House Dems near agreement on energy and climate bill. Energy and Commerce markup may be set for Thursday.

UPDATE: Energy Daily (subs. req’d) has just come out with a bunch of new details, which I excerpt at the end. They report:

The draft bill calls for setting aside an additional 5 percent of the total amount of allowances from 2012 through 2025″”and declining percentages thereafter””for “supplemental emission reductions” obtained by funding programs in tropical forest countries to prevent deforestation. This 5 percent set-aside would have the effect of raising the cap for regulating industries and is likely to boost the cost of allowances.

So the deal looks to be close — and close to what I wrote about here: Waxman-Markey deal-making update: 14% cut by 2020, about half the allowances given away at first, phased out to full auction in 10 to 15 years.

You can read today’s Congress Daily story here, and I’ll excerpt tonight’s E&E News PM (subs. req’d) for climate bill junkies below:


House Democrats are nearing agreement on a major energy and global warming bill and plan to begin an Energy and Commerce Committee markup on Thursday.

According to sources on and off Capitol Hill, Chairman Henry Waxman’s (D-Calif.) plan involves opening statements this week for the 59-member panel, with amendments and votes next week in order to meet his goal of approving the bill before the Memorial Day recess.

Waxman will meet tomorrow afternoon with the committee’s 35 Democrats to explain the contours of the legislative package, including several areas where members have reached agreement.

Still unclear is when Waxman will produce the legislative text that will be the subject of the markup. Several Democrats have held back their support until they have the bill in hand.

“Progress is being made,” Rep. Baron Hill (D-Ind.) said last week. “But it’s important for us to see the entire document so we can get a clear understanding of what we’re going to be voting on.”

Democratic lawmakers negotiated through the weekend and into today on the comprehensive legislative package with the focus primarily on emission targets and timetables, distribution of emission allowances. and a nationwide renewable electricity standard.

While any official details on Waxman’s bill remain under wraps, sources tracking the measure say they expect Democrats to agree on a cap-and-trade program that demands greenhouse gas emission reductions of between 14 and 17 percent by 2020, compared with 2005 levels.

Waxman and the committee’s Democrats are also close on emissions allowances, with about 35 percent of the emission credits being given away for free to the local distribution companies that service the electric utility industry. Trade-intensive industries such as steel, paper and cement also would get between 10 percent and 15 percent of the credits in the opening year. Petroleum refiners also would get between 1 percent and 5 percent of their allowances for free.All free allowances would be phased out in 10 to 15 years, sources say.

On the renewable electricity standard, Waxman has lowered his sights from an original plan requiring 25 percent of the country’s energy to come from wind, solar and biomass by 2025, with efficiency measures used to meet a fifth of the target. It is still unclear what the final agreement will be, but sources said Waxman has offered a target of 15 percent by 2025, with 5 percent compliance through efficiency measures.

Note: The RES compromise sounds pretty weak to me. Congress Daily notes:

Waxman has also worked with committee Democrats on a renewable electricity production mandate. The remaining issues are the stringency of that mandate and which energy sources would be covered under it. The Blue Dog Coalition Friday adopted an official caucus position on a mandate, saying it needs to include such low-carbon sources as nuclear, cleaner coal, biomass, hydropower and heat generated from waste. These Democrats also say an unrealistic mandate “will not help electric utilities deploy more renewables more quickly,” according to a position statement agreed to by at least two thirds of the group. While the Blue Dogs do not call for a specific target, they say a mandate should account for regional disparities in renewable energy production as well as energy efficiency efforts.

Biomass, new hydropower, and waste heat all make sense to include. Coal with CCS — sure, why not? It’ll be a while coming. Nuclear, maybe not, though that will be a long time coming too. I’ll blog more on the RES when the deal is done.

Here are more details from Energy Daily:

House Energy and Commerce Committee Democrats negotiating draft climate change legislation have reached agreements in principle on key provisions, including allowance allocations for utilities and manufacturers and the stringency of a renewable electricity standard, industry sources said Monday.

The deals, however, won’t be finalized until lawmakers sign off on legislative language””still being drafted””embodying the agreements, the sources cautioned.

