Early Action Credits: Road to Kyoto
Early action crediting is being promoted as a way to protect industry in the event that the Kyoto Protocol or some other program to limit greenhouse gas emissions is implemented. But Jack Kemp, a distinguished fellow with the Competitive Enterprise Institute, told the House Government Reform Subcommittee on July 15 that early action crediting is an attempt to create a pro-Kyoto lobby within the business community. Credits acquired under early action would be worthless unless Kyoto is ratified.
David Ridenour, vice president of the National Center for Public Policy Research, and also representing the Cooler Heads Coalition, said that early action crediting would help big business at the expense of small business. “Since most small businesses and family farms lack the political contacts and clever lawyers necessary to negotiate credit deals with the Clinton administration and lack the financial wherewithal to make immediate reductions in their emissions, large businesses would likely garner the lions share of early credits.”
Kevin Fay, executive director of the International Climate Change Partnership, claimed that early action would not hurt small business. “A successful early action program will reduce the overall level of reductions required under any regulatory program. Companies that dont make early reductions will thus have fewer reductions to make and will benefit from the lessons learned by the early actors and the innovations and new technologies that have resulted from these experiments.” But the Kyoto Protocol caps emissions at 7 percent below 1990 emissions for the U.S. Any credit that is awarded now will be one less credit available when the compliance period begins.
Fred Krupp, executive director of the Environmental Defense Fund, argued that early action would reduce carbon emissions while maintaining economic growth. Implementing Kyoto now, said Krupp, will reduce expected costs. Krupp argued that we must act now because “nine more years of unchecked greenhouse gas emissions increases represents an ever increasing environmental risk.”
EDFs Sweet Deal
The congressional hearings also revealed that EDF might possibly profit from early action credits. David Ridenour told the congressmen at the hearing that EDF, which helped write the Chafee early action bill, may be trying to position itself as a third party verifier of emissions reductions. He cited a report by the NonProfit Accountability Project, Crony Environmentalism, in which EDF is accused of a conflict of interest in supporting the Chafee bill.
The report alleges that the Environmental Resource Trust, an arm of the EDF, is positioning itself to run a greenhouse reduction pool. An ERT memo acquired by NPAP states, “a proposal had been made both to EEI (Edison Electric Institute) and the White House to provide early reduction credits for those companies that participate in a greenhouse gas reduction pool. The GHG reduction pool would: provide the government with a legal entity responsible for monitoring, tracking and reporting upon member companies emissions performance; enforce members GHG commitments; operate a GHG reduction trading system.”
Moreover, in early June EDF participated in a conference promoting early action legislation, sponsored by the Progressive Policy Institute. EDF presented a plan to monitor and verify greenhouse gas emissions.
In return for running the pool, the “ERT would receive fees in the form of greenhouse gas reduction credits from the utilities.” It is unclear whether ERT would sell the credits or retire them. Fred Krupp testified that ERT would retire the credits. If so this would contradict other statements made at the hearing that early action crediting would cut costs through emission trading.
Under early action proposals, companies that do not participate in early reductions would be able to choose among different compliance strategies in the event that Kyoto is ratified. They could either reduce emissions at the site or they could buy emission credits. If ERT retires the credits it receives for its services, that would reduce the supply of credits. The range of compliance strategies would be lessened for latecomers.
Finally, Krupp argued that by retiring emission credits EDF would not be profiting from its role as a third party verifier. But, as Ridenour pointed out, “the incentives such a system would provide to corporations to give and give generously to the EDF or similar organization,” should be of grave concern.
“Corporations,” said Ridenour, “will be tempted to pay tribute to environmental groups knowing full well that they are the final arbiters of who does and does not deserve emissions credits.” Crony Capitalism can be downloaded from http://users.erols.com/npap/crony.html.
Restrictions on Tightening CAFE Under Attack
One of the favorite policies of green activists is the Corporate Average Fuel Economy (CAFE) standards that require U.S. auto makers to keep the average fuel economy of their fleet below 27 mpg. Recently, however, the greens have been frustrated because the CAFE standard has not been tightened for years. They are especially upset about the increasing popularity of big trucks and sports utility vehicles that they claim are significantly contributing to global warming.
Moreover, Congress has inserted language into the annual Department of Transportation (DOT) appropriations bill since 1995 prohibiting them from changing the current CAFE standards. Environmentalists want to prevent that from happening again this year. Their first move is to push for a “sense of the Senate” resolution that would force the Senate to negotiate with the House over the matter, and to convince the White House that a veto of the DOT appropriations bill would be sustained.
Auto makers are upset about this development because now they must mount a lobbying effort against higher CAFE standards when they are making efforts to appear green (Wall Street Journal, July 16, 1999).