Competitive Enterprise Institute • American Conservative Union •

Americans for Tax Reform • American Legislative Exchange Council •

Citizens Against Government Waste • Citizens for a Sound Economy •

Consumer Alert • Frontiers of Freedom • National Taxpayers Union •

60 Plus Association • Small Business Survival Committee

January 9, 2004

Mr. Mark Friedrichs

PI-40

Office of Policy and International Affairs

U.S. Department of Energy

Room 1E190

1000 Independence Ave., SW

Washington, DC 20585

Dear Mr. Friedrichs:

Thank you for the opportunity to comment on the Department of Energy's
(DOE) proposed rule, *General Guidelines for Voluntary Greenhouse Gas
Reporting*, published December 5, 2003 in the *Federal Register* (Vol.
68, No. 234).

On behalf of the organizations listed above, we commend DOE for removing
"transferable credits" from its plan to "enhance" the Voluntary
Reporting of Greenhouse Gases Program (VRGGP), established under Section
1605(b) of the 1992 Energy Policy Act (EPAct).

As we have explained on previous occasions, transforming the VRGGP into
an emission reductions credit program would be both illegal and unwise.
It would be illegal because Section 1605(b) furnishes no authority to
award regulatory offsets applicable to future emission reduction
mandates; and unwise because a credit program would mobilize lobbying
for energy rationing schemes such as the Kyoto Protocol, Senator Jim
Jeffords's (I-VT) Clean Power Act (S. 366), and the McCain-Lieberman
Climate Stewardship Act (S. 139)---policies the Administration rightly
opposes.

In the coming months, three interest groups will likely pressure DOE to
reverse its decision and include credit provisions in the final rule.
Those groups are: (1) corporations that expect to have large quantities
of surplus credits to sell under a future Kyoto-style emissions
cap-and-trade program, (2) environmental activists who correctly view
credits as a strategy to build corporate support for cap-and-trade, and
(3) agency officials whose power and prestige would increase
dramatically if the VRGGP became the framework for a future energy
rationing system. To help DOE resist such pressure, we want to explain,
for the record, why DOE was correct to omit from its proposed rule any
provisions for an early credit program.

**(1) Transferable credits will mobilize lobbying for energy
rationing.**

Although the implementing rules would undoubtedly be complex, the basic
idea of an early credit program is simple. Under such programs,
companies that take steps now to reduce emissions of greenhouse
gases---chiefly carbon dioxide (CO~2~) from fossil energy use---earn
credits (emission allowances) they can later use to comply with Kyoto or
a similar compulsory regime.

All such schemes are inherently mischievous. Credits awarded for "early"
reductions are assets that mature and attain full market value only
under a mandatory reduction target or "cap." That is because, although
many companies today would like to sell carbon credits---especially if
they can "earn" the credits by reducing or avoiding emissions they would
reduce or avoid anyway, in the normal course of business
operations---few companies will buy credits unless constrained to do so
by the threat or imposition of a cap. Without buyers, there are no
sellers and, hence, no market.

Consider the embarrassingly low opening bids at the Chicago Climate
Exchange (CCE). The *Greenwire* news service reported that, at the first
auction, the exchange's 22 member companies and municipalities "paid an
average of less than \$1 for the right to emit one ton of CO~2~."[^1]
Why? Former CCE senior vice president for sales and marketing Ethan
Hodel explained: "Without regulation and governmentally imposed
sanctions, the early evidence ... is that the American business
community is not very interested in a voluntary greenhouse gas
cap-and-trade program." No legal limit on emissions, no demand for
credits. Were it not for the risk that Congress may cap carbon emissions
in the future, the "bid" price for credits today would be zero.

Enacting a cap would instantly create demand for emission credits,
boosting credit prices by orders of magnitude. For example, according to
Energy Information Administration (EIA) analyses, carbon equivalent
credits would sell for \$93-\$122 per metric ton under Sen. Jeffords's
Clean Power Act, \$79-\$223 per ton under the McCain-Lieberman Climate
Stewardship Act, and \$67-\$348 per ton under the Kyoto Protocol.[^2]
Clearly, credit holders must lobby for "regulation and governmentally
imposed sanctions" if they want to turn "voluntary" reductions into real
money.

DOE cannot institute a credit program without creating incentives for
participants to lobby to make "voluntary" reductions mandatory.

