Greenhouse Gas Legislation: Summary and
Analysis of H.R. 2454 as Reported by the
House Committee on Energy and Commerce
Mark Holt, Coordinator
Specialist in Energy Policy
Gene Whitney, Coordinator
Section Research Manager
June 17, 2009
Congressional Research Service
7-5700
www.crs.gov
R40643
CRS Report for Congress
P
repared for Members and Committees of Congress
Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Summary
H.R. 2454, the American Clean Energy and Security Act of 2009, was introduced May 15, 2009,
by Representatives Waxman and Markey, and was subsequently modified (both technical and
substantive changes) and ordered reported by the House Committee on Energy and Commerce on
May 21, 2009. The bill was reported (amended) June 5 (H.Rept. 111-137, Part I). Among the
major provisions of the bill are the following:
H.R. 2454 contains provisions that would amend the Clean Air Act to establish a cap-and-trade
system designed to reduce U.S. greenhouse gas emissions 17% below 2005 levels by 2020 and
83% below 2005 levels by 2050. The market-based approach would establish an absolute cap on
the emissions and would allow trading of emissions permits (“allowances”). The bill achieves its
broad coverage through an upstream compliance mandate on petroleum and most fluorinated gas
producers and importers, and a downstream mandate on electric generators, industrial sources,
and natural gas local distribution companies (LDCs). The bill allocates a substantial percentage of
the allowances for the benefit of energy consumers and low-income households. As the program
proceeds through the mid-2020s it shifts to more government auctioning with most of the
proceeds returned to households. The bill’s allocation scheme includes free allowance allocations
to energy-intensive, trade-exposed industries, merchant coal-fired electric generators, and
petroleum refiners. An important cost control mechanism in the cap-and-trade program is the
availability of domestic and international offsets.
The bill contains energy efficiency provisions that cover grants, standards, rebates and other
programs for buildings, lighting and commercial equipment, water-using equipment, wood
stoves, industrial equipment, and healthcare facilities.
H.R. 2454 contains several provisions related to vehicles and fuels, including incentives to
produce plug-in vehicles and other advanced technology vehicles. Three percent of allowances
from the greenhouse gas cap-and-trade program would be allocated to the automotive sector to
provide grants to refit or establish plants to build plug-ins and other advanced vehicles. The bill
would also establish a “cash-for-clunkers” program, providing new vehicle purchasers and lessees
with vouchers worth up to $4,500 for a new, more efficient vehicle to replace an older, less
efficient vehicle, and directs the Environmental Protection Agency (EPA) to establish greenhouse
gas emissions standards for various transportation sectors.
The bill requires EPA to develop a unified national strategy for addressing the key legal and
regulatory barriers to deployment of commercial scale carbon capture and sequestration.
The legislation would amend the Public Utility Regulatory Policies Act of 1978 (PURPA) to
create an integrated energy efficiency and renewable electricity standard starting in 2011,
requiring retail electricity suppliers to meet 20% of their electricity demand through renewable
energy sources and energy efficiency by 2020.
The bill provides for smart grid technologies, including products that can be equipped with smart
grid capability, requirements for electric power retailers to reduce their peak loads using smart
grid and other energy efficient technologies, and requirements that power suppliers ensure that
utility smart grid systems will be compatible with plug-in electric drive vehicles.
Congressional Research Service
Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Contents
Introduction and Overview of Legislation ................................................................................... 1
Renewable Electricity Standard............................................................................................. 1
Geologic Sequestration of Carbon Dioxide............................................................................ 3
Vehicles and Fuels ................................................................................................................ 4
Smart Grid ............................................................................................................................ 5
Energy Efficiency ................................................................................................................. 5
Major Cap-and-Trade Provisions........................................................................................... 7
Title I—Clean Energy ............................................................................................................... 13
Subtitle A—Combined Efficiency and Renewable Energy Standard .................................... 13
Sec. 101. Combined Efficiency and Renewable Energy Standard................................... 13
Sec. 102. Clarifying State Authority to Adopt Renewable Energy Incentives.................. 15
Subtitle B—Carbon Capture and Sequestration ................................................................... 15
Sec. 111. National Strategy............................................................................................ 15
Sec. 112. Regulations for Geologic Sequestration Sites ................................................. 16
Sec. 113. Studies and Reports........................................................................................ 16
Sec. 114. Carbon Capture and Sequestration Demonstration and Early
Deployment Program ................................................................................................. 17
Sec. 115. Commercial Deployment of Carbon Capture and Sequestration
Technologies.............................................................................................................. 19
Sec. 116. Performance Standards for Coal-Fueled Power Plants .................................... 21
Subtitle C—Clean Transportation........................................................................................ 23
Sec. 121. Electric Vehicle Infrastructure ........................................................................ 23
Sec. 122. Large-Scale Vehicle Electrification Program .................................................. 23
Sec. 123. Plug-in Electric Drive Vehicle Manufacturing ................................................ 24
Sec. 124. Investment in Clean Vehicles ......................................................................... 24
Sec. 125. Advanced Technology Vehicle Manufacturing Incentive Loans....................... 25
Sec. 126. Amendment to Renewable Fuels Standard...................................................... 25
Sec. 127. Open Fuel Standard........................................................................................ 25
Sec. 128. Temporary Vehicle Trade-In Program............................................................. 26
Sec. 129. Diesel Emissions Reduction ........................................................................... 27
Sec. 130. Loan Guarantees for Projects to Construct Renewable Fuel Pipelines ............. 27
Subtitle D—State Energy and Environment Development Accounts .................................... 27
Sec. 131. Establishment of SEED Funds ....................................................................... 27
Sec. 132. Support of State Renewable Energy and Energy Efficiency Programs............. 28
Subtitle E—Smart Grid Advancement ................................................................................. 29
Sec. 141. Definitions (no summary or comments).......................................................... 29
Sec. 142. Assessment of Smart Grid Cost-Effectiveness in Products .............................. 29
Sec. 143. Inclusions of Smart Grid Capability on Appliance ENERGY GUIDE
Labels ........................................................................................................................ 30
Sec. 144. Smart Grid Peak Demand Reduction Goals .................................................... 30
Sec. 145. Reauthorization of Energy Efficiency Public Information Program to
Include Smart Grid Information ................................................................................. 31
Sec. 146. Inclusion of Smart-Grid Features in Appliance Rebate Program ..................... 32
Subtitle F—Transmission Planning ..................................................................................... 32
Sec. 151. Transmission Planning ................................................................................... 32
Sec. 152. Net Metering for Federal Agencies................................................................. 33
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Sec. 153. Support for Qualified Advanced Electric Transmission Manufacturing
Plants, Qualified High Efficiency Transmission Property, and Qualified
Advanced Electric Transmission Property .................................................................. 34
Subtitle G—Technical Corrections to Energy Laws ............................................................. 35
Sec. 161. Technical Corrections to Energy Independence and Security Act of
2007 .......................................................................................................................... 35
Sec. 162. Technical Corrections to Energy Policy Act of 2005 ....................................... 35
Subtitle H—Energy and Efficiency Centers......................................................................... 35
Sec. 171. Clean Energy Innovation Centers ................................................................... 35
Sec. 172. Building Assessment Centers ......................................................................... 36
Sec. 173. Centers for Energy and Environmental Knowledge and Outreach ................... 36
Subtitle I—Nuclear and Advanced Technologies ................................................................. 37
Sec. 181. Revisions to Loan Guarantee Program Authority ............................................ 37
Sec. 182. Purpose.......................................................................................................... 37
Sec. 183. Definitions ..................................................................................................... 38
Sec. 184. Clean Energy Investment Fund....................................................................... 38
Sec. 185. Energy Technology Deployment Goals........................................................... 38
Sec. 186. Clean Energy Deployment Administration...................................................... 38
Sec. 187. Direct Support ............................................................................................... 39
Sec. 188. Federal Credit Authority................................................................................. 39
Sec. 189. General Provisions ......................................................................................... 39
Subtitle J—Miscellaneous ................................................................................................... 39
Sec. 191. Study of Ocean Renewable Energy and Transmission Planning and
Siting ......................................................................................................................... 39
Sec. 192. Clean Technology Business Competition Grant Program ................................ 40
Sec. 193. National Bioenergy Partnership...................................................................... 40
Sec. 194. Office of Consumer Advocacy ....................................................................... 41
Title II—Energy Efficiency ....................................................................................................... 41
Subtitle A—Building Energy Efficiency Programs .............................................................. 41
Sec. 201. Greater Energy Efficiency in Building Codes ................................................. 41
Sec. 202. Building Retrofit Program.............................................................................. 42
Sec. 203. Energy Efficient Manufactured Homes........................................................... 42
Sec. 204. Building Energy Performance Labeling Program............................................ 43
Sec. 205. Tree Planting Programs .................................................................................. 43
Sec. 206. Energy Efficiency for Data Center Buildings .................................................. 44
Subtitle B—Lighting and Appliance Energy Efficiency Programs........................................ 44
Sec. 211. Lighting Efficiency Standards ........................................................................ 44
Sec. 212. Other Appliance Efficiency Standards ............................................................ 45
Sec. 213. Appliance Efficiency Determinations and Procedures ..................................... 45
Sec. 214. Best-in-Class Appliances Deployment Program.............................................. 46
Sec. 215. WaterSense .................................................................................................... 47
Sec. 216. Federal Procurement of Water Efficient Products............................................ 47
Sec. 217. Water Efficient Product Rebate Programs ....................................................... 48
Sec. 218. Certified Stoves Program ............................................................................... 48
Sec. 219. Energy Star Standards .................................................................................... 49
Subtitle C—Transportation Efficiency................................................................................. 49
Sec. 221. Emission Standards ........................................................................................ 49
Sec. 222. Greenhouse Gas Emissions Reductions Through Transportation
Efficiency .................................................................................................................. 50
Sec. 223. SmartWay Transportation Efficiency Program................................................ 51
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Sec. 224. State Vehicle Fleets ........................................................................................ 51
Subtitle D—Industrial Energy Efficiency Programs............................................................. 52
Sec. 241. Industrial Plant Energy Efficiency Standards .................................................. 52
Sec. 242. Electric and Thermal Waste Energy Recovery Award Programs ...................... 52
Sec. 243. Clarifying Election of Waste Heat Recovery Financial Incentives ................... 52
Sec. 244. Motor Market Assessment and Commercial Awareness Program .................... 53
Sec. 245. Motor Efficiency Rebate Program .................................................................. 53
Subtitle E—Improvements in Energy Savings Performance Contracts ................................. 53
Sec. 251. Energy Savings Performance Contracts .......................................................... 53
Subtitle F—Public Institutions ............................................................................................ 54
Sec. 261. Public Institutions .......................................................................................... 54
Sec. 262. Community Energy Efficiency Flexibility ...................................................... 54
Sec. 263. Small Community Joint Participation ............................................................. 54
Sec. 264. Low Income Community Energy Efficiency Program..................................... 55
Subtitle G—Miscellaneous.................................................................................................. 55
Sec. 271. Energy Efficient Information and Communications Technologies ................... 55
Sec. 272. National Energy Efficiency Goals .................................................................. 55
Sec. 273. Affiliated Island Energy Independence Team.................................................. 56
Sec. 274. Product Carbon Disclosure Program............................................................... 56
Title III─Reducing Global Warming Pollution........................................................................... 57
Sec. 301. Short Title...................................................................................................... 57
Subtitle A—Reducing Global Warming Pollution ................................................................ 58
Sec. 311. Reducing global Warming Pollution ............................................................... 58
“Title VII─Global Warming Pollution Reduction Program”....................................................... 58
“Part A─Global Warming Pollution Reduction Goals and Targets” ...................................... 58
“Sec. 701. Findings and Purpose”.................................................................................. 58
“Sec. 702. Economy-Wide Reduction Goals” ................................................................ 58
“Sec. 703. Reduction Targets for Specified Sources” ..................................................... 59
“Sec. 704. Supplemental Pollution Reductions”............................................................. 59
“Sec. 705. Review and Program Recommendations” ..................................................... 60
‘‘Sec. 706. National Academy Review” ......................................................................... 60
‘‘Sec. 707. Presidential Response and Recommendations”............................................. 60
‘‘Part B—Designation and Registration of Greenhouse Gases”............................................ 61
‘‘Sec. 711. Designation of Greenhouse Gases” .............................................................. 61
‘‘Sec. 712. Carbon Dioxide Equivalent Value of Greenhouse Gases” ............................. 61
‘‘Sec. 713. Greenhouse Gas Registry” ........................................................................... 61
‘‘Part C─Program Rules” .................................................................................................... 62
‘‘Sec. 721. Emission Allowances” ................................................................................. 62
‘‘Sec. 722. Prohibition of Excess Emissions”................................................................. 62
‘‘Sec. 723. Penalty for Noncompliance” ........................................................................ 64
‘‘Sec. 724. Trading” ...................................................................................................... 64
‘‘Sec. 725. Banking and Borrowing” ............................................................................. 64
‘‘Sec. 726. Strategic Reserve” ....................................................................................... 65
‘‘Sec. 727. Permits” ...................................................................................................... 65
‘‘Sec. 728. International Emission Allowances”............................................................. 65
‘‘Part D─Offsets”................................................................................................................ 66
‘‘Sec. 731. Offsets Integrity Advisory Board”................................................................ 66
‘‘Sec. 732. Establishment of Offsets Program” .............................................................. 66
‘‘Sec. 733. Eligible Project Types” ................................................................................ 66
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
‘‘Sec. 734. Requirements for Offset Projects”................................................................ 67
‘‘Sec. 735. Approval of Offset Projects” ........................................................................ 67
‘‘Sec. 736. Verification of Offset Projects” .................................................................... 68
‘‘Sec. 737. Issuance of Offset Credits” .......................................................................... 68
‘‘Sec. 738. Audits” ........................................................................................................ 68
‘‘Sec. 739. Program Review and Revision” ................................................................... 68
‘‘Sec. 740. Early Offset Supply”.................................................................................... 69
‘‘Sec. 741. Environmental Considerations”.................................................................... 69
‘‘Sec. 742. Trading” ...................................................................................................... 70
‘‘Sec. 743. International Offset Credits” ........................................................................ 70
‘‘Part E─Supplemental Emissions Reductions from Reduced Deforestation”....................... 71
‘‘Sec. 751. Definitions” ................................................................................................. 71
‘‘Sec. 752. Findings”..................................................................................................... 71
‘‘Sec. 753. Supplemental Emissions Reductions Through Reduced Deforestation” ........ 71
‘‘Sec. 754. Requirements for International Deforestation Reduction Program”............... 72
‘‘Sec. 755. Reports and Reviews”.................................................................................. 72
‘‘Sec. 756. Legal Effect of Part”.................................................................................... 73
Sec. 312. Definitions ..................................................................................................... 73
‘‘Sec. 700. Definitions” ................................................................................................. 73
Subtitle B—Disposition of Allowances ............................................................................... 74
Sec. 321. Disposition of Allowances for Global Warming Pollution Reduction
Program ..................................................................................................................... 74
‘‘Part H—Disposition of Allowances” ................................................................................. 74
‘‘Sec. 781. Allocation of Allowances for Supplemental Reductions”.............................. 74
‘‘Sec. 782. Allocation of Emission Allowances” ............................................................ 74
‘‘Sec. 783. Electricity Consumers” ................................................................................ 76
‘‘Sec. 784. Natural Gas Consumers”.............................................................................. 77
‘‘Sec. 785. Home Heating Oil and Propane Consumers”................................................ 77
[Sec. 786 added in Title I (Clean Energy), Section 115] ................................................. 78
‘‘Sec. 787. Allocations to Refineries” ............................................................................ 78
‘‘Sec. 788. [SECTION RESERVED]” ........................................................................... 78
‘‘Sec. 789. Climate Change Consumer Refunds” ........................................................... 78
‘‘Sec. 790. Exchange for State-Issued Allowances” ....................................................... 78
‘‘Sec. 791. Auction Procedures” .................................................................................... 79
‘‘Sec. 792. Auctioning Allowances for Other Entities”................................................... 80
‘‘Sec. 793. Establishment of Funds” .............................................................................. 80
Subtitle C—Additional Greenhouse Gas Standards.............................................................. 80
Sec. 331. Greenhouse Gas Standards ............................................................................. 80
‘‘Title VIII—Additional Greenhouse Gas Standards .................................................................. 81
‘‘Sec. 801. Definitions” ................................................................................................. 81
‘‘Part A─Stationary Source Standards”................................................................................ 81
‘‘Sec. 811. Standards of Performance”........................................................................... 81
Part C─Exemptions from Other Programs ........................................................................... 81
‘‘Sec. 831. Criteria Pollutants” ...................................................................................... 81
‘‘Sec. 832. International Air Pollution”.......................................................................... 82
‘‘Sec. 833. Hazardous Air Pollutants”............................................................................ 82
‘‘Sec. 834. New Source Review”................................................................................... 82
‘‘Sec. 835. Title V Permits” ........................................................................................... 83
Sec. 332. HFC Regulation ............................................................................................. 83
“Sec. 619. Hydrofluorocarbons (HFCS)”....................................................................... 83
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Sec. 333. Black Carbon ................................................................................................. 84
‘‘Part E─Black Carbon” ...................................................................................................... 84
‘‘Sec. 851. Black Carbon” ............................................................................................. 84
Sec. 334. States ............................................................................................................. 85
Sec. 335. State Programs ............................................................................................... 85
‘‘Part F─Miscellaneous” ..................................................................................................... 85
‘‘Sec. 861. State Programs” ........................................................................................... 85
“Sec. 862. Grants for Support of Air Pollution Control Programs” ................................. 86
Sec. 336. Enforcement .................................................................................................. 86
Sec. 337. Conforming Amendments .............................................................................. 86
Sec. 338. Davis-Bacon Compliance............................................................................... 86
Subtitle D—Carbon Market Assurance................................................................................ 87
Sec. 341. Carbon Market Assurance .............................................................................. 87
“Part IV—Carbon Market Assurance” ................................................................................. 87
‘‘Sec. 401. Oversight and Assurance of Carbon Markets” .............................................. 87
Subtitle E—Additional Market Assurance ........................................................................... 88
Sec. 351. Regulation of Certain Transactions in Derivatives Involving Energy
Commodities.............................................................................................................. 88
Sec. 352. No Effect on Authority of the Federal Energy Regulatory Commission........... 89
Sec. 353. Inspector General of the Commodity Futures Trading Commission ................ 89
Sec. 354. Settlement and Clearing Through Registered Derivatives Clearing
Organizations............................................................................................................. 89
Sec. 355. Limitation on Eligibility to Purchase a Credit Default Swap ........................... 90
Sec. 356. Transaction Fees ............................................................................................ 90
Sec. 357. No Effect on Authority of the Federal Trade Commission............................... 90
Sec. 358. Regulation 0f Carbon Derivatives Markets ..................................................... 90
Sec. 359. Cease-and-Desist Authority............................................................................ 91
Title IV─Transitioning to a Clean Energy Economy .................................................................. 91
Subtitle A—Ensuring Real Reductions In Industrial Emissions............................................ 91
Sec. 401. Ensuring Real Reductions in Industrial Emissions .......................................... 91
“Part F—Ensuring Real Reductions in Industrial Emissions.”.............................................. 91
“Sec. 761. Purposes” ..................................................................................................... 91
“Sec. 762. International Negotiations”........................................................................... 92
“Sec. 763. Definitions” ................................................................................................. 92
“Subpart 1—Emission Allowance Rebate Program” ...................................................... 92
“Sec. 764. Eligible Industrial Sectors”........................................................................... 92
“Sec. 765. Distribution of Emission Allowance Rebates”............................................... 93
“Subpart 2 ─ International Reserve Allowance Program” .............................................. 94
“Sec. 766. International Reserve Allowance Program”................................................... 94
“Subpart 3—Presidential Determination” ...................................................................... 94
“Sec. 767. Presidential Reports and Determinations” ..................................................... 94
Subtitle B—Green Jobs and Worker Transition.................................................................... 95
Part 1—Green Jobs ....................................................................................................... 95
Sec. 421. Clean Energy Curriculum Development Grants .............................................. 95
Sec. 422. Increased Funding for Energy Worker Training Program ................................ 95
Part 2—Climate Change Worker Adjustment Assistance................................................ 96
Sec. 425. Petitions, Eligibility Requirements, and Determinations ................................. 96
Sec. 426. Program Benefits ........................................................................................... 96
Sec. 427. General Provisions ......................................................................................... 97
Subtitle C—Consumer Assistance ....................................................................................... 97
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Sec. 431. Energy Tax Credit .......................................................................................... 97
“Sec. 36B. Energy Tax Credit” ...................................................................................... 97
Sec. 432. Energy Refund for Low-Income Consumers................................................... 98
Subtitle D—Exporting Clean Technology............................................................................ 98
Sec. 441. Findings and Purposes ................................................................................... 98
Sec. 442. Definitions ..................................................................................................... 99
Sec. 443. Governance.................................................................................................. 100
Sec. 444. Determination of Eligible Countries ............................................................. 100
Sec. 445. Qualifying Activities .................................................................................... 100
Sec. 446. Assistance .................................................................................................... 101
Subtitle E. Adapting to Climate Change ............................................................................ 102
Part 1. Domestic Adaptation........................................................................................ 102
Subpart A. National Climate Change Adaptation Program ........................................... 102
Subpart B. Public Health and Climate Change............................................................. 103
Subpart C. Natural Resource Adaptation...................................................................... 103
Part 2. International Climate Change Adaptation Program ........................................... 105
Figures
Figure 1. Simplified Emission Allowance Distribution—2016 ..................................................... 8
Figure 2. Simplified Emission Allowance Distribution—2030 ..................................................... 9
Contacts
Author Contact Information .................................................................................................... 107
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Introduction and Overview of Legislation
H.R. 2454, the American Clean Energy and Security Act of 2009, was introduced May 15, 2009,
by Representatives Waxman and Markey, and was subsequently modified (both technical and
substantive changes) and ordered reported by the House Committee on Energy and Commerce on
May 21, 2009. The bill was reported (amended) June 5 (H.Rept. 111-137, Part I). The four titles
of the legislation cover clean energy, energy efficiency, reducing global warming pollution, and
transitioning to a clean energy economy. H.R. 2454 would establish a cap-and-trade system
designed to reduce U.S. greenhouse gas emissions; the market-based approach would establish an
absolute cap on the emissions from covered entities and would allow trading of emissions permits
(“allowances”).
Among the many provisions contained in the bill, several of the major provisions are summarized
in this overview.
Following the overview, this report contains a section-by-section summary of H.R. 2454 as
reported by the Committee, and interpretive or informative commentary for some sections, when
appropriate.
Renewable Electricity Standard
The legislation would amend the Public Utility Regulatory Policies Act of 1978 (PURPA) to
create an integrated energy efficiency and renewable electricity standard starting in 2011,
requiring retail electricity suppliers to meet 20% of their electricity demand through renewable
energy sources and energy efficiency by 2020. Under the standard, each retail electricity supplier
with annual sales of 4 million megawatt-hours (mwh) or more would be required to submit
Renewable Electricity Credits (RECs) equal to at least three-quarters of its annual combined
target. One REC would be awarded for each mwh of renewable energy generated from renewable
energy resources such as wind, solar, geothermal, marine or hydrokinetic, biomass, landfill gas,
or qualified hydropower (as defined in Sec. 101).
RECs could be traded or banked, but would be retired after being submitted in proof of
compliance. “Distributed generation”—small-scale, non-combustion power production located at
consumer sites—would qualify for three RECs for each mwh of eligible renewable electricity.
Funds collected from alternative compliance payments and civil penalties for non-compliance
would be redistributed annually to help deploy renewable energy technologies and help cost-
effective energy efficiency programs. In establishing regulations for this program, the Secretary
of Energy would be required, to the extent practicable, to incorporate and preserve best practices
of existing state-level renewable electricity standards and cooperate with states on minimizing
administrative costs and burdens.
Retail electric suppliers would be required to submit an amount of federal renewable electricity
credits and demonstrated total annual electricity savings equal to the annual combined targets, as
shown in the following schedule for each year:
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
2012 and 2013: 6%
2014 and 2015: 9.5%
2016 and 2017: 13%
2018 to 2019: 16.5%
2020 through 2039: 20%
Generally, a maximum of 25% of a retailer’s combined efficiency and renewable energy target
could be met with energy efficiency. This can include energy saved by the use of high efficiency
combined heat and power plants,1 high efficiency fuel cells,2 solar water heating, and solar light
pipe3 technology.
However, state governors could petition the Federal Energy Regulatory Commission (FERC) to
increase a state’s efficiency percentage for retailers up to 40%.
FERC would be required to set detailed regulations for the standards and protocols that must be
used to verify the amount of energy efficiency savings achieved by an electricity retailer. The
verification must be performed by an independent third party. Retailers must submit annual
reports to FERC on verified savings, which FERC is required to review. If FERC concludes that
some of a retailer’s savings are overstated it could exclude those savings.
Under the provisions of the bill, a state would be able to petition FERC to delegate the
verification authority to the state, including the option of alternative verification procedures. In
such a case, FERC would be required to review the implementation of review authority delegated
to a state at least once every four years, and can revoke the delegation if it concluded the
implementation was faulty.
The bill would allow bilateral contracts for the sale of verified electricity savings, which could be
used by the buyer to meet its annual target. An electric retailer could buy only savings that were
achieved within the retailer’s own state. The bill would not provide for a system for wide-scale
trading of energy efficiency credits, as it does for renewable electricity credits.
A retailer could choose to meet its annual target in whole or part with an alternative compliance
payment equal to $25 per megawatt-hour (inflation-adjusted from a base of 2009) for each
megawatt-hour of the target it would not intend to meet with either renewable electricity credits
or energy efficiency. A retailer that failed to comply with its annual target would be required to
pay a civil penalty equal to the shortfall amount (in megawatt-hours) times twice the alternative
compliance payment (i.e., $50 per megawatt-hour, inflation-adjusted).
The definition of renewable electricity is augmented by adding other qualifying energy resources
(i.e., landfill gas, wastewater treatment gas, coal mine methane, and qualified waste-to-energy) to
the list of renewable energy resources.
1 Combined heat and power or CHP (also referred to as cogeneration) is an integrated process to produce electricity and
process heat for industrial or commercial use. Because the CHP plant makes use of the waste heat lost in a stand-alone
power plant or steam plant, it is a much more energy efficient facility. Many types of CHP plants are in commercial
operation.
2 Fuel cells are a power technology that relies on chemical reactions, without combustion, to produce electricity. Fuels
cells are beginning to see some commercial application.
3 A solar light pipe is a tubular structure that uses, for example, prisms to funnel daylight into a structure to supplement
or replace electric lighting.
