Download An evaluation of the level of ambition and implications of the Bush

Climate Policy 2 (2002) 293–301
An evaluation of the level of ambition and implications
of the Bush Climate Change Initiative
Detlef van Vuuren∗ , Michel den Elzen, Marcel Berk, Andre de Moor
National Institute of Public Health and Environment, PO Box 1, Bilthoven 3720 BA, The Netherlands
Received 17 April 2002; received in revised form 18 July 2002; accepted 5 August 2002
Abstract
This article summarises the results of an evaluation of the Climate Change Initiative launched by President Bush
in February 2002. The policy target to reduce the greenhouse gas intensity of the US economy by 18% between 2002
and 2012 can be considered modest at best. The Initiative is likely to result in a 32% increase in US greenhouse gas
emissions in 2012 compared to the 1990 levels. The effort also falls considerably short of efforts of the EU, Japan
and Canada under the Kyoto Protocol. The Bush Initiative advocates using intensity targets in the international
climate change regime, but overlooks fundamental problems associated with this approach. All the same, the Bush
Initiative is of political significance as it recognises the importance of the climate change problem and may improve
the longer-term prospects for US participation in a global climate regime.
© 2002 Elsevier Science Ltd. All rights reserved.
Keywords: Climate Change Initiative; US greenhouse gas emissions; Economic growth
1. Introduction
On 14 February 2002 President Bush launched his climate change strategy for the USA, after rejecting
Kyoto Protocol earlier on (White-House, 2002a,b). The new ‘Bush Initiative’ is indicated as being based
on the premise that economic growth is not a cause but a solution to the climate change problem. This is
because it provides the resources for de-coupling growth from greenhouse gas emissions. Along this line
of reasoning, the Initiative introduces a step-wise strategy: first, the growth in greenhouse gas emissions
should be slowed down, then (if the science justifies it) be stopped and eventually be reversed. Accordingly,
the Initiative aims at reducing the greenhouse gas (GHG) intensity of the US economy (the quantity of
greenhouse gases emitted per unit GDP) by 18% over the next 10 years (2002–2012). The plan claims
this US effort to be comparable to the average efforts of countries participating in the Kyoto Protocol
∗
Corresponding author. Tel.: +31-30-274-2046; fax: +31-30-274-4435.
E-mail address: [email protected] (D. van Vuuren).
1469-3062/02/$ – see front matter © 2002 Elsevier Science Ltd. All rights reserved.
PII: S 1 4 6 9 - 3 0 6 2 ( 0 2 ) 0 0 0 6 7 - 0
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Fig. 1. Changes in greenhouse gas intensity 1990–2012. Source: US-EPA (2001, 2002), White-House (2002a), US-BEA (2002)
and US-EIA (2001).
(KP). Moreover, the intensity target approach is presented as a more practical way of discussing goals
with developing countries than fixed emission targets adopted under the KP.
For long-term climate protection, US climate policies represent an absolute requirement, not only in
view of the US share in total emissions but also so as to engage developing countries in global climate
change control. In this context this article summarises the findings of an evaluation of the Bush Initiative
(de Moor et al., 2002). It focuses on three questions: (1) What is the level of ambition of the Initiative in
terms of emission reduction efforts? (2) How do these efforts compare to those of Annex I countries under
the KP and (3) what are the implications of the Initiative, in particular, of the intensity targets approach,
for post-Kyoto international climate policy development? Our analysis is based on data analysis and
model calculations using the FAIR model (see den Elzen and Both (2002) for a full description).
2. What is the level of ambition of the Bush Initiative in terms of emission reduction efforts?
The policy target in this Initiative is an 18% reduction of the GHG intensity, from 183 t carbon equivalents (tC-eq.) per million 2001 US$ in 2002 to 151 tC-eq. in 2012. The Initiative compares this target to a
baseline projection (without climate policies) in which the GHG intensity decreases to 157 tC-eq in 2012
(14% reduction compared to 2002).1 Thus, the policy target would result in a 4.5% reduction of emissions compared to the baseline projection (White-House, 2002a). In evaluating the Bush climate target,
we compared the intensity improvement target and baseline of the Initiative with historical improvement
rates and improvement rates in alternative baseline projections (see Fig. 1). Historically, the intensity
improved by almost 2.2% per year—with some periods showing faster improvement than others. The
cumulative reduction was 23% in the 1980s and 17% in the 1990s. The decline was particularly rapid in
the early 1980s after the second oil crisis (more than 3% per year) and the second half of the 1990s. The
1
This baseline is based on the central projection of the 2002 Annual Energy Outlook (EIA, 2002) and the US-EPA projections
for non-CO2 emissions (US-EPA, 2001). Note that CO2 emissions from land use are not included in both in the baseline and
the targeted intensity improvement. Under the baseline, greenhouse gas emissions are projected to increase to 2270 MtC-eq. in
2012. The policy target, using the same economic growth scenario, would limit emissions to 2160 MtC-eq., a 4.5% reduction.