**(2) Although touted as "voluntary" and "win-win" (good for business,
good for the environment), transferable credits will create a coercive
zero-sum system in which one company's gain is another's loss.**

As explained above, credits only have value in relation to an actual or
future emissions cap. A cap is a legal limit on the quantity of
emissions a firm, sector, or nation may release. If the cap is not to be
broken, then the supply of emission allowances available to companies in
the mandatory period must be reduced by the number of credits awarded
for "early" reductions in the "voluntary" period. Thus, for every
company that earns a credit for early reductions, there must be another
that forfeits a credit under the cap. Consequently, companies that do
not "volunteer" will be penalized---forced in the mandatory period to
make deeper emission cuts than the cap itself would require, or pay
higher credit prices than would otherwise prevail.

The coercive, zero-sum nature of early action crediting is easily
illustrated. Assume for simplicity's sake that there are only four
companies in the United States (A, B, C, and D), each emitting 25 metric
tons (MT) of CO~2~, for a national total of 100 MT. Also assume the U.S.
emissions reduction target is 80 MT, with the government issuing 80
tradable allowances or credits (1 credit being an authorization to emit
1 MT). Absent an early credit program, each company would receive 20
allowances during the compliance period, and have to reduce its
emissions by 5 MT.

Now assume there is an early action program that sets aside 20
allowances for reductions achieved before the compliance period. That
reduces each company's compliance period allocation from 20 credits to
15 (4 companies X 15 credits each = 60 + 20 early action credits = 80,
the total U.S. emissions budget). Finally, assume that Companies A and B
each earns 10 credits for early reductions. In the compliance period, A
and B will have 25 credits apiece (10 + 15), which is 5 more (25 instead
of 20) than an equal share under the cap would give them. In contrast, C
and D will each have 5 fewer credits (15 instead of 20). C and D must
make deeper reductions than the cap would otherwise require---or they
must purchase additional credits from A and B. Either way, the early
reducers gain at the expense of non-participants.

Programs that penalize non-participants are coercive, not "voluntary."
Programs that enrich participants at the expense of non-participants are
zero-sum, not win-win.

**(3) Transferable credits will corrupt the politics of energy policy.**

Once companies figure out that the program will transfer wealth---in the
form of tradable credits---from those who do not "act early" to those
who do, many will "volunteer" just to avoid ending up in the shallow end
of the credit pool later on. The predictable outcome is a surge in the
number of companies holding conditional energy rationing
coupons---assets worth little or nothing under current law but worth
millions or billions of dollars under McCain-Lieberman, the Clean Power
Act, or the Kyoto Protocol. Credits will swell the ranks companies
lobbying for anti-consumer, anti-energy policies.

**(4) Transferable credits will disadvantage small business.**

As explained previously, participants in such programs profit at the
expense of non-participants. Most small businesses will not participate,
because they cannot afford to hire carbon accountants and engineers.
Thus, an early credit program will penalize small businesses.

Proponents may respond that all cap-and-trade proposals now on the table
apply only to "major" sources such as electric utilities, large
manufacturers, and fossil fuel refiners. Thus, they contend, small
businesses will be exempt from emission control requirements, and have
no need to purchase credits from their larger cousins.

We consider such assurances disingenuous or naïve. Once created, wealth
transfer programs tend to grow. For example, sponsors of the Sixteenth
Amendment promised---and perhaps even believed---that a federal income
tax would apply only to very large incomes derived from investments, not
to the salaries of professionals, and never to the wages of workmen. For
several years, that was largely the case. The first income tax in 1913
applied to only 350,000 Americans---the top one percent of the day. Even
at the height of World War I, in 1918, only five percent of Americans
paid income taxes.[^3] However, in time, the tax expanded to cover "the
wages of janitors and the tips of waitresses."[^4] Today, more than 80
percent of the population, counting both taxpayers and their dependents,
pay income taxes.[^5]

Note also that various Clean Air Act regulations are binding upon
mom-and-pop operations, like corner dry cleaning establishments.[^6]
Moreover, on a per-employee basis, environmental rules impose
significantly higher costs on small firms than on large ones. Economists
W. Mark Crain of George Mason University and Thomas D. Hopkins of the
Rochester Institute of Technology estimate that, in 2000, firms with
more than 500 employees spent \$717 per employee to comply with federal
environmental rules while firms with fewer than 20 employees spent
\$3,328 per employee.[^7]

Such facts suggest that any small business exemption from CO~2~ controls
would likely be temporary---a tactical concession that energy
suppression advocates would later retract once a cap-and-trade program
were in place. A crediting scheme would simply allow the "big dogs" to
corner the credit market before small firms even got in the game.

