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Bush Announces Global Climate Change Initiatives

For Immediate Release
Office of the Press Secretary
February 14, 2002

President Announces Clear Skies & Global Climate Change Initiatives
National Oceanic and Atmospheric Administration
Silver Spring, Maryland

2:05 P.M. EST

THE PRESIDENT: Thank you very much for that warm welcome. It's an honor to join you all today to talk about our environment and about the prospect of dramatic progress to improve it.

Today, I'm announcing a new environmental approach that will clean our skies, bring greater health to our citizens and encourage environmentally responsible development in America and around the world.

Particularly, it's an honor to address this topic at NOAA, whose research is providing us with the answers to critical questions about our environment. And so I want to thank Connie for his hospitality and I want to thank you for yours, as well. Connie said he felt kind of like Sasha Cohen -- I thought for a minute he was going to ask me to talk to his mother on his cell phone. (Laughter.)

I also want to tell you one of my favorite moments was to go down to Crawford and turn on my NOAA radio to get the weather. (Applause.) I don't know whether my guy is a computer or a person. (Laughter.) But the forecast is always accurate, and I appreciate that. I also want to thank you for your hard work, on behalf of the American people.

I appreciate my friend, Don Evans's leadership. I've known him for a long time. You're working for a good fellow, if you're working at the Commerce Department, or at NOAA. And I want to thank Spence Abraham and Christie Todd Whitman for their service to the country, as well. I've assembled a fabulous Cabinet, people who love their country and work hard. And these are three of some of the finest Cabinet officials I've got. (Applause.)

I want to thank Jim Connaughton, who is the Chairman of the Council on Environmental Quality. He's done a fabulous job of putting this policy together, a policy that I'm about to explain. But before I do, I also want to thank some members of Congress who have worked with us on this initiative. I want to thank Bob Smith and George Voinovich, two United States senators, for their leadership in pursuing multi-pollutant legislation; as well as Congressmen Billy Tauzin and Joe Barton. And I want to thank Senator Chuck Hagel and Larry Craig for their work on climate issues. These members of Congress have had an impact on the policies I am just about to announce.

America and the world share this common goal: we must foster economic growth in ways that protect our environment. We must encourage growth that will provide a better life for citizens, while protecting the land, the water, and the air that sustain life.

In pursuit of this goal, my government has set two priorities: we must clean our air, and we must address the issue of global climate change. We must also act in a serious and responsible way, given the scientific uncertainties. While these uncertainties remain, we can begin now to address the human factors that contribute to climate change. Wise action now is an insurance policy against future risks.

I have been working with my Cabinet to meet these challenges with forward and creative thinking. I said, if need be, let's challenge the status quo. But let's always remember, let's do what is in the interest of the American people.

Today, I'm confident that the environmental path that I announce will benefit the entire world. This new approach is based on this common-sense idea: that economic growth is key to environmental progress, because it is growth that provides the resources for investment in clean technologies.

This new approach will harness the power of markets, the creativity of entrepreneurs, and draw upon the best scientific research. And it will make possible a new partnership with the developing world to meet our common environmental and economic goals.

We will apply this approach first to the challenge of cleaning the air that Americans breathe. Today, I call for new Clean Skies legislation that sets tough new standards to dramatically reduce the three most significant forms of pollution from power plants, sulfur dioxide, nitrogen oxides and mercury.

We will cut sulfur dioxide emissions by 73 percent from current levels. We will cut nitrogen oxide emissions by 67 percent. And, for the first time ever, we will cap emissions of mercury, cutting them by 69 percent. These cuts will be completed over two measured phases, with one set of emission limits for 2010 and for the other for 2018.

This legislation will constitute the most significant step America has ever taken -- has ever taken -- to cut power plant emissions that contribute to urban smog, acid rain and numerous health problems for our citizens.

Clean Skies legislation will not only protect our environment, it will prolong the lives of thousands of Americans with asthma and other respiratory illnesses, as well as with those with heart disease. And it will reduce the risk to children exposed to mercury during a mother's pregnancy.

The Clean Skies legislation will reach our ambitious air quality goals through a market-based cap-and-trade approach that rewards innovation, reduces cost and guarantees results. Instead of the government telling utilities where and how to cut pollution, we will tell them when and how much to cut. We will give them a firm deadline and let them find the most innovative ways to meet it.

