House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) and Chairman of the Energy and Environment Subcommittee Edward J. Markey (D-Mass.) introduced the “The American Clean Energy and Security Act” as the opening salvo in a contentious and complex debate over a greenhouse cap and trade program. The bill links two major and independently controversial proposals: 1) a nationwide cap on greenhouse gases (GHGs); and 2) a national renewable standard and energy efficiency.
The bill would:
- Cut national greenhouse gas emissions 20 percent from 2005 levels by 2020-this is slightly more aggressive than similar measures pushed by the Obama Administration. Overall the goal is to cut GHG emissions by 85% by 2050 when compared to 2005 levels
- Reduce electricity demand by 15% by 2020
- Nationwide renewable energy standard which requires 25 percent of the Country’s energy generation be met through wind, solar and other renewables.
The bill forms a skeletal framework, but leaves major controversial components open to debate. (See summary of the American Clean Energy and Security Act) For example, the bill does not address whether pollution allowances under the cap and trade program would be 100% auctioned or 100% allocated to industry or somewhere in between. The fact the bill does not even make a proposal on this component suggest the drafters understand a deal will need to be struck to give a chance for the bill to pass.
US Climate Action Partnership — a coalition of businesses and environmental groups — called the bill a good starting point. The bill makes several key concessions to Industry: a) allowing domestic and international offsets; b) provides C02 and other GHGs cannot be regulated as criteria pollutants or hazardous air pollutants under the Clean Air Act; c) creates a strategic reserve of allowance in the event allowance prices are too high; and d) allows unlimited banking of allowances.
However, the bill also includes proposals that will raise concerns with Industry beyond the major concern-should the U.S. have a cap and trade system to control GHGs? While the bill essentially exempts GHGs from traditional regulation under the Clean Air Act (a major advantage of legislation), it directs EPA to set up a new regulatory program to curb GHG emission by sources that are not covered by the Cap. The bill also does not create any kind of so called "safety valve" which is a limit on the price of allowances. While the strategic reserve concept allows some cushion, it only provides for release of more allowances into the pool it does not set a ceiling on the price of an allowance.
As reported in the Boston Globe, the House Committee’s goal is complete debate on the bill by Memorial Day. Here is the tentative schedule:
- Week of April 20: Energy and Environment Subcommittee Hearings
- Week of April 27: Energy and Environment Subcommittee Markup Period Begins
- Week of May 11: Full Energy and Commerce Committee Markup Period Begins
This appears to be a highly ambitious schedule given the level of controversy and major components of the bill open to debate. Passage will be still very questionable. You will have virtually no support among Republicans. You will have Democrats in coal states worried about the cost impacts of cap and trade on utilities. You will have Democrats and Republicans in Southern states very concerned about the national renewable energy standard.
For the bill to pass, major components will likely have to be restructured. I am certain there will be plenty to write about regarding the bill in the coming weeks and months.