THE PRESIDENT’S THREE-STAGE PLAN ON CLIMATE CHANGE

October 22, 1997

Reflecting his five key principles, the President’s plan will proceed in three stages:

• Stage 1: Priming the Pump Through R&D, Tax Incentives, Incentives for Early Action, Federal Leadership, and Industry Consultations. The first stage of the President’s package includes a 9-point action plan -- including $5 billion in tax incentives and spending for R&D and energy efficiency, incentives for early action, a set of Federal government energy initiatives, and industry-by-industry consultations to explore their best ideas on how to reduce emissions in a cost-effective manner (including market-oriented standards for energy efficiency). The first economic review would occur near the end of Stage 1.

• Stage 2: Review and Evaluation. The second stage, which would begin around 2004, will build upon the programs adopted in Stage 1, by including a review of our progress and an evaluation of next steps as we move toward a market-based permit trading system for carbon emissions. During this second stage, the details of the permit system would be refined and perhaps tested. Such a permit system is similar in concept to the one that dramatically cut acid rain emissions -- although the scale would be significantly larger than the current acid rain program. The second economic review would occur near the end of Stage 2.

• Stage 3: Meeting Binding Targets Through Domestic and International Emissions Trading Program. In the third stage, we would reduce emissions to 1990 levels by 2008-2012, and below 1990 levels in the 5-year period after that, through a market-based domestic and international emissions trading system. Before beginning this third stage, the second economic update and review would allow Congress and the President to evaluate how the economy had responded to a decade’s worth of experience in the first two stages of the President’s plan. The President is committed to working with labor and Congress to insure that we give proper assistance to any workers dislocated by the changes in energy usage inherent in any climate change plan.

This three-stage program recognizes the long-term nature of the effort to address climate change in three ways:

• By adopting a graduated approach to emissions reductions, it allows us to exploit the tremendous opportunities for win-win reductions first.

• By adopting a system of regular scientific and economic updates and reviews, it allows us to monitor our progress and re-assess our success in reducing emissions, the state of scientific knowledge, and how the economy is responding to our efforts. Only after we have accumulated ten years of experience with the first two stages of the program would we enter the internationally binding period.

• By insisting that the United States will not adopt binding obligations without developing country participation and by emphasizing the importance of an international trading system and joint implementation, we take advantage of low-cost reduction possibilities wherever they occur -- either here or abroad.