Climate Bill Seeks a Broad Coalition
Legislation Would Cap Greenhouse Gases, Hand Out Billions to Utilities

By Steven Mufson
Washington Post Staff Writer
Saturday, May 16, 2009

The congressional trek toward climate legislation inched forward yesterday as the House Energy and Commerce Committee released a 932-page bill chock-full of allowances and provisions designed to bring together a coalition of lawmakers, industries and environmental groups behind the regulation of greenhouse gases.

The bill was hailed by a diverse group including some of the country's biggest utilities and industries, a huge chunk of the environmental movement and leading Democrats, who said that committee Chairman Henry A. Waxman (D-Calif.) had forged a bill capable of winning support on a politically loaded issue that cuts across both regional and political lines.

"This bill marks the dawn of the clean-energy age," said Rep. Edward J. Markey (D-Mass.), co-author of the legislation.

But many economists and environmentalists criticized the proposed legislation's complexity, concessions to oil and coal industries, and compromises on targets for renewable energy use and reductions in greenhouse-gas emissions.

"It looks like our friends in the oil and utility sector got quite a cut for themselves while weakening energy efficiency and renewables," said Josh Dorner, a Sierra Club spokesman.

Experts said that billions of dollars would go to local electricity providers, oil companies and energy-intensive industries to blunt the impact of pricing carbon for years to come. Low- and middle-income earners would also get protection, but many economists said consumers would have been better served by simplifying or cutting taxes. Some groups also said that the opportunity to get credit for reducing emissions abroad could mean that there would be little to no new incentives for reducing emissions in the United States.

The legislation has several key components. It sets national targets for greenhouse-gas emissions, gradually lowering the overall level. Major emitters of the gases would need permits, which they could buy and sell among one another. But to win broad support, the committee made provisions to give away allowances to utilities, energy-intensive industries and others. Those firms could use the allowances to cover the use of carbon-based fuels or materials, or sell the allowances to other firms and reduce their own carbon dioxide emissions.

Compromises abound. The draft sets a goal of cutting emissions by 17 percent by 2020, below Waxman's initial goal of 20 percent. Major utilities said that even the lower number is ambitious, but some environmental groups said it falls short of what's needed to slow climate change.

The final bill also backtracks on targets for renewable-energy use, part of a proposed nationwide standard for utilities. Because 28 states already have tougher renewable energy standards for utilities, the weaker national standard could end up sparking only slightly more, or possibly less, renewable-energy use than the current patchwork, the Sierra Club said.

The bill would hand out, free, 30 percent of the nation's allowances to local electricity distribution companies. Half the nation's electricity comes from coal, and the idea is that this would protect consumers in areas most dependent on coal. Rep. Rick Boucher (D-Va.) led the push for this.

Lisa Zelljadt, a policy analyst with the consulting firm Point Carbon, said that, according to Environmental Protection Agency projections, allowances given to those companies would be worth $20.8 billion a year starting in 2012. Whether the companies are allowed to sell the allowances, enrich shareholders and pass along higher costs to consumers will be up to the public utility commissions in each state.

The bill also caught many observers by surprise by handing out free allowances to users of natural gas and home heating oil. Nine percent of the total allowances would go to gas utilities and 1.5 percent to programs for home-heating-oil assistance.

Oil refiners would also get 2 percent of allowances, and automobile companies would get allowances that could be worth $2 billion a year starting in 2012. The oil provision was considered crucial for winning support of Texas Democrats Charlie Gonzalez and Gene Green.

The bill seeks support from key lawmakers in the Midwest by setting aside 15 percent of the allowances for energy-intensive industries worried that higher carbon costs would give an advantage to competitors from countries without climate policies, such as China and India. This provision was championed by Reps. Jay Inslee (D-Wash.) and Mike Doyle (D-Pa.). The committee decided against a tariff on imports from those countries.

Supporters of the bill said that because the allowances would be phased out between 2020 and 2030, industrial users and utilities would still have incentives to invest in energy efficiency and renewable energy to cut carbon dioxide emissions: Those investments are long-term. But critics of the bill said that by muting price increases for consumers, the bill would undercut incentives for ordinary Americans to use energy more efficiently.

The next stop for the legislation is the House Ways and Means Committee, which could make revisions, especially in areas such as auctions, tariffs and taxes that are outside the Energy and Commerce Committee's jurisdiction. Then the measure must still win full House support and reconcile with a version from the Senate. But top Democrats said that because of the diverse makeup of the House Energy and Commerce Committee, something similar to the draft released yesterday would probably have enough support to get through the entire House.

"Waxman's bargaining has gained major utility and energy-intensive-industry support, key not only to committee approval, but to possible adoption by the full House," said Paul Bledsoe, communications director at the National Commission on Energy Policy.

"To see members who've been in different places on energy from the Rust Belt, oil patch and rural America come together . . . is a big deal," said Jeremy Symons, senior vice president at the National Wildlife Federation.

The Obama administration could bolster that unity through other measures, too. Yesterday, Energy Secretary Steven Chu, speaking to the National Coal Council, outlined how $2.4 billion in stimulus funds would be allocated to carbon capture and storage projects.

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