Analysis: IEA stirs old controversies

By ROSALIE WESTENSKOW, UPI Correspondent  |  March 3, 2008 at 12:45 PM
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THE DALLES, Ore., March 3 (UPI) -- The Paris-based International Energy Agency recently awarded the United States high marks for its energy policy but warned stronger action is needed to mitigate climate change and decrease foreign oil imports.

The assessment praised two major pieces of legislation enacted since the IEA's last U.S. review in 2002. The IEA, an energy advisory body, evaluates the energy sectors and policies of its 27 member countries every four to five years.

U.S. policymakers received accolades from Nobuo Tanaka, IEA's executive director, for passing the Energy Policy Act in 2005 and, more recently, the 2007 energy bill.

Tanaka commended the increase in fuel-efficiency standards for cars mandated by the 2007 law, but said the deadline for car manufacturers to meet the new standard -- 2020 -- is too far away.

"We believe that quicker action is possible and necessary to increase oil security in the U.S. and globally, and reduce transport emissions," he said last month while releasing the report.

If all goes as planned, the average efficiency of new U.S. cars will increase to 35 mpg by 2020. That's too little, too late, said Andreas Biermann, lead author of the IEA report.

"There are currently technologies on the market that aren't rocket science that can be put into vehicles without much effort and without much cost to the consumer that can dramatically improve efficiency," Biermann told United Press International.

Other IEA members have proposed more stringent standards, including Japan and the European Union. EU fuel efficiency standards currently mandate an average of 47 mpg by 2012.

Foreign car manufacturers, many of which already produce more fuel-efficient vehicles than U.S. companies, will be forced to produce even more innovative products because of these laws. And that could spell disaster for segments of the U.S. economy, Biermann said.

The IEA predicts a small oil shortfall by 2015 that will significantly raise gas prices, he said, leading consumers to put a higher emphasis on gas mileage when they purchase a car.

"U.S. consumers aren't stupid," Biermann told UPI. "When gas prices go up, they'll buy more efficient cars, and right now it doesn't look like they'll be coming from the U.S. auto industry, at least not the big three" because they're not producing the most efficient cars.

The IEA also encouraged U.S. policymakers to bolster the nation's climate-change policy. Assigning a cost to CO2 emissions would be the most effective stance for the country to take, the report's authors said.

Current legislation in the U.S. Senate attempts to do just that. America's Climate Security Act establishes a cap-and-trade system that limits the country's total emissions. Businesses are only allowed to emit a certain amount each year, but they can buy permits for more emissions from businesses that emit less than their share.

If passed, the system would lower emissions 63 percent below 2005 levels by 2050, say proponents of the bill, sponsored by Sens. Joseph Lieberman, I-Conn., and John Warner, R-Va.

But its opponents argue a cap-and-trade system would damage U.S. businesses, including Ben Lieberman, senior policy analyst for The Heritage Foundation, a conservative think tank.

"It would clearly be bad for the economy and we're already seeing the adverse effects in the EU," Lieberman told UPI.

The EU established a cap-and-trade program in 2005, and its success has been heavily debated.

"They're not going to meet their (emissions) targets, and they're already incurring higher costs for energy," Lieberman said.

In addition to high costs, cap-and-trade opponents argue such a program would drive jobs away from the United States to countries without carbon controls, such as China, where the absence of a cap would allow for cheaper manufacturing. If this did occur, it could negate any reductions in U.S. emissions by increasing them proportionally somewhere else.

The cap-and-trade bill attempts to address this issue by placing a tax on all imported goods from countries without carbon controls. This would equalize the price of the product to similar products produced with fewer emissions.

The IEA's report also tackles renewable energy, encouraging U.S. policymakers to establish a more consistent policy for tax credits. The report highlighted the negative impact these "stop-start" tax incentives have had on the wind industry.

The federal government has periodically provided tax incentives for renewable energy, but their inconsistent nature has been detrimental, particularly to the wind industry, according to the report.

Investors are often wary of putting money into wind energy projects because they never know what the government's stance will be next year, said Gregory Wetstone, senior director for government and policy affairs for the American Wind Energy Association, a trade association for the industry.

"Today, investors are making decisions on investments and projects that won't come online until 2009, and we don't yet know what tax policies will govern these projects," Wetstone told UPI. "Obviously, that's not a healthy place to be for any business."

The IEA report encouraged Congress to extend today's wind tax credit -- currently 2 cents per kilowatt-hour -- scheduled to expire at the end of this year. Its authors also urged the creation of a federal Renewable Portfolio Standard, requiring a certain percentage of all U.S. electricity to come from renewable sources.

Last year Sen. Jeff Bingaman, D-N.M., attempted to pass a federal RPS that would have required 15 percent of electricity to come from renewables by 2020. The measure did not pass, and congressional Republicans say they will block it again unless dramatic changes are implemented.

Already, 25 states and the District of Columbia have enacted an RPS within their borders, and, although proponents of a federal RPS say this has caused too much confusion for utilities, opponents argue it's best left in the states' hands.

"Different states have very, very different resources," said Matt Letourneau, minority spokesman for the Senate Energy Committee. "When the states (pass an RPS), they're able to tailor their portfolios to the resources they have."

Some areas of the country have fewer renewable resources than others, particularly in the Southeast, and utilities based there would have to pay a fine if they could not meet the RPS.

"Basically, it's a tax on the utilities, and they'll have to pass it on to the consumer," Letourneau told UPI. Congressional Republicans want nuclear and hydropower added to the list of renewables and a different enforcement strategy, Letourneau said, before they'll consider a federal RPS.

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