Long-Delayed Senate Climate Bill Considers Need for Transparency
Sens. John Kerry (D-MA) and Joe Lieberman (I-CT) recently introduced long-awaited Senate climate change legislation. The bill seeks to reduce greenhouse gas emissions in the United States by 17 percent of 2005 levels by 2020 and 83 percent by 2050, matching targets set in a House bill passed in 2009. The bill includes several provisions calling for transparent and participatory policies, especially relating to measures that would create new financial markets for buying and selling the right to pollute. How well such transparency would be implemented is a major question, and the success of the emissions reductions may depend on the level of openness that is built into the nation's climate change policy.
A lack of transparency in key parts of the financial sector is considered to be a major contributing factor to the ongoing economic hardships now afflicting the U.S. and other nations. Numerous recent market crises, such as the 2008 petroleum price spike, the crash of the subprime mortgage and credit default swap markets, and the Bernard Madoff Ponzi scheme have raised significant concerns about the transparency and stability of financial markets. The proposed climate legislation would create enormous new financial markets in an attempt to reduce greenhouse gas emissions. Many are concerned that a lack of transparency in U.S. climate policies would undermine progress in reducing emissions, resulting in the loss of precious time.
The Kerry-Lieberman bill, known as the American Power Act (APA), calls for an expanded greenhouse gas registry to track emissions, public disclosure of key data sets related to emissions reductions, and stresses the need for transparent and participatory design and implementation of market-based programs, which provide greater flexibility to polluters seeking emissions reductions, among other transparency measures. Requiring openness and accountability from the early stages of climate policy development would help ensure the policies make real emissions reductions and would help identify poorly performing measures.
The APA includes market-based policies for reducing emissions, such as the creation of a carbon exchange that uses quarterly auctions to trade the right to emit decreasing "allowances" of greenhouse gases, and the use of "carbon offsets," which allow polluters to meet some of their required reductions by paying for emissions reduction projects elsewhere in the U.S. or in foreign countries. According to the Pew Center on Global Climate Change, "Congress has the opportunity to design the carbon trading market oversight framework at a point in time before long-standing carbon trading practices and systems have been fully established."
Greenhouse Gas Registry
One fundament of a transparent, accountable climate change program is a clear and accurate system for reporting who is emitting greenhouse gases and how much. As a result of language inserted into a 2008 appropriations bill, the U.S. Environmental Protection Agency (EPA) created a mandatory greenhouse gas reporting rule for thousands of large emitters across the U.S. economy. The first reports from facilities are due in 2011. The APA calls for EPA to build on this program to meet the bill's expanded information needs.
The APA would amend the Clean Air Act to expand the existing registry by covering additional sources such as vehicle fleets, requiring reporting on the capture and sequestration of greenhouse gases, requiring more frequent reporting, and placing limits on what information can be withheld from the public by claiming it as a trade secret. The revised registry would also authorize EPA to collect data from 2007 forward, whereas the existing registry only collects emissions data from 2010 onward.
Carbon Offsets Transparency
Carbon offsets are a mechanism whereby a polluter can meet a portion of its required emissions reductions by investing in a project that reduces emissions or sequesters carbon elsewhere. For example, a cement factory could pay to have trees planted or a refinery could pay for citizens to install solar panels. Offsets theoretically allow more flexibility for polluters to comply with the law because paying others to reduce emissions can be cheaper than reducing the polluters' own emissions.
Transparency is again critical to realizing real emissions reductions through offsets. The U.S. Forest Service advises that to be legitimate, offsets must be real, measurable, verifiable, and additional (meaning the offset would not have occurred under a business-as-usual scenario). In a 2008 study, the Government Accountability Office (GAO) determined that "any use of offsets for compliance that lack credibility would undermine the achievement of the program's goals." GAO emphasized the need for transparency to ensure the offsets projects are creating reductions that are real, measurable, and would not have otherwise happened.
The Kerry-Lieberman bill establishes criteria to assure that offset credit is earned only for real and permanent actions that would not have occurred otherwise. The APA includes requirements for the public disclosure of the government's approval or disapproval of specific offsets projects and the information relevant to making the decision. Additionally, the APA calls for audits of offsets projects; however, the results of the audits would be aggregated before being disclosed, likely denying the public information about specific projects.
The transparency of offsets projects in foreign countries receives special attention in the APA. There are many opportunities for offsets projects in developing countries, such as reforestation projects. Questionable practices surrounding past voluntary offsets programs have drawn criticism of their accountability and veracity. One section of the APA requires that "local communities (particularly the most vulnerable communities and populations in the communities and indigenous peoples in areas in which any activities or programs are planned) are engaged through adequate disclosure of information, public participation, and consultation, including full consideration of the interdependence of vulnerable communities and ecosystems to promote the resilience of local communities." Similar language calling for transparency and public participation appears elsewhere in the offsets provisions of the bill.
The EPA and other relevant agencies are required to make periodic reports to Congress on new scientific information, on whether the U.S. program is meeting its goals, and on whether the nation's efforts are sufficient to avoid the most devastating impacts of climate change. For example, a new technical advisory committee will be created to analyze carbon capture and sequestration technologies. All of this committee's studies must be made public.
The Kerry-Lieberman bill authorizes the U.S. Commodity Futures Trading Commission to create rules for the transparent operations of a carbon allowance market, including the public disclosure of carbon market participants. Bidders in auctions must disclose whom they are bidding for, and the identity of winning buyers and the final carbon price must be disclosed. The bill specifies that a greenhouse gas allowance tracking system must be available to the public on the Internet.
Other Transparency Provisions
One controversial feature of the APA calls for expedited and expanded licensing and construction of nuclear power plants. The bill calls on the Nuclear Regulatory Commission (NRC) to report to Congress on ways to move forward on this nuclear expansion. The bill states that the NRC's recommendations must provide ways for "interested parties that have standing" to have their "legitimate concerns" heard.
Another significant measure in the APA is the requirement that companies drilling for natural gas that use a common yet controversial technique known as hydraulic fracturing must publicly disclose the identities of the chemicals used in the drilling process. Hydraulic fracturing has been linked to numerous cases of drinking water contamination, but the chemicals used in drilling, many of which are known to be toxic, are concealed from the public by drilling companies that claim the information is proprietary.
The prospects for the Senate bill are unclear. The House passed its bill in June 2009. Little time remains for the Senate to act on its bill, which technically is considered a "discussion draft." Climate change legislation must get through the Senate, conference committee, and a full congressional vote before the end of the session. Otherwise, a new Congress must take up the matter anew in 2011.