Climate

First impression of Waxman-Markey: A solid bill that boosts the economy, creates green jobs, and puts the country on a path to preserve a livable climate. Grade: B+

House Energy and Commerce Chair Henry Waxman (D-CA) and Energy and Environment Subcommittee Chair Ed Markey (D-MA) are releasing their long-awaited draft energy and climate bill today. Based on reports from a Committe debrief and an E&E Daily story this morning (subs. req’d, excerpted below) and a Reuters story (here), I’ll give some first impressions.

[UPDATE: Full 648-page (!) bill is here and summary is here. More comments to come, but first impression stays the same. I agree with the Greenpeace statement, “Waxman-Markey Draft a Good First Step, but Improvements Needed.”]

Waxman-Markey seems pretty good. It will jumpstart the crucial transition to a green economy. It keeps the overall impact to U.S. businesses and consumers very low (as any smart climate bill would, see “Introduction to climate economics: Why even strong climate action has such a low total cost — one tenth of a penny on the dollar“). And it has the targets needed for the U.S. to join other countries in averting catastrophic lobal warming impacts that are inevitable if we stay on our current emissions path.

I’d give it a B+.The bill, as Friday’s Waxman-Markey-Dingell-Boucher letter suggested, uses the flawed US Climate Action Partnership proposal as a blueprint (see “NRDC and EDF endorse the weak, coal-friendly, rip-offset-heavy USCAP climate plan“).

But it has stronger near-term targets: “a 20 percent cut from 2005 levels by 2020.” And the bill embraces the useful USCAP notion of a medium-term target — in this case “a 42 percent reduction in 2030.” That target sends a strong message that business-as-usual is off the table for fossil fuel companies. It also keeps the needed 80% cut in 2050.

It has both a renewable electricity standard for utilities (25 percent in 2025, though “a fifth can be met with efficiency measures”) and an energy efficiency resource standard — two essential provision for jumpstarting a transition to a clean energy, green jobs economy, while keeping total energy bills low. It also establishes a Low Carbon Fuel Standard — eventually, which is to say apparently after 2022.

One reason the bill doesn’t get an “A” is because it still allows too many offsets — 2 billion, whereas total U.S. GHGs in 2005 were about 7.2 billion tons (see “Bush policies cause U.S. GHG emissions to soar 1.4% in 2007“). The good news is you apparently have to purchase 5 tons of offsets to substitute for 4 tons of actual emissions reductions and you can’t get international offsets from a country that has not agreed to reduce its emissions — which together are vast improvements over USCAP.

The provisions on new coal plants do not strike me as tough enough for the next few years, but don’t lose much sleep — or lower the overall grade for this bill too much — over this since the Obama administration is probably not going allow very many new dirty coal plants anyway (see “EPA makes landmark finding: Global warming threatens public health and welfare“).

Apparently, Waxman-Markey would allow new coal plants without carbon capture and storage before 2015 as long as their are certain “retrofits” by 2025. This is similar to what USCAP did and is a counterproductive sop to the coal industry. The bill sets a standard that new coal-fired electric plants in 2015 must have 50% lower CO2 emissions and 65% lower in 2020. That’s not bad — but why encourage the coal industry to build a bunch of dirty coal plants in the next 5 years with the promise that they will eventually be retrofitted?

Still, I don’t suspect that many new coal plants will be built after this bill passes anyway, and not just because of the Obama EPA. An aggressive push on efficiency and renewables coupled with the imminence of a price for carbon dioxide means that new coal plants are both unnecessary and increasingly uncompetitive (see “If Obama stops dirty coal, as he must, what will replace it? Part 1“).

Indeed, if the bill is written well, rather than seeing new coal plants, we will see a drop in coal consumption as coal is backed out by renewables, particularly biomass, which is easily the cheapest and most practical zero-carbon baseload power substitute for coal, as even major coal utilities understand (see “If Obama stops dirty coal, as he must, what will replace it? Part 2: An intro to biomass cofiring” and “Southern Company embraces the only practical and affordable way to ‘capture’ emissions at a coal plant today — run it on biomass“).

