Washington Energy Report
May 15, 2009
On Tuesday, Democrats on the House Committee on Energy and Commerce (“House Energy Committee”) met behind closed doors to discuss and negotiate several portions of Rep. Henry Waxman’s (D-CA) energy bill (see April 3, 2009 edition of the WER). While the meeting did not finalize every provision of Rep. Waxman’s energy bill, Democrats on the House Energy Committee agreed to several key portions of the bill.
Cap and Trade
While Rep. Waxman initially called for a complete 100% auction of allowances under a cap and trade program, the House Energy Committee announced on Wednesday that various industries would receive free allowances. Specifically, local distribution companies that service electric utilities would receive 35% of the allowances. Such a provision would provide power companies, which are responsible for 40% of U.S. emissions, 90% of the allowances they need to comply with the program’s cap. The free allowances to power companies would begin to decrease in 2026, when carbon capture and storage (“CCS”) is expected to be more fully developed, and phase out completely by 2030. Additionally, somewhere between $75 and $100 billion in bonus allowances will be made available to power companies that install CCS technology at new or existing power plants.
The House Energy Committee also announced on Wednesday that 15% of the allowances will go to U.S. manufacturers that are within energy-intensive, trade-exposed industries. These free allowances will run from 2014 until 2025, when the President will decide whether or not they are still necessary. Meanwhile, the automobile industry will receive 3% of the allowances between 2012 and 2017, and then 1% of the allowances between 2017 and 2025. As of press time it was still unclear what percentage of free allowances would be give to petroleum refiners, which has varied between 1% and 5%.
Renewable Energy Requirements
The House Committee also released details on Rep. Waxman’s new renewable energy standards on Wednesday. Currently, the bill calls for 20% renewable energy and efficiency by 2020. As such, 15% would come from renewable energy and 5% would come from energy efficiency. However, Governors can “swing” the 5% efficiency to 8% and move the renewable standard down to 12% if their state cannot meet the 15% renewable energy requirement. As such, the total combined contribution would still be at 20%, but a greater proportion would be coming from energy efficiency. Originally, Waxman’s energy bill required 25% renewable energy and efficiency by 2025.
Green House Gas Reductions
After initially requiring emission reductions of 20% from 2005 levels by 2020, Democrats tentatively agreed to a 17% reduction by 2020 after several meetings. Some Democrats on the House Energy Committee want the reduction requirement brought down again to 14%, a number previously suggested by President Obama. While the reduction requirements changed for 2020, long-term requirements have remained the same: 45% in 2030, 65% in 2040, and 85% in 2050.
Rep. Waxman’s energy bill is scheduled for mark-up before the entire House Energy Committee beginning on Monday, May 18. At that time, Republicans on the House Committee are expected to begin to introduce up to 200 amendments to the bill. Some of these amendments would remove the cap and trade program, strip EPA of its authority to regulate greenhouse gases under Massachusetts v. EPA, and increase domestic production of all energy supplies. While initial reports stated that Rep. Waxman’s energy bill would be released today, others believe that Waxman will wait until Monday, just before the House Energy Committee’s mark-up session begins. As of press time, Waxman’s energy bill had not been released.