Environment Texas Blog

On May 15, 2009, House Energy and Commerce Committee Chairman Henry Waxman and Subcommittee Chairman Ed Markey introduced the American Clean Energy and Security Act (H.R. 2454), comprehensive energy legislation.  This document summarizes key parts of the bill, including energy efficiency standards, the renewable electricity standard, global warming pollution reduction requirements, and the distribution and use of pollution allowances under the bill.

Now is the time to replace the dirty, polluting energy sources of the past with the clean, homegrown energy sources of today.  In addition to reducing air pollution and limiting America’s contribution to global warming, creating a clean energy economy will increase our security and help put Americans back to work in clean energy jobs.

The American Clean Energy and Security Act would establish a framework for transitioning the nation to clean energy and reducing global warming pollution.  To deliver on the promise that clean energy holds to transform our economy, put millions of Americans back to work, and solve global warming, Congress should strengthen and then pass the bill. 

Reducing Energy Use
•    Standards for New Buildings:  The bill would establish minimum targets for residential and commercial building codes of 30 percent energy savings in 2010 and 50 percent savings for residential buildings in 2014 and for commercial buildings in 2015, with an additional 5 percent savings every three years through 2030 and periodic improvements thereafter.  These standards would save consumers an estimated $25 billion a year by 2030, according to the Building Codes Assistance Project.  The bill also directs the Secretary of Energy to seek to achieve zero-net-energy commercial buildings and provides assistance to state and local governments for compliance with the codes.  (Sec. 201)

•    Retrofits of Existing Buildings:  The bill would establish the Retrofit for Energy and Environmental Performance program, which would set performance standards for existing buildings and provide incentives of up to 50 percent of the cost of residential and commercial energy efficiency upgrades.  The benefits of this program will depend on the degree to which building owners take advantage of the program.  (Sec. 202)

•    Labeling the Energy Performance of Buildings:  The bill would establish a program to label the energy performance of buildings.  (Sec. 204)

•    Standards for Lighting and Appliances:  The bill would establish standards for commercial and consumer lighting and light fixtures, water dispensers, hot food holding cabinets, portable spas, and commercial furnaces.  By 2020, these standards would lead to savings of 17 billion kilowatt hours, enough to meet the needs of 1.5 million typical households and reduce power sector carbon dioxide emissions by 12 million metric tons per year, according to the Appliance Standards Awareness Project.  (Sec. 211, 212)

•    Deployment of Best-in-Class Appliances:  The bill would provide incentives to reward retailers for sales of highly efficient appliances.  (Sec. 214)

•    Standards for Utilities…Eliminated from Bill:  The draft version of the bill included an energy efficiency resource standard (EERS) that required electric and natural gas utilities to improve their efficiency by 15 percent and 10 percent, respectively, by 2020.  This important provision was stripped from the introduced version of the bill.  Instead, the bill would allow up to 8 percent of the 20 percent renewable electricity standard to be met with efficiency if a governor petitions the Department of Energy for approval.  An 8 percent EERS could increase efficiency by as much as 3 percent nationwide, considering that states that already have substantial programs in place, according to the American Council for an Energy Efficient Economy (ACEEE).  This represents a huge missed opportunity since ACEEE estimates that the EERS in the original bill would have created 220,000 jobs and saved utility consumers $168 billion through 2020.

The bill also would provide funding to state and local governments for energy efficiency and clean energy and require that one-third of the money given to natural gas utilities be invested in energy efficiency.  See below under “Who Pays and Where Does the Money Go?”

Increasing Renewable Energy
•    Standard for Utilities…Requires No New Renewables:  The draft version of the bill included a relatively strong renewable electricity standard (RES), but both the targets and other requirements have been significantly weakened so that the standard could require even less renewable energy generation than projected from policies already in place.  While this weakened standard would produce little to no benefits, a strong RES of 25 percent by 2025 would create 297,000 new domestic jobs and save consumers $64.3 billion in electricity and natural gas bills by 2025, according to the Union of Concerned Scientists.  (Sec. 101)

•    RES Structure:  The bill would require large electric utilities to achieve 20 percent of their sales by 2020 from a combination of “renewable” energy generation and energy efficiency improvements.  One-quarter of the total standard each year could be met using energy efficiency (i.e., 5 percent of sales in 2020), and companies could petition governors to increase the use of efficiency to cover up to 8 percent.  Considering the utilities exempted from the standard, the Union of Concerned Scientists estimates that the RES could generate as little as 8.3 percent renewables by 2020.  Yet, the Department of Energy projects the nation will achieve 9.9 percent renewables by 2020 under policies already in place, including state RESs and financial incentives in the economic recovery package.