We will do this by requiring each facility to have a permit for each ton of pollution it emits. By making the permits tradeable, this system makes it financially worthwhile for companies to pollute less, giving them an incentive to make early and cost effective reductions.

This approach enjoys widespread support, with both Democrats and Republicans, because we know it works. You see, since 1995 we have used a cap-and-trade program for sulfur dioxide pollution. It has cut more air pollution, this system has reduced more air pollution in the last decade than all other programs under the 1990 Clean Air Act combined. And by even more than the law required. Compliance has been virtually 100 percent. It takes only a handful of employees to administer this program. And no one had to enter a courtroom to make sure the reductions happened.

Because the system gives businesses an incentive to create and install innovative technologies, these reductions have cost about 80 percent less than expected. It helps to keep energy prices affordable for our consumers. And we made this progress during a decade when our economy, and our demand for energy, was growing.

The Clean Skies legislation I propose is structured on this approach because it works. It will replace a confusing, ineffective maze of regulations for power plants that has created an endless cycle of litigation. Today, hundreds of millions of dollars are spent on lawyers, rather than on environmental protection. The result is painfully slow, uncertain and expensive programs on clean air.

Instead, Clean Skies legislation will put less money into paying lawyers and regulators, and money directly into programs to reduce pollution, to meet our national goal. This approach, I'm absolutely confident, will bring better and faster results in cleaning up our air.

Now, global climate change presents a different set of challenges and requires a different strategy. The science is more complex, the answers are less certain, and the technology is less developed. So we need a flexible approach that can adjust to new information and new technology.

I reaffirm America's commitment to the United Nations Framework Convention and it's central goal, to stabilize atmospheric greenhouse gas concentrations at a level that will prevent dangerous human interference with the climate. Our immediate goal is to reduce America's greenhouse gas emissions relative to the size of our economy.

My administration is committed to cutting our nation's greenhouse gas intensity -- how much we emit per unit of economic activity -- by 18 percent over the next 10 years. This will set America on a path to slow the growth of our greenhouse gas emissions and, as science justifies, to stop and then reverse the growth of emissions.

This is the common sense way to measure progress. Our nation must have economic growth -- growth to create opportunity; growth to create a higher quality of life for our citizens. Growth is also what pays for investments in clean technologies, increased conservation, and energy efficiency. Meeting our commitment to reduce our greenhouse gas intensity by 18 percent by the year 2012 will prevent over 500 million metric tons of greenhouse gases from going into the atmosphere over the course of the decade. And that is the equivalent of taking 70 million cars off the road.

To achieve this goal, our nation must move forward on many fronts, looking at every sector of our economy. We will challenge American businesses to further reduce emissions. Already, agreements with the semiconductor and aluminum industries and others have dramatically cut emissions of some of the most potent greenhouse gases. We will build on these successes with new agreements and greater reductions.

Our government will also move forward immediately to create world-class standards for measuring and registering emission reductions. And we will give transferable credits to companies that can show real emission reductions.

We will promote renewable energy production and clean coal technology, as well as nuclear power, which produces no greenhouse gas emissions. And we will work to safely improve fuel economy for our cars and our trucks.

Overall, my budget devotes $4.5 billion to addressing climate change -- more than any other nation's commitment in the entire world. This is an increase of more than $700 million over last year's budget. Our nation will continue to lead the world in basic climate and science research to address gaps in our knowledge that are important to decision makers.

When we make decisions, we want to make sure we do so on sound science; not what sounds good, but what is real. And the United States leads the world in providing that kind of research. We'll devote $588 million towards the research and development of energy conservation technologies. We must and we will conserve more in the United States. And we will spend $408 million toward research and development on renewables, on renewable energy.

This funding includes $150 million for an initiative that Spence Abraham laid out the other day, $150 million for the Freedom Car Initiative, which will advance the prospect of breakthrough zero-emission fuel cell technologies.

