USCAP “Blueprint” Chorus Sings Complex Tune to Half-Empty Caucus Room

01/17/2009 by James Handley

Reported by CTC Washington representative James Handley. Watch this space (and see postscript below) for CTC’s analysis of the USCAP "Blueprint." Meanwhile, read these parallel critiques of USCAP:

The U.S. Climate Action Partnership unveiled its cap-and-trade-based Blueprint for Legislative Action to a half-empty House Cannon Caucus Room Thursday morning. Arriving at the 9 a.m. event, attendees viewed a podium in front of an array of 18 chairs (each with bottled water) marked with names of CEOs and heads of EDF, NRDC, Pew Center, Nature Conservancy and WRI.

At 9:20, the suited “chorus” filed in, taking their assigned places. General Electric CEO Jeffrey Immelt introduced what he described as a “diverse panel” of CEOs and NGO heads. (All but Ursula Burns of Xerox is white; all but three are male. All seemed past the half-century mark.)

EmptyCongress.jpgEach had a brief speaking role. Jonathan Lash of the World Resources Institute stressed cap-and-trade’s “flexibility and predictability,” saying the blueprint addresses impacts on consumers and includes provisions for emissions offsets to “limit volatility.”

According to the Environmental Defense Fund’s Fred Krupp, “A mandatory cap is the backbone” of USCAP’s proposal to reduce US greenhouse gas emissions from 2005 levels by 80% by 2050, with half the reductions occurring by 2030.  Charles Holliday of DuPont said the plan would maintain competitiveness of U.S. firms. David Crane of NRG Energy touted its “fairness” in “spreading costs through the economy.”  “All components of the plan are linked,” Pew’s Eileen Claussen proclaimed. To “manage price spikes” she pointed to provisions for “banking of emissions allowances,” availability of “strategic verifiable offsets” and a “reserve pool.”

John Deere’s Robert Lane stressed offsets -– credits for 1.5 billion tons of CO2 reduction activities that would not otherwise be undertaken in sectors not subject to the cap. He noted that USCAP’s blueprint allocates “free permits initially… phasing them out.”  John Rowe of nuclear giant Exelon trumpeted renewable portfolio standards for utilities to encourage building “the lowest carbon energy” — nuclear. He said 40% of the free allowances would go to electric utilities at the distribution level — where, he asserted, cost savings would be passed to consumers.

Burns described Xerox’s early GHG emissions reductions and pointed out the blueprint’s rewards for early actions. Frances Beinecke of the Natural Resources Defense Council called the blueprint a way to “help solve both the economic crisis and the climate crisis” by “regulating all major sources, while funding energy technology research and deployment,” a “stimulus,” she said, along with clean fuel vehicle regulations.

Jim Rogers of Duke Energy, the third largest U.S. coal-burner, asserted that “We must find a way to remove CO2 emissions from coal,” noting accelerating construction of coal fired power plants in China. He touted the blueprint’s use of auction revenue to fund Carbon Capture and Sequestration research, funding “not subject to the whims of Congress.” He said the blueprint would “require” all new coal fired power plants after 2015 to capture at least 50% of carbon.

Peter Darbee of Pacific Gas & Electric noted that energy-efficiency is the most cost-effective energy “source” and the cheapest way to reduce GHG emissions, costing about 2 cents per kilowatt-hour. The blueprint urges Congress and states to enact regulatory standards, expand rebates for buildings that outperform codes, and enact tax and regulatory incentives for consumers to improve efficiency. Darbee urged “decoupling” of utility earnings from power generated to encourage them to help customers conserve. James Mulva of Conoco-Phillips explained that the USCAP blueprint makes fuel providers “responsible” for reductions in the transportation sector and that it includes performance measures for vehicles.

Noting that forest destruction generates 20% of global GHG emissions, Mark Tercek of Nature Conservancy applauded the blueprint’s “verifiable” offsets to credit forestry projects to capture CO2. George Noland of Siemens pointed to the plan’s goal of 40-45% reduction of GHG emissions from commercial buildings through design improvements and smarter technology. Jeff Sterba of PNM Resources touted USCAP coalition’s diversity and consensus. Lewis Hay of Florida Power advocated measures to put renewables on a “level playing field,” and Preston Chiaro of mining combine Rio Tinto argued that the plan would motivate other governments to follow.