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Renewable energy resources would be largely technologies still under development. Additional
technologies developed in the timeframe under consideration would need to be evaluated for
inclusion as eligible resources under the definition.
The definition of renewable biomass would be revised to allow the use of thinning materials and
invasive species removed from the National Forest system and public lands.
It is not known how the renewable electricity standard (RES) might complement climate change
mitigation measures in the legislation. As introduced, the bill would have mandated an RES of
25% by 2025. At current requirements of 20% by 2025 (which could be lessened to 12% by
energy efficiency goals), overall GHG reductions achieved could be measurably less, depending
on how energy efficiency gains are realized.
Geologic Sequestration of Carbon Dioxide
H.R. 2454 would require the EPA Administrator to submit a report to Congress, within 120 days
of enactment, detailing a unified national strategy for addressing the key legal and regulatory
barriers to deployment of commercial scale carbon capture and sequestration. The bill requires
two other reports from studies examining: (1) how, and under what circumstances, the
environmental statutes for which EPA has responsibility would apply to CO2 injection and
geologic sequestration activities, due within 12 months of enactment; and (2) the legal framework
for geologic sequestration sites, including existing federal environmental statutes, state
environmental statutes, and state common law, due within 18 months of enactment.
The legislation would amend the Safe Drinking Water Act (SDWA) by inserting a provision
directing the EPA Administrator to promulgate, within one year of enactment, regulations for the
development, operation, and closure of carbon dioxide geologic sequestration wells, and to take
into consideration the ongoing SDWA rulemaking regarding these wells. It would also amend
Title VIII of the Clean Air Act and establish a coordinated certification and permitting process for
geologic sequestration sites. Within two years of enactment, the Administrator would be required
to promulgate regulations to protect human health and the environment by minimizing the risk of
atmospheric release of carbon dioxide injected for geologic sequestration, including enhanced
hydrocarbon recovery combined with geologic sequestration. This provision broadens the scope
of regulatory authority beyond protecting underground sources of drinking water under SDWA to
protecting against atmospheric releases of CO2 under the Clean Air Act.
H.R. 2454 would authorize a Carbon Storage Research Corporation to establish and administer a
program to accelerate the commercial availability of carbon dioxide capture and storage
technologies and methods by awarding grants, contracts, and financial assistance to electric
utilities, academic institutions, and other eligible entities. The corporation would be established
by a referendum if providers of at least two-thirds of the total quantity of fuel-based electricity
delivered to retail consumers vote for approval. If 40% or more of state regulatory authorities
were to submit written notices of opposition to the creation of the corporation, the corporation
would not be established. If established, the corporation would levy an assessment on distribution
utilities for all fossil fuel-based electricity delivered to retail customers, and would adjust the
assessment rates to generate between $1.0 billion and $1.1 billion per year.
The bill would amend Title VII of the Clean Air Act to require that the EPA Administrator
promulgate regulations to distribute emission allowances to support the commercial deployment
of carbon capture and sequestration technologies in both electric power generation and industrial
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operations. Among other eligibility requirements, it would require that the owner or operator
geologically sequester captured carbon dioxide or convert it to a stable form that can be safely
and permanently sequestered.
The legislation would also amend CAA Title VIII by adding performance standards for new coal-
fired power plants and, in some instances, for existing plants retrofitted with carbon capture and
sequestration technology. Covered electric generating units (EGUs) that are initially permitted on
or after January 1, 2020, would be required to reduce their annual emissions of carbon dioxide by
65%. EGUs initially permitted before January 1, 2020, would need to achieve a 50% reduction.
Vehicles and Fuels
H.R. 2454 contains several provisions related to vehicles and fuels. Most notably, the bill would
provide significant incentives for automakers and parts suppliers to produce plug-in vehicles and
other advanced technology vehicles. For example, in early years, 3% of allowances from the
greenhouse gas cap-and-trade program would be allocated to the automotive sector to provide
grants to refit or establish plants to build plug-ins and other advanced vehicles. Depending on the
allowance price in the cap-and-trade system, this allocation could easily be worth billions of
dollars each year.
In addition to allowances for advanced vehicle manufacturing, the bill would also establish a
“cash-for-clunkers” program. This program would provide new vehicle purchasers and lessees
with vouchers worth up to $4,500 for a new, more efficient vehicle to replace an older, less
efficient vehicle. The new vehicle would need to be more fuel efficient than the vehicle it
replaced, and the older vehicle must be crushed or shredded. The vouchers would cover vehicles
purchased between March 31, 2009, and March 30, 2010. The bill authorizes $4 billion for the
program.
H.R. 2454 also directs the EPA to establish greenhouse gas emissions standards for various
transportation sectors. The bill would require EPA to establish standards for passenger vehicles,
heavy-duty vehicles, non-road vehicles (including marine vessels and locomotives) and aircraft.
In addition, the bill would expand the definition of “renewable biomass” for the renewable fuel
standard (RFS) established in the Energy Policy Act of 2005 and expanded in the Energy
Independence and Security Act of 2007 (EISA). The RFS requires that an increasing amount of
biofuels be blended into gasoline and diesel fuel. By 2022, the mandate reaches 36 billion gallons
of biofuels. However, the amendments to the RFS in EISA restricted the feedstocks that would
qualify as renewable biomass under the RFS, effectively excluding a large potential pool of
woody biomass, as well as biomass from federal lands. H.R. 2454 would expand the definition to
allow fuel produced from some of these feedstocks to qualify under the RFS.
Not included in the bill is a low carbon fuel standard (LCFS) similar to that established in
California. An LCFS would require that fuel suppliers reduce the lifecycle greenhouse gas
emissions from motor fuels relative to a baseline year. Such an LCFS would not be an explicit
mandate for biofuel use, but would likely promote some biofuels, as well as other low-carbon
transportation fuels such as natural gas and electricity produced from renewable resources. An
LCFS was part of an earlier draft of the bill, but was not included in the bill as introduced.
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Smart Grid
H.R. 2454 includes several provisions aimed at supporting development and installation of smart
grid4 technologies. The bill would direct the Department of Energy and Environmental Protection
Agency to identify products that could be cost-effectively equipped with smart grid capability. An
example would be a dishwasher that could wirelessly communicate with a “smart meter” installed
by a utility in a home. This linkage would allow the utility to temporarily stop operation of the
dishwasher when electricity was scarce or expensive (assuming the homeowner had agreed to the
procedure). The legislation would also direct the Federal Trade Commission to initiate a
rulemaking to determine whether smart grid information, such as potential dollar savings to the
consumer, should be added to Energy Star product labels. (Energy Star is an existing federal
program for labeling energy efficient products.)
The legislation would establish requirements for electric power retailers to reduce their peak
loads using smart grid and other energy efficient technologies; it would modify an energy
efficiency public information program authorized by the Energy Policy Act of 2005 (EPACT05)
to make it into a smart grid and energy efficiency information program authorized through 2020.
H.R. 2454 would also modify an EPACT05 energy efficiency appliance rebate program to add
appliances with smart grid capabilities. Authorized funding would be increased from $50 million
annually to $100 million, and the authorization would be extended to run through FY2015.
Additionally, H.R. 2454 would require state regulatory authorities and self-regulating power
suppliers (such as municipal utilities) to ensure that utility smart grid systems would be
compatible with plug-in electric drive vehicles.
Energy Efficiency
The bill includes a variety of energy efficiency provisions that cover grants, standards, rebates
and other programs for buildings, lighting and commercial equipment, water-using equipment,
wood stoves, industrial equipment, and healthcare facilities.
Two new programs would be established that aim to facilitate the use of energy efficiency and
renewable energy programs to more directly support the goals of curbing greenhouse gas
emissions to mitigate climate change. First, DOE would be required to create a State Energy and
Environment Development (SEED) program, which allows each state to collect major federal
energy grant appropriations (Weatherization, State Energy, Efficiency Block Grants, and
LIHEAP) into a common fund designed to support clean energy, energy efficiency, and climate
change mitigation. Second, EPA would be directed to implement a legislated carbon allowance
distribution program that would be used to help support several energy efficiency and renewable
energy programs.
Building energy efficiency improvements would be addressed by expanded responsibilities at
DOE and EPA. DOE would be required to regularly update its model building energy codes,
4 The “smart grid” is intended to give the power grid some of the characteristics of a computer network, in which
information concerning, and control of, power supply and demand will flow between and be shared by individual
customers and utility control centers. The smart grid primarily involves the development of software and small-scale
technology (e.g., smart meters for homes and businesses that would interface with grid controls) rather than
construction of new transmission lines.
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which are available for states to adopt and adapt to local circumstances. Further, DOE would be
directed to establish a rebate program designed to encourage replacement of manufactured homes
owned by low-income families. Also, DOE would be required to develop a program that supports
efficiency retrofits of existing commercial buildings. EPA, in parallel, would be required to
develop a program to support efficiency retrofits of existing residential buildings. Also, EPA
would be directed to establish a building energy efficiency labeling program that would be similar
to its existing energy labeling program for cars and appliances.
For lighting and commercial equipment, new efficiency standards would be set by law and some
new procedures and programs would be put in place. Lighting efficiency standards would be set
for the niche categories of outdoor luminaires, outdoor high output lamps, portable light fixtures,
and incandescent reflector lamps. Commercial equipment standards would be legislated for the
niche categories of water dispensers, commercial hot food holding cabinets, portable electric
spas, and commercial furnaces. Also, in general, existing criteria for setting appliance efficiency
standards would be expanded to include criteria related to greenhouse gas emissions and other
factors. Further, DOE would be directed to create an incentive program to encourage consumer
purchases of the most energy-efficient appliances, while also providing an incentive to remove
the least efficient appliances from commercial use. Cost-effectiveness would be explicitly
established as one of the purposes of EPA’s Energy Star program.
Water use efficiency improvements would be addressed by three provisions. First, EPA’s
WaterSense program, a voluntary labeling program to reduce water use, would be given statutory
authority. Second, federal agencies would be directed to use WaterSense-labeled and DOE
Federal Energy Management Program (FEMP)-designated water-using products and services.
Third, EPA would be required to provide funds to support state rebate or voucher programs for
consumer purchases of residential water-efficient products and services.
New residential wood stoves and pellet stoves would have to meet an environmental performance
standard set by EPA. Further, EPA would be authorized to provide funds to state and local
governments, American Indian tribes, Alaskan Native villages, and certain nonprofit
organizations to replace stoves that do not meet the standards. To address a concern that
technological improvements gradually erode the true energy efficiency of products identified with
the EPA Energy Star label, EPA would be required to establish a grading system that ranges from
“A” (most efficient) to “F” (least efficient) and periodically test products to verify compliance.
Industrial energy efficiency would be addressed by four provisions. First, DOE would be directed
to expand an existing industrial standards program to include industrial plant energy efficiency
certification standards. Second, DOE would be required to establish a monetary award program to
spur innovation in the recovery of thermal energy in power plants and industrial facilities. Third,
DOE would be directed to assess the electric motor market, identify energy efficiency
improvement opportunities, and develop methods to estimate energy and cost savings and certain
program impacts. Fourth, DOE would be required to establish a rebate program for purchasers
and distributors of energy efficient motors.
Regulation of energy savings performance contracts (ESPCs) for federal agencies would be
revised to require that agencies establish competitions for task and delivery orders. Further, the
allowable types of energy transactions under ESPCs would be expanded to include thermal forms
of renewable energy. Also, onsite renewable energy production would become eligible for helping
to meet agency requirements for using renewable energy.
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Energy efficiency in public institutions is addressed by three provisions. First, under the Energy
Conservation Program for Schools and Hospitals, the list of eligible facilities would be expanded
to specifically include not-for-profit hospitals and not-for-profit inpatient health facilities. Further,
the authorization for grants would be increased from $1 billion to $2.5 billion annually. Second,
the definition of community eligibility for DOE’s Energy Efficiency and Conservation Block
Grant program would be expanded to include regional groups of small local governments. Third,
DOE would be authorized to create a new grant program for nonprofit community development
organizations that provide energy efficiency and renewable energy financing for businesses and
projects in low-income communities.
A national carbon labeling and disclosure program would be established at EPA, which would
likely have some parallels to EPA’s existing energy labeling program. DOE would be required to
provide affiliated islands (U.S. trust territories) with energy planning and implementation
assistance. Each federal agency, in collaboration with OMB, would be required to create an
implementation strategy for the purchase and use of energy efficient information and
communications technologies, infrastructure, and practices. A national goal would be established
to improve energy productivity by at least 2.5% per year from 2012 through 2030.
Major Cap-and-Trade Provisions
As reported, Title III of H.R. 2454 would amend the Clean Air Act to set up a cap-and-trade
system that is designed to reduce GHG emissions from covered entities 17% below 2005 levels
by 2020 and 83% below 2005 levels by 2050. Covered entities are phased into the program over a
four-year period from 2012 to 2016. When the phase-in schedule is complete, the cap would
apply to entities that account for 84.5% of U.S. total GHG emissions. By including other
provisions contained in the legislation (e.g., a separate cap-and-trade program for
hydrofluorocarbons (HFCs)), the World Resources Institute (WRI) estimates that the overall
potential net reductions in GHG emissions from H.R. 2454 could range from 28%-33% below
2005 levels in 2020 and 75%-81% in 2050.5
The market-based approach adopted by H.R. 2454 would establish an absolute cap on the
emissions from covered sectors and would allow trading of emissions permits (“allowances”)
among covered and non-covered entities.6 The bill achieves its broad coverage through an
upstream compliance mandate on petroleum and most fluorinated gas producers and importers,
and a downstream mandate on electric generators, industrial sources, and natural gas local
distribution companies (LDCs).7 Generally, the emissions cap would limit greenhouse gas
emissions from entities that produce or import more than 25,000 metric tons annually (carbon
dioxide equivalent) of greenhouse gases.
If left unmitigated, any greenhouse gas cap-and-trade program (as well as a carbon tax
alternative) would be regressive. In an attempt to mitigate this distributional problem, H.R. 2454
allocates a substantial percentage of the allowances available for the benefit of energy consumers
and low-income households. In some cases, these allowances are allocated at no cost to entities,
5 John Larsen and Robert Hellmayr, Emission Reductions Under the American Clean Energy and Security Act of 2009
(World Resources Institute, May 19, 2009).
6 See “Common Terms” box for definitions.
7 Title III sets up a separate cap-and-trade program for hydrofluorocarbons (HFCs).
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such as LDCs, with the express purpose of mitigating energy cost increases; in other cases, such
as low-income assistance, the allowances are auctioned by EPA and the proceeds distributed to
eligible recipients. As the program proceeds through the mid-2020s, the energy cost relief, along
with other free allocations, are phased out in favor of more government auctioning with most of
the proceeds returned to households on a per-capita basis. See Figure 1 and Figure 2 for a
summary of how emission allowances are distributed in 2016 and 2030, respectively.
Figure 1. Simplified Emission Allowance Distribution—2016
Energy efficiency
Oil refiners
7.5%
Technology-R&D
2.0%
7.0%
Adaptation
Merchant coal-
2.0%
fired generators
3.5%
Int'l deforestation
Low-Income
5.0%
Trade-Exposed
Consumers
Industries
15.0%
13.5%
Auctioned
Home heating oil
consumers
Allowances
Deficit Reduction
(states)
17.5%
1.0%
1.5%
LDCs for natural
Worker
gas
Assistance
9.0%
0.5%
LDCs for
electricity
Domestic wildlife
31.5%
and resources
1.0%
Source: Prepared by CRS.
Notes: Allotment to local distribution companies (LDCs) would benefit energy consumers.
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Figure 2. Simplified Emission Allowance Distribution—2030
Trade-Exposed
Auctioned
Industries
Allowances
2.3%
71.7%
Consumer Rebate
Int'l Deforestation
36.0%
3.0%
Low-Income
Energy Efficiency
Consumers
5.0%
15.0%
Adaptation
8.0%
Alloted in Prior
Years
15.8%
Technology-R&D
Domestic wildlife
10.0%
and resources
4.0%
Worker
Assistance
1.0%
Source: Prepared by CRS.
H.R. 2454’s allocation scheme also attempts to smooth the economy’s transition to a less carbon-
intensive future through free allowance allocations to energy-intensive, trade-exposed industries,
merchant coal-fired electric generators, and petroleum refiners. Bonus allotments of allowances
are allocated for emission reductions achieved by carbon capture and storage technology. Except
for carbon capture and storage, these free allocations of allowances are phased-out by the early
2030s.
Finally, H.R. 2454’s allocation scheme attempts to address some of the impacts of climate change
by providing allowances to help prevent further tropical deforestation and to fund climate
adaptation activities.
Because allowance prices can be volatile, cap-and-trade bills generally provide some mechanisms
to address either the potential gyrations, or allowance prices more generally. H.R. 2454 does not
have a “safety valve”—an alternative compliance option that permits covered entities to pay an
excess emissions fee instead of reducing emissions. Instead, the legislation addresses cost control
through five main mechanisms: (1) unlimited banking and limited borrowing, (2) a two-year
compliance period, (3) a strategic auction with a reserve price to increase the availability of
allowances in the early years of the program, (4) periodic auctions with a reserve price, and (5)
broad limits on the use of offsets.
With respect to allowance price volatility, the bill includes two design elements that may dampen
volatility to some degree. First, the bill allows entities to borrow (without interest) allowances
from the year immediately following the current year, effectively creating a rolling two-year
compliance period. Second, EPA is directed to hold strategic reserve auctions. Allowances
borrowed from future years and held in a strategic reserve are auctioned off in the early years of
the program. This increases the availability of allowances early, but maintains the overall
emissions cap. The strategic reserve auction would include a reserve price: $28/allowance in 2012
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that would increase annually in 2013 and 2014. Starting in 2015, the reserve price would be 60%
above the 36-month rolling average allowance price.
Regular auctions mandated by the bill also have a reserve price: $10 (in 2009 dollars) in 2012,
increasing at a real 5% annually. An auction reserve price would help create an allowance price
floor, and help dampen allowance price spikes. The auctions, along with the other mechanisms
listed above, attempt to bracket volatility. Whether they would work is subject to debate,
particularly with respect to short-term price volatility.
With respect to overall cost control, analysis indicates that an important cost control mechanism
in the cap-and-trade program is the availability of domestic and international offsets. The bill
limits the availability of domestic and international offsets to two billion allowances annually—
divided equally between domestic and international pools. According to analyses conducted by
the Environmental Protection Agency (EPA), the Congressional Budget Office, and CRA
International, the availability of these offsets reduces projected allowance prices under the
program by half.8
Another concern with respect to a cap-and-trade program is potential allowance market abuse and
manipulation. The size of a U.S. carbon market could be in the hundreds of billions of dollars,
and involve all of the financial instruments, particularly derivatives, that any other commodity
market includes. To provide oversight of the newly created carbon allowance market, the bill has
detailed provisions for Federal Energy Regulatory Commission oversight of the cash allowance
market, and enhanced Commodity Futures Trading Commission (CFTC) oversight of allowance
derivatives. With respect to the latter, the bill would remove energy commodities (including
carbon allowances) from the category of “exempt commodity” and require that over-the-counter
transactions be cleared through a clearing house (a standard feature of a future exchange). In
addition the CFTC is required to establish position limits, thus setting ceilings on the number of
energy contracts that any person could hold.
Besides the two emission caps created under Title III, the bill contains other provisions in Titles
III and IV to reduce greenhouse gas emissions and potential carbon leakage. Among the most
important of these provisions are (1) preventing tropical deforestation, (2) performance standards
for uncovered entities that emit over 10,000 metric tons annually, (3) a 1.25 offset requirement for
international offsets after 2017; and (4) programs designed to reduce potential carbon leakage.
First, H.R. 2454 has a supplemental greenhouse gas reduction program that requires EPA to use
some of the allowances available under the cap-and-trade program to fund international projects
to reduce deforestation. The goal of the program is to achieve 720 million metric tons of
additional emission reductions in 2020 (about 10% of U.S. 2005 emissions), and a total of 6
billion metric tons by 2025 (about equal the U.S. emissions in 1990). If achieved, this would have
significant effect on the net emission reductions achieved in the early years of the program, as
suggested by the WRI study cited earlier.
8 U.S. Environmental Protection Agency, EPA Preliminary Analysis of the Waxman-Markey Discussion Draft: The
American Clean Energy and Security Act of 2009 in the 111th Congress (April 20, 2009); Congressional Budget Office,
Congressional Budget Office Cost Estimate: H.R. 2454, American Clean Energy and Security Act of 2009 (as Ordered
Reported by the House Committee on Energy and Commerce) (June 5, 2009); and, CRA International, Impact on the
Economy of the American Clean Energy and Security Act of 2009 (H.R. 2454), prepared for the National Black
Chamber of Commerce (May 2009).
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Second, as noted above, not all greenhouse gas emitting sources are covered by the Title III cap-
and-trade programs. Under other provisions of Title III, stationary sources not covered by the
Title III caps are potentially subject to greenhouse gas performance standards. WRI estimates that
standards for uncapped sources could reduce emissions from such sources by about 115 million
metric tons annually.
Third, as reported by the House Energy and Commerce Committee, the cap-and-trade program
requires that international offsets submitted for compliance beginning in 2018 be discounted (i.e.,
it will take 5 offset credits to equal 4 allowances). Depending on the number of international
offsets used for compliance after 2017, the discount factor could add up to 375 million metric
tons of reductions annually.
Finally, H.R. 2454 attempts to address the issue of carbon leakage.9 Carbon leakage is a difficult
concept to quantify. H.R. 2454 takes two primary approaches to mitigate its potential impact on
the net greenhouse gas reduction achieved under the bill. The first is the allocation of allowances
at no cost to energy-intensive, trade-exposed industries, as identified above. The second is an
international reserve allowance scheme that essentially imposes a shadow allowance requirement
on importers of energy-intensive, trade-exposed products, creating a de facto tariff. Basically, the
scheme would require importers of energy-intensive products from countries with insufficient
carbon policies to submit a prescribed amount of “international reserve allowances” or IRAs for
their products to gain entry into the United States. Based on the greenhouse gas emissions
generated in the production process, IRAs would be submitted on a per-unit basis for each
category of covered goods from a covered country.
Under H.R. 2454, the international reserve allowance scheme is contingent on a presidential
determination that it is needed, and cannot begin until 2025 at the earliest. Whether this scheme
would actually work is unclear. The vast administrative, informational, and analytical resources
necessary to implement such a program would create significant issues in any attempt to
implement it. Likewise, it is not clear that the potentially severe World Trade Organization
(WTO) implications of the provision have been fully exposed and accommodated.
9 For a full discussion of carbon leakage, see CRS Report R40100, “Carbon Leakage” and Trade: Issues and
Approaches, by Larry Parker and John Blodgett.
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Common Terms
Allowance. A limited authorization by the government to emit 1 metric ton of carbon dioxide equivalent. Although
used generically, an allowance is technically different from a credit. A credit represents a ton of pollutant that an entity
has reduced in excess of its legal requirement. However, the terms tend to be used interchangeably, along with others,
such as permits.
Auctions. Auctions can be used in market-based pollution control schemes to allocate some or all of the allowances.
Auctions may be used to: (1) ensure the liquidity of the credit trading program; and/or (2) raise (potentially
considerable) revenues for various related or unrelated purposes.
Banking. The limited ability to save allowances for the future and shift the reduction requirement across time.
Cap-and-trade program. An emissions reduction program with two key elements: (1) an absolute limit (“cap”) on the
emissions allowed by covered entities; and (2) the ability to buy and sell (“trade”) those allowances among covered and
non-covered entities.
Coverage. Coverage is the breadth of economic sectors covered by a particular greenhouse gas reduction program, as
well as the breadth of entities within sectors.
Emissions cap. A mandated limit on how much pollutant (or greenhouse gases) affected entities can release to the
atmosphere. Caps can be either an absolute cap, where the amount is specified in terms of tons of emissions on an
annual basis, or a rate-based cap, where the amount of emissions produced per unit of output (such as electricity) is
specified but not the absolute amount released. Caps may be imposed on an entity, sector, or economy-wide basis.
Greenhouse gases. The six gases recognized under the United Nations Framework Convention on Climate Change are
carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), hydrofluorocarbons (HFC), and
perfluorocarbons (PFC). H.R. 2454 adds nitrogen trifluoride (NF3).
Leakage. The shift in greenhouse gas (GHG) emissions from an area subject to regulation (e.g., cap-and-trade
program) to an unregulated area, so reduction benefits are not obtained. This would happen, for example, if a GHG
emitting industry moved from a country with an emissions cap to a country without a cap.
Offsets. Emission credits achieved by activities not directly related to the emissions of an affected source. Examples of
offsets would include forestry and agricultural activities that absorb carbon dioxide, and reductions achieved by entities
that are not regulated by a greenhouse gas control program.
Revenue recycling. How a program disposes of revenues from auctions, penalties, and/or taxes. Revenue recycling can
have a significant effect on the overall cost of the program to the economy, as well as its effect on income classes.
Sequestration. Sequestration is the process of capturing carbon dioxide from emission streams or from the atmosphere
and then storing it in such a way as to prevent its release to the atmosphere.
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Title I—Clean Energy
Subtitle A—Combined Efficiency and Renewable Energy Standard
Sec. 101. Combined Efficiency and Renewable Energy Standard
Summary of section
Comments
Amends the Public Utility Regulatory Policies
The definition of renewable electricity is
Act of 1978 (PURPA) to create an integrated
augmented by adding Other qualifying
energy efficiency and renewable electricity
energy resources (i.e., landfill gas,
standard.
wastewater treatment gas, coalmine methane,
and qualified waste-to-energy) to the list of
Establishes a federal Renewable Electricity
renewable energy resources.
Standard to promote renewable energy
production. Under the standard, each retail
Renewable energy resources are largely
electricity supplier with annual sales of 4 million
technologies still under development.
megawatt-hours (mwh) or more must earn or
Additional technologies developed in the
acquire Renewable Electricity Credits (RECs) for
timeframe under consideration may need to
a portion of its retail electricity sales. The portion
be evaluated for inclusion as eligible
begins at 6% in 2012 and rises to 25% in 2025,
resources under the definition.
remaining at that level through 2039. RECs can
be traded or banked, and can be earned by
“Hybrid” power stations using more than one
producing electricity from any “renewable energy source of renewable resource (for example,
resource,” including wind, solar, geothermal,
landfill gas and PV on the same site) may
marine or hydrokinetic, biomass, landfill gas, or
need to be included in the definition.
qualified hydropower. “Distributed generation”—
small-scale, non-combustion power production
Renewable biomass definition is revised to
located at consumer sites—qualifies for three
allow thinning materials and removed
RECs for each mwh of eligible renewable
invasive species from the National Forest
electricity. Up to 20% of the RECs can be
system and public lands.
provided by complying with the Federal Energy
Efficiency Resource Standard in Sec. 611 of the
The type of fuel used in a fuel cell
bill. “Alternative compliance” payments can
determines emissions. For example, fuel
substitute for RECs. A new Renewable Electricity cells powered by natural gas will produce
Deployment Fund would collect alternative
more GHGs and other emissions than those
compliance payments and civil penalties for non-
which use pure hydrogen as a fuel.
compliance; the funds would be redistributed
Nonetheless, natural gas fuel cells are
annually to retail electric suppliers that had
expected to result in cleaner electricity
submitted the required RECs. In establishing
generation than natural gas-fired in
regulations for this program, the Secretary of
combustion turbines.
