S. 139) that
would have imposed a mandatory cap-and-trade greenhouse gas reduction program failed in 2003
on a 43-55 vote. In 2005, a similar initiative was considered as an amendment during the Senate
debate on the Energy Policy Act of 2005 and defeated on a 38-60 vote. These proposals would
have placed a cap on U.S. greenhouse gas emission based on a 2001 baseline. The cap would
have been implemented through a tradeable permit program to encourage efficient reductions.

23 Charter for the Asia-Pacific Partnership on Clean Development and Climate (January 12, 2006),Purposes, 2.1.1.
For additional information, see http://www.asiapacificpartnership.org/.
24 “Asia-Pacific Partnership on Clean Development and Climate: New Vision Statement of Australia, China, India,
Japan, the Republic of Korea, and the United States of America http://www.state.gov/g/oes/climate/app/75320.htm.





However, concern that global climate change should be addressed explicitly during the debate on th
energy policy in the 109 Congress led 13 Senators to introduce S.Amdt. 866—a Sense of the
Senate resolution on climate change. The resolution finds that (1) greenhouse gases are
accumulating in the atmosphere, increasing average temperatures; (2) there is a growing scientific
consensus that human activity is a substantial cause of this accumulation; and (3) mandatory steps
will be required to slow or stop the growth of greenhouse gas emissions. Based on these findings,
the resolution states it is the Sense of the Senate that the Congress should enact a comprehensive
and effective national program of mandatory, market-based limits and incentives on greenhouse
gases that slow, stop, and reverse the growth of such emissions. This should be done in a manner
that will not significantly harm the U.S. economy and will encourage comparable action by other
countries that are our major trading partners and contributors to global emissions. The resolution
passed by voice vote after a motion to table it failed on a 43-54 vote.
As with the Energy Policy Act of 2005, the Energy Independence and Security Act of 2007 (P.L.

110-140) included floor debates about climate change. But also as with the earlier enactment,


direct climate change initiatives were omitted in the final bill, although such provisions as those
promoting energy conservation and more stringent auto efficiency standards were seen as
consistent with climate change initiatives.
Explicit climate change legislation has progressed in the 110th Congress, however: consistent with
Senate Amendment 866, the Committee on Environment and Public Works reported out a revised
version of S. 2191—America’s Climate Security Act of 2007—by an 11 to 8 vote on December 5,
2007. As reported, S. 2191 is estimated to reduce greenhouse gas emissions 19% below 2005
levels by 2020 (up from 15% as introduced) and 63% below 2005 levels by 2050. The bill would
cap greenhouse gas emissions from the electric generation, industrial, transportation, and natural
gas sectors. The program would be implemented through an expansive allowance trading
program to maximize opportunities for cost-effective reductions. Credits obtained from increases
in carbon sequestration and acquisition of allowances from foreign sources could be used to
comply with 30% of reduction requirements. The bill also establishes a Carbon Market Efficiency
Board to observe the allowance market and implement cost-relief measures if necessary.


In the face of scientific uncertainty, congressional debate with respect to beginning a mandatory
CO2 reduction program can be categorized by the three-Cs: Cost, Competitiveness, and
Comprehensiveness. These concerns, as indicated earlier, can be traced throughout the debate on
global climate change.
The fundamental policy assumption that changed between the U.S. ratification of the 1992
UNFCCC and the current Bush Administration’s decision to abandon the Kyoto Protocol process
concerns costs. The ratification of the UNFCCC was based at least partially on the premise that
significant reductions could be achieved at little or no cost. This assumption helped to reduce
concern some had (including those of the former Bush Administration) that the treaty could have
deleterious effects on U.S. competitiveness—a significant consideration because developing
countries are treated differently from developed countries under the UNFCCC. Further
ameliorating this concern, compliance with the treaty was voluntary. While the United States
could “aim” to reduce its emissions in line with the UNFCCC’s goal, if the effort indeed involved