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latter decline was due to such factors as warmer than normal winter weather conditions, an increase in
output from existing nuclear power plants, and strong economic growth in less energy-intensive sectors
(US-EPA, 2002). The reduction in intensity was particularly slow during the economic recession of the
early 1990s (1.0% per year). The target of 18% reduction over the next 10 years (1.9% per year) would
keep the US greenhouse gas intensity in line with its longer-term historical record.
The 4.5% emission reduction mentioned compared to the baseline projection results from the fact that
the intensity improvement rate in the Initiative’s baseline is fairly low compared to historical trends. This
raises the question whether the US baseline really indicates the likely developments in the 2002–2012
period. The baseline projection seems consistent with the US administration’s energy plan of 2001,
which puts emphasis on coal-based electric power generation, and expects increasing prices for natural
gas and oil and stable prices for coal (White-House, 2001). Meanwhile, the recent US Third National
Communication to the UN Framework Convention on Climate Change (UNFCCC) projects a slightly
higher improvement rate of 15% in GHG intensity (USA, 2002). However, projections always include a
considerable degree of uncertainty. It is interesting to see that an alternative set of scenarios, the IMAGE
2.2 implementation of the IPCC SRES scenarios, presents possible outcomes for the USA, ranging
from 8 to 24% improvement in the 2002–2012 period (IMAGE-team, 2001).2 The median scenarios in
IMAGE SRES indicate an 18% improvement, which is similar to the policy target of the Bush Initiative.
It should also be noted that the current GHG intensity of the USA is relatively high compared to other
Annex I countries. The intensities for Western Europe and Japan are about 60 and 30%, respectively,
of US intensities. The Canadian intensity is, in contrast, about 30% higher than that of the USA. This
suggests that there is considerable room for improvement of the US carbon intensity as is confirmed by
studies looking into the potential gains of alternative portfolios of energy policies and technologies (e.g.
Interlaboratory-WG, 2000).
In terms of absolute emissions, the US GHG emissions (excluding sinks) have been growing continuously at an average rate of 1.4% per year since 1990, resulting in GHG emissions of almost 1900
MtC in 2000 (14.8% above 1990-levels). Under the baseline of the Initiative, US GHG emissions will
grow further to a level of almost 39% above 1990 levels. The 18% intensity reduction would limit
US emission growth to 2160 MtC, or 32% above 1990 levels. These numbers are obviously very
different from the target the USA had originally agreed to under the Kyoto Protocol (7% reduction
compared to 1990 levels). The agreements on sinks in Bonn and Marrakech have potentially relaxed
the US emission reduction target under the Kyoto Protocol to about −3% (den Elzen and de Moor,
2001).
The quantitative ambition of the Initiative is therefore considered to be modest. It might even be that
no additional policies are needed to meet the policy target. In addition, the effectiveness of the measures
mentioned in the Initiative might be questioned as well, in particular, as many of them are still unclear
and voluntary in nature. Also in the US, many have criticised the voluntary character of the Initiative
(Kopp et al., 2002; Pew-Center, 2002). More recently the State Attorneys General of 11 US states argued
in their letter to President Bush that only mandatory federal carbon caps of appropriate levels can provide
the regulatory certainty required for an effective response (State Attorneys General, 2002).
2
IMAGE 2.2 is one of the Integrated Assessment models used to develop IPCC’s SRES scenarios. The 2001 IMAGE SRES
scenarios are an updated scenario set originally developed for long-term evaluation. For comparison, the CO2 emissions for land
use change have not been included. The comparison is made here to have scenarios from a different background—and to get
some idea of the uncertainty involved in baseline projections.
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Fig. 2. Emission reductions in 2010 for the USA following the Bush Initiative (as an emission percentage of the baseline scenario
of this Initiative) compared to the 2010 reductions for the EU, Japan and Canada (as a percentage of the A1b scenario) (de Moor
et al., 2002). Source: FAIR model 1.1 (den Elzen and Both, 2002).