Energy must, to the extent practicable,
incorporate and preserve best practices of
Requiring qualified hydropower installations
existing state-level renewable electricity
to result in no water surface elevation
programs and cooperate with states on
changes at existing dams may be too
minimizing administrative costs and burdens.
restrictive, if continued hydroelectric power
production is a goal. A range of water
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Summary of section
Comments
elevation change per kilowatt-hour of
The combined target for each year is:
generation may be more appropriate, or
alternatively, providing for no “net”
2012 and 2013: 6%
degradation of downstream resources,
2014 and 2015: 9.5%
habitats, or existing uses.
2016 and 2017: 13%
2018 to 2019: 16.5%
An issue that may have to be addressed is
2020 through 2039: 20%
how the renewable electricity standard (RES)
can effectively complement climate change
Generally a maximum of 25% of a retailer’s
mitigation legislation. As introduced, the bill
combined efficiency and renewable energy target
mandated an RES of 25% by 2025. At
can be met with energy efficiency. This can
current requirements of 20% by 2025 (which
include energy saved by the use of high
could be lessened to 12% by energy
efficiency combined heat and power plants, high
efficiency goals), overall GHG reductions
efficiency fuel cells, solar water heating, and
achieved could be measurably less depending
solar light pipe technology.
on how energy efficiency gains are realized.
However, a state Governor can petition the
A common standard for federal and state
Commission to increase the efficiency percentage renewable energy certificates could allow for
for the retailers in his or her state up to 40%.
a stratified but harmonized market to develop
FERC is required to promulgate detailed
for RECs. Advantages and disadvantages
regulations on the standards and protocols that
with regard to eventual fungibility between
must be used to verify the amount of energy
the two as commodities could be considered.
efficiency savings achieved by an electricity
The program includes limited
retailer. The verification must be performed by an interchangeability between energy efficiency
independent third-party. Retailers must submit
and renewable electricity to meet the savings
annual reports to FERC on verified savings,
targets established by the amendment. This
which FERC is to review. If FERC concludes that interchangeability responds to concerns that
some of a retailer’s savings are overstated it can
some regions of the country do not have
exclude those savings.
sufficient renewable energy resources (such
A state can petition FERC to delegate the
as the lack of wind power potential in the
Commission’s review authority to the state,
Southeast) to meet a pure renewable
including the adoption of alternative verification
electricity standard.
procedures. FERC must review the
Combined heat and power or CHP (also
implementation of review authority delegated to
referred to as cogeneration) is an integrated
the state at least once every four years, and can
process to produce electricity and process
revoke the delegation if it concludes the
heat for industrial or commercial use, such as
implementation is faulty.
space heating. Because the CHP plant makes
The bill allows bilateral contracts for the sale of
use of the waste heat lost in a stand-alone
verified electricity savings, which can be used by
power plant or steam plant, it is much more
the buyer to meet its annual target. An electric
energy efficient than those types of facilities.
retailer can only buy savings that were achieved
Many types of CHP plants are in commercial
within the retailer’s own state. (The bill does not
operation.
provide for a system for wide-scale trading of
The fuel cell is a generating technology that
energy efficiency credits, as it does for renewable
relies on chemical reactions, without
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Summary of section
Comments
electricity credits.)
combustion, to produce electricity. Fuel cells
are a developmental technology.
A retailer can choose to meet its annual target in
whole or part with an alternative compliance
A solar light pipe is a tubular structure that
payment equal to $25 per megawatt-hour
uses, for example, prisms to funnel daylight
(inflation-adjusted from a base of 2009), for each
into a structure to supplement or replace
megawatt-hour of the target it does not intend to
electric lighting.
meet with either renewable electricity credits or
energy efficiency. A retailer that fails to comply
with its target must pay a civil penalty equal to
the shortfall amount (in megawatt-hours) times
double the alternative compliance payment (i.e.,
$50 per megawatt-hour, inflation adjusted).
Sec. 102. Clarifying State Authority to Adopt Renewable Energy Incentives
Summary of section
Comments
Section 210 of the Public Utility Regulatory
The provision affirms state authority to set
Policies Act of 1978 (PURPA) is amended by
rates for sales of renewable electricity
confirming state regulatory or legislative
produced under a state-approved incentive
authority to set the rates for sales of electric
program. The clarification may be intended
energy from a renewable energy facility under a
to preclude conflict with other PURPA
state-approved production incentive program.
requirements for small power generation
“Qualifying Facilities” which place rate
authority for electricity sales under the
Federal Energy Regulatory Commission.
Subtitle B—Carbon Capture and Sequestration
Sec. 111. National Strategy
Summary of section
Comments
Within 120 days of enactment, the Administrator
of the U.S. Environmental Protection Agency
(EPA), in consultation with the Secretary of
Energy and the heads of other relevant federal
agencies as the President may designate, must
submit to Congress a report setting forth a unified
and comprehensive strategy to address the key
legal and regulatory barriers to the commercial-
scale deployment of carbon capture and
sequestration.
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Sec. 112. Regulations for Geologic Sequestration Sites
Summary of section
Comments
Requires a coordinated certification and
Sec. 112 amends Title VIII of the Clean Air
permitting process for geologic sequestration
Act, and establishes the certification and
sites, considering all relevant statutory
permitting process under the authority of the
authorities. In establishing such an approach, the
Act. This provision broadens the scope of
Administrator shall take into account, and reduce
regulatory authority for CCS beyond the Safe
redundancy with, the requirements of the Safe
Drinking Water Act (SDWA) by requiring the
Drinking Water Act and, to the extent practicable,
EPA Administrator to promulgate regulations
reduce the burden on certified entities and
to protect atmospheric releases of CO2. EPA
implementing authorities.
proposed a new rule on July 25, 2008, to
protect underground sources of drinking
Not later than two years after enactment, the
water under authority of the SDWA
Administrator is to promulgate regulations to
Underground Injection Program. Sec. 112
protect human health and the environment by
requires EPA to take into consideration the
minimizing the risk of atmospheric release of
ongoing SDWA rulemaking, but also requires
carbon dioxide injected for geologic
the Administrator to promulgate regulations
sequestration, including enhanced hydrocarbon
under SDWA for CO2 geologic sequestration
recovery combined with geologic sequestration.
wells within one year after enactment.
Not later than two years after enactment, and at
three-year intervals thereafter, the Administrator
is to deliver to the relevant congressional
committees a report on geologic sequestration in
the United States, and to the extent relevant,
other countries in North America.
Amends the Safe Drinking Water Act by inserting
a provision directing the EPA Administrator to
promulgate regulations for the development,
operation, and closure of carbon dioxide geologic
sequestration wells. The regulations are to
include requirements for maintaining evidence of
financial responsibility for emergency and
remedial response, well-plugging, site closure,
post-injection site care, and related activities.
Sec. 113. Studies and Reports
Summary of section
Comments
Requires a study of the legal framework for
The first study would examine several of the
geologic sequestration sites by a task force
legal framework issues that some observers
composed of an equal number of subject matter
contend may impede the deployment of
experts, nongovernmental organizations with
commercial scale CCS, including liability
expertise in environmental policy, academic
and financial responsibilities post-closure,
experts with expertise in environmental law, state
and property rights associated with the
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Comments
officials with environmental expertise,
underground storage of CO2, such as mineral
representatives of state attorneys general, and
rights, water rights, rights to the pore space,
members of the private sector. The task force is
and others.
to conduct a study of existing federal
environmental statutes, state environmental
statutes, and state common law that apply to
geologic sequestration sites for carbon dioxide. A
report based on the study is due 18 months after
enactment.
Requires a study examining how, and under what
circumstances, the environmental statutes for
which EPA has responsibility would apply to CO2
injection and geologic sequestration activities. A
report based on the study is due one year after
enactment.
Sec. 114. Carbon Capture and Sequestration Demonstration and Early
Deployment Program
Summary of section
Comments
Authorizes a Carbon Storage Research
Sec. 114 is nearly identical to H.R. 1689, the
Corporation to establish and administer a
Carbon Capture and Storage Early
program to accelerate the commercial availability
Deployment Act introduced by Rep. Boucher
of carbon dioxide capture and storage
on March 24, 2009.
technologies and methods by awarding grants,
contracts, and financial assistance to electric
If established, the corporation would award
utilities, academic institutions, and other eligible
grants, contracts, and assistance to support
entities.
commercial-scale demonstration of carbon
capture or storage technology projects that
Establishes the corporation by a referendum
encompass coal and other fossil fuels, and
among “qualified industry organizations” which
are suitable for either new or retrofitted
would include the Edison Electric Institute, the
plants. The corporation would seek to
American Public Power Association, the National
support at least five commercial-scale
Rural Electric Cooperative Association, their
demonstration projects over the lifetime of
successors, or a group of owners or operators of
the corporation. Pilot-scale and other small-
distribution utilities delivering fossil fuel-based
scale projects would not be eligible under the
electricity who collectively represent at least 20% program.
of the volume of all fossil fuel-based electricity
delivered by distribution utilities to U.S.
The authority to collect assessments expires
consumers. Voting rights would be based on the
10.5 years after enactment, and the
quantity of fossil fuel-based electricity delivered
corporation would dissolve 15 years after
to the consumer in the previous year or other
enactment unless extended by Congress. If
representative period. The corporation would be
assessments are collected as specified, the
established if persons representing two-thirds of
corporation would accumulate approximately
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Comments
the total quantity of fuel-based electricity
$10 billion to be awarded over 15 years.
delivered to retail consumers vote for approval. If
40% or more of state regulatory authorities
The program gives priority to “early
submit written notices of opposition to the
movers,” electric utilities that committed
creation of the corporation, the corporation would resources to deploy large scale electricity
not be established.
generation units integrated with carbon
capture and sequestration prior to the award
Establishes requirements for board members,
of any grant authorized under this section.
compensation, and terms of service. Provides
The section does not quantify the amount of
descriptions of the status of corporations,
resources deployed, but does state that they
functions and administration of the corporation,
should be “applied to a substantial portion of
and details of corporation administration,
the unit’s carbon dioxide emissions.”
including the use of grants and contracts,
intellectual property issues, budgeting, record
keeping, audits, and reports.
The corporation would raise funding for its
program by collecting an assessment on
distribution utilities for all fossil fuel-based
electricity delivered to retail customers. The
assessments would reflect the relative CO2
emission rates of different fossil fuel-based
electricity as follows:
Rate of assessment
Fuel type
per kilowatt hour
Coal $0.00043
Natural Gas
$0.00022
Oil $0.00032
The corporation is authorized to adjust the
assessments so that they generate not less than
$1.0 billion and not more than $1.1 billion per
year.
Provides specific provisions for the Electric
Reliability Council of Texas (ERCOT), including
the corporation factors listed above. Methods are
specified for determining fossil-fuel-based
electricity deliveries.
Within five years, the Comptroller General of the
United States must prepare an analysis and report
to Congress assessing the Corporation’s
activities, including project selection and
methods of disbursement of assessed fees,
impacts on the prospects for commercialization
of carbon capture and storage technologies, and
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Comments
adequacy of funding.
Allows that a distribution utility whose
transmission, delivery, or sale of electric energy
are subject to any form of rate regulation shall
not be denied the opportunity to recover the full
amount of the prudently incurred costs associated
with complying with this section.
Establishes a technical advisory committee to
provide independent assessments and technical
evaluations, as well as make non-binding
recommendations to the Board concerning
corporation activities, and describes its role and
management.
Sec. 115. Commercial Deployment of Carbon Capture and Sequestration
Technologies
Summary of section
Comments
Amends Title VII of the Clean Air Act to require
Sec. 115 excludes industrial facilities from
that not later than two years after the date of
eligibility if they produce a liquid
enactment, the EPA Administrator is to
transportation fuel from a solid fossil-based
promulgate regulations providing for the
feedstock.
distribution of emission allowances to support the
commercial deployment of carbon capture and
For projects that capture and sequester
sequestration technologies in both electric power
carbon dioxide for the purposes of enhanced
generation and industrial operations. Eligibility
hydrocarbon recovery, the Administer is
for emission allowances requires an owner or
required to reduce the applicable bonus
operator to implement carbon capture and
allowance value compared to projects that
sequestration technology at: (1) an electric
capture carbon dioxide solely for purposes of
generating unit that has a nameplate capacity of
sequestration.
200 megawatts or more, and derives at least 50%
of its annual fuel input from coal, petroleum
This section provides an incentive for “early
coke, or any combination of these two fuels, and
movers.” Under Phase I distribution to
which will achieve at least a 50% reduction in
electric generating units, the bonus
carbon dioxide emissions annually produced by
allowance value is increased by $10 – of the
the unit; and (2) at an industrial source that,
otherwise applicable bonus value – if the
absent carbon capture and sequestration, would
generating unit achieves a 50% capture rate
emit more than 50,000 tons per year of carbon
before January 1, 2017.
dioxide, and upon implementation will achieve at
least a 50% reduction in annual carbon dioxide
An amendment was successfully offered
emissions from an emission point. Eligibility for
during markup to replace the word “source”
emission allowances requires that the owner or
with the words “emission point” regarding
operator geologically sequester captured carbon
eligibility for emission allowances at an
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Summary of section
Comments
dioxide or convert it to a stable form that can be
industrial source. The change in wording
safely and permanently sequestered.
could affect the eligibility for industrial
sources that might employ carbon capture
Distributes emission allowances to electric
and sequestration at some but not all
generating units in two phases. Phase I applies to
emission points in the facility.
the first 6 gigawatts of electric generating units,
measured in cumulative generating capacity of
An amendment was successfully offered
such units. Under Phase I, eligible projects
during markup that makes retrofitted electric
receive allowances equal to the number of tons of generating units eligible for emission
carbon dioxide captured and sequestered,
allowances if the carbon capture and
multiplied by a bonus allowance value, divided
sequestration technology is applied to the
by the average fair market value of an emission
flue gas from at least 200 megawatts of the
allowance in the prior year. The Administrator
total nameplate capacity of the unit. The
shall establish a bonus allowance value for each
amendment similarly makes retrofitted units
rate of carbon capture and sequestration—
eligible if the carbon capture and
compared to how much would otherwise be
sequestration technology achieves at least a
emitted—from a minimum of $50 per ton for a
50% reduction capacity in emissions from
50% rate to a maximum of $90 per ton for an
the treated portion of the flue gas from the
85% rate.
retrofitted unit.
After the 6 gigawatt threshold is achieved, Phase
An amendment was successfully offered
II distributes emission allowances by reverse
during markup to include retrofitted units in
auction (described in this section of the bill). If
the calculation of bonus allowances with
the Administrator determines that reverse
respect to the treated portion of flue gas from
auctions are not efficient or cost-effective for
the retrofitted units.
deploying commercial-scale capture and
sequestration technologies, the Administrator
may prescribe an alternative distribution method.
In an alternative distribution method, the
Administrator would divide emission allowances
into multiple tranches, each supporting the
deployment of a specified quantity of cumulative
electric generating capacity using carbon capture
and sequestration technology. Each tranche
would support no more than 6 gigawatts of
electric generating capacity, and would be
distributed on a first-come, first-serve basis. For
each tranche, the Administrator would establish a
sliding scale that provides higher bonus
allowance values for projects achieving higher
rates of capture and sequestration. For each
successive tranche, the Administrator would
establish a bonus allowance value that is lower
than the rate established for the previous tranche.
The Administrator would not distribute more than
15% of the allocated allowances under Sec.
782(a) to eligible industrial sources. The
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Comments
allowances may be distributed to eligible
industrial sources using a reverse auction method
or an incentive schedule, similar to the Phase II
methods described for electric generating units.
Total allowances under Sec. 115 are limited to 72
gigawatts of total cumulative generating capacity,
including for industrial sources according to an
equivalent metric designated by the
Administrator.
Sec. 116. Performance Standards for Coal-Fueled Power Plants
Summary of section
Comments
Amends title VIII of the Clean Air Act (CAA) by
The 65% reduction mandated for coal plants
adding performance standards for carbon dioxide
entering service after January 1, 2020, would
removal for new coal-fired power plants. Plants
result in a level of emissions roughly
covered by this section include plants that have a
equivalent to the carbon dioxide released by
permit issued under CAA Title V to derive at
a natural gas-fired plant of modern design (a
least 30% of their annual heat input from coal,
“combined cycle” plant) using no carbon
petroleum coke, or any combination of these
controls.
fuels. The performance standards are as follows:
The use of the term “initially permitted” is
• A covered unit that is “initially
important in the implementation of this
permitted” on or after January 1,
section. A new power plant that has received
2020, shall reduce carbon
a permit that is still subject to administrative
dioxide emissions by 65%.
or legal review is considered to be “initially
• A covered unit that is initially
permitted.” If a proposed new coal plant has
permitted after January 1, 2009,
been “initially permitted” prior to January 1,
and before January 1, 2020, must
2009, it will not fall under the requirements
achieve a 50% reduction in
of this section to eventually install carbon
carbon dioxide emissions by a
controls. In an earlier version of this bill,
compliance date that will be
only new units that had been “finally
determined by future
permitted” prior to January 1, 2009—that is,
developments. Specifically, the
the permit was no longer subject to any
compliance date will be the
challenges or reviews—would have escaped
earliest of (1) four years after the
this requirement.
date in which the equivalent of 4
An amendment was successfully offered
gigawatts (Gw) of generating
during markup allowing retrofitted plants to
capacity with commercial carbon
be included, in addition to new plants, for
capture and sequestration
determining the nameplate capacity of units
technology are operating in the
in commercial operation equipped with
United States and sequestering at
carbon capture and sequestration technology.
least 12 million tons of carbon
dioxide annually (equivalent to
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Comments
roughly eight medium-sized coal
plants). This 4 Gw of capacity
must include at least 3 Gw of
electric generating units, up to 1
Gw of industrial applications that
are capturing and sequestering at
least 3 million tons of carbon
dioxide annually, and at least two
operating 250 megawatt (Mw) or
larger generating units sequester
captured carbon dioxide in
geologic formations other than
oil and gas fields; or (2) January
1, 2025 (which can be extended
by the EPA Administrator by up
to 18 months on a case-by-case
basis).
• Not later than 2025 and at five-
year intervals thereafter, the
Administrator is to review the
standards for new covered units
under this section and shall
reduce the maximum carbon
dioxide emission rate for new
covered units to a rate which
reflects the degree of emission
limitation achievable through the
application of the best system of
emission reduction which the
Administrator determines has
been adequately demonstrated.
The Administrator is also to
publish biennial reports on the
amount of capacity with
commercial carbon capture and
sequestration technology in the
United States.
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Subtitle C—Clean Transportation
Sec. 121. Electric Vehicle Infrastructure
Summary of section
Comments
Electric utilities are required to develop plans to
A key issue with the development and
support the use of plug-in hybrid vehicles
expansion of electric vehicles is the
(PHEVs) and pure plug-in electric vehicles
availability of infrastructure to support those
(EVs), including heavy-duty hybrids. Plans may
vehicles. Currently, various protocols and
include deployment of charging stations, battery
technologies are being tested and have been
exchanges, fast-charging infrastructure, and
considered. In some cases, standards have
triggers for development based on vehicle market
been determined for vehicle recharging plug
penetration. Infrastructure should be
design and other elements, but most
interoperable with products from all
standardization questions remain undecided.
manufacturers, to the extent practicable. State
Requiring utilities to develop plans for
regulatory authorities and utilities must establish
infrastructure development will likely
protocols and standards for integrating plug-in
provide an impetus for further
vehicles into the electrical distribution system,
standardization, as well as expansion of that
and include the ability for each vehicle to be
infrastructure.
identified individually and associated with its
owner’s electric utility account, for the purposes
of billing of electricity use and the crediting of
any power returned to the grid by the vehicle’s
batteries.
Within three years of enactment, state regulatory
authorities must set a hearing date for considering
the plan, and must make a determination on new
standards within four years of enactment. State
regulatory authorities must consider whether to
allow cost recovery for the development and
implementation of such plans.
Sec. 122. Large-Scale Vehicle Electrification Program
Summary of section
Comments
Requires the Secretary of Energy to establish a
program to deploy and integrate plug-in vehicles
in multiple regions. Any state or local
government—either solely or jointly with electric
utilities, automakers, technology providers, car
sharing companies, or other entities—may apply
to the Secretary for financial assistance. The
Secretary is to determine the design elements and
requirements for the program, including the type
of financial assistance provided. Financial
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Comments
assistance may be used for various purposes:
assisting in the purchase of new vehicles;
deployment of recharging or battery exchange
infrastructure; integration of plug-in vehicles into
the grid; and other projects the Secretary deems
appropriate to support large-scale deployment of
plug-in vehicles.
Sec. 123. Plug-in Electric Drive Vehicle Manufacturing
Summary of section
Comments
Requires the Secretary of Energy to establish a
The details of this program, if enacted, would
program to provide financial assistance to
determine its likely scope and effects. For
automobile manufacturers to facilitate the
example, manufacturers are more likely to
manufacture of plug-in vehicles. The Secretary
prefer grants to loans, and direct loans to
may provide assistance for the reconstruction or
loan guarantees.
retooling of vehicles developed and produced in
the United States, and for the purchase of
domestically produced batteries for such
vehicles. However, assistance may be granted
only if the manufacturer is unable to finance the
project without such assistance. The Secretary is
to determine the design elements and
requirements for the program, including the type
of financial assistance provided. The Secretary is
to give preference to facilities located in areas
that have the greatest need for the facility.
Sec. 124. Investment in Clean Vehicles
Summary of section
Comments
Directs EPA to distribute one-quarter of the
Sec. 136 of EISA established a loan program
allowances allocated to the automotive sector in
to support the development of facilities to
Sec. 782 through the cap-and-trade program (see
produce advanced technology vehicles.
below) for plug-in electric vehicle development.
While DOE has received applications for the
Half of those allowances (i.e. one-eighth of auto
Advanced Technology Vehicle
sector allowances) shall be used to implement
Manufacturing Loan Program (ATVM)
Sec. 122 and half to implement Sec. 123.
program, no loans have yet been awarded,
and many automakers may not qualify for the
Directs EPA to distribute the remaining auto
loans due to the financial stability
sector allowances to automakers and parts
requirements in EISA. Sec. 124 contains no
suppliers for the development of advanced
similar requirements, and would effectively
technology vehicles as defined in Sec. 136 of the
be a grant program as opposed to a loan
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Summary of section
Comments
Energy Independence and Security Act of 2007
program.
(EISA, P.L. 110-140). The allowance value may
cover up to 30% of the cost of reequipping,
expanding, or establishing facilities to produce
qualifying vehicles or components.
Sec. 125. Advanced Technology Vehicle Manufacturing Incentive Loans
Summary of section
Comments
Increases the total amount of loans allowed under
The total value of loan applications under
the Advanced Technology Vehicle Manufacturing
EISA Sec. 136 far exceeded the $25 billion
Loan Program established in Sec. 136 of EISA
cap on loan authority.
(see comment in Sec. 124). EISA authorized up
to $25 billion in loans. Sec. 125 authorizes up to
$50 billion.
Sec. 126. Amendment to Renewable Fuels Standard
Summary of section
Comments
Replaces the definition of “renewable biomass”
The EISA definition of “renewable biomass”
in the Renewable Fuel Standard (RFS) that was
effectively restricted the types of feedstock
enacted in EISA.
that could be used to produce eligible fuels
under the RFS. The definition precluded the
use of woody biomass from federal lands,
and significantly limited the use of woody
biomass from private lands. This amendment
would significantly expand the amount of
biomass from forested lands that could be
used to produce fuels under the RFS.
Sec. 127. Open Fuel Standard
Summary of section
Comments
Authorizes the Secretary of Transportation to
Currently, automakers are granted credits
establish an “open fuel standard” for new
under the Corporate Average Fuel Economy
automobiles in model year 2016 or later if he
(CAFE) program for the production of FFVs.
determines that E85 (85% ethanol and 15%
FFVs can run on any mixture of
gasoline) or M85 (85% methanol and 15%
conventional gasoline and an alternative fuel
gasoline) are available in sufficient quantities to
(in most cases, E85). Currently, there are an
be used by flexible fuel vehicles (FFVs), that
estimated six to eight million FFVs on the
sufficient infrastructure exists to fuel the
road, but the vast majority of these vehicles
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vehicles, and that such a requirement is a cost-
are operated only on gasoline, due to the
effective way to meet energy and environmental
higher per-mile cost of E85 and its limited
goals. An open fuel standard would require
availability.
automakers to produce a share of their new
vehicles as FFVs (capable of operating on E85 or
M85) or capable of operating on biodiesel.
Sec. 128. Temporary Vehicle Trade-In Program
Summary of section
Comments
Establishes a “Cash for Clunkers” program
This section was added by the Sutton
within the National Highway Traffic Safety
Amendment.
Administration (NHTSA). The program would
offer vouchers to customers who purchase a new
The concept of a “cash-for-clunkers”
fuel-efficient vehicle to replace an older, less
program has been around for over a decade.
efficient vehicle. The vehicle to be replaced must
However, earlier programs were generally
be crushed or shredded. Vouchers would be
targeted at improving air quality by
valued at $3,500 or $4,500, depending on the
removing from the road vehicles with
class of vehicle (e.g., passenger car, light-duty
malfunctioning emissions control systems, or
truck, medium-duty truck), the fuel efficiency
vehicles that were certified for significantly
improvement from the scrapped vehicle to the
less stringent emissions standards compared
new vehicle, and/or the age of the scrapped
to current emissions standards. Recent
vehicle. The vouchers may only cover vehicles
attention has focused on a German program
purchased or leased between March 30, 2009,
that provided vouchers for the purchase of a
and March 31, 2010. A total of $4 billion is
new vehicle, although there were no fuel
authorized to implement the program.
economy or greenhouse gas emissions
standards attached—this program was
largely seen as aimed at directly promoting
vehicle sales, as opposed to any
environmental goal. Sec. 128 is similar to
bills introduced in the House and Senate that
would require fuel economy improvements.