**(5) Transferable credits will limit fuel diversity.**

Because coal is the most carbon-intensive fuel (CO~2~ emissions per unit
of energy obtained from coal are nearly 80 percent higher than those
from natural gas and about 35 percent higher than those from
gasoline)[^8], Kyoto-type policies would decimate coal as a fuel source
for electric power generation. For example, according to EIA's analysis,
in 2025, the McCain-Lieberman bill would reduce U.S. coal-fired electric
generation from 2,803 billion kilowatt hours to 560 billion kilowatt
hours---an 80 percent decrease.[^9]

If adopted, transferable credits will send a political signal that
mandatory reductions are in the offing and, hence, that coal's days are
numbered. Consider, for example, William Pedersen's article, "Inside the
Bush Greenhouse," in the October 27, 2003 issue of *The Weekly
Standard*. Although we strongly disagree with Pedersen's central
thesis---that the Administration should endorse "a modest mandatory
greenhouse control program"---we cannot fault him for surmising that
cap-and-trade was the implicit goal of the Administration's earlier
embrace of a credit program.

 

Pedersen's remarks on the Administration's earlier policy of
"\[e\]ncouraging companies to register emission reductions by suggesting
those reductions will have value in the future" are worth quoting:

 

> The administration's call for voluntary emission reductions and its
> supporting regulations make sense only on the assumption that the
> government will impose mandatory controls fairly soon. Who would
> participate in a "voluntary" reduction program except to stave off a
> mandatory one? Similarly, company-by-company greenhouse emissions
> accounts are not needed for general debate on greenhouse policy. Why
> develop them except as a step toward mandatory controls? Finally, who
> would participate in a program to register reductions so as not to be
> "disadvantaged under a future regulatory program" unless they believed
> such a program was coming?

Establishment of a credit program would be perceived far and wide as a
sign that the Administration thinks some kind of carbon regulation is
inevitable, or at least highly probable. Anticipating such constraints,
many companies would make plans to switch from coal to natural gas.
That, in turn, would put additional long-term pressure on natural gas
supplies.

According to a recent study by the Industrial Energy Consumers of
America (IECA), the supply crunch that began in June 2000 has increased
the average price of natural gas by 83 percent. IECA estimates that
higher gas prices have cost industrial consumers \$57 billion,
residential consumers \$33 billion, and commercial consumers \$21
billion.[^10] The report notes that, in addition to the \$111 billion
consumer tab, high gas prices have caused manufacturing job losses,
plant shutdowns, and competitiveness and profitability losses,
especially among firms that use natural gas as a feedstock.

Clearly, from an economic point of view, any policy that significantly
increases the demand for and price of natural gas is ill advised. An
early credit program would have exactly those effects.

**(6) Transferable credits will encourage States to enact mandatory
greenhouse gas reduction policies.**

Although most energy companies oppose Kyoto-style regulation, some might
support a national greenhouse gas reductions policy if it were the only
alternative to a dozen or more partially conflicting statewide policies.
Businesses, especially large firms, cannot operate efficiently in
balkanized energy and product markets. There is anecdotal evidence that
some advocates of state climate policies seek to use the threat of
balkanization to force Washington's hand. For example, in a July 17,
2002 letter to President Bush, the attorneys general of 11 states, after
affirming their "support" for "states' regulatory and litigation
efforts" to curb greenhouse gas emissions "within their borders," warn
that "such regulation or litigation will increase the uncertainty of the
business community, thus potentially making the most cost-effective
solutions more difficult." To avoid a regulatory patchwork, the AGs
argue, Bush must adopt nationwide controls on greenhouse gas
emissions.[^11]

In reality, if federal policymakers were to ratify the Kyoto Protocol,
establish CO~2~ standards for vehicles, or cap CO~2~ emissions from
power plants, they would unleash a regulatory feeding frenzy at the
state level. All kinds of state and local agencies would want a piece of
the action. The AGs have things exactly backwards. Only by unequivocally
rejecting CO~2~ controls---and pre-regulatory policies like early
credits---can the Administration discourage states from establishing
mini-Kyoto regimes.

Nonetheless, the threat of economic balkanization is real. In 2001,
Massachusetts adopted regulations requiring power plants to reduce CO~2~
emissions. In 2002, New Hampshire enacted cap and trade legislation, New
Jersey forced its largest utility---Public Services Enterprise
Group---to convert its voluntary greenhouse gas reduction pledge into a
legally binding commitment, and California enacted a law requiring
"maximum feasible" reductions of greenhouse gas emissions from new motor
vehicles. In 2003, New York's Governor Pataki announced a regional
program to cap CO~2~ emissions from power plants in ten Northeast
states. Also in 2003, legislators introduced over 90 climate bills in 27
states---up from 66 bills in 24 states in the previous legislative
session.[^12]

A federal credit program would aid and abet those who seek to install
Kyoto-like regimes at the state and regional levels. Firms acquiring
credits for fuel switching and other CO~2~-reducing actions would be
more inclined to support such policies. Equally important, a federal
credit program would send mixed signals, fostering the impression that
the Administration is a house divided on climate policy and could be
induced to support cap-and-trade if enough states adopt mandatory
programs.

