US market welcomes Waxman-Markey climate bill

www.environmental-finance.com
London, 2 April

Congressmen Henry Waxman and Ed Markey have received plaudits for a bill that would create an emissions trading system in the US. The American Clean Energy and Security Act of 2009, put forward on Tuesday, aims to establish a cap-and-trade programme for greenhouse gas (GHG) emissions, as well as promote renewable energy, carbon capture and storage (CCS), energy efficiency and low-carbon fuels, among other things.

"It's important to remember that the bill is a comprehensive energy bill," said Joseph Stanko, a partner at Hunton & Williams in Washington, DC. "For the first time in our legislature, we're going to see climate change discussed in the context" of a complete energy debate. Stanko also hailed the bill's moves to "stop some of the Clean Air Act's duplicative regulation", such as removing carbon dioxide and other GHGs from the act's remit to regulate hazardous air pollutants.

If passed as is, the bill would require electricity suppliers to source an increasing share of power from renewable sources, starting at 6% in 2012 and rising to 25% by 2025 - similar to a target in a bill tabled by Markey in February. State governors can request to have this obligation reduced by 20% in favour of energy efficiency measures. These targets would be met by suppliers delivering tradable federal renewable energy certificates, awarded to renewable energy generators.

The emissions trading system would cap GHG emissions at 3% below 2005 levels in 2012, 20% in 2020, 42% in 2030, and 83% below 2005 levels in 2050 - mirroring targets proposed by a coalition of businesses and environmental groups in January. This is slightly less aggressive than previous proposals from the two congressmen, noted Manik Roy, director of congressional affairs atthe Virginia-based Pew Center on Global Climate Change.

The bill would cap emissions from sectors that account for 85% of US emissions, including power generators, oil companies, and large industrial emitters. There is also a mention of allowance auctions, starting by 2011 and to be held four times a year at regular intervals. However, there is no explicit mention of the percentage of allowances to be auctioned nor specific allocations to covered sectors.

There are also proposals to speed up the commercial development of CCS, and to reduce regulatory hurdles for pilot projects. And, in a boost to car manufacturers, the bill has provisions to financially support companies that retool their plants to make electric cars. Waxman has pledged to pass cap-and-trade legislation out of the House energy and commerce committee, which he chairs, by Memorial Day, 25 May. Before that, the bill must go through the House subcommittee on energy and environment, chaired by Markey - "one of the toughest hurdles it will face", said Pew's Roy.

"It's a test of if the moderates, Waxman and Markey can work together to get a bill that leads to emissions reductions the environmentalists want with the economic protection the pro-business moderates want," he added. Passing mirroring legislation through the Senate will also be a challenge, as the Democrats fall short of the 60-seat majority required to guarantee a bill's passage.

"They have outlined a very aggressive scheduled for consideration of the bill," added Stanko from Hunton & Williams. "If they hold to the schedule ... we'll go straight into hearings" after a two-week Easter break which starts next week.