# Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House of Representatives > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR40643 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** July 27, 2009 - **Citation:** R40643 ## Text Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House of Representatives Updated July 27, 2009 Congressional Research Service https://crsreports.congress.gov R40643 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary H.R. 2454, the American Clean Energy and Security Act of 2009, was introduced May 15, 2009, by Representatives Waxman and Markey, and was subsequently modified (both technical and substantive changes) and ordered reported by the House Committee on Energy and Commerce on May 21, 2009. The bill was reported (amended) June 5 (H.Rept. 111-137, Part I). It was passed in the House on June 26, 2009, by a recorded vote of 219-212. H.R. 2454 contains provisions that would amend the Clean Air Act to establish a cap-and-trade system designed to reduce greenhouse gas emissions from covered sources 17% below 2005 levels by 2020 and 83% below 2005 levels by 2050. The market-based approach would establish an absolute cap on the emissions and would allow trading of emissions permits (“allowances”). The bill achieves its broad coverage through an upstream compliance mandate on petroleum and most fluorinated gas producers and importers, and a downstream mandate on electric generators and industrial sources, and a midstream mandate on natural gas local distribution companies (LDCs). The bill allocates a substantial percentage of the allowances for the benefit of energy consumers and low-income households. As the program proceeds through the mid-2020s it shifts to more government auctioning with most of the proceeds returned to households. The bill’s allocation scheme includes free allowance allocations to energy-intensive, trade-exposed industries, merchant coal-fired electric generators, and petroleum refiners. An important cost control mechanism in the cap-and-trade program is the availability of domestic and international offsets. The bill contains energy efficiency provisions that cover grants, standards, rebates and other programs for buildings, lighting and commercial equipment, water-using equipment, wood stoves, industrial equipment, and healthcare facilities. H.R. 2454 contains several provisions related to vehicles and fuels, including incentives to produce plug-in vehicles and other advanced technology vehicles. Three percent of allowances from the greenhouse gas cap-and-trade program would be allocated to the automotive sector to provide grants to refit or establish plants to build plug-ins and other advanced vehicles. The bill directs the Environmental Protection Agency (EPA) to establish greenhouse gas emissions standards for various transportation sectors. The bill would also significantly modify the definition of “renewable biomass” under the renewable fuel standard (RFS), expanding the allowable pool of agricultural and forestry feedstocks that could be used. The bill requires EPA to develop a unified national strategy for addressing the key legal and regulatory barriers to deployment of commercial scale carbon capture and sequestration. The legislation would amend the Public Utility Regulatory Policies Act of 1978 (PURPA) to create an integrated energy efficiency and renewable electricity standard starting in 2011, requiring retail electricity suppliers to meet 20% of their electricity demand through renewable energy sources and energy efficiency by 2020. The bill provides for smart grid technologies, including products that can be equipped with smart grid capability, requirements for electric power retailers to reduce their peak loads using smart grid and other energy efficient technologies, and requirements that power suppliers ensure that utility smart grid systems will be compatible with plug-in electric drive vehicles. Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Contents Introduction and Overview of Legislation....................................................................................... 1 Combined Efficiency and Renewable Electricity Standard ...................................................... 1 Geologic Sequestration of Carbon Dioxide .............................................................................. 2 Vehicles and Fuels ..................................................................................................................... 3 Smart Grid ................................................................................................................................. 3 Energy Efficiency ...................................................................................................................... 4 Major Cap-and-Trade Provisions .............................................................................................. 6 Provisions in Title V Added by the “Manager’s Amendment” ............................................... 10 Title I—Clean Energy ................................................................................................................... 13 Subtitle A—Combined Efficiency and Renewable Energy Standard ..................................... 13 Sec. 101. Combined Efficiency and Renewable Energy Standard ................................... 13 Sec. 102. Clarifying State Authority to Adopt Renewable Energy Incentives .................. 15 Sec. 103. Federal Renewable Energy Purchases ............................................................... 16 Subtitle B—Carbon Capture and Sequestration ...................................................................... 16 Sec. 111. National Strategy ............................................................................................... 16 Sec. 112. Regulations for Geologic Sequestration Sites ................................................... 17 Sec. 113. Studies and Reports ........................................................................................... 17 Sec. 114. Carbon Capture and Sequestration Demonstration and Early Deployment Program ..................................................................................................... 18 Sec. 115. Commercial Deployment of Carbon Capture and Sequestration Technologies .................................................................................................................. 20 Sec. 116. Performance Standards for Coal-Fueled Power Plants ..................................... 22 Subtitle C—Clean Transportation ........................................................................................... 24 Sec. 121. Electric Vehicle Infrastructure ........................................................................... 24 Sec. 122. Large-Scale Vehicle Electrification Program .................................................... 24 Sec. 123. Plug-in Electric Drive Vehicle Manufacturing .................................................. 25 Sec. 124. Investment in Clean Vehicles ............................................................................ 26 Sec. 125. Advanced Technology Vehicle Manufacturing Incentive Loans ....................... 26 Sec. 126. Definition of Renewable Biomass..................................................................... 26 Sec. 127. Open Fuel Standard ........................................................................................... 27 Deleted Old Sec. 128. Temporary Vehicle Trade-in Program (New Sec. 128 Below)............................................................................................................................ 27 Sec. 128. Diesel Emissions Reduction .............................................................................. 28 Sec. 129. Loan Guarantees for Projects to Construct Renewable Fuel Pipelines ............. 28 Sec. 130. Fleet Vehicles .................................................................................................... 28 Sec. 130A. Report on Natural Gas Vehicle Emissions Reductions ................................... 28 Subtitle D—State Energy and Environment Development Accounts ..................................... 29 Sec. 131. Establishment of SEED Funds .......................................................................... 29 Sec. 132. Support of State Renewable Energy and Energy Efficiency Programs ............. 29 Sec. 133. Support of Indian Renewable Energy and Energy Efficiency Programs .......... 30 Subtitle E—Smart Grid Advancement .................................................................................... 31 Sec. 141. Definitions (no summary or comments) ............................................................ 31 Sec. 142. Assessment of Smart Grid Cost-Effectiveness in Products ............................... 31 Sec. 143. Inclusions of Smart Grid Capability on Appliance ENERGY GUIDE Labels ............................................................................................................................. 31 Sec. 144. Smart Grid Peak Demand Reduction Goals ...................................................... 32 Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Sec. 145. Reauthorization of Energy Efficiency Public Information Program to Include Smart Grid Information .................................................................................... 33 Sec. 146. Inclusion of Smart-Grid Features in Appliance Rebate Program ...................... 33 Subtitle F—Transmission Planning......................................................................................... 34 Sec. 151. Transmission Planning and Siting ..................................................................... 34 Sec. 152. Net Metering for Federal Agencies ................................................................... 36 Sec. 153. Support for Qualified Advanced Electric Transmission Manufacturing Plants, Qualified High Efficiency Transmission Property, and Qualified Advanced Electric Transmission Property ..................................................................... 36 Subtitle G—Technical Corrections to Energy Laws ............................................................... 37 Sec. 161. Technical Corrections to Energy Independence and Security Act of 2007 ............................................................................................................................... 37 Sec. 162. Technical Corrections to Energy Policy Act of 2005 ........................................ 38 Subtitle H—Energy and Efficiency Centers and Research ..................................................... 38 Sec. 171. Energy Innovation Hubs.................................................................................... 38 Sec. 172. Advanced Energy Research ............................................................................... 38 Sec. 173. Building Assessment Centers ............................................................................ 39 Sec. 174. Centers for Energy and Environmental Knowledge and Outreach ................... 39 Sec. 175. High Efficiency Gas Turbine Research, Development, and Demonstration................................................................................................................ 40 Subtitle I—Nuclear and Advanced Technologies.................................................................... 40 Sec. 181. Revisions to Loan Guarantee Program Authority ............................................. 40 Sec. 182. Purpose .............................................................................................................. 41 Sec. 183. Definitions ......................................................................................................... 41 Sec. 184. Clean Energy Investment Fund ......................................................................... 41 Sec. 185. Energy Technology Deployment Goals............................................................. 41 Sec. 186. Clean Energy Deployment Administration ....................................................... 42 Sec. 187. Direct Support ................................................................................................... 42 Sec. 188. Indirect Support ................................................................................................. 42 Sec. 189. Federal Credit Authority ................................................................................... 43 Sec. 190. General Provisions ............................................................................................ 43 Sec. 191. Conforming Amendments ................................................................................. 43 Subtitle J—Miscellaneous ....................................................................................................... 43 Sec. 195. Increased Hydroelectric Generation at Existing Federal Facilities ................... 43 Sec. 196. Clean Technology Business Competition Grant Program ................................. 43 Sec. 197. National Bioenergy Partnership ........................................................................ 44 Sec. 198. Office of Consumer Advocacy .......................................................................... 44 Sec. 199. Development Corporation for Renewable Power Borrowing Authority ........... 45 Sec. 199A. Study ............................................................................................................. 45 Title II—Energy Efficiency ........................................................................................................... 45 Subtitle A—Building Energy Efficiency Programs ................................................................ 45 Sec. 201. Greater Energy Efficiency in Building Codes ................................................... 45 Sec. 202. Building Retrofit Program ................................................................................. 46 Sec. 203. Energy Efficient Manufactured Homes ............................................................. 46 Sec. 204. Building Energy Performance Labeling Program ............................................. 47 Sec. 205. Tree Planting Programs ..................................................................................... 47 Sec. 206. Energy Efficiency for Data Center Buildings ................................................... 48 Sec. 207. Community Building Code Administration Grants ........................................... 48 Sec. 208. Solar Energy Systems Building Permit Requirements for Receipt of Community Development Block Grant Funds .............................................................. 