Summary
House Democrats issued a draft climate bill titled “The American Clean Energy and Security Act of 2009” on March 31, 2009 which proposes to reduce CO2 emissions and require the development of renewable energy on a nationwide scale. The section that follows highlights important provisions contained in this 648 page draft bill.
Analysis
Important provisions of the draft bill:
*A cap and trade system using CO2 allowances would be used to reduce greenhouse gas; affecting those sources that emit over 25,000 tons per year of CO2-equivalent. This program would cover electricity generators, refiners, and industrials representing 85% of the nation’s emissions sources.
*Emissions would be reduced as follows: 1) 3% under the 2005 level beginning in 2012; 2) 20% under the 2005 level beginning in 2020; 3) 42% below the 2005 level beginning in 2030; and 4) 83% below the 2005 level beginning in 2050. (For comparison, the Obama Administration proposed a 14% reduction from the 2005 level beginning in 2012 and 83% below 2005 by 2050.)
*Some of the CO2 allowances would be auctioned. There is no description yet—only a placeholder—for the amount of CO2 allowances to be allocated for free to affected entities and how many would be auctioned. This free allocation versus auction issue will be a highly debated subject amongst the stakeholders if and when this bill moves forward. In the debate in Congress held the week of April 20, 2009, centrist Democrats from coal mining, coal utilizing, and oil refining districts and states requested more of the CO2 allowances be allocated for free to minimize the economic hit to the affected industries.
*Unused CO2 allowances may be banked and used in later years; following the program used currently for sulfur dioxide (SO2) allowances.
*Offsets may be utilized at the rate of 1.25 offsets for each 1 ton of CO2. The draft bill designates the EPA as the body to determine acceptable offsets.
*Regional Greenhouse Gas Initiative (RGGI) or California program CO2 allowances can be converted to these new national CO2 allowances as long as they are issued before December 31, 2011. The EPA will be the authority to determine the method to roll the financial value of the regional or state CO2 allowances into a national allowance program.
*A portion of the CO2 allowances would be held back as a strategic reserve if the prices became extremely high. This will clearly be a major discussion point amongst the stakeholders.
*A national renewable portfolio standard (RPS) of 6% in 2012 ramping up to 25% in 2025 is required. Individual states may have this reduced by up to 20% by utilizing energy efficiency programs and then petitioning the Department of Energy. An “alternative compliance payment” (ACP) tied to the value of a national Renewable Energy Credit is proposed for failure to meet these RPS requirements. Utilities and Independent Power Producers have already voiced concern that a national RPS is too aggressive or cannot be met in certain areas of the nation (such as the Southeast) that do not have practical access to abundant renewable energy resources.