**(7) Transferable credits have no redeeming environmental value.**

A study in the November 1, 2002 issue of *Science* magazine examined
possible technology options that might be used in coming decades to
stabilize atmospheric CO~2~ concentrations.[^13] Such options include
wind and solar energy, nuclear fission and fusion, biomass fuels,
efficiency improvements, carbon sequestration, and hydrogen fuel cells.
The report found that, "All these approaches currently have severe
deficiencies that limit their ability to stabilize global climate." It
specifically disagreed with the Intergovernmental Panel on Climate
Change's assessment that, "known technological options could achieve a
broad range of atmospheric CO~2~ stabilization levels, such as 550 ppm,
450 ppm or below over the next 100 years."

As the study noted, world energy demand could triple by 2050. Yet,
"Energy sources that can produce 100 to 300 percent of present world
power consumption without greenhouse emissions do not exist
operationally or as pilot plants." The bottom line: "CO~2~ is a
combustion product vital to how civilization is powered; it cannot be
regulated away." Given current and foreseeable technological
capabilities, any serious attempt to stabilize CO~2~ levels via
regulation would be economically devastating and, thus, politically
unsustainable.

The implication for the debate on transferable credits is clear. No good
purpose is served by creating the pre-regulatory ramp-up to
unsustainable regulation. An early start on a journey one cannot
complete and should not take is not progress; it is wasted effort.

\(8\) Transferable credits are incompatible with the President's climate
policy agenda.

History amply demonstrates that economies can grow while reducing
emissions "intensity" (emissions per unit of GDP).[^14] Accordingly, the
President seeks to replace Kyoto's emissions tonnage reduction targets,
which are inimical to growth, with emissions intensity reduction goals,
which can accommodate growth.

However, to be applicable to a future cap-and-trade program, credits
would have to be awarded for "real" (i.e., tonnage) reductions.
Consequently, the scheme would ratify rather than replace the Kyoto
framework. More critically, an emissions intensity goal provides no
alternative to Kyoto if it is coupled with a crediting plan that fuels
pro-Kyoto lobbying.

**(9) Supply-side reform is a better way to decrease emissions
intensity.**

The Administration initially viewed transferable credits as a way to
motivate companies to achieve the President's goal of reducing U.S.
emissions intensity by 18 percent over 10 years. A word of caution is in
order. Government has no competence to set emission intensity targets,
whether voluntary or mandatory. Emissions intensity is like capital
intensity or labor intensity---a product of each firm's unique and ever
changing circumstances. For the economy as a whole, moreover, emissions
intensity is a byproduct of the interactions of millions of decision
makers---a result of human action but not of human design. Debates over
how much or how fast U.S. emissions intensity should decline implicitly
assume the possibility and desirability of centralized economic
planning. In reality, government is no better qualified to decide how
much carbon-based fuel "we" should use per dollar of output than it is
to decide how much capital or labor "we" should use per dollar of
output.

Nonetheless, since emissions intensity reduction will likely remain a
guiding theme of the Administration's climate policy through 2004, we
want to suggest a superior method of achieving it.
Expensing---accelerated capital cost recovery---would help companies
reduce emissions per dollar of output, without creating the
institutional framework and lobbying incentives for cap-and-trade.

 

A study commissioned by the American Center for Capital Formation found
that, in 2002, the United States ranked in the bottom third in terms of
capital cost recovery allowances for investment in energy assets such as
power plants, transmission lines, and pollution control equipment. "For
example, after five years, a U.S. firm recovers only 29 percent of its
investment in a combined heat and power generation facility compared to
51 percent in Germany, 53 percent in Japan, 100 percent in the
Netherlands, and 105 percent in China."[^15]

By reducing the tax penalty on capital investment, expensing would speed
up turnover of plant and equipment. In general, newer facilities are
cleaner and more productive than their older counterparts, delivering
more output per unit of input, including energy inputs. Expensing would
thus accelerate emissions intensity decline while boosting productivity
and wages. Expensing is a true "no regrets" policy---desirable whether
global warming ultimately proves to be a problem or not.

The Administration's economic stimulus package raised the annual
expensing limit from \$25,000 to \$75,000 and allowed firms to invest
\$325,000 annually (up from \$200,000) before the expensing option
begins to phase out.[^16] These changes will spur new investment,
especially in the small business sector, but are too limited to
accelerate capital turnover in the large manufacturing and power
generation sectors. If the Administration continues to pursue emissions
intensity reduction as a goal, it should consider developing a more
comprehensive package of expensing options.