48 Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Sec. 209. Prohibition of Restrictions on Residential Installation of Solar Energy System............................................................................................................................ 49 Subtitle B—Lighting and Appliance Energy Efficiency Programs ......................................... 49 Sec. 211. Lighting Efficiency Standards ........................................................................... 49 Sec. 212. Other Appliance Efficiency Standards .............................................................. 50 Sec. 213. Appliance Efficiency Determinations and Procedures ...................................... 50 Sec. 214. Best-in-Class Appliances Deployment Program ............................................... 51 Sec. 215. WaterSense ........................................................................................................ 52 Sec. 216. Federal Procurement of Water Efficient Products ............................................. 53 Sec. 217. Early Adopter Water Efficient Product Incentive Programs.............................. 53 Sec. 218. Certified Stoves Program .................................................................................. 54 Sec. 219. Energy Star Standards ....................................................................................... 54 Subtitle C—Transportation Efficiency .................................................................................... 55 Sec. 221. Emission Standards ........................................................................................... 55 Sec. 222. Greenhouse Gas Emissions Reductions Through Transportation Efficiency ....................................................................................................................... 55 Sec. 223. SmartWay Transportation Efficiency Program ................................................. 56 Sec. 224. State Vehicle Fleets ........................................................................................... 57 Subtitle D—Industrial Energy Efficiency Programs ............................................................... 57 Sec. 241. Industrial Plant Energy Efficiency Standards.................................................... 57 Sec. 242. Electric and Thermal Waste Energy Recovery Award Programs ...................... 57 Sec. 243. Clarifying Election of Waste Heat Recovery Financial Incentives ................... 58 Sec. 244. Motor Market Assessment and Commercial Awareness Program..................... 58 Sec. 245. Motor Efficiency Rebate Program .................................................................... 58 Sec. 246. Clean Energy Manufacturing Revolving Loan Fund Program.......................... 59 Sec. 247. Clean Energy and Efficiency Manufacturing Partnerships ............................... 59 Sec. 248. Technical Amendments ..................................................................................... 60 Subtitle E—Improvements in Energy Savings Performance Contracts .................................. 60 Sec. 251. Energy Savings Performance Contracts ............................................................ 60 Subtitle F—Public Institutions ................................................................................................ 60 Sec. 261. Public Institutions.............................................................................................. 60 Sec. 262. Community Energy Efficiency Flexibility ........................................................ 61 Sec. 263. Small Community Joint Participation ............................................................... 61 Sec. 264. Low Income Community Energy Efficiency Program ...................................... 61 Sec. 265. Consumer Behavior Research ........................................................................... 61 Subtitle G—Miscellaneous ..................................................................................................... 62 Sec. 271. Energy Efficient Information and Communications Technologies ................... 62 Sec. 272. National Energy Efficiency Goals ..................................................................... 62 Sec. 273. Affiliated Island Energy Independence Team ................................................... 63 Sec. 274. Product Carbon Disclosure Program ................................................................. 63 Sec. 275. Industrial Energy Efficiency Education and Training Initiative ........................ 64 Sec. 276. Sense of Congress (on Aircraft Emissions) ....................................................... 64 Subtitle H—Green Resources for Energy Efficient Neighborhoods ....................................... 65 Sec. 281. Short Title .......................................................................................................... 65 Sec. 282. Definitions ......................................................................................................... 65 Sec. 283. Implementation of Energy Efficiency Participation Incentives for HUD Programs ........................................................................................................................ 65 Sec. 284. Basic HUD Energy Efficiency Standards and Standards for Additional Credit ............................................................................................................................. 66 Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Sec. 285. Energy Efficiency and Conservation Demonstration Program for Multifamily Housing Projects Assisted with Project-Based Rental Assistance ............. 67 Sec. 286. Additional Credit for Fannie Mae and Freddie Mac Housing Goals for Energy Efficient and Location-Efficient Mortgages ...................................................... 68 Sec. 287. Duty to Serve Underserved Markets for Energy-Efficient and LocationEfficient Mortgages ....................................................................................................... 68 Sec. 288. Consideration of Energy Efficiency Under FHA Mortgage Insurance Programs and Native American and Native Hawaiian Loan Guarantee Programs ........ 69 Sec. 289. Energy Efficient Mortgages and Location-Efficient Mortgages Education and Outreach Campaign ............................................................................... 70 Sec. 290. Collection of Information on Energy-Efficient and Location Efficient Mortgages through Home Mortgage Disclosure Act ..................................................... 70 Sec. 291. Ensuring Availability of Homeowners Insurance for Homes Not Connected to Electricity Grid ........................................................................................ 70 Sec. 292. Mortgage Incentives for Energy Efficient Multifamily Housing ...................... 71 Sec. 293. Energy Efficient Certifications for Manufactured Housing with Mortgages ...................................................................................................................... 71 Sec. 294. Assisted Housing Energy Loan Pilot Program .................................................. 71 Sec. 295. Making it Green ................................................................................................ 72 Sec. 296. Residential Energy Efficiency Block Grant Program ....................................... 72 Sec. 297. Including Sustainable Development and Transportation Strategies in Comprehensive Housing Affordability Strategies ......................................................... 73 Sec. 298. Grant Program to Increase Sustainable Low-Income Community Development Capacity ................................................................................................... 73 Sec. 299. HOPE VI Green Developments Requirement ................................................... 73 Sec. 299A. Consideration of Energy-Efficiency Improvements in Appraisals ................. 74 Sec. 299B. Housing Assistance Council ........................................................................... 74 Sec. 299C. Rural Housing and Economic Development Assistance ................................ 74 Sec. 299D. Loans to States and Indian Tribes to Carry Out Renewable Energy Sources Activities .......................................................................................................... 75 Sec. 299E. Green Banking Centers ................................................................................... 75 Sec. 299F. GAO Reports on Availability of Affordable Mortgages .................................. 76 Sec. 299G. Public Housing Energy Cost Report............................................................... 76 Sec. 299H. Secondary Market for Residential Renewable Energy Lease Instruments .................................................................................................................... 76 Sec. 299I. Green Guarantees ............................................................................................. 77 Title III─Reducing Global Warming Pollution ............................................................................. 77 Sec. 301. Short Title .......................................................................................................... 77 Subtitle A─Reducing Global Warming Pollution ................................................................... 78 Sec. 311. Reducing Global Warming Pollution ................................................................ 78 “Title VII─Global Warming Pollution Reduction Program” ...................................... 78 “Part A─Global Warming Pollution Reduction Goals and Targets”........................... 78 “Sec. 701. Finding and Purpose” ................................................................................ 78 “Sec. 702. Economy-Wide Reduction Goals” ............................................................ 78 “Sec. 703. Reduction Targets for Specified Sources” ................................................. 79 “Sec. 704. Supplemental Pollution Reductions” ........................................................ 79 “Sec. 705. Review and Program Recommendations”................................................. 80 “Sec. 706. National Academy Review” ...................................................................... 80 “Sec. 707. Presidential Response and Recommendations” ........................................ 81 “Part B ─ Designation and Registration of Greenhouse Gases” ................................ 81 Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House “Sec. 711. Designation of Greenhouse Gases” ........................................................... 81 “Sec. 712. Carbon Dioxide Equivalent Value of Greenhouse Gases” ........................ 82 “Sec. 713. Greenhouse Gas Registry” ........................................................................ 82 “Part C ─ Program Rules” .......................................................................................... 83 “Sec. 721. Emission Allowances” .............................................................................. 83 “Sec. 722. Prohibition of Excess Emissions” ............................................................. 83 “Sec. 723. Penalty for Noncompliance” ..................................................................... 85 “Sec. 724. Trading” .................................................................................................... 86 “Sec. 725. Banking and Borrowing” .......................................................................... 86 “Sec. 726. Strategic Reserve” ..................................................................................... 86 “Sec. 727. Permits” ..................................................................................................... 87 “Sec. 728. International Emission Allowances” ......................................................... 87 “Part D ─ Offsets” ...................................................................................................... 88 “Sec. 731. Offsets Integrity Advisory Board” ............................................................ 88 “Sec. 732. Establishment of Offsets Program” ........................................................... 88 “Sec. 733. Eligible Project Types”.............................................................................. 89 “Sec. 734. Requirements for Offset Projects” ............................................................ 89 “Sec. 735. Approval of Offset Projects” ..................................................................... 90 “Sec. 736. Verification of Offset Projects” ................................................................. 90 “Sec. 737. Issuance of Offset Credits” ....................................................................... 91 “Sec. 738. Audits” ...................................................................................................... 91 “Sec. 739. Program Review and Revision” ................................................................ 91 “Sec. 740. Early Offset Supply” ................................................................................. 91 “Sec. 741. Environmental Considerations” ................................................................ 92 “Sec. 742. Trading” .................................................................................................... 93 “Sec. 743. International Offset Credits” ..................................................................... 93 “Part E ─ Supplemental Emissions Reductions from Reduced Deforestation” ......... 94 “Sec. 751. Definitions” ............................................................................................... 94 “Sec. 752. Findings” ................................................................................................... 95 “Sec. 753. Supplemental Emissions Reductions Through Reduced Deforestation”.......................................................................................................... 95 “Sec. 754. Requirements for International Deforestation Reduction Program” ......... 95 “Sec. 755. Reports and Reviews” ............................................................................... 96 “Sec. 756. Legal Effect of Part E” .............................................................................. 97 Sec. 312. Definitions ......................................................................................................... 97 “Sec. 700. Definitions” ............................................................................................... 97 Subtitle B—Disposition of Allowances .................................................................................. 