• House Passes Climate Change Legislation, But Just Barely
  • July 14, 2009
  • Law Firm: Jones Day - Pittsburgh Office
  • On June 26, the House of Representatives approved H.R. 2454, comprehensive climate change and "clean energy" legislation authored by Congressmen Henry Waxman of California and Edward Markey of Massachusetts, by a slim majority of 219 to 212. Passage of The American Clean Energy and Security Act of 2009 was assured only after adoption of a last-minute, 309-page amendment to garner additional votes from farm-state House members. Eight Republicans voted for the bill; 44 Democrats voted against it.

    While the bill would withdraw U.S. EPA's conventional Clean Air Act authority to regulate greenhouse gas emissions from sources emitting 25,000 tons per year or more, it would require the Agency to establish new source performance standards under the Act for sources emitting between 10,000 tons and 25,000 tons per year.

    The bill establishes annually decreasing caps on overall U.S. greenhouse gas emissions, beginning in 2012 and reaching a 17 percent reduction (compared to 2005) by 2020 and an 83 percent reduction by 2050. Compliance with the cap will be regulated via a cap and trade scheme in which about 70 percent of available emission allowances will initially be allocated to emitters for free, with about 30 percent to be auctioned.

    By 2031, the percentage of allowances to be auctioned increases to about 70 percent and remains there. In a controversial move that could someday ignite a trade war, the House included a provision requiring the President to impose "border adjustments" (i.e., tariffs) to protect "energy-intensive, trade-exposed" U.S. companies from competitors in countries such as China and India with less stringent controls, a provision that may be waived only by joint resolution of Congress.

    The bill also requires electric utilities to meet 20 percent of demand by 2020 through renewable energy and energy efficiency, and it creates or modifies myriad federal programs and offices to disburse about $200 billion to develop various forms of "clean energy" and promote energy efficiency. The 1,468-page legislation also seeks to shape consumer energy consumption behavior via federal involvement in everything from "green" building codes to "green" mortgages to "green" homeowners insurance.

    The net cost to the federal budget is also as yet unclear. The CBO estimated the bill, as passed, would generate net revenue of about $9 billion for the government over 2010-2019, but did not include in its estimate any spending called for in the bill "that is subject to appropriation," including the cost of running the various branches of new federal bureaucracy necessary to implement the bill. However, the CBO estimated such costs under an earlier version of the bill at about $50 billion over 2010-2019, suggesting that fully implementing Waxman-Markey would cost the government at least $40 billion.

    (For additional details and analysis of the Waxman-Markey bill, see the July 2009 Jones Day Commentary titled "House Passes Waxman-Markey Climate Change Bill, but Just Barely.")