The draft legislation, introduced March 31 by Committee Chairman Rep. Henry Waxman (D-Calif.) and House Energy and Environment Subcommittee Chairman Edward Markey (D-Mass.), calls for capping emissions from much of the U.S. economy at 2005 levels beginning in 2012 and reducing emissions by 20 percent by 2020.

Under one key accord that appears to have been negotiated, the bill would establish a renewable electricity standard (RES) of 20 percent by 2025, and utilities could use energy efficiency improvements for up to 8 percent of the RES, a variety of industry sources said. The original draft called for a 25 percent RES by 2025 and allowed utilities to use efficiency for up to one-fifth of the mandate.

The Waxman-Markey draft did not specify how to allocate the emission allowances companies will need to comply with the caps. Although President Obama initially called for auctioning all the allowances, most Democrats, including Markey, have acknowledged that in the early years of the program some allowances must be allocated at no charge to insulate consumers””and the overall economy””from harm related to the higher energy prices expected to result from the caps.

Moderate Democrats on the panel, seen as crucial votes since no committee Republican is likely to support the legislation, have been meeting regularly with Waxman for the past three weeks to hammer out agreements on allocations and other divisive issues. With Waxman’s self-imposed Memorial Day deadline for completing committee action on the bill fast approaching, negotiations have accelerated, with lawmakers said to have labored through the weekend in search of agreements.

According to the sources, electric utilities would receive in the early years of a cap-and- trade program 35 percent of the allowances they need to comply with the cap””an amount that is 5 percent less than the industry’s 40 percent contribution to total U.S. gas emissions.

The utility allocation would be distributed under a formula proposed by the Edison Electric Institute (EEI), the national association of investor-owned utilities. Under the EEI formula, most of the allowances would be distributed to local distribution companies (LDC) with the expectation that LDCs would pass through to consumers the total value of the allocations.

In addition, merchant coal generators, who operate in unregulated markets and must charge market prices for their power, would receive allowances equivalent to 50 percent of their baseline emissions””another EEI recommendation. Since prices in unregulated markets are based on the cost of natural gas, which has roughly half the carbon content of coal, merchant generators could be expected to recover half their costs through market prices and the 50 percent allocation would allow them to recover the remainder of their costs.

A key issue that remains undecided is the length of the transition period during which free allocations would decline””and the percentage of allowances sold at auction would increase””until all of the allowances would be auctioned. Energy lobbyists said Monday they expect the transition period will be somewhere in the range of 15 to 20 years, roughly within the range of estimates for when carbon capture and storage technology””seen as crucial for the continued use of coal for electricity generation in a carbon-constrained regulatory environment””will be commercially available.

Sources said it appears that trade-exposed and energy-intensive manufacturers would receive between 12 and 15 percent of the allowances they need, but at press time no deal had emerged for oil refiners, who are seeking an allocation of 5 percent. U.S. refiners say their industry is particularly vulnerable to cost increases because their profit margins traditionally are much lower than other segments of the oil and gas industry.

In addition, the draft bill calls for setting aside an additional 5 percent of the total amount of allowances from 2012 through 2025″”and declining percentages thereafter””for “supplemental emission reductions” obtained by funding programs in tropical forest countries to prevent deforestation.

This 5 percent set-aside would have the effect of raising the cap for regulating industries and is likely to boost the cost of allowances. However, backers of the set-aside, which include major environmental organizations, note that deforestation is thought to be responsible for as much as 20 percent of global emissions, and say it is crucial to provide support for avoided deforestation as soon as possible.

Another key undecided issue is the level of the near-term emissions cap. The draft called for a 20 percent reduction below 2005 levels by 2020, and some moderate Democrats two weeks ago called for slashing that target to 6 percent””a level Waxman called “very, very low” and one he said his committee likely would not accept. Sources said Monday the negotiations appear to be aimed at a cut of 14 to 17 percent below 2005 levels by 2020.

Waxman Monday alerted committee members that he will hold a private meeting late this afternoon, presumably to discuss the deals reached thus far, but it remains unclear if a new draft bill will emerge tomorrow evening or later in the week. Most observers think Waxman will bypass the subcommittee and move the bill directly to the full committee for markup early next week.