98 Sec. 321. Disposition of Allowances for Global Warming Pollution Reduction Program.......................................................................................................................... 98 “PART H—DISPOSITION OF ALLOWANCES” ..................................................... 99 “Sec. 781. Allocation of Allowances for Supplemental Reductions” ......................... 99 “Sec. 782. Allocation of Emission Allowances”......................................................... 99 “Sec. 783. Electricity Consumers” ........................................................................... 101 “Sec. 784. Natural Gas Consumers” ......................................................................... 103 “Sec. 785. Home Heating Oil, Propane, and Kerosene Consumers” ........................ 103 [Sec. 786 added in Title I (Clean Energy), Section 115] .......................................... 104 “Sec. 787. Allocations to Refineries” ....................................................................... 104 “Sec. 788. Supplemental Agriculture and Renewable Energy Incentives Programs” .............................................................................................................. 104 “Sec. 789. Climate Change Consumer Refunds” ..................................................... 105 Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House “Sec. 790. Exchange for State-Issued Allowances” ................................................. 105 “Sec. 791. Auction Procedures”................................................................................ 106 “Sec. 792. Auctioning Allowances for Other Entities” ............................................. 107 “Sec. 793. Establishment of Funds” ......................................................................... 108 “Sec. 794. Oversight of Allocations” ........................................................................ 108 “Sec. 795. Exchange for Early Action Offset Credits” ............................................. 108 Subtitle C—Additional Greenhouse Gas Standards .............................................................. 109 Sec. 331. Greenhouse Gas Standards .............................................................................. 109 “Title VIII—Additional Greenhouse Gas Standards ................................................ 109 “Sec. 801. Definitions” ............................................................................................. 109 “Part A ─ Stationary Source Standards” ................................................................... 109 “Sec. 811. Standards of Performance” ...................................................................... 109 “Part C ─ Exemptions from Other Programs”........................................................... 110 “Sec. 831. Criteria Pollutants” ................................................................................... 110 “Sec. 832. International Air Pollution” ...................................................................... 110 “Sec. 833. Hazardous Air Pollutants” ........................................................................ 110 “Sec. 834. New Source Review” ............................................................................... 111 “Sec. 835. Title V Permits” ........................................................................................ 111 Sec. 332. HFC Regulation ............................................................................................... 111 “Sec. 619. Hydrofluorocarbons (HFCs)”................................................................... 111 Sec. 333. Black Carbon .................................................................................................... 113 “Part E ─ Black Carbon” ........................................................................................... 113 “Sec. 851. Black Carbon” .......................................................................................... 113 Sec. 334. States ................................................................................................................ 113 Sec. 335. State Programs ................................................................................................. 114 “Part F ─ Miscellaneous” .......................................................................................... 114 “Sec. 861. State Programs” ........................................................................................ 114 “Sec. 862. Grants for Support of Air Pollution Control Programs” .......................... 114 Sec. 336. Enforcement ..................................................................................................... 114 Sec. 337. Conforming Amendments ................................................................................ 115 Sec. 338. Davis-Bacon Compliance................................................................................. 115 Summary of section ................................................................................................... 115 Comments .................................................................................................................. 115 Sec. 339. National Strategy for Domestic Biological Carbon Sequestration ................... 115 Sec. 340. Reducing Acid Rain and Mercury Pollution .................................................... 115 Subtitle D—Carbon Market Assurance .................................................................................. 116 Sec. 341. Carbon Market Assurance ................................................................................ 116 “Part IV—Carbon Market Assurance” ...................................................................... 116 “Sec. 401. Oversight and Assurance of Carbon Markets” ......................................... 116 Sec. 342. Carbon Derivative Markets .............................................................................. 117 Subtitle E—Additional Market Assurance ............................................................................. 118 Sec. 351. Regulation of Certain Transactions in Derivatives Involving Energy Commodities ................................................................................................................. 118 Sec. 352. No Effect on Authority of the Federal Energy Regulatory Commission ......... 119 Sec. 353. Inspector General of the Commodity Futures Trading Commission ............... 119 Sec. 354. Settlement and Clearing Through Registered Derivatives Clearing Organizations ................................................................................................................ 119 Sec. 355. Limitation on Eligibility to Purchase a Credit Default Swap ........................... 119 Sec. 356. Transaction Fees .............................................................................................. 120 Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Sec. 357. No Effect on Antitrust Law or Authority of the Federal Trade Commission ................................................................................................................. 120 Sec. 358. Effect of Derivatives Regulatory Reform Legislation..................................... 120 Sec. 359. Cease-and-Desist Authority ............................................................................ 121 Sec. 360. Presidential Review of Regulations ................................................................ 121 Title IV ─ Transitioning to a Clean Energy Economy ................................................................ 121 Subtitle A— Ensuring Real Reductions In Industrial Emissions .......................................... 121 Sec. 401. Ensuring Real Reductions in Industrial Emissions ......................................... 121 “Part F—Ensuring Real Reductions in Industrial Emissions”.................................. 121 “Sec. 761. Purposes” ................................................................................................ 121 “Sec. 762. Definitions” ............................................................................................. 122 “Subpart 1—Emission Allowance Rebate Program”................................................ 122 “Sec. 763. Eligible Industrial Sectors” ..................................................................... 122 “Sec. 764. Distribution of Emission Allowance Rebates” ........................................ 123 “Subpart 2 ─ Promoting International Reductions in Industrial Emissions” ........... 124 “Sec. 765. International Negotiations” ..................................................................... 124 “Sec. 766. United States Negotiating Objectives with respect to Multilateral Environmental Negotiations” ................................................................................ 125 “Sec. 767. Presidential Reports and Determinations” .............................................. 125 “Sec. 768. International Reserve Allowance Program” ............................................ 126 “Sec. 769. Iron and Steel Sector” ............................................................................. 127 Subtitle B—Green Jobs and Worker Transition .................................................................... 127 Part 1—Green Jobs ......................................................................................................... 127 Sec. 421. Clean Energy Curriculum Development Grants ............................................. 127 Sec. 422. Increased Funding for Energy Worker Training Program ............................... 128 Sec. 423. Development of Information and Resources Clearinghouse for Vocational Education and Job Training in Renewable Energy Sectors ....................... 128 Sec. 424. Monitoring Program Effectiveness ................................................................. 128 Sec. 424A. Green Construction Careers Demonstration Project .................................... 129 Part 2—Climate Change Worker Adjustment Assistance ............................................... 129 Sec. 425. Petitions, Eligibility Requirements, and Determinations ................................ 129 Sec. 426. Program Benefits ............................................................................................. 130 Sec. 427. General Provisions .......................................................................................... 130 Subtitle C—Consumer Assistance ........................................................................................ 130 Sec. 431. Energy Refund Program .................................................................................. 130 “Title XXII—Energy Refund Program ..................................................................... 131 “Sec. 2201. Energy Refund Program” ...................................................................... 131 Sec. 432. Modification of Earned Income Credit Amount for Individuals ..................... 131 Sec. 433. Protection of Social Security and Medicare Trust Funds ................................ 132 Subtitle D—Exporting Clean Technology ............................................................................ 132 Sec. 441. Findings and Purposes..................................................................................... 132 Sec. 442. Definitions ....................................................................................................... 133 Sec. 443. Governance ..................................................................................................... 134 Sec. 444. Determination of Eligible Countries ............................................................... 134 Sec. 445. Qualifying Activities ....................................................................................... 134 Sec. 446. Assistance ........................................................................................................ 135 Subtitle E. Adapting to Climate Change ............................................................................... 135 Part 1. Domestic Adaptation ........................................................................................... 135 Subpart A. National Climate Change Adaptation Program ............................................. 135 Sec. 451. Global Change Research and Data Management ............................................ 136 Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Sec. 452. National Climate Service ................................................................................ 139 Sec. 453. State Programs to Build Resilience to Climate Change Impacts .................... 141 Subpart B. Public Health and Climate Change ............................................................... 141 Sec. 461. Sense of Congress on Public Health and Climate Change ............................. 141 Sec. 462. Relationship to Other Laws ............................................................................ 142 Sec. 463. National Strategic Action Plan ....................................................................... 142 Sec. 464. Advisory Board .............................................................................................. 142 Sec. 465. Reports ........................................................................................................... 143 Sec. 466. Definitions ...................................................................................................... 143 Sec. 467. Climate Change Health Protection and Promotion Fund ............................... 143 Subpart C. Natural Resource Adaptation ........................................................................ 143 Sec. 471. Purposes ......................................................................................................... 143 Sec. 472. Natural Resources Climate Change Adaptation Policy .................................. 143 Sec. 473. Definitions ...................................................................................................... 144 Sec. 474. Council on Environmental Quality ................................................................ 144 Sec. 475. Natural Resources Climate Change Adaptation Panel ................................... 144 Sec. 476. Natural Resources Climate Change Adaptation Strategy ............................... 145 Sec. 477. Natural Resources Adaptation Science and Information ................................ 145 Sec. 478. Federal Natural Resource Agency Adaptation Plans ...................................... 146 Sec. 479. State Natural Resources Adaptation Plans ..................................................... 146 Sec. 480. Natural Resources Climate Change Adaptation Fund .................................... 