House Approves Sweeping Energy Bill; Senate Up Next

August/September 2009

NSPE TODAY: POLICY PERSPECTIVES
House Approves Sweeping Energy Bill; Senate Up Next

BY SARAH OGDEN

buildingHistory was made on June 26 when the House passed the American Clean Energy and Security Act (H.R. 2454), the first climate-change legislation ever to pass either chamber of Congress. The bill aims to lessen climate change through alternative-energy requirements, improved energy efficiency, and limits on greenhouse gas emissions.

Following months of negotiations with members of Congress, representing both industrial and rural areas, the bill squeaked by with a vote of 219?212, despite the 44 Democrats who opposed the bill. Eight Republicans supported the legislation. The bill is expected to face an even tougher battle when the Senate takes it up following the August recess. With opposition from oil-drilling and coal-mining states and reluctance from farm states, Senate Democrats will likely need to woo moderate Republicans to garner enough support for the bill.

President Obama hopes to sign the bill before the United Nations climate-change negotiations in December.

The nitty-gritty of the legislation is as follows:

  • Alternative energy: Requires power generation companies to have 6% of their energy derived from combined renewable resources and electricity savings by 2012 and 20% by 2020.
  • Energy efficiency: Sets goal to increase overall energy productivity by 2.5% each year from 2012 through 2030, with the Department of Energy, the Environmental Protection Agency, and other agencies collaborating on a plan to achieve that goal. Requires, over the next six years, residential buildings to use 30% less energy and new commercial buildings to use 50% less energy than comparable buildings built to "baseline" standards that were established in 2006.
  • Greenhouse gases: Seeks to reduce emissions to 97% of 2005 levels by 2012, 83% by 2020, 58% by 2030, and 17% by 2050. EPA would be required to set annual greenhouse gas emissions caps beginning in 2012.
  • Cap and trade: Allows companies such as electric utilities, refineries, and factories to purchase and sell pollution allowances and receive credit for funding projects to reduce emissions on farms and in forests.

Democrats are touting the bill as an opportunity to create millions of new "green" jobs in addition to advancing development of renewable energy, reducing dependence on foreign oil, and reducing global warming.

Republicans contend that the legislation is a "national energy tax" that will increase utility costs and actually cost the economy jobs, projecting that the bill will cost households $3,000 annually. A Congressional Budget Office report, however, projects that the annual per-household cost of the bill will be a mere $175 in 2020. (The Republicans' projection was based on a Massachusetts Institute of Technology study on the costs of the bill. The author of the study protested that Republicans misquoted his findings and that the true cost of a cap-and-trade bill would be far lower.)

Republicans also fear that moving to cap and trade without agreements to do the same from developing competitors such as China would put the U.S. at an economic disadvantage. "This is a bad bill," says Rep. Joe Barton, P.E. (R-TX), ranking member of the House Energy and Commerce Committee. "It is the economic disaster bill for the United States of America if it were to pass."

Despite these dire predictions, state financial woes make it likely that the Senate will pass the bill this year. The National Governors Association reported that states are facing a combined $183.3 billion in remaining budget gaps for FY09?11. The billions of dollars in emissions allowances available under cap and trade may persuade undecided senators to support the bill. The emissions allowances, worth between $120 billion and $330 billion, would be distributed to each state from 2012 to 2025 to protect consumers from energy price increases, help utilities and other industries transition to clean energy, and encourage conservation efforts and the development of new technologies.

Whether viewed as an opportunity for "green" jobs and the development of exciting new technologies, or as years of navigating tough new emissions standards and the implementation of a cumbersome cap-and-trade system, both supporters and opponents of the bill agree that this climate-change legislation will completely transform the energy sector. Hold onto your hardhats.