The American Clean Energy Act, Global Warming and the Position of China and India

The American Clean Energy and Security Act (Waxman-Markey) was recently approved (narrowly) by the U.S. House of Representatives. The bill now goes to the U.S. Senate for consideration.

There are several provisions of the bill -- some are bold and others modest, some progressive and others status quoist. With respect to Global Warming and Carbon emission reduction, the Act mandates, "Starting in 2012, ACES establishes annual tonnage limits on emissions of carbon and other global warming pollutants from large U.S. sources like electric utilities and oil refiners. Under these limits, carbon pollution from large sources must be reduced by 17% below 2005 levels by 2020 and 83% below 2005 levels by 2050. To achieve these limits, ACES establishes a system of tradable permits called “emission allowances” modeled after the successful Clean Air Act program to prevent acid rain. This market-based approach provides economic incentives for industry to reduce carbon emissions at the lowest cost to the economy."

So, per ACES Act, the United States is using 2005 as the benchmark, and hoping to reduce the carbon emissions by about 17 percent in 2020. 

However, the benchmark for the world is the Kyoto Protocol which established legally binding commitment for the reduction of four greenhouse gases (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride), and two groups of gases (hydrofluorocarbons and perfluorocarbons). Per Kyoto Protocol, the U.S. was required to reduce the emissions by about 20 percent in 2012 using 1990 as the benchmark. Since the U.S. has abandoned the Kyoto Protocol for the last 8 years or so, the goals set by the Waxman-Markey bill would reduce the emissions (produced in the U.S.) only about 4 percent in 2012.

Europe has been more aggressive in the reduction of carbon emissions.

The Greenhouse effect is the result of carbon and other emissions accumulated in the atmosphere for the last 100-150 years (the stock of emissions), and the current additions (flow) to those emissions. The industrialized nations have contributed most to the stock of the carbon emissions. The rate of current flow is the greatest from China and India, though the per capita emissions (from China and India) are still relatively modest.

While China and India are still at aspirational levels, the United States and other developed countries already have achieved a very respectable quality of life. Further, the developed countries have far more financial, technological and innovation resources to be defray the short-term cost of efforts to reduce the emissions.

Therefore, it is not surprising that China and India are insisting on a global treaty that recognizes the differential contributions by the developed countries, and China and India: the stock of carbon emissions already set in the atmosphere is large, and the current rate of emissions by China and India add only marginally to that stock.

Further, the world will have to establish a corpus global fund (similar to the IMF Fund) to facilitate research, innovation and policy implementation. The contributions to the fund should be based on some equitable formula. The current level of funding and mechanism is limited. What is needed is a predictable, sufficient and stable fund.

Therefore, given these facts India seeks an agreement that is comprehensive, balanced and equitable.

One provision of the ACEA that is not conducive to cooperative and coordinated action on this matter is the mandate to impose tariffs on imports from countries that do not make cuts as envisioned in the Act. This provision ignores the fact that United States has abandoned the Kyoto Protocol for the last 8-9 years, and is punitive on countries like China and India. President Barack Obama, rightly, opposes the tariff mandate in the Act.

India has made a sincere and self-interested effort to reduce the carbon emissions. Over the last five years, even as India has been growing at about 7-8 percent annually, the energy consumption has been increasing only at about 4 percent annually. Prime Minister Manmohan Singh has repeatedly assured the world that India's per capita emission will be no larger than the per capita emission from the developed countries. So far, India has lived up to its commitments.