To help with competitiveness, the bill sets aside “about 15 percent of the cap-and-trade program’s allowances for industries considered most vulnerable to international competition, including iron and steel, aluminum, cement, glass, ceramics, chemicals and paper.” These are also industries that the Department of Energy has had major low-carbon and clean energy technology development and deployment efforts with — efforts that Bush gutted but that Obama and Congress are restoring.

Finally, the other reason the bill doesn’t get an “A” is that the draft appears to sidestep the dicey issue of how allowances will be allocated (see Obama tells Business Roundtable: “If you’re giving away carbon permits for free … it doesn’t work” and Obama, cap-and-trade, and voodoo economists). Also, everyone will have to read the text very closely to see if there are any other hidden cost containment measures that water it down.

But for now it appears to be a very solid effort, a crucial move forward in preserving a livable climate and restoring US leadership in clean energy and green jobs, while keeping the overall impact to U.S. businesses and consumers very, very low.

Here are excerpts from the E&E Daily story:

The bill from Chairman Henry Waxman (D-Calif.) and Energy and Environment Subcommittee Chairman Ed Markey (D-Mass.) includes four separate titles aimed at overhauling U.S. climate and energy policy, starting with a cap-and-trade program that sets mandatory limits on greenhouse gas emissions over the next four decades.

Waxman and Markey have also included a nationwide standard for renewable electricity production, as well as a federal low carbon fuel standard modeled after California law….

“Everything’s converging,” said Rep. Charles Gonzalez (D-Texas). “You’re going to see a product. I believe we’re going to get something out.”

“I think there might be some angst, but they’ll get there,” added Rep. Bart Stupak (D-Mich.).

Waxman and Markey also unveiled a preliminary schedule for moving the legislation, starting with hearings on the bill during the week of April 20 as lawmakers return from a two-week spring recess. A subcommittee markup is penciled in for the week of April 27, with a full committee markup to follow during the week of May 11.

And looking out several months ahead, House Science and Technology Chairman Bart Gordon (D-Tenn.) said Democratic leaders envision conferencing a final House energy and climate bill with a Senate-passed measure later this fall. But Gordon later added that Democrats have considerable wiggle room built into that plan. “If you were to model it out, that’s the model,” he said. “But things don’t always happen the way you’d like for it.”

Emissions targets prompt quick debate

On cap and trade, the Waxman-Markey draft seeks to curb emissions on a slightly more aggressive scale than the limits proposed by President Obama.

The Democrats’ proposal calls for a 20 percent cut from 2005 levels by 2020, compared with Obama’s budget released in February that suggested a 14 percent cut in 2020.

Both the Waxman-Markey draft and Obama’s plan do line up on a midcentury target curbing emissions by 83 percent. But the House lawmakers offer more specifics than the new administration when it comes to the cap-and-trade program’s start in 2012. The Democrats call for a 3 percent emissions cut from 2005 levels. They also include a 42 percent reduction in 2030.

“I think the goals are realistic,” said Rep. Jay Inslee (D-Wash.) “It’s based on science, rather than fear.”

But Rep. Rick Boucher (D-Va.) countered that the 2020 limits may be too aggressive for industry given technological constraints. “I think it’s challenging,” Boucher said, adding that he planned to glean suggestions in the coming weeks from the United Mine Workers of America and the electric utility industry.

“I’m going to be proposing a series of changes to the draft and the early implementation schedule may be one of those,” Boucher said.

The Waxman-Markey draft makes only one decision on the contentious debate over how to distribute hundreds of billions of dollars worth of emission credits.

Inslee said the Democratic committee leaders have incorporated his proposal with Rep. Mike Doyle (D-Pa.) that would set aside about 15 percent of the cap-and-trade program’s allowances for industries considered most vulnerable to international competition, including iron and steel, aluminum, cement, glass, ceramics, chemicals and paper.

Waxman and Markey do not go into any further detail on allowances and auctions, instead leaving the issue open for negotiations with their fellow Democrats and any interested Republicans over the coming weeks. “It’s a statement that we want to find consensus, rather than running this thing through,” Inslee said.

Renewable electricity, energy efficiency standards make the cut

The bill includes a nationwide renewable electricity standard, which requires utilities to supply escalating amounts of power from sources such as wind, solar and geothermal.

