CLIMATE CHANGE, ENERGY BILLS – FIRST DRAFT OF HISTORY

House Democrats release draft energy, climate bill
Darren Samuelsohn and Ben Geman, March 31, 2009 (NY Times)
and
House fast-tracks major changes on energy and climate
Gail Russell Chaddock and Mark Clayton, March 31, 2009 (Christian Science Monitor)

SUMMARY
Congressional Representatives Henry Waxman (D-Calif), Chair of the House Energy and Commerce Committee, and Edward Markey (D-Mass) made public the draft version of their incredibly ambitious American Clean Energy and Security Act of 2009, climate change and energy legislation which they are co-sponsoring. They plan to bring the legislation out of committee and get a full House vote by the Memorial Day recess.

The 684-page draft includes a provision establishing a U.S. cap&trade system reducing greenhouse gas emissions (GhGs) to 20% below 2005 levels by 2020 and 83% below 2005 by 2050.

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It also includes a national Renewable Electricity Standard (RES) requiring utilities to obtain 25% of their power from New energy sources by 2025, as well as a national Energy Efficiency Resource Standard (EERS) and other energy efficiency and vehicle fuel efficiency provisions.

Speaker of the House of Representatives Nancy Pelosi (D-Calif) called the draft bill "historic" and said it was a starting point for debate as it makes its way through the committee process.

As a basis for negotiation, the bill provides specifics on emissions cuts open to bargaining and leaves open points opponents might find worth debating.

The bill establishes the Federal Energy Regulatory Commission (FERC) as the cap&trade system regulator and prevents the Environmental Protection Agency (EPA) from regulating GhGs (because they would be regulated by cap&trade).

On vehicle emission standards, it empowers EPA in the area of airplane, heavy duty, marine and nonroad vehicles and engines from as early as 2010. It opens the door to adopting nationally the strict California passenger vehicle standards.

It also instructs the EPA to work on international agreements to stop deforestation.

It provides Department of Energy (DOE) support for battery electric vehicles (BEVs), both plug-in hybrid electric vehicles (PHEVs) and all electric vehicles (EVs), and requires grid operators and utilities to prepare the way for the transition to BEVs.

The bill’s RES requires utilities to get 6% of their power from New Energy sources in 2012 and raises the requirement stepwise to 25% by 2025. 20% of each state's requirement can come from efficiency implementations.

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To support the RES, the bill allows long-term federal power purchase agreements (PPAs) for New Energy.

The bill’s EERS requires utilities to get 15% (electricity) and 10% (natural gas) demand reductions by 2020. The American Council for an Energy-Efficient Economy (ACEEE) estimates this will eliminate the need for 390 power plants.

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There are also required improvements to building codes and new standards for industrial energy consumption.

Provisions for the deployment of a "smart" grid charge FERC with facilitating federal transmission planning and prioritizing the use of New Energy.

A low-carbon fuels provision in the bill requires U.S. refiners to bring lifecycle emissions of liquid fuels to 2005 levels by 2022, 5% lower by 2030 and 10% lower after that.

A performance standard for coal plants permitted after Jan. 1, 2015, allows no more than 1,100 pounds of carbon dioxide per megawatt-hour and tightens down from 2020 on. Plants built between now and 2015 must also comply, on a slower time-schedule.

The bill has provisions to accelerate the development and deployment of carbon capture and storage (CCS, aka “clean” coal) technology and puts the responsibility for doing so on DOE and EPA.

Environmentalists like what they have seen of the bill though some are dismayed by provisions for “clean” coal and will be dissatisfied by anything less than a 100% auctioning of emissions credits.

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COMMENTARY
Any legislation passed by the House will also require approval in the Senate. The Senate filibuster power has, in the recent past, been used by a minority of recalcitrant conservatives to block most New Energy legislation.

The fear of Senate Republicans, as already announced in debate, is that the Democratic leadership in the House and Senate may join in circumventing the Republican filibuster power in the Senate by submitting climate change legislation to a reconciliation process which overrides the filibuster with a predetermined limit on debate.

The reconciliation process is controversial and normally only used to push budget matters through a divided Senate. Until there are 60 reliable pro-New Energy votes in the Senate, the reconciliation process may be the only way around the recalcitrant fossil fools.

