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Waxman-Markey Climate Bill

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This article is part of the Coal Issues portal on SourceWatch, a project of CoalSwarm and the Center for Media and Democracy.

This article is part of the Climate change portal on SourceWatch.

The Waxman-Markey Climate bill is the common name for the American Clean Energy and Security Act of 2009 (ACES), sponsored by Henry Waxman (Democrat of California) and Ed Markey (Democrat of Massachusetts). The wide-ranging energy and climate bill aims to create clean energy jobs, save consumer energy costs, increase America’s energy independence, and cut global warming pollution. On June 26, 2009, the U.S. House of Representatives voted 219-212 to pass the bill. Eight Republicans voted for the legislation, and 44 Democrats voted against it. Senate Majority Leader Harry Reid said the bill would be considered in the Fall.[1]

The legislation has four titles: Clean Energy, Energy Efficiency, Reducing Global Warming Pollution, and Transitioning to a Clean Energy Economy. Major elements of the bill include a requirement for 20 percent of electricity to come from renewable fuels by 2025; Carbon Capture and Storage incentives; smart grid and electrical car provisions; higher energy efficiency standards for buildings, lighting, and appliances; a Cap and Trade program; reduction of global warming gases by 83 percent by 2050; programs to compensate energy intensive industries for costs incurred under the bill, and green job creation.

Contents

Overview of bill provisions

As passed by the House of Representatives, H.R. 2454 is over 1400 pages long.[1] The bill includes the following key provisions.

Renewable Electricity Standard

The bill establishes a renewable electricity standard (RES) that requires utilities to produce an increasing percentage of their electricity from a combination renewable energy and energy efficiency savings. The bill designates renewable sources as wind, solar, geothermal, biomass, marine and hydrokinetic energy, biogas and biofuels The RES requires that 6 percent of electricity come from renewables by 2012, gradually increasing to 20 percent by 2020. At least 75 percent of the RES must be met by renewable energy, although if a utility cannot meet that target, it can request state permission to reduce the renewable requirement to 60 percent, with the remainder made up with efficieny savings.

The bill also requires the federal government to meet 20 percent of its energy needs through renewable energy by 2020.[1]

Global Warming Emissions

H.R. 2454 mandates gradual reductions in annual global warming emissions, such that these emissions from major US sources are lowered to 97 percent of 2005 levels by 2012, 83 percent by 2020, 58 percent by 2030, and 17 percent of 2005 levels by 2050.[1]

The bill also includes a provision to prevent tropical deforestation and claims the program will reduce carbon emissions by an additional 10 percent below 2005 levels by 2020.[1]

Emissions Allowances and Offsets

The bill establishes a program of "emission allowances" that creates tradable pollution permits modeled after the Clean Air Act system, which was designed to prevent acid rain. According to EPA and Congressional Budget Office estimates of the cost of these permits, the total value of the allowances will range from approximately $70 to $80 billion in 2015 to $90 to $120 billion in 2030. Approximately 80 percent of allowances are given away for free until 2025, after which an increasing percentage is auctioned, with about 70 percent of allowances auctioned by 2031. A changing percentage of the revenue generated from the sale of these allowances will be used to protect consumers from increases in energy prices; assist vulnerable industries transition to a clean energy economy; support investments in clean energy and energy efficiency; aid domestic and international adaptation to climate change, worker assistance and training, and prevention of deforestation; and ensure that the bill remains budget-neutral.

The bill also creates a system of emissions offsets, which will allow capped sources to increase their carbon emissions by up to 2 billion tons annually, if they invest in projects that offset their target emissions reductions. At least half such credits must come from U.S. sources, unless domestic offsets are not available, in which case as much as 1.5 billion tons of emission credits can be obtained through international offset projects.[1]

Carbon Capture and Storage

H.R. 2454 aims to ensure that all new coal-fired power plants will operate with carbon capture and storage technology, with the following provisions:[1]

  • All new coal plants permitted after 2020 must use CCS when they begin operating.
  • Coal plants permitted between 2015 and 2020 will lose eligibility for federal funding if they do not use CCS when they begin operating. If plants do not have CCS when they go into service, they must retrofit by 2025 without federal financial assistance.
  • Coal plants permitted between 2009 and 2015 will lose eligibility for federal funding if they do not retrofit CCS within five years after they begin operating. If they miss this cutoff, they must retrofit CCS by 2025 without federal financial assistance.
  • No requirements are placed on coal plants permitted before 2009.