3. How do the efforts under the Bush Initiative compare to those of Annex I countries?
The Initiative claims that the 4.5% emission reduction for the US compared to baseline levels is
comparable to the average progress of Annex I regions under the Kyoto Protocol. However, considering
all Annex I countries collectively, as in the comparison of the Initiative, obscures the fact that some Annex I
countries will have to realise real emission cuts while others, in particular, the so-called ‘Economies in
Transition’, have emission allowances exceeding their present and likely 2008–2012 emission levels (hot
air). We consider it more relevant to compare the US effort to countries in a similar position, e.g. the EU,
Japan and Canada.
The analysis presented here is based on calculations using the FAIR model (see also den Elzen and
Both, 2002). This is a decision-support tool to evaluate the implications of different international climate
regimes, in which cost calculations and emissions trading are based on marginal abatement cost (MAC)
curves derived from macro-economic and energy system models (den Elzen and Both, 2002). Here, the
MAC curves of the WorldScan model are used (CPB, 1999). We use this tool to get an initial indication
of the abatement effort and costs of climate policies of countries under the Kyoto Protocol vis-à-vis the
effort of the Bush Initiative.3 The use in FAIR of MAC curves derived from other models and other
baselines could affect the figures but are less likely to change the relative positions of the regions—and
thus the conclusions.
In an earlier evaluations of the Bonn/Marrakech agreements, we have indicated the reduction effort
of the countries that are part of this agreement (den Elzen and de Moor, 2002). On this basis, Fig. 2
3
Using MACs is an attractive and transparent way to show the effects of climate change policies, assuming a cost-effective
implementation of policies. However, MACs only represent the direct costs, and not costs resulting from various linkages and
rebound effects in the economy. To assess the exact costs of different policies it is necessary to evaluate the proposed measures
in detail. Moreover, in practise it may be difficult to implement climate targets in a cost-effective way due to domestic social
and political barriers or considerations. Nevertheless, MAC-based analysis still provide an useful first indication of the relative
costs of reduction targets and burden sharing proposals (see also Criqui et al., 1999).
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compares the effort of the EU, Japan and Canada under the Kyoto Protocol to the US effort for 2010,
using the baseline of the Initiative for the USA and the IMAGE 2.2 A1b scenario for the other regions.4
The calculations for the USA include abatement through sinks, estimated at about 38 MtC, based on
figures about sinks presented in the Initiative.5 To determine the domestic effort of the EU, Japan and
Canada, we need to assess the likely outcome of emissions trading. There is a wide range of possible
scenarios for international emission trading under the Kyoto Protocol, reflecting a number of major uncertainties. First of all, it is currently unclear if Canada is going to ratify the Protocol, while Australia
has already indicated that it will not. If both countries do not ratify, this will reduce the demand for
emission credits. However, the impact on the international market will be relatively small. Second, it
is not clear whether both Russia and the Ukraine will be able to meet the eligibility criteria for emission trading under the Kyoto Protocol (e.g. related to their monitoring of emissions). If not, this would
substantially reduce the supply of emission credits, increasing the required domestic action in Europe.
Finally, it is expected that the major suppliers of emission credits under the Kyoto Protocol, Russia and
the Ukraine, will act in their own interest and pursue a strategy to maximise their revenues from emission trading. Obviously, it is also conceivable that Russia and the Ukraine are only partially effective in
limiting supply leading to lower international trading prices—and thus possibly less domestic action in
Europe.
Here, we have assumed a case of optimal banking, in which Russia and the Ukraine will exercise market
power, and curtail and bank their supplies of hot air. We believe that given the uncertainties sketched
above, this can be considered a reasonable assumption. In the A1b scenario, such an optimal banking
strategy would lead to 40% banking of hot air and result in an international trading price of US$ 15–20/tC
(den Elzen and de Moor, 2002).
Fig. 2 clearly shows the effort of the USA under the Climate Change Initiative to be significantly less
than the efforts of the EU, Japan and Canada under the Kyoto Protocol (in terms of emission reduction
compared to baseline). The total effort, including the reductions obtained from ‘hot air’, amounts to a
25% reduction under baseline levels in the EU, 25% in Japan and over 30% in Canada.6 Even when
comparing domestic action, the efforts of each of the regions comes to at least twice the US effort.
As the Initiative is far less ambitious than the efforts of other major Annex I countries, the costs for
the USA to reach the intensity target are much lower as well. Using the Kyoto mechanisms, the annual
costs in 2010 in the FAIR model are projected at 0.05, 0.03 and 0.07% of GDP for the EU, Japan and
Canada, respectively. The costs for the USA under the climate change Initiative are projected to be far
less, around 0.003% of its GDP.