•    Standard Opened to Non-Renewable Sources:  The bill would add coal mine methane and municipal solid waste (MSW) to the list of energy sources that could be used to meet the standard, though neither is renewable.  MSW plants would be required to meet Clean Air Act standards for new plants and could only be counted if the municipality from which the waste comes “provides for recycling.”  While protecting certain critical areas on public lands, the bill also would open up the rest of our national forests for providing biomass fuels.  In addition, the bill would allow generation from new nuclear power plants and coal-fired power plants with carbon capture and storage to be subtracted from the baseline amount of utility power sales against which the renewable energy increases are measured.  Coal and nuclear are not renewable sources of energy and should not be allowed to offset the amount of renewable energy generation required by an RES.

Cutting Global Pollution
•    Requirements to Reduce Pollution:  The bill would establish a market-based program to reduce global warming pollution from electric utilities, fuel refiners and importers, large industrial emitters, and natural gas suppliers, covering an estimated 87 percent of total U.S. emissions.  The program would require these sources to reduce their emissions by 17 percent below 2005 levels by 2020, by 42 percent by 2030, and by 83 percent by 2050.  In addition, the bill would direct the EPA to achieve additional emission reductions through agreements to prevent tropical deforestation, requiring reductions equivalent to another 10 percent of U.S. 2005 emissions by 2020.  Finally, the bill would direct EPA to establish performance standards to reduce emissions from sources that are not subject to the market-based program.  (Sec. 703, 704, 811)

•    Updating the Requirements Based on Evolving Science:  The bill would direct the National Academy of Sciences to review the program periodically in light of the best available science, and the president would recommend program changes to Congress.  (Sec. 706, 707)

•    Offsets Jeopardize Success of Program:  The bill would allow polluters to purchase offsets – actions taken to reduce emissions domestically in areas of the economy not covered by the market-based program or for projects undertaken overseas – rather than reduce their own pollution, which will result in less-certain emission reductions and delay the transition to cleaner technology.  The bill would allow 2 billion tons of offsets per year, split evenly between domestic and international offsets, but EPA could allow up to 1.5 billion tons of international offsets if there are insufficient domestic ones.  Starting in 2017, the bill would require polluters to turn in 1.25 tons of international offset credits to cover 1 ton of domestic emissions (a one-to-one ratio is required prior to 2017 and for domestic offsets).  The bill would establish an independent Offsets Integrity Advisory Board and other rules to help ensure that offsets are the highest quality possible.  (Sec. 722; 731-743)

•    Other Flexibility Mechanisms in Market-Based Program:  In addition to offsets, the bill also would allow trading, banking, and borrowing of pollution allowances, and it would establish a pool of pollution allowances (“strategic reserve”) to address the potential for carbon price spikes.  (Sec. 724, 725, 726)

•    Performance Standards for Power Plants, Cars, and Other Sources:  The bill would repeal EPA’s authority to set source-specific global warming emission performance standards for stationary sources that are capped under the bill.  In place of that authority, the bill would establish performance standards only for new coal-fired power plants.  The bill would direct the president to establish global warming emission standards for new motor vehicles and the EPA to set standards for new heavy-duty vehicles, marine vessels, locomotives, and aircraft.  (Sec. 116, 811, 221, 821)

•    Authority of State and Local Governments to Act:  The bill would bar states from implementing cap-and-trade programs from 2012 to 2017, while the federal program is getting up and running, but ultimately the bill recognizes that state and local efforts will continue to be central to our nation’s success in moving to clean energy and solving global warming.  (Sec. 861)

Who Pays and Where Does the Money Go?
Rather than requiring polluters to pay for their pollution, the bill gives most of the pollution allowances to industry for free in the early years of the program.  Instead, the government should auction the allowances and invest the revenues in energy efficiency, renewable energy, and assisting consumers.

•    66 percent of the allowances are given to industry – electric and natural gas utilities, automakers, oil refiners, and manufacturers – in the early years of the program; these free allowances generally phase out from 2026-2030. 

•    10 percent of the allowances are given to state and local governments for energy efficiency and renewable energy from 2012 through 2015, declining to 7.5 percent of the allowances in 2016 and 2017, 6.5 percent of the allowances from 2018 through 2021, and 5 percent of the allowances thereafter.  An additional 1.5 percent of allowances are given to states to assist consumers who use home heating oil or propane, requiring that one-half of that money be used for cost-effective energy efficiency.   

•    15 percent of the allowances are used to directly assist low-income consumers.

•    10.5 percent of the allowances in the early years of the program are dedicated to reducing tropical deforestation (5 percent), domestic adaptation (2 percent), international adaptation and clean technology transfer (2 percent), worker assistance and job training (.5 percent), and applied research and development of clean energy technologies (1 percent).

Now is the time for bold and meaningful action on clean energy and global warming.  Congress should strengthen and pass the America Clean Energy and Security Act.