Reporters asked about the cost of the plan. Claussen contended that its costs can’t be assessed in isolation because the plan would revitalize a new economy — for example, by encouraging building of wind power. I asked the panel why the blueprint didn’t follow President-elect Obama’s pledge of 100% auction of permits and instead sought permit giveaways ("allowances"). Darbee replied that the free permits would go to electricity distribution utilities, which would ensure that consumers benefited from them.   A reporter from Time magazine asked what the target carbon price would be; Claussen said a Carbon Market Board would decide, and that the plan is intended to avoid “a dash for (natural) gas.”

Another reporter asked about EPA authority and federal preemption of state efforts already underway to reduce GHG emissions; Krupp replied that they had not taken a position on EPA or preemption. Asked if coalition members will support the plan jointly or lobby individually, the panel indicated that there will be agreements on some elements and divergences on others.

WRI’s Lash concluded the session: “The economy will recover but without serious steps, the climate will not.” The panel then rushed out to join the first climate legislation hearing of the 111st Congress, before Rep. Waxman’s Energy & Commerce Committee.

Photo: Flickr / James Morrison.

Postscript, after reading USCAP’s vague "blueprint" (few numbers, no graphs):

Does Thirst for Offsets, Allowances Unite "Diverse" USCAP Coalition?

Offsets (1.5 billion tons domestic and 1.5 billion abroad) overwhelm the cap.  When the smoke clears, USCAP’s blueprint amounts to a source of funds for offsets.  Retaining tropical forests as carbon sinks instead of burning them is crucial (and deserves funding), but USCAP would sell "indulgences" for U.S. emissions without "repentance": no reason to reduce.  (See Hill Heat’s graph showing the huge bubble of additional emissions that USCAP’s offsets would accommodate.)

USCAP’s free allowances to downstream electricity distribution utilities would mute (obliterate?) the price signal, reducing incentives for electricity users to conserve and upgrade.

A "cap with free allowances" worked for the acid rain SO2 cap-and-trade program by pressing utilities to install scrubbers and shift to low sulfur coal without passing SO2 permit costs through to consumers.  CO2 is different– we don’t have a way to burn coal without producing CO2.  (Yes, we might someday, but even DOE’s rosy estimates say capture and sequestration would require ~ 1/3 more fuel.) 

Conservation is the cheapest "source" of energy and GHG reductions.  Gradually-rising prices, via a tightening cap without free allowances, or better yet a rising carbon tax, would push all levels of the economy to become the laboratory for efficiency and low-carbon innovation.  For a strong enough price signal without crippling the economy, an offsetting tax shift or "dividend" is needed to dampen the "income effect" (but not the incentive to conserve or substitute) of that price hike.  That’s where auction money (or carbon tax revenue) should go: all the way downstream to households.

In short: Huge offsets mean USCAP’s plan wouldn’t press U.S. industry to shift to renewables (e.g., by building wind capacity) and its free allowances mean consumers wouldn’t have reason to reduce demand anytime soon.  Pretty close to a "nothing-burger."