Proponents contend that such a program can
lead to significant reductions in fuel
consumption and greenhouse gas emissions,
while critics argue that there are more cost-
effective measures for reaching the same
results.
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Sec. 129. Diesel Emissions Reduction
Summary of section
Comments
Amends the Diesel Emission Reduction Grant
Program established in the Energy Policy Act of
2005 (P.L. 109-58) to include American Samoa,
Guam, the Commonwealth of the Northern
Mariana Islands, Puerto Rico, and the Virgin
Islands to the states eligible to receive and
distribute grant funds.
Sec. 130. Loan Guarantees for Projects to Construct Renewable Fuel Pipelines
Summary of section
Comments
Amends the loan guarantee program in title XVII
of the Energy Policy Act of 2005 to include the
construction of pipelines for renewable fuels,
including ethanol, biodiesel, and any other
qualified fuel under the renewable fuel standard
in EISA.
Subtitle D—State Energy and Environment Development Accounts
Sec. 131. Establishment of SEED Funds
Summary of section
Comments
Directs the Department of Energy (DOE) to
The SEED Fund is designed to collect a few
create a program that allows each state energy
major, but separate, grant programs into a
office to establish a State Energy and
more unified effort.
Environment Development (SEED) Fund. The
state-level SEED Fund is to serve as a common
repository that manages and accounts for federal
financial assistance that is designated mainly for
clean energy, energy efficiency, and climate
change purposes. DOE is required to develop
model regulations for SEED operations and to
assist states with set-up and operations.
Each state is allowed to deposit into its SEED
Fund the appropriations from DOE’s
Weatherization Assistance Program (WAP), State
Energy Program (SEP), and Energy Efficiency
and Conservation Block Grant (EECBG)
Program. Also, appropriations from the
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Summary of section
Comments
Department of Health and Human Services’ Low
Income Home Energy Assistance Program
(LIHEAP) could be deposited in the SEED Fund.
To the extent that amounts deposited in a SEED
Funds are not tied to a specific use, such amounts
may be used to support grants, loans, loan
interest subsidies, and revolving loan programs.
Sec. 132. Support of State Renewable Energy and Energy Efficiency Programs
Summary of section
Comments
Directs the Environmental Protection Agency,
The carbon allowance distribution program
during the period from 2012 through 2050, to
established in this section would be used to
distribute carbon offset allowances among states
help support several energy efficiency
according to a legislated formula. The formula
programs in Title II.
would distribute one-third of the allowances
among the states equally, one-third to states
according to population, and one-third to states
according to energy use.
State use of allowances would also be controlled
by a legislated formula. That formula directs that
each state distribute a minimum of: 12.5% to
local governments for efficiency and renewables;
15% for building codes (§201), manufactured
homes (§203), building energy labels (§204),
smart grid, transportation planning, low-income
energy efficiency programs (§264), and other
“cost-effective” efficiency programs for end-use
consumers; and 5% for implementation of the
Retrofit for Energy and Environmental
Performance (REEP) program (§202). Also, 20%
would support a variety of incentives aimed to re-
equip, expand, or establish a manufacturing
facility that produces renewable energy
equipment or energy storage systems; deploy
renewable energy technologies; or deploy
facilities or equipment (e.g. solar panels) for
urban buildings. The remaining 47.5% would be
used to support any of the preceding categories,
with the stipulation that the low-income
efficiency programs would get at least 1%.
Each state receiving emission allowances would
be required to submit biennial reports to
Congress. Those reports are to include a list of
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Comments
entities that received allowances; the amount and
nature of allowances; the purposes of allowance
use; the amount of energy savings and emission
reductions; and an assessment of the cost-
effectiveness of spending for the low-income
energy efficiency programs (§264).
Subtitle E—Smart Grid Advancement
Sec. 141. Definitions (no summary or comments)
Sec. 142. Assessment of Smart Grid Cost-Effectiveness in Products
Summary of section
Comments
Directs the Energy Secretary and EPA
Administrator to assess the cost-effectiveness of
integrating smart grid capability into all products
that are reviewed for potential designation as
Energy Star (i.e., energy efficient) products. The
evaluation process is to begin within a year of
enactment. Within two years of enactment the
Administrator and Secretary are to prepare an
analysis of the energy, greenhouse gas, and cost
savings that could result (under certain specified
conditions) from the inclusion of smart grid
capability in the products analyzed pursuant to
this section. Within three years of enactment the
findings from this work are to be summarized in
a report to Congress. Additionally, product
manufacturers are to be notified if the
incorporation of smart grid technology in their
products appears to be cost-effective.
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Sec. 143. Inclusions of Smart Grid Capability on Appliance ENERGY GUIDE
Labels
Summary of section
Comments
Directs the Federal Trade Commission to begin a
rulemaking, within three years of enactment, to
consider adding to Energy Guide labels
information on the smart grid features of products
that incorporate smart grid technology. The
information would inform the consumer that the
product actually has smart grid technology, that
the benefits of the technology can only be
realized if the consumer’s local utility has
implemented a smart grid power system, and the
potential cost savings from using the smart grid
features of the product.
Sec. 144. Smart Grid Peak Demand Reduction Goals
Summary of section
Comments
Requires load serving entities (i.e., utilities that
Although this section is under the smart grid
sell electricity directly to customers) to establish
rubric, many of the listed measures for
and meet goals reducing peak electricity demand
achieving peak demand reductions do not
for the years 2012 and 2015. No targets are set in
necessarily require deployment of smart grid
the bill itself, except that the goals should be
technology. These include, for example,
“realistically achievable with an aggressive effort
utility ability to cycle demand at industrial
to deploy Smart Grid and peak demand reduction
facilities that have signed up for demand
technologies and methods.” This provision is
response programs (in which they receive
mandatory for load-serving entities with an
lower rates in return for giving the utility the
annual baseline peak demand of at least 250
option of interrupting service), and power
megawatts (equivalent to the output of a single,
supply from distributed generation.10 Other
relatively small power plant).
options, such as direct control of residential
appliances, do require smart grid technology.
Goals can be set by individual load-serving
entities, by states, or by “regional entities.” The
The term regional entity is not defined in the
goals can be designed to cover a single load-
bill. It could refer to the FERC-sponsored
serving entity or a region.
Regional Transmission Organizations that
operate the transmission grid and perform
FERC is ordered to implement this program in
other functions in parts of the United States.
coordination, to the extent possible, with state
The term could also refer to the regional
demand response and peak reduction programs.
reliability entities that assist the North
There is no penalty for a load-serving entity’s
American Electric Reliability Corp. in
10 This is generation owned by the customer and located at the customer’s site. Distributed generation ranges from
rooftop solar on a home to large generating facilities located at big manufacturing plants.
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Summary of section
Comments
failure to reach goals, except for being identified
establishing and enforcing power system
in annual progress reports to Congress. The bill
reliability standards. It also not clear how the
authorizes financial assistance to the states using
states, load-serving entities, and regional
emission allowances from the SEED Accounts
entities are supposed to coordinate the
established by Sec. 132 of this bill.
process of setting peak reduction goals.
The Energy Independence and Security Act
of 2007 (EISA) articulated a national policy
to modernize the power system with smart
grid technology, and authorized research and
development programs, funding for
demonstration projects, and matching funds
for investments in smart grid technologies.
These and related programs received $4.5
billion in funding in the 2009 stimulus bill.
In addition, the Emergency Economic
Stabilization Act of 2008 shortens the
depreciation period for smart meters and
other smart grid equipment from 20 years to
10 years (which increases each year’s
depreciation tax deduction for the
equipment). The value of this tax change to
the power industry is reportedly $915 million
over 10 years.
Sec. 145. Reauthorization of Energy Efficiency Public Information Program to
Include Smart Grid Information
Summary of section
Comments
Modifies an energy efficiency public information
program authorized by the Energy Policy Act of
2005 to make it into a smart grid and energy
efficiency information program. In addition to the
change in emphasis, the end-date for the program
is extended from 2010 to 2020.
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Sec. 146. Inclusion of Smart-Grid Features in Appliance Rebate Program
Summary of section
Comments
Modifies an energy efficiency appliance rebate
program authorized by the Energy Policy Act of
2005 to add appliances with smart grid
capabilities. The section also amends the original
language generally such that federal money can
be used to fund 100% of the rebate amount
instead of just administrative costs (states must
still supply at least 50% of administrative costs).
Authorized funding is increased from $50 million
annually to $100 million, and the authorization is
extended to run through FY2015.
Subtitle F—Transmission Planning
Sec. 151. Transmission Planning
Summary of section
Comments
Amends the Federal Power Act to create a new
Unlike some other transmission development
voluntary transmission planning process. The
proposals, this bill does not direct FERC to
primary purpose is to facilitate the development
designate federally sponsored regional
of new renewable power sources.
planning entities, does not give transmission
projects included in final transmission plans
Establishes a national transmission planning
any special benefits, does not give FERC
policy. Based on this policy, FERC is to establish
new transmission siting authority, and is not
within a year of enactment planning principles
mandatory.
which can be adopted and used by a variety of
existing and new planning entities to develop
Specifies that the transmission planning
transmission plans. FERC is to receive all plans
processes should consider non-transmission
(effectively combining regional plans into super-
solutions to power system needs, such as
regional or national plans) no more than 18
energy efficiency, distributed generation, and
months after filing the planning principles, and
electricity storage. These requirements
attempt to resolve conflicts between plans. It is
implicitly turn transmission planning into
also to report to Congress on the status of the
wider scope power system planning.
planning efforts three years after enactment and
can recommend legislative changes to facilitate
development of the transmission system.
The planning processes are directed to focus
primarily on facilitating the “deployment of
renewable and other zero-carbon” power sources.
Other objectives are noted, such as power system
reliability and cost-effective service, but these are
to be met in the context of the overarching goal
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Summary of section
Comments
of facilitating renewable/zero-carbon power
deployment.
The bill authorizes funding as necessary for
FERC to assist the planning process with, for
example, technical expertise, computer modeling
support, and dispute resolution services.
Sec. 152. Net Metering for Federal Agencies
Summary of section
Comments
Amends the Public Utility Regulatory Policies
Net metering is a ratemaking concept intended
Act of 1978 (PURPA) to require state
to encourage the development of “distributed
regulatory authorities to consider ordering
generation.” Distributed generation is
utilities under their jurisdiction to implement
electricity generated at the customer’s site,
net metering for federal facilities. It also
possibly (but not necessarily) using renewable
requires non-regulated utilities (such as many
energy. In principal the wider use of distributed
municipal utilities) to make the same
generation could reduce the need for new large
evaluation. The standard would not apply to
utility power plants and the need for new
small utilities that sell less than 4 million
transmission lines to bring electricity from
megawatt-hours of electricity annually.
power plants to customers.
Consideration of net metering for federal
Net metering is intended to make distributed
facilities must take place within a year of
generation more economical by requiring the
enactment. As with other electricity rate
utility that supplies electricity to a facility to
standards included in PURPA, state regulatory
also take any electricity generated by that
authorities and non-regulated utilities must
facility, such as from rooftop solar panels or an
evaluate whether to adopt this net metering
on-site diesel generator. The ultimate utility bill
standard, but can choose not to. A decision not
to the facility is reduced by the amount of
to adopt the standard must be stated in a public
electricity supplied to the power company. This
document that explains the basis for rejection.
cuts the utility bill for the customer, although in
a complete economic analysis the cost of
building and operating the consumer’s power
generator would also have to be taken into
consideration.
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Sec. 153. Support for Qualified Advanced Electric Transmission
Manufacturing Plants, Qualified High Efficiency Transmission Property, and
Qualified Advanced Electric Transmission Property
Summary of section
Comments
Amends the Energy Policy Act of 2005
(EPACT05) to provide for incentives for the
development and construction of transmission
lines and related facilities using currently non-
commercial technology. The categories of
technology include “advanced electric
transmission property” (essentially high-
efficiency underground transmission lines and
associated equipment), “advanced electric
transmission manufacturing plant” (plants that
manufacture the “advanced electric
transmission property”), and “high efficiency
transmission property” (essentially high-
efficiency overhead transmission lines and
associated equipment).
All three categories of technology would be
added to the list of technologies qualifying for
the new loan guarantee program added to
EPACT05 by the American Recovery and
Reinvestment Act of 2009. These loan
guarantees are available to specified renewable
energy and transmission projects that begin
construction no later than September 30, 2011.
In addition, the first “advanced electric
transmission property” project to qualify
pursuant to this amendment will be eligible for
a grant from the Department of Energy to cover
up to 50% of project development and
construction costs. The amendment authorizes
up to $100 million for this grant program for
FY2010.
Additionally, “advanced electric transmission
property” and “advanced electric transmission
manufacturing plant” only would be added to
the original loan guarantee program included in
EPACT05. This program was originally created
to support the development of low carbon and
other advanced energy technologies.
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Subtitle G—Technical Corrections to Energy Laws
Sec. 161. Technical Corrections to Energy Independence and Security Act of
2007
Summary of section
Comments
Clarifying, technical amendments.
No substantive changes.
Sec. 162. Technical Corrections to Energy Policy Act of 2005
Summary of section
Comments
Clarifying, technical amendment.
No substantive change.
Subtitle H—Energy and Efficiency Centers
Sec. 171. Clean Energy Innovation Centers
Summary of section
Comments
Directs DOE to establish regional Clean Energy
Innovation Centers to promote commercial
deployment of clean indigenous energy forms
that help reduce fossil energy use, curb
greenhouse gas emissions, and help maintain
national technological leadership.
The Centers are to focus on cross-disciplinary
R&D in areas not served by the private sector.
Also, the Centers are to promote regional
economic development by cultivating “clusters”
of clean energy technology firms and other
businesses and organizations.
DOE is required to conduct a competitive process
for the distribution of emission allowances to
consortia with the aim of establishing eight
Centers, each with a unique technology focus.
Each consortium must include at least two
research universities and at least one other
qualifying entity, which can be another
university, a state energy institution, or a
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Summary of section
Comments
nongovernmental energy organization.
Each Center is required to use allowances to
provide awards to projects managed by
qualifying entities. Also, each Center must
submit an annual report to DOE.
Sec. 172. Building Assessment Centers
Summary of section
Comments
Requires DOE to fund Building Assessment
A Building Assessment Center may serve as
Centers at institutions of higher education to
a Center for Energy and Environmental
promote energy efficiency techniques for new
Knowledge and Outreach, as identified in
and existing buildings, promote applications of
Section 173.
new technologies, provide training, assist
community colleges and trade schools, promote
R&D, and coordinate with accredited technical
training centers. Starting with FY2010, the
program is authorized $50 million per year.
Sec. 173. Centers for Energy and Environmental Knowledge and Outreach
Summary of section
Comments
Directs DOE to conduct a competitive process to
establish up to 10 regional Centers for Energy
and Environmental Knowledge and Outreach at
institutions of higher education. Each Center
shall consist of at least one industrial research
and assessment center, Clean Energy Application
Center, or Building Assessment Center (§172).
DOE is required to ensure that the Centers cover
all geographic regions of the nation. Each Center
is required to develop regional goals, cultivate
technical resources, and perform outreach.
Each Center must establish a workforce training
internship program. A federal funding share of
50% would be provided. Starting with FY2010,
the training program is authorized $5 million per
year.
The Small Business Administration is required to
consider loans to affiliated industrial research and
assessment centers, Clean Energy Application
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Summary of section
Comments
Centers, and Building Assessment Centers.
Starting with FY2010, DOE is authorized $10
million per year to support these Centers. Also,
for Clean Energy Application Centers, a previous
authorization of $10 million per year would rise
to $30 million per year, starting in FY2010.
Subtitle I—Nuclear and Advanced Technologies
Sec. 181. Revisions to Loan Guarantee Program Authority
Summary of section
Comments
Amends DOE’s loan guarantee program for low-
This section makes some administrative
carbon energy projects under title XVII of the
changes in the existing DOE loan guarantee
Energy Policy Act of 2005. A procedure for
program but otherwise leaves it intact.
“conditional commitments” for federal loan
Perhaps the most significant change is to
guarantees is established, potential government
require projects receiving loan guarantees to
losses from loan guarantees can be covered by a
pay prevailing wages under the Davis-Bacon
combination of payments by project sponsors and
Act.
appropriations, a fund is established for
administrative expenses, and prevailing wages
are required for projects receiving loan
guarantees.
Sec. 182. Purpose
Summary of section
Comments
States that the purpose of the remainder of this
subtitle is to promote domestic development and
deployment of clean energy technologies.
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Sec. 183. Definitions
Summary of section
Comments
Defines key terms, including: “breakthrough
technology” as promising technology with high
commercial risk; and “clean energy technology,”
as technology that can reduce greenhouse gas
emissions but for which insufficient commercial
lending is available.
Sec. 184. Clean Energy Investment Fund
Summary of section
Comments
Establishes a revolving fund in the Treasury to be
The revolving fund would be in addition to
used by the newly established Clean Energy
DOE loan guarantee authority under EPACT.
Deployment Administration to provide financial
assistance to clean energy projects.
Sec. 185. Energy Technology Deployment Goals
Summary of section
Comments
Requires the Secretary of Energy to establish
goals and performance targets for clean energy
technology deployment.
Sec. 186. Clean Energy Deployment Administration
Summary of section
Comments
Establishes Clean Energy Deployment
Administration (CEDA) as an agency within
DOE and reporting only to the Secretary of
Energy. CEDA would be headed by a
presidentially appointed administrator for a five-
year term and would have a nine-member board
of directors, including the CEDA Administrator
and the Secretary of Energy. A CEDA Energy
Technology Advisory Council would develop
methodologies for assessing clean energy
technologies for potential CEDA financial
support.
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Sec. 187. Direct Support
Summary of section
Comments
Authorizes CEDA to issue direct loans, letters of
The financial support authorized by CEDA
credit, loan guarantees, insurance products, and
would be in addition to the DOE loan
other financial instruments to support clean
guarantee authority under EPACT. The new
energy projects. CEDA is to establish a loan loss
program would be substantially broader in
reserve to cover estimated losses from the
the types of support that could be provided.
program; the initial target for the reserve is 10%
The 30% limit on support for any single
of the CEDA investment portfolio. No single
technology is most likely to affect nuclear
energy technology may receive more than 30% of power projects. Primarily because of their
CEDA financial support. Projects supported by
relatively large size, proposed nuclear plants
CEDA must pay prevailing wages to their
are currently seeking more total financial
workers.
assistance than other technologies.
Sec. 188. Federal Credit Authority
Summary of section
Comments
Supports CEDA obligations with the full faith
and credit of the United States.
Sec. 189. General Provisions
Summary of section
Comments
Establishes immunity requirements, procurement
procedures, court jurisdiction, and reporting and
auditing requirements.
Subtitle J—Miscellaneous
Sec. 191. Study of Ocean Renewable Energy and Transmission Planning and
Siting
Summary of section
Comments
Directs the Federal Energy Regulatory
Commission, the Secretary of the Interior, and
the National Oceanic and Atmospheric
Administration, in consultation with the Council
on Environmental Quality (CEQ) and, as
appropriate, coastal States, regional organizations
of coastal States, and relevant nongovernmental
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Summary of section
Comments
organizations, to jointly conduct a study of the
potential for marine spatial planning to facilitate
the development of offshore renewable energy
facilities in a manner that protects and maintains
coastal and marine ecosystem health. A report is
required within six months. CEQ is then required
to implement the recommendations of the report
within four months or propose an alternate
implementation.
Sec. 192. Clean Technology Business Competition Grant Program
Summary of section
Comments
Authorizes $20,000,000 for the Secretary of
Energy to provide grants to non-profit
organizations to conduct business competitions
that provide incentives, training, and mentorship
to entrepreneurs and early stage start-up
companies throughout the United States to meet
high priority economic, environmental, and
energy security goals in areas to include energy
efficiency, renewable energy, air quality, water
quality and conservation, transportation, smart
grid, green building, and waste management.
Sec. 193. National Bioenergy Partnership
Summary of section
Comments
Authorizes $7,500,000 for the Secretary of
Energy to establish a National Bioenergy
Partnership to provide coordination among
programs of state governments, the federal
government, and the private sector that support
the institutional and physical infrastructure
necessary to promote the deployment of
sustainable biomass fuels and bioenergy
technologies for the United States.
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Sec. 194. Office of Consumer Advocacy
Summary of section
Comments
Establishes an Office of Consumer Advocacy
within FERC to serve as an advocate for the
public interest to represent, and appeal on behalf
of, energy customers on matters concerning rates
or service of public utilities and natural gas
companies under the jurisdiction of the
Commission at hearings of the Commission, in
judicial proceedings in the courts of the United
States, and at hearings or proceedings of other
federal regulatory agencies and commissions.
Establishes the Consumer Advocacy Advisory
Committee to review rates, services, and disputes
and to make recommendations to the Director.
Title II—Energy Efficiency
Subtitle A—Building Energy Efficiency Programs
Sec. 201. Greater Energy Efficiency in Building Codes
Summary of section
Comments
Requires DOE to update the national model
Working from the beginning of the design
building energy codes at least once every three
phase, new buildings present a major
years. The target for nationwide energy savings is
opportunity to improve energy efficiency. In
set 30% higher than the baseline for updates
the absence of being able to mandate national
released after enactment, and then rises to 50%
standards for new buildings, DOE prepares a
for updates released after January 1, 2016. All
model code for efficiency that is available for
model code updates are coordinated with updates
states to adopt and adapt to local
of specified industry standards. Federal training
circumstances.
and funding assistance is provided to states that
adopt advanced building efficiency codes. States
are required to certify their code updates and
code compliance with DOE.
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Sec. 202. Building Retrofit Program
Summary of section
Comments
Creates a Retrofit for Energy and Environmental
Most building energy use takes place in the
Performance (REEP) program to facilitate the
population of existing buildings, which is
retrofitting of existing buildings nationwide to
much larger than the annual production of
achieve maximum cost-effective energy
new buildings. This provision directs EPA to
efficiency improvements and significant
develop a program to support efficiency
improvements in water use and other
retrofits of existing residential buildings and
environmental attributes. EPA is charged with
directs DOE to develop a similar program for
one part of the program: developing standards for
existing commercial buildings.
a retrofit policy for single-family and multi-
family residences. In creating and operating the
residential REEP program, EPA is required to use
existing programs, especially the Energy Star for
Buildings program.
DOE is charged with another part of the REEP
program: developing standards for a retrofit
policy for commercial buildings. In creating and
operating the commercial REEP program, DOE
is required to use existing programs, including
delegating authority to the Director of
Commercial High-Performance Green Buildings
(established under 42 U.S.C. 17081) to designate
and fund a High-Performance Green Building
Partnership Consortium.
Provides federal financial assistance to be
deposited in each state’s SEED Fund (Sec. 131).
DOE is required to administer financing for the
REEP program. State and local agencies would
have broad flexibility in REEP program
operations.
Sec. 203. Energy Efficient Manufactured Homes
Summary of section
Comments
Authorizes DOE grants to states to provide
A rebate program is established to encourage
rebates to low-income families residing in pre-
turnover of manufactured homes owned by
1976 manufactured homes. The rebate could be
low-income families.
applied only toward the purchase of a new
Energy Star-rated manufactured home. The value
of the rebates is capped at $7,500.
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Sec. 204. Building Energy Performance Labeling Program
Summary of section
Comments
Directs EPA to establish a building energy
A building energy efficiency labeling
performance labeling program that would apply
program would be established that would be
broadly to residential and commercial building
similar to the existing labeling program for
markets. The goal is to encourage owners and
cars and appliances.
occupants to reduce energy use. EPA is required
to consider existing programs, such as the Home
Energy Rating System and DOE programs. Also,
EPA is required to develop model performance
labels for residential and commercial buildings
and to use incentives and other means to spur the
use of labels by public and private sector
buildings.
Sec. 205. Tree Planting Programs
Summary of section
Comments
Requires DOE to establish a grant program to
assist retail power providers with targeted tree-
planting programs in residential and small office
settings. Program goals include reducing peak-
load power demand (either summer or winter),
curbing pollution (air and water), and reducing
electric bills. Program eligibility requires the use
of targeted, strategic tree-siting guidelines. The
program must either provide maximum shade
during summer or maximum wind protection
during fall and winter.
DOE must ensure that at least 30% of funds go to
retail power providers that have not operated
qualified tree-planting programs. Also, DOE may
only award grants to retail providers that have
formed binding legal agreements with nonprofit
tree-planting organizations. The federal share of
support for tree-planting projects is limited to a
50% match. Such sums as may be needed are
authorized.
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Sec. 206. Energy Efficiency for Data Center Buildings
Summary of section
Comments
Clarifying technical amendment to EISA that
fixes a two-year deadline for identifying an
information technology industry to consult with
and to coordinate a voluntary national
information program about the potential to
improve energy efficiency in data centers.
Subtitle B—Lighting and Appliance Energy Efficiency Programs
Sec. 211. Lighting Efficiency Standards
Summary of section
Comments
Sets four lighting standards. First, manufacturers
Efficiency standards were previously
of outdoor luminaires are required to achieve a
legislated for several types of lighting
minimum lighting efficiency of 50 lumens per
equipment. This provision adds new
watt by January 1, 2012; 70 lumens per watt by
standards for a few additional niche
January 1, 2013; and 80 lumens per watt by
categories of lighting equipment.
January 1, 2015. By January 1, 2017, DOE is
required to issue a final rule to amend that
standard to “the maximum level that is
technically feasible and economically justified.”
The amended standard would take effect by
January 1, 2020. Second, manufacturers of
outdoor high output lamps are required to achieve
a standard of 45 lumens per watt by January 1,
2012. Third, manufacturers of portable light
fixtures are required by January 1, 2012, to either
meet Energy Star requirements for residential
light fixtures or meet a minimum efficiency of 29
lumens per watt for LED light fixtures. DOE is
required to publish amended standards by
January 1, 2014, that would take effect on
January 1, 2016. Fourth, certain technical
requirements are set for art work light fixtures;
and DOE is required to establish standards for
certain incandescent reflector lamps, which
would take effect three years after the law is
enacted.
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Sec. 212. Other Appliance Efficiency Standards
Summary of section
Comments
Sets four efficiency standards for certain
Efficiency standards were previously
commercial appliances, in addition to existing
established for several categories of
standards for a number of other types of
residential and commercial appliances. This
residential and commercial equipment. First, by
provision extends the coverage to a few
January 1, 2012, water dispensers are required to
additional niche categories of commercial
have a maximum standby energy use of 1.2
equipment.
kilowatt-hours per day. Second, by January 1,
2012, commercial hot food holding cabinets are
required to have a maximum idle energy use rate
of 40 watts per cubic foot of interior volume.
