Members of Congress and their staffs are facing a growing body
of legislation intended to address global climate change.
Given the tremendous complexity of this issue, and given that few
offices have any specialized expertise in it, understanding
the implications of these climate-change bills may seem like
an impossible task.
Nonetheless, Members of Congress may face votes on one or more
such bills in the near future. This guide is intended to give
non-experts an overview of how the major pieces of climate-change
legislation would work. Subsequent analyses will delve further into
the economic impacts of these bills.
The similarities and differences between these
climate-change bills are summarized below and in Table 1. One thing
that they all have in common is that they will not be cheap. Each
tries to force down emissions associated with the fossil fuel use
that is the backbone of the U.S. economy. Indeed, most proponents
of global climate-change legislation intend to slow the rate
of economic activity by reducing the use of the coal, oil, and
natural gas upon which the United States relies for 85 percent of
All of the bills constrain the supply and/or raise the cost of
energy in one way or another. This is especially true of coal,
which provides half of America's electricity. Thus, all of the
proposed approaches would add costs to the economy. The only
variables would be the extent, distribution, and timing of these
A detailed discussion of the science of climate change is beyond
the scope of this guide. However, each of these bills is a solution
only to the degree that climate change is a problem in the first
place and that the bill addresses it effectively. Thus, a short
scientific overview is necessary to gauge the worth of these bills
and determine whether or not the costs that they impose are
There has never been much doubt that the release of carbon
dioxide and other so-called greenhouse gases into the
atmosphere has at least some warming effect on the planet. The real
issues are whether or not the release of greenhouse gases is a
significant factor relative to natural temperature variability and
what the likely consequences of warming would be.
For any legislation, there are two key questions:
- What would each climate-change bill accomplish toward
reducing any adverse impacts of global warming?
- Would the benefits justify the costs?
Climate change is not unprecedented. The Earth's average
temperature has increased over the past 30 years, and many point to
this as evidence of dangerous human-induced warming. However,
temperatures have risen and fallen many times before, including the
Medieval Warm Period and a well-documented global cooling trend
from the 1940s to the 1970s that prompted headlines and
Newsweek cover stories warning of a coming ice age. While
mankind's activities have likely contributed to the current warming
trend, today's temperatures are still within the range of natural
Nor is the degree of the current warming worthy of the
description "catastrophic." The current upward trend in
temperatures is not unprecedented and will not lead to
unprecedented catastrophes unless a very unlikely pattern appears,
and this view is supported by the scientific evidence. Indeed,
virtually all of the alarming rhetoric surrounding global
warming--a massive rise in the sea level, deadlier hurricanes, the
spread of tropical diseases, and other calamities--lies outside the
scientific consensus. These climate bills would address real
concerns, but these concerns are not catastrophic.
In addition, whatever the adverse consequences of warming, even
the most stringent of the pending bills would reduce only a
fraction of those consequences at a large cost. The most
ambitious measure to date is the Kyoto Protocol, the multilateral
treaty to reduce greenhouse gas emissions to which the U.S. is not
a party. Even if the U.S. were a party to the treaty and the
European nations and other signatories were in full compliance
(most are unlikely to meet their targets), the treaty would reduce
the Earth's future temperature only by an estimated 0.07 degrees
Celsius by 2050--an amount too small even to verify.
Indeed, most of the climate-change bills have already been
criticized by environmental activists as inadequate or, at best, as
mere "first steps" toward more stringent controls.
Ironically, carbon dioxide emissions in several Kyoto nations
have risen faster in recent years than U.S. emissions. This raises
serious questions about the efficacy of bills that mimic the Kyoto
Climate legislation runs the real risk of doing more economic
harm than environmental good. Congress should carefully weigh the
costs of these proposed measures against the likely benefits.
The Climate-Change Bills
The pending climate-change bills and those likely to be
introduced can be divided into two broad categories: traditional
energy measures and "cap-and-trade" legislation. Some hybrid bills
contain elements of both.
Traditional Energy Measures. Most people are familiar
with the first category because such measures are included in
existing energy law. This includes mandates and incentives to
switch to non- fossil fuel alternatives--namely, Renewable Fuels
Standards (RFS; e.g., corn-based ethanol for vehicles) and
Renewable Portfolio Standards (RPS; e.g., wind power for
electricity generation). This category also includes measures
aimed at reducing energy consumption, such as energy efficiency
standards for home appliances and motor vehicle
efficiency standards for cars and trucks, sometimes referred
to as corporate average fuel economy (CAFE) standards.
Most of these measures are currently in place at the federal
and/or state levels and have been justified on a variety of
non-climate change grounds, including energy security and air
pollution control. For example, the vehicle standards were first
adopted in the 1970s in response to the Arab oil embargo, but
climate change is now serving as a rationale for further tightening
and expanding these provisions.
The primary vehicle for these measures is the comprehensive
energy bill currently before Congress, but some provisions are
included in the cap-and-trade bills.
Cap-and-Trade. This approach involves the first-ever
restrictions on fossil fuel use in the United States. The "cap"
refers to a limit on the amount of carbon dioxide that may be
emitted from the use of coal, oil, or natural gas. "Trade" refers
to the mechanism by which those covered entities can buy or
sell the rights to emit, called allowances. These allowances could
be bought and sold like a commodity. Thus, if a regulated
entity reduced its emissions more than required, it could sell
its excess allowances to others at the market price, usually
measured in dollars per ton of carbon dioxide.
These bills have different emissions-reduction targets.
Obviously, the more rapid and deep the reductions required,
the more costly the bill would be. Each of the bills covers
different entities. Some focus on specific sectors like electricity
generation, while others would apply to the entire economy. Some
bills cover only the largest emitters, while others would apply
more broadly to even smaller entities.
provides a description of the major bills currently before the
As Table 1
highlights, these legislative proposals to reduce greenhouse gas
emissions would mandate significant federal interference in the
energy choices made by businesses and consumers. The economic
impacts would certainly be substantial, as will be detailed in
subsequent Heritage Foundation analyses. Whether or not these
costs are worthwhile will be the key question in the upcoming
debate over climate-change legislation.
Ben Lieberman is Senior
Policy Analyst in Energy and the Environment in the Thomas A. Roe
Institute for Economic Policy Studies and William W. Beach is
Director of the Center for Data Analysis at The Heritage
legislation overview in Table 1 is based on a detailed analysis of
global climate-change legislation prepared by analysts at Global
Insight, Inc. (GII) under a contract with The Heritage Foundation.
GII chose the legislation reviewed in Table 1 and the review
categories in consultation with Heritage Foundation analysts.
However, the methodologies, assumptions, conclusions, and opinions
presented here are entirely the work of analysts at The Heritage
Foundation. They have not been endorsed by and do not necessarily
reflect the views of GII.
example, under the cap-and-trade bills, each utility would be
granted a certain amount of annual emissions allowances based on
past emissions or some other formula. If the utility could reduce
its emissions below the allotted levels (e.g., by switching some of
its power generation from coal to a lower-emitting fuel source), it
could then sell its excess allowances to another utility that has
not been able to reduce its emissions sufficiently.
of this writing, some major cap-and-trade proposals, such as one
from Senators Joseph Lieberman (I-CT) and John Warner (R-VA), have
yet to be formally introduced.