It is a busy week on Capital Hill for climate change policy, with three major hearings scheduled in a two-day period and the potential of more to come:

On Wednesday, the House Select Committee on Energy Independence and Global Warming held a hearing to explore the potential role of auctioning tradable pollution allowances under a cap-and-trade system to reduce global warming pollution, rather than allocating them based on historic emissions or other criteria. The issue of how emissions allowances are allocated is of significant importance to regulated entities.

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The World Economic Forum (WEF) meetings officially open tomorrow in Davos, Switzerland. The meetings bring together leaders from all over the world to help set the global agenda for the coming year. This year’s theme is “The Power of Collaborative Innovation” - which Japan’s Prime Minister Yasuo Fukuda sees as “the keyword to make progress on the issues of climate change, Africa’s development, and the global economy.”

Climate change will play a significant role in this year’s meetings. There are 5 official sessions dealing directly with climate change, and several others that cover related issues such as water rights and scientific and technological innovation.

The WEF is an international non-profit whose annual meetings host over 2,000 business, cultural, religious, media, and governmental leaders. Addressing the most important issues facing the world, the meetings offer a unique opportunity for global cooperation on solving complex problems. Several WEF initiatives focus on climate change, energy challenges, global risk, and related problems.

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At a House Subcommittee on Energy and Air Quality hearing yesterday, White House chief environmental adviser James Connaughton briefed Representatives and responded to questions on the “major achievement” from the UN Climate Change Conference: the creation of the Bali Action Plan.

After reiterating the U.S. positions on “an environmentally effective and economically sound” outcome to the global climate negotiations, Mr. Connaughton described how the Bali Action Plan (also know as the “Bali Roadmap”), signed by more than 190 countries, establishes a sound framework to support the development of a global climate treaty by December 2009 so that implementation can begin in 2012. Mr. Connaughton stressed that, in order to understand the United States’ position, members should carefully study the Bali Action Plan.

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Amidst the fanfare surrounding the launch of Phase 2 of the European Union’s Emission Trading System, little attention is being paid to litigation that has the potential to upset the balance of emissions allowances. In late December, Romania became the ninth European country to challenge the Commission’s annual allocation of emissions allowances for the 2008 through 2012 trading period on grounds the decisions are discriminatory and will unduly harm their growing economies.

The difference between the number of allowances requested by Poland, Hungary, the Czech Republic, Estonia, Latvia, Lithuania, Bulgaria, and Romania and the final allocation adopted by the Commission is 163 million allowances annually — if even a quarter of these allowances flowed back into the market it would represent a substantial number of additional emissions permissible under the cap. (The ninth country, Slovakia, dropped its suit on January 16.)

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The U.S. Department of Commerce is leading a Clean Energy Trade Mission to China and India, on January 8-17, 2008, to promote a broad range of clean energy technologies such as renewable energy, biofuels, energy efficiency, clean coal, and distributed generation. The Mission is taking place in the context of the Asia-Pacific Partnership on Clean Development and Climate, and reflects growing dialogue between the United States and China on urgent environmental issues.

Media reports from China on the Mission (also known as the Sino-U.S. Clean Energy Dialogue) focused on the significant opportunities for U.S. and Chinese businesses that could be gained through collaboration, as well as the political and policy barriers that expanded trade in clean energy technologies may face.

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British Prime Minister Gordon Brown recently required that all Ministers account for the cost of carbon when making policy and investment decisions. This new policy covers the transportation, construction, housing, planning, and energy sectors.

As a way to internalize the costs of environmental damage caused by large-scale projects, the price of carbon has been set by government economists for every year through 2050. For 2008, one ton of carbon equivalent emissions must be factored at a cost of £26.0. By 2050, that price will increase to £59.6. This means that, for a construction project with a cash cost of £100 million, which is calculated to emit £20 million of carbon, the government will treat the project as it if actually cost £120 million.

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The ongoing World Trade Organization (WTO) Doha Round process includes negotiations toward an agreement that would reduce or eliminate tariff and non-tariff barriers to international trade in “environmental” good and services. While the mandate for these negotiations is the 2001 WTO Doha Declaration, the United States now views these negotiations as “complementing and supporting the objectives of and the process under” the UN Framework Convention on Climate Change process. The fundamental goal of a WTO agreement on trade in environmental goods and services is to harness trade liberalization to encourage the global distribution and deployment of environmentally friendly technologies that, among other things, help mitigate climate change.

As in other areas of the ongoing WTO Doha Round negotiations, substantial differences have emerged between developed and developing countries – and in particular, between the United States and the European Communities (EC), on the one hand, and Brazil, on the other.

Currently, one of the principal areas of contention is whether to include biofuels in the definition of “environmental” goods. Brazil argues that the inclusion of biofuels is critical in order to increase exports of environmental goods from developing countries. The United States and the EC have rejected Brazil’s proposal, contending that trade liberalization in biofuels should be negotiated as part of the separate WTO market access negotiations for agricultural goods. Further, in a recent joint proposal, the United States and the EC argue that the environmental goods and services negotiations should be divided into two phases – the first and more urgent phase addressing trade in goods and services directly linked to addressing climate change, and the second phase covering the remaining substantial body of environmental goods and services.

Negotiations are currently scheduled to resume in February 2008. It is widely accepted that Brazil and other developing countries will object strenuously to the recent joint US/EC proposal because it excludes biofuels, and it seems unlikely that it will be easy to bridge this divergence of views. Unlike other areas of the WTO Doha Round negotiations, it does not seem that these negotiations will soon advance to the stage of discussions based on a draft text for an agreement.

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Subcommittee on Energy and Air Quality: The Subcommittee will hold a hearing on “Administration Perspectives on United Nations Climate Change Conference in Bali” on Thursday, January 17, 2008, at 10:00 a.m. in room 2123 Rayburn House Office Building. White House chief environmental adviser James Connaughton will serve as the witness for the hearing. The event will be available via webcast.

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Next week, the Congress returns from its Holiday recess to an agenda that will build upon the energy and efficiency bill that President Bush signed into law on December 19. Still left to be done by the Congress are an extension of renewable energy tax credits and a comprehensive climate change bill. The tax bill will be easy, in fact much of it had broad bipartisan and bicameral support, but was removed from consideration due to budgetary constraints. A climate bill will be much more difficult.

Prior to the recess, the Senate’s Environment and Public Works Committee passed the Lieberman-Warner Climate Security Act, the first economy-wide climate change bill to make it to the Senate calendar. Now the attention shifts to the House, where Chairman John Dingell, the Energy and Commerce Committee, and Speaker Pelosi will all take center stage.

Here are some questions that should guide observers of the Congressional climate change debate in the coming year:

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The U.S. Federal Trade Commission’s (FTC) recent efforts to evaluate marketing claims made within the carbon market are sending a clear message to consumers and businesses alike: buyers and sellers beware.

On Tuesday, FTC held a day-long workshop to examine the growing consumer and corporate market for carbon offset products and renewable energy certificates. The well attended workshop included participants from government agencies, carbon product vendors, renewable program certification organizations, consumer advocacy groups, and retail manufacturers. Despite the diversity of the attendees, however, the observations offered throughout the day emphasized the risks to consumers inherent in the lack of a consistently applied standard for evaluating the quality of carbon offset products.

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