Another Big Step Toward Climate Protection

May 20, 2009 | What's New |

The American Climate and Energy Security Act

H.R. 2454

This bill, introduced May 15 by Congressmen Waxman and Markey, builds upon the discussion draft circulated in March. Though the bill’s major components are the same, Waxman and Markey made important additions and changes, which are outlined below. The bill is currently being “marked up” in the Energy and Commerce Committee. Chairman Waxman has pledged to pass this landmark legislation through his committee by Memorial Day.

Allowance Allocations

One of the most important areas where the discussion draft was silent was the issue of how the valuable emissions permits, or “allowances” will be distributed. With billions of dollars on the table, this has been a key focus of negotiation where significant concessions were made by Waxman and Markey in order to gain enough support to pass the bill out of the Energy and Commerce Committee.

Interfaith Power and Light, most faith and environmental groups, and President Obama had supported 100% auction of permits in order to create a fair system and bring in revenue for clean energy incentives, green jobs, and leveling out the impact on low income residents. The bill does embrace that goal and delineates a timeline to phase out the free allowances, moving close to a full auction, but not until almost 2030.

At the outset of the act’s timeline, 2012, over half of the allowances will be given away to utilities via local distribution companies and energy intensive industries with the goals of consumer protection and avoiding shifting jobs overseas, respectively. In perhaps the most objectionable provisions, 5% is earmarked for merchant coal and other long-term power agreements, 2% for domestic oil refiners, and 2% for utilities to pursue carbon capture and sequestration. About a quarter will be allocated to states and other entities for public purpose programs, such as domestic impacts mitigation, adaptation assistance for the most vulnerable countries, protecting tropical forests, clean energy investments, and worker training. Finally, 15% of the permits will be auctioned and the revenue directed to assist moderate and low-income households with energy costs through tax credits and the like.

While the auction component starts small, it does grow over time as most specific allocations are phased out.

Emissions Targets

The 2020 cap has changed from the discussion draft. The target was reduced from 20% below 2005 levels by 2020 to 17% below 2005.

As before, sources representing about 85 percent of U.S. carbon emissions are covered by a firm, enforceable cap on their emissions. The economy-wide goals have not changed:  3 percent below 2005 levels by 2012, 20 percent below by 2020, 42 percent below by 2030, and 83 percent below by 2050. These economy-wide goals are less significant than the firm cap on covered sources, but they guide emission reduction expectations for sources outside the cap.

Like the discussion draft, the bill directs the National Academy of Sciences to review the targets periodically in light of the best available science, and the President is to recommend program changes to Congress. This is a good insurance policy in case emissions reductions need to be accelerated.

We are also pleased that the bill continues to provide for further reducing emissions through reductions in tropical deforestation in other countries (which now accounts for 20% of global carbon emissions). This is a key policy to get supplemental emissions reductions through a program that supports developing nations in keeping their forests. Specifically, five percent of the emissions allowances would be earmarked to fund a program to achieve in 2020 supplemental reductions equal to 10 percent of U.S. 2005 emissions.

Renewable Energy and Energy Efficiency Standards

The RES and EES have been combined in the new bill, with significantly less ambitious targets. The new policy requires electrical utilities to procure 20% of their energy from renewable sources by 2020, but up to 5% of that could come from energy savings. In addition, the definition of renewable has been expanded to include sources like municipal solid waste and biomass from federal lands.

There is much more to report (the bill is now over 900 pages!) and we’ll keep tracking key amendments, proposals, and action opportunities as the bill moves forward.

Overall, despite its flaws, HR 2454 represents a huge step forward toward stabilizing the climate. Remember that this legislation is still in its early stages. We’ll continue to work with leaders in Congress and our allies to get the most effective and equitable policy possible.

Stay tuned…

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