Filed under Carbon Tax


  1. This whole business of limiting CO2 emissions and taxing them or selling the right to produce extra is not only a huge waste of time, it is also just another example of the government deluding itself into believing it can guide industry better than market forces can naturally.
    The whole notion that "global warming" is being caused by greenhouse gases made by man, at best, is a misguided assessment of the data available.  It is a prime example of "bad science" where the scientist started with a conclusion and then sought out data that would hint that the conclusion was factually based.  Unfortunately, those who originally published this conclusion made sure to avoid all the data that would indicate that their desired conclusion was not, in fact, supported by the data available.  A closer examination of all the data available clearly indicates that man-made levels of CO2 produce no more than a marginal effect on our planet’s climate, but it also shows that our climate is determined by the level of sun spot activity. 
    What does that mean for the big picture?  It means that all the time and energy being placed into a struggle to limit the production of CO2 will have no effect whatsoever on the climate while having an extremely adverse effect on our economy.  Is that to say that we, as a nation shouldn’t be looking for ways to move from a fossil fuels based energy system to something more environmentally neutral and domestically produced sources of "green energy" technologies?  Of course not!  But these sources will take years to perfect and to bring to the public in a form that is cost effective compared to fossil fuels.  Trying to spur the country to invent such technologies under a government mandated timeframe will have two definate results.  One is that we will be forced to invest in first or second generation "green technologies" as soon as they become available regardless of the price. Once sold to the public, the industries that create the technologies will have less of an incentive to perfect them quickly since they already have their market and they had to invest heavily in the means of production to meet the demand that has been artifically created by the government mandate.  Secondly, if industry is forced to adopt the new technology to produce their goods, they will have to make the choice of making massive capital outlays for a less efficient power source or pull up stakes and move their operation to a nation that is quite happy to continue using fossil fuels.  Since many of these nations are sources of cheap labor already and are hungry for more development and industries to keep the standard of living rising in their countries, the decision for most industries remaining in the U.S. will be a no brainer…move overseas, at least until the green energies can compete head to head with fossil fuels.  This exodus of industries will throw our nation into a downward spiral that will make the Great Depression look like the good old days by comparison.
    If this nation’s industries are left alone to determine when they personally want to make the move to a greener energy source, they will be able to determine when the new technologies are efficient enough to meet their demands.  If technology invented is not scooped up quickly, the inventors will continue working diligently to make perfections to improve the cost effectiveness of the new energy source.  With each improved version, more and more industries and cities will make the investment giving the manufacturers of the new technology the necessary capital to continue their research and development  to produce the next generation.  The marketplace will determine the winners and losers when it comes to the new technologies as only unhampered free enterprise can and that’s the only way we, as a nation will make the change over without destroying ourselves. 

    Comment by Tim Fletcher — January 19, 2009 @ 9:50 am

  2. Has Mr. Fletcher been living in a cave the last six months?  The "magic of the markets" is what brought us the dot com bubble of 2000, the housing bubble, and the subprime mortgage fiasco.  Next thing you know, he’s going to be recommending credit default swaps as the way out of our environmental morass.  Not even Alan Greenspan–that Ayn Rand lover–is recommending that markets be given free rein anymore.And where is the "all data available" that he cites for denying the role of human influenced climate change?  I guess it’s not enough that literally thousands of scientists have participated in the consensus reached by the IPCC on global warming.  He would rather listen to the 0.01 percent of scientists who are still arguing the case is not proven.Jeez.  Some people will never shed their ideological blinders.  Sorry.  I have no patience for this sort of nonsense. 

    Comment by Anonymous — January 22, 2009 @ 11:41 pm

  3. Mr. Fletcher, you seem to be implying that, were anthropogenic climate change real, the market would recognize it before the scientists.  Mind explaining that one?

    Comment by Jurgen Hissen — January 26, 2009 @ 12:17 am

  4. Pew’s Eileen Claussen’s comments in this article are a great example of how the cap-and-traders want to have their cap and eat it too.  If there’s banking of allowances and a "reserve pool", then it’s not really a cap, is it?  It’s just a big pointless accounting exercise.

    Comment by Jurgen Hissen — January 26, 2009 @ 12:20 am

  5. The US Climate Action Partnership’s Cap’n·Trade-based Blueprint for Legislative Action amply illustrates the folly of participating in Europe’s Cap’n·Trade system. The European system has failed to control greenhouse gas emissions; it has not failed to enrich the well-positioned, well-connected. Frankly, it looks to me as though the USCAP’s Cap’n·Trade proposal is intended to fail; I cannot see any other motive; the folks intended are bright enough to come in from the rain, and they all seem to be able to read without moving their lips. Terribly discouraging.
    Recently more increasingly gloomy reports on climate change have been published. And today, the economic stimulus bill was "passed" along strict party lines. All this does not augur well for visionary legislation. Meanwhile, the Internet yakuza are out in force. I wish I had an idea of a productive path.

    Comment by David Ocampo G — January 28, 2009 @ 11:21 pm

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    Comment by Electric Utility Software — March 29, 2010 @ 10:46 am

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