New Version of Clean Energy Bill May be Considered by House on Friday (Still Has "Import Tax" Provisions)

The industry rebate provision, and its related international reserve allowance ("import tax") program in the June 22 version of ACES are modified from the draft version of the bill, but are largely unchanged from the Committee-reported version.

According to Committee sources, at least one amendment, a "Managers Amendment" is expected to be offered on Friday. Its text is expected to be available on June 25, as well as the text of any other offered amendments.

Industry Rebates to Compensate for Cost of Reducing GHG Pollution

H.R. 2454 would implement a rebate (subsidy) program for eligible industrial sectors that would include the following provisions (partial list):

Rebates (subsidy) to eligible industrial sectors. The ACES bill would establish a program to provide emission allowance rebates to entities in eligible industrial sectors in order to compensate them for the costs of complying with the green house gas (GHG) limits established by ACES' global warming pollution reduction program (which would become Title VII of the Clean Air Act²).

EPA to determine eligibility. The Environmental Protection Agency Administrator would be required to determine which industrial sectors should be eligible for emission allowance rebates based on an assessment of economic factors, including (1) the energy or GHG intensity in a sector and (2) the trade (import/export) intensity in such sector. Sectors meeting the listed criteria for both factors, or with a very high factor in either one, would be deemed eligible to receive rebates.

Rebates and their phase-down. The EPA Administrator would be required to distribute rebates annually to the owners and operators of entities in eligible industrial sectors. Rebates would be distributed on a product output basis, with compensation based on direct and indirect carbon factors (carbon usage per unit of output). Unless modified by the President, rebates would be phased down by 10 percent per year beginning in 2026.

President to Determine if International Reserve Allowance Program Needed

The President would be required to report to Congress, by January 1, 2018, on the effectiveness to date of the distribution of emission allowance rebates in mitigating carbon leakage (the shifting of GHG pollution abroad) in industrial sectors, including the feasibility and usefulness of an International Reserve Allowance Program.

Every 4 years beginning no later than June 30, 2022, the President, in consultation with the EPA Administrator and other agencies, would be required to determine for each eligible industrial sector whether more than 30% of global output is produced in countries that do not meet certain criteria representing a comparable level of enforcement of GHG control measures. The President would then be required to assess whether the emission allowance rebate levels are working in that sector or should be adjusted, and/or assess whether an international reserve allowance program should be established or modified.

International Reserve Allowance Program if Needed

If the President determines that an international reserve allowance (import tax) program is needed for an eligible industrial sector, the President would require the EPA to promulgate regulations within two years, which would:

establish an appropriate price for, and offer for sale to U.S. importers international reserve allowances;

require the submission of appropriate amounts of such allowances in conjunction with the importation into the U.S. of a primary product produced by that sector.

(Primary products include iron, steel, steel mill products (including pipe and tube), aluminum, cement, glass (including flat, container, and specialty glass and fiberglass), pulp, paper, chemicals, industrial ceramics and certain other manufactured products.);

exempt primary products in certain least developed or low GHG-emitting countries;

prohibit the introduction into interstate commerce of a primary product without submitting the required number of international reserve allowances in accordance with such regulations, unless the product was produced by a covered entity under Title VII or by an entity that is regulated by Title VII.

The bill states that the international reserve allowance (import tax) program could be established no earlier than January 1, 2025, would be consistent with U.S. international agreements, and would address the competitive imbalance in the costs of producing or manufacturing a primary product in an affected sector.

(H.R. 2454 defines the term primary productmeans a product manufactured by an eligible industrial sector that is iron, steel, steel mill products (including pipe and tube), aluminum, cement, glass (including flat, container, and specialty glass and fiberglass), pulp, paper, chemicals, or industrial ceramics; or any other manufactured product that is sold in bulk for purposes of further manufacturing or inclusion in a finished product.)

The term carbon leakage is defined to mean any substantial increase (as determined by the Administrator) in greenhouse gas emissions by industrial entities located in other countries if such increase is caused by an incremental cost of production increase in the United States resulting from the implementation of this title.)

¹The June 22 version of the bill was introduced on June 23, 2009 under a new bill number, H.R. 2998; however, this was a temporary 'technical' renumbering, and the bill will move forward and continue to be referred to as H.R. 2454.

²Title III of the ACES discussion draft would establish a new Title VII in the Clean Air Act to provide a declining limit on global warming pollution and hold industries accountable for pollution reduction under the limit.

(See ITT's Online Archives or 04/21/09 and 04/22/09 news, 09042155 and 09042220, for BP summaries on the announcement of these hearings.

See ITT's Online Archives or 04/29/09 news, 09042940, for BP summary of the Committee's announcement of an additional day of hearings on May 1, 2009.

See ITT's Online Archives or 04/01/09 news, 09040105, for BP summary of the ACES discussion draft.

See ITT's Online Archives or 04/23/09 news, 09042325, for BP summary of USTR's response to congressional concerns about linkage of climate change and U.S. trade policies.)

Witness statements (organized by hearing date) available at http://energycommerce.house.gov/index.php?option=com_content&view=section&layout=blog&id=9&Itemid=56.

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.