Carbopedia

United States Energy and Climate Change Policies

On June 26, 2009, the House of Representatives passed the landmark American Clean Energy and Security Act "ACES", sponsored by Rep. Henry A. Waxman, Chairman of the House Energy and Commerce Committee, and Rep. Edward J. Markey, Chairman of the House Select Committee on Energy Independence and Global Warming.

The bill contains the following key provisions:

Requires electric utilities to meet 20% of their electricity demand through renewable energy sources and energy efficiency by 2020.
Invests $190 billion in new clean energy technologies and energy efficiency, including energy efficiency and renewable energy ($90 billion in new investments by 2025), carbon capture and sequestration ($60 billion), electric and other advanced technology vehicles ($20 billion), and basic scientific research and development ($20 billion).
Mandates new energy-saving standards for buildings, appliances, and industry.
Reduces carbon emissions from major U.S. sources by 17% by 2020 and over 80% by 2050 compared to 2005 levels. Complementary measures in the legislation, such as investments in preventing tropical deforestation, will achieve significant additional reductions in carbon emissions.
Protects consumers from energy price increases. According to recent analyses from the Congressional Budget Office and the Environmental Protection Agency, the legislation will cost each household less than 50 cents per day in 2020 (not including energy efficiency savings).

US Cap and Trade under the American Clean Energy and Security Act

Scope of Coverage

The discussion draft would cover seven GHGs: carbon dioxide (co2), methane (CH4), nitrous oxide (N2O), hydro-fluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3).

Entities covered by the proposal would include: large stationary sources emitting more than 25,000 tons per year of GHGs, producers (i.e., refineries) and importers of all petroleum fuels, residential and commercial sellers of natural gas (i.e., local distribution companies), producers of "F-gases," and other specified sources.

The proposal also calls for regulations to limit black carbon emissions in the United States.

Targets

ACES establishes emission caps to reduce aggregate GHG emissions for all covered entities to 3% below their 2005 levels in 2012, 20% below 2005 levels in 2020, 42% below 2005 levels in 2030, and 83% below 2005 levels in 2050.

Distribution of Allowances

The ACES does not specify whether allowances will be auctioned or distributed free of charge. Nor, with the exception of allocating 5% of allowance value for reducing international deforestation, does the draft specify how the allowance value would be distributed. Both of these topics, however, are expected to be addressed in the next version of the ACES Act.

Offsets and Cost

The discussion draft allows up to 2 billion allowance equivalent tonnes of offsets to be used for compliance system wide (1 billion domestic and 1 billion international); the President would be authorized to recommend that Congress alter this total number up or down.

For every tonne of emissions, 1.25 offset credits will be submitted (2.5 billion offset credits submitted for 2 billion tons of emissions compliance).

The EPA (Environmental Protection Agency) will determine the list of eligible projects based on recommendations from an Offsets Integrity Advisory Board.

There will be a multi-year compliance period (rolling 2 year period) with unlimited banking and next year borrowing with no interest. Borrowing of up to 15% of compliance obligation in years 2 - 5 beyond the current calendar year at 8% interest will also be allowed.

The discussion draft sets up a quarterly strategic reserve auction for the purposes of cost containment using a small percentage of allowances taken from the cap each year. The initial minimum price level for the auction would be set at two times the EPA's price forecast for year 2012 allowances (increasing in subsequent years).

Up to 5% of the total annual allowances in years 2012 - 2016 could be auctioned from the reserve, increasing to 10% in 2017, with proceeds from the strategic reserve to be used to buy international reduced deforestation offset tons.

Carbon Market Oversight

The discussion draft requires the Federal Energy Regulatory Commission (FERC) to regulate the cash market in allowances and offsets. The President will designate regulatory responsibility for the derivatives market in allowances.

Interaction with State and Regional Programs

The discussion draft allows states to enact more stringent climate regulations (treated as in the Clean Air Act) with the exception of cap-and-trade programs. Under the proposal, state trading programs will be put on hold from 2012 - 2017 to give the federal system a chance to get started. If after that time, the federal system was not adequate, states would be allowed to restart their trading programs. Holders of allowances issued by California or RGGI before 12/31/2011 can be compensated through the federal program for the cost of purchasing those allowances.

The Obama-Biden comprehensive New Energy plan for America

The Plan will:

Provide short-term relief to American families facing pain at the pump
Help create five million new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future.
Within 10 years save more oil than the US currently imports from the Middle East and Venezuela combined.
Put 1 million American made Plug-In Hybrid cars (cars that can get up to 150 miles per gallon) on the road by 2015.
Ensure 10% of US electricity comes from renewable sources by 2012, and 25% by 2025.
Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80% by 2050.
Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80% by 2050.

The Obama-Biden cap-and-trade policy will require all pollution credits to be auctioned, and proceeds will go to investments in a clean energy future, habitat protection, and rebates and other transition relief for families.

The US and the UNFCCC

Obama and Biden will re-engage with the U.N. Framework Convention on Climate Change (UNFCC) - the main international forum dedicated to addressing the climate problem. They will also create a Global Energy Forum of the world's largest emitters to focus exclusively on global energy and environmental issues.

Confront Deforestation and Promote Carbon Sequestration:

A comprehensive strategy to combat global warming must address tropical deforestation which accounts for approximately 20% of global greenhouse gas emissions. Reducing rates of tropical deforestation will not only slow greenhouse gas emissions but will also protect the livelihoods of local people and the abundance of biodiversity inextricably linked to those forests. By offering incentives to maintain forests and manage them sustainably, the United States can play a leadership role in dealing with climate change.

Background Information

The United States has not ratified the Kyoto Protocol. The US has signed the Asia Pacific Partnership on Clean Development and Climate, allowing member countries to set their goals for reducing greenhouse gas emissions on an individual basis. Additionally, State-level efforts to develop mandatory cap-and-trade programs for greenhouse gas emissions are currently being implemented.

A multi-state effort by Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont is an initiative to develop a cap-and-trade program covering greenhouse gas emissions. The Regional Greenhouse Gas Initiative (RGGI), which will begin capping emissions in 2009,will initially cover co2 emissions from power plants and, later, RGGI will expand to monitor additional sources of co2 emissions as well as other greenhouse gases.

The state of California, under a Climate Change Program is currently considering the feasibility of implementing a cap-and-trade program for co2 emissions. In September 2006, California enacted legislation, the California Global Warming Solutions Act of 2006, that directs the California Air Resources Board (CARB) to establish a comprehensive program that would reduce the state's greenhouse-gas emissions to 1990 levels by 2020.

On January 16th 2008, Ontario announced that it had joined the Climate Registry, which now has a membership of 39 US states, 2 Mexican states, and 6 Canadian Provinces, Native American tribes, businesses, and other organizations. Based on the initiatives set forth by the California Climate Action Registry (CCAR), the goal of the Climate Registry is to "...provide an accurate, complete, consistent, transparent, and verified set of greenhouse gas emissions data from reporting entities, supported by a robust accounting and verification infrastructure." In late December 2007, Senators Feinstein and Boxer, suggested that the EPA could use the Climate Registry as the model for a mandatory national greenhouse gas registry.

Right now, 740 US cities in 50 states - representing over 76 million Americans - support Kyoto, and are applying pressure on the federal government to ratify the protocol.