Draft Global Warming Bill Released

04/01/2009

On March 31, 2009, U.S. Representatives Waxman and Markey released draft global warming legislation: The American Clean Energy and Security Act of 2009. The 648-page draft bill consists of four titles addressing clean energy, energy efficiency, reducing global warming pollution, and transitioning to a clean energy economy.

The issue of primary concern is how the bill proposes to reduce global warming pollution. As expected, the bill would impose a greenhouse gas “cap and trade” requirement applicable to electric utilities and major industrial operations that emit at least 25,000 tons per year of carbon dioxide equivalent, which are said to account for 85% of this country’s global warming emissions. Under the cap and trade program the covered entities would be required to hold sufficient “allowances” to cover all of their greenhouse gas emissions over a rolling two-year compliance period. The total amount of allowances would be lowered over time to reduce the 2005 greenhouse gas emissions from the covered entities on a sliding scale, including a 20% reduction by 2020 and 83% by 2050. Allowances could be banked, traded, or sold, and covered entities could “borrow” allowances from future years in certain circumstances.

Although the bill provides a significant amount of detail, the important question of how the allowances would be allocated is not addressed and apparently will be left to development through the legislative process. Options for distributing the allowances to the covered entities could include a simple distribution based upon historical operations, selling the allowances for a fixed price, auctioning the allowances, or a combination of these or other methods. The bill does provide for the maintenance of a strategic reserve of allowances, to be auctioned off to covered entities if the cost of allowances exceeds projected amounts.

The bill also addresses the controversial issue of whether greenhouse gas emissions should be regulated under the federal Clean Air Act. Greenhouse gases would not be regulated as criteria or hazardous air pollutants and would not be subject to the air quality new source review permitting requirements. The bill however, does direct EPA to set emissions standards for greenhouse gases from sources not subject to the cap and trade program and to require reductions in emissions of hydrofluorocarbons and so-called black carbon or soot. The bill also addresses “preemption” providing that no state or political subdivision would be allowed to implement or enforce a cap on greenhouse gas emissions from 2012 through 2017.

The generation of electricity from renewable resources is also addressed. Electricity from renewable resources are to be increased beginning at 6% in 2012 and rising to 25% by 2025. Incentives are provided for the development of carbon capture and sequestration technology, and clean fuels and vehicles. The bill also a calls for energy efficiency standards for buildings, manufactured homes, appliances, transportation equipment, industrial energy, and utilities.

Provisions are included to ensure that the transition to the “clean energy economy” does not result in severe economic consequences. These provisions include rebates, funds to support educational and training programs for workers, and unspecified measures for assisting consumers.

The bill will be controversial both as to its overall scope and goals and as to the details for accomplishing those goals, which could entail significant costs as well as benefits. Those who have a significant stake in the energy and environmental arenas will want to follow the bill through the legislative process.

For more information, please contact: James Braddock, Jeff Civins, or Mary Mendoza or see our Environmental practice.

Email Disclaimer