substantial costs, the United States could fail to reach the goal (as has happened) without
incurring any penalty under the treaty.
This flexibility would have been eliminated under the Kyoto Protocol with its mandatory
reduction requirements. The possibility of failure to comply with a binding commitment
intensifies one’s perspective on potential costs: How confident can one be in the claim that carbon 25
reductions can be achieved at little or no costs? Compliance cost estimates ranging from $5.5 26
billion to $200 billion annually cause some to pause. The current Bush Administration was
sufficiently concerned about potential CO2 control costs to reverse a campaign pledge to seek
CO2 emissions reductions from power plants, in addition to its decision to abandon the Kyoto 27
Protocol process.
As a stalemate has continued on mandatory strategies to control CO2 emissions, particularly
because of costs fears, attention increasingly focuses on the cost-limiting benefit of a carbon tax,
either as the primary strategy or as a component blending a carbon tax with the reduction
certainty of the tradeable permit system. The object is to create a safety valve to avert
unacceptable control costs, particularly in the short-term. These safety valves limit unit (per ton)
costs of reducing emissions.
A safety valve bounds the costs of any climate change control program (price) at the expense of 28
reductions achieved (quantity). In general, market-based mechanisms to reduce CO2 emissions
focus on specifying either the acceptable emissions level (quantity), or compliance costs (price),
and allowing the marketplace to determine the economically efficient solution for the other
variable. For example, a tradeable permit program sets the amount of emissions allowable under
the program (i.e., the number of permits available caps allowable emissions), while letting the
marketplace determine what each permit will be worth. Likewise, a carbon tax (or safety valve)
sets the maximum unit (per ton of CO2) cost that one should pay for reducing emissions, while
the marketplace determines how much actually gets reduced. In one sense, preference for a pure
tradeable permit system or inclusion of a safety valve depends on how one views the uncertainty
of costs involved and benefits to be received.
An impetus for this new debate is a report by the National Commission on Energy Policy 29
(NCEP). The NCEP report called for a mandatory, economy-wide tradeable permit program to
begin limiting greenhouse gases. The mechanism for limiting such emissions involves a
progressively lower limit on greenhouse gas intensity over time tied to the projected increase in
GDP. Thus, the target is not fixed, but increases to the degree that projected economic growth
exceeds the mandated reduction in greenhouse gas intensity. The NCEP recommends the
reduction rate for greenhouse gas intensity be set at 2.4% annually beginning in 2010, increasing
to 2.8% beginning in 2020.

25 For a further discussion of the foundations for such divergent cost estimates, see CRS Report 98-738, Global Climate
Change: Three Policy Perspectives, by Larry Parker and John Blodgett.
26 For a review of several cost analyses, see Energy Information Administration, Impacts of the Kyoto Protocol on U.S.
Energy Markets and Economic Activity, DOE Report SR/OIAF/98-03, October 1998, pp. 137-151.
27 President George W. Bush, Letter to Senators Hagel, Helms, Craig, and Roberts, Office of the Press Secretary,
March 13, 2001.
28 See CRS Report RS21067, Global Climate Change: Controlling CO2 Emissions—Cost-Limiting Safety Valves, by
Larry Parker.
29 The National Commission on Energy Policy, Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s
Energy Challenges (December 2004).





In addition, to limiting potential costs, the scheme includes a safety valve. The NCEP
recommends this safety valve be set at $7 a ton of carbon dioxide equivalent in 2010 dollars. This
would be equivalent to about $5.90 a ton in 2001 dollars. This safety valve puts an upper limit on
the marginal cost that an affected entity should pay for greenhouse gas reductions. If control costs
exceed $7 a ton, the entity could pay the safety value price instead.
The effects of the safety valve on the price vs. quantity equation can be seen in Table 5 below.
The safety valve increases uncertainty with respect to emission reductions achieved while
increasing certainty with respect to price. Allowing some flexibility in the quantity of emissions
reduced is a concession to the three-C that have prevented legislative movement on mandatory
greenhouse gas emissions. Whether it represents the start of a new dialogue on reducing
greenhouse gas emissions remains to be seen.
Table 5. Comparison of Trading Program With and Without Safety Valve
Impact on Emissions (Quantity) Impact on Cost (Price)
Variable Tradeable Permits Tradeable Permits Tradeable Permits Tradeable Permits
with fixed with safety valve with fixed cap with safety valve
cap
GDP Growth No impact on Potentially increases Increases costs as Increases costs only to
emissions cap emissions target and more emissions have the level of the safety
possibility of safety to be reduced to valve
valve being used maintain cap
Availability of No impact on Lack of cost-effective Lack of cost-effective Lack of cost-effective
Cost-effective emissions cap control technologies control technologies control technologies
Control increases the increases costs increases costs only to
Technologies or possibility of the the level of the safety
Natural Gas safety valve being valve
used
Effectiveness of No impact on Lack of effective Lack of effective Lack of effective permit
trading system emissions cap permit market may permit market will market will increase cost
increase the increase costs; an only to the level of the
possibility of the effective permit safety valve; an effective
safety valve being market will reduce permit market will
used cost reduce cost
Source: Congressional Research Service.

