Let me start by warning/notifying readers that this week will see a lot of posts about Waxman-Markey.  The name of this blog is Climate Progress — and I so rarely get to blog on actual climate progress!

This is, after all, the first bill to require reductions in global warming pollution ever considered by a House committee, let alone one with a very serious chance of passing. Also, it is a complicated and controversial bill (big PDF here) and recent articles suggest that the traditional media is not going to do a terrific job of explaining the issues.

And this is the key week:

On Monday, May 18, 2009, at 1:00 p.m. in room 2123 Rayburn House Office Building, the full Committee on Energy and Commerce will meet in open markup session to consider H.R. 2454, the American Clean Energy and Security Act of 2009 (ACES Act) comprehensive energy legislation to deploy clean energy resources, increase energy efficiency, cut global warming pollution, and transition to a clean energy economy.

So begins a memo to the committee from the majority staff.

The revolution will be televised!  On C-SPAN3 (here).  And that immediately brings up the possibility of a drinking game.  And you can certainly get plastered faster than “The historic 2008 election drinking game” (in which you took one shot every time you heard the word “historic”).

driking-game.jpg

Today, just take one shot every time a conservative says “tax” or anyone says “jobs.” I guarantee you’ll be plastered faster than you can say American Clean Energy and Security Act of 2009, which may not be a bad thing, given how mind-numbing a mark up can be — and how inane most of the GOP’s 450 planned amendments to Waxman-Markey are, not to mention the possibility they may force a reading of the entire bill.

More seriously, the memo contains an extended summary of the major provisions in the bill.  I will summarize the part of the summary on the climate title below:

Title III – REDUCING GLOBAL WARMING

Section 301, Short Title: Safe Climate Act.

Subtitle A – Reducing Global Warming Pollution

Section 311, Section 312, and Section 321, Reducing Global Warming Pollution: Establishes Title VII of the Clean Air Act to provide a declining limit on global warming pollution and to hold industries accountable for pollution reduction under the limit. Adds definitions to section 700 of the Clean Air Act.

Title VII – GLOBAL WARMING POLLUTION REDUCTION PROGRAM

Part A – Global Warming Pollution Reduction Goals and Targets

Section 701, Findings and Purposes

Section 703, Reduction Targets for Specified Sources: Directs the EPA Administrator to issue regulations to reduce emissions of covered sources to 97% of 2005 levels by 2012, 83% by 2020, 58% by 2030, and 17% by 2050.

Section 704, Supplemental Pollution Reductions: Directs the Administrator to achieve additional low-cost reductions in global warming pollution by using a small portion of the emissions allowances to provide incentives to reduce emissions from international deforestation.

Note:  This provision is definitely a big deal.  It would another 10 percentage points of reductions — 700 million metric tons of emissions reductions a year — in avoided deforestation.

Section 706, National Academy Review: Directs the Administrator to commission reports from the National Academy of Sciences every four years. These reports will include: an update on the progress of various clean technologies, and an evaluation of the most recent EPA report submitted under Section 705 . The reports will identify steps that could be taken to better improve our understanding of climate impacts, improve monitoring and verification, speed the deployment of clean technology, and any additional reductions in emissions that may be needed to avoid dangerous climate change.

Section 707, Presidential Response and Recommendations: Directs the President to use existing authority to respond to recommendations in the reports. If the National Academy review confirms that further emissions reductions are needed, either domestically or globally, the President must submit a report to Congress recommending steps (including legislation) to achieve those reductions.

Again, the targets can be tightened as warranted by the science.  This does require congressional action, of course.

Part B – Designation and Registration of Greenhouse Gases

711, Designation of Greenhouse Gases: Establishes a list of greenhouse gases regulated under this title: carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons (HFCs) emitted as a byproduct, perfluorocarbons, and nitrogen trifluoride. The Administrator may designate additional anthropogenic greenhouse gases by rule.

Section 713, Greenhouse Gas Registry: Directs EPA to establish a federal greenhouse gas registry and comprehensive reporting system for greenhouse gas emissions.

Part C – Program Rules

Section 721, Emission Allowances: Establishes an annual tonnage limit on greenhouse gas emissions from specified activities. Directs the Administrator to establish allowances equal to the tonnage limit for each year (with one allowance representing the permission to emit one ton of greenhouse gases, measured in tons of carbon dioxide equivalent).

Section 722, Prohibition of Excess Emissions: Prohibits covered entities from emitting or having attributable greenhouse gases in excess of their allowable emissions level, which is determined by the number of emission allowances and offset credits they hold. Electricity generators, liquid fuel refiners and importer, and fluorinated gas manufacturers are covered starting with emissions in 2012. Industrial sources that emit more than 25,000 tons of carbon dioxide equivalent per year are covered starting with emissions in 2014. Local distribution companies that deliver natural gas are covered starting with emissions in 2016.

