Waxman and Markey Introduce American Clean Energy and Security Act
March 31st, 2009
On March 31, 2009 House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and House Energy and Environment Subcommittee Chairman Ed Markey (D-MA) introduced the American Clean Energy and Security Act (ACES), a draft energy and global warming bill aimed at overhauling U.S. climate and energy policy. The legislation seeks to prompt debate and discussion as lawmakers head into several rounds of hearings and markups with the intent of moving forward with a completed product by the Memorial Day recess.
The 648-page, four part draft legislation covers clean energy jobs, energy efficiency, global warming, and transitioning to a low-carbon economy. The Waxman-Markey legislation establishes new energy efficiency programs, sets limits on carbon content of motor fuels, and creates a nationwide renewable electricity standard of 25 percent by 2025.
Cap-and-Trade
At the core of the Waxman-Markey draft is a market-based cap-and-trade program that establishes mandatory limits on greenhouse gas emissions over the next four decades. The cap-and-trade program targets a 20 percent U.S. emissions reduction below 2005 levels by 2020, a 42 percent reduction by 2030 and an 83 percent reduction by 2050. The legislation, however, does not put forth a plan to allocated emissions allowances prescribed by the cap-and-trade proposal or how much to charge for them. Waxman and Markey's decision to leave the details of the cap-and-trade plan until later is seen as a political moved designed to shield the proposed bill from fierce opposition in its early stages. Yet, this move leaves ample opportunity for outside interest groups to shape the legislative language in the coming weeks.
The proposed Waxman-Markey cap-and-trade plan seeks to reduce emissions on a somewhat more aggressive scale than the targets that President Obama put forth in the budget unveiled in February. While Obama's plan recommended a 14 percent reduction in greenhouse gases by 2020, the Waxman-Markey plan calls for a 20 percent reduction. The two plans are in agreement on the 2050 target of an 83 percent cut.
While leaving the issues of allowances and auctioning of credits open to debate, the plan does attempt to address those industries that are most vulnerable to international competition. The proposed legislation incorporates a proposal from Congressmen Jay Inslee (D-WA) and Mike Doyle (D-PA) to reserve a specific number of allowances for industries to be determined by the Environmental Protection Agency.
The EPA will have further jurisdiction to enter into agreements to prevent deforestation abroad-which accounts for about 20 percent of yearly greenhouse gas emissions. In order to flexibly respond to rising domestic costs associated with the cap-and-trade program, the EPA will oversee a "strategic reserve" of about 2.5 billion carbon allowances to inject into the market, should credit prices rise faster than predicted.
The Federal Energy Regulatory Commission is the proposed oversight agency of the carbon markets-responsible for both allowances and offsets. However, the EPA will create separate emission standards for hydrofluorocarbons-a major contributor of greenhouse gas emissions.
Emission Standards & Plug-ins
The draft American Clean Energy and Security Act takes would establish federal greenhouse gas standards for various vehicle categories. The bill mandates the EPA to set new standards for heavy duty vehicles by 2010, for marine vessels and engines by 2012, and for aircraft engines in the future. Also, the draft bill gives EPA the authority to set standards for other nonroad vehicles and engines.
The plan seeks to promote greater integration of plug-in electric vehicles, offering state and local governments financial assistance from the Department of Energy to support programs which sponsor the growth of plug-ins in their area.
Energy Efficiency & Renewable Energy Standards
The Waxman-Markey bill sets a nationwide renewable energy electricity standard requiring utilities to provide increasing amounts of power from renewable sources, such as wind, solar, tidal, wave and geothermal. The bill sets the renewable energy standard at 6 percent in 2012 and requires 25 percent by 2025. It also sets forth an energy efficiency resource standard with a target of 15 percent electricity savings and 10 percent natural gas savings by 2020. The draft legislation includes a set of other efficiency provisions intended to improve building codes and set new standards for industrial energy efficiency. A key measure outlines a suite of provisions to deploy "smart" power grid technology to enable greater energy efficiency, while overhauling the federal transmission planning process. FERC will have authority over the smart grid planning principles.
Coal Carbon Standards
Under the proposed legislation, new coal-fired power plants that receive their final permits after January 1, 2015 must meet newly established performance standards. Coal plants cannot emit more than 1,100 pounds of carbon dioxide per megawatt-hour. Standards get progressively more stringent for plants approved in 2020 and beyond.
Helios Strategies will continue to monitor the movements of the proposed American Clean Energy and Security Act and other climate and energy related legislation.