Compromises likely as cap-and-trade proposal moves through House

US House Energy and Commerce Committee Chairman Henry A. Waxman (D-Calif.) had planned to mark up cap-and-trade legislation the week of May 11, however, changes will need to be made.

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Apr. 28 -- US House Energy and Commerce Committee Chairman Henry A. Waxman (D-Calif.) planned to mark up cap-and-trade legislation the week of May 11 when he and Rep. Edward J. Markey (D-Mass), the chairman of the committee's Energy and Environment Subcommittee, introduced their draft proposal on Mar. 31.

By the time the committee completed 3½ days of hearings on their climate-change proposal Apr. 24, however, it was obvious that changes would need to be made. Opposition from committee Republicans was no surprise. But some Democrats also expressed reservations about several provisions and their potential impacts.

The hearings also revealed basic climate change strategy disagreements that could hamper Waxman's plan to have a bill ready to send to the House floor by Memorial Day.

US Energy Secretary Steven Chu, Transportation Secretary Ray LaHood, and Environmental Protection Agency Administrator Lisa P. Jackson expressed the Obama administration's support for the working draft. It does not appear likely that the White House's desire for a cap-and-trade program free of offsets will last long once lawmakers start marking up the bill, however.

Jackson also had to contend with committee members who felt EPA's proposed finding that greenhouse gases pose a danger to public health and the environment is a tactic to pressure Congress to act. It actually was a response to a US Supreme Court order that Congress authorized when it passed the 1990 Clean Air Act amendments, she said in response to a committee member's question.

'The best way'
EPA spent months researching the GHG issue, as that law requires, before issuing its proposed finding, Jackson continued. A 60-day public comment period is under way and the agency has begun to develop regulations for its implementation if it becomes final, she said. Earlier in the hearing, however, she said: "I believe new legislation is the best way to address global warming and greenhouse gases."

US President Barack H. Obama would prefer that a cap-and-trade program be a simple auction, Jackson continued. "He also is interested in finding ways to mitigate impacts this would have on the economy and looks forward to working with the committee on this," she said.

EPA's release of preliminary cost estimates for the Waxman-Markey working draft during the Apr. 22 hearing caused a mild stir. Republican committee members had complained that the proposal said nothing about costs. Rep. John M. Shimkus (R-Ill.) called the omission "a big, gaping hole." They said the committee's Democratic leaders were moving it through so quickly that the Congressional Budget Office, which provides nonpartisan objective economic analyses for federal lawmakers, had not had time to fully examine the draft.

Jackson emphasized that EPA's estimates were preliminary. They did not consider the massive economic recovery bill, with billions of dollars in renewable energy and energy efficiency investments, which Congress passed and Obama signed earlier this year. They also did not include significant provisions of the Waxman-Markey working draft such as the renewable electricity standard and the energy efficiency standards.

The estimates found that costs under the working draft would be low for the average US household (27-38¢/day or $98-140/year before appliance efficiency, weatherization, and other cost-saving measures were applied). Allowance prices would be $13-17 in 2015 and $17-22 in 2020. These would be 96% higher if substantial use of cost-saving offsets was not allowed, according to an EPA handout distributed in the hearing room as Jackson testified.

Robust growth
It also said the US gross domestic product would grow robustly under the Waxman-Markey proposal (to $15-16 trillion in 2015 and $22-23 trillion in 2030) as clean energy technology was deployed and GHG emissions were reduced. Consumption, which measures a household's purchase potential, would grow by 9-10% from 2010 to 2015, 18-19% by 2020, and 36-40% by 2030, it indicated.

Republicans were skeptical. Several called the proposed legislation "cap-and-tax" instead. "We thought the American public was angry over a dollar or two increase in [gasoline] prices last summer. Just wait until they get their hands on their utility bills under cap-and-tax," said Rep. Fred Upton (Mich.), the Energy and Environment Subcommittee's ranking minority member.

Approximately 21% of all US utility accounts were overdue in 2008 as end-users carried past-due balances averaging $160 for electricity and $360 for gas, he added. "Times are tough, yet this proposal puts a bull's-eye on the back of working families who are struggling to feed their families and keep the lights on," Upton said.

Some Democrats' questions were specific. When Rep. Diana DeGette (Colo.) asked Jackson more about ways the program in the discussion draft could relieve cost impacts on families, the EPA administrator replied: "One opportunity is deciding what happens to money a cap-and-trade system would generate. We assumed that 40% would be returned to American families."

Rep. Gene Green (Tex.), whose Houston district includes several refineries, asked Jackson and Chu if impacts of the national Renewable Fuel Standard's second phase on carbon emissions during motor fuel production had been fully analyzed. Jackson responded that she would work with the US Department of Energy on the matter. Chu said that he would ask the US Energy Information Administration to look into it.

Republicans continued to question the US government's ability to efficiently operate a carbon cap-and-trade program, contending that one in Europe has failed. Jackson responded in her testimony that the Acid Rain Trading Program, which became law in 1990, delivered an estimated $120 billion of annual economic benefits while costing only $3 billion yearly. "Our economy grew by 64% even as the program cut acid rain pollution by more than 50%. And past auto emissions standards sparked key technological innovations," she said.

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