U.S. CONGRESS PREPARES TO ACT ON GREENHOUSE GAS EMISSIONS AND RENEWABLE PORTFOLIO STANDARDS
July 6, 2009 – As the U. S. Senate reconvenes today it is posed to take up whether to establish federal limits on greenhouse gas emissions. There is, as yet, no direct bill in the Senate that is comparable to the U. S. House passed H.R. 2454, the
American Clean Energy and Security Act of 2009 (ACES), which aims to establish federal limits on greenhouse gas (GHG) emissions along with an emissions trading program for regulated sources. However, the Senate Energy and Natural Resources Committee currently have reported an energy bill that proposes a Renewable Electricity Standard (RES) similar to House legislation. Further, there are rumblings among staff that a separate cap-and-trade bill may soon be introduced in the Senate.
On June 26, 2009, the U.S. House passed the ACES legislation and included an emissions cap designed to reduce GHG emissions 3 percent by 2012, 17 percent by 2020 and 83 percent by 2050, as measured against 2005 baseline levels. Limits on GHG emissions would take effect in several phases. Electric utilities would have to obtain GHG credits for the carbon content of their emissions from the combustion of coal or natural gas beginning in 2012. In subsequent phases, industrial sources would have to begin complying in 2014, and local natural gas distributors would have to begin complying in 2016. Under the proposed cap-and-trade scheme, federal GHG emission allowances would be issued for free, via bonus allowances, to a wide variety of covered entities in the early years of the program, with the majority allocated to electric utilities. Initially allocations to utilities will be allowed up to 85 percent of their total needs, but the allocations will be subsequently decreased. Also, local electricity distribution companies may obtain allowances calculated to include equally both retail sales and emissions of their retail sales. Utilities will have to subsequently obtain any additional needed allowances on the open market. In addition to relying on allowances obtained or purchased from the federal government, regulated sources also can comply with the cap-and-trade program by obtaining “offset” credits. The bill temporarily allows offset projects that may only provide short-term emission reductions, not permanent reductions.
ACES legislation also proposes a nation-wide Renewable Electricity Standard (RES) which will require utilities to meet 20 percent of their electricity demand from renewable sources and increased energy efficiency. Specifically, by 2020, utilities will have to obtain 15 percent of their electricity from renewable sources and reduce demand an additional 5 percent through energy efficiency measures. Renewable sources include energy derived from wind, solar, geothermal, biomass and qualified hydropower. The ACES legislation would also expands the current federal definition of what constitutes renewable biomass. The bill would also expand the Federal Energy Regulatory Commission’s (FERC) jurisdiction over interstate transmission projects within the Western Interconnection region.
The proposed legislation also provides for the development of clean energy jobs and technologies such as carbon capture and sequestration, energy efficiency, “smart grid” devices and electric transportation. Finally, it also provides transition assistance to foreign trade-dependent industries and financial assistance to low-income energy consumers.
If you would like more information on these issues, please contact
Jeffrey Genzer,
Tanja Shonkwiler,
Derek Dyson, or
Fred Hoover.
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