U.S. Climate Change Legislation

In the United States, the linked issues of climate change and energy security create an urgent need to transform the country's economy into one with lower greenhouse gas emissions, higher energy efficiency and less dependence on fossil fuels and foreign oil. This transformation will require changes in all sectors of the economy and society. A comprehensive legislative framework is needed to spur these changes.

Since 2007, Ford has been a member of the U.S. Climate Action Partnership (USCAP), a group of businesses and leading environmental organizations that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of GHG emissions. With a new administration in Washington that is committed to enacting climate legislation, the prospects for a new U.S. policy framework are stronger than ever.

In January 2009, USCAP released A Blueprint for Legislative Action, a report that details comprehensive, integrated policy recommendations for developing legislation that would create an environmentally effective and economically sustainable national climate protection program. The Blueprint is a consensus product of a diverse group of companies and environmental organizations; it attempts to provide a balanced approach to key linked issues that must be addressed in any national climate legislation. The Blueprint recommends a cap-and-trade program and complementary standards as a framework for legislation that can slow, stop and reverse the growth of greenhouse gas emissions. Specific USCAP recommendations include:

• A broad scope of coverage to encompass GHG emissions from large stationary sources as well as the carbon content of fossil fuels used by other sources;
• Cost-containment measures to both encourage investment in emissions-reducing technology and reduce potential volatility in the cost of emissions allowances;
• Principles to guide the fair and equitable allocation of allowance value, to mitigate costs to consumers and affected sectors of the economy; and
• Credit for early action. (In other words, companies like Ford that have already made substantial emissions reductions would not be penalized for those actions.)

USCAP also recommends "complementary measures" beyond a cap-and-trade system to address certain types of emissions, including those from the transportation sector. For example, USCAP recommends implementing a GHG performance standard for transportation fuels, following the development of a methodology to determine the life-cycle carbon intensity of these fuels. They also support a national low-carbon fuel performance standard, which is an important complement to vehicle technology actions. Other USCAP recommendations address the efficiency of commercial vehicles and transportation systems.

USCAP members prefer a cap-and-trade program with complementary policies over a carbon tax, for several reasons. Both approaches would set a price for carbon that would influence economic activity, and either approach could be complex to implement. However, a cap-and-trade approach enables policy makers to set specific targets for GHG emissions reductions, while a carbon tax does not. A cap-and-trade system would also facilitate long-range planning and could be linked to global carbon markets. As a market-based approach, cap-and-trade adjusts to economic conditions and prices carbon efficiently. In preparing its proposals, USCAP analyzed potential implementation issues and has recommended steps to address them.

USCAP is currently reaching out to the government and other stakeholders to build support for its recommendations and participate in the process of developing national legislation.