One last, rather hypothetical, question is how the effort under the Initiative would compare to US
participation under the Kyoto Protocol and the Marrakech Accords. Simulation with FAIR indicates
the abatement effort to be far more substantial than under the Initiative (a 26% reduction compared to
the baseline). At the same time, the costs would also be much higher than under the current Initiative.
4
Considering that the Kyoto agreements apply to the 2008–2012 period, we will shift the focus here to 2010, presenting as
well the outcomes of the Bush Initiative in terms of its likely result in 2010.
5
Although CO2 emissions from land use have not been included in the targeted emission intensity of 151 tC eq. per million
US$ GDP, sinks enhancement measures are explicitly mentioned as part of the intensity based approach. We therefore assume
that sinks are used to offset fossil fuel greenhouse gas emissions in the Bush Plan. Interestingly, the numbers mentioned in
the Initiative correspond well to those based on the total carbon credits from domestic sink activities, according to the rules
applicable to Annex-I countries under the Kyoto Protocol and Marrakech Accords.
6
Not accounting for the part of the reductions obtained by ‘hot air’ would reduce reductions to 20, 21 and 28%, respectively.
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However, using the international emissions trading mechanisms that are allowed under the Protocol, the
USA could limit compliance costs to $13 billion or 0.1% of GDP (somewhat higher than the other regions)
(see also den Elzen and de Moor, 2002).
4. What are the implications of the Bush Initiative for post-Kyoto international climate policy
development?
The Initiative, conceived and presented as a new approach to defining GHG emission targets, suggests
the intensity target approach as being an interesting alternative for other countries, in particular, developing
countries, in taking on quantified commitments in the future. In evaluating its international climate
policy implications, we distinguished between the implications of an intensity target approach and the
implications of the example set by the Initiative itself.
The idea of intensity targets is not new. Such targets have received attention, particularly as possible
targets for developing countries (Baumert et al., 1999; Hargrave, 1998; Jacoby et al., 1999; Philibert,
2000). More recently, it has also been suggested to use intensity targets for defining commitments for all
countries (Philibert and Pershing, 2001). In principle, intensity targets can be used not only to limit the
growth of emissions, but—if sufficiently stringent—also to realise emission reductions.7
It has been argued that intensity targets have a number of merits when compared to fixed targets (see
Philibert, 2000; Philibert and Pershing, 2001). First, intensity targets will reduce the level of uncertainty
about the costs of climate change policies. Second, it has been argued that this reduced uncertainty about
costs would lead to the adoption of more stringent targets, resulting in a higher overall environmental
effectiveness than with fixed targets. Third, intensity targets are said to avoid the creation of hot air due
to inflated baseline projections or economic crises.
At the same time, intensity targets have a number of disadvantages compared to fixed targets (see also
Müller et al., 2001).
1. Intensity targets create an inherent uncertainty about environmental effectiveness. The effectiveness
in terms of absolute emission reduction can only be determined ex-post. Under the present climate
regime targets for a subsequent commitment period need to be negotiated before the preceding period
starts. This is likely to result in substantial policy delay, if the effectiveness of intensity targets adopted
turns out to be substantially less than expected.
2. Historical evidence has shown that carbon intensity improvement is often rapid during periods of high
economic growth, but slows down significantly when there is low growth or recession. This relationship
is not ‘a law’, and it only holds if other factors remain constant. Evidence for such a relationship can
be found in historical US trends, except for the early 1980s when high oil prices resulted in high
improvement rates (Fig. 1) but also in international and temporal comparisons (Baumert et al., 1999).
An important reason is that capital turnover rates (introducing new, often more efficient, technologies)
and innovation both are slower in the case of a low economic growth than in the case of high economic
growth. This relationship is assumed in many energy models and scenarios, including the US Annual
Energy Outlook that provides the baseline for carbon dioxide emissions used in the Bush Inititiative.
Using the alternative low and high economic growth cases also presented in this Outlook would change
the emission intensity improvement in the 2002–2012 period into 12 and 16%, respectively, instead
7
If the rate of GHG intensity improvement is higher than economic growth rates, emission levels will decline.
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of 14% in the central case (EIA, 2002). In other words, the required emission reduction (4.5% in the
Bush plan based on the central projection) would be translated into a 2% reduction under a high growth
scenario and a 6% reduction under a low growth scenario. Thus, while intensity targets may be more
easily achievable under favourable economic conditions, in times of economic slowdown or recession
they actually create additional costs or even economic risks. This is opposite in the case of absolute
targets that in general become harder to meet under favourable economic conditions. We have used
the same high and low growth projections of the Annual Energy Outlook to compare the reduction
effort of the 18% intensity improvement target with an absolute target that would result in the same
reduction under the central baseline. This analysis shows that the additional costs (as percentage of
GDP) required to meet the intensity target of the Bush plan in the low economic growth case are only
slightly lower than the additional costs required to meet the absolute target in the high growth case
(a factor 2 and 2.3 higher than the central case, respectively).
