The House Energy and Commerce Committee discussion draft, “The American Clean Energy and Security Act of 2009,” released on March 31st is very robust, a 648 page document. Based upon one reading of this document, these seem to be most of the significant provisions:

-It would establish a cap-and-trade system which sets mandatory and declining limits on greenhouse gas emissions (ghg) over the next 40 years. Emissions credits would be allocated to accomplish this, but the draft is silent on how many of those credits would be given away or auctioned, or perhaps distributed in some other way. This remains to be negotiated.

-It appears that the cap is more “downstream” than “upstream.” The summary of the document says that it “establishes a market-based program for reducing global warming pollution from electric utilities, oil companies, large industrial sources, and other covered entities that collectively are responsible for 85% of U.S. global warming emissions.” At several points throughout the document it describes a “covered entity” as one which emits at least 25,000 tons of greenhouse gas emissions annually.

-The draft projects a 20% reduction in ghg’s from 2005 levels via the cap, which is about a 7% reduction below the 1990 baseline year. There is another 10% reduction projected via investments in prevention of deforestation outside the U.S., and there is another 0-6% projected via offsets.

-The document states that one of its objectives is to “avoid atmosphere greenhouse gas concentrations above 450 parts per million carbon dioxide equivalent; and global surface temperature 3.6 degrees Fahrenheit (2 degrees Celsius) above the pre-industrial average.”

-Based upon a five-page “Discussion Draft Summary” of the 648-page document, there is nothing in it about dividends or rebates to U.S. consumers. The “Summary” notes at one point, “Consumer Assistance: The discussion draft notes that a consumer assistance section remains to be provided.”

-As far as international action, the document “directs EPA to achieve additional reductions in global warming pollution by entering into agreements to prevent international deforestation.” The document projects that this “will achieve reductions equivalent to 10% of U.S. emissions in 2005” and that these “can be secured by devoting approximately 5% of the allowance value to the program.”

-“The discussion draft includes provisions to provide U.S. assistance to encourage widespread deployment of clean technologies to developing countries. . . that have ratified an international treaty and undertaken nationally appropriate mitigation activities.”

-The document also has a category, “Worker Transition,” with no content other than the three words, “to be supplied.” This follows several pages of language about “Green Jobs” which the committee summary describes as “authoriz(ing) the Secretary of Education to award grants to universities and colleges to develop curriculum and training programs that prepare students for careers in renewable energy, energy efficiency and other forms of climate change mitigation. . . the Secretary of Labor is authorized to carry out such training programs.” As with almost all of the other programs, the document is silent about how much money would be allocated for green jobs, and there is no language to ensure that low-income, predominantly people of color communities that have been locked out of the fossil fuel economy will be affirmatively included in the new, green economy.

-There is a very large provision made for offsets, up to 2 billion tons worth each year, “split evenly between domestic and international offsets.” This is more than 27% of the U.S.’s total annual emissions. Fully 10% of the document, from pages 372 to 436, deals directly or indirectly with the offsets issue. The document makes clear that the buying and selling of emissions credits “is not restricted to owners and operators of covered entities,” which means that some of the same kind of speculators responsible for the economic recession could get involved in the carbon emissions market. Given the problems experienced internationally with offsets—a recent study reported that between 1/3 and 2/3 of them under the Clean Development Mechanism of the Kyoto Protocol were for renewable energy, efficiency or conservation projects that likely would have happened anyway—this emphasis on offsets is not a good thing.

-The authors of the document are clearly aware of the risks inherent in a cap and trade system. In their summary they explain, “the draft provides for strict oversight and regulation of the new markets for carbon allowances and offsets. It ensures market transparency and liquidity and establishes strict penalties for fraud and manipulation. The Federal Energy Regulatory Commission is charged with regulating the cash market in emission allowances and offsets. The President is directed to delegate regulatory responsibility for the derivatives market to an appropriate agency (or agencies), based on the advice of an interagency working group.” Gulp.

-A penalty is established for any covered entity that does not have sufficient emissions credits to cover its actual emissions. The penalty is “twice the fair market value of emissions allowances established for emissions occurring in the calendar year for which emission allowances were due.” Given the reality that markets go up and down, is it unrealistic to think that there could be years when fossil fuel users can make more money by using more carbon-based fuels than they have permits for and then paying the penalty?

-There is an Advisory Board established to periodically review the offsets program to be sure that it is working as intended, but the first review would not have to be produced until January 1, 2017, almost eight years from now (!), and only once every five years after that.

-Provision is made for an overall review of the entire cap-and-trade program by the National Academy of Sciences but only every four years. Given the accelerating pace of climate change, as indicated most dramatically by what is happening with Arctic sea ice, this is a seriously flawed proposal. The President is charged with submitting legislation to Congress based on NAS recommendations as far as any acceleration or adjustments to the overall program.

-It provides for significant support of carbon capture and sequestration. It allows for the building of new coal plants without any requirements for reduced carbon emissions until 2015. In 2015 there must be a 50% reduction of CO2 and by 2020 a 65% reduction. The New York Times reported that $10 billion is provided by the document for CCS, although they did not say over what time period.

-There is a renewable electricity requirement rising to 25% by 2025, 5% of which can be from efficiency, and an energy efficiency standard for 15% electricity savings and 10% natural gas savings by 2020. For the period from 2025 to 2039 there is no increase projected above 25% renewables annually, which is definitely problematic.

-The document calls for various kinds of infrastructure support for the development of plug-in hybrids and electric vehicles. It also “establishes a new low-carbon transportation fuel standard to promote advanced biofuels and other clean transportation fuels.”

-There is a broad program of support for energy efficiency standards and investments across the economy and society. This seems to be one of the strongest aspects of the overall document. $500-$3000 per household is provided for families which weatherize their home to reduce energy use at least 20%. Similar financial support is also provided for weatherization of commercial buildings. Up to $10,000 per house is provided for installation of renewable energy technology.

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