My comprehensive energy plan, the first energy plan that any administration has put out in a long period of time, provides $4.6 billion over the next five years in clean energy tax incentives to encourage purchases of hybrid and fuel cell vehicles, to promote residential solar energy, and to reward investments in wind, solar and biomass energy production. And we will look for ways to increase the amount of carbon stored by America's farms and forests through a strong conservation title in the farm bill. I have asked Secretary Veneman to recommend new targeted incentives for landowners to increase carbon storage.

By doing all these things, by giving companies incentives to cut emissions, by diversifying our energy supply to include cleaner fuels, by increasing conservation, by increasing research and development and tax incentives for energy efficiency and clean technologies, and by increasing carbon storage, I am absolutely confident that America will reach the goal that I have set.

If, however, by 2012, our progress is not sufficient and sound science justifies further action, the United States will respond with additional measures that may include broad-based market programs as well as additional incentives and voluntary measures designed to accelerate technology development and deployment.

Addressing global climate change will require a sustained effort over many generations. My approach recognizes that economic growth is the solution, not the problem. Because a nation that grows its economy is a nation that can afford investments and new technologies.

The approach taken under the Kyoto protocol would have required the United States to make deep and immediate cuts in our economy to meet an arbitrary target. It would have cost our economy up to $400 billion and we would have lost 4.9 million jobs.

As President of the United States, charged with safeguarding the welfare of the American people and American workers, I will not commit our nation to an unsound international treaty that will throw millions of our citizens out of work. Yet, we recognize our international responsibilities. So in addition to acting here at home, the United States will actively help developing nations grow along a more efficient, more environmentally responsible path.

The hope of growth and opportunity and prosperity is universal. It's the dream and right of every society on our globe. The United States wants to foster economic growth in the developing world, including the world's poorest nations. We want to help them realize their potential, and bring the benefits of growth to their peoples, including better health, and better schools and a cleaner environment.

It would be unfair -- indeed, counterproductive -- to condemn developing nations to slow growth or no growth by insisting that they take on impractical and unrealistic greenhouse gas targets. Yet, developing nations such as China and India already account for a majority of the world's greenhouse gas emissions, and it would be irresponsible to absolve them from shouldering some of the shared obligations.

The greenhouse gas intensity approach I put forward today gives developing countries a yardstick for progress on climate change that recognizes their right to economic development. I look forward to discussing this new approach next week, when I go to China and Japan and South Korea. The United States will not interfere with the plans of any nation that chooses to ratify the Kyoto protocol. But I will intend to work with nations, especially the poor and developing nations, to show the world that there is a better approach, that we can build our future prosperity along a cleaner and better path.

My budget includes over $220 million for the U.S. Agency for International Development and a global environmental facility to help developing countries better measure, reduce emissions, and to help them invest in clean and renewable energy technologies. Many of these technologies, which we take for granted in our own country, are not being used in the developing world. We can help ensure that the benefits of these technologies are more broadly shared. Such efforts have helped bring solar energy to Bangladesh, hydroelectric energy to the Philippines, geothermal electricity to Kenya. These projects are bringing jobs and environmental benefits to these nations, and we will build on these successes.

The new budget also provides $40 million under the Tropical Forest Conservation Act to help countries redirect debt payments towards protecting tropical forests, forests that store millions of tons of carbon. And I've also ordered the Secretary of State to develop a new initiative to help developing countries stop illegal logging, a practice that destroys biodiversity and releases millions of tons of greenhouse gases into the atmosphere.

And, finally, my government is following through on our commitment to provide $25 million for climate observation systems in developing countries that will help scientists understand the dynamics of climate change.

To clean the air, and to address climate change, we need to recognize that economic growth and environmental protection go hand in hand. Affluent societies are the ones that demand, and can therefore afford, the most environmental protection. Prosperity is what allows us to commit more and more resources to environmental protection. And in the coming decades, the world needs to develop and deploy billions of dollars of technologies that generate energy in cleaner ways. And we need strong economic growth to make that possible.

Americans are among the most creative people in our history. We have used radio waves to peer into the deepest reaches of space. We cracked life's genetic code. We have made our air and land and water significantly cleaner, even as we have built the world's strongest economy.

When I see what Americans have done, I know what we can do. We can tap the power of economic growth to further protect our environment for generations that follow. And that's what we're going to do.

Thank you. (Applause.)

