House Energy and Commerce Chair Henry Waxman and Energy and Environment Subcommittee Chair Ed Markey released their draft energy and climate bill last Tuesday. It’s very comprehensive. It’s also far from perfect. It’s also, for now, just a draft, sure to change and be amended. For those of you who just want a quick peek at what this bill is about, here is the bill’s 5-page summary (pdf) and here is a portion of the introduction:
The legislation has four titles: (1) a “clean energy” title that promotes renewable sources of energy and carbon capture and sequestration technologies, low-carbon transportation fuels, clean electric vehicles, and the smart grid and electricity transmission; (2) an “energy efficiency” title that increases energy efficiency across all sectors of the economy, including buildings, appliances, transportation, and industry; (3) a “global warming” title that places limits on the emissions of heat-trapping pollutants; and (4) a “transitioning” title that protects U.S. consumers and industry and promotes green jobs during the transition to a clean energy economy.
Overall, the bill is pretty decent. It’s not as strong as I think it should be. Knowing that it will be amended and changed in subcommittees, committees and during Senate-House negotiations, I’m afraid I see too much room for major weakening to be done. There is no time left for weakening. The U.S. needs to take an aggressive stance on greenhouse forcing. We’ve caused plenty of change to the climate system already with even more to come that’s “in the pipeline”. Whatever this legislation ends up doing, it will take time to implement and then more time to take effect. Then there will be interactions with the international community. As the world’s largest greenhouse forcer, it is up to us to take responsibility for our actions and start leading the world on the most critical 21st century issue we’ll face.
Below, I go through most of the 5-page summary items. The items stack up to a pretty big list. Having this draft summary is important as we’ll see what changes are implemented in the next couple of months and what the final legislation ends up containing. Oh, and if you’re feeling really adventurous, here is the entire draft bill (Big pdf!).
1. Clean Energy Items
The bill has a national renewable electricity requirement that begins at 6% in 2012 and gradually rises to 25% in 2025, which is good.
It has carbon capture and sequestration language, which I have to say seems silly. CCS is many years away from any kind of realistic test. I support some research into this technology as long as it doesn’t distract from activities that we can take today to reduce our greenhouse forcing.
The draft contains provisions to facilitate the deployment of a smart grid, including measures to reduce utility peak loads through smart grid and demand response applications and to help promote smart grid capabilities in new home appliances. Boulder, CO is the first smart-grid city in the nation, as I’ve written about before. Policy makers would be wise to discuss future smart grid plans with people who were involved with Boulder’s implementation. I know some delays were encountered and some goals had to be scaled back (though not very well communicated with the public).
The draft authorizes federal agencies to enter into long-term contracts to purchase renewable electricity. Good – the federal government will provide a stable, large-scale customer of renewable electricity. That will help develop the industry and market.
2. Energy Efficiency Items
The draft promotes energy efficiency in new buildings by providing federal training and funding assistance to states that adopt advanced building efficiency codes. It authorizes funding for retrofitting existing commercial and residential buildings to improve their energy efficiency. And it directs the Environmental Protection Agency to develop procedures for rating building energy efficiency. All of this sounds good to me. Energy efficiency is the cheapest way to reduce our greenhouse forcing. It is also the fastest technologies to implement since mature versions are in the market today. Increasing the size and thus the fluidity of that market is needed. To boot, this will help the economy slow down in its tumble and eventually turn around.
The draft codifies four negotiated agreements on efficiency standards for lighting and four additional agreements for other appliances. In addition, it creates a program to provide financial incentives to retailers who sell high volumes of “Best-in-Class” appliances. Good and good. Standards should be standards. This will help reduce consumer confusion regarding different suppliers’ use of efficiency language.
The draft directs the President to work with the relevant agencies and California to harmonize, to the maximum extent possible, the federal fuel economy standards, any emission standards promulgated by EPA, and the California standards for light-duty vehicles. As long as California and other states retain the freedom to decide if they want stricter standards within their states, I’m fine with this portion of the bill. California has been on the leading edge of influencing what fuel economy standards are. If auto manufacturers don’t want to sell in the world’s 7th largest economy, they don’t have to. If they do, then they need to recognize states’ standards that are designed to protect their citizens, not the corporate profit margins.
The draft establishes a new energy efficiency resource standard to enlist electricity and natural gas distribution companies in the effort to make the nation more energy efficient. The efficiency standard starts with a 1% electricity savings and 0.75% natural gas savings in 2012 and gradually increases to a 15% cumulative electricity savings and a 10% cumulative natural gas savings by 2020. We’re guaranteed to hear about how 2012 is too soon and too onerous a time to provide the numbers in this bill. It’s all nonsense. The driving factor here won’t be corporate profits, it will be staving off nearly unimaginable disasters. The standards set by this draft are realistic and needed.
