The House Energy and Commerce Committee issued a discussion draft Tuesday of the energy and climate change legislation that many have been expecting.
In a nutshell, the bill will:
• Get the U.S. to reduce its global warming emissions by 30 percent below 2005 levels by 2020 through a combination of domestic action and efforts to help stop tropical deforestation. This would be via a cap-and-trade system.
• Require the nation to get 25 percent of its electricity from renewable sources, like wind and solar power, by 2025.
• Require increasing use of low-carbon fuels in vehicles.
There’s still a lot of work left to be done on it before the committee attempts a vote (some parts were intentionally left blank today, a sign the Democrats are open to some compromise). But there’s plenty of reaction to the 648-page document.
Scott Segal, a Bracewell & Giuliani attorney and director of the Electric Reliability Coordinating Council (a group of power-generating companies) notes meeting the Memorial Day deadline for passage of the bill will be difficult.
“On the renewable energy standard, it appears as the though the discussion draft adopts a relatively narrow definition of clean energy sources that qualify as evidence of compliance with the bill. We would hope to see the Committee consider a more generous – and accurate – definition of qualifying energy sources, including more expansive use of efficiency programs, hydropower, nuclear, waste to energy and the like.
In light of the bill’s substantial cap and trade program, the necessity of the renewable energy standard is somewhat in doubt. Indeed, by the time the bill sunsets the RES in 2040, we will have had a trading program up and running for almost 30 years. The trading program sets a market price for carbon — a far more efficient way to encourage investment in clean energy than an RES. Indeed, the restrictive definition of technology in the RES actually reduces the choice of compliance strategies under the cap and trade program, thus undermining the cost effectiveness of the bill.”
The Institute for Energy Research, a fiercely pro-free market group called the bill more than just “a blueprint for higher energy prices, fewer jobs, and reduced economic output are unfortunately missing the whole truth.”
“In reality, the bill introduced today is part of an agenda whose mandate extends well beyond utility bills and unemployment rolls. Quite simply, this bill envisions the wholesale reordering of American society, where those who produce are punished, those who remain idle are rewarded, and those who require affordable energy to live are forced to subsidize those who require political pull to survive.
IER’s president Thomas J. Pyle goes on to rename parts of the bill as part of his critique, saying the Cap-and-Raid part of the bill will force hundreds of thousands of American businesses to obtain federal permission (via carbon credit) before creating a new job or manufacturing a new product. The Low-Carbon Fuel Standard will lead to the creation of a weaker fuel, with less energy content, at a higher price – both in absolute terms, and on a per/BTU basis. The Renewable Electricity Mandate will set in motion a massive redistribution of wealth from the southeast United States to the regions along the coast.
Environment Texas Director Luke Metzger calls the bill “pragmatic” and says it tries to balance a historic opportunity to unleash clean energy to rebuild our economy and stop the climate crisis. But he expressed concern about “high levels of carbon offsets in the bill, which provide less-certain reductions in emissions, and large subsidies, including funds from ratepayers, for still-unproven carbon capture and storage technology.”
The U.S. Climate Action Partnership (USCAP), a coalition of 25 companies and 5 environmental NGOs hailed the draft as “a strong starting point” and “a solid foundation” that addresses most of the core issues USCAP outlined in its own “Blueprint for Legislative Action.” However…
USCAP has stated that the distribution of allowance value should facilitate a transition period toward a low-carbon future. This critical phase must protect consumers and businesses; provide capital to support new low and zero-GHG-emitting technologies; and address the need for humans and the environment to adapt to climate change. USCAP recommends that a significant portion of allowances be initially distributed free to entities covered by the cap in order to mitigate costs to consumers and particularly vulnerable sectors of the economy. This free distribution should then be phased out over time.
Fred Krupp, president of the Environmental Defense Fund praised Waxman and Markey as “experienced legislators who have focused on exactly the right issues to quickly build consensus and allow Congress to pass a strong bill this year.”