END 2:30 P.M. EST

ATTACHED.. FACT SHEET AND POLICY BOOK

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FACT SHEET

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Fact Sheet: President Bush Announces Clear Skies & Global Climate Change Initiatives

Today's Presidential Action

Today the President will unveil the most aggressive initiative in American history to cut power plant emissions, as well as a bold new strategy for addressing global climate change.


The Clear Skies Initiative. Cuts power plant emissions of the three worst air pollutants - nitrogen oxides, sulfur dioxide, and mercury - by 70 percent. The initiative will improve air quality using a proven, market-based approach.

Global Climate Change. Commits America to an aggressive strategy to cut greenhouse gas intensity by 18% over the next 10 years. The initiative also supports vital climate change research and ensures that America's workers and citizens of the developing world are not unfairly penalized.
The Clear Skies Initiative

Dramatically & Steadily Cuts Power Plant Emissions of Three of the Worst Air Pollutants:


Cuts sulfur dioxide (SO2) emissions by 73 percent, from current emissions of 11 million tons to a cap of 4.5 million tons in 2010, and 3 million tons in 2018.

Cuts emissions of nitrogen oxides (NOx) by 67 percent, from current emissions of 5 million tons to a cap of 2.1 million tons in 2008, and to 1.7 million tons in 2018.

Cuts mercury emissions by 69 percent -- the first-ever national cap on mercury emissions. Emissions will be cut from current emissions of 48 tons to a cap of 26 tons in 2010, and 15 tons in 2018.
Uses a Proven Market-Based Approach:


Protects Americans from respiratory and cardiovascular diseases by dramatically reducing smog, acid rain, fine particles, regional haze, nitrogen and mercury deposition.
Protects our wildlife, habitats and ecosystem health.
Cuts pollution further, faster, cheaper, and with more certainty, using a 'cap-and trade' program, replacing a cycle of endless litigation with rapid and certain improvements in air quality.
Saves as much as $1 billion annually in compliance costs that are passed along to American consumers, and improves air quality and protects the reliability and affordability of electricity.
Uses the model of our most successful clean air law - the 1990 Clean Air Act's acid rain program - and encourages use of new and cleaner pollution control technologies.
A New Approach on Global Climate Change

The President has committed America to an aggressive new strategy to cut greenhouse gas intensity by 18% over the next 10 years. The initiative also supports vital climate change research and ensures that America's workers and citizens of the developing world are not unfairly penalized. The President's initiative puts America on a path to slow the growth of greenhouse gas emissions, and - as the science justifies - to stop, and then reverse that growth.


Cutting Greenhouse Gas Intensity by 18 Percent Over the Next 10 Years. Greenhouse gas intensity is the ratio of greenhouse gas emissions to economic output. The President's goal seeks to lower our rate of emissions from an estimated 183 metric tons per million dollars of GDP in 2002, to 151 metric tons per million dollars of GDP in 2012. By significantly slowing the growth of greenhouse gases, this policy will put America on a path toward stabilizing GHG concentration in the atmosphere in the long run, while sustaining the economic growth needed to finance our investments in a new, cleaner energy structure. America is already improving its GHG intensity; new policies and programs will accelerate that progress, avoiding more than 500 million metric tons of GHG emissions over the next ten years -- the equivalent of taking nearly one out of every three cars off the road. This goal is comparable to the average progress that nations participating in the Kyoto Protocol are required to achieve.

A New Tool to Measure and Credit Emissions Reductions. The U.S. will improve its GHG registry to enhance measurement accuracy, reliability and verifiability, working with and taking into account emerging domestic and international approaches. These improvements will give businesses incentives to invest in new, cleaner technology and voluntarily reduce greenhouse gas emissions.

Protect and Provide Transferable Credit for Emission Reductions. The President will direct the Secretary of Energy to recommend reforms to: (1) ensure that businesses that register voluntary reductions are not penalized under a future climate policy, and (2) give credit to companies that can show real emissions reductions.

Reviewing Progress on Climate Change and Taking Additional Action if Necessary in 2012, which may include a broad, market-based program, as well as additional initiatives to accelerate technology. If, in 2012, we find that we are not on track toward meeting our goal, and sound science justifies further policy action, the United States will respond with additional measures that may include a broad, market-based program as well as additional incentives and voluntary measures designed to accelerate technology development and deployment.

