Testimony of David A. Ridenour Before the House Subcommittee on National Economic Growth, Natural Resources and Regulatory Affairs on Early Action Crediting

July 15, 1999, 2:30 P.M.

Mr. Chairman, thank you for inviting me to testify today on the important issue of global warming and early action crediting. I'm David Ridenour, Vice President of The National Center for Public Policy Research, a non-partisan, non-profit educational foundation based here in Washington.

Before I begin, I think its important that you know that The National Center has never received government funding in support of its work, nor do we ever plan to seek such funding in the future. Our support has come principally from some 200,000 individuals. We therefore have no financial stake in the decisions of this subcommittee or indeed of the U.S. Congress as a whole.

In addition to representing The National Center, I'm here today representing the Cooler Heads Coalition, an alliance of some two dozen non-profit public policy groups concerned about the implications of the Kyoto Protocol for consumers. The Cooler Heads Coalition also accepts no government funding.

It's not often that free-market organizations like The National Center for Public Policy Research and the Cooler Heads Coalition can agree with the Sierra Club, Ozone Action, Friends of the Earth and National Environmental Trust on anything - much less on climate change policy. But when it comes to early action crediting bills like the ones introduced by Senator John Chafee in the Senate and drafted by Rep. Rick Lazio, we agree with these groups on several key points. First, these early action crediting programs can't possibly benefit the environment. Second, they can't possibly benefit the economy. Perhaps they were never intended to.

Even if one assumes that man-made greenhouse gas emissions are responsible for increases in the planet's temperature - and this does not appear to be supported by the satellite and weather balloon data - early action crediting programs would provide little relief and could even prove counterproductive. The reason? These programs would make it more difficult for many small businesses and family farms to comply with the Kyoto Protocol's emissions targets by allowing the largest firms to shift a greater proportion of the burden on to small enterprises. Under current early action proposals, the President would be permitted to offer companies making voluntary reductions in their greenhouse gas emissions prior to 2008, when the Kyoto Protocol is slated to take effect, emissions credits that these companies could either use or sell during Kyoto's first emission budget period (2008-2012). But unlike the situation for developing countries, U.S. emissions reductions occurring prior to 2008 would not entitle the U.S. to more credits during the first budget period. In other words, every credit the President grants under early emissions crediting would mean one less credit in the U.S. pool during 2008-2012. Since most small businesses and family farms lack the political contacts and clever lawyers necessary to negotiate credit deals with the Clinton Administration and lack the financial wherewithal to make immediate reductions in their emissions, large businesses would likely garner the lion's share of early credits. Thus, the burdens of Kyoto - if the treaty is ultimately ratified - would rise for small firms while dropping for larger ones.

The final issue concerns accounting and verification issues. Under current proposals, independent third parties would be permitted to measure and track reductions on behalf of corporations. As the National Environmental Trust has noted, "[there are] no guidelines for who would qualify as an auditor." This in my mind certainly brings the validity of any emissions accounting into question. Another environmental group, the NonProfit Accountability Project, has even suggested that the Environmental Defense Fund - which the group says helped formulate the early credits proposal -- would stand to gain financially from the plan, saying, "...EDF has financial interests at stake in the 'early action' bill - its satellite group [Environmental Resources Trust] will profit from services it will render..." Of greater concern to me, however, is the incentives such a system would provide to corporations to give - and give generously - to the EDF or similar organization. Even if it was not the intention of the early action plans to create such a dynamic, corporations will be tempted to pay tribute to environmental groups knowing full well that they are the final arbiters of who does and does not deserve emissions credits, who is a good corporate citizen and who is not.

As presently constituted, third party monitoring could compromise not only the integrity of accounting and verification, but our political process.

Thank you again for the opportunity to speak.