Investments in Clean Energy

The bill creates investments in new "clean energy" technologies and energy efficiency. Through 2025, the bill would devote an estimated $90 billion to energy efficiency and renewable energy, $60 billion to carbon capture and storage (CCS) technologies, $20 billion to advanced technology automotives such as electric vehicles, and $20 billion to general scientific research and development. The $190 billion total was derived from EPA's estimates of the price of emissions allowances. The investments represent 13 percent of the revenue generated by the sale of these allowances. The amount allotted to CCS also includes $10 billion created by a "wires charge" on fossil fuel-generated electricity.

After 2025, 5 percent of allowances are directed to renewable energy and energy efficiency, 5 percent to CCS, and 1.5 percent to research and development.[1]

Energy Efficiency Standards

The legislation mandates new energy efficiency standards for buildings, appliances, and heavy-duty and off-road vehicles.[1]

EPA analysis

On February 27, 2009 the House Energy and Commerce Committee Chairman Waxman and Energy and Environment Subcommittee Chairman Markey requested that EPA estimate the economic impacts of the Waxman-Markey Discussion Draft.

The EPA analysis was released on April 20, 2009. The report focuses on the bill’s proposed cap-and-trade mechanism and suggests that the share of low-carbon and zero-carbon energy sources would rise to 26 percent of the nation’s energy mix by 2030, and could reach 46 percent by 2050 under the plan. The EPA estimates that the share would remain at 14 percent without policy such as proposed in the ACES legislation.

Effect on construction new coal plants

According to EPA's analysis of the discussion draft, without the statute 17,000 megawatts of new conventional coal-fired power plants would be built by 2025. With the statute, no further conventional coal plants would be built but 7,000 megawatts of coal-fired power plants with carbon capture and storage would be built by 2025.[1]

EPA projects only modest retirements of coal plants

According to EPA's analysis of the discussion draft, the statute would lead to a retirement of 11,000 megawatts of coal-fired generating capacity in 2000 and an additional 3,000 megawatts by 2015, with no further retirements through 2025 for a total of 14,000 megawatts. Without the bill, 3,000 megawatts of capacity would be retired in 2010, with no further retirements. Thus, the effect of the discussion draft of the bill on the coal fleet would be a net reduction of 11,000 megawatts of coal capacity by 2025, about 3 percent of the total capacity of existing coal plants.[1]

Congressional Budget Office analysis

At the request of the Committee on Ways and Means, the Congressional Budget Office (CBO) analyzed the potential impacts on U.S. households of the cap-and-trade program included in the Waxman-Markey legislation. CBO's findings were released on June 19, 2009. The analysis focused on the year 2020 as a representative indication of the effects of the legislation.

CBO stipulated that its estimates included the cost of restructuring energy production and use and of payments made to foreign entities under the program, but did not assess the economic benefits of the reduction of greenhouse gas emissions and the mitigation of global warming. Given those stipulations, CBO estimated that the net cost of the cap-and-trade program in 2020 would be $22 billion per year, or approximately $175 per household. According to the report, households with incomes in the lowest 20 percent would get an average benefit of about $40 in 2020. For those with incomes in second lowest quintile, average costs in 2020 would be about $40, in the middle quintile about $235, and in the second highest quintile about $340. Households with incomes in the highest 20 percent would see an average net cost of $245 in 2020. As a whole, overall net costs would average about 0.2 percent of after-tax income for each household.[1]

Criticism

Objections from coal opponents and environmentalists

As the bill worked its way through Congress, critics of the Waxman-Markey legislation cited numerous offsets and provisions for energy companies, including two billion tons of pollution offsets (equal to a quarter of all U.S. emissions), and exemptions on emissions for coal plants currently under construction by companies such as Duke Energy.[1][1]

Environmentalists also worried that numerous amendments had made it too favorable to the coal industry. In May, Representative Rick Boucher, a Democrat representing coal counties in Virginia, announced that he had worked out pro-coal changes to the bill with Waxman and Markey, including:

  • Changing the near-term requirement for emissions reductions to 17 percent below 2005 levels by 2020, instead of the original mandate of 20 percent reductions over the same period. Coal industry officials hope that the lesser reductions will allow them more time to develop "clean coal" technologies.
  • Allotting $1 billion per year for the next ten years to fund the development of carbon capture and storage technology.
  • Giving power companies most of their greenhouse gas emissions permits for free.
  • Giving "bonus emissions" to utilities that capture and store their carbon emissions. United Mine Workers of America (UMWA) estimates the additional allowances are worth over $180 billion between now and 2050.[1]

UMWA International President Cecil E. Roberts released a statement praising the changes and taking credit for the allowances for utilities, which he said had followed from a recommendation by the Union. Roberts expressed his thanks to Congress, saying, "Rep. Boucher and others in Congress have fought hard to protect the interests of coal miners and all working families. We look forward to working closely with him as the legislation moves through the legislative process."[1]

Brent Blackwelder, president of Friends of the Earth, praised the efforts by Waxman, Markey, and others to develop global warming legislation, but added that the bill had been "corrupted by members of Congress backed by oil and coal interests."[1]

On June 27, 2009, Public Citizen released a statement calling for the bill to be strengthened, including by changing the emissions reductions target to 80 percent below 1990 levels by 2050, requiring polluters to pay for emissions credits, and increasing the amount of renewable energy utilities must use.[1]

Environmental groups and public health advocates are also concerned about how the legislation may - or may not - impact existing coal plants. Although the version of the American Clean Energy and Security Act that passed the House requires a 50 percent reduction in carbon emissions from new coal plants by 2025, it mandates no specific reduction requirements for existing plants. Some groups are concerned that, by driving up the cost of new plants and offering free emissions allowances or carbon offsets for older facilities, the bill may result in even heavier reliance on an aging fleet of coal plants. Environmental advocates fear the legislation may end up having similar issues to the 1977 Clean Air Act, which grandfathered in older plants and largely exempted them from requirements that facilities use the best available pollution-control technologies.[1]

Environmental groups also express concern that the bill strips the EPA of its ability to regulate greenhouse gases. In Massachusetts v. EPA, the Supreme Court ruled that EPA can regulate carbon dioxide and other greenhouse gases. However, the Waxman-Markey legislation rescinds this ability by prohibiting any greenhouse gas, including CO2, from being listed as a "criteria pollutant" or a "hazardous air pollutant" on the grounds of its impact on climate change. The bill prevents greenhouse gas emissions from triggering New Source Review and from blocking a permit to operate under Title V of the Clean Air Act. The legislation also prohibits EPA from regulating greenhouse gas emissions as international air pollutants or creating technology-based standards for capped sources.[1]

In September 2009, a "coalition of more than 300 organizations including faith, human rights, social justice and environmental groups" delivered letters to U.S. Senators asking them to strengthen the climate change bill, expressing "profound concern" about the version passed by the House. The groups -- including Appalachian Voices, Greenpeace, Friends of the Earth and the United Church of Christ Network for Environmental and Economic Responsibility - urge Senators to work towards a 350 parts per million target of carbon dioxide, maintain the EPA's ability to regulate greenhouse gas emissions, minimize offsets and funding for polluting industries, such as research into carbon capture and storage. [1]

Objections from Dennis Kucinich

After the bill passed the U.S. House of Representatives by a vote of 219-212, Congressman Dennis Kucinich (Democrat from Ohio) outlined the reasons he voted against the measure. His concerns echoed those of other concerned citizens and environmental groups opposed to the numerous amendments and qualifications added to the legislation. His specific objections include:[1]

