U.S. House lawmakers are targeting a 20% reduction in greenhouse
gases by 2020 in a draft climate bill unveiled Tuesday that
promises to raise energy costs for the country, but leaves many of
the most important details for later negotiations.
The draft document, published by the Energy and Commerce
Committee, omitted specifics on a key determinant of how much such
a program will cost: the percentage of carbon dioxide credits to be
auctioned off versus given freely to industry.
Facing a fierce political fight over a measure that will have a
wide-reaching impact across the economy, the decision by House
Energy and Commerce Committee Chairman Henry Waxman, D-Calif., will
buy time for further negotiations on the issue.
The draft bill - the American Clean Energy and Security Act -
establishes a decreasing cap on greenhouse gases and creates a
market where businesses could buy and sell the right to emit those
gases. Calling for a cut of 20% from 2005 levels by 2020, the bill
is slightly more aggressive in the near term than President Barack
Obama's call for a 14% cut by 2020, but the proposal's long-term
goals of 83% cuts by 2050 parallel the administration's target.
The 600-page draft legislation also includes measures written by
energy subcommittee chairman Ed Markey, D-Mass., that set a federal
mandate for an increasing percentage of electricity to come from
renewable sources, an efficiency standard and new performance
standards for coal-fired power plants.
"This legislation will create millions of clean energy jobs, put
America on the path to energy independence, and cut global warming
pollution," Waxman said. "Our goal is to strengthen our economy by
making America the world leader in new clean energy and energy
efficiency technologies," he said in a statement.
Environmentalists applauded the draft, but said there was still
much work ahead. "It's still a work in progress and we have a lot
of challenges yet to go through," said Frank O'Donnell, head of the
advocacy group, Clean Air Watch.
"It's the highwater mark, and may be the best hope we have for
passage of climate change in Congress," O'Donnell said,
acknowledging that the proposal is likely to be weakened in later
iterations as it moves through the legislative process into the
Senate.
Industry groups such as the U.S. Chamber of Commerce believe
that too aggressive emission cuts without safety valves that can
alleviate price pressures could force businesses overseas and will
raise energy prices to unsustainable levels.
It's a good starting point, and there are some positives," said
American Electric Power Co. (AEP) spokesman Pat Hemlop. "But one of
our concerns is that the timetable is very ambitious."
At the same time, many companies that could take advantage of a
price on emitting greenhouse gases such as wind-turbine
manufacturers, nuclear power companies and investment banks that
can capitalize on the creation of a multi-trillion dollar market
will likely be encouraged by the milestone of progress the proposal
represents. Such companies desire the longer-term investment
certainty a climate bill could create.
Waxman's omission of allocation details indicates that Obama's
plan for an auction of 100% of the credits is unlikely, and a later
version of the bill will most likely include allocation of credits
to energy-intensive industries such as steel, aluminum, paper and
chemicals. In the president's 2010 budget proposal, Obama estimated
the auction could have raised nearly $650 billion in climate
revenue over eight years, though Treasury officials estimated it
would likely raise two to three times that amount.
So while the emission cut targets may be tougher than the
president's, it could prove to be more lenient on some sectors.
Hounded by an army of lobbyists,lawmakers - particularly those
from manufacturing and coal-powered states - will likely lock horns
in the coming weeks over the percentage of allocations distributed
to industry and the distribution of climate revenue. Obama wants to
give most of the revenue as tax credits to consumers to help ease
the rising cost of energy.
But many companies and lawmakers whose manufacturing
constituencies are likely to be hardest hit want the money funneled
to the utilities and their energy-intensive businesses.
Few believe that the Senate, where the biggest battle looms for
a climate change bill, will pass legislation this year to cut
greenhouse gases even if the House approves a version of Waxman's
bill.
But House passage would give the president substantial leverage
in international climate treaty talks to be conducted through the
year. Waxman has said he wants to pass the bill out of his
committee by the end of May, and the House could approve the bill
before a meeting of major economies in July, leading up to the
December United Nations negotiations in Copenhagen.
One of the key measures to mitigate costs will be the "offset"
program, which allows companies to offset their emissions through
other emission-reduction projects such as re-forestation or
updating technology at foreign power plants. The offset program is
designed to leverage greater emission reductions, however, and
requires a certain amount of emission cuts to buy offset
credits.
Emily Figdor, Environment America's Federal Global Warming
Program director, said that while Waxman's bill helped to fuel
momentum for climate law, "we're disappointed that the bill
includes sky-high levels of carbon offsets."
Waxman's bill also tries to prevent the migration of
energy-intensive industries to cheaper countries that don't have
the same climate standards - a process called "carbon leakage" that
wouldn't reduce the total world-wide emissions - by providing
rebates to energy-intensive industries.
Waxman's draft includes:
- A new source performance standard for coal-fired power plants
that cuts carbon dioxide emissions by 50% by 2015 and 65% by
2020
- Renewable electricity standard from 6% by 2012 up to 25% by
2025
- An energy efficiency standard, up to 15% in electricity
savings and 20% in natural gas savings by 2020.
- A low-carbon fuel standard designed to drive development of
electric vehicles and biofuels
- A required $10 billion utility charge to fund carbon dioxide
sequestration projects
- A mandate for a 30% increase in building efficiency for new
buildings by 2012 and a 50% increase by 2016
-By Ian Talley, Dow Jones Newswires, 202-862-9285;
ian.talley@dowjones.com