Thursday, September 27, 2012

Heritage Foundation: Funding World Climate Initiatives

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September 25, 2012

Testimony Before
The Committee on Energy and Commerce Subcommittee on Energy and Power
United States House of Representatives
September 11, 2012

My name is David Kreutzer. I am Research Fellow in Energy Economics and Climate Change at The Heritage Foundation. The views I express in this testimony are my own and should not be construed as representing any official position of The Heritage Foundation.

EPA and Foreign Grants

The Environmental Protection Agency’s funding of foreign grants is worrisome for reasons beyond whether the grants are affordable or whether they exceed the mandates of legislation. That the EPA has to pay other countries to fund their own environmental programs indicates a limited willingness on the part of these countries to fund them themselves. This hesitancy does not bode well for their willingness to bear the considerably larger burdens of implementing climate policies.
The unwillingness to fund their own programs is not the only sign that we should not expect developing countries to fall in line should the United States implement costly global-warming legislation. Negotiations in Copenhagen, Cancun, and Rio de Janeiro stumbled over the question of who was to contribute to the Green Climate Fund and how large the fund was to be.

Futility of Carbon Legislation

Though the magnitude of carbon dioxide’s impact on global warming is, in fact, not settled, even using the Intergovernmental Panel on Climate Change’s (IPCC) figures shows that unilateral action on the part of the U.S. or even coordinated action of the Kyoto nations will not significantly moderate world temperature increases.[1] This is because the growth of carbon dioxide emissions will come overwhelmingly from developing nations for the next century and beyond. For example, China’s carbon dioxide emissions are now 50 percent larger than those of the U.S. while they were 40 percent below U.S. emissions in 2002.[2]
Though China’s total carbon dioxide emissions are significantly larger than those of the U.S., the per capita emissions are significantly smaller. Yet, to reach a worldwide emissions target that might stabilize warming (according to IPCC climate sensitivities), the EPA assumed that the developing world would implement policies that take them back to their 2000 level of emissions by mid century.[3] For many developing countries (including India) this would limit per-capita emissions to five percent, or less, of current U.S. levels; and even this low limit makes no accounting for likely population growth or for economic growth.

Can We Pay Them Enough?

Though many feel that it will not be enough to pay for the targeted carbon reductions, international climate negotiators established the framework for a $100 billion annual Green Climate Fund to be administered by the United Nations.[4] Most, if not all, of the $100 billion will come from the developed nations, and the U.S. will be expected to make the largest c

U.S. Climate Legislation Included Mechanism for Funding International Programs

The proposed cap-and-trade legislation of the previous two Congresses included provisions for distributing revenue from allowance sales (essentially sales of permits to emit carbon dioxide) to international adaptation funds.
The Lieberman-Warner Climate Security Act of 2008 [5]
In Section 4101, the authors established seven funds to receive the allowance revenue (money paid for emissions permits), including Number 4, “The Climate Change and National Security Fund.” Then, in Section 4804 of Subtitle H—International Climate Change Adaptation and National Security Program—the authors stipulated that all of the allowance revenue in the Climate Change and National Security Fund was to be used for the international adaptation program in Subtitle H.
American Clean Energy and Security Act of 2009 (also known as the Waxman-Markey Bill)[6]
Part 2 of Subtitle E was “The International Climate Change Adaptation Program.” Section 494 specifies that designated allowance revenue is to be distributed in the form of bilateral assistance, distributed to multilateral funds or institutions, or some combination of the two. The U.N.’s Green Climate Fund would fit into this category.
Clean Energy Jobs and American Power Act (also known as the Kerry-Boxer Bill)[7]
Designated allowance distributions under Section 207—International Climate Change Adaptation and Global Security.
The American Power Act (also known as the Kerry-Lieberman Bill)[8]
Section 5005, International Climate Change Adaptation and Global Security Program, uses language nearly identical to that in Waxman-Markey to designate the distribution of allowance revenue among international programs.


EPA funding of foreign environmental programs is a clear sign that the foreign countries are unwilling to fund these programs themselves. It should be noted that the cost of these programs is a small fraction of the cost of those necessary for these countries to meet carbon emission targets set out by proponents of global-warming policies. So, this is yet another sign that any carbon legislation in the U.S. is likely to obligate U.S. energy consumers to bear not only the burden of our own policies, but the additional burden of paying foreign countries for their compliance. There is near universal agreement that without severe restrictions on the carbon emissions of the developing countries, no policy in the developed world will have sufficient impact to meet meaningful targets.
Though unadvertised, the significant additional burden of paying for the developing world’s compliance is known to those involved in climate negotiations and policy making. The U.N. has established a fund that will require developed countries to contribute hundreds of billions of dollars. U.S. energy consumers may not know about this obligation, but those negotiating on their behalf do. That every major cap-and-trade bill in the U.S. included mechanisms for contributing to this fund, or ones like it, makes clear that climate-policy makers in the U.S. intend to acquiesce to these demands for our wealth. Taken in this context, the EPA grants may be just the camel’s nose in the tent.

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