**(10) DOE has no authority to issue transferable credits.**

The Natural Resources Defense Council, the Northeast States for
Coordinated Air Use Management, the Pew Center on Global Climate Change,
and the Competitive Enterprise Institute each examined this matter, and
independently concluded that neither Section 1605(b) nor any other
provision of law authorizes DOE to award transferable credits.

The first rule of statutory construction is to read the statute
carefully. In the present case, this task is quite painless---Section
1605(b) is less than one and a half pages long. It is immediately
apparent that 1605(b) makes no reference, or even allusion, to tradable
credits. Appropriately, the program established pursuant to 1605(b) is,
and from its inception has always been known as, a *reporting* system.
Consistent with the foregoing, the Conference Report's discussion of
1605(b) does not say or imply anything about credits.[^17] Section
1605(b) simply provides no authority to award credits for reported
reductions.

When Congress does create credit programs, it has no difficulty making
its intention clear. For example, Title IV of the Clean Air Act (42
U.S.C. Sec. 7651) established a sulfur dioxide allowances trading
program. Similarly, Section 508 of the EPAct (42 U.S.C. 13258)
authorized federal and state government agencies to use tradable credits
to comply with the Act's alternative fueled vehicle mandates. The
Supreme Court has stated that, "where Congress included particular
language in one section of a statute but omits it in another section of
the same Act, it is generally presumed that Congress acts intentionally
and purposefully in the disparate inclusion or exclusion."[^18] Since
Congress did not use any of the same or similar terms ("credit,"
"allocate," "transfer") in Section 1605(b) that it used in Section 508,
we may presume that Congress intentionally and purposely omitted such
language.

Some proponents might argue that under the Supreme Court's *Chevron*
doctrine, deference is to be given to an agency's interpretation of a
statute "if the statute is silent" and the agency's interpretation is
"based on a permissible construction."[^19] In our judgment, construing
1605(b) as authority for a crediting program is not permissible, because
there is no textual ambiguity that might make such a reading plausible.
But even if the statute were ambiguous, EIA, which has administered the
VRGGP from its inception, has historically taken the position that
1605(b) authorizes a reporting program, and nothing more. For example,
in its *Annual Report to Congress 1998*, EIA stated:

> In October 1997, the White House announced that it favored "credit for
> early reductions," shorthand for a not-yet-legislated program in which
> companies that reduced emissions prior to the 2008-2012 target date
> for the Kyoto Protocol would receive some to-be-defined "credit" for
> their actions. The announcement generated intellectual ferment as
> policymakers, companies, and advocates attempted to define the notions
> of "credit," "early," and "reductions."[^20]

Clearly, when EIA published its 1998 report (April 1999), it viewed
"credit for early reductions" as a "not-yet-legislated program," i.e., a
program for which there was no existing legislative authority.

Similarly, in his July 15, 1999 testimony on the VRGGP before the House
Government Reform Subcommittee on Regulatory Affairs, then-EIA
Administrator Jay Hakes, stated: "It should be noted that the EIA's
Voluntary Reporting Program was never designed as an emissions trading
program, or as a 'credit for early reductions' program."[^21] Hakes also
stated that, "EIA lacks the legal authority to resolve the numerous
issues that would be raised by moving towards a crediting
program...."[^22] To transform the VRGGP into a credit program, Congress
would have to amend the EPAct.

Some proponents suggest that DOE may award transferable credits because
1605(b) nowhere prohibits the agency from doing so.[^23] But to infer
authority from the absence of prohibition overturns the central
principle of administrative law, namely: "an agency literally has no
power to act ... unless and until Congress confers power upon it."[^24]
Courts do "not presume a delegation of power based solely on the fact
that there is not an express withholding of such power."[^25]

The clincher is that Congress, when it enacted Section 1605(b),
specifically considered and rejected the option of establishing an early
credit program.

Representative Jim Cooper (D-TN) drafted Section 1605 of the
House-passed version of the EPAct (H.R. 776). If enacted, Cooper's
language would have established a credit program. It directed DOE to
provide "opportunities for entities to receive official certification of
net greenhouse gas emission reductions relative to the baseline for
purposes of receiving credit against any future Federal requirements
that may apply to greenhouse gas emissions." In keeping with this,
Cooper's language directed DOE to ensure the credit system's integrity
by providing safeguards against double counting (two or more entities
claiming credit for the same reduction), cherry picking (claiming credit
for project-level reductions while entity-wide emissions increase), and
windfall profits for "anyway tons" (claiming credits for reductions that
would occur anyway under existing environmental controls). In addition,
as befits a crediting scheme, with its obvious potential to affect
companies' bottom lines under future regulation, Cooper's language
directed DOE to structure participation by means of a legally binding
"rule."

