WRI analyzes emissions caps, allowances, offsets, and other critical components of the American Clean Energy and Security Act.
What are the key elements of the climate bill approved by the House of Representatives on June 26?
The bill contains four major elements:
- A clean energy requirement, designed both to set new standards for current types of power generation and to accelerate development and deployment of clean energy technologies such as renewables, energy efficiency and carbon capture and storage.
- An efficiency requirement that provides funding for energy efficiency programs, and the setting of stronger building codes and product efficiency standards.
- A cap and trade program that sets mandatory caps on 87 percent of U.S. greenhouse gas (GHG) emissions including the electric power and oil and gas sectors, and heavy industry.
- Measures designed to ease the transition into a low carbon economy by providing assistance to those impacted by a cap - including industry, affected sectors of America’s workforce, and low income households; these also include support for international climate change programs.
What emission reductions would be achieved if this bill was implemented?
Implementation of the cap would require emissions reductions from covered sources to 17% below 2005 levels by 2020 and 83 percent below 2005 levels by 2050. Total U.S. GHG emissions would be reduced, as a result, by 15% below 2005 levels by 2020. This exceeds President Obama’s goal of reducing emissions to 1990 levels by 2020 (approximately 14% below 2005 levels). Covered sources would be permitted to use offsets in place of on-site reductions to meet a substantial amount these requirements. In addition, implementing the American Clean Energy and Security Act (ACESA) would result in emissions reductions beyond those generated by the pollution cap.
The bill contains substantial complementary requirements, including emissions performance standards for uncapped sources and emission reductions from forest preservation in developing countries. When these are taken into account, GHG emissions could be reduced by 28 percent below 2005 levels by 2020 and 75 percent below 2005 levels by 2050. The bill also contains requirements related to international offsets - used for compliance with the federal cap and trade regime. Factoring these in would make potential emission reductions from the bill even greater, reaching up to 33 percent below 2005 levels by 2020 and up to 81 percent below 2005 levels by 2050, depending on the quantity of offsets used.
For more information, see WRI’s analysis of emission reductions under cap-and-trade proposals in the 111th Congress.
What assistance would industry and consumers receive to cushion the transition?
Title III of the bill provides details on the distribution of emission allowances to aid industries and consumers affected by the transition to a clean energy, low carbon economy. The vast majority of these allowances - 76 percent - are directed to consumer assistance and other public benefits between 2012 and 2025. (This is true regardless of whether they are distributed by allocation or auction.)
For example, the largest component of allowances devoted to public benefit – 39 percent between 2012 and 2025 - is awarded to electric power distributors, with the requirement that the benefit from these allowances must be passed on to consumers to cushion against potential increases in energy bills. Similarly, allowances are designated for consumers of natural gas, heating oil and propane. States would also receive some allowances, to be used for specific purposes such as deployment of clean energy technologies. Between 2012 and 2025, at least 18 percent of total allowances would be auctioned. The proceeds would be channeled into programs to assist low income energy consumers and support other federal programs on adaptation, worker assistance and deficit reduction. The bill also earmarks a small percentage of allowances to the automobile industry to help re-tool factories to manufacture new, clean vehicles such as plug in hybrids. Finally, between 2012 and 2025 up to 19 percent will be given away for free to petroleum refineries, certain electric power generators, and trade exposed industries to aid their adjustment to a carbon constrained economy.
For more information, see WRI’s analysis of allowance distribution.
Allowance Value Distribution (Click to enlarge)
What are the bill’s offset provisions?
The bill allows for up to 2 billion metric tons of offsets a year, split 50/50 between domestic and international activities. Domestic offsets would come from GHG emissions sources not covered by the carbon cap, such as carbon sequestration in forestry and agriculture. International offsets would be generated from activities that reduce forest loss, as well as sectoral crediting mechanisms and other programs in developing countries. Authority over almost all offsets will rest with the Administrator of the Environmental Protection Agency. However, the U.S. Department of Agriculture (USDA) will oversee the domestic forestry and agriculture component of the offsets program.
Once approved by the appropriate regulator, these offsets would be traded in domestic and international carbon markets, purchased by capped sources, and used toward their legal compliance with the emissions cap.
(If the Administrator finds that 1 billion metric tons domestic offsets are unavailable in any given year, the 50/50 split may be adjusted to increase the amount of international offsets - up to a 25/75 ratio.)
What aspects of the bill are causing concern?
Several areas of the bill raised concerns among different interests and constituencies, including environmental groups and carbon intensive industries. These included, but were not limited to, the following issues.
- Role of USDA: The bill gives authority to the U.S. Department of Agriculture for the administration of domestic GHG emissions offsets generated by farms and forests in the U.S. While USDA has an important role to play supporting carbon sequestration, it has less expertise on regulating pollutants which is the province of the U.S. Environmental Protection Agency (EPA). The respective roles of the two agencies in ensuring robust carbon accounting for offsets under a U.S. cap and trade program remains to be satisfactorily resolved.
