Transcript What to Watch in the Waxman-Markey Climate and Energy Bill

What to Watch in the Waxman-Markey
Climate and Energy Bill
A discussion led by WRI climate experts John Larsen, Paul Joffe, and Alexia Kelly
July 9, 2009
Overview
HR 2454 The American Clean Energy and Security Act of 2009
• Passed the House 219-212 on June 26th after 3 months of hearings and revisions
• Senate EPW committee hearings commenced this week
• Senate floor vote as early as mid-September
What HR 2454 does:
 A clean energy title, designed both to set new standards for current types of power generation and to
accelerate development and deployment of clean energy technologies such as renewables, energy efficiency
and carbon capture and storage.

An efficiency title that provides funding for energy efficiency programs, and the setting of stronger building
codes and product efficiency standards.

A cap and trade program that sets mandatory caps on 87% of U.S. greenhouse gas (GHG) emissions,
including the electric power and oil and gas sectors, and heavy industry.

Measures designed to ease the transition into a low carbon economy by providing assistance to those
impacted by a cap - including industry, affected sectors of America’s workforce, and low income households;
these also include support for international climate change programs.

Additional measures of domestic offset development
Key issues:
• Jobs
• Allowance distribution (who bears the costs?)
• Offsets (rules, who’s in charge, limits)
• International engagement, trade and competitivness
• Targets
The Cap: Who’s covered and where?
Primary Cap
• Covered gases: 5 Kyoto gases (not HFCs) plus NF3 with EPA authorized to add
additional GHGs in the future
• Mandatory reporting: Required by 2011 for all prior years through 2007. Quarterly
reporting is required beginning in 2011. All covered entities plus other types of entities
are required to report
• Point of regulation: A hybrid approach is used with sources phased in over a 5-year
time frame:
–
Covered in 2012: The ACES assumes the cap covers 66.2 percent of total US emissions during
this phase.
•
•
–
•
•
Added to coverage in 2014: The ACES assumes the cap covers 75.7 percent of total US
emissions during this phase.
•
–
All electric power generators (downstream)
Natural gas liquid-, petroleum- and coal-based liquid fuel producers/importers (upstream) whose
products when combusted emit over 25,000 tonnes annually.
Producers and importers of fluorinated gases (upstream) except HFCs
Geologic storage sites
Industrial sources (downstream) that annually emit 25,000 tonnes or more, not including emissions from
petroleum and biomass combustion; plus all sources (regardless of size) in select energy intensive
sectors (e.g. glass, ceramics).
Added to coverage in 2016: The ACES assumes the cap covers 84.5 percent of total US
emissions during this phase.
•
Natural gas Local Distribution Companies (LDCs) (midstream) that deliver more than 460,000,000 cubic
feet of gas annually to non-covered entities. Emissions that result from sales are regulated with
measures to prevent double counting.
HFC cap on consumption covers all HFCs and starts in 2012 as an extension of
Title VI of the CAA
Complementary policies achieve
reductions beyond the cap
Allowance distribution: Something for everyone
Percent of total allowance pool under HR 2454 as passed
Climate change dividend fund
100
Deficit reduction
Supplemental Agriculture and RE
Early action compensation
90
Domestic fuel production
DRAFT
CCS
80
Natural gas consumers
Climate change health protection and promotion fund
RE and EE worker training
70
Investment in workers
Domestic adaptation
International clean technology deployment
International adapation
Wildlife and natural resource adaptation (feds)
50
Wildlife and natural resource adaptation (states)
Advanced energy research
40
Energy Innovation hubs
Home heating oil and propane consumer
Trade vulnerable industries (up to)
30
Clean vehicle technology
Supplemental forest emissions reductions
20
State building retrofits
State Building Codes
State EE and RE
