Bipartisan Commission Advocates New Energy and Environmental Policies

On December 8, a private, bipartisan commission issued a report advocating the adoption of new national policies addressing oil security, climate change, natural gas supply, and other energy-related issues. The report, Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s Energy Needs, was released by the National Commission on Energy Policy, which includes top industry officials, labor representatives, environmentalists, and former government officials.

The Commission, which was established by the William and Flora Hewlett Foundation, consists of 16 Commissioners, each serving in an individual capacity rather than on behalf of his or her associated organization. The Commission is led by three Co-Chairs – Harvard Professor John P. Holdren, former U.S. Environmental Protection Agency Administrator William K. Reilly, and the Chairman and CEO of Exelon Corporation, John W. Rowe – and a Congressional Chair – former Congressman Phil Sharp (D-IN). Sharp is also a Senior Advisor to Van Ness Feldman. Other commissioners include Archie Dunham, the former Chairman of Conoco Phillips; Ralph Cavanaugh of the Natural Resources Defense Council; Leo Gerard, International President of the Steelworkers Union of America; Martin Zimmerman, a former Vice President of Ford Motor Company; and R. James Woolsey, Vice President of Booz Allen Hamilton and former Director of the Central Intelligence Agency.

Reilly stated that the Commission’s recommendations “aim to achieve a gradual but decisive shift in the nation’s energy policy, toward one that directly addresses our long-term oil, climate, electricity supply, and technology challenges.”

One element of the report that has attracted significant attention is its proposal for a mandatory, economy-wide greenhouse gas (GHG) regulatory program. Under the proposed program, the U.S. government would require, starting in 2010, an annual 2.4 percent per year reduction in the GHG emissions intensity of the economy (measured in tons of emissions per dollar of GDP). The intensity approach reflects the Bush Administration’s favored metric for measuring emissions mitigation progress. The Commission projects that U.S. emissions of GHGs either would remain at 2010 levels or increase slightly under its proposal.

The Commission’s proposal also includes a cost-minimization approach not seen in any of the climate change legislation that has been introduced to date: a “safety valve” mechanism. This mechanism would allow regulated entities to purchase additional allowances from the government at an initial price of $7 per ton, with that price increasing by 5 percent per year. In effect, this approach would cap the potential costs associated with the program.

The Commission’s report asserts that the combination of the intensity-based emissions targets, emissions trading, and a safety valve mechanism would reduce significantly the cost of the program, particularly in comparison with the Kyoto Protocol and the McCain-Lieberman “Climate Stewardship Act.”

The Commission also would condition U.S. efforts on climate change policy on actions taken by the nation’s trade competitors. The proposal would require Congress to review the climate program every five years and assess whether climate policy progress by other nations (including China and India) merits either suspending or escalating U.S. efforts.

In addition, to reduce oil demand, the report recommends the establishment of a more stringent, yet more flexible, Corporate Average Fuel Economy (CAFE) program. The Commission recommends that Congress direct the National Highway Traffic Safety Administration to phase in a more aggressive standard over a five-year period and add a mechanism allowing automakers to trade permits with one another.

Other policy recommendations address a range of energy supply and conservation subjects, including the following: