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Ready for CO2 Allowances? U.S. Passes on Emissions Cap, Kyoto or No

Fortnightly Magazine - May 15 1998

there now and the EPA is looking at them, and other things as well," Hardgrave says.

To Bluff or Bid?

It appears likely that future domestic legislation will be linked intrinsically to the ultimate outcome of the Kyoto Protocol, which includes general language concerning an emissions trading program. %n8%n

The Kyoto Protocol calls for joint implementation of projects that reduce CO2 but restricts cooperation (for credit) to the 39 countries named in the appendix to the agreement, Annex I (which includes no developing countries and just a few former Soviet bloc nations). The Kyoto agreement also calls for the creation of a Clean Development Mechanism that would allow developed countries to participate in projects in developing countries that might generate CO2 reduction credits in the future, according to Lawrence Susskind, a professor at the Massachusetts Institute of Technology and an active participant in the Kyoto convention. The protocol will take affect when it is ratified by at least 55 nations representing 55 percent of CO2 emissions.

Participants say more details will be hammered out at the meeting this summer in Bonn; it's a work in progress.

While the official domestic plan remains ephemeral, utilities like PacifiCorp plow ahead toward an as-yet undetermined emissions target. PacifiCorp began developing projects about five years ago to identify the most efficient way to offset emissions, says Bill Edmonds, company public policy manager.

PacifiCorp is working under the premise that the United States eventually will sign the Kyoto Protocol, a position other observers have adopted despite debate over global warming effects and the veracity of carbon reductions. Edmonds acknowledges that by moving early the company is taking a big risk, but it also has the advantage of finding the most cost-effective way of meeting targets.

"Companies have to hedge their bets," says Alden Myer, government relations director for the Union of Concerned Scientists, one of the more vocal supporters of the protocol. There will be a binding treaty on the CO2 problem, he adds without doubt.

"If we wait too many more years¼ it's going to be virtually impossible for the U.S. to get where it's supposed to be under the Kyoto Protocol," says Mark Trexlar, president of Trexlar and Associates a climate change consulting firm.

The U.S. has several years before it needs to make a decision about Kyoto. But by then, it could prove tremendously expensive to meet targets. %n9%n Early experimentation helps to identify cost-effective remedies and could provide companies a much-needed head start. It is also possible the Administration will develop a domestic program before making any decision on the protocol.

"We will undoubtedly have a U.S. trading system," says Carlton Bartels, "that will be harmonious with an international trading system that's developed."

Elizabeth Striano is managing editor of Public Utilities Fortnightly.

1 This figure is about 36 percent below what emissions otherwise would have been based on current levels.

2 Katie McGinty, chairwoman of the Council on Environmental Quality: "The president will want to work in partnership with industry, affording them credit for taking early action to reduce emissions," Press Briefing, Oct.