In addition to emission allowances, covered entities are able to offset up to 2 billion tons of emissions by using EPA-approved domestic and international offset credits, split evenly between international and domestic offsets. The ability to use these offsets is divided pro rata among all covered entities. If the Administrator determines an insufficient number of domestic offsets are available, the number of international offsets available may be increased up
to 1.5 billion metric tons.
Beginning in 2017, covered entities using offsets must submit five tons of international offset credits for every four tons of emissions being offset. Covered entities may also submit an international emission allowance or compensatory allowance in place of a domestic emission allowance.

I am not a fan of this potential expansion in international offsets, but then again, I am now in the camp that says substantial domestic reductions will be cheaper than the vast majority of international offsets

Section 723, Penalty for Noncompliance: Establishes penalties for parties that fail to comply with the program guidelines.

Section 725, Banking and Borrowing: Permits unlimited banking of allowances for use during future compliance years. Establishes a two-year rolling compliance period by allowing covered entities to borrow an unlimited number of allowances from one year into the future. Covered entities may also satisfy up to 15% of their compliance obligations by submitting emission allowances with vintage years 2 to 5 years in the future, but must pay an 8% premium (in allowances) to do so.

Section 726, Strategic Reserve: Directs the Administrator to create a “strategic reserve” of 2.5 billion metric tons of emission allowances by setting aside a small number of allowances from each year’s tonnage limit. Establishes rules for releasing allowances from the reserve and for refilling the reserve if allowances from the reserve are sold.

I may do a post later this week on the strategic reserve.  It is actually a pretty clever idea for an additional cost containment measure (really, more of a, price-spike-avoidance measure), one that should be popular with all sides of the issue.

Part D – Offsets

Section 731, Offsets Integrity Advisory Board: Establishes an independent Offsets Integrity Advisory Board composed of scientists and others with relevant expertise. The Advisory Board is charged with providing recommendations to the Administrator on: the types of offset project types that should be listed by EPA as eligible; potential levels of scientific uncertainty associated with certain offset types; appropriate quantification or other methodologies; and other areas of the offsets and deforestation provisions in the draft. The Board is also charged with conducting a regular review of all relevant areas.

Section 732, Establishment of Offsets Program: Directs the EPA Administrator to establish an offsets program and requires that regulations ensure offsets are verifiable, additional, and permanent.

Section 733, Eligible Project Types: Requires the Administrator to establish a list of offset project types that are eligible under the program, taking into account the recommendations of the Offsets Integrity Advisory Board. Provides guidelines for establishing and updating the list.

Section 734, Requirements for Offset Projects: Requires that for each offset project type, the Administrator establish standardized methodologies for determining additionality; establishing baselines; measuring performance; accounting for leakage; discounting for uncertainty; and addressing reversals.

Sections 735 – 737, Approval and Verification of Offset Projects; Issuance of Offset Credits: Establishes procedures to approve and verify offset projects. Requires the use of accredited third-party verifiers. Directs the Administrator to issue offset credits only if the emissions reduction or sequestration has already occurred and other specified conditions are met.

Section 738, Audits: Requires the Administrator to conduct, on an on-going basis, random audits of offset projects, offset credits, and practices of third-party verifiers.

Section 741, Environmental Considerations: Provides requirements for additional environmental considerations for forestry projects.

These sections are very important because they make the domestic offsets much more credible (see “How I learned to stop worrying and love Waxman-Markey, Part 2: In praise of domestic offsets“).

Section 743, International Offset Credits: Allows the Administrator to issue international offset credits for activities that take place outside the United States. Requires that all international offset credits must meet the criteria established in preceding sections, unless for specified types of international offset credits compliance is infeasible and other safeguards for environmental integrity are established. In addition, requires that the United States be a party to a bilateral or multilateral agreement or arrangement with the country where an offset activity would take place before any international offset credits can be issued.

Requires the Administrator, in consultation with the Secretary of State, to identify sectors in specific countries in which the issuance of international offset credits on a sector-wide basis is appropriate. Establishes the terms under which the Administrator may issue international offset credits for other international instruments, specifically requiring a determination that the issuing international body has implemented substantive and procedural requirements for the relevant project type that provide equal or greater assurance of environmental integrity.

Establishes procedures and requirements regarding the issuance of international offset credits for activities that reduce deforestation. For major emitting nations, international offset credits can only be issued for national-scale activities, or for state or province-level activities in states or provinces that would themselves be considered major emitters. Smaller-scale offset projects are only allowed in countries that generate less than 1% of global greenhouse gas emissions as well as less than 3% of global forest sector and land use change emissions. All countries must transition to national baselines to continue generating credits.

These sections are very important because they make the international offsets much more credible.

Part E – Supplemental Emissions Reductions from Reduced Deforestation

Section 751-752, Definitions and Findings: Defines forest carbon activities and finds that land use change, primarily deforestation, accounts for roughly 20% of global greenhouse gas emissions.

