Details On Allocation Of Emission Allowances Under ACES

May 15: Following yesterday's release by the Committee on Energy and Commerce of details of agreements on a Combined Efficiency and Renewable Electricity Standard (RES); allocation of allowances to the automobile industry; and major provision for the allocation of allowances to major energy-intensive, trade-exposed industries [See WIMS 5/14/09] ; Chairman Henry Waxman (D-CA) and Subcommittee Chairman Ed Markey (D-MA) released a document summarizing how the emission allowances will be allocated in the current version of the American Clean Energy and Security Act of 2009 (ACES). The Committee is scheduled to begin the markup on Monday, May 18, at 1:00 PM, and Chairman Waxman has pledged to get the bill approved by the full Committee before the Memorial Day recess.

According to the 2-page summary, emission allowances will be allocated to accomplish three primary goals: (1) to protect consumers from energy price increases; (2) to assist industry in the transition to a clean energy economy; and (3) to spur energy efficiency and the development and deployment of clean energy technology. A small amount of allowances will be allocated to prevent deforestation and support national and international adaptation efforts and for other purposes.

Under consumer protections the Committee lists protection from Electricity Price Increases; Natural Gas Price Increases; Home Heating Oil Price Increases; and protections for Low- and Moderate-Income Households. The electricity sector will receive 35% of the allowances, representing 90% of current utility emissions; and local electric distribution companies will receive 30% of the allowances. Merchant coal and long-term power purchase agreements will receive 5% of the allowances. The allowances will be distributed according to a formula recommended by the utility industry. Local natural gas distribution companies will receive 9% of allowances, and states will receive 1.5% of allowances for programs to benefit users of home heating oil and propane. All allowances would phase out over a five-year period from 2026 through 2030.

15% of allowances will be auctioned each year and the proceeds of these allowances will be distributed to low- and moderate-income families to protect them from other energy cost increases. These allowances will be distributed through tax credits, direct payments, and electronic benefit payments and will not phase out.

Under the Transition Assistance for Industry, protection would be provided for Energy-Intensive, Trade-Exposed Industries, as described in the Inslee-Doyle agreement announced earlier [See WIMS 5/14/09]. In addition, oil refiners will receive 2% of allowances starting in 2014 and ending in 2026.

Under Energy Efficiency and Clean Energy Technology allowances would be provided for: Investments in Carbon Capture and Sequestration; Renewable Energy and Energy Efficiency; Advanced Automobile Technology; Research and Development. Additional allowances would be provided for Other Public Purposes including: Supplemental Reductions from Preventing Tropical Deforestation; Domestic Adaptation (wildlife and natural resource protection, public health and other domestic adaptation purposes); International Adaptation and Clean Technology Transfer; and Worker Assistance and Job Training. Unallocated allowances will be auctioned to ensure budget neutrality and the remainder will be used for consumer protection.

While the Committee Democrats have generally agreed to the compromise bill designed to accommodate the diversity of issues and interests within their party, Republicans have remained opposed to the bill. On May 14, Republicans members of the Committee, led by Ranking Member Joe Barton, (R-TX), outlined what they are proposing as an alternative to the Waxman-Markey. They said their bill will be offered during the bill’s markup beginning next week.

Among other items the Republican bill would amend the Clean Air Act to overturn Massachusetts v. EPA; preempts state authority to regulate certain fuels and all gases from CAA regulation; provide regulatory certainty to once again invest in coal-fired generation; provide an all-encompassing alternative to a renewable portfolio standard; expand nuclear power development and open Yucca Mountain; repeals “decoupling” mandates; Retire the Vehicle Incentive Rebate program; create federal transmission grid facility siting authority; create a Volunteer Service Corps to focus on reforestation; expand exploration & production in the Outer Continental Shelf, Arctic coastal plain, and Oil Shale; provide tax incentives for alternative fuel vehicles and a $500 million prize for the first U.S. automobile manufacturer to produce and sell 50,000 economically feasible, super-fuel-efficient vehicles reaching 100 miles-per-gallon; encourage the use of clean coal-to-liquid technology; and provide a trust fund to promote the development of renewable and alternative energy.

Access the complete summary of allocation of the allowances (click here). Access a summary of the Republican bill (click here); and the complete draft (click here).