The Climate Policy Equivalent of Graham-Rudman-Hollings

June 14th, 2006

Posted by: Roger Pielke, Jr.

Graham-Rudman-Hollings refers to U.S. legislation in the 1980s that sought to bring the federal budget deficit under control. It didn’t work because it based its “budget cuts” on projected spending, and thus required cuts from some imaginary baseline of what would have happened absent the “budget cuts.” As former Bush Administration spokesman Ari Fleisher explained in 2001:

Graham-Rudman-Hollings was, in essence, an approach based on deficit projections of what government had to do to bring deficits into certain lines. And it lead to a lot of gimmickry, and to other issues that were complicating the process of government.

Efforts to reduce greenhouse gas emissions are currently in their “Graham-Rudman-Hollings” phase, and this is a condition, ironically enough, shared by both the current U.S. approach as well as that under the Kyoto Protocol.


Under the Kyoto Protocol there is a complex policy called the “Clean Development Mechanism” that – simplified – provides emissions reductions credits to countries that invest in developing countries to generate clean technologies. According to a recent press release (PDF) from the UN Framework Convention on Climate Change:

According to the United Nations Climate Change Secretariat, the Kyoto Protocol’s clean development mechanism (CDM) is as of today estimated to generate more than one billion tonnes of emission reductions by the end of 2012. In addition to the implementation of climate-friendly policies at home, the 1997 landmark treaty allows industrialized countries to meet their emission targets through the treaty’s flexible mechanisms. “We have crossed an important threshold with these emission reductions”, said Richard Kinley, acting head of the United Nations Climate Change Secretariat. “It is now evident that the Kyoto Protocol is making a significant contribution towards sustainable development in developing countries”.

Emissions reductions are calculated off of a baseline of what would have occurred absent the CDM investment. So it would be more accurate to say that the CDM represents a smaller increase in emissions than otherwise estimated would have occurred. Nonetheless, CDM projects each represent an additive increase in total global GHG emissions.

Now contrast this with the Bush Administration’s stated goal of reducing “greenhouse gas intensity” which is a measure of how much GHGs are produced per unit of economic activity. From an official U.S. government “fact sheet“:

In February 2002, President Bush committed the United States to a comprehensive strategy to reduce the greenhouse gas intensity of the American economy (how much we emit per unit of economic activity) by 18 percent by 2012. Meeting this commitment will prevent the release of more than 500 million metric tons of carbon-equivalent emissions to the atmosphere.

The Bush plan has been widely criticized for basically following a business-as-usual approach, as reductions in greenhouse gas intensity are occurring throughout many global economies. According to the White House lead on climate change, James Connaughton, last month:

But when it comes to carbon, what we found is by focusing on intensity we can find the lowest hanging fruit for outcomes. It does not diminish the importance of counting absolute reductions.

One formal difference between the Bush plan (a critique is here) and that of the CDM (a critique is here) is that the CDM is part of a framework that seeks to reduce overall emissions. But the practical reality is that both programs, whatever their positive merits, cannot be honestly be justified as “reducing emissions” as they in fact make very small contributions to reducing the increase in GHG emissions. Consider that most countries participating in Kyoto will all but certainly fail to meet their modest emissions reductions targets.

For advocates of immediate action emissions reductions, under all current and proposed policies (that I am aware of) the future looks like an extended period of uninterrupted growth in greenhouse gas emissions, accounting games notwithstanding. All of the debate about action on emissions will be of little practical effect unless there are policy options on the table that can actually achieve real emissions reductions, not just a reduction in the rate of increase. Right now, there does not seem to be evidence of such options, and so long as the climate debate remains in its Graham-Rudman-Hillings phase, don’t expect to see such options, or much more importantly, significant efforts to create them. The conclusions of one scholarly article on Graham-Rudman-Hollings is worth thinking about:

Gramm-Rudman-Hollings legislation has failed to control the budget deficit. However, the yearly ritual of preparing budgets that conform to the legislated requirements of this Act creates the illusion of deficit control and removes the incentive for developing real deficit controls.

It is great to argue that something should be done, but at some point the discussion has to be moved to what actions are worth doing and with what effects.

4 Responses to “The Climate Policy Equivalent of Graham-Rudman-Hollings”

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  1. Alex Bozmoski Says:

    Dr. Pielke,

    I appreciate the analogies here very much.

    “Nonetheless, CDM projects each represent an additive increase in total global GHG emissions.”

    I think this is wrong. Some do–absolutely. But, and please correct me if I’m wrong, projects that reduce emissions by the thermal oxidation of HFC 23 , projects that partially substitute fossil fuels with alternative fuels, projects that optimize use of clinker in PPC manufacturing or increase the additive blend in cement manufacturing, demand-side conservation projects, fossil fuel switch/alternative fuel replacement projects, and catalytic N2O destruction projects — reduce net GHG emissions.

    I know you’re right that the CDM allows projects to “directly or indirectly” lead to a net increase in GHG so long as reductions are made below the baseline established with an approved methodology.

    But some projects reduce emissions below current levels. No? I think a more pressing problem with the CDM is that the projects that I’m saying result in net decreases in GHGs are more attractive to investors (because having that ‘baseline’ rule makes these projects register greater CERs than by setting the bar at current emissions) and these attractive projects generally also contribute the least to sustainable development. They’re low hanging fruit.