Third, by January 1, 2012, portable electric spas
are required to have a maximum standby power
use set by formula that depends on the volume of
the spa. DOE is directed to consider revisions to
each of the foregoing three standards and publish
a final rule by January 1, 2013. Revised standards
would take effect on January 1, 2016. Fourth,
efficiency standards are set for commercial
furnaces with an input heat rate of 225 thousand
Btu per hour. Gas-fired furnaces are required to
have a minimum combustion efficiency of 80%
and oil-fired furnaces would have a minimum
combustion efficiency of 81%.
Sec. 213. Appliance Efficiency Determinations and Procedures
Summary of section
Comments
Revises the criteria for prescribing new or
Existing criteria for setting appliance
amended standards to include the estimated value
efficiency standards would be expanded to
of reduced emissions of carbon dioxide and other
include criteria related to greenhouse gas
greenhouse gases; the estimated impact on
emissions and other factors.
average consumer energy prices; and the
estimated energy efficiency attributable to Smart
Grid technologies. Further, the criteria would
require that the carbon output of each covered
product be included on the EnergyGuide labels.
Other criteria for prescribing new or amended
standards would require information about the
commercial availability of products that meet
higher standards; the standard’s potential creation
of a serious hardship on consumers or
manufacturers; and the potential to avoid
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Summary of section
Comments
hardship through the prescription of regional
standards.
Requires manufacturers of covered products to
submit annual reports and information to DOE
regarding compliance, economic impact, annual
shipments, facility energy and water use, and
sales data that could support an assessment of the
need for regional standards.
Clarifies the definition of “energy conservation
standard” to include energy efficiency for some
covered equipment, water efficiency for some
covered equipment, and both energy and water
efficiency for still other equipment.
Directs that state and local building codes use
appliance efficiency requirements that are no less
stringent than those set by federal standard.
Revises other definitions and provisions,
including the use of test procedures adopted
elsewhere, updated test methods for televisions, a
state waiver, waiver of federal preemption, and
permitting states to seek injunctive enforcement.
Sec. 214. Best-in-Class Appliances Deployment Program
Summary of section
Comments
Directs DOE to establish a deployment program
This program aims to encourage the use of
to reward retailers with bonuses for increasing
the most energy-efficient appliances, while
the sales of best-in-class high-efficiency installed
also providing an incentive to remove the
building equipment, high-efficiency consumer
least efficient appliances from commercial
electronics, and high-efficiency household
use.
appliance models. The goal of the program is to
reduce life-cycle costs for consumers, encourage
innovation, and maximize energy savings and
public benefits. DOE would determine the size of
the bonus payments. The best-in-class products
would include no more than 10% of the most
efficient product models in a class, and that group
must show a “distinctly greater” efficiency than
the average for that class. Further, DOE would
review the class annually and make upward
adjustments in the criteria as appropriate.
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Summary of section
Comments
In parallel, DOE is to establish bounties to
retailers for replacing and recycling old,
inefficient, and environmentally harmful
appliances. The size of the bounty is based on the
increment of energy use above that for an average
new product. DOE is allowed to require that a
product bonus be accompanied by retirement of
old products. Also, DOE is required to ensure
that no product receiving a bounty is returned to
active service.
A bonus program is established for manufacturers
that develop new “superefficient best-in-class”
products. The structure of the program and
calculation of bonuses is similar to that for the
retail sector. DOE would have the authority to
establish a standard, even if no product existed
yet, if it determined that a mass-producible
product could be made to meet the standard.
Products that receive a Sec. 45M federal tax
credit would not be eligible for bonus payments.
Sec. 215. WaterSense
Summary of section
Comments
Establishes the WaterSense Program at EPA to
In 2006 EPA established WaterSense, a
identify and promote water efficient products,
voluntary labeling program to reduce water
buildings and landscapes, and services to reduce
use. EPA issues performance-based water-use
water use; conserve energy used to pump, heat,
specifications for product categories, such as
transport, and treat water; and preserve water for
plumbing products. EPA and the Department
future generations. Specifies EPA duties under
of Energy administer a parallel energy
the program, including promoting WaterSense-
efficiency labeling program, Energy Star,
labeled products and researching and updating
that Congress formally authorized in P.L.
WaterSense criteria for product categories.
109-58.
Authorizes appropriations totaling $87.5 million
for FY2010-FY2013, and $50 million for each
year thereafter to implement this section.
Sec. 216. Federal Procurement of Water Efficient Products
Summary of section
Comments
Directs federal agencies to procure water
The mission of the Department of Energy’s
consuming products or services that are
FEMP is to facilitate the federal
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Summary of section
Comments
WaterSense labeled or designated under the
government’s implementation of sound, cost-
Federal Energy Management Program (FEMP).
effective energy management and investment
Allows exceptions if a product or service is not
practices to enhance the nation’s energy
cost-effective or is not reasonably available.
security and environmental stewardship.
WaterSense-labeled and FEMP-designated
Executive Order 13423, Strengthening
products are to be clearly listed in federal
Federal Environmental, Energy, and
procurement inventories or listing.
Transportation Management (72 FR 3919,
Jan. 29, 2007) sets goals for federal agencies
in the areas of energy efficiency, acquisition,
recycling, water conservation and others. The
E.O. directs federal agencies, beginning in
2008, to reduce water consumption intensity
through life-cycle cost-effective measures by
2% annually through FY2015. The FEMP
has resources to assist agencies in complying
with the E.O.
Sec. 217. Water Efficient Product Rebate Programs
Summary of section
Comments
Directs EPA to provide funds to support state
A number of states and localities, as well as
rebate or voucher programs for consumer
some local water utilities, offer incentives for
purchase of residential water efficient products or
consumers to use water-efficient products,
services. Federal funds are to supplement, not
such as product rebates or sales-tax holiday,
supplant, state funds. Federal funds are to be
grants to replace or upgrade landscape
allocated by EPA according to a population-based irrigation equipment, rebates for replacing
formula. Details of the rebate or voucher program grass with water-efficient landscaping, and
are to be determined by the state. Authorizes
reduced rates for using reclaimed water for
appropriations totaling $425 million for FY2010-
landscaping. Currently there are no federal
FY2014, and $150 million for each year
programs to offer consumers rebates or assist
thereafter to implement this section.
state rebate or voucher programs.
Sec. 218. Certified Stoves Program
Summary of section
Comments
Establishes an environmental performance
Establishes an environmental standard for
standard for all new wood stoves and pellet
new residential wood stoves and pellet
stoves based on regulations set by the
stoves.
Environmental Protection Agency (EPA). The
provision requires that old stoves replaced by the
program be removed from use and the usable
components and materials be recycled. Priority is
given to stoves manufactured before July 1, 1990.
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Summary of section
Comments
EPA is authorized to provide funds to state and
local governments, Indian tribes, Alaskan Native
villages, and certain nonprofit organizations to
replace stoves that do not meet the standards. A
total of $20 million is authorized for FY2010
through FY2014. Of that total, 25% is designated
for Indian tribes, 3% for Alaskan Native villages,
and 72% for a broader nationwide program.
EPA is authorized to accept stove replacement
“supplementary environmental projects” as part
of a settlement of any alleged violation of a
federal environmental law.
Sec. 219. Energy Star Standards
Summary of section
Comments
Amends the statutory authority for the EPA
Addresses a concern that technological
Energy Star program to (1) establish for each
improvements gradually erode the true
category of products a scaled grading system that
energy efficiency of products identified with
ranges from “A” for the most efficient product to
the EPA Energy Star label.
“F” for the least efficient product, (2) require a
review at least once every three years for the 10
product categories that represent the greatest
amount of energy use, and (3) require periodic
testing of marketed products to verify compliance
with current Energy Star criteria.
Subtitle C—Transportation Efficiency
Sec. 221. Emission Standards
Summary of section
Comments
Requires the President to use all current statutory
This section is as amended by the Butterfield
authorities to set motor vehicle GHG standards.
Amendment.
Standards must be achievable by automakers,
harmonize Corporate Average Fuel Economy
On April 24, 2009, EPA proposed to find that
(CAFE) standards with any standards set by the
greenhouse gases endanger public health and
EPA Administrator under the Clean Air Act,
welfare, and that emissions from motor
achieve emissions reductions at least as much as
vehicles cause or contribute to that
those required by California under its current
endangerment. If EPA finalizes that proposal,
vehicle GHG standards, and not preempt
then the agency is required under the Clean
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Summary of section
Comments
California’s authority to adopt and enforce new
Air Act to regulate emissions from motor
emissions standards. EPA must give automakers
vehicles. Further, EPA would also have the
at least four model years of lead time.
authority to regulate emissions from other
sectors and classes of vehicles, depending on
The EPA Administrator is also required to
the specific sector/class. For more
establish GHG standards for heavy-duty vehicles
information, see CRS Report R40506, Cars
and engines, non-road vehicles and engines
and Climate: What Can EPA Do to Control
(including locomotives and marine vessels), and
Greenhouse Gases from Mobile Sources?.
aircraft. Such standards must be based on various
This amendment would require EPA to
factors, including the relative contribution to
establish emission standards for these
GHG emissions from that class of vehicles, the
vehicles.
costs of achieving reductions, technology
available to meet the standards, and the effects on
safety and energy consumption. The
Administrator is granted the authority to establish
provisions for averaging, banking, and trading
emissions reduction credits within or across
classes of vehicles and engines.
Sec. 222. Greenhouse Gas Emissions Reductions Through Transportation
Efficiency
Summary of section
Comments
States must submit to EPA goals and plans to
This section was amended by the Sullivan
stabilize transportation-related GHG emissions in
Amendment.
a “designated year” (determined by the state) and
reduce emissions in subsequent years. States
must consider establishing 2010 as the designated
year, and must update goals every four years. If a
state fails to submit goals or a plan, the EPA
Administrator may prohibit the awarding of
federal highway funds.
Metropolitan planning organizations (MPOs) in
areas with population exceeding 200,000 must
update transportation plans and transportation
improvement programs (TIPs) to achieve such
goals. The EPA Administrator may award
competitive grants to MPOs to develop or
implement submitted plans. The Administrator is
required to give priority to applicants based on
total or per capita GHG reductions, and other
factors the Administrator deems appropriate.
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Sec. 223. SmartWay Transportation Efficiency Program
Summary of section
Comments
Codifies EPA’s existing SmartWay program
(established under EPA’s existing authority). The
Administrator is required to quantify,
demonstrate, and promote the benefits of
technologies, products, fuels, and strategies to
reduce petroleum consumption, air pollution, and
GHG emissions from mobile sources. The
Administrator must develop measurement
protocols for fuel consumption and emissions
reductions, thresholds for designating SmartWay
technologies and strategies, develop programs to
promote best practices, and promote the
availability and adoption of SmartWay
technologies and strategies. The Administrator is
required to establish a SmartWay Transport
Partnership to promote the efficient shipment of
goods.
Requires the EPA Administrator to establish a
SmartWay Financing Program. Entities receiving
funds are required to use the funds to provide
flexible loan and lease terms to public and private
entities for the financing of low-GHG
technologies and strategies. The Administrator is
to determine the type of financial mechanism, the
designation of eligible entities, and criteria for
evaluating applications.
Sec. 224. State Vehicle Fleets
Summary of section
Comments
Amends the state vehicle fleet requirements
The Energy Policy Act of 1992 requires
under the Energy Policy Act of 1992 such that
federal agencies, state agencies, and
any guidance issued by the Department of Energy alternative fuel providers to purchase a
for federal fleets shall likewise apply to state and
minimum percentage (depending on the type
alternative fuel provider fleets.
of fleet) of their new vehicle purchases as
alternative fuel vehicles.
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Subtitle D—Industrial Energy Efficiency Programs
Sec. 241. Industrial Plant Energy Efficiency Standards
Summary of section
Comments
Directs DOE to develop industrial plant energy
Expands an existing industrial standards
efficiency certification standards as part of the
program to include energy efficiency
existing DOE program of developing American
certification.
National Standards Institute (ANSI) accredited
standards for industrial benchmarking, and would
seek ANSI accreditation of such standards.
Sec. 242. Electric and Thermal Waste Energy Recovery Award Programs
Summary of section
Comments
Directs DOE to establish a monetary award
An award is created to spur innovation in the
program for owners and operators of electric
recovery of thermal energy in power plants
power generation facilities and thermal energy
and industrial facilities.
production facilities that use fossil or nuclear
fuels. The award is to encourage innovative
means for recovering thermal energy as a
potentially useful byproduct of electric power
generation or certain other electric or thermal
energy production processes. The award is
capped at the value of 25% of the energy
projected to be recovered or generated during the
first five years of facility operation that uses the
innovative method. Further, DOE is directed to
provide appropriate regulatory status for thermal
energy byproduct businesses of regulated electric
utilities. Owners and operators of electric and
thermal energy facilities are eligible for SEED
Fund loans for initial capital.
Sec. 243. Clarifying Election of Waste Heat Recovery Financial Incentives
Summary of section
Comments
Clarifying, technical amendment.
No substantive change.
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Sec. 244. Motor Market Assessment and Commercial Awareness Program
Summary of section
Comments
Directs DOE to assess electric motors and the
DOE is directed to assess the electric motor
national electric motor market. For key industrial
market, identify energy efficiency
and commercial subsectors, the assessment is to
improvement opportunities, and develop
identify the equipment stocks and efficiency
methods to estimate energy and cost savings
categories, estimate opportunities for energy
and certain program impacts.
efficiency improvements, and develop a profile
of motor purchase and maintenance practices.
Requires DOE to use the assessment to develop
methods of estimating energy savings and market
penetration resulting from its Save Energy Now
Program. DOE is also required to establish a
national program targeted at motor end-users that
aims to increase awareness of energy and cost-
saving opportunities, improvements in motor
procurement and management procedures, and
decision criteria for motor repair and
replacement.
Sec. 245. Motor Efficiency Rebate Program
Summary of section
Comments
Directs DOE to establish a rebate program for the
A rebate program is established for users and
purchase and distribution of energy efficient
distributors of energy efficient motors.
motors. For motors that meet certain efficiency
standards, purchasers would be eligible for a
rebate amount determined by multiplying the
rated horsepower of the motor times $25. Also,
distributors would be eligible for a payment
related to processing and motor core disposal
costs determined by multiplying the rate
horsepower of the motor times $5.
Subtitle E—Improvements in Energy Savings Performance
Contracts
Sec. 251. Energy Savings Performance Contracts
Summary of section
Comments
Revises regulation of energy savings
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Summary of section
Comments
performance contracts (ESPCs) for federal
agencies to require that agencies establish
competitions for task and delivery orders.
Further, the allowable types of energy
transactions under ESPCs would be expanded to
include thermal forms of renewable energy. Also,
onsite renewable energy production would
become eligible for helping to meet agency
requirements for use of renewable energy.
Subtitle F—Public Institutions
Sec. 261. Public Institutions
Summary of section
Comments
Expands the list of eligible facilities under the
Energy Conservation Program for Schools and
Hospitals to specifically include not-for-profit
hospitals and not-for-profit inpatient health
facilities. Further, the authorization for grants
would be increased from $1 billion to $2.5
billion.
Sec. 262. Community Energy Efficiency Flexibility
Summary of section
Comments
Makes a technical amendment.
No substantive change.
Sec. 263. Small Community Joint Participation
Summary of section
Comments
Expands the definition of community eligibility
for DOE’s Energy Efficiency and Conservation
Block Grant program to include regional groups
of small local governments.
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Sec. 264. Low Income Community Energy Efficiency Program
Summary of section
Comments
Authorizes DOE to create a new grant program
for nonprofit community development
organizations that provide energy efficiency and
renewable energy financing for businesses and
projects in low-income communities.
Subtitle G—Miscellaneous
Sec. 271. Energy Efficient Information and Communications Technologies
Summary of section
Comments
Requires each federal agency, in collaboration
This provision would add a new area of
with OMB, to create an implementation strategy
focus to a broad array of federal agency
for the purchase and use of energy efficient
energy efficiency measures already
information and communications technologies
underway.
and practices. The strategy is to include best
practices and measurement and verification
techniques. Specific technologies and
infrastructure are to include advanced metering,
data centers, building systems energy efficiency,
and telework. OMB is tasked with establishing
performance goals to use for evaluating agency
efforts. Not more than 18 months after
enactment, OMB would be required to submit the
first annual report to Congress, which would
track the progress of each agency in reducing
energy use and describe new and emerging
technologies that could help achieve energy
efficiency.
Sec. 272. National Energy Efficiency Goals
Summary of section
Comments
Sets a national goal to improve energy
EIA reports that U.S. energy intensity
productivity by at least 2.5% per year from 2012
dropped about 51.2% over the period from
through 2030. Within one year of enactment,
1973 to 2008, which represents an average
DOE, EPA, and other federal agencies are
annual rate of less than 1.5% per year. This
required to prepare a strategic plan for attaining
provision would call for the annual rate of
the annual productivity goals. The plan would
improvement to increase by more than two-
identify future regulatory, funding, and policy
thirds of the past rate.
priorities the help meet the goals; estimate energy
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Summary of section
Comments
savings for each sector; and include
methodologies for establishing baseline and
energy savings data. Biennial updates of the plan
would be required, covering progress on policy
implementation and verification of energy
savings. The plan and each update must be
submitted to Congress and made available to the
public.
Sec. 273. Affiliated Island Energy Independence Team
Summary of section
Comments
Directs DOE to establish a team of technical,
DOE has previously provided energy
policy, and financial experts to address the energy resource assessments and planning assistance
needs of each affiliated island (U.S. Trust
to island (U.S. trust territory) governments.
Territory). DOE is required to consider including
This provision would require that DOE
representatives of regional utility organizations
provide assistance with a new round of
on the team. The team is directed to provide
planning and implementation assistance.
technical, programmatic, and financial assistance
to each island utility and government to develop
and implement an energy action plan. Each plan
would identify and implement the most cost-
effective strategies to reduce dependence on
fossil fuels, promote capacity development
through education and training, and develop
private-public partnerships. Starting one year
after enactment, biannual reports to DOE would
be required. Such sums as may be needed are
authorized.
Sec. 274. Product Carbon Disclosure Program
Summary of section
Comments
Directs EPA to develop a national carbon labeling There are some parallels to EPA’s current
and disclosure program. As a first step, EPA
energy labeling program.
would be required to study the feasibility of
establishing a program to measure, report,
publicly disclose, and label the carbon content of
products and materials sold in the United States.
Based on the study, EPA would report to
Congress on the likely effectiveness of such a
program in helping to reduce greenhouse gas
emissions.
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Summary of section
Comments
The study would examine strengths and
weaknesses of other labeling programs
worldwide; identify products, processes, and
sectors that could have a substantial carbon
impact; identify methods for measuring lifecycle
carbon content; review product accounting
standards; design a label for clear and accurate
communication; recommend certification and
verification options; assess consumer education
options; analyze costs; and evaluate incentives.
After completing the study, EPA would be
required to establish a voluntary national product
carbon disclosure program for wholesale and
consumer markets. In designing the program,
EPA is required to use incentives and develop
methods for assessing, verifying, and labeling a
product’s greenhouse gas content. The agency is
also directed to encourage participation from
suppliers, manufacturers, and retailers; evaluate
program effectiveness; develop training,
education, and consumer awareness programs;
gather public input from workshops and hearings;
develop means for assessing validity of
manufacturer claims; and create a process for
reviewing label accuracy.
Within five years of program establishment, EPA
would be required to report to Congress on
program effectiveness and impact. For the study,
$5 million is authorized. For the program, $25
million per year would be authorized for FY2010
through FY2025.
Title III─Reducing Global Warming Pollution
Sec. 301. Short Title
Summary of section
Comments
Provides suggested title ─ “Safe Climate Act.”
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Subtitle A—Reducing Global Warming Pollution
Sec. 311. Reducing global Warming Pollution
Summary of section
Comments
Amends the Clean Air Act (42 U.S.C. 7401 et
seq.) by adding title VII, below.
“Title VII─Global Warming Pollution Reduction
Program”
“Part A─Global Warming Pollution Reduction Goals and Targets”
“Sec. 701. Findings and Purpose”
Summary of section
Comments
Identifies threats posed by global warming.
Highlights scientific studies that find links
between manmade greenhouse gas (GHG)
emissions and global warming. Determines that
GHG emission control is vital to the mitigation of
global warming and its impacts, some of which
are listed. Finds that U.S. action is critical to
engage other nations in international efforts.
Names purpose as prevention, reduction, and
mitigation of global warming and its impacts, to
be accomplished by establishing an emissions
trading market and advancing clean energy and
efficiency technologies.
“Sec. 702. Economy-Wide Reduction Goals”
Summary of section
Comments
Lists GHG emission reduction goals as:
To increase support for the bill, the 2020 goal
was revised from the discussion draft, which
1. in 2012, U.S. GHG emissions
called for emissions to not exceed 80% of
not to exceed 97% of 2005 GHG
2005 levels. The 2012 goal is less stringent
emissions
than targets (8% below 1990 levels by 2012)
2. in 2020, U.S. GHG emissions
imposed by the Kyoto Protocol, which the
not to exceed 83% of 2005 GHG
United States did not ratify.
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Summary of section
Comments
emissions
H.R. 2454 would not achieve its GHG
3. in 2030, U.S. GHG emissions
emission reduction goals through the cap-
not to exceed 58% of 2005 GHG
and-trade program alone; the bill includes
emissions
complementary policies—international
forestry efforts, performance standards,
4. in 2050, U.S. GHG emissions
energy efficiency—that are intended to
not to exceed 17% of 2005 GHG
provide reductions in addition to those
emissions
imposed by the GHG emissions cap.
“Sec. 703. Reduction Targets for Specified Sources”
Summary of section
Comments
Clarifies that the emissions cap imposed by Sec.
721 would reduce GHG emissions from capped
sources in relation to the economy-wide emission
reduction goals in Sec. 702. For example, in
2012, GHG emissions from capped sources
should not exceed 97% of GHG emissions from
such sources in 2005.
“Sec. 704. Supplemental Pollution Reductions”
Summary of section
Comments
Instructs EPA to allot emission allowances to
The bill drafters are counting on emission
support international deforestation reduction
reductions from this section to help meet the
efforts. Between 2012 and 2025, EPA is to
overall GHG emission reduction goals that
transfer (per Sec. 781) up to 5% of each year’s
the cap will not achieve by itself.
emission allowances to nations that enter into and
implement agreements (pursuant to Part E)
International deforestation reduction
relating to reduction of deforestation. The allotted activities are also part of the international
percentage decreases to 3% between 2026 and
offsets program (Sec. 743). Deforestation
2030 and 2% between 2031 and 2050. The
reduction projects motivated by this section
section’s objective is to support emission
may limit to some degree the pool of
reductions (through avoided deforestation) that is
international offset opportunities.
outside of and additional to those required by the
U.S. emissions cap. For example, the 2020 goal
is to achieve reductions of 720 million metric
tons, roughly equivalent to 10% of U.S.
emissions in 2005.
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“Sec. 705. Review and Program Recommendations”
Summary of section
Comments
Directs EPA to prepare periodic reports to
Congress—starting in 2013 and every four years
thereafter—that provide (1) the latest scientific
information on various climate change issues, (2)
an analysis of GHG emission monitoring and
verification capabilities in the United States and
abroad, and (3) an assessment of both U.S. and
worldwide GHG emission reduction efforts.
Instructs EPA to include recommendations
relevant to the three categories listed above.
‘‘Sec. 706. National Academy Review”
Summary of section
Comments
Establishes process for scientific review to be
conducted by the National Academy of Sciences
(NAS). NAS is to prepare a report by July 1,
2014, and every four years thereafter. The report
will include an analysis of (1) latest climate
change science, (2) technological feasibility of
GHG emission mitigation efforts, and (3)
domestic and international efforts to mitigate
climate change. (The first report will examine
only the latest scientific information). This
section provides considerable detail regarding
what the NAS is to provide in its reports,
including recommendations and identification of
improvements.
‘‘Sec. 707. Presidential Response and Recommendations”
Summary of section
Comments
Directs federal agencies ─ by July 1, 2015, and
every four years thereafter ─ to address shortfalls
identified in the periodic NAS reports (Sec. 705).
If NAS report finds that emission reduction
targets (or atmospheric concentration or safe
temperature thresholds) are not on schedule, the
President is to submit a plan outlining additional
domestic and international reduction efforts or
legislative recommendations that would address
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Summary of section
Comments
these concerns.
‘‘Part B—Designation and Registration of Greenhouse Gases”
‘‘Sec. 711. Designation of Greenhouse Gases”
Summary of section
Comments
Designates the following gases as GHGs: (1)
It is unclear to which advisory board this
carbon dioxide, (2) methane, (3) nitrous oxide,
section refers. EPA is to establish an Offsets
(4) sulfur hexafluoride, (5) hydrofluorocarbons
Integrity Advisory Board per Sec. 731. In
emitted as a byproduct, (6) perfluorocarbons, (7)
addition, Title IV, Sec. 464 directs the
nitrogen trifluoride. Sets up process by which
Secretary of Health and Human Services to
EPA can designate other GHGs. Allows for any
establish a scientific advisory board. In
person to petition EPA for other manmade gases
addition, there already exist an EPA Science
to be added as GHGs. Directs EPA to consult
Advisory Board and a Clean Air Scientific
with the Scientific Advisory Board before
Advisory Committee under the Clean Air
making determinations.
Act.
‘‘Sec. 712. Carbon Dioxide Equivalent Value of Greenhouse Gases”
Summary of section
Comments
Lists the carbon dioxide equivalents of other
GHGs. For example, one metric ton of methane
equals 25 metric tons of carbon dioxide
equivalent. Directs EPA to periodically review,
not later than February 1, 2017, and every five
years thereafter, the carbon dioxide equivalent
values. Establishes process by which EPA can
revise the values.
‘‘Sec. 713. Greenhouse Gas Registry”
Summary of section
Comments
Directs EPA , no later than six months after
EPA issued a proposed rulemaking April 10,
enactment, to establish a federal GHG emission
2009 (74 FR 16448), that would require
registry. The registry will include data on (1)
mandatory emission reporting from facilities
GHG emissions, (2) production/importation of
that emit 25,000 metric tons or more per year
fuels and products that lead to GHG emissions,
of GHG emissions. The applicability of the
and (3) electricity delivered to carbon-intensive
proposed rulemaking may be broader than
industries. Reporting entities, including covered
Sec. 713 requirements, but EPA has authority
entities and other entities that EPA determines
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Summary of section
Comments
will help achieve overall goals of the new title
to expand coverage under Sec. 713(a)(2)(C).
