"Landmark" Cap-and-Trade Bill Passes in U.S. House Energy and Committee

The U.S. House Energy and Commerce Committee yesterday approved landmark legislation that, if enacted by Congress and signed into law by President Barack Obama, will for the first time in the U.S. establish a cost for emitting carbon and other greenhouse gases

H.R. 2454, "The American Clean Energy and Security Act" as amended, was passed by a vote of 33 to 25. According to the Democratically controlled committee, "This legislation is a comprehensive approach to America's energy policy that charts a new course towards a clean energy economy."

According to a story in today's Wall Street Journal ("House Panel Clears Plan to Cut Greenhouse Gases," May 22, 2009), the approval of the proposal bolsters "prospects that the government will put a price on carbon for the first time [thus] portending a major shift in how the U.S. uses energy." The European Union has had similar legislation in place since January 1, 2005, and thus the U.S. efforts in this regard are several years behind what the EU is already doing.

The bill as amended would cut U.S. GHG emissions about 17 percent below 2005 levels by 2020 and by 80 percent by 2050. It also calls for about 85 percent of the emissions allowances to be given way for free (as opposed to auctioned off) to energy intensive sectors in the economy. President Obama has called for complete auctioning of the allowances, but clearly that is not going to happen and it now appears the president is flexible on this issue. The remaining 15 percent of allowances would be auctioned at a starting price of $10 per metric ton.

Diane Cappiello, national environment reporter for the Associated Press, explained on the NewsHour tonight, more about why such a large percentage of allowances will be distributed for free: 

"This bill would actually give 85 percent of those credits away for free to a variety of industries. And they did that for the sole purpose [of] assuaging some of the concerns of moderate Democrats who say, hey, listen the coal plants in my state are going to have a really hard time getting there if they have to buy these [credits] and also reduce emissions.  So that's exactly why it was done."

Despite passing in the House Committee, formidable challenges lie ahead for any eventual passage. The challenge lies not so much in the U.S. House where the Democratic majority is likely to pass the bill this summer but in the U.S. Senate. Despite a big Democratic majority in the Senate, bill advocates will need 60 votes in favor of the measure in order to avoid a filibuster. The bill does not lend itself to strictly "party-line" thinking, since Democratic senators from "rust belt" states are likely to want even more concessions before approving the measure.

A good overview of the bill can be found by clicking here, "House Panel Approves Climate Bill," (NPR Morning Edition, May 22, 2009).

However, it is way too early for green advocates to cheer since yesterday also brought news that the Chinese government is calling for far more aggressive greenhouse gas emissions cuts than either the American bill or EU law has called for. The Chinese have proposed that western nations cut their emissions by 40 percent by 2020 with a baseline of 1990. Washington and Brussels are not likely to agree with this proposition.

New Report From NREL Evaluates Proposed Federal Renewable Standards on the Electricity Sector

The National Renewable Energy Laboratory, the premier renewable energy research institution in the U.S., has published a new study that compares three proposed federal renewable energy standards (RES).

The "Comparative Analysis of Three Proposed Federal Renewable Electricity Standards" analyzes bills introduced by Senator Jeff Bingaman, a New Mexico Democrat, Congressman Ed Markey, a Massachusetts Democrat, and a bill sponsored jointly by Congressmen Henry Waxman, a California Democrat, and Markey.  The analysis compares these bills with the combined impact of the renewable portfolio standards already in place in 28 states.  

According to the study, the Bingaman measure would result in a "peak effective RES" of 12.1 percent.  The Markey measure would result in a peak of 21.8 percent, and the Waxman-Markey bill would result in a peak of 17 percent.  The base scenario -- which takes into account the currently existing state-based renewable energy portfolio standards -- was estimated to generate 10.4 percent of national load in 2020 and 12.4 percent in 2024.

