TCS Daily

Effective Threats

By Nick Schulz - March 15, 2002 12:00 AM

Sen. Jim Jeffords of Vermont bolted the GOP and as a result got his hands on the chairmanship of the Environment and Public Works committee (and as an "independent," he is stumping for Democrats to make sure he holds on to that chairmanship). We are now seeing the results.

The full committee that Jeffords chairs held a hearing on Capitol Hill this week on climate change. Diligent Hill staffers and earnest policy wonks heard conflicting testimony on the "economic and environmental risks of increasing greenhouse gas emissions."

In what passes for cleverness in Washington these days, Jeffords timed the hearing one year to the day after President Bush, as Jeffords put it, "formally notified the world and the Senate of his decision to unilaterally abandon the Kyoto Protocol." (Of course, it was almost five years ago that the Senate rejected the treaty 95-0, so presumably Bush's notification hardly came as a surprise to the Senate.)

Jeffords kicked off his testimony by claiming: "It's important to note that this hearing is not a debate about whether manmade emissions are causing warming. ... What the committee will review is the magnitude of the possible injuries or losses that may be caused by this warming. I urge the witnesses to stay on that topic and help us assess the risks related to increasing greenhouse gas emissions."

Now, it's the prerogative of any committee chairman to run a hearing as he sees fit. And if Jeffords no longer cares about the science -- or simply refuses to listen to scientists for whom the fact or degree of human-induced warming is highly debatable -- then he's free to do so. It's a republic, not a democracy after all.

But Jeffords went on to say: "Many carbon intensive businesses have already begun to take action [to reduce greenhouse gas emissions]. They see a duty to their shareholders and to the public to start reducing their carbon risks. Major insurance companies are increasingly concerned about the uncertainty of changing climate and their financial exposure. Several markets are developing for the trading of greenhouse gas reduction credits, even in the United States. It seems that there must be some level of economic or environmental risk associated with these emissions. Otherwise, how could the credits have value and why would anyone trade them?"

This statement is as dishonest and as self-serving as the announcement of his party-switching last year.

One of Jeffords' witnesses at the hearing, Jack Cogen of Natsource, an energy environmental commodity broker, said that "the role of Natsource is to work with clients who decide it is in their best interest to evaluate the extent of their financial exposure under possible greenhouse gas policies. ... Our experience indicates that companies consider a variety of factors when they weigh the degree of risk they face and what to do about it. The primary factors are (1) the probability they will be subject to emission limitation policies, and (2) the potential direct and indirect cost of those policies to the company."

He then went on to point out that "companies choose to undertake emission reduction measures in spite of or because of policy uncertainty for a variety of reasons, including to reduce future compliance costs, gain experience in the greenhouse gas markets, maintain or enhance their environmental image, and place a value on internal reduction opportunities."

In other words the development of greenhouse gas credit trading markets has nothing necessarily to do with fears over global climate change. Instead, it seems to have more to do with the fear that Jim Jeffords and his green allies in governments and bureaucracies around the world are likely to hit corporations with costly regulations. These companies have more to fear from Uncle Sam than from Mother Nature.

Indeed, a radical bill Sen. Jeffords has proposed, S. 556, would force reductions of carbon emissions to 1990 levels. It is a legislative equivalent of the Kyoto protocol. Since cost estimates of Kyoto range between $100 and $400 billion per annum in the United States, it's perfectly reasonable that companies would hedge their risk of exposure - to economic calamity, not environmental calamity.

The threat posed by Jeffords' bill to energy producers and consumers, ultimately, may be enough for Jeffords to get his way. At a minimum, the bill was to have the practical political effect of establishing the legislative outlier in order to make Sen. Tom Daschle's heavy-handed energy bill look acceptable, even moderate, by comparison. But after the hearing this week, it's apparent that just the very possibility of this kind of bill - and other regulatory schemes like it - is sufficient to prompt much of the effect Sen. Jeffords wants; Its simple existence frightens companies to put costly energy reduction measures before the economic concerns of their customers and shareholders before the legislation is even passed.

As the "independent" Senator from Vermont sat back in his chair listening to Cogen's testimony, a smile cracked along his lips. Jeffords may not be totally honest, but he ain't dumb.

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