House fast-tracks major changes on energy and climate

But how much will they cost Americans, particularly during a recession?

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    Wind farm: The Judith Gap Wind Energy Center in Montana has 90 turbines that produce 7 percent of the energy for the state's electric customers.
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Congressional Democrats have launched a bid to shift the United States into greener energy technologies, while protecting US consumers and jobs during a difficult transition.

The draft plan, released Tuesday by the House Energy and Commerce Committee, moves one of President Obama’s key campaign pledges onto a fast track on Capitol Hill. It also opens a debate over how America powers its economy – one that crosses party and regional lines – at a time of deep economic stress.

“This legislation will create millions of clean-energy jobs, put America on the path to energy independence, and cut global warming pollution,” said Rep. Henry Waxman (D) of California in a statement.

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The bills main elements

The bill has three main elements: developing clean energy sources, dramatically boosting energy efficiency, and capping and reducing greenhouse-gas emissions. The bill also aims to protect US consumers and industry during the transition to a clean energy economy.

Development of wind energy, solar energy, geothermal energy, smart-grid efforts, and new transmission lines would be accelerated, and there would be a new standard for utilities to meet regarding use of renewable sources for generating electricity. Utilities in all states would be required to gradually increase the proportion of renewables to 25 percent by 2025. The measure would also set a low-carbon standard for transportation fuels and push to reduce coal emissions by developing technologies to capture and sequester carbon.

As expected, the bill unveiled Tuesday is getting mixed reviews. Critics, including many Republicans, charge that the plan will kill jobs and add thousands of dollars to the average family’s utility bill.

“Tuesday’s cap-and-trade bill marks a triumph of fear over good sense and science, and it couldn’t come at a worse time, because it proposes to save the planet by sacrificing the economy,” said Rep. Joe Barton of Texas, the top Republican on the energy panel.

Citing a recent University of Massachusetts study, he added that new jobs associated with boosting domestic oil and gas supplies, which would be hard hit by the proposed bill, pay twice as much as jobs associated with green investment. “It’s not hard to guess which line of work most people would choose, especially if they didn’t have the foresight to be born into money,” he said.

Energy-efficiency advocates, on the other hand, are generally enthused. The bill contains a number of reforms that strengthen the US Energy Department’s authority to set energy standards for energy guzzlers that currently don't have any standards, such as hot tubs, says Andrew Delaski, executive director of the Appliance Standards Awareness Project, which is sponsored by several environmental groups.

“This is a pragmatic bill that tries to balance a historic opportunity to unleash clean energy to rebuild our economy and stop the climate crisis, with the diversity of views on the Energy & Commerce Committee,” says Emily Figdor, director of the Federal Global Warming Program at Environment America, a coalition of environmental groups.

The draft bill includes strong clean-energy standards that reflect the latest climate science, Ms. Figdor notes. “But on the flip side, we’re disappointed that the bill includes sky-high levels of carbon offsets, which provide less-certain reductions in emissions, and lavish subsidies, including for ratepayers, for still-unproven carbon capture and storage technology.”

Business backing

The bill draws heavily on recommendations by the US Climate Action Partnership (USCAP), a coalition of business groups favoring climate legislation. As a result, it may be more likely to attract moderate lawmakers.

The draft legislation is “a strong starting point for enacting legislation to reduce greenhouse-gas emissions,” according to a statement from USCAP, which includes Alcoa, ConocoPhilips, Duke Energy, and General Motors, among other corporations.

“A number of compromises and proposals were already hammered out,” says David Doniger, policy director of the Natural Resources Defense Council (NRDC). “It’s not a bill crafted just by environmentalists, but with all the interests in mind.”

The cost of the bill hasn’t been assessed yet by the Energy Information Administration or the Environmental Protection Agency.

The cost of cap-and-trade

"It would be reasonable to anticipate that, overall, the climate portion would cost, at most, 1 percent of GDP [gross domestic product],” says Robert Stavins, an environmental economist and director of Harvard’s environmental economics program. “That’s a big number, but I don’t see it pushing us into another recession.”

"Still,” he adds, “it will be difficult to deal with during an economic downturn.”

A big facet of the cap-and-trade portion of the legislation involves the allocation of pollution permits – one permit per ton. Many environmental groups have supported the idea of auctioning 100 percent of the permits.

But the bill, while it avoids specifying how the permits would be allocated, does set aside 15 percent of them to be allocated to energy-intensive industries such as steel, concrete, paper, and glass, which would be immediately hit by higher energy prices and foreign competition.

“Our view is that some measure of free allocation to companies that can’t pass along their cost – [that] are very energy-intensive and trade-exposed – is appropriate,” says Mr. Doniger of the NRDC.

Power companies are emerging as early critics of the plan.

Scott Segal, director of the Electric Reliability Coordinating Council, a trade group representing power companies, says, “There is an open question as to whether … the bill is based on sufficient energy and economic modeling.”

He cites the bill’s “silence” on how emissions permits will be allocated and notes that the recession will make “an across-the-board increase in energy prices all the more difficult.”

Business and environmental groups have been gearing up for an overhaul of US energy policy for years.

To succeed, the bill will need bipartisan support

But even with Mr. Obama in the White House and with Democrats holding majorities in the House and Senate, lawmakers will have to structure a bill that can cross regional and party lines, as well as win some business support, to get a bill to the president’s desk.

Early on, Democrats signaled a concern for those hardest hit in adjusting to the new law.

“It creates new green-collar jobs, creates a reliable market for private-sector investment, promotes energy efficiency with stronger fuel and renewable-energy standards,” said House majority leader Steny Hoyer in a statement Tuesday. “And it also helps businesses comply and be part of the transition to a clean energy future, which we think is absolutely critical.”

For the Alliance for American Manufacturing (AAM), that means adjusting rebates and border controls to makes sure that foreign competitors are also held accountable for their contributions to greenhouse emissions.

'A global solution is an imperative'

“Greenhouse gases are a global problem, and a global solution is an imperative,” said AAM executive director Scott Paul in a statement. “The last thing Congress should want to do is offshore jobs and production to foreign manufacturers that have significantly larger carbon footprints, undermining the aim of climate change policy.”

Environmental groups, which generally support the broad plan, want to see how – exactly – a proposed cap-and-trade system would function.

“They haven’t worked out exact allocation schemes,” says Sarah Saylor, legislative representative for Earth Justice. “This has been the sticky piece of this legislation.”

The House Energy panel plans hearings on this draft proposal after a two-week recess that begins next week, with a goal of moving to a floor vote by the end of May.

The Senate Energy and Natural Resources Committee began a markup of energy legislation Tuesday and is aiming to pass a bill out of committee by Memorial Day. The Senate Environment and Public Works Committee is preparing stand-alone legislation on global warming.

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