- Trade Provisions: The final version of the bill introduced controversial new trade provisions which would enable the United States, from 2020, to use aggressive, unilateral border measures to impose duties on certain energy intensive foreign goods. President Obama publicly expressed concern about the provision which he described as “protectionism.”
- Allowance Allocations: These remain an area of contention. Some constituencies - including various environmental groups - argue that industry received too much assistance. Others - including carbon intensive industrial corporations - argue that more assistance is needed to cushion the transition to cleaner technology. Some in the international community believe too few allowances are dedicated to assisting developing countries as they adapt to climate change impacts and adopt clean energy technologies.
- Biomass Emissions: There are concerns that the bill’s provisions accounting for emissions from biomass may potentially include fuels that yield a net increase in GHG emissions.
What happens next?
The historic passage of the American Clean Energy and Security Act has generated substantial momentum for U.S. climate legislation to become law, possibly as early as the end of 2009.
Action now moves to the Senate, where the Environment and Public Works Committee will take up its own climate legislation in July. Other Senate committees including the Energy and Natural Resources Committee, Commerce Committee, Agricultural Committee, Finance Committee and the Senate Foreign Relations Committee all are likely to take actions on parts of the legislation that fall within their jurisdiction. The EPW committee will work on the bill after the summer recess with floor debate likely later this fall. Then, the Senate leadership will need to pull these various parts together for a vote on the Senate floor. EPW Committee chair Barbara Boxer and the Senate leadership have made it clear that passage of climate legislation is a key priority.
If the Senate does pass a bill, it will need to be reconciled with the American Clean Energy and Security Act. To become law, the joint legislation would then receive a final vote in both chambers, before being sent to the president for signing. This entire process could conceivably be completed in 2009. In December, the U.S. will attend negotiations to conclude a post-2012 international climate change agreement in Copenhagen. A firm U.S. commitment to emissions reductions will be key to a successful outcome.
John Larsen, Senior AssociateJohn Larsen is an expert on federal climate and energy policy, currently on detail at the U.S. Department of Energy.
7 Comments
Also posted earlier on a
Also posted earlier on a different story.
When I post something to a site I normally try and explain my position; change your mind to my belief and offer some type of suggestion or recommendation to improve what we are trying to accomplish. So here goes.
First the comment 'the political will is there'; I don't believe that a consensus still exists that Cap and Trade is the best approach for American. It may have been a consensus at one time but not now. And, as each day passes I believe we get further and further from being able to pass this legislation. There is a significant difference between 'political will' and the 'will of the people'. Some people might believe we have the political will at the moment while not realizing at the time that we do not have the 'will of the people' on our side. I think that is the case with the Cap and Trade bill.
As far as the second statement of “we have this bill or nothing” all I can say is bills come and go all the time. Into and out of committees, some get approved in the House and other never see the light of day. Heck sometime the President even vetoes one of them LOL
So here is where I am coming from. I have worked in the public utility sector for about 20 years. I have visited and spoke with many CEO, CFO and/or operational plant managers at a lot of different types of power plants. I also understand capitalism quite well and with this knowledge in hand believe we are heading in the wrong direction for the following reasons.
Burning coal is dirty and I don't care how you slice the pie. I also don't care if you believe that global warming is REAL or NOT. I also wouldn't consider “clean coal” clean if you captured 100% of the CO2 either. There is still a whole bunch of other stuff coming out the stack, in the fly ash, in the evaporator and leaching ponds, and in the chemicals used to treat the water for the plant. In short; using coal to generate about 40% of our electricity just might not be in the best interest of the American people given what we know about coal today. There are also other considerations like the mining of coal, the transportation, the grinding and the processing of coal to try and get it cleaned up before we burn it. Before you know it, clean coal will become just like clean nuclear – too expensive to build and too expensive to use as a fuel to generate electricity. Yet here we are talking about taxing coal so we can continue to use it well into some future date 20-30 years from now.
If I look at coal and Cap and Trade the only thing I see is more dirty power for 40% of our electrical energy. Sure Cap and Trade will put a cap on carbon and tax it and we might even pass that tax [or the cost of using it] through to the consumer. We will also capture some percentage of the CO2, buy and sell and trade some of the free credits on Wall Street. We have even built in provisions to give people living below some magical number a tax credit just so we can continue burn coal. Now none of the above things are cast in concrete yet or may never even come to pass since the President hasn't signed anything yet.
There are so many alternatives to burning coal, capping carbon and trading credits and so little space here to discuss them. We seem to get on these band wagons heading down a hill and never even try to see if the brakes work before we start. Cap and Trade has been tried in Europe and other countries and to date, they are still a work in progress.