Unprecedented Funding for Climate Change-Related Programs: The President's budget in FY 2003 provides $4.5 billion for global climate change-related activities -- a $700 million increase. This includes the first year of funding for a five-year, $4.6 billion commitment to tax credits for renewable energy sources.

A Comprehensive Range of New and Expanded Domestic and International Policies, including:

Expanded research and development of climate-related science and technology
Expanded use of renewable energy
Business sector challenges
Improvements in the transportation sector
Incentives for sequestration
Enhanced support for climate observation and mitigation in the developing world.

A Better Alternative to the Kyoto Protocol. Rather than making drastic reductions in greenhouse gas emissions that would put millions of Americans out of work and undermine our ability to make long-term investments in clean energy - as the Kyoto Protocol would have required - the President's growth-based approach will accelerate the development of new technologies and encourage partnerships on climate change issues with the developing world.

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POLICY BOOK

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Executive Summary – The Clear Skies Initiative

February 14, 2002

Today, President Bush proposed the most significant step America has ever taken to cut power plant emissions, the Clear Skies Initiative. This new proposal will aggressively reduce air pollution from electricity generators and improve air quality throughout the country. The Clear Skies Initiative will cut air pollution 70 percent, using a proven, market-based approach that will save American consumers millions of dollars.


America needs a clean, secure, affordable, reliable energy supply in the years ahead. President Bush has often said that environmental protection and energy production are not competing priorities. This progressive plan shows how that objective can be reached. We can meet our environmental goals while providing affordable electricity for American consumers and American businesses.


America has made great progress in reducing air pollution. Over the last three decades, air pollution has declined by 29 percent, while our economy has grown nearly 160 percent. These gains have provided cleaner air for millions of people. Our understanding of science, technology, and markets has improved since the Clean Air Act was passed in 1970. We know more about the best way to reduce pollution, and how to do it cost effectively. The acid rain cap and trade program created by Congress in 1990 reduced more pollution in the last decade than all other Clean Air Act command-and-control programs combined, and achieved significant reductions at two-thirds of the cost to accomplish those reductions using a "command-and-control" system. It’s time to take the best of what we have learned and modernize the Clean Air Act. That’s why President Bush is proposing a new Clean Air Act for the 21st century.


The Clear Skies Initiative will:


Dramatically Cut Power Plants’ Emissions of Three of the Worst Air Pollutants.

Cut sulfur dioxide (SO2) emissions by 73 percent, from current emissions of 11 million tons to a cap of 4.5 million tons in 2010, and 3 million tons in 2018.

Cut emissions of nitrogen oxides (NOx) by 67 percent, from current emissions of 5 million tons to a cap of 2.1 million tons in 2008, and to 1.7 million tons in 2018.

Cutting mercury emissions by 69 percent, - the first-ever national cap on mercury emissions. Emissions will be cut from current emissions of 48 tons to a cap of 26 tons in 2010, and 15 tons in 2018.

Emission caps will be set to account for different air quality needs in the East and the West.


Use A New, Market-Based Approach To Clean Air:

Protect Americans from respiratory and cardiovascular diseases by dramatically reducing smog, fine particulate matter, regional haze; and protect wildlife habitat and ecosystem health from acid rain, nitrogen and mercury deposition. NOx and SO2 emissions both contribute to fine particulate matter emissions and NOx also contributes to ground-level ozone or smog.

Save Americans as much as $1 billion annually in compliance costs that are passed along to American consumers, while improving air quality and protecting the reliability and affordability of electricity for consumers.

Cut pollution further, faster, cheaper – and with more certainty – eliminating the need for expensive and uncertain litigation as a means of achieving clean air.

Build upon the 1990 Clean Air Act’s acid rain program, America’s most successful clean air law in the last decade, and encourage the use of new pollution control technologies.


President Bush has a strong track record on enacting far-reaching clean air initiatives. In 1999, then-Governor Bush signed legislation that permanently caps NOx and SO2 emissions from older power plants in Texas starting in 2003. The legislation was widely hailed as a model for the country. The Texas program is designed to reduce NOx emissions by 75,000 tons per year, and SO2 emissions by 35,000 tons per year, while giving utilities flexibility in determining how and where to achieve the reductions.