Up to the Kyoto Protocol, the thrust of U.S. climate change policy, as represented by its national 31
action plans, focused on technological and efficiency improvements—improvements that
promised to reduce carbon emissions at little or no cost, and with “no regrets.” The Clinton
Administration’s 1997 Climate Change Action Plan continued to base the Administration’s
climate change policy on technology development and efficiency improvement as a means of

30 For an analysis of the impacts of policy perspectives on costs, see CRS Report 98-738, Global Climate Change:
Three Policy Perspectives, by Larry Parker and John Blodgett.
31 See CRS Report 98-738, Global Climate Change: Three Policy Perspectives, by Larry Parker and John Blodgett.





reducing emissions at little or no cost. This position was reiterated in President Clinton’s 1998 $6
billion Climate Change Technology Initiative. As summarized by National Economic Council
Chairman Gene Sperling on the introduction of the President Clinton’s initiative:
We think that this package is a very good example of what we spoke about when we said that
there were win-win opportunities for positive incentives that would clearly show how we can 32
address the issue of climate change and strengthen our economy at the same time.
For those who hold to this technological perspective, a global agreement to reduce greenhouse
gas emissions—such as the Kyoto Protocol—would improve the possibilities for improved
efficiency and technology by creating a stronger market for such innovations. They see concerns
that increased costs would destroy U.S. competitiveness as unfounded; indeed, they see increased
efficiency and innovation as improving U.S. competitiveness. They contend that United States not
only can afford to take the lead in carbon reductions (negating the comprehensiveness concern),
but should do so in order to increase its technological leadership as well as to provide an example
to the third world.
To those who are skeptical of this perspective but who may have been willing to accept it when it
was part of a voluntary framework, the scenario appears too risky and overly optimistic in the
context of a mandatory scheme. Looking at economic analyses from various sources, these
skeptics do not see the potential economic costs of mandatory schemes resulting in commensurate
environmental benefits, particularly in the case of the Kyoto Protocol where developing nations
are excluded from controls. From their perspective, the reward does not appear to be worth the
risk, and until it does, the country would be better off keeping its options open rather than moving
down an unsure and potentially very expensive track. This appears to be the position of the
George W. Bush Administration, which is prepared to encourage technological development—as
through the Asia-Pacific Partnership—but is not prepared to commit to a binding reduction target
such as that embodied in the Kyoto Protocol.
With the Bush Administration having rejected the Kyoto Protocol in 2001, what does the Senate
passage in 2005 of a Sense of the Senate resolution calling for mandatory steps to reduce climate
change mean for the future direction of U.S. climate change policy? The Sense of the Senate
resolution has spurred renewed discussion on directly incorporating cost considerations (e.g., a
safety valve or a Carbon Market Efficiency Board) into any mandatory greenhouse gas reduction
program.
From a policy perspective, the debate on incorporating a safety valve into a mandatory reduction
scheme represents an attempt to quantify the risks involved in addressing global climate change.
As a safety valve has the effect of allowing emissions that otherwise would be reduced, those
who see great risk in climate change will want to see a substantial price attached to the safety
valve—so emitters would invest in more reductions before it would be cheaper for them to pay
for releasing greenhouse gases instead. In contrast, those more concerned about the costs will
want to set the safety valve at a lower price level—accepting more emissions.
A second approach beginning debate would create a board to observe the allowance market and
implement cost-relief measures if necessary. Seen as a more flexible response with the potential
for avoiding or mitigating the environmental impacts of a safety valve, a Carbon Market

32 As reported in Daily Environment Report, “Administration Announces $6.3 Billion Plan of Spending, Tax Credits to
Curb Emissions,” February 2, 1998, p. AA-1.





Efficiency Board would not provide the certainty of a safety valve. The price versus quantity
debate is likely to continue.
Larry Parker John Blodgett
Specialist in Energy and Environmental Policy Specialist in Environmental Policy
lparker@crs.loc.gov, 7-7238 jblodgett@crs.loc.gov, 7-7230