The draft requires the Secretary of Energy to establish standards for industrial energy efficiency and to seek recognition of the result by the American National Standards Institute. Energy Secretary Chu is going to show us how competent he is with this and other actions. I have complete faith in his capabilities to establish realistic, yet aggressive standards because he does understand the enormity of the problems we face if they aren’t aggressive.
3. Reducing Global Warming Pollution
I’ll start out by copying the intro for this section below:
The global warming provisions in the discussion draft are modeled closely on the recommendations of the U.S. Climate Action Partnership (USCAP), a coalition of electric utilities, oil companies, chemical companies, automobile manufacturers, other manufacturers and energy companies, and environmental organizations.
USCAP recommendations aren’t the ones that should be used, IMO. They’re too weak, as we’ll see below. Look at the list of corporations that get listed versus the list of environmental organizations. It’s been the environmental organizations, and others, that have been the most correct with respect to climate change. Industry has fought every change tooth-and-nail for decades. Where has that gotten us? A world with quickly warming poles, increasingly acidic oceans, and more severe weather and climate events. I have no interest in seeing those industries at the negotiating table – they’ve done their darndest to saddle the next millenium’s generations with a hot, acidic, dead world. That being said, here are the items in Section 3:
The draft establishes a market-based program for reducing global warming pollution from electric utilities, oil companies, large industrial sources, and other covered entities that collectively are responsible for 85% of U.S. global warming emissions. Under this program, covered entities must have tradable federal permits, called “allowances,” for each ton of pollution emitted into the atmosphere. Entities that emit less than 25,000 tons per year of CO2 equivalent are not covered by this program. The program reduces the number of available allowances issued each year to ensure that aggregate emissions from the covered entities are reduced by 3% below 2005 levels in 2012, 20% below 2005 levels in 2020, 42% below 2005 levels in 2030, and 83% below 2005 levels in 2050. Okay – there appears to be a lot there. This piece of the legislation is good, but it could be a whole lot better. In fact, it should be a whole lot better. How? By switching “2005 levels” with “1990 levels”. To give you an idea why, it’s important to realize that the 20% below 2005 levels in 2020 would approximate 1990 levels. Think of the emissions that would be reduced if it read instead: 20% below 1990 levels in 2020. I honestly think that’s the level of emission reductions we’re going to have to go after to get things under some semblance of control. Realize further that these numbers represent goals. I recognize, however little I want to admit, that these goals probably won’t be met. So why not make the goals stronger – that way, when they’re not met, the work done will be as strong as possible? I’ll put this out there also: these numbers are more stringent than the ones that Barack Obama was talking about on his presidential campaign and even as recently as his February budget: 14% by 2020. So a small measure of what I would term success has been achieved. On top of the above concern, how much will these numbers be watered down by the Cons and ConservaDems? Time will tell, of course.
The draft directs EPA to achieve additional reductions in global warming pollution by entering into agreements to prevent international deforestation. By 2020, these supplemental reductions will achieve reductions equivalent to 10% of U.S. emissions in 2005. I’ll have to read more about this portion. It sounds interesting, but the effectiveness of such an approach of course depends upon the details of that approach.
The draft allows covered entities to increase their emissions above their allowances if they can obtain “offsetting” reductions at lower cost from other sources. The total quantity of offsets allowed in any year cannot exceed 2 billion tons, split evenly between domestic and international offsets. Covered entities using offsets must submit five tons of offset credits for every four tons of emissions being offset. Offsets are a dangerous area of action. They can be very good or they can be absolutely worthless. The numbers of offsets matter too. On first read, it looks like these offsets are closer to the good variety. Unfortunately, 2 billion offsets is way too many. That’s 2 billion extra tons of greenhouse pollution every year. To put this in context, the U.S. GHG emissions in 2005 totaled 7.2 billion tons. Thus, 2 billion tons of offsets is 28% of 2005 emissions, which I’ve already described as much higher than 1990 emissions. This number must be reduced.
To provide additional flexibility without compromising environmental goals, the draft permits unlimited banking of allowances for use during future compliance years. The draft also establishes a rolling two-year compliance period, effectively allowing covered entities to borrow from one year ahead without penalty. Allowances from two to five years in the future can be borrowed under limited circumstances. I’m not too sure what the results of this portion would be – it’s another portion in which I don’t have the experience necessary to comment on it.
The draft directs EPA to create a “strategic reserve” of about 2.5 billion allowances by setting aside a small number of allowances authorized to be issued each year thereby creating a cushion in case prices rise faster than expected. The draft directs EPA to make allowances from the reserve available through an auction when allowance prices rise to unexpectedly high levels. The proceeds of the auction will be used to purchase additional offsets that will replenish the strategic reserve. A year’s worth of offsets in strategic reserve? I’d have to see how the offset market is supposed to work more closely, but I think a year’s worth is a little high – especially given my reservations about the too-high offset allowances.