VII, must submit 2007-2010 data by March 31,
2011. For calendar year 2011 and each
Some stakeholders may worry that emission
subsequent year, reporting entities will submit
reporting requirements may lead to coverage
quarterly data. In creating the registry, EPA is to
under an emissions cap (assuming their
consider best practices from ongoing state and
industries are not already identified as
regional efforts. EPA is to disseminate the data to
covered), because if a source’s emissions are
states and tribes and publish the data online as
amenable to reporting, some may make a
soon as practicable.
case—for efficiency or equity reasons—for
that source’s inclusion under the “economy-
wide” emissions cap.
‘‘Part C─Program Rules”
‘‘Sec. 721. Emission Allowances”
Summary of section
Comments
Instructs EPA to establish a specific quantity of
The actual emission results in any year may
emission allowances (the cap), starting in 2012,
not be the same as the emissions limit for
based on the table provided in Sec. 721(e). Each
that year because of various flexibility
allowance will have a unique identification
mechanisms—banking, borrowing, offsets—
number. From a legal standpoint, neither
designed into the cap-and-trade program.
emission allowances, compensatory allowances,
strategic reserve allowances, nor offset credits
constitute a property right. EPA may adjust the
annual caps, if specified assumptions are
subsequently found to be inaccurate, such as
2005 emission levels and percentage of emissions
from covered sources. Directs EPA to promulgate
regulations to establish a process of providing
compensatory allowances for several activities,
including the use of fossil fuels (e.g., asphalt or
plastic manufacturing) that does not lead to
emissions.
‘‘Sec. 722. Prohibition of Excess Emissions”
Summary of section
Comments
Requires covered entities, starting April 1,
When the phase-in schedule concludes (in 2016),
2013, and each year thereafter, to have one
and all of the covered entities are subject to the cap,
emission allowance for each ton of carbon
approximately 85% of the U.S. GHG emissions
dioxide equivalent of GHGs that were
would be covered. Although this section does not
either, depending on the type of covered
specifically exclude specific emission sources,
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Summary of section
Comments
entity, (1) directly emitted by the entity in
certain sources do not meet any of the definitions or
the previous year or (2) emitted
thresholds. These uncapped sources include:
downstream in the economy in relation to a agricultural emissions, residential emissions,
covered entity’s outputs (e.g., fossil fuels)
commercial buildings, stationary sources that emit
that were produced or imported for sale or
less than 25,000 tons/year. The Congressional
distribution in the previous year. EPA will
Budget Office estimates that a total of 7,400
retire the held allowances after the annual
entities would be covered by the cap and trade
deadline has passed. Covered entities
program as written. According to recent EPA
(defined in Sec. 700) include electricity
analysis, lowering the threshold to 10,000 tons/year
generators, various fuel producers and
would subject approximately 7,000 additional
importers, fluorinated gas producers and
facilities to the cap, but would only cover an
importers, geological sequestration sites,
additional 0.6% of U.S. emissions (EPA, Proposed
various industrial sources, and local
Mandatory GHG Reporting Rule: Overview,
distribution companies (LDCs) that deliver
Powerpoint Presentation).
natural gas. Compliance provisions are
phased in by entity: most entities start
Offsets are expected to play a critical role in terms
compliance in 2012; industrial stationary
of cost containment. For example, EPA found that
sources begin compliance in 2014; natural
if international offsets are excluded, the emission
gas LDCs begin in 2016.
allowance price would increase by 96%. Compared
to other cap-and-trade programs and proposals, the
Upon review, EPA may lower the emission
offset percentage limitation in H.R. 2454 is
threshold, which currently stands at 25,000
relatively generous, particularly for international
tons/year, to not less than 10,000 tons/year,
offsets. However, many details regarding offset
after considering various factors, such as
implementation are delegated to EPA. Thus, issues,
cost-effectiveness.
such as which types are eligible, would be
determined through a rulemaking process after
In 2012, approximately 30% of an entity’s
enactment. See CRS Report RL34436, The Role of
allowance obligation can be satisfied with
Offsets in a Greenhouse Gas Emissions Cap-and-
offsets; this percentage increases to 67%
Trade Program: Potential Benefits and Concerns,
by 2050; if all entities maximized their use
by Jonathan L. Ramseur.
of offsets, the aggregate annual number of
submitted offsets would total 2 billion tons.
Half of an entity’s offsets can come from
domestic sources and half from
international sources (e.g., 15% domestic
and 15% international in 2012); EPA can
increase the allowable percentage for
international offsets (up to 1.5 billion), if
the agency determines use of domestic
offsets will not be maximized in a
particular year. Starting in 2018,
international offsets are discounted: 1.25
offsets equals 1 emission allowance.
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‘‘Sec. 723. Penalty for Noncompliance”
Summary of section
Comments
Establishes penalties for noncompliance. A
This provision is similar to previous cap-and-
covered entity must pay a penalty to EPA for
trade proposals.
each allowance the entity should have held at the
compliance deadline. The penalty amount equals
the emissions generated in excess to the
allowances held multiplied by twice the fair
market value for emission allowances in the
relevant calendar year. In addition, covered
entities must submit, in the following calendar
year or other time period determined by EPA,
allowances to cover the excess emissions from
the previous year.
‘‘Sec. 724. Trading”
Summary of section
Comments
Ensures that emission trading will not be
Some have voiced concern over the prospect
restricted. Allows for both covered and non-
of non-covered entity (e.g., banks,
covered entities to hold allowances. Holders of
investment groups) participation, but others
allowances may ask the EPA to retire the
argue that such participation would
allowance. Allowance transfers are not effective
strengthen the market by providing market
until EPA receives written certification in
liquidity.
accordance with regulations required by Sec.
721.
‘‘Sec. 725. Banking and Borrowing”
Summary of section
Comments
Allows for unlimited banking of emission
By allowing covered entities to borrow
allowances for compliance in future years.
allowances (without interest) from the next
calendar year, the bill effectively creates a
Allows entities to borrow (without interest)
rolling, two-year compliance period.
emission allowances from the calendar year
Compared to previous cap-and-trade
(vintage) immediately following the compliance
proposals, this is a new design element
year. For example, vintage 2015 allowances can
(although the Regional Greenhouse Gas
be used for compliance in 2014. In addition,
Initiative—RGGI—program has a three-year
covered entities may borrow at interest
compliance period). This feature may help
allowances (limited to 15% of their emissions)
alleviate some of the market volatility that
from up to five vintage years in the future.
would otherwise exist.
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‘‘Sec. 726. Strategic Reserve”
Summary of section
Comments
Directs EPA to create a “strategic reserve” of
A strategic reserve (SR) auction is meant to
approximately 2.7 billion allowances by setting
provide some cost containment, particularly
aside a small number of allowances from each
for emission allowance price spikes. The
vintage year. EPA will conduct quarterly auctions
level of the reserve price will influence the
of allowances from the strategic reserve. Only
nature of the strategic reserve auction. For
covered entities may participate in the auctions.
example, an SR auction with a relatively
The auctions will have a reserve price, which in
high reserve price may be used by entities
2012 will be $28/allowance and increase
only during relatively extreme price spike
annually (by 5% plus inflation) in 2013 and 2014. conditions. A relatively lower reserve price
Subsequent year reserve prices will be 60%
may alter the character of the SR auctions,
above the 36-month rolling average allowance
which are held regardless of market
price. Entities are limited in the number of
conditions. Some covered entities may
allowances they may purchase at each auction.
choose to purchase strategic reserve
Unsold allowances replenish the reserve. EPA is
allowances (at higher than current prices)
to use the auction proceeds to purchase
and bank the allowances for future use, in
international (reduced deforestation) offsets (with expectation that the emission allowance price
a 1.25 discount rate) that will replenish the
will rise over time.
strategic reserve. Under certain conditions,
international (reduced deforestation) offsets may
be sold by EPA at the strategic reserve auction.
‘‘Sec. 727. Permits”
Summary of section
Comments
Describes procedural requirements for sources
that are also subject to Title V of the Clean Air
Act. Requires an entity’s designated
representative to file a certificate of
representation. Describes procedural process for
situations involving multiple owners or leasing
arrangements.
‘‘Sec. 728. International Emission Allowances”
Summary of section
Comments
Lists process by which EPA can designate an
International allowances are not to be
international climate change program as
confused with international offsets.
“qualifying.” Only international allowances from
“qualifying” programs can be used by covered
Allows for linkage between other cap-and-
entities for compliance purposes. Requires
trade programs, such as the European
covered entities to certify that international
Union’s Emission Trading Scheme (EU
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Summary of section
Comments
allowances used for U.S. compliance have not
ETS). See CRS Report RL34150, Climate
been used for compliance with other programs.
Change and the EU Emissions Trading
Allows EPA to issue a rulemaking that would
Scheme (ETS): Kyoto and Beyond, by Larry
modify the percentage of international offsets a
Parker.
covered entity may use for compliance purposes.
‘‘Part D─Offsets”
‘‘Sec. 731. Offsets Integrity Advisory Board”
Summary of section
Comments
Instructs EPA to create an independent Offsets
The creation of an offsets board is a new
Integrity Advisory Board, which will make
development compared to previous cap-and-
recommendations that include (1) which offset
trade proposals. Regardless of the board’s
types should be eligible for compliance purposes,
input, EPA has ultimate authority in
and (2) methodologies for evaluating offset
determining eligible offset types and
projects. The Board shall by 2017, and every five
protocols.
years thereafter, provide an analysis to EPA of the
offset program and make recommendations
regarding the offset program.
‘‘Sec. 732. Establishment of Offsets Program”
Summary of section
Comments
Directs EPA, not later than two years after
Although the bill identifies key principles
enactment, to promulgate regulations that
that EPA must address, the details are to be
establish a program for issuing offsets for
developed through a regulatory process.
compliance purposes. EPA is to consult with
Some stakeholders argue that Congress
other federal agencies and consider the Advisory
should be more explicit in legislation
Board’s (Sec. 731) recommendations. EPA must
regarding offset implementation. Others
ensure that offsets are verifiable and additional,
contend that the lack of prescriptive details
that sequestration projects are permanent, and
provides more flexibility to the agency and
that offsets avoid or minimize negative effects.
the offsets board.
EPA must set up an offset registry. The agency
may collect fees from offset project
representatives to cover administrative costs.
‘‘Sec. 733. Eligible Project Types”
Summary of section
Comments
Directs EPA (through the regulatory process) to
Other cap-and-trade proposals have provided
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Summary of section
Comments
develop a list of eligible offset project types,
lists of specific projects that should be
which can be revised at a later time. EPA must
eligible or, at the least, given consideration.
consider (and give priority to) the Advisory
Stakeholders in the agricultural sector have
Board recommendations. Persons may petition
raised particular concern regarding the
EPA to add or remove offset project types from
omission of specific project types in the
the list of eligibility.
legislation.
‘‘Sec. 734. Requirements for Offset Projects”
Summary of section
Comments
Instructs EPA to include certain provisions in its
These provisions provide both flexibility and
regulations, including project-specific standards
some prescription to EPA. For example, the
that address additionality, baseline calculations,
bill sets some parameters for crediting
measurement, leakage, and uncertainty. EPA is to
periods (some stakeholders may seek longer
develop a process that accounts for offset
periods), but allows EPA to determine
“reversals,” including mechanisms such as an
specific timeframes. The offsets reserve
offsets reserve and/or insurance. “An offsets
provisions are a new concept compared to
reserve... is a program under which, before
previous cap-and-trade proposals. However,
issuance of offset credits under this part, the
EPA is provided the authority to address
Administrator shall subtract and reserve from the
reversals with this approach or another
quantity to be issued a quantity of offset credits
mechanism.
based on the risk of reversal.” EPA will specify
the crediting period for each offset type. The
periods must fall between 5 and 10 years, except
for sequestration projects.
‘‘Sec. 735. Approval of Offset Projects”
Summary of section
Comments
Describes the process by which an offset project
In general, there are two approaches to
representative seeks approval for a particular
issuing offsets in a cap-and-trade system: a
offset project. The representative must submit to
project-by-project assessment and a
EPA a petition that includes the information
standards scheme. This bill adopts the former
specified in EPA’s forthcoming rulemaking. EPA
strategy. Each project must be submitted to,
must respond in writing to the petition within 90
and approved by, EPA. Some question
days. Procedures for an appeal process are to be
whether the agency would be able to process
established by EPA. In addition, EPA is to
offset petitions in timely manner. On the
establish a voluntary pre-approval review process
other hand, some argue that this level of
as an option for project developers.
oversight is important for offset projects.
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‘‘Sec. 736. Verification of Offset Projects”
Summary of section
Comments
Requires offset project representatives to provide
Many consider third-party verification to be
EPA with verification from an EPA-accredited
a necessary element in an offsets program.
third-party. EPA is to create a process to accredit
However, some question whether this
third-parties for this function. Required
requirement will create a bottleneck for
information (e.g., tons
issuing offsets, particularly if the supply of
reduced/avoided/sequestered, methodologies
accredited third-parties is limited (especially
used) in the verification and the schedule for its
in the early years).
submittal will be determined by EPA.
‘‘Sec. 737. Issuance of Offset Credits”
Summary of section
Comments
Directs EPA to make offset issuance
Some sequestration offset projects may
determinations no later than 90 days after receipt
provide offsets for decades, but this section
of the third-party verification reports. EPA may
prevents project developers from receiving
issue offset credits only for approved projects
credit for sequestration that will occur in the
(Sec. 735) and only for reductions, avoidance, or
future.
sequestration that have already occurred (i.e., no
forward crediting) during the project’s crediting
A tracking system with serial numbers is
period. EPA will assign a unique serial number to
used to avoid situations of double-counting.
each offset credit.
‘‘Sec. 738. Audits”
Summary of section
Comments
Authorizes EPA to conduct random audits of
offset projects, credits, and practices of third-
party verifiers. EPA is required to annually audit,
at minimum, a representative sample of project
types and geographic areas. EPA may delegate
this duty to a state or tribal government.
‘‘Sec. 739. Program Review and Revision”
Summary of section
Comments
Requires EPA to review various components ─
methodologies, reversal policies, accountability
measures ─ of its offset program at least once
every five years.
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
‘‘Sec. 740. Early Offset Supply”
Summary of section
Comments
Directs EPA to issue offset credits, if specific
Allowing offsets to be generated from
conditions are met, for offsets issued under other
pre-exiting state or voluntary programs
regulatory or voluntary offset programs. The
would increase the available supply,
following are highlights of some of the conditions:
which may be an issue in the early years
of the program. Thus, this section’s
• An offset project must have started
purpose is largely one of transition,
after January 1, 2001.
providing opportunity for the offset pool
• EPA can only issue offset credits for
to increase (under existing programs),
reduction/avoidance/sequestration
while EPA develops its offset regulations.
tons that occur after January 1, 2009,
Some may be concerned that offsets
and only for a limited period of time
created under other systems are
(three years after enactment or
developed with less stringent standards,
effective date of regulation,
thus imposing some uncertainty as to
whichever is sooner).
their legitimacy. As with the offsets
program in general, this section would
• The other-program offsets must have
delegate the decision to EPA regarding
been issued under a program that
whether other programs, such as the
was established by state (or tribal)
Chicago Climate Exchange, could
law or regulation, or a program
contribute offsets during the transition
specifically approved by EPA.
period and beyond.
• The offset standards must have been
developed through a public
consultation process.
• All projects must have been or will
be verified by a state regulatory
agency or accredited third-party.
• Offsets are ineligible if used for
compliance with a state law.
‘‘Sec. 741. Environmental Considerations”
Summary of section
Comments
Instructs EPA, if it lists forestry projects as
This section supplements the requirement in
eligible offset types, to develop regulations that
Sec. 732 for EPA to consider negative effects
address concerns particular to forestry offsets.
of offset projects.
The list of concerns includes biodiversity,
invasive species, and non-native species.
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‘‘Sec. 742. Trading”
Summary of section
Comments
States that Sec. 724 shall apply to offsets.
This would allow any party to hold and trade
offset credits.
‘‘Sec. 743. International Offset Credits”
Summary of section
Comments
Authorizes EPA to issue (in consultation with
Considering the importance (e.g., cost
Department of State) international offset credits.
containment) of international offsets, this
Directs EPA to promulgate regulations
section may warrant particular scrutiny. The
(considering recommendations from the Advisory
section contains a four-prong approach to
Board) to carry out this section. EPA may only
developing international offsets: (1) project-
issue international offset credits if (1) the United
by-project; (2) sectoral offsets; (3) credits
States is a party to a bilateral or multilateral
from an international body; and (4) avoided
agreement that includes the nation hosting the
deforestation offsets.
offset project; and (2) the host nation is a
“developing country” (defined in Sec. 700).
Regarding the first method, the details—
including eligible project types—are largely
Establishes a process through which EPA can issue
delegated to EPA to determine through
international offset credits on a sectoral basis in
regulation. The second method is a novel
developing nations if such an approach is deemed
approach for cap-and-trade proposals, likely
appropriate to ensure the integrity of the U.S.
stemming from the 2008 international
emissions cap against carbon leakage and would
negotiations in Bali. It is unclear how U.S.
encourage other counties to take measures to
parties would participate through this
reduce, avoid, or sequester greenhouse gases.
method (and the Copenhagen discussions
may influence this concept). The third
Allows EPA to issue international offset credits
method, allowing EPA to issue offsets
that originate from international bodies established
originating from a UNFCCC protocol (e.g.,
by the United Nations Framework Convention on
the Kyoto Protocol), suggests that Clean
Climate Change (UNFCCC), a UNFCCC protocol, Development Mechanism (CDM) offsets
or a treaty that succeeds the UNFCCC.
would be available for compliance
purposes. Although offsets generated
Authorizes EPA to issue, if certain conditions are
through the CDM undergo a relatively
met, international offset credits for projects that
rigorous evaluation, the CDM has received
reduce deforestation. The United States must be a
criticism on several fronts (see GAO,
party to a bilateral or multilateral agreement that
Lessons Learned from the European
includes the nation hosting the offset project. A
Union’s Emissions Trading Scheme and the
national deforestation baseline must be established
Kyoto Protocol’s Clean Development
in accordance with an appropriate agreement
Mechanism, 2008), but this may be partially
(details for developing baselines are provided).
due to its high profile. The fourth method
Credits can only be issued after deforestation
provides the most prescriptive details in the
reduction has been demonstrated using “ground-
legislative text. Although this offset
based inventories, remote sensing technology, and
category offers enormous potential, there
other methodologies” to ensure carbon stocks are
may be questions as to whether these
measured. EPA must make country-specific
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Summary of section
Comments
adjustments, such as discounting. EPA (with
project types can be implemented (in
Department of State) is to prepare a list of
accordance with Sec. 743) in a relatively
developing nations that are eligible, based on the
short period of time (i.e., by 2012).
nation’s ability to monitor/measure carbon fluxes
from deforestation and its institutional capacities
and governance.
‘‘Part E─Supplemental Emissions Reductions from Reduced
Deforestation”
‘‘Sec. 751. Definitions”
Summary of section
Comments
Includes definitions of five terms relevant to Part
E.
‘‘Sec. 752. Findings”
Summary of section
Comments
States that (1) deforestation amounts to
approximately 20% of global GHG emissions, (2)
reducing deforestation is cost-effective compared
to other GHG emission mitigation efforts, and (3)
reducing deforestation yields secondary benefits,
such as biodiversity.
‘‘Sec. 753. Supplemental Emissions Reductions Through Reduced
Deforestation”
Summary of section
Comments
Directs EPA, in consultation with the
The bill drafters are counting the
Departments of State and Agriculture, to
supplemental reductions projected from
promulgate regulations that create a program to
avoided deforestation efforts toward their
allot emission allowances for supporting reduced
overall emission reduction goals, particularly
deforestation efforts. Identifies objectives as (1)
in the first 10-15 years.
achieving 720 million tons of reductions in 2020
and a cumulative emission reduction of 6 billion
The specific objectives identified in this
tons by 2025, (2) building institutional capacities
section are unlikely to be achieved with the
in developing nations, and (3) preserving intact,
initial 5% allotment. (See John Larsen and
native forests.
Robert Hellmayr, Emission Reductions
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Summary of section
Comments
Under the American Clean Energy and
Security Act of 2009, World Resources
Institute, May 19, 2009). However, Sec.
781(b) allows EPA to make adjustments
(effectively borrowing future year
allotments) to meet the 2020 and 2025
supplemental reduction objectives.
‘‘Sec. 754. Requirements for International Deforestation Reduction Program”
Summary of section
Comments
Authorizes EPA to support efforts only in
EPA may distribute the allowances (per Sec.
developing nations whose forest carbon stock
781) to support a wider variety of efforts
presents a deforestation risk and have entered a
than those related to international avoided
bilateral or multilateral agreement with the
deforestation offsets (Sec. 743). For
United States. EPA may support projects directly
example, efforts can include pilot activities
or distribute allowances to established
that are “subject to significant uncertainty,”
international funds. EPA must promulgate
as well as efforts that improve a developing
standards to ensure emission reductions from
nation’s institutions and governance (at least
reduced deforestation are additional,
as they relate to deforestation), but may not
measureable, verifiable, permanent, monitored,
by themselves avoid deforestation.
and account for leakage and uncertainty. National
baselines for deforestation must be established.
EPA must develop a publicly available registry of
the supplemental emission reductions.
‘‘Sec. 755. Reports and Reviews”
Summary of section
Comments
Directs EPA to submit, by January 1, 2014, a
This report may lead to adjustments as
report that lists the quantity of emission
authorized by Sec. 781(b), allowing EPA to
reductions under the program, a breakdown of
effectively borrow allowances allotted to
allowances provided, and the activities supported
future years for avoided deforestation
by the supplemental reduction program. EPA is to purposes. Note that these adjustments would
conduct a review of the supplemental emission
not impact allotments for other purposes,
reduction program four years after enactment and
because EPA can only reduce the percentages
every five years thereafter. The review will
allotted in future years for avoided
include an assessment of emission reductions
deforestation efforts. Thus, less support for
achieved per participating nation and an
future avoided deforestation efforts may be
examination of related factors, such as
the ultimate outcome of such an adjustment.
governance, biodiversity, and leakage.
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‘‘Sec. 756. Legal Effect of Part”
Summary of section
Comments
States that Part E does not supersede, limit, or
affect restrictions imposed by federal law on any
interaction between an entity in the United States
and an entity in another country.
Sec. 312. Definitions
Summary of section
Comments
Amends Title VII of the Clean Air Act (created
by this legislation) by adding a definitions section
before Part A.
‘‘Sec. 700. Definitions”
Summary of section
Comments
Provides definitions for terms relevant to title
Among other terms, this section defines
VII.
“covered entity,” the applicability of which
determines whether an emission source is
subject to the cap. Some have voiced concern
that the covered entity definition does not
specifically exclude certain emission sources,
particularly agriculture. However, the three
categories of “stationary sources” within the
covered entity definition identify specific
industrial sectors that are subject, if they
exceed the 25,000 ton annual threshold. The
definition does not include a provision for
EPA to add additional sources, but (per Sec.
722(g)) EPA may lower the threshold to
10,000 tons in 2020, based on certain
conditions.
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Subtitle B—Disposition of Allowances
Sec. 321. Disposition of Allowances for Global Warming Pollution Reduction
Program
Summary of section
Comments
Adds Part H to the new Title VII of the Clean Air
Act.
‘‘Part H—Disposition of Allowances”
‘‘Sec. 781. Allocation of Allowances for Supplemental Reductions”
Summary of section
Comments
Instructs EPA to allot particular percentages of
EPA will likely need to make adjustments
emission allowances to support supplemental
(effectively borrowing future year allotments
reduction efforts, i.e., including the avoided
designated for the same purpose) to meet the
deforestation projects described in Part E. For
2020 and 2025 supplemental reduction
vintage years 2012 through 2025 the program
objectives. See John Larsen and Robert
receives 5% of each year’s allotment; for 2026
Hellmayr, Emission Reductions Under the
through 2030, 3%; for 2031 through 2050, 2%.
American Clean Energy and Security Act of
Directs EPA to modify these percentages as
2009 (World Resources Institute, May 19,
necessary to meet the 2020 reduction objective
2009).
(720 million metric tons of reductions in 2020,
which is equivalent to 10% of U.S. emissions in
2005) and the cumulative 2025 objective
(achieve total reduction of 6 billion tons). Unused
allowances are to be sold at an auction (Sec. 791)
in the following year, and the following vintage
year’s allotment (for supplemental reduction) is
increased by the number of unused allowances
from the previous year.
‘‘Sec. 782. Allocation of Emission Allowances”
Summary of section
Comments
Distributes emission allowance value (which can
In 2016, 17.5% of the allowances are sold
include auction revenue or no-cost allowances) to through an auction; in 2030, 71.7% are
a range of parties, both covered and non-covered
auctioned. Arguably, a more important
entities, to support a range of policy objectives.
distinction is to whom the allowance value
The distribution changes over time. In 2016,
(auction revenue and/or no-cost allowance) is
allowance value is allotted in the following
distributed and for what purpose.
manner (in some cases, the percentages are
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Summary of section
Comments
estimates):
Energy consumers receive a substantial
• Up to 31.5% to electricity local distribution
portion of allowance value (in some fashion)
companies (LDCs); 9% to natural gas local
throughout the program. In 2016, 42% of no-
distribution companies; 1.5 % to states for home-
cost allowances are provided to LDCs (and
heating oil consumers; 15% directly to low-
states for home heating oil users) to help
income consumers
energy consumers, which includes both
• 13.5% to energy-intensive, trade-exposed
commercial and residential sectors. As the
industries; 3.5% to merchant coal-fired
no-cost allowances to LDCs diminish over
generators; 2% to petroleum refineries; an
time (reaching zero in 2030), a greater
unspecified share of electricity sector allowances
percentage of allowances are auctioned, with
for certain long-term power contract operators
the revenue used to support consumer
• 7.5% to states to support renewable energy and
rebates. However, “consumers” in this case
energy efficiency efforts
include households, not commercial energy
•
users. A 15% allotment to assist low-income
6% to promote technological advances
individuals (via tax credits) remains constant
• 10.5% to further other objectives.
through 2050.
In 2030, allotments are as follows:
In the early years of the program, covered
• 36% for consumer rebate; 15% for low-income
entities receive almost 20% of the
consumers
allowances at no cost. Allowances allotted to
•
covered entities are phased out over time
2.3% for trade-exposed industries
(reaching zero by 2033).
