House-Passed Clean Energy Bill Accelerates and Strengthens "Import Tax" Provisions

Meanwhile, Senate Energy and Natural Resources Committee sources report that the Committee has voted to report its own, different energy and climate bill out of committee, and expects to attach its report and submit the bill to the Senate at large during the week of July 6-10, 2009.

The following is a partial list of some notable changes and features of the House bill as passed on June 26th, from the subtitle most related to international trade (Section 401, "Ensuring Real Reductions in Industrial Emissions").

Industry Rebates to Compensate for Cost of Reducing GHG Remain in Bill

H.R. 2454 would implement a emission allowance rebate (subsidy) program for eligible industrial sectors. Changes from the prior version of the measure include (partial list):

Report on rebates. The House bill would expand what is required in the President's report on the effectiveness of emission allowance rebates to eligible industrial sectors in stemming green house gases (GHG).

The President's report would now have to include: 1) an assessment of per-unit cost of production increases in each eligible industrial sector receiving emission allowance rebates; 2) recommendations on an international reserve allowance program (import tax); 3) proposed alternative actions or programs where international reserve allowances would not be effective; 4) an assessment of the amount and duration of assistance other developed countries provide to mitigate costs of compliance with GHG reduction programs.

Phase-down provisions still in place. As in the prior version, in the event emission allowance levels or international reserve allowances, or both, are altered in response to leakage, the year-by-year phase-down schedule would begin the next year, with the percentage reduction based on the amount of the distribution of emission allowances in the previous year. Otherwise, the phase-down would still start in 2026.

President to Report to Congress Sooner, Import Trigger Level Set

As in the prior version, the bill would require the President to report to Congress on the effectiveness of the distribution of emission allowance rebates in mitigating carbon leakage (the shifting of GHG pollution overseas) in eligible industrial sectors, and respond to such leakage with revised emission allowance calculation factors, or new or revised international reserve allowances (import taxes, also termed border adjustments in the bill), or both. However, the deadline for reporting to Congress on the effectiveness of the allowances in regards to leakage is moved up to January 1, 2017 from January 1, 2018.

Critical level of imports from non-compliant countries set to 15%. The bill provides a different criterion for the critical condition that requires the President to assess whether emission rebate levels need to be adjusted or whether international reserve allowances need to be established or adjusted, in view of increased imports from non-compliant countries. Instead of a determination that 30 percent or more of "global output" from an eligible sector is originating from non-compliant countries, the new threshold is 15 percent or more of U.S. imports coming from such countries.

"Leakage" monitoring to start sooner. For all industrial sectors in which international reserve allowance programs are launched, every 4 years starting by June 30, 2018, the President, in consultation with Administrator, must determine whether 85% or more of U.S. of covered goods originate in countries complying with treaties or comparable GHG control regimes. (The prior version initiated this process in 2022, and had a threshold level of "70 percent of global output" from compliant countries.)

International Reserve Allowance Program Now "Automatic" if No Int'l Agreement

The President may determine that an international reserve allowance (import tax, also termed border adjustment) program is needed for an eligible industrial sector.

If no agreement, import tax program required no earlier than 2020. If a multilateral agreement has not entered into force by January 1, 2018 to cover a particular sector, the bill would require the President to establish an international reserve allowance program, but not earlier than January 1, 2020. The prior version had deferred until 2025 the initiation of any international reserve program.

Less flexibility on international allowances. Another much strengthened aspect of this bill is that only a certification from the President to Congress that such a program would not be in the national interest, together with a joint resolution of Congress, could waive this requirement.

Country exemption criteria unaltered. As in the prior version, the bill would exempt from international reserve allowance requirements the products of any country which:

is a party to an international agreement to which the United States is a party that includes a nationally enforceable and economy wide greenhouse gas emissions reduction commitment for that country that is at least as stringent as that of the United States;

is a party to multilateral or bilateral emission reduction agreements for that sector to the which the United States is a party;

has an annual energy or GHG intensity less than the energy or GHG for the same industrial sector in the U.S. in the most recent calendar year for which data are available;

is a country that the United Nations has identified as among the least developed of developing countries;

is a country that the President has determined to be responsible for less than 0.5 percent of total global greenhouse gas emissions and less than 5 percent of United States imports of covered goods with respect to the eligible industrial sector.

Requirements on Notification of Foreign Countries

The bill now expands on the requirement that the President give notification to all non-exempted foreign counties, giving them a statement of the policy of the US, requesting them to take appropriate measures to limit GHG gas emissions, and warning them of the international reserve requirements that may apply as of January 1, 2020. (Sec. 765(C)).

Data Sources Expanded, Calculation Rules Altered

Minor revisions were made in the sections defining sources of data for the Administrator to use to determine electricity and fuel costs, and import and export data, chiefly providing for additional data sources in the event the first-named sources are unavailable.

The bill now also calls for the use of four-year averages, rather than two-year averages, in the calculation of GHG emissions in eligible industrial sectors, and stipulates that electricity efficiency factors (kWh per unit of output) cannot be raised above prior levels from year-to-year

(See ITT's Online Archives or 06/25/09 and 06/26/09 news, 09062505 and 09062615, for BP summaries of the Energy and Commerce Committee draft and the Rules Committee's amendments, respectively.)

Text of H.R. 2454 as passed by House on June 26, 2009 available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h2454eh.txt.pdf