However, when House and Senate conferees produced the final version of
the EPAct, they made three fundamental changes to Cooper's language.
First, they deleted the credit provision. Second, they removed the
strictures against double counting and other irregularities fatal to a
credit program but perfectly compatible with a simple reporting program.
Third---consistent with the fact that a reporting program, unlike a
crediting system, is not a setup for future regulation---they directed
DOE to structure participation via flexible "guidelines" rather than by
means of a legally binding "rule."

In short, when the conferees re-wrote the House version of 1605, they
decided not to establish an early credit program. As the Supreme Court
has emphasized, "Few principles of statutory construction are more
compelling than the proposition that Congress does not intend *sub
silentio* \[by its silence\] to enact statutory language that it has
earlier discarded in favor of other language."[^26]

Other legislative history confirms our interpretation. Senator Joe
Lieberman (D-CT) was the chief Senate sponsor of the 1605(b) program.
Lieberman would have preferred that Congress establish a greenhouse gas
reductions credit program.[^27] However, in his floor statement
following final passage of the EPAct, he did not pretend or insinuate
that the 1605(b) program would or could function as a crediting system.
Rather, he correctly described 1605(b) as setting up a "simple
accounting mechanism" and "data base."[^28]

In the 105^th^ and 106^th^ Congresses, Lieberman was the leading
advocate of credit for early reductions legislation.[^29] His
high-profile push for such legislation in two successive Congresses
presents a massive problem for those who claim or suggest that 1605(b)
authorizes DOE to award credits. To repeat, Lieberman was a key
architect of the 1605(b) provision and presumably understood what it
did---and did not---authorize. If 1605(b) already provided authority for
transferable credits, then why did he champion early credit legislation
in 1998 and again in 1999 and 2000? Indeed, since President Clinton and
Vice President Gore also advocated credit for early reductions,[^30] why
didn't Clinton and Gore institute a credit program via administrative
action? Finally, why didn't Lieberman call upon the Clinton-Gore
Administration to award credits under existing 1605(b) authority?

There is only one reasonable answer to those questions---neither Sen.
Lieberman, nor Messrs. Clinton and Gore, viewed 1605(b) as providing
authority for anything other than a "simple accounting mechanism" and
"data base."

Consider also the unavoidable implication of Section 2 of Lieberman's
"Credit for Early Voluntary Reductions Act" (S. 2617), introduced
October 10, 1998, in the 105^th^ Congress. Section 2 states:

> The purpose of this Act is to encourage voluntary greenhouse gas
> emission mitigation actions by *authorizing* the President to enter
> into binding agreements under which entities operating in the United
> States will receive credit, usable in any future domestic program that
> requires mitigation of greenhouse gas emissions, for voluntary
> mitigation actions before 2008. \[Emphasis added.\]

Senators do not usually introduce legislation to authorize the President
to do something he already has authority to do. Is it not clear from
Section 2 of S. 2167 that, in Lieberman's opinion, the President (hence
DOE) needed new legislative authority to award credit for early
reductions?

Finally, note that Lieberman's early credit legislation and
Representative Rick Lazio's (R-NY) House companion bill (H.R. 2520) in
the 106^th^ Congress gained little support on Capitol Hill. Lieberman's
legislation attracted only 12 co-sponsors on its second go-round.
Lazio's House companion attracted a mere 15 co-sponsors. Neither bill
ever came to a vote in committee, much less on the Senate or House
floor. In short, the Lieberman-Lazio legislation never came close to
being enacted into law. The notion that Congress somehow delegated to
DOE the authority to administer a greenhouse gas reductions credit
program, without anyone noticing until now, is not credible.

# Conclusion

DOE's decision to drop early credits from its proposed revision of the
VRGGP is a policy breakthrough as significant as the Environmental
Protection Agency's disavowal of authority to regulate CO~2~, the
Senate's defeat of the McCain-Lieberman bill, and Russia's refusal to
ratify the Kyoto Protocol. Each of those events is a major setback to
those who would use climate alarmism to scare the public into embracing
environmentally pointless and economically ruinous energy rationing
schemes.

Credit advocates will likely lobby hard over the coming months to
persuade DOE to reverse its decision. DOE officials should respond with
a simple and clear message: The Executive Branch has no authority to
implement a credit program, and DOE does not seek such authority,
because credits would imperil the public interest in economic growth and
affordable energy.

