Obama sets a course for low-carbon economy

President Barack Obama has made an early start on delivering on the green commitments made during his election campaign.

Big spending programmes aimed at reducing reliance on fossil fuels, improving energy efficiency and curbing carbon dioxide emissions form a major part of his $800 billion economic stimulus package.

His administration also wants the US, which emits a fifth of global greenhouse gases, to make a legislative commitment to cutting its emissions by 80% by 2050 relative to their 1990 level. It has also set a target to return emissions to 1990 levels by 2020. These commitments could strongly improve the chances of an effective global emissions deal being finalised at the UN’s Copenhagen climate summit in December.

The President has made it clear his administration will participate constructively in these international negotiations, but he will look for commitments from developing countries in return.

This represents a sea change in climate policy compared with the Bush administration, which had rejected and drastically reduced the effectiveness of the UN’s Kyoto Protocol. This is the current emissions-curbing agreement for developed nations which was negotiated in 1997 and in effect expires in 2012.

In doing little to curb the US’s own fast-rising emissions, the previous administration was also diminishing its influence on any post-Kyoto deal. What limited diplomatic resources it did have were largely focused on two non-Kyoto initiatives involving major emitters from both the developed and the developing world. Their focus was on promoting low-carbon technologies rather than committing to emissions reductions.

Dr Pankaj Bhatia, an associate at the World Resources Institute (WRI), an environmental thinktank in Washington, told ENDS that one of these, the Asia Pacific Partnership, "is going through an internal review" and could be wound up.

Yet bilateral talks between the US and big emitters, especially China, in the coming months are likely to play a key role in paving the way to any global climate deal.

To underpin its international climate negotiating strategy the White House attaches great importance to the US getting its own house in order on curbing greenhouse gas emissions.

At the heart of domestic climate change policy will be a cap-and-trade scheme, which the administration hopes will be much wider in scope than the EU’s emissions trading scheme (EUETS). This scheme will not be running in time for Copenhagen, but may be well on the way to launch.

One of President Obama’s first acts was to direct the federal Environmental Protection Agency to review its refusal throughout the Bush presidency to allow California and now 18 other states to go beyond national legislation and require 30% emission cuts in new cars and light trucks by 2016.

As well as setting national emission curbing targets, the Obama-Biden New Energy for America plan aims to invest $150 billion over the next ten years "to catalyse private efforts to build a clean energy future", creating millions of green jobs. It calls for 10% of electricity to come from renewables by 2012, increasing to 25% by 2025, and the development of clean coal technology including carbon capture and storage. On advanced vehicles, it calls for tax credits for buyers, for one million Plug-In Hybrid cars on the road by 2015, and for creation of a National Low Carbon Fuel Standard.

High priority is given to energy efficiency and retrofitting one million lower income homes annually with Federal grants of up to $6,500 per house, mainly to improve insulation, heating and cooling systems, totalling $5 billion.

Dr Manik Roy, vice president for federal government outreach at the Pew Center on Global Climate Change think tank, welcomed the new target to bring US emissions back to their 1990 level by 2020 as a considerable challenge, equivalent to EU commitments from 2005. But he said there was no chance the US could still ratify the Kyoto Protocol. This would have required a 7% cut from 1990 levels by 2012, but by 2005 economic and population growth had already boosted emissions by over 14%.

The President’s first act was to appoint a strong environment and energy team, including Carol Browner, a former head of the US Environmental Protection Agency, as assistant to the President for energy and climate change.

He also appointed a former high-level Kyoto negotiator under President Clinton, Todd Stern, as special envoy in the State Department for international climate negotiations. Nobel Prize physics laureate Dr Steven Chu will head up the Department of Energy and is expected to loosen its long-standing ties to the fossil fuel sector.

Since taking office, the President has faced stiff opposition from Republicans over the economic stimulus package, which is aimed mainly at reflating the economy but with key energy and climate aspects. The American Recovery and Reinvestment Act 2009 was signed into law on 17 February.

The core of the energy and climate element contained in the $800 billion stimulus package sets aside some $4.5 billion for modernising the electricity grid, and $16.8 billion for energy efficiency and renewable energy. There are also federal loan guarantees for electricity grid and renewable energy amounting to $6 billion. Renovations to schools ($20 billion) and federal buildings ($4.5 billion plus) also include a large energy efficiency component.

Robert Heilmayr, a WRI researcher, cautions that "a green stimulus is no replacement for comprehensive climate and energy policy." He and colleagues have estimated the package will save about 600 tonnes of CO₂ for every $1 million spent - a modest return. For the transport sector, increased spending in the package - which includes roads - yields "a slightly negative impact in terms of greenhouse gases" through increased mobility, he noted.

However, in future green recovery efforts "can reduce the cost of comprehensive climate and energy policy," he adds.

An energy bill later in 2009 will propose raising incentives and targets for renewable energy further. This will worry the renewables sector in the UK, because some major energy companies have already lost interest in large renewable projects here saying opportunities in the US are better.

Meanwhile, work is under way on a climate and energy package focusing mainly on a carbon cap-and-trade system. This requires new federal legislation, which must be introduced as separate bills through both the House of Representatives and the Senate. If approved by each, a House-Senate Conference Committee drawn from the two chambers tries to reconcile the bills. The resulting compromise must then be returned for approval by each chamber before the President can sign it into law.

The first proposed bill, championed by Congressman Henry Waxman, chair of the House of Representatives Committee on Energy and Commerce, calls for an economy-wide greenhouse gas cap-and-trade programme, cutting emissions by 15-20% by 2020 from current levels, and by 80% relative to 1990.

The second, by the Senate Environment and Public Works Committee, is less detailed but equivalent.

The Waxman principles focus on establishing a huge national cap-and-trade carbon market. It should be based on rigorous, verifiable and transparent reporting, with enforceable targets, capable of linking with the EUETS and others.

Investments in clean and energy-efficient technology would benefit from "a significant portion of revenues from auctioning emissions allowances".

Revenues from auctioning of allowances to polluters would be used to minimise impact of higher energy costs on lower income households, and to help workers retrain for a green economy.

Any free allocation of allowances to existing polluters would be limited and allowed only for a brief transitional period in order to avoid windfall profits being made by firms allocated free allowances - as has sometimes happened in the EUETS. Use of carbon offsets from overseas and within the US will be permitted but must be real, additional, verifiable, permanent and enforceable.

The cap-and-trade proposals will cover about 85% of US emissions, and will most likely include power plants, industrial and commercial sources, but details are still scarce.

Outside the trading scheme, environmental experts stress that complementary emissions reduction policies would be needed, aimed at greener urban growth and buildings and electricity sector efficiency policies.

Even so, it is clear the carbon market will play a major role in the US’s future climate policy, possibly allowing trading with the EUETS by 2012. Cap-and-trade schemes covering CO₂ are already about to start operating or are planned in 24 states (ENDS Report 396, p 13 ).