This approach enjoys strong, bipartisan support throughout the country:


"Congress should pass legislation to establish a flexible, market-based program to significantly reduce and cap emissions of sulfur dioxide, nitrogen oxides, mercury and voluntary reductions of carbon dioxide from electric power generators. The legislation should provide regulatory certainty by establishing reduction targets for emissions, phasing in reductions over a reasonable period of time and providing market-based incentives such as emissions-trading credits to help achieve the required reductions."

¾ Unanimous Resolution of the National Governors Association, August, 2001.


The Environmental Council of the States approved a resolution in February, 2001, supporting a cost-effective, efficient and environmentally protective multi-pollutant proposal.

Background ¾ The Success of the Clean Air Act


Pollution has declined by 29 percent while our economy has grown nearly 160 percent


In the U.S., power plants emit significant amounts of air pollution: 67 percent of all sulfur dioxide (SO2) emissions, 37 percent of mercury emissions, and 25 percent of all nitrogen oxide (NOx) emissions. These pollutants contribute to a variety of health and environmental problems, such as smog, acid rain, nitrogen deposition and visibility impairment.


Current law addresses each of these pollutants independently, on different timetables, through several different programs. These laws are uncoordinated and often inconsistent. Power plants might install equipment one year that is rendered obsolete the next. Implementation and enforcement usually requires years of litigation, leaving the fate of America’s air to the uncertainties of the courtroom.


After 30 years of experience in regulating air pollution, America has proved that there is a better way to accomplish our clean air goals.


The 1990 Clean Air Act Amendments, proposed and signed into law by President George H.W. Bush, have significantly reduced air pollution, especially through the innovative "cap-and trade" acid rain control program. The acid rain program has been a resounding success, cutting annual sulfur dioxide emissions in the first phase by 50 percent below allowed levels. Emissions were reduced faster than required, and at far less cost. Industry compliance has been nearly 100 percent, and the program only requires a handful of EPA employees to operate. This approach is vastly more effective, and cheaper – two-thirds cheaper – than the traditional "command-and-control" approach.


This program is clearly a model for success. President Bush wants to expand this program to include two new pollutants – nitrogen oxides and mercury – while also dramatically reducing the SO2 emissions allowed by current law.

The Clear Skies Initiative ¾ Building on the Clean Air Act


The President’s Clear Skies Initiative is designed to help us meet our national air quality goals. A new Clean Air Act for the 21st century must build on this founding principle - modernization and better technology will mean a progressive new way to accomplish these long-standing environmental goals. The Clear Skies Initiative will continue to bring Americans:

Improved Air Quality: Reducing air pollution will bring clean air to tens of millions of people, saving them from smog (ground-level ozone) and fine particulate matter (dust) that cause respiratory and cardiovascular distress.

Improved Health: Reducing emissions of fine particulate matter will prolong thousands of lives and prevent thousands of new cases of chronic bronchitis, hospitalizations and emergency room visits. Reducing the formation of ground-level ozone, or smog, will bring healthier air to tens of millions of people, and reduce the number of ozone-related health problems such as respiratory infection, asthma attacks, and chronic lung damage. Reducing mercury emissions will reduce the risk of toxic effects from mercury exposure to children exposed during their mother’s pregnancy.

Better Environmental Protection from Acid Rain, Smog, Haze, Mercury and Nitrogen Deposition: Reducing SO2 and NOx emissions will save hundreds of northeastern lakes and hundreds of thousands of acres of forests from acid rain, particularly in the Adirondacks and other parts of the Appalachian Mountains. It will also improve visibility over much of the country, particularly the scenic vistas in national parks such the Grand Canyon. Reducing emissions of nitrogen oxides will also reduce nitrogen deposition in water, improving coastal ecosystem health along the East and Gulf coasts. Reducing mercury emissions will reduce mercury deposition in lakes and streams.