  • The bill's overall targets for greenhouse gas reductions are too weak. The bill is based on a target atmospheric concentration of 450 parts per million (ppm), which, while supported by the most recent report from the Intergovernmental Panel on Climate Change, is out of date. The latest scientific studies advise that 350 ppm is necessary to avoid the worst effects of climate change.
  • The offsets included in the bill undermine the emission reductions. Offsets will enable polluters to go about business as usual and keep polluting. They can also be manipulated with fraudulent claims of emissions reductions, in what Kucinich compares to "Enron-style accounting methods." The carbon markets that are created will also be manipulated by Wall Street to the financial gain of an elite few. Many of the benefits designed to aid consumers will go through coal companies and other large corporations, which will be entrusted with passing on the savings to customers.
  • The legislation does not require reductions below current levels until 2030, despite the immediate need to address rapid global warming. By requiring the bulk of the emissions to be carried out in the long term and requiring few reductions in the short term, the bill almost guarantees catastrophic levels of global warming.
  • The bill strips the EPA's authority to help reduce greenhouse gas emissions in the short- to medium-term. Kucinich argues that the EPA offers the strongest defense against a new generation of coal power plants, which he says have no place as a major source of energy if the climate is to stabilize.
  • The coal industry gets record subsidies, essentially getting a lifeline instead of being phased out. $60 billion is allocated for CCS technology, which may or may not work. Either way, the coal industry will be able to spend the next one to two decades emitting CO2 while research and demonstration projects are underway.
  • The Renewable Electricity Standard (RES) is too weak. The 15 percent RES standard would be accomplished even if there were no mandate in the legislation. In addition, the bill allows dirty energy sources to qualify as "renewable." Kucinich cites trash incinerators, which emit greenhouse gases and highly toxic materials, as well as biomass burners that can use trees as a source of fuel, as two types of energy sources that are defined as renewable and whose greenhouse gas emissions are not counted as contributing to global climate change.

Kucinich also detailed eight amendments he sponsored in an effort to make the bill more effective. Three amendments attempted to limit the damages that could potentially be caused by offsets included in the bill. Three others would have required renewable energy to eventually supply all federal energy, in an attempt to accelerate the transition to green energy. Another Kucinich amendment proposed to move the year by which greenhouse gas emissions are required from 2030 to 2025 and attempted to reduce possible abuses with emissions allowances. The final amendment would have removed trash incineration from qualifying as renewable energy. None of the amendments were allowed to be heard by the full House of Representatives.[1]

Objections from conservatives

Our Country Deserves Better, a political action committee formed in 2008 to oppose then-presidential candidate Barack Obama, launched a campaign in June 2009 called "stop cap and trade." The conservative group, which has ties to the Republican-leaning public relations firm Russo Marsh & Rogers, claimed the climate change bill "will saddle Americans with thousands of dollars in new taxes, fees, and and costs each year." [1]

Objections from industry and corporate-aligned groups

The Congress of Racial Equality (CORE), a former civil rights group that has received funding from ExxonMobil, criticized the bill. CORE chairman Roy Innis said "it was an 'elitist view' that higher prices for fossil fuels would prompt conservation and that 'the poor and working families we represent cannot bear that luxury.'" Innis added, "Americans don't want 'energy welfare payments' from the government to help ease the sting of these government-driven cost increases." [1]

Innis added, in a statement to Congress, "In my 40-plus years as the chairman of CORE, I have seen few federal bills that would do more harm to America’s working class and low-income citizens and families than the Waxman-Markey climate tax bill." [1]

In a September 2009 luncheon talk at the Montana Petroleum Association's annual meeting (which included a golf tournament), CORE's Niger Innis "called for the production of 'more of everything,' including renewable energy like solar and wind power and 'good old-fashioned fossil fuel,'" reported the Billings Gazette. Innis called Waxman-Markey a "cap and tax" bill, and accused "the green mafia" and the "elite media" of trying to stop energy production. [1]

Industry groups were also very critical of the measure. "At a time when America is trying to recover from a serious recession, the House has approved legislation that would cost energy uses billions of dollars and add new stress to the economy," said American Petroleum Institute President Jack N. Gerard, shortly after the House passed the bill. [1]

Independent Petroleum Association of America President Barry Russell said the bill "skews energy policy away from clean-burning natural gas. Second, it imposes new limits on gas and oil trading that will cripple independent producers' access to commodity markets." [1]

National Petrochemical and Refiners Association President Charles T. Drevna criticized "the unfair burden placed on American refiners by the mandated responsibility for emissions resulting from the use of their products, including home heating oil, gasoline, diesel, jet fuel, and industrial fuels." He called the measure "a tremendous tax hike for American consumers that will threaten domestic energy supplies and could actually increase the nation's reliance on foreign refined products." [1]

