Good Afternoon, Mr. Chairman and members of the Subcommittee. My name is Kevin Fay
and I serve as Executive Director of the International Climate Change Partnership (ICCP), a
coalition of U.S. industry representatives and associations, as well as international associations,
interested in the policy development process with respect to global climate change. We
appreciate the opportunity to appear before the Subcommittee today on the subject of credit
for early action to voluntarily reduce greenhouse gas emissions.
ICCP was organized in 1991 to provide a forum to address the issue of global climate change
and to be a constructive participant in the policy debate. We continue to recognize the
climate change issue as an important matter with which governments should be concerned.
We are one of the largest industry coalitions in the world dedicated to this issue.
ICCP has consistently stressed the need to provide legally binding assurances that voluntary
actions to reduce greenhouse gas emissions will be credited in any future mandatory scheme
adopted by the government. Such "credits" should be granted to those companies that achieve
verified reductions between 1990 and the commencement of any mandatory program.
Voluntary efforts to reduce emissions of greenhouse gases now can slow the rate of growth of
emissions and contribute to the longer-term goal of achieving appropriate greenhouse gas
concentration levels. Because of the long atmospheric lifetimes of these substances, there are
significant environmental benefits associated with reductions made today versus sometime in
the future. In addition, by flattening the trajectory of the "business as usual" curve, we reduce
future economic disruption and dislocation. In circumstances where there is marginal
economic value in an emission reduction investment, granting credit may provide the
incentive for such investments.
It has been suggested that supporting credit for early action legislation may unwittingly create
support for the Kyoto Protocol, and that instituting a credit for early action program is
tantamount to implementation of the Kyoto Protocol. We do not agree.
ICCP believes that the Kyoto Protocol is incomplete, should not be ratified in its current
form, and should not be implemented without the advice and consent of the Senate. While
the treaty is a good start in establishing a market-based framework for addressing the issue on
a global basis, it is a work in progress. It sets ambitious targets to be met in an unrealistic
timeframe and does not provide for developing country participation. The treaty negotiators
have also failed to identify an appropriate long-term objective.
Concern has also been raised that by granting credit for early action, companies who
participate will have an economic interest in ratification of the Kyoto Protocol and will
become supporters of the treaty. ICCP believes that credit for early action legislation can be
"Kyoto Protocol-neutral". Regardless of the fate of the treaty, investments made in energy
efficiency and the reduction of greenhouse gas emissions should be legally protected if and
when any mandatory program to control greenhouse gas emissions is implemented.
While the U.S. debates whether certain government actions constitute "back door"
implementation of the Kyoto Protocol, other countries such as Japan and European Union
nations are actively designing and implementing policies and measures that will reduce
greenhouse gas emissions. These initiatives will spur technology and innovation in these
nations thus potentially giving them a future competitive edge. U.S. companies that compete
in these markets are forced to respond to these conditions regardless of their views on the
Kyoto Protocol. The competitiveness of these companies could be affected by the lack of
resolution of the credit issue and the lack of support in Congress for climate-related research,
development, and technology programs.
Under the Bush Administration, the U.S. signed the United Nations Framework Convention
on Climate Change (UNFCCC or Rio treaty), which was ratified by the Senate in 1992. This
agreement establishes 1990 as the baseline for measuring greenhouse gas emissions and requires
all signatories to take measures to reduce them. Responding to this commitment and to the
subsequent U.S. Climate Change Action Plan (CCAP), many companies have already taken
steps to reduce their greenhouse gas emissions. Enactment of credit for early action legislation
represents "open door" compliance with the Framework Convention and sends a positive
public policy message that those who acted in response to this national commitment will not
Companies that have already taken action or are contemplating doing so want to ensure that
these contributions are not ignored if or when a mandatory phase of emission reductions
begins. Failure to recognize these contributions could unfairly force companies to make
reductions through increasingly more costly options. This would have the perverse effect of
penalizing those companies who act early.
