IEEJ: January 2011

Special Bulletin
July 30, 2010
A Japanese Perspective on the International Energy Landscape (5)U.S. Senate Gets New Energy Bill Including No GHG Reduction Target
Ken Koyama, PhD
Director
Strategy and Industry Research Unit
Institute of Energy Economics, JapanOn July 27, 2010, U.S. Senate Majority Leader Harry Reid said he had submitted a newenergy bill titled the “Clean Energy Jobs and Oil Company Accountability Act of 2010.”
The bill calls for the elimination of the $75 million corporate liability limit and othermeasures to specify corporate responsibilities for and toughen responses to crude oil spills andsimilar accidents in the wake of the Gulf of Mexico oil spill accident that attracted U.S. and globalattention. It also seeks to enhance energy security and create 150,000 jobs through investment of $5
billion in the Home Star energy conservation program and to promote renewable and other cleanenergies. The bill thus emphasizes high-priority energy measures for the United States.
Meanwhile, the bill falls short of including greenhouse gas emission reduction targets,domestic emissions trading and other U.S. global warming measures that have been discussed in theUnited States and attracted global attention. It fails to become any omnibus energy and global
warming bill. In this respect, the bill is far different from the “American Power Act of 2010” billpresented by Senator John Kerry and others in May, which included a GHG emission reduction
target, indicating a circumstantial change in U.S. discussions on global warming measures.
President Barack Obama has positively tackled and promoted the establishment of GHG
emission reduction targets and a domestic emissions trading system as a means for the GHGreduction. But the introduction of such measures in the United States has grown even more difficult
as an economic decline and a drop in industrial competiveness have been feared amid a prolonged
slump under the economic crisis and as the negative effects of tough global warming measures on
the economy and industry have been recognized and discussed the related issue more realistically.
Particularly in political conditions ahead of the midterm congressional elections in November, it has
become more difficult to gain wide support for the introduction of tough global warming measures.
Eventually, a decision has come for the bill to become specialized into energy measures. Of course,
no optimism is warranted about future Senate actions even on the bill and the coordination between
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the Senate bill and a House version. Although efforts could emerge to consider global warming
measures again, the future congressional schedule, including the summer recess and the midterm
elections, indicates that Congress is unlikely to pass any bill including global warming measures
such as GHG emission reduction targets within this year.
How should we interpret the effects of the absence of global warming measures?
Hereinafter, I would like to analyze the effects of the absence, rather than details of the energy bill.
How difficult it is to form a consensus on specific global warming measures including GHG
emission reduction targets in the United States has been well known among experts in the world
since last year. Under such circumstances, the decision on details of the bill cannot necessarily beviewed as any surprise. However, the bill itself reaffirms that it may be difficult for the United States
to set any GHG emission reduction targets within this year. The reaffirmation means that the absenceof U.S. targets will be a firm precondition for international discussions and negotiations on globalwarming.
In this sense, it will become even more difficult for the 16th Conference of the Parties to theUnited Nations Framework Convention of Climate Change, known as COP16, to produce any
consensus on how to reduce GHG emissions after the Kyoto Protocol expires in 2012. As is the samecase with last year's COP15 meeting, it is significant that the United States, which is still one of theworld's biggest GHG emitters, though having been replaced with China as the largest emitter, hasfailed to conclude domestic discussions or form a consensus on GHG emission reduction targets.
Although sincere efforts to form an international consensus are expected to come at the COP16meeting, it has become difficult to expect a specific, essential agreement on GHG emission
reductions in the world in and after 2013. COP16 participants may have to get prepared to promote
negotiations and discussions toward next year's COP17 meeting.
What positions are major countries taking on global warming negotiations as it is growing
more difficult to form any comprehensive agreement for the entire world? They are making various
moves that we should closely watch. Britain, France and Germany have proposed that the EU aim tocut GHG emissions in 2020 by 30% from 1990 (against the present reduction target of 20%). Media
reports stated that China would consider introducing a domestic emissions trading system under the
12th five-year development plan. These moves are among attention-attracting developments thatcame along with the U.S. move. As a comprehensive international agreement is growing moredifficult to achieve, so-called bottom-up approaches are likely to emerge as specific and effective
efforts. Under such approaches, countries may seek to forge bilateral or regional agreements topromote energy conservation and clean energies for GHG emission cuts and to create and spreadcarbon credits. Arguments on global warming negotiations, major nations' measures and strategic
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approaches, bilateral or regional bottom-up approaches and other international moves are verysignificant for Japan. Based on these moves, Japan will have to work out and implement relevant
strategies.

Contact: report@tky.ieej.or.jp

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