The draft provides for strict oversight and regulation of the new markets for carbon allowances and offsets. It ensures market transparency and liquidity and establishes strict penalties for fraud and manipulation. The Federal Energy Regulatory Commission is charged with regulating the cash market in emission allowances and offsets. The President is directed to delegate regulatory responsibility for the derivatives market to an appropriate agency (or agencies), based on the advice of an interagency working group. This is probably a very important piece of the legislation – once the markets are established. Since we’re in the middle of the worse recession since the 1st Republican Great Depression, most of us are very aware that reduced regulations in every market is high on the list of reasons for the crisis. Setting up oversight and regulation is easy. Ensuring that it actually works is quite another. I am especially concerned with the language directing the President to delegate regulatory responsibility. Have we learned nothing from our current state of affairs? I trust a President Obama to do the right thing here. I don’t know of any Republicon that I would trust in the White House to ensure regulatory responsibility was handled properly. That said, I’m not sure what other options are available to legislators.
The draft provides that CO2 and other greenhouse gases may not be regulated as criteria pollutants or hazardous air pollutants on the basis of their effect on global warming. The draft also provides that new source review does not apply to these global warming pollutants. This is very interesting language. To once again put my lack of understanding on display, I’m not sure what criteria pollutants or hazardous air pollutants are, as defined by the Clean Air Act. I’m not sure if this would affect the process underway to get the EPA to regulate CO2 emissions as pollutants – the detail is obviously important. What kind of pollutant are we talking about?
4. Transitioning To a Clean Economy
To ensure that U.S. manufacturers are not put at a disadvantage relative to overseas competitors, the draft authorizes companies in certain industrial sectors to receive “rebates” to compensate for additional costs incurred under the program. Sectors that use large amounts of energy, and produce commodities that are traded globally, would be eligible for the rebates. I can’t wait to hear about the flood of companies applying for these rebates. What are the eventual consequences of this portion?
The draft includes several provisions to promote green jobs. One section authorizes the Secretary of Education to award grants to universities and colleges to develop curriculum and training programs that prepare students for careers in renewable energy, energy efficiency, and other forms of climate change mitigation. Under another section, the Secretary of Labor is authorized to carry out such training programs. The discussion draft also notes that a worker transition section remains to be provided. This is exactly the kind of thing that needs to be made available. Increased employment in the developing greeen energy sector will occur without this portion, but the transition to that new economy would be rougher without it. This language would ensure that the transition and expansion to the green economy of the future is staffed with prepared, educated and motivated people.
The discussion draft notes that a consumer assistance section remains to be provided. Good – I look forward to hearing about these measures.
The discussion draft includes provisions to provide U.S. assistance to encourage widespread deployment of clean technologies to developing countries. The draft specifies that only developing countries that have ratified an international treaty and undertaken nationally appropriate mitigation activities that achieve substantial greenhouse gas reductions are eligible for funding. This section is so ironic, it’s not funny. The U.S. is responsible for the majority of the GHGs currently in the atmosphere. We bear the greatest responsibility for ensuring those gases are mitigated to the maximum extent possible in the future. Not China, not India, not the developing nations. We do. The rest of the world should pass legislation like this and the U.S. would see just how far behind the rest of the developed world we really are. We wouldn’t get any funding to buy other countries’ technologies. This fact remains: every country must be engaged in this process. We can’t vilify or point fingers in pettiness. No country will be immune from the effects of climate change. Some will be affected more than others, certainly, but every country will experience something. We will save our societies if we assist others. It’s that simple.
The draft establishes an interagency council to ensure an integrated federal response to the effects of global warming. The National Oceanic and Atmospheric Administration (NOAA) is directed to conduct vulnerability assessments and establish a National Climate Service. Each federal agency is directed to prepare an adaptation plan, review climate impacts on matters within its jurisdiction, and develop plans for addressing those impacts. To address international adaptation issues, the draft creates an International Climate Change Adaptation Program within USAID to provide U.S. assistance to the most vulnerable developing countries for adaptation to climate change. Impacts have already come to pass across the country. For the time being, they are relatively minor relative to expected impacts soon to come. Some states and agencies have already begun the work of assessing the impacts on regions of the country. Communication about those results between states, the federal government and agencies at all levels will be critical moving forward. Some hard decisions will have to be made – there is no doubt about that. Do we fund a multi-trillion dollar wall to keep sea water at bay from our coasts? Do we fund the transport of property and infrastructure inland as sea levels rise? Those are merely two questions that easily pop into my head. Dozens, hundreds and thousands more await us as a nation. Part of NOAA’s directive here will need to be educating the public on those options.
Cross-posted at SquareState.