146 Sec. 481. National Wildlife Habitat and Corridors Information Program. .................... 146 Sec. 482. Additional Provisions Regarding Indian Tribes ............................................. 147 Part 2. International Climate Change Adaptation Program ............................................. 147 Sec. 491. Findings and Purposes.................................................................................... 147 Sec. 492. Definitions ...................................................................................................... 147 Sec. 493. International Climate Change Adaptation Program ....................................... 148 Sec. 494. Distribution of Allowances............................................................................. 148 Sec. 495. Bilateral Assistance ........................................................................................ 148 Subtitle F—Deficit Neutral Budgetary Treatment ................................................................ 149 Sec. 496. Deficit Neutrality ........................................................................................... 149 Title V—Agriculture and Forestry Related Offsets ..................................................................... 149 Subtitle A—Offset Credit Program from Domestic Agricultural and Forestry Sources ....... 149 Sec. 501. Definitions ....................................................................................................... 149 Sec. 502. Establishment of Offset Credit Program from Domestic Agricultural and Forestry Sources.................................................................................................... 150 Sec. 503. List of Eligible Domestic Agricultural and Forestry Offset Practice Types ............................................................................................................................ 150 Sec. 504. Requirements for Domestic Agricultural and Forestry Practices .................... 150 Sec. 505. Project Plan Submission and Approval ........................................................... 151 Sec. 506. Verification of Offset Practices ....................................................................... 152 Sec. 507. Certification of Offset Credits ......................................................................... 152 Sec. 508. Ownership and Transfer of Offset Credits ...................................................... 152 Sec. 509. Program Review and Revision ........................................................................ 152 Sec. 510. Environmental Considerations ........................................................................ 153 Sec. 511. Audits .............................................................................................................. 153 Subtitle B—USDA Greenhouse Gas Emission Reduction and Sequestration Advisory Committee .......................................................................................................................... 153 Sec. 531. Establishment of USDA Greenhouse Gas Emission Reduction and Sequestration Advisory Committee ............................................................................. 153 Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Subtitle C—Miscellaneous.................................................................................................... 154 Sec. 551. International Indirect Land Use Changes ........................................................ 154 Sec. 552. Biomass-Based Diesel ..................................................................................... 155 Sec. 553. Modification of Definition of Renewable Biomass ........................................ 155 Figures Figure 1. Simplified Emission Allowance Distribution—2016....................................................... 7 Figure 2. Simplified Emission Allowance Distribution—2030....................................................... 8 Contacts Author Information...................................................................................................................... 156 Congressional Research Service Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Introduction and Overview of Legislation H.R. 2454, the American Clean Energy and Security Act of 2009, was introduced May 15, 2009, by Representatives Waxman and Markey, and was subsequently modified (both technical and substantive changes) and ordered reported by the House Committee on Energy and Commerce on May 21, 2009. The bill was reported (amended) June 5 (H.Rept. 111-137, Part I). It was passed by the House on June 26, 2009. The five titles of the legislation cover clean energy, energy efficiency, reducing global warming pollution, transitioning to a clean energy economy, and agriculture and forestry related offsets. Among the many provisions contained in the bill, several of the major provisions are summarized in this overview. Following the overview, this report contains a section-by-section summary of H.R. 2454 as passed by the House, and interpretive or informative commentary for some sections, when appropriate. Combined Efficiency and Renewable Electricity Standard The legislation would amend the Public Utility Regulatory Policies Act of 1978 (PURPA) to create an integrated energy efficiency and renewable electricity standard starting in 2012, requiring retail electricity suppliers to meet 20% of their electricity demand through renewable energy sources and energy efficiency by 2020. Under the standard, each retail electricity supplier with annual sales of 4 million megawatt-hours (mwh) or more would be required to submit Renewable Electricity Credits (RECs) equal to at least three-quarters of its annual combined target. One REC would be awarded for each mwh of renewable energy generated from renewable energy resources such as wind, solar, geothermal, marine or hydrokinetic, biomass, landfill gas, or qualified hydropower (as defined in Sec. 101). The credits can be awarded to generators or to “central procurement states.”1 RECs could be traded or banked, but would be retired after being submitted in proof of compliance. “Distributed renewable generation”—small-scale, renewable power production located at consumer sites—would qualify for three RECs for each mwh of eligible renewable electricity. Funds collected from alternative compliance payments and civil penalties for noncompliance would be redistributed annually to help deploy renewable energy technologies and fund cost-effective energy efficiency programs. In establishing regulations for this program, the Secretary of Energy would be required, to the extent practicable, to incorporate and preserve best practices of existing state renewable electricity standards and cooperate with states on minimizing administrative costs and burdens. Retail electric suppliers would be required to submit an amount of federal renewable electricity credits and demonstrated total annual electricity savings equal to the annual combined targets, as shown in the following schedule for each year: 2012 and 2013: 6% 2014 and 2015: 9.5% 2016 and 2017: 13% 2018 to 2019: 16.5% 2020 through 2039: 20% 1 A central procurement state is state that as of January 1, 2009, has adopted and implemented a program under which the state, rather than individual utilities, procures renewable electricity. Congressional Research Service 1 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House The definition of renewable electricity is augmented by adding other qualifying energy resources (i.e., landfill gas, wastewater treatment gas, coal mine methane, and qualified waste-to-energy) to the list of renewable energy resources. Geologic Sequestration of Carbon Dioxide H.R. 2454 would require the Administrator of the Environmental Protection Agency (EPA) to submit a report to Congress, within one year of enactment, detailing a unified national strategy for addressing the key legal and regulatory barriers to deployment of commercial scale carbon capture and sequestration. The bill requires two other reports from studies examining: (1) how, and under what circumstances, the environmental statutes for which EPA has responsibility would apply to CO2 injection and geologic sequestration activities, due within 12 months of enactment; and (2) the legal framework for geologic sequestration sites, including existing federal environmental statutes, state environmental statutes, and state common law, due within 18 months of enactment. The legislation would amend the Safe Drinking Water Act (SDWA) by inserting a provision directing the EPA Administrator to promulgate, within one year of enactment, regulations for the development, operation, and closure of carbon dioxide geologic sequestration wells, and to take into consideration the ongoing SDWA rulemaking regarding these wells. It would also amend Title VIII of the Clean Air Act and establish a coordinated certification and permitting process for geologic sequestration sites. Within two years of enactment, the Administrator would be required to promulgate regulations to protect human health and the environment by minimizing the risk of atmospheric release of carbon dioxide injected for geologic sequestration, including enhanced hydrocarbon recovery combined with geologic sequestration. This provision broadens the scope of regulatory authority beyond protecting underground sources of drinking water under SDWA to protecting against atmospheric releases of CO2 under the Clean Air Act. H.R. 2454 would authorize a Carbon Storage Research Corporation to establish and administer a program to accelerate the commercial availability of carbon dioxide capture and storage technologies and methods by awarding grants, contracts, and financial assistance to electric utilities, academic institutions, and other eligible entities. The corporation would be established by a referendum if providers of at least two-thirds of the total quantity of fuel-based electricity delivered to retail consumers vote for approval. If 40% or more of state regulatory authorities were to submit written notices of opposition to the creation of the corporation, the corporation would not be established. If established, the corporation would levy an assessment on distribution utilities for all fossil fuel-based electricity delivered to retail customers, and would adjust the assessment rates to generate between $1.0 billion and $1.1 billion per year. The bill would amend Title VII of the Clean Air Act to require that the EPA Administrator promulgate regulations to distribute emission allowances to support the commercial deployment of carbon capture and sequestration technologies in both electric power generation and industrial operations. Among other eligibility requirements, it would require that the owner or operator geologically sequester captured carbon dioxide or convert it to a stable form that can be safely and permanently sequestered. The legislation would also amend Title VIII of the Clean Air Act (CAA) by adding performance standards for new coal-fired power plants and, in some instances, for existing plants retrofitted with carbon capture and sequestration technology. Covered electric generating units (EGUs) that are initially permitted on or after January 1, 2020, would be required to reduce their annual emissions of carbon dioxide produced by the unit by 65%. EGUs initially permitted before January 1, 2020, would need to achieve a 50% reduction. Congressional Research Service 2 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Vehicles and Fuels H.R. 2454 contains several provisions related to vehicles and fuels. Most notably, the bill would provide significant incentives for automakers and parts suppliers to produce plug-in vehicles and other advanced technology vehicles. For example, in early years, 3% of allowances from the greenhouse gas cap-and-trade program would be allocated to the automotive sector to provide grants to refit or establish plants to build plug-ins and other advanced vehicles. Depending on the allowance price in the cap-and-trade system, this allocation could easily be worth billions of dollars each year. H.R. 2454 also directs the Environmental Protection Agency to establish greenhouse gas emissions standards for various transportation sectors. The bill would require EPA to establish standards for heavy-duty vehicles and non-road vehicles (including marine vessels and locomotives). A provision from the version reported by the Energy and Commerce Committee requiring emissions standards for aircraft and aircraft engines was not included in the Housepassed version. The bill would expand the definition of “renewable biomass” for the renewable fuel standard (RFS) established in the Energy Policy Act of 2005 and expanded in the Energy Independence and Security Act of 2007 (EISA). The RFS requires an increasing amount of biofuels to be blended into gasoline and diesel fuel. By 2022, the mandate reaches 36 billion gallons of biofuels. However, the amendments to the RFS in EISA restricted the feedstocks that would qualify as renewable biomass under the RFS, effectively excluding a large potential pool of woody biomass, as well as biomass from federal lands and from lands not previously cultivated. H.R. 2454 would amend the biomass definition to allow fuel produced from some of these feedstocks to qualify under the RFS. Not included in the bill is a low carbon fuel standard (LCFS) similar to that established in California. An LCFS would require that fuel suppliers reduce the lifecycle greenhouse gas emissions from motor fuels relative to a baseline year. Such an LCFS would not be an explicit mandate for biofuel use, but would likely promote some biofuels, as well as other low-carbon transportation fuels such as natural gas and electricity produced from renewable resources. An LCFS was part of an earlier draft of the bill but was not included in the bill as introduced. Further, a “cash for clunkers” provision was removed from the bill because a nearly identical program was enacted as part of P.L. 111-32. Smart Grid H.R. 2454 includes several provisions aimed at supporting development and installation of smart grid2 technologies. The bill would direct the Department of Energy and Environmental Protection Agency to identify products that could be cost-effectively equipped with smart grid capability. An example would be a dishwasher that could wirelessly communicate with a “smart meter” installed by a utility in a home. This linkage would allow the utility to temporarily stop operation of the dishwasher when electricity was scarce or expensive (assuming the homeowner had agreed to the procedure). The legislation would also direct the Federal Trade