Updated on April 1 at 6:15 a.m. PDT with comments from utilities.
Updated on April 2, 3:05 p.m. PDT to address dispute over Boehner cost estimate.
The first draft of an energy and climate change bill calls for national mandates for renewable energy and energy efficiency but leaves crucial details on carbon regulations open for negotiation.
The House Energy and Commerce Committee on Tuesday released the first draft of the American Clean Energy and Security Act of 2009, (click for PDF) which its backers hope will be voted on this summer. Key figures for the bill in the House are Rep. Henry Waxman, who chairs the Energy and Commerce Committee, and Rep. Edward Markey, who chairs the Energy and Environment subcommittee.
The document was well received by clean-energy advocates on Tuesday but panned by political foes who complained that the global warming portions of the bill will amount to an energy tax on consumers.
According to a summary document (click for PDF), major provisions of the bill are:
A national renewable electricity mandate where utilities need to get 6 percent of power from solar, wind, biomass, or geothermal sources in 2012 and 25 percent in 2025. One-fifth of the requirement can be met with energy-efficiency measures.
A demonstration facility for carbon capture and sequestration where carbon dioxide from coal-burning power plants is stored underground.
Giving authority to the Federal Electricity Regulatory Commission for planning power grid modernization with smart-grid technology and upgrades to the transmission lines.
A single federal fuel-efficiency standard and low-carbon fuel standard for biofuels.
An "energy efficiency resource standard" to create incentives for electricity and natural gas companies to invest in customer efficiency programs.
A global warming reduction program modeled on recommendations from U.S. Climate Action Partnership, a coalition of large corporations advocating regulation. The target is a 20 percent reduction of greenhouse gas emissions below 2005 levels in 2020, 42 percent reduction in 2030, and 83 percent cut in 2050.
Programs to promote "green jobs," such as training, and rebates for heavily polluting industries that could be put at a competitive disadvantage from costs related to carbon regulations.
The proposals build on the significant energy and efficient-related investments already passed as part of the government stimulus package earlier this year. In general, green technology company executives and investors have said the stimulus plan can help the finance-challenged solar and wind industries in the short term and drive investment in smart-grid technologies and weatherization services.
In reaction to Tuesday's draft bill, environmental groups said that the bill moves the country in the right direction by lessening dependence on imported oil while investing in new green technologies.
"Firm limits on global warming pollution will drive investment to recharge our economy today and enhance our economic stability tomorrow. This discussion draft recognizes that we must act quickly to avoid the worst impacts of climate change and jump-start our economy with clean jobs," said National Resources Defense Council president Frances Beinecke in a statement.
House minority leader, Ohio Republican John Boehner, argued in a statement that the global warming-related portion of the bill will impose as much as $3,100 a year in energy-related costs on households during a recession.
How much and whether carbon regulations will raise electricity prices, is a source of debate. However, the author of a Massachusetts Institute of Technology (MIT) report (click for PDF), which is the source of Boehner's estimate, said that Boehner "misrepresented" the study.
MIT professor John Reilly, who published a study of cap and trade proposals in 2007, on Wednesday sent a letter to Boehner saying that actual number is closer to $340 per household per year, or about ten times less. (Click here for text of entire letter). The Republican party published a release on Thursday defending its cost estimate.
The cost of enacting climate change regulations remains a difficult question both practically and politically. The energy bill draft does not propose a specific mechanism for how a price is fixed to carbon dioxide emissions by heavy polluters. Some observers expect that an energy bill will only be passed this year if climate regulations are separated out.
At least two utilities on Wednesday supported the bill. Lew Hay, CEO of Florida-based FPL Group, a significant investor in wind and solar energy, said in a statement that the bill is a "bold blueprint" to confront "a triple threat of challenges: an economy in recession, an overdependence on foreign energy, and a warming planet."
While touting its actions on energy efficiency, National Grid also applauded the bill for addressing climate change but added that the entire country now needs a "clear framework" to reduce carbon emissions.
For more reaction to the draft bill, see the The New York Times, GreenWire, and Dow Jones.
In signing two executive orders on Monday, President Barack Obama made the first moves in a bold multi-pronged strategy to reshape energy policy and spur technology innovation.