I have followed solar, geothermal, wind, biomass, nuclear and other energy options for many years. Just the other day I came across an interesting article in Scientific American [written in 2008] about how we can use the solar option to become energy independent in just 40 years. Now that's not nearly fast enough to suit me but we can talk about speeding up the process later if you like. We could if we CHOOSE to; cut carbon emissions quickly instead of over a 10-40 year period. You can read this Scientific American article here:
http://www.scientificamerican.com/article.cfm?id=a-solar-gra...
Now I am certain you can find lots of reasons for not using solar but please take the time to at least read a few of the 6 pages and some of the 706 comments before you say this is just another fantasy. You will be amazed at how quickly technology is making solar a valid option. Also within the 706 reader comments are the comments of the original authors. They answer many of the typical nay sayer questions in excellent detail explaining how the plan could work.
I like solar but in my not so humble opinion it is NOT the complete answer. It is however so much better than coal it doesn't even deserve comparison. You install a solar panel and it just sits there producing power for about the next 20-30 years. You don't have to dig up the fuel, grind it, transport it, burn it, take away the ash, pump the CO2 into the ground AND come along 20 years later and clean up the mess. True you have to mine the raw materials and periodically recycle the panels and make more of them but that's child play compared to what we do for coal. And if you add up all the cost associated with coal and solar I'll bet you a steak dinner that they are so close to the same price per KW it doesn't make any difference which one you use to make power. It just so happens that one is a whole lot cleaner [greener?] than the other. To put it in very simple terms – the cost of sunshine is not expected to change in the next 1000 years; BUT the cost of coal is going to go up every year.
It's no longer even a question in my own mind that we have some vary valid alternatives to dirty energy sources. The only question I have is, can we build ENOUGH renewable energy sources FAST ENOUGH to make our carbon footprint SMALL enough to save the planet. Are you really WILLING to wait another 10-40 years for Cap and Trade to significantly improve our environment?
Cap and Trade to me is like saying - lets throw a 100 darts at a dart board and see if we hit the bulls eye. Is the target CO2 reduction? Is it more renewable energy; more conservation; better building construction and trying to eliminate the importing of foreign oil? This is why I don't think Cap and Trade will ever pass in its current form. It is not the fact that EVERYTHING we want to do is in the bill; it is just that EVERYTHING is IN the bill. It's like trying to fix 30 years of neglecting your teeth in one visit to the dentist office. I guess you could ask a further question like; what will dentists even be doing 20 years from now?
I will bet you another one of those steak dinners that if you asked 10,000 voters to give you a a YES or NO answer if global warming is REAL; you might be very surprised at the answers you get. Try it – ask you friends and neighbors the YES or NO question and see what you get; I have. While there is a significant amount of data suggesting global warming is real there is also some data suggesting it is not. Instead of arguing about if it IS or IS NOT real, wouldn't we be better off if we just did what was in the best interest of our country?
Earlier I promised to make some recommendations even if I couldn't change your mind so here they are.
# 1 I recommend a selective carbon tax instead of the broad approach of Cap and Trade. Cap and Trade as written is too complex and the American people no longer trust their government legislators, special interest groups and lobbyists to do what is in their best interest. The American people are sick and tired of their representatives not even reading something before they buy into it.
# 2 I recommend an immediate $1.00/gallon gasoline tax increase. I would also accept a phased in $.25/year/gallon increase if necessary to get it passed. Why only gasoline? Well for one reason; it would raise $136,000,000,000 dollars a year in taxes. Taxing only gasoline would NOT have a SIGNIFICANT impact on shipping, rail, farm or other energy consumers who might be using natural gas, propane, heating oils or diesel fuels. The following stipulation must also be a part of the gas tax bill. It would be a 90% 10% tax. The government would only get to keep 10% of the taxes to administer the program and the other 90% would go directly to fund renewable energy projects.
So do you have your calculator out yet? How many Concentrating Solar Power [CSP], Photovoltaic [PV] and geothermal power plants do you think we can build with lets say $100,000,000,000 a year. How many solar panels do you think we can install on homes if we spent $10 billion dollars each year for that purpose. Wait a minute; so far we haven't even spent our first years tax revenues yet. So lets build a billion dollar polycrystalline silicon plant and give the manufacturers of solar panels here in the U.S. the raw materials for free – the government can run the plant out of their 10% commission if they think they can do the job. My guess is that it would cost about $50 million a year to run it. This might be fun - maybe it's time for some of the people in the Washington to actually see how a real business works.
We are still not out of money yet so lets give about 10 of our best solar manufactures here in the U.S. a $1 billion dollars each to increase production. For example; a billion dollars should buy Nanosolar another 100 roll to roll thin film machines. The one [1] they have now is creating about 1000 Megawatts a year so 100 should give us a good bump in production and some real serious solar power number to work with. Lets also give a billion to First Solar to build a couple of new production plants. They are already producing solar for less than $1.00/watt so they say.