    Maybe, it’s good that the current framework encourages picking this low-hanging fruit so in the second committment period perhaps investors and host countries will have developed the capability to gainfully participate in a more strict regime — where maybe baseline projections will be less generous.

    There is a lot of gimmickry I’m sure, by project participants, to ensure the most profitable methodology is validated by the DOE. I don’t know that this means the CDM won’t work. We need to develop institutional capacities and iron-out percieved risks that prevent extensive participation in CDM/JI. A bottom-up approach is necessary: make market players comfortable and let them play before tightening regulations to strive for the final goal. A top-down approach that sets up the CDM so that all projects result in a net decrease in emissions, would remove all the flexibility from this nascent implementation of project-based flexibility mechanisms — because no one would flex it. That would be fine if Annex Bs didn’t need these mechanisms for Kyoto to be viable — we just pretty much lost Canada, take away flexibility and we’ll lose a lot more.

    I’d love to hear your thoughts!

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  3. Tom Dreves Says:

    Roger, clearly you are right to criticize both the US domestic “voluntary” approach to climate change and the Kyoto Protocol as neither actually achieves real emissions reductions. However, the comparison of both sets of policies to Graham-Rudman-Hollings fails, since only the Administration’s purely voluntary approach is like GRH in creating the illusion of AGW control and while deflecting pressures for developing real AGW controls (and in this case, unlike GRH, the Administration’s domestic policy is quite cynically INTENDED to create illusions and deflect pressures).

    On the other hand, the CDM under Kyoto establishes a mechanism that achieves long-term reductions that would not have been achieved otherwise and by trading lowers the cost of achiving such reductions, and in this way differs significantly from the Administrations voluntary policies, which do not create financial interests that can be traded. The failure with respect to Kyoto has rather been a failure of the ratifying parties to agree to and then pursue significant GHG emission reductions, due to the free rider problems resulting from the decision of the US, S. Korea, Australia, China, India and others to accede to the treaty with undertakings of meaningful commitments. The lack of political will in the US to join Kyoto and to push others to do so in a meaningful way has itself directly produced the inefficacy of Kyoto to which you refer. Why should other ratifying parties perform their obligations when there are huge free riders?

    Because the realization of meaningful AGW mitigation measures has been captive (i) to stalling in the US and (ii) to free rider and cheating problems abroad, aren’t the most productive questions not “what actions are worth doing and with what effects”, but what levers are available (carrots and sticks) (iii) to entice those who are blocking mitigation in the US to move, and (iv) to reduce free riding and cheating problems globally?

    As I noted on another thread, there are definite winners in the US from our deliberately ineffectual voluntary approach. To get them to move, we can both put pressure on them by putting the spotlight on them and entice them to move by offering benefits for getting out of the way. The spotlight will become more effective as people generally better understand the looming consequences of failure to take action, resulting costs, the genesis of the problem in a market failure, and the nature of the solution in remedying the market failure through the creation of tradable GHG emissions rights and offsets (just like the Administration is finally understanding that the way to prevent over-fishing is create similar property rights).

    As people can better understand the nature of the problem, they will begin to see more clearly that “fear of enviros” has simply been a smokescreen.

    Regards,

    Tom

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  5. Roger Pielke, Jr. Says:

    Alex-

    Thanks much for your comments. I wouldn’ disagree with you that some CDM projects may actually reduce (real) emissions. However, I would bet that these are pretty rare in the big picture. This if for the simple reason that CDM projects occur in developing countries and these countries are rapidly seeking to get more energy, so the vast majority of investment (and thus CDM opportunities) would be in new projects that will add to emissions.

    A mandate that CDM be required to reduce actual emssions would, I bet, dramaticly limit the scope of possible investment opportunities. But I’d be interested in the views in someone more familiar with the CDM than I am.

    Certainly, the reduction of emissions below what they otherwise would be makes sense, for a lot of reasons, but suggesting that these are “emissions reductions” as the FCCC has announced, or are in the direction of stabilizing concentrations of GHGs is misguided.

    Thanks!

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  7. Roger Pielke, Jr. Says:

    Tom-

    Thanks for your comments. However, I disagree that Kyoto’s broader failures are due to US free-ridership. Emissions increases throughout the EU and elsewhere have much more to do with the challenges of emissions reductions that any conscious choice to defect from the regime in order to compete with the US. I think that many in he EU see emissions reductions as imperitive quite independent of what the US decides to do — and it is still proving difficult.

    I’d be interested in any data that readers can provide on how EU emissions intensity has decreased.

    I would hypothesize that given the EU’s relatively stable population that a good share of its aggregate performance on emissions can be explained by decreasing emissions intensity in the context of economic growth, in other words it is quite like the US despite Kyoto. The main diffences in emissions trends will be a result of (a) the starting baseline, (b) subsequent economic growth, and (b) the added factor of population growth in the US. Does anyone have such information they can point to?

    background:

    http://sciencepolicy.colorado.edu/prometheus/archives/climate_change/000633spinning_greenhouse_.html

    http://sciencepolicy.colorado.edu/prometheus/archives/climate_change/000192population_greenhou.html

    Thanks!