Commission to initiate a 2 The “smart grid” is intended to give the power grid some of the characteristics of a computer network, in which information concerning, and control of, power supply and demand will flow between and be shared by individual customers and utility control centers. The smart grid primarily involves the development of software and small-scale technology (e.g., smart meters for homes and businesses that would interface with grid controls) rather than construction of new transmission lines. Congressional Research Service 3 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House rulemaking to determine whether smart grid information, such as potential dollar savings to the consumer, should be added to ENERGY GUIDE product labels. (ENERGY GUIDE is an existing federal program for labeling energy efficient products.) The legislation would establish requirements for electric power retailers to reduce their peak loads using smart grid and other energy efficient technologies; it would modify an energy efficiency public information program authorized by the Energy Policy Act of 2005 (EPACT05) to make it into a smart grid and energy efficiency information program authorized through 2020. H.R. 2454 would also modify an EPACT05 energy efficiency appliance rebate program to add appliances with smart grid capabilities. Authorized funding would be increased from $50 million annually to $100 million, and the authorization would be extended to run through FY 2015. Additionally, H.R. 2454 would require state regulatory authorities and self-regulating power suppliers (such as municipal utilities) to consider implementing standards intended to ensure that utility smart grid systems would be compatible with plug-in electric drive vehicles. Energy Efficiency The bill includes a variety of energy efficiency provisions that cover grants, standards, rebates and other programs for buildings, lighting and commercial equipment, water-using equipment, wood stoves, industrial equipment, and healthcare facilities. Two new programs would be established that aim to facilitate the use of energy efficiency and renewable energy programs to more directly support the goals of curbing greenhouse gas emissions to mitigate climate change. First, the Department of Energy (DOE) would be required to create a State Energy and Environment Development (SEED) program, which allows each state to collect major federal energy grant appropriations (Weatherization, State Energy, Efficiency Block Grants, and LIHEAP) into a common fund designed to support clean energy, energy efficiency, and climate change mitigation. Second, EPA would be directed to implement a legislated carbon allowance distribution program that would be used to help support several energy efficiency and renewable energy programs. Building energy efficiency improvements would be addressed by expanded responsibilities at DOE and EPA. DOE would be required to regularly update its model building energy codes, which are available for states to adopt and adapt to local circumstances. Further, DOE would be directed to establish a rebate program designed to encourage replacement of manufactured homes owned by low-income families. Also, DOE would be required to develop a program that supports efficiency retrofits of existing commercial buildings. EPA, in parallel, would be required to develop a program to support efficiency retrofits of existing residential buildings. Also, EPA would be directed to establish a building energy efficiency labeling program that would be similar to its existing energy labeling program for cars and appliances. For lighting and commercial equipment, new efficiency standards would be set by law and some new procedures and programs would be put in place. Lighting efficiency standards would be set for the niche categories of outdoor luminaires, outdoor high output lamps, portable light fixtures, and incandescent reflector lamps. Commercial equipment standards would be legislated for the niche categories of water dispensers, commercial hot food holding cabinets, portable electric spas, and commercial furnaces. Also, in general, existing criteria for setting appliance efficiency standards would be expanded to include criteria related to greenhouse gas emissions and other factors. Further, DOE would be directed to create an incentive program that aims to encourage consumer purchases of the most energy-efficient appliances, while also providing an incentive to remove the least efficient appliances from commercial use. An explicit cost-effectiveness purpose would be set by law for EPA’s Energy Star program. Congressional Research Service 4 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Water use efficiency improvements would be addressed by three provisions. First, EPA’s WaterSense program, a voluntary labeling program to reduce water use, would be given statutory authority. Second, federal agencies would be directed to use WaterSense-labeled and DOE Federal Energy Management Program (FEMP)-designated water-using products and services. Third, EPA would be required to provide funds to support state rebate or voucher programs for consumer purchases of residential water-efficient products and services. New residential wood stoves and pellet stoves would have to meet an environmental performance standard set by EPA. Further, EPA would be authorized to provide funds to state and local governments, American Indian tribes, Alaskan Native villages, and certain nonprofit organizations to replace stoves that do not meet the standards. To address a concern that technological improvements gradually erode the true energy efficiency of products identified with the EPA Energy Star label, EPA would be required to establish a grading system that ranges from “A” (most efficient) to “F” (least efficient) and periodically test products to verify compliance. Industrial energy efficiency would be addressed by four provisions. First, DOE would be directed to expand an existing industrial standards program to include industrial plant energy efficiency certification standards. Second, DOE would be required to establish a monetary award program to spur innovation in the recovery of thermal energy in power plants and industrial facilities. Third, DOE would be directed to assess the electric motor market, identify energy efficiency improvement opportunities, and develop methods to estimate energy and cost savings and certain program impacts. Fourth, DOE would be required to establish a rebate program for purchasers and distributors of energy efficient motors. Regulation of energy savings performance contracts (ESPCs) for federal agencies would be revised to require that agencies establish competitions for task and delivery orders. Further, the allowable types of energy transactions under ESPCs would be expanded to include thermal forms of renewable energy. Also, onsite renewable energy production would become eligible for helping to meet agency requirements for use of renewable energy. Energy efficiency in public institutions is addressed by three provisions. First, under the Energy Conservation Program for Schools and Hospitals, the list of eligible facilities would be expanded to specifically include not-for-profit hospitals and not-for-profit inpatient health facilities. Further, the authorization for grants would be increased from $1 billion to $2.5 billion annually. Second, the definition of community eligibility for DOE’s Energy Efficiency and Conservation Block Grant program would be expanded to include regional groups of small local governments. Third, DOE would be authorized to create a new grant program for nonprofit community development organizations that provide energy efficiency and renewable energy financing for businesses and projects in low-income communities. A national carbon labeling and disclosure program would be established at EPA, which would likely have some parallels to EPA’s existing energy labeling program. DOE would be required to provide affiliated islands (U.S. trust territories) with energy planning and implementation assistance. Each federal agency, in collaboration with OMB, would be required to create an implementation strategy for the purchase and use of energy efficient information and communications technologies, infrastructure, and practices. A national goal would be established to improve energy productivity by at least 2.5% per year from 2012 through 2030. A new subtitle was added in the Manager’s Amendment that provides a number of provisions for energy efficient neighborhoods. The bill requires The Secretary of Housing and Urban Development (HUD) to promulgate regulations to encourage energy efficiency in HUD housing programs. The language defines standards for energy efficiency to be applied, as appropriate, in the implementation of a number of housing programs. Different programs apply to single-family Congressional Research Service 5 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House residences, multi-family residences, rural residences, and some non-residential buildings. Programs provide incentives to improve energy efficiency through mortgage and loan instruments, loans to upgrade existing residential properties, and grants to increase sustainable low-income community development capacity. Major Cap-and-Trade Provisions As passed, Title III of H.R. 2454 would amend the Clean Air Act to set up a cap-and-trade system that is designed to reduce greenhouse gas (GHG) emissions from covered entities 17% below 2005 levels by 2020 and 83% below 2005 levels by 2050. Covered entities are phased into the program over a four-year period from 2012 to 2016. When the phase-in schedule is complete, the cap will apply to entities that account for 84.5% of U.S. total GHG emissions. By including other provisions contained in the legislation (e.g., a separate cap-and-trade program for hydrofluorocarbons (HFCs)), the World Resources Institute (WRI) estimates that the overall potential net reductions in GHG emissions from H.R. 2454 could range from 28%-33% below 2005 levels in 2020 and 75%-81% in 2050.3 The market-based approach adopted by H.R. 2454 would establish an absolute cap on the emissions from covered sectors and would allow trading of emissions permits (“allowances”) among covered and non-covered entities.4 The bill achieves its broad coverage through an upstream compliance mandate on petroleum, most fluorinated gas producers and importers, and a downstream mandate on electric generators and industrial sources, and a midstream mandate on natural gas local distribution companies (LDCs).5 Generally, the emissions cap would limit greenhouse gas emissions from entities that produce or import more than 25,000 metric tons annually (carbon dioxide equivalent) of greenhouse gases (or produce or import products that when used will emit greenhouse gases). If left unmitigated, any greenhouse gas cap-and-trade program (as well as a carbon tax alternative) would be regressive. In an attempt to mitigate this distributional problem, H.R. 2454 allocates a substantial percentage of the allowances available for the benefit of energy consumers and low-income households. In some cases, these allowances are allocated at no cost to entities such as LDCs, with the express purpose of mitigating energy cost increases; in other cases, such as low-income assistance, the allowances are auctioned by EPA and the proceeds distributed to eligible recipients. As the program proceeds through the mid-2020s, the energy cost relief, along with other free allocations are phased out in favor of more government auctioning with most of the proceeds returned to households on a per-capita basis. See Figure 1 and Figure 2 for a summary of how emission allowances are distributed in 2016 and 2030, respectively. 3 John Larsen and Robert Hellmayr, Emission Reductions Under the American Clean Energy and Security Act of 2009 (World Resources Institute, May 19, 2009). 4 See “Common Terms” box for definitions of terms in boldface. 5 Title III sets up a separate cap-and-trade program for hydrofluorocarbons (HFCs). Congressional Research Service 6 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Figure 1. Simplified Emission Allowance Distribution—2016 CCS, 1.75% Energy Eff. (States), 7.1% Small Refiners, 0.25% Oil Refiners, 2% R&D, 1.5% Ag.& Renewables Incentives, 0.28% Autos, 3% Int'l Deforest., 5% Domestic Adapt., 0.9% Dom. Wildlife & Res., 0.39% Int'l Clean Tech., 1% Int'l Adapt., 1% Trade-Exposed Industries, 13.4% Heating oil Consumers, 1.5% Natural Gas LDCs, 9% Low-Income Consumers, 15% Deficit Reduction, 0.2% Auction, 16.5% Worker Assistance, 0.5% Domestic Adapt., 0.1% Dom. Wildlife & Res., 0.62% Small Electric LDCs, 0.5% Long-Term Contracts, 1.5% Electric LDCs, 30% Merchant Coal, 3.5% Source: Prepared by CRS Congressional Research Service 7 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Figure 2. Simplified Emission Allowance Distribution—2030 Int'l Clean Tech., 4% Int'l Adapt., 4% Low-Income Consumers, 15% Dom. Wildlife & Res., 1.54% Worker Assistance, 1.0% Domestic Adaptation, 3.9% Domestic Adapt., 0.1% Int'l Deforestation, 3% Auction, 65.3% R&D, 1.5% Energy Eff. (States), 5.0% Dom. Wildlife & Res., 2.46% Consumer Rebate, 30% CCS, 5.00% Trade-Exposed Industries, 6.7% Auctioned in Prior Years, 17% Source: Prepared by CRS H.R. 2454’s allocation scheme also attempts to smooth the economy’s transition to a less carbonintensive future through free allowance allocations to energy-intensive, trade-exposed industries, merchant coal-fired electric generators, and petroleum refiners. Bonus allotments of allowances are allocated for emission reductions achieved by carbon capture and storage technology. Except for carbon capture and storage, these free allocations of allowances are phased out by the early to mid-2030s. Finally, H.R. 2454’s allocation scheme attempts to address greenhouse gas emissions by providing allowances to help prevent further tropical deforestation and to fund climate adaptation activities. Because allowance prices can be volatile, cap-and-trade bills generally provide some mechanisms to address either the potential gyrations, or allowance prices more generally. H.R. 2454 does not have a “safety valve”—an alternative compliance option that permits covered entities to pay an excess emissions fee instead of reducing emissions. Instead, the legislation addresses cost control through five main mechanisms: (1) unlimited banking and limited borrowing, (2) a two-year compliance period, (3) a strategic reserve auction with a pool of allowances available at a minimum reserve price, (4) periodic auctions with a reserve price, and (5) broad limits on the use of offsets. With respect to allowance