Secure, Affordable Power: The Clear Skies Initiative will keep electricity costs low for consumers by saving as much as $1 billion each year in compliance costs. Power generators will have the flexibility to reduce emissions in the most cost-effective way. It will also encourage the continual improvement in technology to reduce emissions from coal-fired power plants in concert with the Department of Energy’s Clean Coal Technology program and incentives for power plants that install "scrubbers" early in the program. Under the Clear Skies Initiative, America will continue to have a diverse fuel mix that ensures a reliable, affordable energy supply.

How the Clear Skies Initiative Works

To improve air quality for millions of Americans, the Clear Skies Initiative will adopt the lessons learned from 30 years of environmental regulation by:

Establishing Emission Reduction Targets, Based on Sound Science, That Will Significantly Improve Air Quality, Protecting Human and Environmental Health: By reducing air pollution, and conducting constant monitoring of emissions, the Clear Skies Initiative guarantees that America’s power plants will meet ambitious air quality goals, even as they bring new power plants on line to meet growing demand. During the first phase, the EPA Administrator will review new scientific, technology and cost information and, if necessary, adjust the phase two targets. This will include a vigorous research program to further understand the fate and transport of pollutants in the atmosphere.

Adopting a Comprehensive, Integrated, Multi-Pollutant Approach: By reducing emissions of the three key sources of air pollution at the same time, the Clear Skies Initiative will produce environmental results more effectively and efficiently than the current labyrinth of overlapping and uncoordinated single-pollutant requirements. The current approach is inefficient and ineffective, imposing unnecessarily high costs due to: (1) stranded capital investments from the installation of controls that later become obsolete when additional requirements are promulgated; (2) reduced lead time for complying with those requirements; (3) limited or non-existent flexibility for emissions trading to allow cost-efficient control options; and (4) a reliance upon lengthy, expensive, and uncertain litigation to sort out regulatory ambiguity and compliance with the law.

Improving Environmental Performance at Lower Cost Using Market-Based Mechanisms That Create Incentives for Innovation: Using the market-based mechanism of a cap-and-trade program, the Clear Skies Initiative will establish national, federally enforceable emissions limits for each pollutant. Allowances are distributed to electricity generators, and the cap declines at specific intervals, 2010, and then again in 2018. Generators respond by gradually reducing their emissions – reducing more than the cap requires early in the program in order to save allowances for use later in the program when the caps decline. That is, generators respond to declining allowance caps just like people respond to declining income when they’re planning for retirement: they do more now, investing and saving for the future. Individual generators can choose when to reduce their emissions in response to their particular circumstances and the price of allowances they see in the market. This encourages the least expensive reductions over time as well as across facilities.


At this point, the government only has to enforce the emission limits, distribute allowances and verify that each facility has sufficient allowances for their annual emissions. There’s no need for lengthy, costly, uncertain litigation to enforce the law. Creative, innovative strategies to reduce emissions are immediately rewarded: facilities save money by finding innovative ways to reduce emissions more than a command-and-control law would require. This creates an incentive for continual improvement in environmental performance.


The flexibility in the process of allocating emission credits or allowances will also accommodate the different air quality needs in the East and the West while preserving fair competition. Western states have already made significant headway in identifying future SO2 reductions necessary to meet air quality goals in the Western Regional Air Partnership ("WRAP") agreement between EPA, Western states, tribes, industry and environmental groups. SO2 allocations will track this agreement. NOx reduction caps for the East and West will also be set to accommodate these different needs, and separate East and West trading regions will be created.

Ensuring a secure, affordable energy supply: By setting firm caps while offering flexibility in how utilities can meet those caps, the Clear Skies Initiative preserves a diverse fuel mix that supports economic growth with reasonably priced energy. The firm caps and the adequate lead time create a predictable climate for long-term planning and capital investment in power generation, which will ensure an adequate energy supply. This will also create substantial cost savings to consumers.

The Cap and Trade System in the Clear Skies Initiative

HOW DOES IT WORK?


The Clear Skies Initiative will deliver substantial health and environmental benefits through a market-based approach that rewards innovation, reduces costs, and ensures results. Instead of the government telling electricity generators precisely where and how to reduce their emissions – the old command-and-control approach – this market-based program tells them when and how much to reduce pollution by establishing a firm, maximum "cap" on emissions. The trading program creates incentives for electricity generators to reduce their emissions even more than the law requires, and more quickly than required. Electricity generators must hold an "allowance" for each ton of pollution they emit – one ton, one allowance. The government controls the number of allowances that are distributed and reduces them over time. Electricity generators must continually monitor and report their emissions.