In terms of reductions in carbon dioxide emissions, the Bingaman proposal reduces emissions 95 million metric tons annually in 2030 compared to the base case.  The Markey RES saves an estimated 150 million metric tons annually in 2030 and the Waxman proposal reduces emissions by 435 million metric tons by 2030.

To evaluate the impact of the three federal proposals on the U.S. electricity sector, a team of NREL senior energy analysts used a "detailed least-cost optimization model capable of simulating the special attributes of variable sources like wind and solar power."

The study provides an overview of how the electric utility sector "might develop in the next several decades under various policy scenarios," Douglas J. Arent, NREL's director of Strategy Energy Analysis and Applications Center, said.

New Version of "American Clean Energy and Security Act of 2009" Introduced; Markup Session Begins Today

The real battle over the "American Clean Energy and Security Act of 2009" started today as the House Committee on Energy and Commerce began its "markup" on the bill.

This new version of the legislation -- which would institute a cap-and-trade system for greenhouse gas emissions -- replaces the "draft bill" that Reps. Henry Waxman, California Democrat, and Edward Markey, Massachusetts Democrat, introduced on March 31.

However, no sooner had the new bill been introduced last Friday than an amendment in the nature of a substitute bill was introduced.

The bill -- certain to be one of the most contentious environmental/energy bills handled by Congress in years -- will be considered by the House committee this week and next. Chairman Waxman's goal is to report the bill out of committee by the end of next week.

As the markup session began this afternoon, Chairman Waxman said, "I am very proud of the work this committee has done in developing this legislation. Energy legislation is by its nature contentious. It can inflame regional differences. But over the last several weeks, we have been able to bridge these differences and build a remarkable coalition behind the legislation."

Well, I guess we'll wait and see. One thing is for sure -- the bill is now replete with all sorts of free (for the time being) emissions allowances.

Word in Washington is that the measure will receive no Republican votes in committee. Does a nearly straight party-line vote (although some Democrats are likely to join the Republicans in voting against the bill) represent "a remarkable coalition?" Maybe in Washington, D.C., but not in the real world. On the other hand, the bill was never likely to receive much Republican support in any case.

EPA GHG Endangerment Proposal: "A Game Changer"

One day after the U.S. EPA's historic proposed endangerment finding involving greenhouse gases, the sentiment across the country is that the Obama Administration's action has changed the political landscape.

U.S. Rep. Edward Markey, chairman of a U.S. House Energy Committee subcommittee that will begin hearings next week on legislation calling for a GHG cap-and-trade system and a long-time supporter of GHG reductions, characterized the decision as "a game changer," The Wall Street Journal reported today.  "It's now no longer a choice between doing nothing.  It is now a choice between regulation and legislation."

Consequently, a few things are clearer today:

• The U.S. is going to have a GHG emissions reduction scheme either through legislation or regulation.
• Congress is likely to take a more flexible (including, most importantly establishing a cap-and-trade system) approach to reducing GHG emissions; this is largely linked to the fact that the multiple stakeholder groups will have greater influence over elected representatives and senators than the "unelected" regulators in the EPA.
  
• No industry sector will want to be left out of the political discussions; expect increased lobbying of politicians as well as more TV and radio ads by stakeholder groups aiming to frame the overall issue; from past experience industry is well aware that it is easier to have "a seat at the table" during the legislative process as contrasted to the regulatory process.
• Left-wing and right-wing talkers, bloggers and other "self-anointed experts" will attempt to rally their own bases; whether this will add anything to the overall debate is questionable at best; what it will do is give the talkers another issue to ruminate over for the foreseeable future and a good way to increase ratings.  
• The U.S. has increased its global credibility in terms of addressing climate change; but the U.S. is so far behind the European Union that even with an enormous effort this year, the U.S. is unlikely to take the global leadership role away from the Europeans (a role, incidentally, that the Europeans greatly cherish).

To paraphrase former U.K. Prime Minister Winston Churchill, this is not the beginning of the end...rather it is the end of the beginning.