“Climate legislation to kick start the economy is exactly what the country needs right now. Thousands of U.S. companies from coast to coast are poised to pump billions of dollars into clean energy and create new jobs when Congress acts. If we move quickly, we can help the U.S. corner the market for low-carbon technologies and save billions we’d otherwise send overseas or spend on the high costs of climate change.
“Government studies show that the U.S. will have strong economic growth with a cap on greenhouse gas emissions. The impact on household utility bills will be about a dime a day, and that dime will be the hardest working dime in America. It will create jobs, reduce our dangerous dependence on foreign oil, and protect the climate.
The Union of Concerned Scientists notes that economists who have studied the issue “agree that reducing emissions is much less costly than failing to reduce emissions and adapting to resulting climate change.”
“Increasing our reliance on clean energy sources would help pull our economy out of the ditch and prevent the worst consequences of global warming,” said economist Michael Hanemann, a Chancellor’s Professor in the Department of Agricultural and Resource Economics at the University of California Berkeley’s Goldman School of Public Policy. “The energy efficiency provisions in the draft are a key way to reduce electricity bills for consumers as we transition to a clean energy economy. Doing nothing is the most expensive thing we can do. Opponents of energy and climate legislation want to keep us addicted to increasingly expensive fossil fuels and saddle us, our children and our grandchildren with the massive costs of unchecked climate change.”
According to a UCS analysis:
• Requiring utilities to obtain 25 percent of their electricity from renewable energy sources by 2025 would create 297,000 new domestic jobs
• Save consumers $64.3 billion in lower electricity and natural gas bills.
• Generate $13.5 billion in new income for farmers, ranchers and rural landowners
• Reduce global warming pollution by 277 million metric tons a year by 2025, the equivalent of 70 average-size coal-fired power plants per year.
House Republican Leader John Boehner (R-OH) called the plan “the wrong thing to do and the worst possible time to do it.”
“Families and small businesses are struggling to get by, and this proposal, like the President’s budget, would raise taxes on every American who drives a car, flips on a light switch, or buys a product manufactured in the United States. It would cost every family as much as $3,100 a year in additional energy costs, and will drive millions of good-paying American jobs overseas.
“In my district, for example, there is steel manufacturer called AK Steel. If they are forced to pay this new energy tax – while competitors in places like India, China, and Mexico are not – their costs will skyrocket, and their customers will simply buy cheaper imported steel. That’s a recipe for shipping more good-paying American manufacturing jobs overseas, and that’s simply unacceptable. Democrats should shelve this national energy tax and work with Republicans to enact policies that will truly help get our economy moving again.”
**** UPDATE: MIT Professor John Reilly says Boehner has exaggerated the cost per family, saying it was based on an analysis MIT conducted, that it’s approximately $340 per family. Read the full letter here. ***
Myron Ebell, the Competitive Enterprise Institute’s Director of Energy and Global Warming Policy said the bill “should be dead on arrival.”
“We will work to see that it dies as quickly as possible. Waxman and Markey blithely set targets for reducing greenhouse gas emissions without any serious analysis or even awareness of the colossal costs of energy rationing to American consumers, workers, and industry.”
Iain Murray, CEI Senior Fellow, warned that parts of the bill would violate World Trade Organization laws by giving “rebates” to companies that have to pay higher costs than their international competitors, which amounts to illegal state aid under WTO rules.
“Further, it directs the President to institute what is laughably called a ‘border adjustment’ program requiring foreign companies to pay for the cost of carbon. This is nothing more than a tariff aimed at eliminating the competitive advantage of other nations. Taken together, these provisions represent the first shot in what is likely to prove a disastrous carbon trade war.”
The American Council for an Energy-Efficient Economy praised the energy efficiency resource standard (EERS) which “would require electricity and natural gas utilities to achieve cumulative energy savings of 15 percent and 10 percent, respectively, by 2020.”
The group says such a measure would:
• create 222,000 net permanent, high quality jobs in construction, manufacturing and other fields;
• prevent 262 million metric tons of greenhouse gas emissions in 2020 – the equivalent of taking 48 million cars off the roads for that year;
• avoid the need to build 390 power plants.