Most importantly, these allowances can be traded freely. That means that if you're smart and creative, and you figure out a better way to reduce emissions, you get rewarded by making those reductions and selling unneeded allowances in the market. And, if you unexpectedly can’t reduce emissions as much as planned, you have the flexibility to go out and buy more allowances in the market – all without any government interference, and without undermining air quality. This flexibility lets businesses figure out the cheapest way to reduce emissions while government sticks to setting the overall emission cap at a level that guarantees that industry meets ambitious air quality goals.


WHY DOES IT WORK?


The cap ensures that the reductions in SO2, NOx and mercury required by the Clear Skies Initiative are achieved and maintained over time even as new power plants are built. The open trading program gives power plants the flexibility to choose how they meet their target emission reductions, which minimizes compliance costs and lowers consumer electricity prices.


WHAT ARE THE RESULTS?


Cost savings – The acid rain cap and trade program passed by Congress in 1990 achieved reductions at two-thirds the cost of achieving the same reductions under a command-and-control system. This program reduced more pollution in the last decade than all other Clean Air Act command-and-control programs combined during the same period.


Innovation – Trading under the acid rain program created financial incentives for electricity generators to look for new and low-cost ways to reduce emissions and to do so early.


Integrity –The acid rain cap and trade program has high accountability and transparency. Electricity generators must install monitors to prove that they have sufficient allowances to match their actual emissions.


Regional Effect – The acid rain program resulted in emission reductions well below the cap in the areas that contribute most of the sulfur in acid rain. Comparing emissions from the 263 power plants regulated in the first phase of the program in 1999 with those in 1990, the North Central, Southeast and Mid-Atlantic regions achieved 49 percent, 48 percent and 43 percent reductions in SO2 respectively. Several analyses of trading under the acid rain program have concluded that the program did not result in local areas with higher emission levels ("hot spots").


Guaranteed Results – The Acid Rain program enjoys nearly 100 percent compliance and only takes 75 EPA employees to run – a track record no command-and-control program can meet. Reductions in the early years averaged 25 percent below the required cap. Emission cuts resulted in air quality improvements over a broad area of the U.S. and significant reductions in acid rain.


Emissions From Power Plants in the First Phase of the Acid Rain Program


What the Experts Say About the Acid Rain Cap and Trade Program

"The data confirm a general prediction about cap-and-trade programs, that they will tend to create incentives for the dirtiest plants to clean up the most, as the per-ton cost of emissions reductions may be expected to be the least. …The data show that, if anything, trading may be expected to cool hot spots and not create them."

-- Byron Swift, Environmental Law Institute, "Allowance Trading and Potential Hot Spots – Good News from the Acid Rain Program" 31 Environment Reporter, pp. 954-959, May 12, 2000.

"The superior environmental and economic results of ...the Program are precisely what should have been expected of a program that matched an explicit emissions limit with a market that turned pollution reductions into marketable assets."

-- From "Obstacle to Opportunity: How Acid Rain Emissions Trading is Delivering Cleaner Air", Environmental Defense, September 2000, p. 2.

"The flexibility of the trading program has encouraged utilities to capitalize on advantageous trends, such as changing fuel prices and technological innovation that might have been delayed or discouraged by traditional regulatory approaches."

-- Curtis Carlson, Dallas Burtraw, et al., "Sulfur Dioxide Control By Electric Utilities: What are the Gains from Trade?" Resources for the Future, July 1998, Revised April 2000.

"[The] simplicity [of the Program] has kept transaction costs low and helped to create efficiencies that might otherwise not exist."

-- Daniel Chartier, Former Emission Trading Manager, Wisconsin Electric, Congressional Testimony, July 1997.

"This grand experiment [emissions trading under the Acid Rain Program] has demonstrated that the government can be effective and non-intrusive."

-- Danny Ellerman, Executive Director, Massachusetts Institute of Technology Center for Energy and Environmental Policy Research, remarks at the 21st Conference of the International Association for Energy Economics, Quebec City, Canada, May 1998.


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