The current legal vacuum provides a disincentive to companies that wish to reduce
greenhouse gas emissions or enhance carbon storage. Based on past experience, there is a real
fear that early actions will be punished by lower emission baselines as the starting point under
an eventual regulatory program.
In addition to removing the existing disincentive to action, a credit for early action program
could provide an additional incentive for technical innovation. This is the time to experiment
with a broad range of options and to more precisely determine the costs and benefits of
various opportunities for reduction. This type of experimentation and innovation not only
spurs economic growth, it provides an insurance policy against truly wrenching economic
impacts in case much deeper cuts in emissions are necessary in the future.
Finally, while many have touted the success of market-based mechanisms in reducing
environmental compliance costs, the fact remains that our experience with such mechanisms is
very limited. An active credit for early action program could provide useful experience and
educate the government and industry alike as to policies that should be avoided.
It has been argued that small businesses and farmers will be hurt by a credit for early action
program. We do not agree. ICCP is currently encouraging a simplified approach to credit
for early action that will allow small business to participate with minimal administrative or
beauracratic burdens. Discussions have also included the issue of credit for changes in land
management practices that could allow farmers to participate. In addition, the program
should create a market for the technical innovations that are often made by small,
entrepreneurial companies. Last but not least, we should keep in mind that this is an entirely
voluntary program. There are no mandates for small business or farmers' participation.
It has been argued that companies that do not act early will be hurt if the government
provides credit to those that do. Again, we do not agree. A successful early action program
will reduce the overall level of reductions required under any regulatory program. Companies
that don't make early reductions will thus have fewer reductions to make and will benefit
from the lessons learned by the early actors and the innovations and new technologies that
have resulted from these experiments. Moreover, because there will be a pool of reduction
credits available, non-early actors will have much lower-cost compliance options available to
ICCP believes that credit for early action legislation should not discriminate against
"non-actors". The window of opportunity for investment in more energy efficient equipment,
processes or products varies among companies. Credit for early action legislation should not
force premature capitol stock turnover or penalize companies that choose not to make
The precedent for crediting early action was established in the 1990 Clean Air Act
amendments, when companies who moved early on sulfur dioxide emissions reductions
received additional consideration in the subsequent sulfur trading program. Relying on this
statutory precedent is important for the climate change issue. However, given the scope of
industries covered and the enormous task to be undertaken, the government should go on
record now by developing experience in advance of any regulatory requirements.
The United States is on record in support of responsible action to address greenhouse gas
emissions. We have ratified the Framework Convention on Climate Change. Congress has
funded a variety of activities under the Climate Change Action Plan and other significant
government programs. It is not unreasonable to request assurance from the government that
these activities, whether past or in the future, not place the voluntary actors in future
There are a number of legislative proposals that seek to address this short term aspect of a
domestic climate change policy. ICCP commends:
- The efforts of Senators Chafee, Lieberman and Mack to eliminate the disincentives and
provide credit for voluntary actions to reduce greenhouse gas emissions and the
enhancement of carbon storage.
- The efforts of Senators Murkowski and Hagel to compel more systematic attention to the
long-term challenge of climate change and to focus on the necessary role of research and
technology in meeting that long-term challenge.
- The efforts of Representatives Lazio and Dooley to advance credit for early action on the
While none of these initiatives meets all of our objectives, we are committed to working with
the appropriate parties to address specific ICCP concerns such as provision for growth and
product coverage. (ICCP's principles on credit for early action and our simplified approach to
credit legislation are attached.)
It is time to start forging a bipartisan national strategy for addressing the climate change
challenge. That strategy should begin by liberating and systematically rewarding the
leadership of U.S. industry in this global cause.
U.S. industry will be a major player in developing technologies to reduce greenhouse gas
emissions, making investments in equipment, facilities and products and generating reductions
in their operations and products. Enactment of legislation that removes disincentives for early
action and that preserves investments already made will help to retain our competitive edge
and provide significant economic and environmental benefits for our nation and the world.