10
Low income consumers
Cogen incentives
0
2050
2048
2046
2044
2042
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
Small LDCs for EE, RE and rate relief
2012
Percent
60
Merchant coal and Long-term Contract generators (up to)
Electricity consumers
Most allowances are given away but not just to
industry and not without strings attached
Chart 1. Allowance Value Distribution HR.2454 as passed, 2012-2050
July 8, 2009
100
Auction with proceeds to the public
Auction with proceeds to agencies for public benefit
Free allocation to regulated entities no restrictions
Free allocation to agencies for public benefit
Free allocation to regulated entities for technology deployment
Free allocation to regulated entities to benefit energy consumers
90
70
60
50
40
30
20
10
50
20
48
20
46
20
44
20
42
20
40
20
38
20
36
20
34
20
32
20
30
20
28
20
26
20
24
20
22
20
20
20
18
20
16
20
14
20
12
0
20
Percent of allowance pool
80
Regardless of distribution method,
the cap still gets tighter
6000
DRAFT
5000
Auction with proceeds to the public
Auction with proceeds to agencies for public benefit
Free allocation to regulated entities no restrictions
Free allocation to agencies for public benefit
Free allocation to regulated entities for technology deployment
Free allocation to regulated entities to benefit energy consumers
3000
2000
1000
0
20
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
20
32
20
34
20
36
20
38
20
40
20
42
20
44
20
46
20
48
20
50
Million Allowances
4000
GHG Offset Provisions Overview
Offsets and Cap and Trade
Emissions
10 tons “offset”
Capped and
Uncapped Sectors
65 cap
Uncapped Sectors
Capped sectors
100
90 tons
tons
75 tons
Emissions
Emissionswithout
with Offset
Offset
System
System
165 tons
175
Administration
• Administrator
– USDA for domestic agriculture and forestry
– EPA for all others
• EPA will establish an offset registry
Limits
• System level limit set at 2 billion tons per year
– Can be adjusted by president rec. to congress
• Firm-level limits
– vary by year, e.g. 30% in 2013, ~65% in 2050
• Discount applies to int. credits only after 2017
– 1.25 offset credits for every 1 allowance
• 50/50 on int. and domestic
– Administrator can adjust up to .5 dom/1.5 int. if less
than 900 million domestic tons in system
HR 2454 Offset Timeline
Avoided Deforestation
Credits-Sub-national and
Project (2012-2017)
Avoided Deforestation
Credits-Sub-national and
Project in LDC (2012-2025)
Avoided Deforestation Credits-National (2012-2050)
Sectoral Credits (2012-2050)
EPA Project-Based Credits (2012-2050)
Project-Based Credits from Approved Int. Program if no sectoral (2016-2050)
Project-Based Credits from Approved Int. Program (2012-2050 or until sectoral agreement in place)
DOMESTIC EPA Project-Based Credits (2012-2050)
DOMESTIC USDA Agriculture and Forestry Credits (2011-2050)
Early Offset Supply
(2009-2013)
2009
2010
2012
2014
2016
2018
2020
2025
2030
2040
2050
Project Types
• EPA has 2 years to promulgate regulations
– 1 year for positive list
– IAB has 90 days to advise
• USDA has 1 year
• Silent on which project types qualify
– Except for separate program for developing country
REDD
– USDA provisions include potential list of project types
Early Offset Program
•
•
Project started after Jan. 1, 2001
Credits will only be issued for emission reductions
occurring after Jan.1, 2009 until 3 years after date of
enactment
– Or date that new regs take effect
•
Only from qualified program
•
Allowances available for pre-2009 reductions
HR 2454 Early Offset Timeline
Jan.1, 2001
Jan, 1,2009
August 2009
2012
The International Provisions of Waxman-Markey
• The bill establishes the key components of the U.S.
contribution to a new international treaty.
• Key international elements of the bill:
- Targets, mitigation actions, and offsets
- Cooperation and financing on tech transfer, forests, and adaptation
- Competitiveness
• The wider context: on all these issues, bilateral and
multilateral discussions are under way to try to mesh the
expectations of the U.S. and other countries in time for the
Copenhagen conference in December, 2009.