Thank you for considering these comments. We look forward to the
opportunity to participate further in DOE's development of policy on
these matters. Please direct any questions you may have about these
comments to Mr. Lewis and Mrs. Bourne.

Sincerely,

Marlo Lewis, Jr., Ph.D.

Senior Fellow

Competitive Enterprise Institute

202-331-1010; <mlewis@cei.org>

Sandy Liddy Bourne

Director

Energy & Environment Task Force

American Legislative Exchange Council

202-466-3800; <abourne@alec.org>

Paul Beckner

President

Citizens for a Sound Economy

202-783-3870; <pbeckner@cse.org>

John Berthoud

President

National Taxpayers Union

703-683-5700; <jberthoud@ntu.org>

David A. Keene

Chairman

American Conservative Union

703-836-8602

Karen Kerrigan

Chairman

Small Business Survival Committee

202-785-0238; <kkerrigan@att.net>

George C. Landrith

President

Frontiers of Freedom

703-446-0110; <glandrith@ff.org>

James L. Martin

President

60 Plus Association

703-807-2070; <jmartin@60plus.org>

Grover Norquist

President

Americans for Tax Reform

202-785-0266; <gnorquist@atr.org>

Tom Schatz

President

Citizens Against Government Waste

202-467-5300; <tschatz@cagw.org>

Francis B. Smith

Executive Director

Consumer Alert

202-467-5809; <fbsmith@consumeralert.org>

Malcolm Wallop

Chairman

Frontiers of Freedom

703-446-0110

[^1]: Lauren Miura, "Voluntary emissions trading draws mild interest,
    criticism," *Greenwire*, October 3, 2003.

[^2]: EIA, *Analysis of Strategies for Reducing Multiple Emissions from
    Electric Power Plants with Advanced Technology Scenarios*, October
    2001, Table 4, p. 22,
    <http://www.eia.doe.gov/oiaf/servicerpt/eppats/pdf/sroiaf(2001)05.pdf>
    ; *Analysis of S. 139,* *The Climate Stewardship Act of 2003*, June
    2003, p. 65,
    <http://www.eia.doe.gov/oiaf/servicerpt/ml/pdf/sroiaf(2003)02.pdf>*;
    Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic
    Activity*, October 1998, p. xiv,
    <http://www.eia.doe.gov/oiaf/kyoto/pdf/sroiaf9803.pdf>.

[^3]: Mark Schmidt, *Income Tax Withholding: Why "First Dibs" for Uncle
    Sam Leaves Taxpayers Finishing Last*, National Taxpayers Union
    Policy Paper \# 106, July 2002, p. 3;
    <http://www.ntu.org/taxpayer_issues/ntu_policy_papers/pp_ntu_106.php3>.

[^4]: G. Edward Griffin, *The New American*, April 1, 1996, available at
    <http://freerepublic.com/forum/a3953fed82135.htm>.

[^5]: W. Cleon Skousen, *History of the Sixteenth Amendment*, National
    Retail Sales Tax Alliance,
    <http://www.salestax.org/library/skousen_16history.html>.

[^6]: Jonathan Adler, *Taken to the Cleaners: A Case Study of the
    Overregulation of American Small Business*, Cato Institute Policy
    Analysis, No. 200, December 22, 1993,
    <http://www.cato.org/pubs/pas/pa-200.html>.

[^7]: W. Mark Crain and Thomas D. Hopkins, *The Impact of Regulatory
    Costs on Small Firms*, Report prepared for the Small Business
    Administration, Office of Advocacy, RFP no SBAHQ-00-R-0027, October
    2001,
    [www.sba.gov/advo/research/rs207tot.pdf](http://www.sba.gov/advo/research/rs207tot.pdf).

[^8]: EIA, *Analysis of S. 139*, p. 173.

[^9]: EIA, *Analysis of S. 139*, p. 176.

[^10]: IECA, *41 Month Natural Gas Crisis Has Cost Consumers Over \$111
    Billion*, December 3, 2003,
    <http://www.ieca-us.com/downloads/natgas/$111bilion.doc>.

[^11]: The AGs who signed the July 17, 2002 letter are: Thomas F. Reilly
    (MA), Bruce M. Botelho (AK), Bill Lockyer (CA), Richard Blumenthal
    (CT), G. Steven Rowe (ME), J. Joseph Curran, Jr. (MD), Philip Tl
    McLaughlin (NH), David Samson (NJ), Elliot Spitzer (NY), Sheldon
    Whitehouse (RI), and William Sorrell (VT),
    <http://www.ago.state.ma.us/press_rel/climate.pdf>.

