House Committee Releases Draft of Clean Energy Legislation

Committee to Complete Work on ACES by Memorial Day

The Committee continues to state that it will complete consideration of ACES by Memorial Day. The preliminary schedule is as follows:

Energy and Environment Subcommittee Hearings - week of April 20, 2009

Energy and Environment Subcommittee Markup Period Begins - week of April 27, 2009

Full Committee Markup Period Begins - week of May 11, 2009

Highlights of Trade-Related Aspects of the ACES Draft

According to the Committee's summary, the ACES draft would:

Clean fuels, vehicles - establish a new low-carbon transportation fuel standard to promote advanced biofuels and other clean transportation fuels. The draft would also authorize financial support to car companies to retool their plants to build electric vehicles.

Appliance energy efficiency - codify four negotiated agreements on efficiency standards for lighting and four additional agreements for other appliances. It would make numerous improvements to the current Department of Energy process for setting energy-efficiency standards, strengthening the cost-effectiveness test to establish minimum standards and requiring improved disclosure. In addition, it would create a program to provide financial incentives to retailers who sell high volumes of "Best-in-Class" appliances.

Transportation efficiency - direct 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 the Environmental Protection Agency (EPA), and the California standards for light-duty vehicles.

The draft would also direct EPA to set emissions standards for other mobile sources of pollution such as locomotives, marine vessels, and non-road sources.

The draft would require states to establish goals for reducing global warming pollution from the transportation sector and requires large metropolitan planning organizations to submit transportation plans to meet those goals. The draft would authorize EPA to carry out the Smart Way Transportation Efficiency Program to increase the efficiency of highway trucking.

Global warming pollution reduction program - establish 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.

Supplemental pollution reductions - direct EPA to achieve additional reductions in global warming pollution by entering into agreements to prevent international deforestation.

Offsets - allow 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 could not exceed 2 billion tons, split evenly between domestic and international offsets. Covered entities using offsets would have to submit five tons of offset credits for every four tons of emissions being offset.

Penalties for fraud, manipulation - provide for strict oversight and regulation of the new markets for carbon allowances and offsets. It would ensure market transparency and liquidity and establishes strict penalties for fraud and manipulation.

Add'l greenhouse gas standards - direct EPA to set emission standards on sources that are not covered by the allowance system. In addition, it would create special programs to reduce emissions of two pollutants that contribute to global warming - hydrofluorocarbons (HFCs) and black carbon.

The draft would add HFCs to the list of similar substances that EPA currently regulates because they deplete the ozone layer. Under this regulatory program, EPA would be directed to phase down the production of HFCs. EPA would also be directed to use its existing authority under the Clean Air Act to reduce emissions of black carbon domestically and study opportunities for reductions internationally.

Ensuring U.S. competitiveness - authorize companies in certain industrial sectors to receive "rebates" to compensate for additional costs incurred under the program to ensure that U.S. manufacturers are not put at a disadvantage relative to overseas competitors. Sectors that use large amounts of energy, and produce commodities that are traded globally, would be eligible for the rebates. If the President found that the rebate provisions did not sufficiently correct competitive imbalances, the President would be directed to establish a "border adjustment" program. Under that program, foreign manufacturers and importers would be required to pay for and hold special allowances to "cover" the carbon contained in U.S.-bound products.

Exporting clean technology - 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 would be eligible for funding.

ACES Draft Does Not Address Allocation of Tradable Emission Allowances

According to a summary of the ACES draft, one key issue that it does not address is how to allocate the tradable emission allowances that restrict the amount of global warming pollution emitted by electric utilities, oil companies, and other sources. This issue will be addressed through discussions among Committee members.

(See ITT's Online Archives or 03/04/09 news, 09030420, for BP summary of Committee Chairman Waxman's statement that his goal was to complete Committee consideration of climate change legislation by Memorial Day.)

Committee press release available at http://energycommerce.house.gov/index.php?option=com_content&task=view&id=1560&Itemid=1.

Committee summary of draft legislation available at http://energycommerce.house.gov/Press_111/20090331/acesa_summary.pdf.

Committee's draft legislation available at http://energycommerce.house.gov/Press_111/20090331/acesa_discussiondraft.pdf.