Coalition Agrees on Emissions Cuts
Businesses, Environmentalists Set Plans on Climate Change

By Steven Mufson
Washington Post Staff Writer
Thursday, January 15, 2009

An influential group of large U.S. corporations and environmental organizations have forged a detailed blueprint for limiting greenhouse gases in the hope of shaping and pushing forward climate change legislation this year.

The U.S. Climate Action Partnership says its ability to reach consensus is a crucial step forward since its 32 members include corporate giants such as General Electric, Conoco Phillips, Duke Energy, DuPont and General Motors as well as the Environmental Defense Fund and World Resources Institute.

Their plan for a cap-and-trade system calls for a 42 percent cut in emissions by 2030 from 2005 levels, limits on emissions from petroleum products and natural gas, rich incentives for the first few coal plants to capture and sequester carbon dioxide emissions, and a carbon market board to examine offsets and contain costs.

The plan would also require any coal plant permitted after Jan. 1, 2015, to emit no more than half the carbon dioxide emissions now considered normal and require any newly permitted plant today to have the ability to be retrofitted to meet that standard.

"The fact that we got this coalition to coalesce around a set of choices I think is impressive," said Jeffrey R. Immelt, chief executive of General Electric. "Most businesses prefer to make investments with certainty about what regulations are going to be in place."

Though some critics have said that climate legislation could impose costs on an already weak economy, DuPont Chairman Charles Holliday said his company would likely boost spending on thin film solar panels and some biofuel projects if a bill established incentives for non-carbon energy sources.

The same group issued an action plan two years ago, but at that time members could not agree on key specifics. Today's more detailed blueprint is "more aggressive than what we called for two years ago," said Fred Krupp, president of the Environmental Defense Fund.

A cap-and-trade system establishes a limit on carbon emissions, then allows companies to buy and sell allowances in order to meet the targets. Climate Action Partnership's proposal would allow companies to offset a limited amount of their own emissions by reducing emissions in developing countries.

However, elements of the plan designed to win corporate support will likely face criticism from some supporters of cap-and-trade. Whereas many economists and environmentalists support auctioning all emission allowances, Climate Action Partnership says its blueprint gives a significant number allowances away free to companies currently releasing carbon dioxide. The free allowances would be phased out.

Some lawmakers might also balk at a proposal to subsidize a limited number of coal plants designed to capture carbon dioxide emissions. The subsidies could cost as much as $540 million a year for a 1,000 megawatt plant.

Though the U.S. CAP is broad, many corporate executives and economists remain skeptical. Last week, Exxon Mobil chief executive Rex Tillerson called cap-and-trade a "stealth tax" and instead endorsed a tax on carbon emissions that he said would be more transparent and predictable.

"Cap and trade introduces enormous volatility in the price of permits," said Rob Shapiro, who was undersecretary of commerce under President Clinton and is chairman of Sonecon, an economic advisory firm. Moreover, he said, "cap and trade is so complex that it allows a lot of mechanisms for gaming the system."

However, there is widespread support for a cap-and-trade system among leading Democrats and Obama nominees. House Energy and Commerce Committee Chairman Henry A. Waxman (D-Calif.), who will hold a hearing on the business group's blueprint today, is eager to pass a cap-and-trade bill.

"We will move forward as fast as we can recognizing that we'll need considerable bipartisan consensus given the size of the issue," said Drew Hamill, a spokesman for House Speaker Nancy Pelosi (D-Calif.). "It's a huge issue. It's going to take time to get everyone on the same page." He said Pelosi had not set any target date for the legislation, adding only that "it's not something you start out of the gate with."

In one sign of the difficulty of keeping a coalition together, the National Wildlife Federation withdrew from Climate Action Partnership rather than endorse its blueprint. In a statement yesterday, the group called Climate Action Partnership "a welcome, strong force for action," but said that it would independently try to "enact a cap-and-invest bill that measures up to what scientists say is needed and makes bold investments in a clean energy economy."

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