Landmark greenhouse gas cap-and-trade bill heads to Senate
Early Friday evening, the U.S. House of Representatives narrowly passed the American Clean Energy and Security Act of 2009, also known as the Waxman-Markey bill, by the vote of 219-212. The centerpiece of the bill is a proposed cap-and-trade program that would require emitters of greenhouse gases (GHGs) to take steps to reduce their emissions or obtain allowances or other credits. The bill was marked up by the House Energy and Commerce Committee in May.
The bill will now go to the Senate, where Chair of the Environmental and Public Works Committee Barbara Boxer (D-CA) intends to consider the bill in Committee before the congressional August recess. Passage in the Senate is widely believed to be more difficult, especially given the chamber's procedural rules that provide individual senators opportunity to hold up legislation. However, passage out of the House may provide some momentum that improves the bill's prospects.
Following a day of impassioned speeches on the House floor and a “mini-filibuster” by Republican Minority Leader John Boehner (R-OH), prompted by a significant Manager’s Amendment by Chairman of the Energy and Commerce Committee Henry Waxman (D-CA), the House reported a bill that features:
- A new economy-wide cap-and-trade program beginning in 2013 that would reduce GHG emissions by 3% of carbon dioxide equivalents (COe) emitted in 2005, and would eventually lead to an 83% reduction by 2050.
- COe allowances will be issued each year by EPA to implement the cap. The bill will allocate varying percentages of the allowances for free, depending on the year and the covered industry affected; about 75% will be distributed for free in 2012. The rest will be sold in quarterly auctions.
- Emissions allowances can be sold or traded without restriction.
- Covered entities will be allowed to borrow emissions allowances with a vintage year of 1 to 5 years in the future to satisfy up to 15% of their annual compliance obligation, but must repay borrowed allowances with a vintage year of 2 to 5 years in the future with interest. In addition, the program will allow unlimited allowance banking for use in future reporting periods.
- The EPA will establish a carbon offset project verification and oversight program. Many existing offset project standards are expected to generate credits under Waxman-Markey; for example, in a floor statement today, Mr. Waxman said that projects established under the Chicago Climate Exchange’s protocol would continue to generate credits, although it is not settled whether the bill as written would support this interpretation.
- Trading of derivatives for emission allowances, offset credits, and renewable electricity credits will be overseen by the CFTC.
- The Congressional Budget Office has estimated that cap-and-trade will add $175 annually to average household energy costs, while the EPA has estimated it will add $80-$111.
- The creation of a federal Renewable Energy Standard (RES) that requires at least 6% of energy produced by electric utilities to come from renewable resources and energy savings by 2012, with that requirement rising to 20% by 2020.
- New requirements and programs designed to promote carbon capture and sequestration.
- New transmission capacity to transmit renewable energy, more efficient operation of the existing electrical grid using new technologies, and new oversight of transmission lines according to demand for electricity, to be regulated by FERC.
- Reauthorization of loan guarantees to assists in funding development, construction, and integration of electricity transmission technologies.
- Major changes affected by Mr. Waxman’s amendment today include:
- Expanding recognition of hydroelectric power under the RES.
- New backstop transmission siting authority for FERC in the West.
- New state authority to convey certain emissions allowances directly to renewable energy generators.
- New grants for local government enforcement of energy efficiency building code provisions.