• 10% for technology;
• 5% energy efficiency;
This section directs EPA to sell a portion of
future vintage-year allowances at earlier
• 8% for adaptation
dates. For example, a percentage of vintage-
• 8% for other objectives
2026 allowances are sold in 2015. Although
•
covered entities can only use the 2026
16% of the 2030 allowances were sold in prior
allowances for compliance in 2026, the
years to support consumer rebate or deficit
reduction.
government would collect the value of 2026
allowance (as auction revenue) in 2015, and
apply that value in 2015. While this creates
additional funds early in the program, which
are applied to deficit reduction and then to
consumer rebates (in 2026), it depletes the
number of allowances (and potentially the
total allowance value) available for
distribution in later years. The effect of this
provision may have unforeseen
consequences.
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‘‘Sec. 783. Electricity Consumers”
Summary of section
Comments
Outlines process by which EPA is to distribute
This section is intended to alleviate the
allowance value to electricity consumers, which
electricity price increases that would be
includes both households and commercial
expected under a cap-and-trade program.
entities. Recipients of no-cost allowances would
Although some press reports have described
include: electricity local distribution companies
allotment to LDCs as a win for industry,
(LDCs); merchant coal-fired electric generating
LDCs are different from the industrial sector
facilities; and specifically defined power
that generates electricity. In general, LDCs
production facilities that have entered into long-
control the wires that deliver electricity to
term power contracts.
homes and businesses. Unlike electric
generating facilities, some of which are
Instructs EPA, based on specific parameters, to
(price) regulated and some of which are not,
allot a portion of the percentages listed for
all LDCs are regulated by a state agency that
electricity consumers in Sec. 782 to merchant
controls the price of delivered electricity.
coal generators and facilities in long-term power
contracts; the remainder (which would represent
The 50/50 formula for allowance allotment
the vast majority of the allotment) would go to
to LDCs is an attempt to address regional
LDCs.
differences in energy use. For example, some
parts of the country use a higher percentage
Directs EPA to distribute allowances to LDCs
of coal than others, and these areas are
based on specific formula: 50% of the
expected to experience relatively higher
distribution would be based on the CO2 emissions electricity price increases from H.R. 2454
associated with the electricity delivered to
than areas that use less-carbon intensive
customers and 50% would be based on the
energy (e.g., hydropower).
quantity of electricity delivered (or sold).
Some have argued that if merchant coal-fired
Requires LDCs to use allowances “exclusively
generators receive no-cost allowances, the
for the benefit of retail ratepayers.” EPA will
facilities would simply pass along the
develop regulations with specific implementation
opportunity cost of the allowances to
guidelines. If LDCs choose to provide rebates,
consumers and thus gain so-called “windfall
the rebates cannot be based solely upon the
profits.” (See, for example, comments and
quantity of electricity delivered.
testimony from the National Association of
Regulatory Utility Commissioners, at
http://www.naruc.org.) Indeed, this section
requires EPA (in 2014) to examine this issue.
Moreover, these entities would receive
allowances based on an output-based
formula, which some argue would create a
(perverse) incentive to generate electricity in
order to receive more allowances.
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‘‘Sec. 784. Natural Gas Consumers”
Summary of section
Comments
Outlines process by which EPA is to distribute
Similar to Sec. 783, this section is intended
allowance value to natural gas consumers, which
to alleviate the natural gas price increases
includes both households and commercial
that would be expected under a cap-and-trade
entities. To meet this objective, EPA is to allot all
program.
of the no-cost allowances (per Sec. 782) to
natural gas local distribution companies (LDCs).
Some may question why the legislation
LDCs would receive a portion of allowances
compels natural gas LDCs to use 33% of the
based on annual natural gas deliveries from each
allowances for energy efficiency programs,
LDC (i.e., quantity sold).
while not requiring a similar carve-out for
electricity LDCs.
Requires natural gas LDCs to use the allowances
“exclusively for the benefit of retail ratepayers.”
Includes rebate provisions that are similar to
electricity LDCs. Directs natural gas LDCs to
use, at minimum, 33% of the allowances to
support energy efficiency programs for natural
gas consumers.
‘‘Sec. 785. Home Heating Oil and Propane Consumers”
Summary of section
Comments
Outlines process by which EPA is to distribute
Similar to Sec. 783, this section is intended
allowance value to home heating oil and propane
to alleviate the heating oil and propane price
consumers, which includes both households and
increases that would be expected under a
commercial entities. To meet this objective, EPA
cap-and-trade program.
would distribute no-cost allowances (per Sec.
782) to states. States would receive allowances
Some may question why the legislative
based on a ratio of each state’s carbon emissions
carve-out for energy efficiency (at least 50%)
associated with home heating oil sales compared
differs from the requirement in Secs. 783 and
to a similar national value.
784.
States may use allowances for either energy
efficiency programs or financial assistance
(rebates) to customers, but at least 50% of the
allowances must be used for energy efficiency.
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[Sec. 786 added in Title I (Clean Energy), Section 115]
‘‘Sec. 787. Allocations to Refineries”
Summary of section
Comments
Outlines process by which EPA is to distribute
Distributing no-cost allowances to the
no-cost allowances (per Sec. 782) to petroleum
petroleum refining industry may generate
refineries. Distribution formula is based on a
debate. This industry is sometimes not listed
refinery’s output and its CO2 emissions intensity
among the carbon-intensive, trade-exposed
(emissions per unit of output). Emissions
industries that would receive allowances per
intensity includes both direct, process-related
Sec. 782 (and described in Sec. 764).
emissions and emissions associated with
Providing no-cost allowances to refineries
electricity used at a refinery (indirect emissions).
may encourage other industries to seek a
share of no-cost allowances.
‘‘Sec. 788. [SECTION RESERVED]”
‘‘Sec. 789. Climate Change Consumer Refunds”
Summary of section
Comments
Directs the President (or an agency designated by
The allocation to the Consumer Climate
the President) to annually distribute monies from
Change Rebate Fund (CCCRF) begins in
the Consumer Climate Change Rebate Fund (per
2021 and by 2030, 36% of the annual
Sec. 782) to each household—on a per capita
allowance value (plus additional value from
basis—in the United States.
future year sales) is allotted to this fund.
However, this consumer assistance method
differs from the assistance to consumers
provided for by Secs. 783-785. Those
provisions would support both households
and commercial entities. The CCCRF only
helps households. Moreover, the allotment
from CCCRF (unlike Secs. 783-785) would
not account for regional differences in energy
use or carbon content of energy use.
‘‘Sec. 790. Exchange for State-Issued Allowances”
Summary of section
Comments
Instructs EPA to promulgate regulations that
This section relates to Sec. 861, which
would establish a process by which any person
effectively pre-empts state/regional cap-and-
can exchange emission allowances issued before
trade programs (until 2018). The exchange
December 31, 2011, by California or the
will not necessarily be a one-to-one swap.
Regional Greenhouse Gas Initiative (RGGI) for
EPA’s regulations will provide that a person
exchanging a “state allowance” receive a
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Summary of section
Comments
emission allowances under this title.
Title III allowance that is “sufficient to
compensate” for the cost of obtaining (this is
specifically defined) and holding a state
allowance.
Title III allowances allotted for this purpose
will be deducted from the “allowances to be
auctioned pursuant to section 782(b).” This
citation is likely incorrect, because it is a
holdover from the “discussion draft.”
It is difficult to assess the quantity of state
emission allowances that will be exchanged.
A rough calculation: assuming RGGI entities
(the only state program in operation) would
need to exchange a year’s amount of
allowances (188 million tons), this would
account for about 4% of the 2012 federal
cap. However, RGGI allowance prices have
hovered around $3.50/ton. Assuming an
exchange based solely on price (assuming a
$15/ton price for federal allowances) would
thus reduce the 2012 allowance pool by 1%.
‘‘Sec. 791. Auction Procedures”
Summary of section
Comments
Establishes auction format and procedures.
The auction format largely follows the
Directs EPA to promulgate regulations, within 12
auction scheme used in RGGI, which has
months of enactment, that govern allowance
held three auctions, all of which have been
auctions. Auctions will be held quarterly, starting
successful. However, a federal emission
no later than March 31, 2011. The auctions will
allowance auction would be both larger in
include a reserve price, starting at $10/allowance
scale and broader in scope. Although this
(in 2009 dollars) and increasing by 5% plus
section is relatively prescriptive regarding
inflation each year. At each auction, EPA will
the auction design, EPA has authority to alter
offer both current and some proportion of future
the format.
vintage allowances. Auctions will follow a
single-round, sealed-bid, uniform price format.
The reserve price provision was not included
Auctions will be open to any person. EPA may
in the “discussion draft.” A reserve price may
require demonstrations of financial assurance as a help alleviate market volatility to some
condition of participation. Persons may not
degree and provide assurance to parties
purchase more than 5% of allowances offered in
making emission reductions that the
any auction. EPA may revise auction design
reductions will have some value in the
(through the regulatory process) if the agency
allowance market.
determines an alternative design is more
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Summary of section
Comments
effective.
‘‘Sec. 792. Auctioning Allowances for Other Entities”
Summary of section
Comments
Allows for any holder of emission allowances to
Without this section, parties that receive
request that EPA auction their allowances. EPA
allowances at no cost would need to sell the
will sell the allowances during one of the
allowances in the secondary market, either
quarterly auctions per Sec. 791. EPA may permit
through a market exchange or an over-the-
allowance holders to set a reserve price for their
counter transaction. This activity may
allowances. However, allowance holders from
involve some level of transaction cost. This
foreign nations (selling allowances received per
section provides the opportunity for parties
avoided deforestation projects) may not request a
to effectively let EPA conduct the transaction
reserve price. EPA is to promulgate regulations to
(through an auction). It is uncertain whether
implement this section within 24 months of
parties would receive a higher price through
enactment.
the latter route. Indeed, there is some
evidence (from RGGI) that the market price
dips right before an auction event.
‘‘Sec. 793. Establishment of Funds”
Summary of section
Comments
Establishes the Strategic Reserve Fund and the
The “Climate Change Consumer Refund
Climate Change Consumer Refund Fund.
Fund” likely refers to the fund described in
Sec. 789, which is called the “Consumer
Climate Change Rebate Fund.” Note that the
name of this fund is slightly different in Sec
782(r), where it is called the “Climate
Change Consumer Refund Account.”
Subtitle C—Additional Greenhouse Gas Standards
Sec. 331. Greenhouse Gas Standards
Summary of section
Comments
Amends the Clean Air Act to include a new
subtitle C at the end of the new Title VII.
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‘‘Title VIII—Additional Greenhouse Gas Standards
‘‘Sec. 801. Definitions”
Summary of section
Comments
Provides a revised definition of “stationary
For this title, the threshold for a “stationary
source” under this title (Title VIII).
source is lowered from 25,000 metric tons
under Title VII to 10,000 metric tons of
carbon dioxide equivalent.
‘‘Part A─Stationary Source Standards”
‘‘Sec. 811. Standards of Performance”
Summary of section
Comments
Generally provides that EPA promulgate New
The provision focuses on categories of
Source Performance Standards (NSPS) under
stationary sources that are responsible for at
Sec. 111 of the Clean Air Act for categories of
least 20% of uncapped greenhouse gases (or
uncapped stationary sources that emit more than
10% of uncapped methane emissions). EPA
10,000 tons of carbon dioxide equivalent
is not required to make an “endangerment
annually. Stipulates the schedule for
finding” under these provisions to
promulgation of the NSPS for various categories
promulgate the necessary NSPS.
that is not subject to judicial review. Sources of
enteric fermentation are expressly exempted from Stationary sources controlled under the Title
these provisions. In setting the appropriate NSPS, VII emissions cap would not be subject to a
EPA is to take into account projections of
greenhouse gas NSPS under these
allowance prices to ensure that the marginal costs
provisions.
imposed by such standards are not expected to
exceed those projected allowance prices.
Some have voiced concern that the
performance standards would make certain
projects—methane from landfills and/or coal
mines—ineligible as offsets under the cap-
and-trade program.
Part C─Exemptions from Other Programs
‘‘Sec. 831. Criteria Pollutants”
Summary of section
Comments
Provides that a greenhouse gas can not be listed
Prevents EPA from regulating greenhouse
as a criteria air pollutant under Sec. 108(a) of the
gases via a National Ambient Air Quality
Clean Air Act on the basis of its effect on climate
Standard (NAAQS) because of their climate
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change. impacts.
For more information on stationary sources
of greenhouse gases and the Clean Air Act,
see CRS Report R40585, Climate Change:
Potential Regulation of Stationary
Greenhouse Gas Sources Under the Clean
Air Act, by Larry Parker and James E.
McCarthy.
‘‘Sec. 832. International Air Pollution”
Summary of section
Comments
Provides that Sec. 115 of the Clean Air Act shall
Prevents EPA from regulating greenhouse
not apply to a greenhouse gas because of its
gases via the international air pollution
climate impact.
provisions of the Clean Air Act.
‘‘Sec. 833. Hazardous Air Pollutants”
Summary of section
Comments
Provides that a greenhouse gas can not be added
Prevents EPA from regulating greenhouse
to the list of hazardous air pollutants under Sec.
gases via the hazardous air pollution
112 of the Clean Air Act unless such gas meets
provisions of the Clean Air Act.
the listing criteria of Sec. 112(b) on a basis other
than its climate change effects.
‘‘Sec. 834. New Source Review”
Summary of section
Comments
Provides that a greenhouse gas can not be subject
Prevents new or modified stationary sources
to the New Source Review provisions of the
from coming under the Clean Air Act’s New
Prevention of Significant Deterioration (Part C of
Source Review provisions (including the
the Clean Air Act) program solely on the basis of
requirement to install best available control
its effect on climate change or its regulation
technology or BACT) solely because they
under Title VII.
emit greenhouse gases.
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‘‘Sec. 835. Title V Permits”
Summary of section
Comments
Provides that in determining whether a source is
Prevents any source (large or small) from
covered under the permitting provisions of Title
having to obtain a state permit under Title V
V of the Clean Air Act, EPA shall not consider
of the Clean Air Act solely because they emit
the source’s GHG emissions.
greenhouse gases.
Sec. 332. HFC Regulation
Summary of section
Comments
Amends Title VI of the Clean Air Act to add a
HFCs are very powerful greenhouse gases. A
new program to reduce hydrofluorocarbons
common use for HFCs (specifically HFC-
(HFCs)
134a) is as a refrigerant in automobile air
conditioning systems.
“Sec. 619. Hydrofluorocarbons (HFCS)”
Summary of section
Comments
Creates a separate cap-and-trade program to
The cap-and-trade program for HFCs under
reduce emissions of hydrofluorocarbons (HFCs).
Title VI is completely separate from the cap-
Basically, the section puts 20 HFC substances in
and-trade program for other greenhouse
a new class II, group II category to be regulated
gases set up under the new Title VII.
under Title VI of the Clean Air Act. Beginning in
2012, producers and importers of any class II,
The set price for the pool of consumption
group II substance are required to hold a
allowances not auctioned (and for the
consumption allowance or destruction offset
secondary pool) is set at $1 an allowance in
credit for each CO2-equivalent ton of class II,
2012, rising to the average of $1.40 and the
group II substance. The consumption allowances
2016 auction clearing price in 2017. For the
available are capped and that cap is steadily
allowances in the producer-importer pool,
reduced from 90% of the average annual
these allowances are available to covered
consumption during a 2004-2006 baseline to 15% entities based on their share of production,
of that baseline after 2032. Allowances may be
importation, or acquisitions, minus exports.
banked for future use.
Auctions are to be held once a year and
Consumption allowances are divided into two
follow a single-round, sealed-bid uniform
pools: a producer-importer pool with 80% of
price format.
available allowances and a secondary pool with
20% of available allowances. In the producer-
Program provides for an exception to the
importer pool, 10% of available consumption
reduction program for specific essential uses:
allowances are auctioned in 2012, increasing
medical devices, aviation safety, natural
steadily to 90% in 2020 and thereafter. Only
security (fire suppression, etc.) and exports
covered entities may participate in the auction.
to developing countries.
The remaining consumption allowances are to be
All proceeds from auctions and sales are
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Summary of section
Comments
offered for sale by EPA at a set price for the years
deposited in a Stratospheric Ozone and
2012-2017, and at the auction clearing price
Climate Protection Fund to encourage the
thereafter.
recovery, recycling, and reclamation of any
Class II substance (subject to appropriations)
For the secondary pool, EPA provides for the sale
in order to reduce emissions.
of available consumption allowances at the same
price as the un-auctioned allowances above.
Covered entities and specific other entities that
have taken significant steps to purchase or import
any class II, group II substance, or produced or
imported any such substance in 2004-2006 are
eligible for this pool.
EPA regulations are to provide offset credits for
the destruction of chlorofluorocarbons (CFCs)
equal to 80% of the carbon dioxide equivalent
reduction achieved by the destruction.
Other provisions include the regulation of small
containers of class II, group II substances used to
refill motor vehicle air conditioners.
Sec. 333. Black Carbon
Summary of section
Comments
Requires EPA to submit a report to Congress on
black carbon abatement within one year of
enactment.
Also amends the new Title VIII of the Clean Air
Act to provide for black carbon mitigation (see
below).
‘‘Part E─Black Carbon”
‘‘Sec. 851. Black Carbon”
Summary of section
Comments
Authorizes EPA to propose a finding that existing
Authorizes such sums as necessary to fund
Clean Air Act provisions adequately address
this section.
black carbon emissions or to promulgate a
regulation to reduce black carbon emissions.
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Summary of section
Comments
Requires EPA to submit a report to Congress on
U.S. efforts internationally to reduce, mitigate,
and abate black carbon emissions. The report
shall also identify opportunities and
recommendations to achieve significant emission
reductions in foreign countries through technical
and other assistance.
Sec. 334. States
Summary of section
Comments
Amends Sec. 116 of the Clean Air Act ─ which
This section should be read in conjunction
allows for states to implement more stringent air
with Sec. 335 (“sec. 861”) below, which
pollution standards for stationary sources than the effectively pre-empts state/regional cap-and-
federal government ─ to clarify that the phrase
trade programs for a specific period of time.
“standard or limitation respecting emissions of
air pollutants” includes provisions relating to
GHG emission controls.
Sec. 335. State Programs
Summary of section
Comments
Amends Title VIII of the Clean Air Act by adding
Part F─“Miscellaneous.”
‘‘Part F─Miscellaneous”
‘‘Sec. 861. State Programs”
Summary of section
Comments
Prohibits states from implementing or enforcing a Effectively provides federal pre-emption of
GHG emission cap that covers any (federally)
state cap-and-trade program for covered
capped emissions during the years 2012 through
entities from 2012 through 2017. However, it
2017. Clarifies that a cap does not include fleet-
does not pre-exempt state programs that
wide motor vehicle emission requirement or life-
reduce greenhouse gas emissions by means
cycle fuel standards. This section is
other than a cap-and-trade program (e.g.,
“notwithstanding section 116.” Sec. 116 allows
fleet-wide motor vehicle emissions
states to implement more stringent standards at
requirements).
stationary sources, including (per Sec. 334 of this
bill) GHG emission controls.
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“Sec. 862. Grants for Support of Air Pollution Control Programs”
Summary of section
Comments
Authorizes the EPA to make grants to air
pollution control agencies for purposes of
providing implementation assistance in terms of
this act.
Sec. 336. Enforcement
Summary of section
Comments
Amends Sec. 307 of the Clean Air Act to provide
Attempts to prevent delays in environmental
that (1) in cases where the EPA is found to have
regulation through two means: (1) permits
erred in an action, the court may remand that
the courts to remand an EPA regulation back
action, without vacatur, if vacatur would impair
for reconsideration without requiring the
or delay protection of the environment or public
court to vacate the entire rule if doing so
health or timely achievement of the purposes of
would harm public health or the
the Clean Air Act; (2) a petition for
environment; and (2) attempts to prevent
reconsideration shall be considered denied for the
EPA from delaying consideration of petitions
purpose of judicial review if EPA does not take
for reconsideration by putting a 150-day
final action on such petition within 150 days; and
limit on EPA’s review process before the
(3) that the party denied the petition may seek
petition would be automatically denied and
judicial review in the appropriate court of
the petitioner could then seek a judicial
appeals.
remedy.
Sec. 337. Conforming Amendments
Summary of section
Comments
Makes various conforming amendments to
existing laws.
Sec. 338. Davis-Bacon Compliance
Summary of section
Comments
Recipients of emission allowances are required to Laborers working on retrofitting certain
provide reasonable assurances that all laborers
residential properties are exempted.
and mechanics employed by contractors and
subcontractors on funded projects, including the
Carbon Storage Research Corporation, will be
paid wages at rates not less than those prevailing
on projects of a character similar in the locality.
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Subtitle D—Carbon Market Assurance
Sec. 341. Carbon Market Assurance
Summary of section
Comments
Amends the Federal Power Act to include a new
Provides for the regulation of trading in
Part IV at the end entitled “Carbon Market
regulated allowances and regulated
Assurance.”
allowance derivatives. (Both these terms are
defined in this section.)
“Part IV—Carbon Market Assurance”
‘‘Sec. 401. Oversight and Assurance of Carbon Markets”
Summary of section
Comments
Provides for the Federal Energy Regulatory
Regulation of derivatives contracts (futures,
Commission (FERC) to regulate the cash market
options, etc.) based on allowances would fall
in emission allowances and offsets created under
to the Commodity Futures Trading
Title VII of the Clean Air Act and directs the
Commission (CFTC) under current law. This
President to delegate regulatory authority for the
section might assign that responsibility to
derivatives market to “an appropriate agency.”
another agency (or group of agencies), at the
FERC is to promulgate regulations for the
President’s discretion.
establishment, operation, and oversight of the
cash market, within 18 months of enactment,
The bill specifies that the CFTC is to be the
designed to prohibit fraud, market manipulation,
default regulator, until (or unless) the
and excess speculation, and provide measures to
President designates another agency.
limit unreasonable allowance price fluctuations.
Participants are limited to no more than a 10%
position in any class of regulated allowance or
allowance derivative, and FERC has the authority
to suspend or revoke the registration of any
trading entity violating any rule or order issued
under this subsection.
Taking into consideration the recommendations
of an interagency working group created under
the bill, the President is to delegate to appropriate
agencies the authority to promulgate regulations
for the establishment, operation, and oversight of
all markets for regulated allowance derivatives.
The purposes of the derivatives provisions are
similar to those above for the cash market. Each
federal agency that is designated under these
provisions shall have the same authority to
enforce compliance as does the Commodity
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Summary of section
Comments
Futures Trading Commission (CFTC).
Subtitle E—Additional Market Assurance
Sec. 351. Regulation of Certain Transactions in Derivatives Involving Energy
Commodities
Summary of section
Comments
Amends Section 1a and other sections of the
These and most other provisions in this
Commodity Exchange Act to increase oversight
subtitle affect existing energy derivatives
of carbon markets. Under its provisions energy
markets, not just those based on carbon
commodities (as defined) are taken out of the
allowances.
“exempt commodity” category, meaning that
energy derivatives must be traded on a CFTC-
The Commodity Exchange Act (CEA)
regulated exchange unless the CFTC issues a
currently provides a statutory exemption for
specific exemption.
over-the-counter (OTC) derivatives based on
non-agricultural commodities. This means
The section would also restrict CFTC’s authority
that legislation is necessary to give CFTC
to issue such exemptions—the CFTC must
power to regulate OTC derivatives.
provide 60 days advance notice and take public
comments. Limits on CFTC’s exemptive
CFTC currently has authority to set position
authority would apply not only to prospective
limits, but delegates that authority to the
OTC energy contracts, but also to contracts listed
exchanges. There are no position limits
on a foreign futures exchange that involve
applicable to OTC derivatives.
delivery in the United States or that are traded
over a computer located in the United States.
Index trading—strategies that generate
returns replicating an index of commodity
In addition, the CFTC is required to establish
prices—by pension funds and others was
position limits setting ceilings on the number of
blamed by some observers for the run up in
energy contracts that any person could hold, and
oil prices in 2008. CFTC disagreed, but does
creates a Position Limit Energy Advisory Group
not routinely collect data on index trading.
to make recommendations to the CFTC regarding
appropriate levels for position limits. Exemptions
from the position limits would be available only
for “bona fide hedging transactions,” defined as
either traders directly involved in physical energy
markets, or financial intermediaries who are
dealing with such traders.
Finally, the CFTC is required to publish data on
positions of swap dealers and index traders (such
as institutional investors and financial
intermediaries that deal in derivatives). This
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Summary of section
Comments
provision would apply to all commodities, not
just energy.
Sec. 352. No Effect on Authority of the Federal Energy Regulatory Commission
Summary of section
Comments
Amends Section 2 of the Commodity Exchange
Act to provide that the Act does not affect
FERC’s regulatory jurisdiction.
Sec. 353. Inspector General of the Commodity Futures Trading Commission
Summary of section
Comments
Amends the Commodity Exchange Act to make
Under current law, the IG is appointed by the
the Inspector General (IG) of the CFTC a
CFTC chairman.
presidential appointee.
Sec. 354. Settlement and Clearing Through Registered Derivatives Clearing
Organizations
Summary of section
Comments
Amends the Commodity Exchange Act to require
Clearing houses are a standard feature of the
that over-the-counter (OTC) derivative contracts,
futures exchanges. They are a central point
such as swaps, be settled and cleared through a
for collection of data on all traders’ positions;
derivatives clearing organization (DCO)
the CFTC currently obtains daily figures
registered with the CFTC. DCOs would be
from exchange clearing houses on large
required to disclose information about the terms
trader positions.
and conditions of contracts, the methodology for
determining margin requirements, and data
regarding prices, volume, and open interest. In
addition, DCOs would have to adopt fitness
standards for directors and certain other parties.
CFTC would be authorized to issue exemptions
from the clearing requirement for certain OTC
contracts that are not standardized instruments,
but contracts so exempted would still have to be
reported to the CFTC.
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Sec. 355. Limitation on Eligibility to Purchase a Credit Default Swap
Summary of section
Comments
Amends Section 4c of the Commodity Exchange
The collapse of AIG in 2008 was attributed
Act to set new eligibility requirements for trading
to trading in “naked” credit swaps—basically
credit default swaps. Participation in that market
insurance contracts sold to speculators who
would be limited to those who (1) own the credit
did not have an insurable interest in the
instrument that the credit swap was insuring, (2)
bonds for which the swaps provided
would experience financial loss if the credit event insurance against default.
that triggers the swap insurance payment were to
occur, or (3) met capital adequacy standards to be
established by the CFTC in consultation with the
Federal Reserve.