At a press conference, the president ordered the Department of Transportation to establish rules by 2011 to raise fuel efficiency to an average of 35 miles per gallon by 2020.
He also ordered the Environmental Protection Agency to immediately review the denial of a waiver that would allow California and other states to set limits on tailpipe emissions.
In Washington, D.C., the moves signal a sharp change in direction from the Bush administration which was the first to block a waiver request from California and did not implement existing legislation that mandated a 40 percent increase in car and light truck fuel economy.
Technology entrepreneurs and investors got the signal, too. If firmer regulations around fuel efficiency take hold, the business for energy-efficient technologies in transportation technology starts to look more attractive.
"Right now, the investment community is thinking that by 2015, if we're lucky, electric vehicles may be one percent of the marketplace--that's not very many," said Bilal Zuberi, an investor at venture-capital firm General Catalyst Partners. "But if that becomes larger and becomes nearer, then that's pretty interesting."
If California adopts stricter greenhouse gas emissions levels, at least 13 other states and the District of Columbia are expected to adopt those mandates. That effectively creates a larger market for fuel-efficient technologies like electric vehicles, efficient transmissions, or lighter vehicle materials.
Zuberi said technology investors typically have a seven- or eight-year window for making a financial return. Knowing that there is demand for fuel-efficient technologies allows investors to invest with more confidence and a better-understood timescale.
The auto technology companies themselves can also develop and validate products faster, he added. Established car companies could also seek to acquire auto start-ups.
Not so fast
Through its industry association, automakers quickly voiced their opposition to granting California its waiver, underscoring the difficulty of establishing tougher environmental standards in an ailing industry.
The Alliance of Automobile Manufacturers issued a statement on Monday calling for a set of national regulations to limit greenhouse gas emissions. It noted that, at the moment, there are effectively three "voices" influencing fuel economy and carbon dioxide emission regulations: the EPA, California, and the National Highway Traffic Safety Administration (NHTSA).
It also urged the administration to have the higher fuel efficiency standards to go into effect for model year 2011 cars "because automakers are working on their product plans now and need the certainty of final standards," according to the statement.
General Catalysts' Zuberi noted that large automakers typically make less money on small, fuel-efficient cars. Changing the mix of their sales to include more fuel-efficient vehicles will force them to innovate on technology or manufacturing, he argued.
Environmental groups, meanwhile, praised the move.
"The cleaner cars he will help put on the road will show us the way to reduce our dangerous dependence on oil and will push automakers to make the cars that the world will want and need in the 21st Century," wrote Dave Hawkins, head of the climate center at the Natural Resources Defense Council.
Other shoes to drop
During Obama's press conference--his first official event in the East Room of the White House--he indicated that the proposed changes in transportation policy are part of broader set of measures his administration is rapidly lining up on energy and environment.
A proposed $825 billion stimulus package includes billions of dollars in tax incentives and direct government spending on clean-energy programs.
In addition to repeating the administration's pledge to doubling the amount of renewable energy in the country in three years, Obama on Monday said that the stimulus plan calls for laying 3,000 miles of new transmission lines--considered crucial for moving wind and solar power to different corners of the country.
The plan also has billions for dedicated to weatherizing two million homes and saving $2 billion a year by making 75 percent of federal buildings more energy efficient.
"Embedded in America's soil, wind, and sun, we have the capacity to change," Obama said. "It will be the policy of my administration to reverse our dependence of foreign oil while creating a new energy economy that will create millions of jobs."
In transportation, plug-in electric or all-electric vehicles do promise to bring a jump in fuel efficiency. All major automakers are preparing some form of electric sedans to be first released in the next two years.
But the policies outlined by Obama on Monday only address a portion of the policies needed to get electric car on the roads en masse, said Brian Wynne, the president of the Electric Drive Transportation Association.
Auto suppliers are not yet prepared to meet a huge spike in demand for electric cars, in particularly the lithium-ion batteries planned for these vehicles.
"There's little doubt this will impact the demand for greener vehicles across the board," said Wynne. "But trying to transition to deployment and a new manufacturing infrastructure for advanced electric vehicles as the auto industry is shedding capacity is a big challenge."
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