Democrats outnumber Republicans in the House at large and in Waxman’s committee, which must first approve the bill. But cap&trade is controversial, splitting liberal and progressive Democrats from those in conservative and fossil fuel-rich regions. Waxman's 36-23 committee majority could be tough to hold and the conservative Blue Dog Democrat faction could be a problem when the bill gets to the House floor.

Most Republicans remaining in the House after the 2008 Democratic wave are from solidly conservative districts and simply reject cap&trade as a complicated financial boondoggle of the kind that created the current economic downturn. Many remain climate change deniers.

That the draft legislation has tougher emissions reductions than proposed by the White House (the Obama budget calls for a 14% cut from 2005 levels by 2020) suggests there is room for negotiation. The draft bill also has specifics (3% cuts in 2012, 40% cuts by 2030) and specifics are always fodder for bartering.

Crucially, the draft legislation leaves open the question of the percent of the cap&trade system's emissions credits to be auctioned. Senator John McCain (R-Ariz) is known to be one of the few Republican proponents of cap&trade but advocates a partial give-away of credits to ease the burden on big emitters, while the White House wants a 100% auction. Successful brokering there could bring a powerful Republican to the support of the bill.

In an apparent nod to conservatives and the business community, a section of the bill ("Transitioning to a Clean Energy Economy" from Reps. Jay Inslee, D-Wash, and Mike Doyle, D- Penn) allots free credits to industries most vulnerable to international competition (iron and steel, aluminum, cement, glass, ceramics, chemicals and paper).

The provision that removes authority from EPA to regulate GhGs once a FERC-regulated cap&trade system is legislated is cleverly strategic. Opponents of cap&trade are all too aware that EPA has the legal authority, under Clean Air Act powers recently-affirmed by a 2007 Supreme Court decision, to strictly regulate GhGs. That power was obstinately not exercised by the Bush administration but President Obama’s EPA has already signaled it is ready to go to work ratcheting down emissions. The bill’s provision tells conservatives they can be rid of the threat of harsh EPA action if they put a cap&trade system law in place.

The Senate Energy and Natural Resources Sommittee is working on a similar comprehensive bill on the same time schedule, aiming for floor debate by Memorial Day. Separate climate change legislation is being developed by the Senate Environment and Public Works Committee.

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QUOTES
- Waxman: "This legislation will create millions of clean energy jobs, put America on the path to energy independence, and cut global warming pollution…Our goal is to strengthen our economy by making America the world leader in new clean energy and energy efficiency technologies."
- Rep. Charles Gonzales, 6-term Democrat, conservative San Antonio (Tex): "It's time for us to prepare, fill in the blanks, and submit what we think are areas of concern for us…It's going to be all regional."
- Rep. Tammy Baldwin, 6-term Democrat, liberal Madison (Wis): "It's going to be probably an impossible challenge to make everyone happy in such complex and important legislation…But I think the efforts are building upon [prior] successful collaborations..."
- Robert Stavins, environmental economist/director, Harvard environmental economics program: It would be reasonable to anticipate that, overall, the climate portion would cost, at most, 1 percent of GDP [gross domestic product]...That’s a big number, but I don’t see it pushing us into another recession...Still...it will be difficult to deal with during an economic downturn.”

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- Joe Barton (R-Tex), Ranking Republican, Energy and Commerce Committee: "[The bill] marks a triumph of fear over good sense and science, and it couldn't come at a worse time, because it proposes to save the planet by sacrificing the economy…This cap-and-trade plan is a priority for the Obama administration and the Democratic party's congressional leaders…but it is so proudly ignorant of the daily economic reality faced by working people that I do not believe it could survive a vote in either the House or Senate just now."
- Fred Krupp, president, Environmental Defense Fund: "Chairmen Waxman and Markey are experienced legislators who have focused on exactly the right issues to quickly build consensus and allow Congress to pass a strong bill this year,"
- Lance Pierce, director, Union of Concerned Scientists' climate program: "This is a truly comprehensive outline…This broad approach is the best way to promote renewable energy sources, curb our oil dependence and avoid the most expensive consequences of climate change."
- Emily Figdor, Environment America: "[It is a] pragmatic bill that tries to balance a historic opportunity to unleash clean energy to rebuild our economy and stop the climate crisis, with the diversity of views on the Energy and Commerce Committee…[though it also has] sky-high levels of carbon offsets, which provide less-certain reductions in emissions, and lavish subsidies, including from ratepayers, for still-unproven carbon capture and storage technology."