The Week That Was
April 12, 2002








2. A backwards step in U.S. energy policy
By Marlo Lewis, Jr.

Which climate-related initiative poses the biggest threat to America's economic future?
Is it:

(a) the Kyoto Protocol, with its growth-chilling restrictions on carbon-based energy use;

(b) Sen. Jim Jeffords's (I-Vt.) "Clean Power Act," which would impose Kyoto-like carbon dioxide (CO2) controls on the electric power industry; or

(c) the McCain-Lieberman "Climate Stewardship Act," which would cap CO2 emissions from the electric power, manufacturing, and transportation sectors?

Surprisingly, the most toxic climate policy is none of the above headline grabbers but rather one most people have never heard of - "transferable credits" for "verified" greenhouse gas reductions. If enacted, this plan will mobilize corporate lobbying for Kyoto and dozens of kindred energy-rationing schemes like McCain-Lieberman.

Surprisingly, the chief sponsors of this political force-multiplier for the Kyoto agenda are three anti-Kyoto stalwarts: President Bush, Sen. Chuck Hagel (R-Neb.), and Sen. Pete Domenici (R-N.M.). The motives of these honorable men are not in question. However, on this issue they have been deplorably advised.

On Feb. 14, 2002, Bush directed several agencies to transform the Department of Energy's Voluntary Reporting of Greenhouse Gases Program (VRGGP) into a program awarding "transferable credits" for verified greenhouse gas emission reductions.

Responding to the president's initiative, several months later Hagel introduced an amendment to the Senate energy bill directing the Department of Energy to expand the VRGGP into a crediting program - only to withdraw the amendment a week later due to lack of support. However, Domenici's recent staff-drafted energy bill revives the Hagel amendment. All of which just goes to show that bad policy ideas never die; they just get recycled.

Originally known as "credit for early action," transferable credits began as a strategy to win corporate and congressional support for Kyoto-style regulation. The strategy's chief architect was the pro-Kyoto activist group Environmental Defense. President Clinton endorsed the idea in 1997. Meanwhile, the Pew Center on Global Climate Change, headed by former Clinton-Gore Kyoto negotiator Eileen Claussen, marketed the plan to corporate America. Kyoto-leaning Sens. John Chafee (R-R.I.) and Joe Lieberman (D-Conn.) introduced early credit legislation in the 105th and 106th Congresses.

The basic idea was simple: Award credits to companies that begin to comply with Kyoto before it is even ratified, and allow those companies to sell or use the credits to offset future regulatory obligations. In effect, participating companies acquire Kyoto stock that bears dividends if - but only if - Kyoto or similar regulation is ratified or enacted. Credit-holders thus acquire cash incentives to support Kyoto, or lobby for its domestic equivalent.

Although touted as "voluntary" and "win-win" (good for business, good for the environment), transferable credits create a coercive system in which one company's gain is another's loss.

Tradable credits have value only in relation to an emissions reduction target or "cap." If the cap is not broken, then every credit awarded for "voluntary" reductions in the "early action" period must be subtracted from the total available in the mandatory period. Thus, for every company that gains a credit in the early action period, there must be another that loses a credit in the compliance period.

Consequently, companies that do not "volunteer" will be penalized - forced in the mandatory period to make deeper reductions than the cap itself would require, or to purchase credits at higher prices than would otherwise prevail.

The scheme has a vast potential to corrupt the politics of energy policy. Because it penalizes non-participants, many businesses will "volunteer" just to avoid getting shoved to the shallow end of the credit pool later on. The calculated political result is a critical mass of companies holding energy rationing coupons - assets that mature only under Kyoto or comparable regulation.

When it comes to climate policy, Lieberman, Environmental Defense, and the Pew Center on Climate Change may be wrongheaded, but they are not naïve. They all advocate: (a) energy rationing - carbon "cap-and-trade" programs - and (b) government-certified energy-rationing coupons - what Domenici's draft bill calls "transferable credits with unique serial numbers for verified reductions." The two policies are so clearly linked that it's embarrassing to hear Bush advisors try to deny it.

When will the Bush administration and its pro-energy allies on Capitol Hill wake up? If they embrace Chafee-Lieberman, America will get stuck with McCain-Lieberman. If they create energy rationing coupons, America will end up with energy rationing.

Credits for early reductions are the pre-regulatory ramp-up to an energy-constrained future. They have no place in an energy bill worthy of the name.

Marlo Lewis is a senior fellow at the Competitive Enterprise Institute.


3. Nuclear question ducked, say MPs
By Mark Henderson, Science Correspondent

BRITAIN'S ability to meet future energy needs is in jeopardy because the Government has ducked a controversial but crucial decision to build new nuclear power stations, a committee of MPs said yesterday.

A new report from the House of Commons Science and Technology Committee has criticized ministers for refusing to take a stand on the future of nuclear power, even though, it says, a new generation of reactors is essential if greenhouse gas emissions are to be reduced.

As the existing nuclear plants, which produce 23 per cent of the nation's electricity without contributing to global warming, are due to be decommissioned over the next 20 years, replacements will be needed if Britain is serious about fighting climate change, the committee found.

