Joe Nation, Alex Rau
The summer heat in Washington, D.C., often drives congressional observers (and policy wonks) to cooler climates. (After all, who wouldn't rather be boating in Maine or camping in the Rockies?) That heat sometimes obscures the development of important policy. Two amendments introduced during this summer's federal energy debate represent some of the most significant steps yet for the development of legislation to reduce greenhouse-gas emissions in the United States. Yet there's been little discussion of them outside of Washington.
Alternative proposals by Sens. Dianne Feinstein, D-Calif., and Amy Klobuchar, D-Minn., call on the U.S. Environmental Protection Agency to establish a mandatory national registry of carbon emissions, although neither one has been enacted. Their objective, nevertheless, represents a critical step that the federal government should take to speed comprehensive climate legislation and promote early investments to reduce emissions.
For companies, regulators and ordinary citizens alike, there is as much clarity in carbon emissions policy as in a bowl of tomato soup. That must change.
Clarity in how carbon emissions will be measured and documented is essential. Complete, detailed and reliable data of emissions form the backbone of all types of greenhouse-gas regulations, whether carbon taxes, cap-and-trade or hybrid systems. They help corporate managers and investors determine risk exposure to carbon regulations, as well as identify and price strategies to reduce emissions. They also allow regulators to design effective policies and measure their progress.
The Environmental Protection Agency, whose authority over greenhouse gas emissions was recently reaffirmed by the Supreme Court, should begin to develop a nationwide registry for documenting those emissions. (Not surprisingly, California is ahead of the game - a nonprofit, the California Climate Action Registry, is attempting to establish a national registry at the state-level and now claims 39 participating states.) Any utility, factory or business with emissions over a certain threshold would be required to report annually and be subject to independent verification.
So-called early actors, i.e., those that reduce emissions before they are required to do so, will receive credit for those actions. Additionally, the registry should track and document any reductions in emissions that occur as a result of specific projects.
A national registry of emissions will also help the United States avoid one of the most significant problems that plagued the first phase of the European Union's Emissions Trading Scheme (ETS). The ETS did not have an accurate registry in place prior to the launch of trading, which led to inaccurate data and allowed some members to overstate their emissions levels. That manufactured "oversupply" caused the price of emissions credits to crash and decreased confidence in the ETS.
A national emissions registry will also benefit businesses that are struggling to reduce their carbon footprint. First, an abundance of evidence from programs in the European Union, California, and many companies shows that simply measuring emissions (or energy use) will help reduce those emissions (or energy use) at little cost, and may even generate cost savings. (We sometimes call this the "Prius effect," where drivers closely monitor their mpg-gauge all of the time.) The second benefit to businesses is that an accurate measurement and record-keeping system provides a much clearer pathway for receiving credit from regulators for early actions to reduce emissions.
A national registry, along with standards for documenting individual emission reduction projects, would also encourage increased investment in such projects through "carbon finance." That alone would likely help foster a domestic carbon market in the United States, well in advance of any final consensus on legislation.
Simply tracking and documenting emissions will on its own lead to modest reductions in emissions, but will not reduce emissions 80 percent below 1990 levels by the year 2050, which is emerging as a consensus target. Congress must still pass legislation that regulates greenhouse gases.
A national registry can open the door to the regulatory process, bring clarity to the market and engage the private sector in reducing emissions as soon as possible.
Former Assemblyman Joe Nation, a principal at Environ International, teaches climate change at Stanford University. Alex Rau is a principal at Climate Wedge, a carbon-finance firm.