Lawmakers and lobbyists say the standard is expected to reach 25 percent in 2025, and a fifth of this can be met with efficiency measures. Markey had earlier floated a standard of 25 percent by 2025 that did not include this efficiency carve-out.

Nonetheless this plan, if indeed in the bill, would be more aggressive than a measure passed by the House in the last Congress, which set a 15 percent standard by 2020 while allowing roughly a fourth to be met with efficiency measures. It did not advance in the Senate.

“It is a good solid piece,” Inslee said. “It recognizes the advances we have made in technology most recently, the concentrated solar power contacts that are coming on. There are some good things happening out there.”

A nationwide renewable power standard has been a longstanding Democratic goal but nonetheless faces continued hurdles in the Senate, where many Republicans are opposed and some conservative Democrats have misgivings.

Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) this year has floated a plan that requires power providers to obtain 16 percent of their supply from renewables by 2019, and 20 percent in 2021 and for almost two decades thereafter. The plan allows a fourth of the target to be met with energy efficiency measures.

Sources tracking the House committee draft said they also expect it to include a separate measure called an energy efficiency resource standard, another Markey policy goal. Last month he introduced H.R. 889, which requires electric and natural gas utilities to take various steps to reduce demand.

H.R. 889 would require escalating savings by power providers, reaching 15 percent in 2020, while the level for gas distributors reaches 10 percent in 2020. Two sources tracking the committee draft slated for release today say it contains an efficiency standard that mirrors these levels.

Low-carbon fuel standard — eventually

On the transportation fuels side, Rep. Gene Green (D-Texas), a member of the Energy and Commerce Committee, said the bill is expected to include a low-carbon fuel standard. This would require a reduction in the greenhouse gas emissions from the nation’s fuel mix.

Green and other sources said the standard would not begin, however, until after the end of the renewable fuels standard that was expanded in a major 2007 energy bill.

The standard, which requires escalating use of renewable fuels such as ethanol and cellulosic fuels, hits 36 billion gallons annually in 2022. It requires biofuels, to varying degrees, to have lower lifecycle greenhouse gas emissions than conventional fuels like gasoline.

Green, from a Houston-area district with a number of refineries, said he had been concerned about overlapping mandates with the biofuels standard and a low-carbon fuels standard. He warned against policies that would end up “running production offshore.”

“That gives me a lot of comfort level from where I was coming from,” Green said of the apparent decision to have the low-carbon fuels standard begin after the current renewable fuels standard has reached its limit. However, Green noted he has not yet seen bill language.

Overall, Green praised the process so far but cautioned that much remains to be done. “I have talked to Chairman Waxman for months now and Chairman Markey, and we talk about it in good faith. We want to sit down and see what we can do and as I bring up a problem we will work on it,” he said. “That is legislating. We will see how we get there, but I feel more comfortable now, but I want to see what the language is.”

14 Responses to First impression of Waxman-Markey: A solid bill that boosts the economy, creates green jobs, and puts the country on a path to preserve a livable climate. Grade: B+

  1. danl says:

    Two things, Joe:
    1) Why are emissions reductions given from 2005 levels instead of 1990? Do you know what those targets translate to? Seems like it’s creating a false sense of complacency.

    2) I think you meant “allowances” instead of “apartments” in your 2nd to last paragraph.

  2. Joe says:

    Danl:

    1) Members can’t and/or won’t do math. The 1990 baseline is an international thing for most members. We are currently about 15% above 1990 levels. This bill takes us below 1990 levels by 2020.

    2) Thanks.

  3. Will Greene says:

    Sorry not sure who else to ask this, so is this THE bill equivalent of Boxer-Warner? Or is it just a proposal that will be changed? I lobby a local congressman so it’s good to stay up on these things.

  4. MarkB says:

    Very general question: What are the chances that the U.S. will pass cap and trade legislation (signed into law) in 2009-2010 that earns at least a “C” grade on the Romm scale? My concern is that it’s going to be resisted hard by Republicans in the Senate. McCain, previously a co-sponsor of cap and trade legislation, is showing further flip flopping tendencies, calling existing discussions of cap and trade “cap and tax”, which leads me to believe he will oppose any reasonable legislation going forward.