There is nothing new and magical we need to do to make this happen. We know how to build the wind turbines, geothermal, CSP and PV power plants. We already know how to build hybrid and electric vehicles and create bio fuels. We know how to transmit power across the country and we do it every day. We do not have to invent or wait for some new technology to make it all happen we just need some LEADERSHIP.
When gasoline prices peaked in 2008 we used 4,500,000,000 [4.5 billion] fewer gallons of gasoline than we did in 2007. If you care to calculates the carbon savings you can use either 18 or 20 lbs/gallon since different people use different values. In either case, that is one heck of a lot of CARBON we didn't put into the air of our planet. AND we didn't have to create any new government agencies, cap carbon at some magical number or trade carbon credits on some exchange. We did it by simply raising the price of gasoline by about a $1.00/gallon.
In summary, these are just a couple of ideas. Someday our children will look back at us and say; what in the world took our parents so long to realize what they were doing? Or will they look back and say why on earth did they let lobbyists write the laws.
As citizens we need to stand up and say enough is enough. We need to just start saying no to some political leaders who are so arrogant they believe that they don't even have to read a piece of legislation before they sign it. We also need to tell some of our special interest groups and lobbyists to get out of our White House every once in a while.
Thank you for listening
tomgarven@hotmail.com
Its about time the United
Its about time the United States cut down its emissions whether it bad for the country.If this continues-the US will have no moral high ground to satnd against China or India-the state of affairs will continue.Whether Americans like it or not-so much destruction of the ozone was caused by the USA.I went to Williamsberg recently and saw the devastation of the black tree forests when the first Americans landed.this seems to continue tirelessly.This must stop!
Succint and useful analysis.
Succint and useful analysis. Two specific points on the 'concerns' -
Firstly, on USDA's role, I would argue GHG accounting are perhaps better understood by people at USDA for farm and forestry offsets and I see no harm bringing on expertise of both of USDA and EPA to address robust accounting (lessons from South East Asia could be useful here).
Secondly, I support the idea of majority of emission allowance being freely auctioned or atleast addressing the end use needs (or, perhaps my understanding is flawed). But someone has to pay for not emitting a tonne of CO2 in the atmosphere (the 'cap' mechanism) and if you let the industries optimise the cost (the 'trade' part) for doing it; then you get to make sure the cost remains low (esp to the end-users) as a whole. For me, if the proposed allocation were the most cost-effective one from an optimisation point of view, the act has done a fairly good job.
This bill will only hurt
This bill will only hurt America. This is simply a way to apply punitive measures to force conservation, which is good but when mandated no longer is conservation it is prohibition. The lack of supporting nuclear power shows they are really not concerned about clean energy. The support of foreign allowances show they really are not concerned about America. The Congress and President have a constitutional duty to protect the interests of America and promote the general welfare of America, not the world. This is an energy and manufacturing killing bill. Two sectors that built America will be badly hurt. This bill is a solution for a problem that doesn't exist and we will all pay for it. Costs for everything will go up. They have to or else the plan will fail. "Necessarily skyrocket" were Obama's words. The only way to save money on utlility bills will be turn off power because you can't afford the new cost or they will turn off for you because they think you shouldn't be using electricity at certain times of the day. Or, you could replace all of your appliances with the new higher cost efficient ones and rebuild your house to make it more efficient which you will be forced to do anyway before you sell it. But how will the average family afford any of this, especially with an additional 10% of the population unemployed. No, this is more junk bolstered by false science to push an eco agenda.
Excellent analysis! Thank
Excellent analysis! Thank you.
Of the electricity used in
Of the electricity used in the United States, combustion of coal generates about 40% of the total and burning other forms of fossil fuels generate another 25% of the total. In the event of failure of the $60 billion designated in the ACESA for research and development of carbon sequestration, then will "clean coal" and/or "clean fossil fuels" not be achieved? In that case, does the ACSEA provide any direction toward alternatives to be considered for generation of the electric base load?
Also, is it true that the ACESA exempts coal fired electric generation plants from regulation by the EPA?
Certainty in the deployment
Certainty in the deployment of a new technology is unfortunately not possible, but the chances of successful CCS demonstration and deployment increase with the provisions outlined in the bill. The ACSEA provides a strong framework of incentives for carbon capture and storage, which is currently the most promising climate change solution for coal-fired power plants. The bill also provides incentives for alternatives, forestry offsets, and energy efficiency actions. Importantly, the bill establishes performance standards for future coal plants that represent a 50% reduction in overall emissions in the near term and a 65% reduction in overall CO2 emissions over the long term (after 2020 or before if CCS is deployed at significant levels. If you're interested in the details of the CCS provisions, our CCS summary is posted here: http://www.wri.org/stories/2009/06/updated-carbon-capture-an...