In August 2009, natural gas and pipeline companies formed an alliance to lobby for more gas-friendly measures in the Senate version of the climate bill. America's Natural Gas Alliance has 28 member companies and an estimated budget of $80 million. President and CEO Rod Lowman said that giveaways to the coal industry in the House bill -- particularly, funding for "clean coal" research -- would hurt the natural gas industry, despite the fact that natural gas has a lower carbon footprint than coal. Lowman said the bill's provisions would would give utilities too little incentive to switch to less polluting fuel sources. The alliance wants the Senate bill to put more emphasis on switching to natural gas as an immediate means of reducing global warming emissions.[1] Specifically, the gas industry plans to lobby the Senate for incentives to encourage utilities to switch from coal to natural gas, and for transportation companies to convert their truck fleets from diesel to natural gas. Gas lobbyists also hope to limit the carbon offsets offered to power companies, because such offsets may reduce the motivation to move away from coal.[1]

Other reactions

Support from the nuclear industry

Of special interest to the nuclear energy industry is the bill's Clean Energy Deployment Administration, which would oversee loan guarantees for new, low-carbon energy projects. "These provisions can help mobilize private capital and facilitate debt financing on reasonable terms for the first wave of nuclear plant projects to help reduce uncertainties and ultimately lower the cost to consumers," said Nuclear Energy Institute lobbyist Alex Flint. [1]

Possible impact on Alberta's tar sands

Companies invested in Alberta's tar sands expressed concern that the bill would dampen the U.S. market for the carbon-intensive oil "Still, the oil industry did dodge a major bullet when the House dropped plans to include a low-carbon fuel standard, similar to one adopted in California, that would impose significant costs on oil sands producers," reported The Globe & Mail. "Canada's petroleum industry has carefully monitored the bill's progression and lobbied U.S. legislators in a bid to convince them that a rule that damages Canadian oil production also damages U.S. energy security." The Canadian Association of Petroleum Producers' vice-president of environment and policy, Tom Huffaker, remarked, "We're delighted that low-carbon fuel standards are not in the Waxman-Markey bill ... but we're resisting dancing on the table because we know this is a work in progress." [1]

Inadequacy of CO2 targets

On June 22, 2009, twenty scientists and scholars sent an open letter to Congress and President Barack Obama, with qualified support for the Waxman-Markey bill. "The Waxman-Markey bill ... must be enacted this year," they wrote, "but at its best will be only a first step." The scientists cautioned that to limit carbon dioxide emissions worldwide "to 450 parts per million and to limit the rise of global temperatures to less than 2° Celsius ... are inadequate to sustain the integrity of global climate and to hold the risk of ruinous climatic change to an acceptably low level." Signatories included J. G. Speth, formerly Dean of the Yale School of Forestry and Environmental Studies; Richard A. Houghton, Acting Director and Senior Scientist at the Woods Hole Research Center; William Schlesinger, Director of the Cary Institute of Ecosystem Studies; and George M. Woodwell, Director Emeritus and Senior Scientist at the Woods Hole Research Center. [1]

Offsets in Waxman-Markey Criticized as a "Protection Racket"

Economists Steven Stoft and Dan Kirshner have criticized the offset provisions of the Waxman-Markey bill as a "carbon protection racket."[1] According to Stoft and Kirshner:

Here's the story: India has offered to cap its greenhouse-gas emissions – but only at a level 10 times higher than its own emission rate. China will not accept a cap at all, and at the Major Economies Forum on July 9, China and India even blocked setting a target for world emissions in 2050. This trend confirms that other developing countries will also stick with their anti-cap positions, leaving half the world's emissions unchecked and growing far faster than emissions from the industrialized nations.
The Waxman-Markey bill was supposed to remedy this problem by providing US leadership, which poor nations would follow by accepting caps. But this hope ignored the inequities of caps and ignored the bill's offer of an estimated $13 billion a year – growing to $83 billion annually in 2050 – to buy "international offset credits" from developing countries.
Such offset purchases encourage poor countries not to accept caps. Global cooperation requires a reversal in US climate policy toward developing countries. We must reward cooperation rather than the lack of it.
Buying offset credits pays emitters in developing countries to emit "less than they would have emitted." But implementing a cap cuts back on what "they would have emitted," and reduces their profits from selling offsets

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