price volatility, the bill includes two design elements that may dampen volatility to some degree. First, the bill allows entities to borrow (without interest) allowances from the year immediately following the current year, effectively creating a rolling two-year compliance period. Second, EPA is directed to hold strategic reserve auctions. A strategic reserve of allowances borrowed from future years is auctioned off in the early years of the program. This increases the availability of allowances early, but maintains the overall emissions cap. The strategic reserve auction would include a reserve price: $28/allowance in 2012 that would Congressional Research Service 8 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House increase annually in 2013 and 2014. Starting in 2015, the reserve price would be 60% above the 36-month rolling average allowance price. Regular auctions mandated by the bill also have a reserve price: $10 (in 2009 dollars) in 2012, increasing at 5% real annually. An auction reserve price would help create an allowance price floor, and help dampen allowance price spikes. The auctions, along with the other mechanisms listed above, attempt to bracket volatility. Whether they would work is subject to debate, particularly with respect to short-term price volatility. With respect to overall cost control, analysis indicates that an important cost control mechanism in the cap-and-trade program is the availability of domestic and international offsets. The bill limits the availability of domestic and international offsets to two billion tons of emissions annually—divided equally between domestic and international pools. According to analysis done by EPA, the Congressional Budget Office, and CRA International, the availability of these offsets reduces projected allowance prices under the program by half.6 Another concern with respect to a cap-and-trade program is potential allowance market abuse and manipulation. The size of a U.S. carbon market could be in the hundreds of billions of dollars, and involve all of the financial instruments, particularly derivatives, that any other commodity market includes. To provide oversight of the newly created carbon allowance market, the bill has detailed provisions for Federal Energy Regulatory Commission (FERC) oversight of the cash allowance market, and enhanced Commodity Futures Trading Commission (CFTC) oversight of allowance derivatives. With respect to the latter, the bill would remove energy commodities (including carbon allowances) from the category of “exempt commodity” and require that overthe-counter transactions be cleared through a clearing house (a standard feature of a futures exchange). In addition the CFTC is required to establish position limits, thus setting ceilings on the number of energy contracts that any person could hold. Besides the two emission caps created under Title III, the bill contains other provisions in Titles III and IV to reduce greenhouse gas emissions and potential carbon leakage. Among the most important of these provisions are (1) preventing tropical deforestation, (2) performance standards for uncovered entities that emit over 10,000 metric tons annually, (3) a 1.25 offset requirement for international offsets after 2017; and (4) programs designed to reduce potential carbon leakage. First, H.R. 2454 has a supplemental greenhouse gas reduction program that requires EPA to use some of the allowances available under the cap-and-trade program to fund international projects to reduce deforestation. The goal of the program is to achieve 720 million metric tons of additional emission reductions in 2020 (about 10% of U.S. 2005 emissions), and a total of 6 billion metric tons by 2025 (about equal the U.S. emissions in 1990). If achieved, this would have significant effect on the net emission reductions achieved in the early years of the program, as suggested by the WRI study cited earlier. Second, as noted above, not all greenhouse gas emitting sources are covered by the Title III capand-trade programs. Under other provisions of Title III, stationary sources not covered by the Title III caps are potentially subject to greenhouse gas performance standards. WRI estimates that 6 U.S. Environmental Protection Agency, EPA Preliminary Analysis of the Waxman-Markey Discussion Draft: The American Clean Energy and Security Act of 2009 in the 111th Congress (April 20, 2009); Congressional Budget Office, Congressional Budget Office Cost Estimate: H.R. 2454, American Clean Energy and Security Act of 2009 (as Ordered Reported by the House Committee on Energy and Commerce) (June 5, 2009); and, CRA International, Impact on the Economy of the American Clean Energy and Security Act of 2009 (H.R. 2454), prepared for the National Black Chamber of Commerce (May 2009). Congressional Research Service 9 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House standards for uncapped sources could reduce emissions from such sources by about 115 million metric tons annually. Third, as passed, the cap-and-trade program requires that international offsets submitted for compliance beginning in 2018 be discounted (i.e., it takes 1.25 offset credits to equal 1.00 allowance). Depending on the number of international offsets used for compliance after 2017, the discount factor could add up to 375 million metric tons of reductions annually. H.R. 2454 takes two primary approaches to mitigating the potential impact of carbon leakage on the net greenhouse gas reductions to be achieved under the bill.7 The first is the allocation of allowances at no cost to energy-intensive, trade-exposed industries, as identified above. The second is an international reserve allowance scheme that essentially imposes a shadow allowance requirement on importers of energy-intensive, trade-exposed products, creating a de facto tariff. Basically, the scheme would require importers of energy-intensive products from countries with insufficient carbon policies to submit a prescribed amount of “international reserve allowances,” or IRAs, for their products to gain entry into the United States. Based on the greenhouse gas emissions generated in the production process, IRAs would be submitted on a per-unit basis for each category of covered goods from a covered country. Whether the international reserve allowance scheme would actually work is unclear. The daunting administrative, informational, and analytical resources necessary to implement such a program would create significant issues in any attempt to implement it. Likewise, it is not clear that the potentially severe World Trade Organization (WTO) implications of the provision have been fully exposed and accommodated. Provisions in Title V Added by the “Manager’s Amendment” The June 26, 2009, “Manager’s Amendment” included a new Title V to H.R. 2454—“Agriculture and Forestry Related Offsets.” Most of this title concerns the establishment of a separate offsets program for agriculture and forestry practices that is to be implemented by the U.S. Department of Agriculture (USDA), rather than EPA under Title III. However, the title also includes provisions that are not part of the new offsets program. Some of these provisions have been the subject of intense debate. Subtitle A of Title V would create within USDA an offsets program that covers domestic agriculture and forestry-related practices. For the most part, the provisions in Title V are similar to those found in Title III, the most striking exception being the difference in implementing agencies. The separate offset jurisdictions between EPA and USDA are made by the revised definitions of “domestic offset credit” and “offset credit.” These terms now have different meanings between Parts C and D of Title III. In effect, these changes allow (domestic) offset credits generated under Title V (agriculture and forestry offsets) to be used for compliance per Title III, Part C, but would separate the implementation of offsets generated under Title III (Part D) and Title V. In the reported version of the bill, many stakeholders were concerned that the Title III offset program did not include an explicit list of offset practices. Such a list is now part of the proposal in Title V. However, as written, USDA is not required to include the practices specifically identified in the regulatory program that would carry out the statutory provisions. 7 For a full discussion of carbon leakage, see CRS Report R40100, “Carbon Leakage” and Trade: Issues and Approaches, by Larry Parker and John Blodgett. Congressional Research Service 10 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Title V would set up a domestic offset development process almost identical to the one in Title III: Offset project developers would submit a petition to USDA; USDA would approve or reject the petition; and third-party verification would be required before USDA would issue offset credits. But there are several differences identified in the section-by-section analysis below. One key difference is that Title V would allow USDA to issue (in lieu of offset credits) a “term offset credit.” The inclusion of “term offset credits” is a new concept in U.S. cap-and-trade proposals. This mechanism is similar to the temporary certified emission reductions (tCER) that are allowed under the Kyoto Protocol for forestry and agriculture projects. Term offset credits are temporary offsets that may be submitted for compliance per the conditions of Section 722(d)(2). These credits expire at their term’s conclusion and must be replaced with emission allowances, other offsets, or unexpired term offset credits. Term offset credits address concerns regarding the permanence of particular offset practices, such as agriculture sequestration efforts. In contrast to offset credits, reversals from term offset credits are only relevant during their crediting period. In addition to the offsets program, Title V includes several other provisions. Within Section 501 (definitions), the bill specifically excludes “agriculture and forestry sectors” from the definition of “capped sector” in Title III (i.e., the cap-and-trade program). However, neither the phrase “agriculture and forestry sectors” nor “capped sector” appear elsewhere in the bill. Congressional Research Service 11 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Common Terms Allowance. A limited authorization by the government to emit 1 metric ton of carbon dioxide equivalent. Although used generically, an allowance is technically different from a credit. A credit represents a ton of pollutant that an entity has reduced in excess of its legal requirement. However, the terms tend to be used interchangeably, along with others, such as permits. Auctions. Auctions can be used in market-based pollution control schemes to allocate some or all of the allowances. Auctions may be used to: (1) ensure the liquidity of the credit trading program; and/or (2) raise (potentially considerable) revenues for various related or unrelated purposes. Banking. The limited ability to save allowances for the future and shift the reduction requirement across time. Cap-and-trade program. An emissions reduction program with two key elements: (1) an absolute limit (“cap”) on the emissions allowed by covered entities; and (2) the ability to buy and sell (“trade”) those allowances among covered and non-covered entities. Coverage. Coverage is the breadth of economic sectors covered by a particular greenhouse gas reduction program, as well as the breadth of entities within sectors. Emissions cap. A mandated limit on how much pollutant (or greenhouse gases) affected entities can release to the atmosphere. Caps can be either an absolute cap, where the amount is specified in terms of tons of emissions on an annual basis, or a rate-based cap, where the amount of emissions produced per unit of output (such as electricity) is specified but not the absolute amount released. Caps may be imposed on an entity, sector, or economy-wide basis. Greenhouse gases. The six gases recognized under the United Nations Framework Convention on Climate Change are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), hydrofluorocarbons (HFC), and perfluorocarbons (PFC). H.R. 2454 adds nitrogen trifluoride (NF3). Leakage. The shift in greenhouse gas (GHG) emissions from an area subject to regulation (e.g., cap-and-trade program) to an unregulated area, so reduction benefits are not obtained. This would happen, for example, if a GHG emitting industry moved from a country with an emissions cap to a country without a cap. Offsets. Emission credits achieved by activities not directly related to the emissions of an affected source. Examples of offsets would include forestry and agricultural activities that absorb carbon dioxide, and reductions achieved by entities that are not regulated by a greenhouse gas control program. Revenue recycling. How a program disposes of revenues from auctions, penalties, and/or taxes. Revenue recycling can have a significant effect on the overall cost of the program to the economy, as well as its effect on income classes. Sequestration. Sequestration is the process of capturing carbon dioxide from emission streams or from the atmosphere and then storing it in such a way as to prevent its release to the atmosphere. Congressional Research Service 12 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Title I—Clean Energy Subtitle A—Combined Efficiency and Renewable Energy Standard Sec. 101. Combined Efficiency and Renewable Energy Standard Summary of section Comments Amends the Public Utility Regulatory Policies Act of 1978 (PURPA) to create an integrated energy efficiency and renewable electricity standard. The definition of renewable electricity is augmented by adding other qualifying energy resources (i.e., landfill gas, wastewater treatment gas, coal mine methane, and qualified waste-to-energy) to the list of renewable energy resources. Establishes a federal Renewable Electricity Standard to promote renewable energy production. Under the standard, each retail electricity supplier with annual sales of 4 million megawatt-hours (mwh) or more must earn or acquire Renewable Electricity Credits (RECs) for a portion of its retail electricity sales. Credits can also be acquired by “central procurement states.”8 In establishing regulations for this program, FERC must, to the extent practicable, incorporate and preserve best practices of existing state-level renewable electricity programs and cooperate with states on minimizing administrative costs and burdens. RECs can be traded or banked, and can be earned by producing electricity from specified renewable energy sources, including wind, solar, geothermal, marine or hydrokinetic, biomass, landfill gas, or qualified hydropower. “Distributed renewable generation”—smallscale, renewable power production located at consumer sites—qualifies for three RECs for each mwh of eligible renewable electricity. The object of this provision (which is explicitly stated in the bill) is to improve the costcompetitiveness of distributed renewable power versus more conventional electricity sources. The required renewable energy and efficiency percentage for each year is: Renewable biomass definition is revised to allow thinning materials and removed invasive species from the National Forest system and public lands. The bill’s requirement that qualified hydropower installations must result in no water surface elevation changes at existing dams has been criticized as impractical. Alternatives include establishing a range of water elevation change per kilowatt-hour of generation and providing for no “net” degradation of downstream resources, habitats, or existing uses. The program includes limited interchangeability between energy efficiency and renewable electricity to meet the savings targets established by the amendment. This interchangeability responds to concerns that some regions of the country do not have sufficient renewable energy resources (such as the lack of wind power potential in the Southeast) to meet a pure renewable electricity standard. Combined heat and power or CHP (also referred to as cogeneration) is an integrated process to produce electricity and process heat for industrial or commercial use, such as space heating. Because the CHP plant makes use of the waste heat lost in a stand- 8 A central procurement state is state that as of January 1, 2009, has adopted and implemented a program under which the state, rather than individual utilities, procures renewable electricity. Congressional Research Service 13 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary of section Comments 2012 and 2013: 6% alone power plant or steam plant, it is much more energy efficient than those types of facilities. Many types of CHP plants are in commercial operation. 