    The other concern is Democrats like Dingell, who have unhealthy ties to certain industries. Along with Republicans and the threat of a fillibuster, it seems like a large challenge. I’m extremely pleased with actions by the Obama Administration and Congress with regards to low carbon energy investments, energy efficiency, and coal and CO2 EPA initiatives, but specific legislation targeting emissions seems like a much bigger fish to fry.

  5. Brendan says:

    It seems to me that some level of allowing offsets might actually be beneficial with the right stipulations for buying internationally. Maybe this bill doesn’t do it correctly, but what if you could only buy from countries that have their own cap and trade markets which have reductions of x percent by 2040 (or whatever the stipulations are). Something like this may encourage developing countries to add their own carbon caps which could instigate further reductions. Any comments?

  6. GARY says:

    this new waxmam/markey is just more government propaganda. they are trying to scare the american public like they do when they elevate the terror color. and the government also says that it will create millions of so called green jobs and save trillions of dollars. how is this possible and how is it that all of these jobs require the applicants to have college degrees.? the global warnings are just that. it is hotter in temperature in 2009 than it was in the 50’s. more buildings ? more cars ? more people ? more concrete ? the polar ice cap that is melting sometimes takes up the same amount of room in the water whether its solid or liquid…. think about it…….and dont allow the companies to buy and sell the permits for emissions……..punish them all equally………..

  7. CTF says:

    I agree that this is a great first step, but I’m concerned not only about the political realities of passage (or, more specifically, what they’ll have to give away for passage), but also about the lack of language concerning market regulation. Better yet would be a carbon tax shift approach–we could avoid the “subprime carbon market” altogether. I’m not sure why they are so married to cap and trade…

  8. I hope Joe will repost so there can be a serious discussion about the Waxman House bill, which was filed March 31 and therefore came out as April Fool news. http://energycommerce.house.gov/ Press_111/ 20090331/ acesa_discussiondraft.pdf

    Seriously (which I hope is possible today), I don’t like how Waxman mandates adoption of underground CO2 storage, known as sequestration (Section 115(a)). Although in Section 114 (c)(1) lines 9-10 there is “or capture and convert” mentioned as an alternative, sequestration is clearly understood to mean storage. There is even a Carbon Storage Research Corp., to be a subsidiary of the Electric Power Research Institute (EPRI), set up under Section 114.

    For some reason, Section 114 (c)(3) excludes pilot projects from funding, so there will be no research. Congress has made up its mind to pursue sequestration and not to explore conversion. The GAO has opined that sequestration is a dry hole due to transportation costs and liability concerns. http://www.gao.gov/new.items/d081080.pdf

  9. Sam Penrose says:

    I don’t see anything in the Draft Summary about land use issues. Aren’t they a huge driver of energy (and therefore GHG) consumption: drving to big suburban houses vs. walk/bike/mass transit to smaller urban dwellings? And aren’t they mostly regional issues (per Yglesias recently), necessitating federal coordination to effect change?

  10. Philohara says:

    I’m going building my own home and trying to keep it as Zero Carbon as possible, In my research I have found this company who seems to offer the most on the Eco front http://www.germanpassivehouses.ie/index.html, any other recommendation?

  11. Johnny says:

    You got to be kidding. Who is the idiot that believes this will help the economy. They are giving away 85percent of the permits which is huge corporate welfare! I really am shocked at the stupidity of the carbon crazys out there. Really you people should get your heads examined. You won’t have to worry about carbon when this administration destroys the economy. Hard to expel carbon when your homeless.

  12. Raynelle says:

    Remember the saying “Don’t judge a book by its cover”? This bill might seem sweet on top, but when you dig down deeper you will see that the overall affects this bill with have on the economy are definately worth worrying about. This bill will creat higher gas prices, higher energy prices, fewer coal plants which leads to fewer jobs, higher prices on everyday items such a food which will be a direct hit by the higher gas prices. Stop and really think about if you can really afford for your wallet to take another hit-I know mine can’t. Sign this letter and make your voice heard: http://tinyurl.com/klfut8

  13. Foto Wanita says:

    I agree that this is a great first step, but I’m concerned not only about the political realities of passage (or, more specifically, what they’ll have to give away for passage), but also about the lack of language concerning market regulation. but this is great post, thanks for share with we..

  14. I love this steatment, “That gives me a lot of comfort level from where I was coming from,” Thanks…