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Climate Change at the Stack: Posturing Toward Kyoto

Fortnightly Magazine - August 1997

an economic analysis to rival that of the White House.

• Private Industry Studies. And then there are private efforts, like the CEO-sponsored Washington Post advertisement urging U.S. negotiators to take a reasoned approach to the climate change summit.

Post-Kyoto, more political issues will arise. The Senate must approve the treaties by a two-thirds vote. Then Congress must approve implementing legislation ... in an election year.

Paying Up

The U.S. is closely awaiting the economic fallout from Kyoto (em from the impact climate change policy will have on utility control costs to the higher cost of trade for manufacturers tapped into "clean energy" grids.

Rachel Hopp, the first chief of EPA's acid rain permits program, and now a lawyer who works primarily with utilities in emissions trading, says it's unlikely that negotiators will agree on the ideal global concentration of gases, which could affect industry. "You try to define the parties' obligations in a way that achieves that environmental goal, but also assures equity from an economic standpoint." Otherwise, she adds, "You're going to end up with some trade disadvantages and a lot of unintended economic consequences."

It's clear to most that the utility industry is the sitting duck of any environmental regulation. Since November, the Clinton administration has been working with three economic models to estimate the cost of CO2 emission caps, according to Duncan Austin, a World Resources Institute economist.

"I know that they've completed all the simulations," he says. "They're sort of bound by

confidentiality at the moment. They can't talk."

Bill White, an EPA special assistant in policy planning and evaluation, says the analysis accounts for the effects of various environmental policies.

"We want to have a strong environmental target, lots of flexibility to keep the costs down and keep the impacts to the economy as low as they can be," he insists. "It's just figuring out how best to do that."

The State Department official points out the department has always promoted "realistic and achievable targets. [The analysis] probably does reinforce our calls for flexible implementation schemes, emissions trading, joint implementation (em trying to give countries the channels and avenues through which they can have reductions at the most cost-effective manner."

One industry observer says his fear is that one administration "bottom up" economic model might make assumptions about "no regrets," "cost-free" technologies. "No regrets" technologies include pollution controls or energy efficiency measures that also have climate benefits.

"Well, if they're cost free, why is no one doing them?" asks John Novak, issue manager for global climate change at the Edison Electric Institute. "Someone [at EEI] once asked a representative of the EPA, 'If all this is out there, why don't you quit the government and go hire yourself out and have industry pay you millions of dollars to save them billions of dollars?'"

Based on the June 1996 White House Conference on Analysis & Assessment, an auction permit fee (or carbon tax) of $125 per metric ton of carbon would be required to reduce emissions to 1990 levels in 2010. According to EEI, the tax would raise