Sec. 356. Transaction Fees
Summary of section
Comments
Amends Section 12 of the Commodity Exchange
The Securities and Exchange Commission
Act to authorize the CFTC to set and collect fees
and the federal bank regulators have long
from registered clearing organizations at a rate
been funded by fees and assessments on the
calculated to cover the cost of derivatives
financial institutions and markets they
regulation (with the exception of costs directly
regulate. Every administration since
related to enforcement). Fee rates would be
President Reagan’s has proposed similar fees
adjusted annually so that amounts collected
for the futures market, but none has been
would approximate the CFTC’s budget authority
enacted.
for non-enforcement activities.
Sec. 357. No Effect on Authority of the Federal Trade Commission
Summary of section
Comments
The subtitle does not affect FERC jurisdiction to
Specifies that nothing in this act diminishes
obtain information, carry out enforcement
the jurisdiction or authority of the Federal
activities or other responsibilities under either the
Trade Commission.
Federal Trade Commission Act or EISA.
Sec. 358. Regulation 0f Carbon Derivatives Markets
Summary of section
Comments
Amends Section 2 of the Commodity Exchange
See Sec. 341 above. The category of “energy
Act to specify that the CFTC is the default
commodity” does not exist in current law,
regulator of allowance derivatives until and
but would be created by Sec. 351 of this act.
unless the President designates another agency.
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Also specifies that allowance derivatives are to
be regulated like energy commodity contracts—
they must be traded on an exchange unless the
CFTC issues a specific exemption.
Sec. 359. Cease-and-Desist Authority
Summary of section
Comments
Amends Section 20 of the Natural Gas Act to
Market regulators such as the CFTC and
authorize FERC to issue cease-and-desist orders
SEC already have such authority.
for violations. Provides for administrative and
judicial review of such orders.
Title IV─Transitioning to a Clean Energy Economy
Subtitle A—Ensuring Real Reductions In Industrial Emissions
Sec. 401. Ensuring Real Reductions in Industrial Emissions
Summary of section
Comments
Amends Title VII of the Clean Air Act by
For further information on trade and carbon
inserting a new “Part F—Ensuring Real
leakage, see CRS Report R40100, “Carbon
Reductions in Industrial Emissions.”
Leakage” and Trade: Issues and
Approaches, by Larry Parker and John
Blodgett.
“Part F—Ensuring Real Reductions in Industrial Emissions.”
“Sec. 761. Purposes”
Summary of section
Comments
Lists five environmental and economic purposes
The purpose of the new Part F is both
for the provisions of Part 1.
environmental in terms of reducing potential
carbon leakage resulting from potential shifts
of production and investment from the
United States to countries without carbon
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controls, and economic in terms of
preventing the associated job loss from such
a shift.
“Sec. 762. International Negotiations”
Summary of section
Comments
States U.S. policy is to negotiate binding
The International Reserve Allowance
agreements with all major greenhouse gas-
Program is a border adjustment scheme that
emitting countries to equitably reduce emissions.
would be imposed if provisions of Subpart 1
Foreign countries will be notified by the
failed to prevent carbon leakage (as
President no later than January 1, 2020, that the
discussed in Subpart 2 below).
International Reserve Allowance Program
described below may apply to them if their
carbon policies are determined to be inadequate.
“Sec. 763. Definitions”
Summary of section
Comments
The new Part F generally uses the same
Coverage is for primary products, such as
definitions as those used in Title VII above, with
iron, steel, aluminum, cement, and the like. It
some specific additions here with respect to
does not include finished goods, such as
defining terms such as eligible sectors and
automobiles.
products.
“Subpart 1—Emission Allowance Rebate Program”
“Sec. 764. Eligible Industrial Sectors”
Summary of section
Comments
Requires EPA to publish a list of eligible
This new Part F is a modified version of the
industrial sectors and amount of allowances to be
Inslee-Doyle proposal (H.R. 1759). It creates
rebated per unit of production for the next two
a rebate program directed at
years by June 30, 2011 (revised every four years
energy/greenhouse gas-intensive, trade-
thereafter). As determined by EPA,
exposed industries harmed by the direct
presumptively eligible sectors, based on six-digit
emissions reduction costs and indirect
NAICS classification, are those who meet energy
increased energy input costs from
or greenhouse gas intensity criteria (specifically,
implementing Title VII.
that energy or greenhouse gas costs are at least
5% of the value of the their shipments) and trade
The criteria reflects those contained in H.R.
exposure criteria (specifically, a trade intensity of
1759, but with a modification of the
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at least 15%); or have very high energy or
greenhouse gas intensity calculation and the
greenhouse gas intensity (at least 20%). The bill
addition of the very energy or greenhouse
specifies data sources to be used in these
gas intensive category.
determinations and, specifically, annual average
data for the 2004-2006 time period, unless
unavailable. The bill also has provisions allowing
individual entities to petition for inclusion under
the program.
“Sec. 765. Distribution of Emission Allowance Rebates”
Summary of section
Comments
Based on the best data available, EPA is to
H.R. 1759 contains an 85% electricity
provide the rebate to eligible companies based on
efficiency factor, and an 85% direct emission
a two-part formula: (1) 100% of the industry’s
factor to encourage innovations to reduce
average emissions per unit of output times the
emissions. These factors are effectively
company’s average output over the preceding two eliminated in H.R. 2454, which bases these
years (direct emissions); and (2) average
calculations on 100% of the industry’s
emissions per kilowatt-hour of electricity
average emissions and electricity use.
purchased by the company times the industry
average electricity used per unit of output over
the preceding two years times an electricity
efficiency factor to be determined by EPA
(indirect emissions). Entities not covered by Title
VII are eligible for the indirect emissions rebate.
If these formulas result in more allowance needs
than provided under the bill, the allocations to
entities would be reduced on a pro rata basis to
match the allowances available.
Unless modified by the President, the allowance
rebates are phased-out over a 10-year period,
beginning in 2026. The President may modify the
phase-out schedule for a sector if more than 70%
of global output for that sector is still produced
by countries with inadequate carbon policies.
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“Subpart 2 ─ International Reserve Allowance Program”
“Sec. 766. International Reserve Allowance Program”
Summary of section
Comments
Within 24 months of a President’s determination
Whether this program can be designed in a
under Sec. 767, EPA is to promulgate rules
manner that would sustain a challenge before
establishing an appropriate price and distribution
the World Trade Organization (WTO) is a
system for international reserve allowances.
hotly debated topic.
These allowances will be required for
importation into the United States of any covered
primary product as determined by EPA.
Exemptions are provided for least developed
countries or countries who emit less than 0.5% of
global greenhouse gas emissions. The purpose of
the program is to address the competitive
imbalance of production costs resulting from the
direct and indirect costs of implementing Title
VII. The international reserve allowances issued
under this program may not be used by covered
entities to comply with the emissions cap under
Title VII. Also, this program may not begin
before January 1, 2025.
“Subpart 3—Presidential Determination”
“Sec. 767. Presidential Reports and Determinations”
Summary of section
Comments
Requires the President by January 1, 2018, to
Implementation of an international reserve
submit a report to Congress on the effectiveness
allowance program is not automatic, but
of the emission rebates under Subtitle 1 at
based on criteria and a Presidential
mitigating carbon leakage and recommendations
determination that it would be effective in
on improving the subtitle’s purposes. By June 30,
addressing carbon leakage within an eligible
2022, and every four years thereafter, the
industrial sector.
President shall determine for each eligible
industrial sector whether more than 70% of
global output for that sector is from countries that
either (1) are parties to international agreements
requiring binding national commitments, or
within the eligible industrial sector; (2) have
annual energy or greenhouse gas intensities
comparable or better than the equivalent U.S.
sector; or (3) have implemented policies that are
at 60% of equivalent U.S. cost of complying with
Title VII. If not, the President shall no later than
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June 30, 2022 (and every four years thereafter)
assess the effectiveness of Subpart 1 rebates and
the international reserve allowance program in
mitigating or potentially mitigating the carbon
leakage in that sector, and respond by either
modifying the rebate formula under Subpart 1,
implementing an international reserve allowance
program, or both.
Subtitle B—Green Jobs and Worker Transition
Part 1—Green Jobs
Sec. 421. Clean Energy Curriculum Development Grants
Summary of section
Comments
The Secretary of Education may competitively
The term “Green Jobs” is undergoing
award grants to eligible partnerships for
definition at the Labor Department as to what
developing programs focused on emerging
these jobs are, and under which sector or
careers and jobs in renewable energy, energy
sectors they will be classified under the
efficiency, and climate change mitigation.
North American Industry Classification
Partnerships shall include at least one local
System (NAICS). The NAICS is used by the
agency eligible for funding under Sec. 131 of the
federal government to collect and analyze
Perkins Career and Technical Education Act of
data with regard to the U.S. economy. There
2006 (PCTEA), or an area career and technical
is agreement that Green Jobs will relate to
education school or education service agency; at
renewable energy and energy efficiency, but
least one post-secondary institution eligible for
the extent to which these jobs will be
PCTEA funding; and representatives of the
exclusive to these areas is under debate as
community (including business, labor or
the skills and training necessary may be
industry) with experience in clean energy.
transferable from and to other job
Application criteria and priorities are prescribed.
classifications.
A peer review panel (comprised of educators and
clean energy professionals) is to review
applications and recommend awards.
Sec. 422. Increased Funding for Energy Worker Training Program
Summary of section
Comments
Section 171(e)(8) of the Workforce Investment
Act of 1998 is amended by striking $125,000,000
and adding $150,000,000.
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Part 2—Climate Change Worker Adjustment Assistance
Sec. 425. Petitions, Eligibility Requirements, and Determinations
Summary of section
Comments
Workers can file for certification of eligibility as
The level and specialization of these jobs
a group, or a union or authorized representative
could vary from tradesmen such as
can file on their behalf with the Labor Secretary
electricians and welders to technical
and the governor of the state where the workers
engineers or financial managers, and from
are employed. Workers can then apply for
intellectual design to maintenance workers.
adjustment assistance, subsequent to a hearing to
determine if they are eligible. Partial or total
separation from employment or such a possibility
will be considered by the Secretary in the
determination of eligibility. Impacts are defined
which may be felt by workers in energy-intensive
or energy-producing industries which may be
affected by measures to mitigate climate change
(pursuant to Title VII of the Clean Air Act). The
Labor Secretary will make a determination of
eligibility for assistance and inform the industry
of the finding.
Sec. 426. Program Benefits
Summary of section
Comments
Rules for eligibility under the program are
Climate change mitigation may affect the
established. Eligibility for payments under the
competitiveness of U.S. industries. As such,
program make the worker ineligible for certain
if a group of workers can show how their
other benefits (unemployment insurance) while
current or prospective employment is
receiving a climate change adjustment allowance.
impaired by such measures, then these
Workers must participate in retraining programs
workers may apply for climate change
during the period of eligibility (no longer than
adjustment assistance. Assistance may
156 weeks). Workers may be eligible for
include a monetary allowance while workers
employment services, on-the-job training, and
are retrained or otherwise seeking new jobs
career counseling. Funds will be made available
or seeking full employment if their work
to states to assist in these purposes.
hours are reduced. Assistance may be
provided for up to three years for eligible
workers.
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Sec. 427. General Provisions
Summary of section
Comments
The Labor Secretary may enter into agreements
Funds will be made available to states to
with states for the workforce investment purposes carry out the retraining, on-the-job training,
such as mentioned above. Data sharing may be
career counseling or other employment
required with the federal government for
services. The federal government may seek
coordination, program control, verification and
to audit use of funds and applicants to guard
review. Penalties for fraud and collection of
against fraud or misuse of funds.
overpayment are described. The program will not
displace employed workers or impair existing
contracts.
Subtitle C—Consumer Assistance
Sec. 431. Energy Tax Credit
Summary of section
Comments
Amends the Internal Revenue Service code by
adding Section 36A to Subpart C of Part IV of
Subchapter A of Chapter 1.
“Sec. 36B. Energy Tax Credit”
Summary of section
Comments
Amends the Internal Revenue Service code (Title
This credit would be funded from the auction
26) by adding an income tax credit that would
revenues allotted for low-income consumers
seek to alleviate the effects of higher energy
(per Sec. 782(d)).
prices on low-income households.
Tax credit would only be available to
Directs EPA to determine the average annual
individuals or households that file a tax
reduction in purchasing power that the cap-and-
return. Section 432 would address non-filing
trade program would impose on low-income
households.
households (bottom 20%) of varying sizes. EPA
must factor in the benefit of no-cost distribution
The Congressional Budget Office (CBO)
of allowances, such as those provided (for
estimates that a family of four would be
consumer benefit) to LDCs.
eligible for the credit if their income was
below $42,000. In addition, CBO estimates
Restricts credit to incomes below a certain level.
(in 2012) an individual would receive an
annual credit of $161; a five-person
Reduces tax credit for households if they
household would receive $359. See CBO,
participate in the energy refund program in Sec.
Congressional Budget Office Cost Estimate:
432 (below).
H.R. 2454 – American Clean Energy and
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Security Act of 2009 (June 2009).
Sec. 432. Energy Refund for Low-Income Consumers
Summary of section
Comments
Establishes a program to provide a monthly cash
This refund would be funded from the
refund to low-income households. The monthly
auction revenues allotted for low-income
refund would be based on the average annual
consumers (per Sec. 782(d)).
reduction in purchasing power that the cap-and-
trade program would impose on low-income
This section is meant to cover the low-
households: equal to one-twelfth of the tax credit
income households that do not file income
determined by EPA pursuant to Sec. 431 (“Sec.
tax returns, and thus would not be eligible
36B”) above.
for the tax credits per Sec. 431.
Households that participate in other low-income
subsidy programs (e.g., food stamps) would
automatically be included.
Monthly refund would be deposited directly into
eligible bank accounts or distributed through a
state’s existing electronic benefit transfer system.
Subtitle D—Exporting Clean Technology
Sec. 441. Findings and Purposes
Summary of section
Comments
Provides developing countries with assistance
Climate change mitigation is perceived as
from the United States to encourage widespread
being in the best interests of the American
deployment of technologies that reduce GHG
people, and recognition is given that most
emissions, and encourage developing countries to
new growth in GHG emissions may result
adopt policies and measures that will reduce
from energy and economic activity in
GHG emissions.
developing countries.
Assistance to help deploy clean energy
technologies in developing countries is seen
as the route to GHG mitigation, and the
benefits of such a program to the technology
deployment cycle and development of
markets for U.S. industries is recognized.
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Emissions allowances will be set aside from
the Clean Air Act provisions and placed in
the International Clean Technology Account
(ICTA). This will be the mechanism used to
provide assistance to developing countries
for climate change mitigation, and implies
such emissions allowances will be an
international marketable commodity.
Sec. 442. Definitions
Summary of section
Comments
Allowance—An emission allowance established
under Sec. 721 of CAA.
Appropriate Congressional Committees—House:
Energy and Commerce, Foreign Affairs. Senate:
Environment and Public Works, Energy and
Natural Resources, Foreign Relations.
Convention—United Nations Framework
Convention on Climate Change
Developing Country—Country eligible to receive
assistance from the World Bank.
Eligible Country—A developing country
determined by the President under Sec. 454 as
eligible to receive assistance from the
International Clean Technology Fund (ICTF).
Interagency Group—Group established by the
President under Sec. 453 to administer the ICTF.
International Clean Technology Account—The
account to which the Administrator allocates
allowances under Sec. 782(o) of the CAA.
Least Developed Country—A foreign country the
United Nations has identified as among the least
developed of developing countries.
Qualifying Activity—An activity that meets the
criteria in Sec. 445.
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Comments
Qualifying Entity—A national, regional, or local
government in, or a nongovernmental
organization or private entity located or operating
in, an eligible country.
Sec. 443. Governance
Summary of section
Comments
Establishes an International Clean Technology
Fund in the U.S. Treasury. An Interagency Group
is to consist of the Secretaries of State, Energy,
and the Treasury, the EPA Administrator, and any
other federal agency head or executive branch
appointee the President designates. The Secretary
of State is to chair the Group.
Sec. 444. Determination of Eligible Countries
Summary of section
Comments
Directs the President to publish a list of countries
The Development Assistance Committee of
eligible for assistance no later than January 1,
the Organization for Economic Co-operation
2012, and revise this list annually. Criteria for
and Development (OECD) will decide which
eligibility shall include developing countries that
countries are “developing countries,” and
have signed and ratified an agreement or treaty to
thus eligible to receive assistance.
undertake GHG mitigation activities; a
determination by the President that such activities It is noted that while a category of “least
will achieve substantial, measurable and
developed countries” is defined, there is no
verifiable GHG reductions (relative to business
subsequent mention or note of whether
as usual); and such other criteria as the President
specific advantage or disadvantage results
determines.
from such a designation (as compared to
“developing country” status).
Sec. 445. Qualifying Activities
Summary of section
Comments
Assistance under this subtitle may be provided
U.S. assistance is linked to “nationally
only to qualifying entities for clean technology
appropriate mitigation” strategies in the
activities that contribute to substantial,
eligible country to achieve “substantial
measurable, reportable, and verifiable reductions,
reductions, sequestration or avoidance of
sequestration, or avoidance of greenhouse gas
greenhouse gas emissions.” This may mean
emissions including—
that assistance is primarily targeted at
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industrializing economies with substantial
(1) deployment of technologies to capture and
GHG emissions.
sequester carbon dioxide emissions from electric
generating units or large industrial sources
The establishment of viable measuring and
reporting capabilities in developing countries
(2) deployment of renewable electricity
is recognized as a necessary tool in
generation from wind, solar, sustainably-
understanding GHG emissions impacts and
produced biomass, geothermal, marine, or
eventual mitigation.
hydrokinetic sources;
(3) substantial increases in the efficiency of
electricity transmission, distribution, and
consumption;
(4) deployment of low- or zero emissions
technologies that are facing financial or other
barriers to their widespread deployment which
could be addressed through support under this
subtitle in order to reduce, sequester, or avoid
GHG emissions;
(5) reduction in transportation sector emissions
through increased transportation system and
vehicle efficiency or use of transportation fuels
that have lifecycle greenhouse gas emissions that
are substantially lower than those attributable to
fossil fuel-based alternatives;
(6) reduction in black carbon emissions; or
(7) capacity building activities.
Sec. 446. Assistance
Summary of section
Comments
Authorizes the Secretary of State, in consultation
with the Interagency group, to provide assistance
from the ICTF for projects in eligible countries.
Assistance may be in the form of grants, loans, or
other assistance. Distribution of assistance from
the ICTF may be direct, via the World Bank or
other international development bank or
institution; through an international fund created
by the UNFCCC; or through some combination
of these mechanisms. The Interagency Group will
establish criteria for project selection. The
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Secretary of State shall monitor project
performance and shall have authority to terminate
assistance in whole or part for noncompliance
with the approved proposal.
Subtitle E. Adapting to Climate Change
Part 1. Domestic Adaptation
Subpart A. National Climate Change Adaptation Program
Summary of subpart
Comments
Directs the President to establish a National
Parts 1 and 2 establish cooperative federal
Climate Change Program within the U.S. Global
programs to reduce domestic and
Change Research Program (USGCRP) to
international vulnerabilities to climate
increase the effectiveness of federal climate
change, and to develop adaptation strategies
change adaptation efforts.
and plans. The Parts fund the new programs
with proceeds from distribution of
Establishes a National Climate Service within
allowances.
NOAA to develop climate information, forecasts
and warnings, and to distribute information
Part 1 establishes three overlapping domestic
related to climate impacts to state, local and tribal programs with distinct interagency
governments and the public.
coordination bodies, program offices,
requirements for assessments, adaption plans
Beginning no later than FY2012 and annually
and strategies, funding mechanisms, and
though 2050, the EPA Administrator must
reporting requirements. Part 2 addresses an
distribute emission allowances to states on the
international adaptation assistance program.
basis of population and the ratio of each state’s
per capita income relative to that of the United
States as a whole. Allowances must be sold
within one year, with proceeds deposited into the
State Energy and Environment Development
(SEED) Funds and used to support State Climate
Adaptation Plans according to rules promulgated
within two years of enactment. To be eligible to
receive these allowances, each state must gain
federal approval of its state climate adaptation
plan within two years of enactment. State
reporting and independent evaluation are required
within one year of receiving allowances and
every two years thereafter.
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Subpart B. Public Health and Climate Change
Summary of subpart
Comments
States the sense of the Congress that the federal
government should “use all practicable means
and measures” to assist the efforts of public
health professionals and communities to adjust
health systems to address impacts of climate
change, to ensure they have sufficient
information, to encourage research, to enhance
preparedness, and to encourage public education,
and to assist developing nations to prepare health
systems to respond to climate change.
Requires the Secretary of Health and Human
Services (HHS) to prepare a national strategic
action plan to prepare for and respond to public
health impacts of climate change in the United
States and other nations, in consultation with
relevant agencies and stakeholders. The plan
must be revised by 2014 and every four years
thereafter. Requires a public health needs
assessment from the National Research Council
and the Institute of Medicine within one year of
enactment.
A Climate Change Health and Protection Fund is
established in Treasury, without specification of
the source of resources to be deposited into the
Fund, except that the funds should supplement
existing sources of funding. The Secretary of
HHS may distribute funds from the Fund to
federal agencies, other governments, or other
entities, to carry out any of the provisions of the
health and climate change provisions in this
subtitle.
Subpart C. Natural Resource Adaptation
Summary of subpart
Comments
States that federal policy is “to use all practicable
means and measures to protect, restore, and
conserve natural resources to enable them to
become more resilient, adapt to, and withstand
the impacts of climate change and ocean
acidification” (hereafter “adapt to”).
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Summary of subpart
Comments
Directs the Chair of the Council on
Environmental Quality (CEQ) to advise the
President on development and implementation of
a Natural Resources Climate Change Adaptation
Strategy and federal natural resource agency
adaptation plans, and to coordinate such
strategies and activities. Each agency represented
on the Panel must consider climate change
impacts and ocean acidification in agency plans
and activities, and develop a Natural Resources
Climate Change Adaptation Strategy within one
year after development of the national adaptation
strategy. After approval by the President,
agencies must report these agency strategies to
relevant congressional committees.
Establishes a new Natural Resources Climate
Change Adaptation Panel as a forum for
coordination of related federal agencies’
adaptation strategies, plans, programs and
activities. CEQ is to chair the Panel. The Panel
must be established within 90 days of enactment
of the law, and include NOAA, Forest Service,
National Park Service, U.S. Fish and Wildlife
Service, Bureau of Land Management, USGS,
Bureau of Reclamation, Bureau of Indian Affairs,
EPA, Army Corps of Engineers, and CEQ. The
Panel must develop the Natural Resources
Climate Change Adaptation Strategy within two
years of enactment.
A Science Advisory Board appointed by the
Secretaries of Commerce and Interior shall
advise the Program. Its advice and
recommendations shall be publicly available.
Directs the Administrator of NOAA and the
Director of the U.S. Geological Survey (USGS)
to establish a Natural Resource Climate Change
Adaptation Science and Information Program, to
be led by the USGS National Global Warming
and Wildlife Center and the National Climate
Service in NOAA. This Program is to provide
technical assistance, research, monitoring tools,
and information. The Secretaries of Commerce
and Interior must conduct five-year surveys of
natural resources impacts of climate change and
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Comments
ocean acidification, monitoring of baselines and
trends, and stakeholder needs for monitoring,
research, and decision tools.
Establishes a fund in a new Natural Resources
Climate Change Adaptation Account in Treasury.
Specifies percentages of the amounts allocated
from the fund to states for various categories of
adaptation activities and resources. To be eligible
for more than three years for funding from the
new fund, each state must prepare a state natural
resources adaptation plan, to include priorities,
programs, measures of effectiveness, and to be
reviewed and updated every five years. Directs
percentages of the fund to support a variety of
agencies, governments, and programs.
Establishes a National Wildlife Habitat and
Corridors Information Program within DOI to
support States and Tribes to develop a geographic
information system of fish and wildlife habitat
and corridors for information and modeling of
climate change impacts and adaptation, and to
enhance state wildlife action plans.
Part 2. International Climate Change Adaptation Program
Summary of section
Comments
The Secretary of State, with the Administrators of
the U.S. Agency for International Development
(USAID) and EPA, and the Secretary of Treasury,
is to establish an International Climate Change
Adaptation Program.
Directs that an unspecified portion of allowances
be allocated to carry out an International Climate
Change Adaptation Program, supplementing
other available U.S. public resources for similar
activities. 40%-60% of these allowances may be
distributed to multilateral funds if any meet
specified conditions, and provided that at least 15
days advance notice is given to Congress. The
Secretary of State or other agency designated by
the President shall oversee the distribution of
allowances to multilateral funds or international
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Summary of section
Comments
institutions.
USAID may carry out programs and give
allowances to any private or public group to
assist with the development of adaptation plans
and projects to assist the most vulnerable
developing countries, support investments,
research programs and activities, and encourage
engagement of local communities. No more than
10% of the allowances distributed for bilateral
assistance in a year may support activities in any
one country. The USAID Administrator must
provide for consultation and disclosure of
information to stakeholders regarding any
programs or activities carried out under this
section.
The Administrator of USAID must report within
180 days after enactment, and within 18 months
to the President and Congress, and annually
thereafter. The reports would detail potential
impacts and ramifications, describe how
allowances were distributed, make
recommendations, and describe cooperation with
other countries and international organizations.
Congressional Research Service analysts contributing to this summary are:
• Richard Campbell, renewable energy
• Peter Folger, carbon capture and storage
• Jane Leggett, global warming adaptation
• Stan Kaplan, electricity grid
• Larry Parker, pollution reduction programs
• Jonathan Ramseur, pollution reduction programs
• Fred Sissine, energy efficiency
• Brent Yacobucci, transportation
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Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454
Author Contact Information
Mark Holt, Coordinator
Peter Folger
Specialist in Energy Policy
Specialist in Energy and Natural Resources Policy
mholt@crs.loc.gov, 7-1704
pfolger@crs.loc.gov, 7-1517
Gene Whitney, Coordinator
Stan Mark Kaplan
Section Research Manager
Specialist in Energy and Environmental Policy
gwhitney@crs.loc.gov, 7-7231
skaplan@crs.loc.gov, 7-9529
Brent D. Yacobucci
Richard J. Campbell
Specialist in Energy and Environmental Policy
Specialist in Energy Policy
byacobucci@crs.loc.gov, 7-9662
rcampbell@crs.loc.gov, 7-7905
Larry Parker
Jane A. Leggett
Specialist in Energy and Environmental Policy
Specialist in Energy and Environmental Policy
lparker@crs.loc.gov, 7-7238
jaleggett@crs.loc.gov, 7-9525
Jonathan L. Ramseur
Fred Sissine
Analyst in Environmental Policy
Specialist in Energy Policy
jramseur@crs.loc.gov, 7-7919
fsissine@crs.loc.gov, 7-7039
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