Thursday night the House Committee on Energy and Commerce voted 33-25 to approve the Waxman-Markey Climate Change Bill. The Bill, H.R. 2454, the American Clean Energy and Security Act (ACES), is a major effort to deal with CO2 emissions, setting targets leading to an 80 percent reduction by 2050 and establishing a cap and trade mechanism by 2012.

The bill’s concepts were introduced in draft in late March and the bill formally introduced last Friday. Over the last four days of Committee markup, additional changes have been negotiated to obtain sufficient support among Democrats to gain Committee approval. Only one Republican voted in support, and four Dems voted against.

I’ve been following this but haven’t read the final Committee version; it’s available at the Committee web page. That site and Markey’s sub-Committee’s markup page track the history. I’ll revise as needed, but as of Wednesday, major provisions included:

Major US CO2 emitters must achieve overall national reductions by the following target dates

— A 17% reduction from 2005 levels by 2020
— A 42% reduction from 2005 levels by 2030
— An 80% [83%?] reduction from 2005 levels by 2050

Use Cap and Trade system to establish carbon price and allocate permits/allowances

EPA will design/run the auctions, which will begin by 2012. Initially, the Cap and Trade auctions will apply to only 15 percent of the total allowances needed to meet the targets (Obama campaigned on 100 percent). Auctions revenues will be allocated to low- and moderate-income families, via tax credits, direct payments or mechanism like "food stamps."

EPA will allocate 85 percent of the allowances “free” to various groups/causes.

It’s a long list, and was still being negotiated this week. But as of Wednesday, the key recipients were:

— 30% to electric distribution companies (allocations to be update in 2013)
— 9% to gas distribution companies
–5-10% (declines over time) to states to fund renewables and energy efficiency
— 1.5% to states to compensate home heating oil/propane users
— 15% to energy-intensive industry: paper, steel, cement, etc.
— 2-5% for carbon capture and storage (CCS) applications
— 2% to oil refineries
— rest to various other interests

These "free" allowances generally last until the mid 2020s; they they phase out between 2026 and 2030, at which time the prices of carbon permits should rise faster. But anticipation of this should begin to affect investment and regulatory decisions before then.

A total of 30% plus 9% of the allowances will be allocated to utilities, but what happens to that value will be determined by their state regulators or municipal boards; the allowances are meant to help states partly offset the effects of rising electricity gas prices, but that doesn’t necessarily mean a direct lowering of utility rates.

State regulators and municipal boards will decide whether to rebate directly to consumers on their utility bills or to return the value indirectly through efficiency programs, R&D or other means. Expect utilities to fight hard to control this money.

A key point is that the allowances and other provisions in the bill constitute a huge subsidy to the coal industry to bet on the hope that CCS will actually work. There are incentives for CCS R&D, rewards for early CCS demonstrations, and allowances for commercial applications. The "clean coal" bet is worth, by some accounts, up to $100 billion to the coal industry. We’re betting a ton of money on a technology that may never prove feasible or reliable ("leakage" has been an early concern in international pilot test), but that seems to have been the price for getting coal-state Democrats to move the bill. [Update: Coal company stocks react positively to W-M provisions?]

Process for permitting “offsets” to cover permit/allowance requirements

CO2 emitters subject to the reduction requirements may substitute "offsets" for the allowances they need. An "offset" is a reduction from a source that would not otherwise by regulated/reduced. There can be domestic (reforestation projects) or international (controlling emissions in other countries).

Up to 2 billion tons per year can be offered in offsets, split between domestic and international, but the expectation is that domestic offsets will be scarce, while international offsets will be more plentiful (and cheaper), at least at first. More important, success may depend on whether China takes equivalent actions on its own, in which case international offsets would have to do more than rely on reductions in China.

Establish a national Renewable Energy Standard

As of Wednesday, the rule would require that 15 percent of electricity generation be provided by renewable resources by 2020. That’s lower than Obama’s campaign proposal to achieve 25 percent by 2025. There will be exemptions for areas of the country that claim to have fewer options.

Funding for additional energy efficiency, R&D, compliance, and lots of other stuff . . .

A difficult debate among the environmental/climate change community is underway over whether the bill is strong enough to warrant support. Al Gore supports, as do Sierra Club, NRDC, EDF; but Greenpeace, Friends of the Earth and others believe the bill has already sacrificed too much.

Most supporters, but clearly not all, seem reconciled to the need to move the Waxman-Markey bill forward, and some view this as a seminal event. However, there is widespread concern about the continuing process of compromise as the bill moves through other Committees and then confronts the Senate.

I’ll add reactions as I find them:

Climate Progess
Grist
Solve Climate
Rogues and Scholars
1Sky
Sierra Club
Greenpeace (and others)
Adam Siegel, at Get Energy Smart NOW!
Study: Climate Bill would generation $750 billion for consumers.
Other background: see the Climate section at Think Progress Wonk Room; NYT on next steps in the House.

h/t to Think Progress for the nutty video.

Scarecrow

Scarecrow

John has been writing for Firedoglake since 2006 or so, on whatever interests him. He has a law degree, worked as legal counsel and energy policy adviser for a state energy agency for 20 years and then as a consultant on electricity systems and markets. He's now retired, living in Massachusetts.

You can follow John on twitter: @JohnChandley

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