On Friday evening, by a seven vote margin, the House of Representatives approved H.R. 2454, the American Clean Energy and Security (ACES) Act. Introduced by Reps. Henry Waxman (D-CA) and Ed Markey (D-MA), the bill would reduce greenhouse gas emissions from roughly 7,400 power plants, industrial facilities, and other major sources to 17 percent below 2005 levels by 2020, with an 83 percent reduction required by 2050. These limits would be enforced through a system of emissions allowances, the total number of which will correspond with bill’s overall emissions cap.
Covered facilities would have to reduce their emissions to match their supply of allowances, purchase allowances from other regulated sources, or buy offsetting reductions from sectors not covered under the cap (e.g., domestic agriculture, international forestry). Implementation of this “cap-and-trade” approach is modeled in part after the Regional Greenhouse Gas Initiative (RGGI), a program created in 2005 to regulate carbon dioxide emissions from power plants in 10 Northeastern and Mid-Atlantic states, including New York.
As described in an earlier post, the House bill would preempt RGGI and other state cap-and-trade programs between 2012 and 2017, the first five years of the new federal program. Sources with unused RGGI allowances could trade them in for federal credits based on the average auction price for the year in which the RGGI allowances were issued. In its last auction earlier this month, the price of future RGGI allowances fell significantly, reflecting this possible preemption and the limits the House ACES bill imposes upon the exchange of RGGI credits.
In a last-minute change intended to protect the international competitiveness of vulnerable U.S. industries, by 2020 the House bill could require U.S. importers to purchase special allowances covering the manufacturing-related emissions of aluminum, steel, and other goods produced overseas under less stringent greenhouse gas controls. This weekend President Obama criticized this international reserve allowance program, which could function as a tariff on certain carbon-intensive products and is likely to draw complaints under World Trade Organization (WTO) agreements. A report released last week by the WTO and the United Nations Environment Programme (UNEP) provides an in-depth analysis of these trade-related climate issues.
The climate debate now moves to the Senate, where Barbara Boxer (D-CA), chair of the Environment and Public Works Committee, is likely to play a leading role. A global warming bill crafted by Boxer, Sen. Joe Lieberman (I-CT), and former Sen. John Warner (R-VA) passed out of that committee in the last Congress, but fell to a filibuster on the Senate floor. This year, however, the prospects for federal legislation are greater given the threat of EPA rulemakings that could regulate greenhouse gases under the existing Clean Air Act, preparations for upcoming international negotiations in December, and the Obama Administration’s emphasis on addressing climate change.
