EPA:

Voluntary climate programs may get a face-lift under cap and trade

Former President George W. Bush may never be accused of having been a climate leader. A more appropriate title, however, could be volunteer in chief.

Although Bush stalled on making greenhouse gas emissions cuts mandatory, he relied on voluntary programs, such as one called Climate Leaders, as the hallmark of his goal to cut carbon dioxide emissions relative to growing economic output.

Now, U.S. EPA is evaluating the role of a slew of climate- and energy-related voluntary programs in an entirely different context. The Obama administration and Democratic leaders in Congress hope to pass legislation that will cap absolute emissions of large sectors of the economy by the end of the year.

"Both programs have benefits, voluntary and non-voluntary and the new administration will be looking to find the best way to realize the benefits of both," said a statement from EPA Administrator Lisa Jackson's office.

Even with climate regulations in place, many say that some voluntary programs, which have maneuvering freedom to push new technologies, remove market barriers and set higher emission reduction goals, could retain their own niche. Others could develop new functions within a regulatory framework.

"There are places in the overall scheme where it may be either politically not viable or inefficient or simply intrusive to have a regulatory program," said Michael Vandenbergh, former EPA chief of staff during President Clinton's administration and now director of the Climate Change Research Network at Vanderbilt University Law School.

"In those places, voluntary programs can pick up the slack," he said.

In the same breath, however, advocates of carbon regulation are quick to say that voluntary programs could neither replace mandatory requirements nor themselves address the immensity of the climate problem. "They are to feel good or get an award or have a plaque on the wall. That's not money," said Rena Steinzor, president of the Center for Progressive Reform.

'Hard to pin down what is real and what is PR'

In fact, voluntary programs are often criticized for lacking accountability and transparency. "It's hard to pin down what is real and what is PR," said Frank O'Donnell, president of the advocacy group Clean Air Watch.

This week, EPA announced it was halting one Bush-era program, Performance Track, for this very reason (Greenwire, March 16). Independent audits have also found flaws in other programs.

A 2006 Government Accountability Office report criticized EPA's Climate Leaders and the Department of Energy's Climate VISION programs for failing to ensure participants' progress. In 2002 and 2003, Bush launched these programs to help willing individual businesses and industry sectors reduce emissions beyond usual practices.

Last year, two separate reports by EPA's inspector general concluded that the emissions savings reported under the Energy Star program, an energy efficiency program jointly managed by EPA and DOE, are inaccurate and unreliable, and that data collection systems for several of EPA's voluntary greenhouse gas reduction programs are wanting.

In the memorandum halting Performance Track, Jackson announced she would commission a more general review to evaluate the future of all "environmental leadership" programs and address their design and management challenges.

But despite their pitfalls, voluntary programs, including DOE's voluntary greenhouse gas reporting program, have made headway in solving the climate puzzle.

Providing information to market players

"I'd say their biggest success is that they were informational," said Stephen Seidel, vice president for policy analysis at the Pew Center on Global Climate Change.

That information went two ways, explained Maria Vargas, with EPA's partnership programs office. Companies have gained experience accounting for their carbon and identifying opportunities to reduce their emissions. EPA has learned to deal with virtually all sectors of the economy, from large utilities and pharmaceutical manufacturers to consumer businesses, and has established building blocks for making the transition to a regulatory program.

"When I started in this area, utilities would often come with their own definition of what's efficient," said Vargas. Today, EPA has the experience to evaluate such claims independently.

Likewise, Ned Helme, president of the Center for Clean Air Policy, said business and industry volunteers have helped the government assess the feasibility of various levels of emissions reductions. "You've got some sense of what the benchmark could be," he said.

Many energy and climate programs actually predate the Bush administration. Energy Star, the oldest and best-known program, started in 1992. Several programs that work with specific industries to reduce methane emissions and other extremely potent warming gases also began in the 1990s, and are largely credited with the fact that currently U.S. methane emissions are today actually below their 1990 levels and are expected to stay that way.

Vargas said that right now, there is a lot of discussion within the agency about exactly how voluntary climate programs would fit into a regulatory framework.

"Oftentimes, these voluntary programs are on the cutting edge of market transformation. We'll always continue to do that," she said. No matter what future energy efficiency standards look like, for example, Energy Star will always have room to raise the bar, she said.

Tools to minimize 'leakage'

Vandenbergh, who studies the interplay between formal legal regulation and more informal incentives, said that reducing consumer energy demand will be just as important as the command-and-control regulations from above, especially over the short term. Those goals might not fit well into standard regulatory structures, he said.

Non-regulatory frameworks could also be one way to avoid the problem of carbon "leakage," he said, describing the fear that emissions saved from capped sectors could merely be subcontracted or shifted to unregulated businesses or even abroad.

Voluntary programs could create consumer, management and investment pressure to reduce that leakage and gather emissions disclosures from across the supply chain, he said. Importantly, this could happen well before legal requirements are effective.

Climate Leaders, which includes large utilities like American Electric Power and Duke Energy as well as chemical giants like DuPont Co., could continue to push capped participants to go further than the law requires.

Or, suggested Vargas and Seidel, the program could morph into a technical assistance program to aid capped sectors with compliance.

Will companies receive future credits for what they've done?

One lingering unknown for the businesses that have participated is whether they will receive future credit for emissions reductions they have already made. "This is a question that cuts across all of these programs," said Seidel.

The answer will likely depend on which baseline year future legislation sets.

Some voluntary programs could help regulated industries; others could help establish carbon offsets, which allow regulated sectors to fund emissions reduction projects elsewhere.

Industry leaders who support a cap-and-trade plan have called offsets critical for reducing compliance costs, but others are wary that, without stringent accounting, those savings could quickly become dubious.

Some of EPA's voluntary programs, such as landfill, coal mine and agricultural methane reduction initiatives, have for years dealt with exactly this problem. Many of these kinds of projects are touted as ideal for offset projects. More recently, the Climate Leaders program developed its own methodology for verifying offsets and allowing participating businesses to purchase them. "We have learned a lot from that experience," said Vargas.

While volunteers will still have a role as carbon regulation becomes a reality, most observers agreed that a new era is fast approaching. Vicki Arroyo, director of the Georgetown State-Federal Climate Resource Center, said that voluntary programs have made significant strides over the last 15 years, especially on the individual and firm levels.

"The problem is that it's voluntary in terms of who signs up for it," she said. "If they just passed a hat like they do at church, I doubt that we would all pay what we owe."

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