The recent Energy White Paper, however, failed to consider the issue, with ministers instead taking the perplexing decision that further public consultation was needed. This failure to give a lead could adversely affect the ability to build new reactors as and when the need arises.

The White Paper was also accused of wishful thinking about the potential of renewable energy such as wind and wave power, in which far too little money is being invested. There is no prospect of meeting goals of generating 10 per cent of electricity by 2010, and 20 per cent by 2020, from renewable sources.

Even were such targets to be achieved, they would not fill the void left by the closure of nuclear plants. There is no chance of meeting the Government's targets for carbon dioxide reductions if current policies and market conditions remain in place, the report said.

Ian Gibson, the committee s Labor chairman, was particularly critical of the Energy Minister, Brian Wilson, who had shied away from a difficult challenge.


4. Will we see damage suits from climate change?

The vast numbers affected by the effects of climate change, such as flooding, drought and forest fires, mean that potentially people, organizations and even countries could be seeking compensation for the damage caused.

"It's not a question we could stand up and survive in a court of law at the moment, but it's the sort of question we should be working towards scientifically," Myles Allen, a physicist at Oxford University, UK, told the BBC World Service's Discovery programme.

"Some of it might be down to things you'd have trouble suing - like the Sun - so you obviously need to work how particularly human influence has contributed to the overall change in risk," the scientist, who has worked with the UN's Intergovernmental Panel on Climate Change (IPCC), said.

"But once you've done that, then we as scientists can essentially hand the problem over to the lawyers, for them to assess whether the change in risk is enough for the courts to decide that a settlement could be made."

In 2001, the IPCC's third climate change assessment report stated that it was "likely" - meaning a better than a two in three chance - that human activities were forcing the global climate to warm up.

Some environmental lawyers believe this was a hugely significant step in paving the way to compensation claims against those responsible for climate change.

"Civil courts usually require a 51% proof of certainty, which is an interesting issue in terms of scientific levels of proof - and legal levels of proof," stated Peter Roderick, a lawyer who works with Friends Of The Earth International.

"I think there is no doubt at all now that the third assessment report has taken forward the legal significance of the science, and this next decade is going to see quite a lot of climate change cases around the world."

'Not practical'

Many, however, remain highly skeptical that, even if cases were brought, much could be proved.

"I would question whether it's desirable, at least at the moment, to take legal action against parties," said Julian Morris, an environmental policy specialist with the International Policy Network.

"Who is responsible? You face the problem of identifying the extent to which humanity has caused change in the first place.

"Even if you actually attributed it to humanity, then you've got the problem of saying, 'well who was it?'."

Dr Morris added that it would also be difficult to assess who would deserve to benefit from any legal action.

"Who is going to be compensated? Is it going to be the six billion who are now supposedly at risk from the change in the climate?

"Is it going to be a more concentrated group of people, i.e. those who live on flood plains? And how do you get compensation to those people practically?

"The difficulties of obtaining compensation for several billion people at least, who might be worthy of compensation, would be enormous, and quite possibly would be larger than the benefits of setting up a system to enable that compensation to take place."

SEPP Comment: We would welcome a test of IPCC climate science in a court of law


5. Toxic Chemicals Dramatically Declining in Great Lakes:

U. S. Environmental Protection Agency (EPA) and Environment Canada have announced that levels of the "most critical, persistent pollutants" around the Great Lakes continued to drop in 2002. The Duluth News-Tribune reported that the declines continue a 15-year trend. On the U.S. side, mercury releases have declined 40 percent since 1990, hexachlorobenzene emissions have declined by 75 percent, and dioxin releases are down 92 percent from the late 1980s. The phenomenal success in decreasing pollutants is credited to a combination of increased regulations and voluntary industry actions. The 2002 Great Lakes Binational Toxics Strategy Progress Report is available online at


6. Europe's Techno-Pessimism
Excerpted from Matt Ridley (in The Guardian , 3 April 2003),12981,928170,00.html

"My techno-optimism is deeply unfashionable in Europe, where Jeremiah is treated as a serious, cautious and - let's face it - cool guy, but Pollyanna is a silly twit.

We discuss the potential drawbacks of genetic testing or genetic modification of crops. We do not discuss the suffering and environmental damage that will be caused by holding back innovation."


7. "Warning Signs" written by the founder of The Boring Institute and The National Anxiety Center: Highly recommended

Alan Caruba has come up with a collection of his writings that's fun to read and educational too. It includes energy and environmental topics - and much more. I particularly enjoyed reading about the eco-whacko who thinks we are using up too much of the Sun's energy. And I learned about the Tulane U scientist who was censured for falsifying data. He had claimed that some chemicals were 1000 times more dangerous when in combination with others. His "findings" found their way into the book "Our Stolen Future" that popularized the concept of hormonal disrupters a few years ago. Al Gore wrote the foreword and EPA administrator Carol Browner hyped its conclusions.

Published by the Merril Press at $15 a copy, the book can also be ordered from <> Quantity discounts are available.



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