[^12]: Bourne, A., *Sons of Kyoto: Greenhouse Gas Legislation in the
    States,* January 2004, American Legislative Exchange Council,
    [http://www.alec.org/meSWFiles/pdf/Sons%20of%20Kyoto.pdf](http://www.alec.org/meSWFiles/pdf/Sons of Kyoto.pdf).

[^13]: Martin I. Hoffert et al., "Advanced Technology Paths to Global
    Climate Stability: Energy for a Greenhouse Planet," *Science*, Vol.
    298, 1 November 2002, 981-987.

[^14]: For example, from 1980 to 2000, U.S. emissions intensity
    decreased by 34.7 percent while aggregate emissions, reflecting GDP
    and population growth, increased by 22.5 percent. General Accounting
    Office, *Climate Change: Trends in Greenhouse Gas Emissions and
    Emissions Intensity in the United States and other High-Emitting
    Nations*, October 28, 2003, p. 4,
    <http://www.gao.gov/new.items/d04146r.pdf>.

[^15]: Margo Thorning, *A Positive Role for Federal Tax Policy in
    Promoting Energy Security and Reducing Emissions Intensity*, Special
    Report, American Council for Capital Formation, November 2002.

[^16]: *The President's Small Business Agenda*, April 29, 2003,
    <http://www.whitehouse.gov/infocus/smallbusiness/agenda.html>.

[^17]: The Conference Report's sole remarks on 1605 are as follows: "The
    guidelines for the voluntary reporting of greenhouse gases and the
    national inventory shall address coalbed methane emissions,
    inventories and reductions. Persons who wish to establish baselines
    shall be provided an opportunity to do so." *H. Conf. Rep*.
    102-10181 at 393 (1992).

[^18]: *Russello v. United States*, 464 U.S. 16, 23 (1983).

[^19]: *Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc*., 467
    U.S. 842-43 (1984).

[^20]: EIA, *Annual Report to Congress 1998*, April 1999, DOE/EIA-1073
    (98), p. 7, <http://www.eia.doe.gov/pub/pdf/other.docs/017398.pdf>.

[^21]: Testimony of Jay Hakes, "The Voluntary Reporting of Greenhouse
    Gases Program," July 15, 1999, p. 5,
    <http://www.eia.doe.gov/neic/speeches/htest715/testimony.htm>.

[^22]: Hakes, Testimony, p. 10.

[^23]: Electric Power Industry Climate Initiative, Comments on Legal
    Authority Questions, September 20, 2002, pp. 11, 14, 15,
    <http://www.pi.energy.gov/EnhancingGHGRegistry/>.

[^24]: *Louisiana Pub. Serv. Comm'n v. FCC*, 476 U.S. 355, 374 (1986).

[^25]: *Chevron U.S.A. Inc. v Natural Res. Def. Council, Inc*. 467 U.S.
    842-43 (1984).

[^26]: *INS v. Cardoza-Fonseca*, 480 U.S. 421, 442-43 (1987).

[^27]: 138 *Cong. Rec*. S1611 (daily ed., Feb. 18, 1992): "Along with
    Senator Wirth, I prepared a simple amendment, virtually identical to
    one offered by Representative Cooper to H.R. 776, the House energy
    bill, which was adopted unanimously on a bipartisan basis by the
    House Subcommittee on Energy and Power."

[^28]: 138 *Cong. Rec*. S17626 (daily ed. Oct. 8, 1992).

[^29]: In the 105^th^ Congress, Senator Lieberman, along with Senators
    John Chafee (R-RI) and Connie Mack (R-FL), introduced S. 2617, the
    "Credit for Early Voluntary Action Act." In the 106^th^ Congress,
    Senators Chafee, Lieberman, Mack, Warner (R-VA), Moynihan (D-NY),
    Reid (D-NV), Jeffords (R-VT), Wyden (D-OR), Biden (D-DE), Collins
    (R-ME), Baucus (D-MT), and Voinovich (R-OH) introduced S. 547, the
    "Credit for Voluntary Reductions Act."

[^30]: President Clinton, Remarks to the National Geographic Society,
    October 22, 1997: "Second, we must urge companies to take early
    actions to reduce emissions by ensuring they receive appropriate
    credit for showing the way,"
    <http://frwebgate.access.gpo.gov/cgi-bin/multidb.cgi>; Press
    Release, October 17, 1998, "U.S. Environmental and Business Leaders
    Agree Early Action Is Needed to Reduce Greenhouse Gas Emissions and
    Present Principles for Early Action to Vice President Gore,"
    <http://clinton3.nara.gov/PCSD/tforce/cctf/cpress.html>.