Transatlantic Energy and Environment Policy

The United States and the European Union are the world's two largest economies, account for almost 40% of total world trade, and maintain the largest bilateral trading and investment relationship in the world. Cooperation between the US and the EU in the area of environmental policy, therefore, has the potential to be extremely effective at addressing global environmental challenges. The need for transatlantic cooperation on environmental issues, particularly climate change, is pronounced.

Transatlantic environmental cooperation formally began in 1974, with the Exchange of Letters on the Environment between the European Commission and the US government. This established a bilateral framework for collaboration on environmental issues. For the next twenty-five years, high-level meetings between the US and Europe provided a regular forum for exchanging information and discussing cooperation on environmental policy.

In 1995, the New Transatlantic Agenda (NTA) and its Joint Action Plan expanded US-EU cooperation to the full range of political and economic matters, including environmental issues. This led to the establishment of the Transatlantic Environment Dialogue (TAED), which lasted from 1999 to 2001. It was short-lived, but was useful in bringing the European and American environmental NGO communities together.

While there are many environmental issues that can best be addressed by international cooperation, perhaps the most crucial of these is global climate change. Climate change is one of the most severe environmental and economic threats facing the US, Europe, and indeed the entire world.

In 2001, an EU-US Summit recognized the need to promote effective transatlantic cooperation in the face of global climate change. This led to the establishment of a dialogue on ways to address climate change, in the form of meetings of EU-US High-Level Representatives on Climate Change. The first such meeting was held in April 2002.

However, initial cooperation on climate change was not easy. In the decade following the 1997 climate summit in Kyoto, Japan, the European Union and the United States began to see a divergence in their approaches to this global threat. The US was hesitant to join the rest of the world in setting strict time tables and quotas for the reduction of emissions of the greenhouse gases (GHG) which cause climate change. This difference became pronounced in 2001, when then-US President George W. Bush withdrew the United States from the Kyoto Protocol on Climate Change.

The Kyoto Protocol, which was created at the 1997 climate summit, created international standards for industrialized countries to reduce emissions of GHGs, particularly carbon dioxide. Much of the rest of the world went ahead with the treaty in 2003, and it took effect in 2008 with the support of 169 nations.

Europe has generally been regarded as leading the way in environmental policy. Every EU country signed the Kyoto treaty. In February 2005, the EU enacted an Emissions Trading Scheme, in which industrial GHG producers can buy and sell permits that allow them to pollute, but there is a cap on the total number of permits. This system provides economic incentive for companies to decrease their GHG emissions. The trading scheme was designed as a mechanism for Europe to meet its Kyoto obligations by 2012.

In 2007, when Germany, under Chancellor Angela Merkel, held the rotating presidency of the EU and headed the group of eight of the world's most industrialized countries (G8), transatlantic issues were put at the forefront of European policy. Merkel made climate change central to her engagement with the United States, stressing that for any global environmental policy to be effective, it must have the support of the US as well as China and India.

The EU would like to extend its emissions trading scheme across the Atlantic, to include the United States and ultimately the rest of the world. European lawmakers have also been looking ahead to 2012, when the Kyoto treaty expires. A dialogue began between the EU and the US on what should be done post-2012, initiated with Angela Merkel's visit to the United States in 2007. There was widespread agreement that all major industrial countries, particularly the US, needed to participate in the next international agreement.

Merkel and other European leaders were heartened by President Bush's remarks about climate change in his 2007 State of the Union address. Bush's declared goal of a 20% reduction in emissions by 2020 signified that the United States had accepted the reality of climate change and the necessity of action to prevent its drastic effects. However, by focusing on new technologies, research and development, and energy security - rather than emissions caps, reduction targets, and international cooperation - Bush demonstrated Washington's continued divergence with European policy.

Climate change was the central topic at the 2007 World Economic Forum held in Davos, Switzerland. Many international business and political leaders, including Angela Merkel and British Prime Minister Tony Blair, spoke about the need for immediate action to address climate change. The forum focused on the use of free market mechanisms to address environmental policy.

Also in 2007, a three-part report released by the Intergovernmental Panel on Climate Change (IPCC) added more credence and urgency to the issue. Signed by 2,500 scientists from 113 countries, the report clearly stated not only that climate change is occurring and will have severe consequences, but that climate change is most likely the result of human activity. With the German initiative, the publicity of the World Economic Forum, and the credence of the IPCC report, the issue had gained tremendous momentum.

In 2008, prospects for transatlantic cooperation on environmental issues increased significantly with changes in American leadership. The US presidential election was won by Senator Barack Obama, whose campaign platform included greater and more substantial action on climate change and the environment than that of his opponent, Senator John McCain. Obama also appeared more willing to take strong environmental action and more prone towards transatlantic engagement than his predecessor, President Bush. In addition to this significant change, the chairmanship of the powerful Energy and Commerce Committee in the US House of Representatives was shifted from Representative John Dingell, a long-time supporter of the auto industry, to Representative Henry Waxman, an avid champion of environmental causes.

By 2009, US leadership appeared more favorable to the prospect of multilateral efforts to address climate change and other environmental issues. Since his inauguration in January, President Obama has made moves to show his commitment to combating climate change. The economic stimulus package passed by Congress included over $80 billion in clean energy investments. Obama also signed two important presidential memoranda - one raising the fuel efficiency standards for carmakers for the 2011 model year, and another allowing states to establish higher emissions standards than those set by the federal government. Additionally, the administration supports the establishment of an emissions cap and trade system for the US, similar to the Emissions Trading Scheme in Europe. A bill creating such a system was passed by the US House of Representatives, and another bill introduced into the Senate by Senators Barbara Boxer and John Kerry proposes a similar program but with more ambitious emissions reduction targets.

More evidence of the shift towards transatlantic cooperation on climate change is a 2009 report by the European Commission that called for, among other measures, the establishment of an OECD-wide emissions market by 2015. The report stressed active engagement with the US on the issue of emissions trading. The idea of a transatlantic carbon market, and possibly an eventual global carbon market, has gained traction in recent months. However, there is still strong opposition by some in the US to any type of carbon emissions trading program, let alone a transatlantic system, and harnessing the political will in Congress would not be easy for President Obama.

2007 United States Climate Policy Legislation

The Heiligendamm Meeting