3. The technical problems related to the measurement of compliance with intensity targets will be larger
than for absolute targets. Uncertainty in economic data is added to uncertainty in emissions data.
Moreover, the approach is complicated by the use of different currencies (e.g. under or overrated
currencies, or devaluation).
4. The adoption of intensity targets could complicate the functioning of the Kyoto Mechanisms (based
on absolute emission units) and the monitoring of emissions and compliance.
5. Furthermore, intensity targets may not prevent hot air due to inflated baselines. Like absolute targets,
intensity targets too can be set at levels less strict (higher) than those resulting from business-as-usual
developments. In fact, rapid economic growth could result in countries easily meeting their intensity
targets and having higher emissions than projected, but still being allowed to sell the additional assigned
amounts generated (see next section). In contrast to fixed targets, emission trading may then result in
a reduction of the environmental effectiveness aimed for.
Although these problems may be (partly) solved with additional clauses and provisions, they indicate
that the adoption of an intensity target approach is not as simple and attractive as it may appear at first sight.
It might only be attractive to use such targets in mixed approaches, where intensity targets are used as a
transitory stage for developing countries only, before accepting fixed targets (see the multi-stage approach
(Berk and Elzen, 2001)). It is not possible to fully discuss all pros and cons of intensity targets versus
fixed targets in the context of this article and further analysis is needed. However, from our preliminary
assessment we conclude that intensity target do not seem to provide a better alternative to the fixed targets
adopted under the Kyoto Protocol.
Apart from problems related to the concept of the intensity targets, it can be seriously questioned
whether the example set by the Bush Initiative would result in an effective regime for reducing emissions to stabilise GHG concentrations at a ‘non-dangerous’ level, the key objective of the UNFCCC
(Article 2). Considering the modest US policy target, developing countries are quite likely to claim
even lower intensity-improvement targets, in accordance with their lower per capita income levels.8
This will effectively result in a delayed global response in reducing GHG emissions, which is likely
8
Such a claim could be based on Article 3.1 of the UNFCCC, stating that developed and developing countries have common
but differentiated commitments. At the same time, it is interesting to note that some developing countries have a better historical
record of reducing greenhouse gas intensity of their economy than the USA. China is a notable example, with emissions over
the last five years declining under continued economic growth (see Van Vuuren et al., 2001).
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to put stabilisation of GHG concentrations at levels below a doubling of pre-industrial levels out of
reach.9
At the same time, the Bush Initiative does include certain elements that could facilitate future US
re-engagement into the international climate change regime. First of all, the Initiative explicitly accepts
the objective of the UNFCCC and, albeit very modest, the current US administration seems willing to make
some policy effort to control US GHG emissions. Clearly, these efforts would gain much in credibility
if their implementation would no longer be based on voluntary domestic action. Moreover, the Initiative
aims at supporting the development of breakthrough technologies such as fuel-cell and hydrogen-based
energy systems. Technology development (R&D) may provide a fruitful alley for the Annex I countries
for opening a dialogue with the US on elaborating agreements on common technology standards. Such
agreements would not need to hinder but could be supplemental to whatever overall targets for future
commitment periods would be agreed upon in future negotiations (see also Barrett, 2001).
5. Conclusions
This article, evaluating the Climate Change Initiative as presented by President Bush on 14 February
2002, concludes that:
• the ambition of the proposed policy target is, in quantitative terms, modest at best when compared to
historical trends, the Initiative’s baseline and alternative baselines. The targeted 18% reduction would
keep the US greenhouse gas intensity close to its longer-term historical record (23% in the 1980s and
17% in the 1990s). The Initiative is likely to result in an increase in US emissions in 2012 of around
30% over the 1990 levels;
• the effort of the Initiative demands is significantly less than the efforts demanded of the EU, Japan and
Canada under the Kyoto Protocol. As the Bush Initiative is far less ambitious, the costs for the USA to
realise the intensity target are lower than for other OECD countries;
• there are serious and fundamental problems associated with the intensity target approach adopted in
the Bush Initiative, making universal application of the approach questionable;
• nevertheless, the Initiative is politically significant because of the recognition by the Bush administration of the importance of the climate change problem. It also provides some handles for promoting US
re-engagement in future climate negotiations.
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