Section 753, Supplemental Emissions Reductions through Reduced Deforestation: Directs the Administrator of EPA, in consultation with the Administrator of USAID, to establish a program to build capacity in developing countries to reduce emissions from deforestation (including preparation to participate in international markets for deforestation reduction credits), to achieve emissions reductions in addition to those achieved under the domestic emissions limit, and to protect intact forest from any shifts in land use as a result of reduced deforestation in other areas.

Section 754, Requirements for International Deforestation Reduction Program: Directs the Administrators of EPA and USAID to support a broad range of activities to reduce deforestation, create markets for deforestation reduction credits, and reduce the leakage of emissions. Activities supported through this program must be environmentally sound and should protect the rights of indigenous groups and local communities. Support for emissions reductions must ensure that countries are transitioning to nationwide accounting of reduced deforestation.

Subtitle B – Disposition of Allowances

I am not going to repe
at their summary of the allowance distribution.  I have posted on Friday a better summary, with commentary — and your comments — here.

Section 331, Greenhouse Gas Standards: Establishes Title VIII of the Clean Air Act to achieve additional greenhouse gas reductions outside of Title VII.

Title VIII – ADDITIONAL GREENHOUSE GAS STANDARDS

Section 811, Standards of Performance: Requires the Administrator to use existing Clean Air Act authority (section 111) to set greenhouse gas emission performance standards for certain sources with greenhouse gas emissions that are not subject to the annual tonnage limit in Title VII. Precludes the Administrator from using existing Clean Air Act section 111 authority to issue standards for entities covered by Title VII that directly emit greenhouse gases.

Part C – Exemptions from Other Programs

Section 831, Criteria Pollutants: Provides that greenhouse gases may not be listed as criteria air pollutants on the basis of their effect on climate change.

Section 832, Hazardous Air Pollutants: Provides that greenhouse gases may not be listed as hazardous air pollutants on the basis of their effect on climate change.

Section 833, New Source Review: Provides that New Source Review shall not apply to greenhouse gas emissions.

Section 834, Title V Permits: Provides that greenhouse gases shall not be considered when determining whether a stationary source is required to operate pursuant to a permit under Title V.

Section 835, Existing Proceedings: Provides that this Act does not affect the requirements to be applied in existing administrative proceedings or litigation initiated under the Clean Air Act prior to the date of enactment, such that this legislation does not interfere with or determine the outcome of ongoing permit appeals. Further provides that new electric utility units subject to performance standards adopted under this Act are not subject to any new source review requirements with respect to greenhouse gas emissions.

All this exemption makes some people unhappy, I know, but Congress is establishing the EPA’s regulatory authority over GHGs in this bill, and it is not surprising that they spell this all out.  The Clean Air Act can be used for some limited and piecemeal regulation of GHGs (especially new sources), as the Supreme Court made clear, but no one I know in the administration thinks it is a better way to establish an economy-wide shrinking cap for GHGs than congressional action like Waxman-Markey.

Section 332, HFC Regulation: Regulates the production and consumption of HFCs, many of which are extremely potent greenhouse gases, under a separate limit and reduction schedule. Allowances are distributed through a combination of annual auctions and non-auction sales based on the auction price. HFC consumption will be phased-down to 15% of the baseline by 2032. Offset credits can be obtained through the destruction of chlorofluorocarbons (CFCs), which contribute to global warming and deplete the stratospheric ozone layer.

Section 333, Black Carbon: Directs the Administrator to report on existing efforts to reduce domestic black carbon pollution and, if necessary, to use existing authority to achieve further reductions. Directs the Administrator, in coordination with the Secretary of State, to report to Congress on current and potential future assistance to foreign nations to help reduce black carbon pollution.

Section 334, States: Preserves states’ existing authority to adopt and enforce standards or limitations on air pollution under the Clean Air Act, including greenhouse gas emissions.

Section 335, State Programs: Bars states from implementing or enforcing a cap on greenhouse gas emissions between the years 2012 to 2017, but allows regulation of emissions by other means during this period.

Subtitle D – Carbon Market Assurance

Section 341, Oversight and Assurance of Carbon Market: Amends the Federal Power Act to provide for strict oversight and regulation of the new markets for carbon allowances and offsets. Ensures market transparency and liquidity and allows trading in carbon allowance futures so that regulated entities can protect themselves against future cost increases and obtain the allowances they need for compliance at a fair price. The Federal Energy Regulatory Commission is charged with regulating the allowance and offset markets. The President is empowered to delegate regulatory responsibility for the derivatives markets to an appropriate agency, based on the advice of an interagency working group. Protects market participants from speculation and manipulation of carbon prices, including default position limits of 10% on carbon

If any of these summary descriptions pique your curiosity, the full bill can be found here.

But, of course, the bill be amended this week during mark up.  Cheers!