House passes sweeping energy, climate bill
Sets mandatory caps on greenhouse gases for first time ever. Aims to make renewable energy cost competitive with fossil fuel. Opponents worry over cost.
NEW YORK (CNNMoney.com) -- The House approved a sweeping energy and climate bill Friday which could for the first time usher in widespread government restrictions on greenhouse gases and help renewable energy become cost competitive with fossil fuels.
The bill passed 219-212, with virtually no Republican support.
The central part of the legislation limits the amount of carbon dioxide, the main gas behind global warming, that companies like electric utilities, gasoline refiners, chemical firms and other large users of energy can put into the atmosphere. There were previously no restrictions on carbon dioxide emissions.
The bill aims to cut greenhouse gas emissions by over 80% by 2050, in-line with what scientists say is needed to avoid the worst effects of global warming.
Meeting those targets is expected to cost the average household $175 a year by 2020, according to a recent analysts by the Congressional Budget Office.
But that estimate is widely disputed, with opponents saying it will cost far more and supporters saying consumers will actually save money by reducing their energy use.
Consumers will mainly see this cost increase in the form of higher electric bills and gas prices. The impact on the Federal budget is minimal, with one analysis suggesting that it could actually increase revenues a bit.
Opposition to the bill stemmed largely from the costs. House leadership and the Obama administration struggled all week to bring their own party together on the issue, and it was a tough sell. Several Democrats from coal producing or big manufacturing states voted against the measure, afraid of what higher energy prices may mean for their constituents. Most all Republicans voted against it.
While some environmental groups and lawmakers also opposed the bill on the grounds it was too weak, it has the support of many mainstream environmentalists as well as several of the industries it will regulate.
The bill now heads to the Senate, which isn't expected to take up the matter until the fall. There's considerably more opposition to the plan in the Senate.
But the Obama administration, which would like some domestic progress on cap-and-trade when U.S. negotiators show up in Copenhagen at the end of the year to hammer out a successor to the Kyoto Treaty, will likely keep pressure on Congress. This is currently being done by a thinly veiled threat to use the EPA to regulate greenhouse gases, a process most observers say would be even costlier than a cap-and-trade plan.
The bill also includes a requirement that utilities get at least 20% of their power from renewable sources by 2020, hikes building efficiency standards 50% by 2016, and includes over $20 billion for electric car research and development.
Environmentalists and other clean energy advocates have been saying for years the nation needs to put a price on carbon dioxide if it wants to let cleaner forms of energy compete with cheaper fossil fuels and avoid the potentially disastrous effects of global warming. But up until now, those efforts have failed.
Just 10 years ago the Senate rejected the Kyoto Treaty - a similar plan to the one passed Friday - by a vote of 95 to zero.
But in the intervening years public and scientific opinion around climate change has shifted. High energy prices, Hurricane Katrina, and the buzz over Al Gore's movie "An Inconvenient Truth" have all been cited as reasons for the change.
But mostly it's the scientific opinion that's changed, with scientists becoming more certain that global warming is happening, caused largely by humans and may have serious consequences.
Earlier this month, government scientists at the National Oceanic and Atmospheric Administration said evidence of climate change was already apparent in the United States, and that "the current trend in the emission of greenhouse gas pollution is significantly above the worst-case scenario that this and other reports have considered."
It went on to say that heat waves will become more intense, leading to human health problems and affecting crop and livestock production; water shortages will increase; ocean waters will rise, killing coral reefs and impacting tourism and fisheries; greater outbreaks of insect infestations and wildfires will occur; and rising sea levels will inundate coastal buildings and infrastructure.
If greenhouse gases are not curbed, by 2100 damages from global warming could cost the country $1.8 trillion a year, according to a study by The Natural Resources Defense Council.
This is where the House bill comes in. Known as Waxman-Markey after its two sponsors, Henry Waxman (D-Calif.) and Ed Markey (D-Mass.), the bill attempts to reduce greenhouse gas emissions through a system known as cap-and-trade.
Under a cap-and-trade plan, the government requires companies emitting large amounts of greenhouse gases to obtain a permit for each ton they emit each year.
Most of these companies are electricity generators, including big industry that generates its own power. The number of permits issued each year is then reduced. As the more limited supply of permits increases their price, companies can either pay to install cleaner equipment, fund carbon-offset projects like tree farms, or buy these permits on a secondary market from other companies that have cleaned up their operations and now have extra permits to sell.
The ultimate goal is to make fossil fuels, the main source of energy and of man-made carbon emissions, more expensive and low carbon technologies like wind, solar and nuclear more competitive.
While the overall costs of the program are huge - over $100 billion a year - the bill pumps much of this money back into the economy and into consumers' pockets. It requires the electricity generators to buy the permits from local utilities, which receive them free from the government, or to buy them from the government itself.
Then this money will be used for a host of programs that benefit electricity users including energy efficiency retrofits, tax credits for low income families hard hit by the price increase, and subsidies for the steel, concrete and chemical industries that might suffer from competition with companies in countries that don't have a cap-and-trade law.
This is how the CBO came to estimate the household cost as a relatively low $175.
For some, any price increase is too much.
"I don't think it maters what the number is," said Laura Henderson, a spokeswoman for the Institute for Energy Research, which opposed the bill. "We're in a recession. People can't afford an increase in something they need so much."
The bill is bound to face stiff opposition from Senate members hearing similar concerns from their constituents.
"In a year when we haven't seen much of an economic recovery, going forward with a bill that will raise prices is probably going to be difficult," said Whitney Stanco, an energy policy analyst at Concept Capital.
Eventually, Stanko thinks that companies will have to pay to emit carbon.
"In our view Congress will likely be compelled to enact greenhouse gas emissions legislation rather than let the EPA regulate," said Stanco, although she said that might not happen until after the 2010 elections.
In the meantime, opponents will continue to use the cost issue to fight the bill, as well as a more ideological approach.
Some, including most economists, say a simple carbon tax would be a more efficient way to reduce greenhouse gases.
Many in the political sphere oppose a cap-and-trade plan right now because they say the benefits don't outweigh the costs. In short, they don't think global warming will present as big of a problem as some say, and argue that it will be far cheaper to deal with the issue in the future when the costs of cleaner energy technology falls.
It's not a view shared by most scientists that study the issue.
"Implementing sizable and sustained reductions in carbon dioxide emissions as soon as possible would significantly reduce the pace and the overall amount of climate change," the NOAA scientists wrote, "and would be more effective than reductions of the same size initiated later."