In big U.S. energy bill, who will pay?

Conservation measures may lead to most fuel savings since 1970s.

By Mark Clayton | Staff writer of The Christian Science Monitor

from the November 7, 2007 edition

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If the last energy bill was about squeezing remaining drops of oil from US soil, the newest is still a nascent, muddy legislative donnybrook over one question: Who will pay to shift the US energy mix to green and lean?

Energy-conservation measures in House and Senate bills approved earlier this year could by 2030 save the US twice as much oil as it now imports from the Persian Gulf, slash greenhouse-gas emissions by 40 percent, and reduce electricity use by at least 10 percent.

If key elements of the two bills now being reconciled behind closed doors make it into the final version, the result would be the biggest shift in US energy use since the 1970s – and underpin larger greenhouse-gas cuts in future legislation, observers say.

"We haven't seen any plan this significant in terms of oil savings since the 1970s," says Bill Prindle, deputy director of the American Council for an Energy Efficient Economy in Washington. While electric-efficiency gains would be more modest, they would save consumers billions of dollars on utility bills and eliminate the

need for dozens of new power plants.

Senate majority leader Harry Reid and House Speaker Nancy Pelosi are pushing to give the president a bill to sign no later than Christmas – before the 2008 election cycle hits. To do that, they must reconcile two starkly different energy bills – and avoid a White House veto.

Two key but controversial measures hang in the balance: tougher Corporate Average Fuel Economy (CAFE) standards for cars and trucks as well as a national Renewable Portfolio Standard (RPS) for utilities to require more green power. Three other important pieces enjoy broad legislative support: the "Renewable Fuels Standard" requiring more ethanol use in gasoline, tougher electrical efficiency standards for appliances and lighting, and a production tax credit for renewable energy.

But industry groups – oil, coal, auto, and electric utilities – worry that they will have to foot most of the cost of any new energy legislation, which could run up to $32 billion. Most new green measures would be paid for by repealing tax incentives of $16 billion (House bill) to $32 billion (Senate version) that now flow to the oil and gas industry.

"Neither of those bills answers the question of how we produce more energy or how we get more energy into this country," says Mark Kibbe, senior policy analyst for the American Petroleum Institute, a Washington trade association representing large oil companies. "While there might be some good in these bills, the negatives outweigh it."

Even those not hit by tax break repeals worry over anticipated higher costs of compliance. The House bill, for instance, includes a new national RPS, requiring all electric utilities by 2020 to generate at least 15 percent of their power from renewable energy sources, such as biomass, wind, or geothermal.

Although 25 states already have such requirements – many of them far tougher than the proposed national RPS – utilities in the Southeast and elsewhere oppose a federal standard that doesn't take geography into account.

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