US: Waxman-Markey Bill changes the landscape of international climate change negotiations

Author: Frank Jotzo

The US House of Representatives has passed the Waxman-Markey bill, or American Clean Energy and Security Act. The bill mandates national emissions reductions using economy-wide emissions trading and various other policy measures. The bill is now entering the Senate process, and though the hurdles there are much higher than in the House, America could have in place comprehensive and not unambitious carbon emissions control in the near future. It would be a momentous change for the US, and it would catalyse action elsewhere.

Rep. Henry A. Waxman &  Rep. Ed Markey

For Australia, progress towards US climate legislation means that there is zero credibility left to the argument that Australia should not get ahead of other developed countries. Australia has been behind Europe on climate change policy for a number of years, and would be part of a small bunch of developed country followers once America takes the lead. And follow it invariably would, as it is simply unthinkable to hold out as a renegade rich polluter in the face of America setting to the task.

Equally, the ‘waiting for Copenhagen’ argument falls to pieces with any meaningful degree of progress on US climate policy. American domestic commitment will create strong pressure for China to formalise and extend its existing goals on energy and emissions, and that in turn will make it hard for many other countries to resist the push. Whether or not a comprehensive agreement is struck at Copenhagen in December, if the US enacts legislation along the lines of Waxman-Markey then the train is on its way.

The result in Australia might well be to foster a repositioning by the opposition, which could even lead to the Carbon Pollution Reduction Scheme being enacted, with amendments, in the not too distant future and without the need for Green and independents’ votes.

Waxman-Markey also matters for developing countries. The US coming to the party would place a tick in the biggest box of prerequisites for action by developing countries: the need for rich countries to begin reigning in their carbon emissions at home.
Developing countries could also benefit directly from selling emissions reductions to the US. The proposed legislation would allow significant amounts of trading in international emissions units, with a sizeable additional program to help reduce deforestation in developing countries. The obvious first destination for US carbon investment in the developing world is Latin America, but some of the tens of billions of dollars that might flow each year would likely also find their way to Asia, including for avoided deforestation. That in turn would create business engagement and help domestic policy efforts in developing countries.

But is the US legislation too weak? The national target is for a reduction in total emissions by 20 per cent compared to 2005 levels at 2020 (17 per cent for sources covered under emissions trading). This means a return to just below 1990 levels, while America’s Kyoto target was to reduce by 7 per cent below 1990 already at 2010. The lack of ambition has been criticised, including by Chinese officials. And it is true that a much quicker and steeper fall in emissions by the rich and highest emitting countries would be needed for a truly strong global outcome on greenhouse gas emissions. But the longer term targets under Waxman-Markey at least go in the direction that climate science calls for, with an 83 per cent reduction by 2050. It is in sharp contrast to the 60 per cent reduction that the Australian government still proposes for 2050.