The U.S. economy is one of the most diverse in the world. Because of the size and complexity of the economy, Business Roundtable believes that a comprehensive climate agenda that is truly effective across the entire U.S. economy will leverage a portfolio of complementary policies that demonstrate a strong commitment to reducing GHG emissions, rapidly accelerating innovation and preserving business competitiveness. While there is more than one path to addressing the climate challenge in a manner that is consistent with the key principles in this document, Business Roundtable believes that the most successful portfolio of policies should contain the following elements, which taken together represent the preferred path for a comprehensive emissions reduction strategy.
Implement a Well-Designed Market-Based Mechanism
Business Roundtable supports a market-based emissions reduction strategy that includes a price on carbon where it is environmentally and economically effective and administratively feasible, but it does not endorse any specific market-based mechanism.
This approach would reduce the administrative complexity and uncertainty associated with a regulatory approach to limiting emissions and help ensure that U.S. companies remain competitive. It would also send an important market signal that would lead to greater efficiency; technological innovation; and deployment of the low-, no- and negative-GHG emissions technologies that will be necessary for reducing GHG emissions by at least 80 percent by 2050.
There are several ways to implement a market-based emissions reduction approach. Under any such approach, key components must include:
◗ Placing a price on carbon. A price on carbon would provide an effective incentive to reduce GHG emissions and mitigate climate change, including through the development and deployment of breakthrough technologies. The price-setting mechanism should be implemented in a manner that achieves desired environmental outcomes while minimizing administrative burdens and implementation costs. Establishing a clear price signal is the most important consideration for encouraging innovation, driving efficiency, and ensuring sustained environmental and economic effectiveness.
◗ Preserving the competitiveness of U.S. businesses. Policymakers must remain alert to the prospect of economic activity and associated emissions shifting to less-regulated jurisdictions (i.e., economic and emissions “leakage”) and design policy frameworks that mitigate the unique risks of leakage faced by energy-intensive, trade-exposed industries. Rebates, allowances and/or border adjustments — consistent with U.S. international obligations — could be considered as policy mechanisms to address these challenges. Policymakers must also ensure that U.S. companies are not at a disadvantage from carbon pricing policies that may be implemented abroad.
◗ Using resulting revenues, if any, to maximize economic and environmental benefits. If any government revenues are generated by a market-based mechanism, they should primarily be used for policies that support economic growth, reduce societal impact, and provide assistance for those individuals and communities most negatively affected. This approach should be paired with at least a doubling of federal funding for research, development and demonstration (RD&D) of GHG reduction technologies.
A market-based policy with these core components must be carefully designed and implemented in a way that gives businesses and consumers an appropriate transition period in which to plan, invest and adjust. Policymakers must also provide certainty and be sensitive to the economic impact of an initially high or sharply escalating carbon price. Appropriate and targeted incentives could help to ease the transition and ensure fair and equitable treatment. A well-designed policy can minimize the costs and disruption of such a transformation while maximizing GHG emissions reduction.
Recognize Unique Circumstances and Adopt Complementary Policies Where Appropriate
While a market-based climate strategy should apply broadly across the economy, no one policy or approach can fully address climate change across such a diverse economy and such diverse sources of GHG emissions. In unique circumstances, non-duplicative, tailored policies may be more effective or administratively feasible.
For example, some emissions sources may face unique technological challenges or are subject to separate international agreements to limit emissions, such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Additionally, verifiable offsets represent an important complement to a market-based approach and can be an effective and efficient tool for taking advantage of the full range of GHG emissions reduction opportunities across the economy. For example, such opportunities could include cost-effective nature-based solutions with the potential to sequester carbon and improve soil health while also improving farmers’ livelihoods.
Address Duplicative Policies
Existing federal and state climate regulations and policies often create an aggregation of uncoordinated requirements and compliance obligations for businesses. More often than not, a market-based mechanism is more cost-effective and efficient than regulations for reducing emissions. Increased regulatory uncertainty can also limit long-term decision-making and discourage investment. However, there may be unique circumstances in which a regulatory approach would be more effective. For example, when decision-makers and affected parties are different (i.e., have a “split incentive”), a price signal would be less environmentally effective. Building energy codes are perhaps the best example of this situation.
With the adoption of a comprehensive federal climate strategy, some existing federal and state climate policies and regulations addressing GHG emissions may prove duplicative, inefficient or counterproductive. Enacting such a strategy would provide an opportunity to assess how to best handle the confluence of new and existing policies and regulations so that GHG emissions can be addressed in the most efficient, cost-effective manner. Further, additional regulations or policies should not be adopted without careful consideration of whether the desired outcome is already more efficiently achieved by a market-based mechanism.