2014 and 2015: 9.5% 2016 and 2017: 13% 2018 to 2019: 16.5% 2020 through 2039: 20% Generally a maximum of 25% of a retailer’s (or a Central Procurement State’s) combined efficiency and renewable energy target can be met with energy efficiency. This can include energy saved by the use of high efficiency combined heat and power plants, high efficiency fuel cells, solar water heating, and solar light pipe technology. However, a state governor can petition the Commission to increase the efficiency percentage for the retailers in his or her state up to 40%. FERC is required to promulgate detailed regulations on the standards and protocols that must be used to verify the amount of energy efficiency savings achieved by an electricity retailer. The verification must be performed by an independent third-party. Retailers must submit annual reports to FERC on verified savings, which FERC is to review. If FERC concludes that some of a retailer’s savings are overstated it can exclude those savings. The fuel cell is a generating technology that relies on chemical reactions, without combustion, to produce electricity. Fuel cells are a developmental technology. The type of fuel used in a fuel cell determines emissions. For example, fuel cells powered by natural gas will produce more GHGs and other emissions than those using pure hydrogen as a fuel. Nonetheless, natural gas fuel cells are expected to result in cleaner electricity generation than natural gas fired in combustion turbines. A solar light pipe is a tubular structure that uses, for example, prisms to funnel daylight into a structure to supplement or replace electric lighting. A state can petition FERC to delegate the Commission’s review authority to the state, including the adoption of alternative verification procedures. FERC must review the implementation of review authority delegated to the state at least once every four years, and can revoke the delegation if it concludes the implementation is faulty. The bill allows bilateral contracts for the sale of verified electricity savings, which can be used by the buyer to meet its annual target. An electric retailer can only buy savings that were achieved within the retailer’s own state. (The bill does not provide for a system for wide-scale trading of energy efficiency credits, as it does for renewable electricity credits.) A retailer can choose to meet its annual target in whole or part with an alternative compliance Congressional Research Service 14 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary of section Comments payment to the state equal to $25 per megawatthour (inflation-adjusted from a base of 2009), for each megawatt-hour of the target it does not intend to meet with either renewable electricity credits or energy efficiency. The state would be required to use the payments to promote the deployment of renewable electricity and energy efficiency. A retailer that fails to comply with its target must pay to FERC a civil penalty equal to the shortfall amount (in megawatt-hours) times double the alternative compliance payment (i.e., $50 per megawatt-hour, inflation-adjusted). Sec. 102. Clarifying State Authority to Adopt Renewable Energy Incentives Summary of section Comments Section 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA) is amended by confirming state regulatory or legislative authority to set the rates for sales of electric energy from a renewable energy facility under a state-approved production incentive program. The provision affirms state authority to set rates for sales of renewable electricity produced under a state-approved incentive program. The clarification may be intended to preclude conflict with other PURPA requirements for small power generation “Qualifying Facilities” which place rate authority for electricity sales under the Federal Energy Regulatory Commission. Congressional Research Service 15 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Sec. 103. Federal Renewable Energy Purchases Summary of section Comments Requires that, for each of calendar years 2012 through 2039, the President shall ensure that, of the total amount of electricity federal agencies consume in the United States during each calendar year, the following percentage shall be renewable electricity: Calendar year Required annual percentage 2012 ......................................6.0 2013 ......................................6.0 2014 ......................................9.5 2015 ......................................9.5 2016 ....................................13.0 2017 ....................................13.0 2018 ....................................16.5 2019 ....................................16.5 2020 ....................................20.0 2021 through 2039 .............. 20.0 The requirements will be managed by the Federal Energy Management Program in DOE. Standardized contracts for the federal government to acquire renewable energy may be entered into for up to 20 years. Subtitle B—Carbon Capture and Sequestration Sec. 111. National Strategy Summary of section Comments Within one year of enactment, the Administrator of the U.S. Environmental Protection Agency (EPA), in consultation with the Secretary of Energy and the heads of other relevant federal agencies as the President may designate, must submit to Congress a report setting forth a unified and comprehensive strategy to address the key legal and regulatory barriers to the commercial-scale deployment of carbon capture and sequestration. Congressional Research Service 16 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Sec. 112. Regulations for Geologic Sequestration Sites Summary of section Comments Requires a coordinated certification and permitting process for geologic sequestration sites, considering all relevant statutory authorities. In establishing such an approach, the Administrator shall take into account, and reduce redundancy with, the requirements of the Safe Drinking Water Act and, to the extent practicable, reduce the burden on certified entities and implementing authorities. Sec. 112 amends Title VIII of the Clean Air Act, and establishes the certification and permitting process under the authority of the Act. This provision broadens the scope of regulatory authority for CCS beyond the Safe Drinking Water Act (SDWA) by requiring the EPA Administrator to promulgate regulations to protect atmospheric releases of CO2. EPA proposed a new rule on July 25, 2008, to protect underground sources of drinking water under authority of the SDWA Underground Injection Program. Sec. 112 requires EPA to take into consideration the ongoing SDWA rulemaking, but also requires the Administrator to promulgate regulations under SDWA for CO2 geologic sequestration wells within one year after enactment. Not later than two years after enactment, the Administrator is to promulgate regulations to protect human health and the environment by minimizing the risk of atmospheric release of carbon dioxide injected for the purposes of geologic sequestration. Not later than two years after enactment, and at three-year intervals thereafter, the Administrator is to deliver to the relevant congressional committees a report on geologic sequestration in the United States, and to the extent relevant, other countries in North America. Amends the Safe Drinking Water Act by inserting a provision directing the EPA Administrator to promulgate regulations for the development, operation, and closure of carbon dioxide geologic sequestration wells. The regulations are to include requirements for maintaining evidence of financial responsibility for emergency and remedial response, wellplugging, site closure, post-injection site care, and related activities. Sec. 113. Studies and Reports Summary of section Comments Requires a study of the legal framework for geologic sequestration sites by a task force composed of an equal number of subject matter experts, nongovernmental organizations with expertise in environmental policy, academic experts with expertise in environmental law, state officials with environmental expertise, representatives of state attorneys general, and The first study would examine several of the legal framework issues that some observers contend may impede the deployment of commercial scale CCS, including liability and financial responsibilities post-closure, and property rights associated with the underground storage of CO2, such as mineral rights, Congressional Research Service 17 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary of section Comments members of the private sector. The task force is to conduct a study of existing federal environmental statutes, state environmental statutes, and state common law that apply to geologic sequestration sites for carbon dioxide. A report based on the study is due 18 months after enactment. water rights, rights to the pore space, and others. Requires a study examining how, and under what circumstances, the environmental statutes for which EPA has responsibility would apply to CO2 injection and geologic sequestration activities. A report based on the study is due one year after enactment. Sec. 114. Carbon Capture and Sequestration Demonstration and Early Deployment Program Summary of section Comments Allows for the establishment of a Carbon Storage Research Corporation, by referendum, that would establish and administer a program to accelerate the commercial availability of carbon dioxide capture and storage technologies and methods by awarding grants, contracts, and financial assistance to electric utilities, academic institutions, and other eligible entities. Sec. 114 is nearly identical to H.R. 1689, the Carbon Capture and Storage Early Deployment Act introduced by Rep. Boucher on March 24, 2009. Establishes the corporation by a referendum among “qualified industry organizations” which would include the Edison Electric Institute, the American Public Power Association, the National Rural Electric Cooperative Association, their successors, or a group of owners or operators of distribution utilities delivering fossil fuel-based electricity who collectively represent at least 20% of the volume of all fossil fuel-based electricity delivered by distribution utilities to U.S. consumers. Voting rights would be based on the quantity of fossil fuel-based electricity delivered to the consumer in the previous year or other representative period. The corporation would be established if persons representing two-thirds of the total quantity of fuel-based electricity delivered to retail consumers vote for approval. If 40% or more of state regulatory Congressional Research Service If established, the corporation would award grants, contracts, and assistance to support commercial-scale demonstration of carbon capture or storage technology projects that encompass coal and other fossil fuels, and are suitable for either new or retrofitted plants. The corporation would seek to support at least five commercial-scale demonstration projects over the lifetime of the corporation. Pilot-scale and other smallscale projects would not be eligible under the program. The authority to collect assessments expires 10.5 years after enactment, and the corporation would dissolve 15 years after enactment unless extended by Congress. If assessments are collected as specified, the corporation would accumulate approximately $10 billion to be awarded over 15 years. The program gives priority to “early movers,” electric utilities that committed 18 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary of section Comments authorities submit written notices of opposition to the creation of the corporation, the corporation would not be established. resources to deploy large scale electricity generation units integrated with carbon capture and sequestration prior to the award of any grant authorized under this section. The section does not quantify the amount of resources deployed, but does state that they should be “applied to a substantial portion of the unit’s carbon dioxide emissions.” Establishes requirements for board members, compensation, and terms of service. Provides descriptions of the status of corporations, functions and administration of the corporation, and details of corporation administration, including the use of grants and contracts, intellectual property issues, budgeting, record keeping, audits, and reports. The corporation would raise funding for its program by collecting an assessment on distribution utilities for all fossil fuel-based electricity delivered to retail customers. The assessments would reflect the relative CO2 emission rates of different fossil fuel-based electricity as follows: Fuel type Coal ........................................ Natural Gas ............................. Oil ........................................... Rate of assessment per kilowatt hour $0.00043 $0.00022 $0.00032. The corporation is authorized to adjust the assessments so that they generate not less than $1.0 billion and not more than $1.1 billion per year. Provides specific provisions for the Electric Reliability Council of Texas (ERCOT), including the corporation factors listed above. Methods are specified for determining fossilfuel-based electricity deliveries. Within five years, the Comptroller General of the United States must prepare an analysis and report to Congress assessing the Corporation’s activities, including project selection and methods of disbursement of assessed fees, impacts on the prospects for commercialization of carbon capture and storage technologies, and adequacy of funding. Allows that a distribution utility whose transmission, delivery, or sale of electric energy Congressional Research Service 19 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary of section Comments are subject to any form of rate regulation shall not be denied the opportunity to recover the full amount of the prudently incurred costs associated with complying with this section. Establishes a technical advisory committee to provide independent assessments and technical evaluations, as well as make non-binding recommendations to the Board, concerning Corporation activities and describes its role and management. Sec. 115. Commercial Deployment of Carbon Capture and Sequestration Technologies Summary of section Comments Amends Title VII of the Clean Air Act to require that not later than two years after the date of enactment, the EPA Administrator is to promulgate regulations providing for the distribution of emission allowances to support the commercial deployment of carbon capture and sequestration technologies in both electric power generation and industrial operations. Eligibility for emission allowances requires an owner or operator to implement carbon capture and sequestration technology at: (1) an electric generating unit that has a nameplate capacity of 200 megawatts or more, and derives at least 50% of its annual fuel input from coal, petroleum coke, or any combination of these two fuels, and which will achieve at least a 50% reduction in carbon dioxide emissions annually produced by the unit; and (2) at an industrial source that, absent carbon capture and sequestration, would emit more than 50,000 tons per year of carbon dioxide, and upon implementation will achieve at least a 50% reduction in annual carbon dioxide emissions from an emission point. Eligibility for emission allowances requires that the owner or operator geologically sequester captured carbon dioxide or convert it to a stable form that can be safely and permanently sequestered. Sec. 115 excludes industrial facilities from eligibility if they produce a liquid transportation fuel from a solid fossil-based feedstock. Distributes emission allowances to electric generating units in two phases. Phase I applies An amendment was successfully offered during markup that makes retrofitted Congressional Research Service For projects that capture and sequester carbon dioxide for the purposes of enhanced hydrocarbon recovery, the Administer is required to reduce the applicable bonus allowance value compared to projects that capture carbon dioxide solely for purposes of sequestration. This section provides an incentive for “early movers.” Under Phase I distribution to electric generating units, the bonus allowance value is increased by $10—of the otherwise applicable bonus value—if the generating unit achieves a 50% capture rate before January 1, 2017. An amendment was successfully offered during markup to replace the word “source” with the words “emission point” regarding eligibility for emission allowances at an industrial source. The change in wording could affect the eligibility for industrial sources that might employ carbon capture and sequestration at some but not all emission points in the facility. 20 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary of section Comments to the first 6 gigawatts of electric generating units, measured in cumulative generating capacity of such units. Under Phase I, eligible projects receive allowances equal to the number of tons of carbon dioxide captured and sequestered, multiplied by a bonus allowance value, divided by the average fair market value of an emission allowance in the prior year. The Administrator shall establish a bonus allowance value for each rate of carbon capture and sequestration—compared to how much would otherwise be emitted—from a minimum of $50 per ton for a 50% rate to a maximum of $90 per ton for an 85% rate. electric generating units eligible for emission allowances if the carbon capture and sequestration technology is applied to the flue gas from at least 200 megawatts of the total nameplate capacity of the unit. The amendment similarly makes retrofitted units eligible if the carbon capture and sequestration technology achieves at least a 50% reduction capacity in emissions from the treated portion of the flue gas from the retrofitted unit. After the 6 gigawatt threshold is achieved, Phase II distributes emission allowances by reverse auction (described in this section of the bill). If the Administrator determines that reverse auctions are not efficient or costeffective for deploying commercial-scale capture and sequestration technologies, the Administrator may prescribe an alternative distribution method. In an alternative distribution method, the Administrator would divide emission allowances into multiple tranches, each supporting the deployment of a specified quantity of cumulative electric generating capacity utilizing carbon capture and sequestration technology. Each tranche would support no more than 6 gigawatts of electric generating capacity, and would be distributed on a first-come, first-serve basis. For each tranche, the Administrator would establish a sliding scale that provides higher bonus allowance values for projects achieving higher rates of capture and sequestration. For each successive tranche, the Administrator would establish a bonus allowance value that is lower than the rate established for the previous tranche. An amendment was successfully offered during markup to include retrofitted units in the calculation of bonus allowances with respect to the treated portion of flue gas from the retrofitted units. The Administrator would not distribute more than 15% of the allocated allowances under Sec. 782(f) to eligible industrial sources. The allowances may be distributed to eligible industrial sources using a reverse auction method or an incentive schedule, similar to the Congressional Research Service 21 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary of section Comments Phase II methods described for electric generating units. Total allowances under Sec. 115 are limited to 72 gigawatts of total cumulative generating capacity, including for industrial sources according to an equivalent metric designated by the Administrator. Sec. 116. Performance Standards for Coal-Fueled Power Plants Summary of section Comments Amends Title VIII of the Clean Air Act (CAA) by adding performance standards for carbon dioxide removal for new coal-fired power plants. Plants covered by this section include plants that have a permit issued under CAA Title V to derive at least 30% of their annual heat input from coal, petroleum coke, or any combination of these fuels. The performance standards are as follows: The 65% reduction mandated for coal plants entering service after January 1, 2020, would result in a level of emissions roughly equivalent to the carbon dioxide released by a natural gas-fired plant of modern design (a “combined cycle” plant) using no carbon controls.   A covered unit that is “initially permitted” on or after January 1, 2020, shall reduce carbon dioxide emissions by 65%. A covered unit that is initially permitted after January 1, 2009, and before January 1, 2020, must achieve a 50% reduction in carbon dioxide emissions by a compliance date that will be determined by future developments. Specifically, the compliance date will be the earliest of (1) four years after the date in which the equivalent of 4 gigawatts (Gw) of generating capacity with commercial carbon capture and sequestration technology are operating in the United States and sequestering at least 12 million tons of carbon dioxide annually (equivalent to roughly eight medium-sized coal plants). This 4 Gw of capacity Congressional Research Service The use of the term “initially permitted” is important in the implementation of this section. A new power plant that has received a permit that is still subject to administrative or legal review is considered to be “initially permitted.” If a proposed new coal plant has been “initially permitted” prior to January 1, 2009, it will not fall under the requirements of this section to eventually install carbon controls. In an earlier version of this bill, only new units that had been “finally permitted” prior to January 1, 2009—that is, the permit was no longer subject to any challenges or reviews—would have escaped this requirement. 22 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary of section  Comments must include at least 3 Gw of electric generating units, may include up to 1 Gw of industrial applications that are capturing and sequestering at least 3 million tons of carbon dioxide annually, and must include at least two operating 250 megawatt (Mw) or larger generating units that sequester captured carbon dioxide in geologic formations other than oil and gas fields; or (2) January 1, 2025 (which can be extended by the EPA Administrator by up to 18 months on a case-by-case basis). Not later than 2025 and at fiveyear intervals thereafter, the Administrator is to review the standards for new covered units under this section and shall reduce the maximum carbon dioxide emission rate for new covered units to a rate which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which the Administrator determines has been adequately demonstrated. The Administrator is also to publish biennial reports on the amount of capacity with commercial carbon capture and sequestration technology in the United States. Congressional Research Service 23 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Subtitle C—Clean Transportation Sec. 121. Electric Vehicle Infrastructure Summary of section Comments Establishes a new standard that state regulatory authorities and non-regulated electric utilities may adopt. The standard would require electric utilities to develop plans to support the use of plug-in hybrid vehicles (PHEVs) and pure plugin electric vehicles (EVs), including heavy-duty hybrids. Plans may include deployment of charging stations, battery exchanges, fastcharging infrastructure, and triggers for development based on vehicle market penetration. Infrastructure should be interoperable with products from all manufacturers, to the extent practicable. State regulatory authorities and utilities must establish protocols and standards for integrating plug-in vehicles into the electrical distribution system, and include the ability for each vehicle to be identified individually and associated with its owner’s electric utility account, for the purposes of billing of electricity use and the crediting of any power returned to the grid by the vehicle’s batteries. A key issue with the development and expansion of electric vehicles is the availability of infrastructure to support those vehicles. Currently, various protocols and technologies are being tested and have been considered. In some cases, standards have been determined for vehicle recharging plug design and other elements, but most standardization questions remain undecided. Requiring utilities to develop plans for infrastructure development will likely provide an impetus for further standardization, as well as expansion of that infrastructure. Under the standard, within three years of enactment, state regulatory authorities would be required to set a hearing date for considering the plan, and must make a determination on new standards within four years of enactment. State regulatory authorities would consider whether to allow cost recovery for the development and implementation of such plans. Sec. 122. Large-Scale Vehicle Electrification Program Summary of section Comments Requires the Secretary of Energy to establish a program to deploy and integrate plug-in vehicles in multiple regions. Any state or local government—either solely or jointly with electric utilities, automakers, technology providers, car sharing companies, or other entities—may apply to the Secretary for financial assistance. The Secretary is to Congressional Research Service 24 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Summary of section Comments determine the design elements and requirements for the program, including the type of financial assistance provided. Financial assistance may be used for various purposes: assisting in the purchase of new vehicles; deployment of recharging or battery exchange infrastructure; integration of plug-in vehicles into the grid; and other projects the Secretary deems appropriate to support large-scale deployment of plug-in vehicles. Sec. 123. Plug-in Electric Drive Vehicle Manufacturing Summary of section Comments Requires the Secretary of Energy to establish a program to provide financial assistance to automobile manufacturers to facilitate the manufacture of plug-in vehicles. The Secretary may provide assistance for the reconstruction or retooling of vehicles developed and produced in the United States, and for the purchase of domestically produced batteries for such vehicles. The Secretary is to determine the design elements and requirements for the program, including the type of financial assistance provided. The Secretary is to give preference to facilities located in areas that have the greatest need for the facility, and to proposals that are most likely to be successful. The details of this program, if enacted would determine its likely scope and effects. For example, manufacturers are more likely to prefer grants to loans, and direct loans to loan guarantees. Congressional Research Service 25 Greenhouse Gas Legislation: Summary and Analysis of H.R. 2454 as Passed by the House Sec. 124. Investment in Clean Vehicles Summary of section Comments Directs EPA to distribute one-quarter of the allowances allocated to the aut [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR40643. Public record. Not legal advice.