by Richard R. Loomis and Susan Salter

It has everything you would expect from a Barack Obama-era bill. It has a promise to create millions of green-collar jobs, save Americans billions of dollars in energy costs, enhance the nation’s energy independence and curtail global warming. It has a name – the American Clean Energy and Security Act of 2009 – that lends itself to a catchy acronym (ACES). It has cap-and-trade, which also means it has the endorsement of left-wing interests and the criticism of those leaning to the right. And it is all backed up by a dense, 648-page discussion draft that has kept analysts and pundits busy for days.

An example of go-go Democratic policy? Interestingly enough, the George W. Bush administration seemed to be much more aggressive about renewable energy. The Department of Energy published a report in July 2008 about the possibility of achieving Bush’s plan to satisfy 20 percent of the nation’s entire energy needs with wind power by 2030. On page seven, the report states:

The 20% Wind Scenario presented here would require U.S. wind power capacity to grow from 11.6 GW in 2006 to more than 300 GW over the next 23 years. This ambitious growth could be achieved in many different ways, with varying challenges, impacts, and levels of success. The 20% Wind Scenario would require an installation rate of 16 GW per year after 2018.

But we digress. Welcome to ACES, introduced in draft this spring by Energy and Commerce Committee Chairman Henry A. Waxman (D-Calif.) and Energy and Environment Subcommittee Chairman Edward J. Markey (D-Mass.). “This legislation will create clean energy jobs that can’t be shipped overseas, reduce our dependence on foreign oil, and make America the global leader in energy technology. We will create jobs by the millions, save money by the billions, and unleash energy investment by the trillions,” Markey said. “Chairman Waxman and I will work with our colleagues to ensure that we are protecting American consumers and that our clean energy future helps all parts of the country.” (The full Energy and Commerce Committee will mark up the bill the week of May 11. Waxman promised “completed consideration of the legislation” by Memorial Day.)

The current draft legislation has four titles:

Title 1: Creating Clean Energy Jobs: This clean-energy title promotes renewable sources of energy, carbon capture and sequestration technologies, low-carbon fuels, clean electric vehicles and the smart grid and electricity transmission.

Title 2: Cutting Waste, Saving Money: The energy-efficiency title increases energy efficiency across all sectors of the economy, including buildings, appliances, transportation and industry.

Title 3: Cap Global Warming Pollution: The global-warming title places limits on emissions of heat-trapping pollutants.

Title 4: Protecting Consumers: The transitioning title protects U.S. consumers and industry and promotes green jobs during the transition to a clean-energy economy.

Voices from the Fray “Politics is a painfully slow and inadequate way to go about forming an energy strategy, but it seems to be the only way we have.” – Energy analyst Chris Nelder, in Business Insider (April 11, 2009) “Cap-and-trade is a tax on energy consumption rather than production. Its effect on oil and gas producers will be primarily indirect. Also, it is very hazy what the specifics of the Obama administration’s future carbon policy will be. … We will defer to other experts about the overall wisdom or lack thereof of cap-and-trade policy, but what we can say today is that the prospect of such a ‘tax’ on the economy would not materially influence our outlook on the U.S. energy sector – either positively or negatively – over the next 3-5 years.” – Excerpt from article posted by Raymond James & Associates (March 30, 2009)

The sweep of the Waxman-Markey bill “is massive,” wrote Jay Newton-Small of Time. “It includes provisions to require that a quarter of U.S. power production be based on renewable energy by the year 2025; investments to facilitate mounting those new energy sources onto the grid; incentives for green buildings, appliances and vehicles; and an ambitious schedule to reduce greenhouse gases 20 percent below 2005 levels by the year 2020. The goals are even more ambitious than those in Obama’s plan, which calls for only a 14 percent reduction in the same period – and that may well be the point.”

According to the New York Times, both ACES and President Obama’s plan “do line up on a midcentury target curbing emissions by 83 percent. But the House lawmakers offer more specifics than the new administration when it comes to the cap-and-trade program’s start in 2012. The Democrats call for a 3 percent emissions cut from 2005 levels. They also include a 42 percent reduction in 2030.” “I think the goals are realistic,” Rep. Jay Inslee (D-Wash.) told the New York Times. “It’s based on science, rather than fear.”

But Rep. Rick Boucher (D-Va.) told the paper that the limits may be too aggressive for industry given technological constraints. “I think it’s challenging,” Boucher was quoted in the New York Times.

“Challenging” could be an understatement as the economy continues to falter, even though the goals are less ambitious than those proposed by the Bush administration. Congress may have a very hard time passing a bill that will directly affect the pocketbooks of so many of its constituents.

Cap This!

ACES brought out fast, expected assault from Republican leaders and industry representatives:

• House Minority Leader John Boehner (R-Ohio) called the proposal an ill-timed “energy tax.”
• Rep. John Shimkus (R-Ill.) told the right-leaning CNSNews.com: “This cap-and-trade scheme may not just reduce Illinois coal jobs further – it is my worry that this legislation aims to kill the entire coal industry.”
• Thomas Pyle, the president of the Institute for Energy Research, said it constituted a “wholesale reordering of American society.”
• Rep. Joe Barton (R-Tex.), the ranking minority member of the Energy Committee, said the draft proposal is “so proudly ignorant” of today’s economy that it is destined to fail, adding that his party plans to offer an alternative to Waxman-Markey.

But “proudly ignorant” appeared only to be Barton’s opening salvo. He went on to say that cap-and-trade “is a scheme devised by radical environmentalists and liberal politicians in Washington to get their big government hands in American’s wallet.” In Barton’s view, cap-and-trade will result in massive job losses caused by closed factories, shut-down mines and power plants rendered uncompetitive. Electricity and fuel, he said, “would be so expensive, every product so pricey that we will literally be forced to change the American way of life.”

What’s more, cap-and-trade “will add to the cost of everything produced with energy, which is literally everything,” Barton said. “The people at greatest risk are low- and middle-income families, blue-collar workers, the elderly, and those whose jobs will be destroyed if we adopt a cap- and-tax policy. You can bet your devalued dollar that these new costs will be passed along to you. It will also cost Americans jobs by sending many industries overseas due to higher production costs.”

Both Waxman and Barton make wild assertions of what the effects of this bill will be. Perhaps unsurprisingly, they seem to be standing as complete opposites, with Barton saying the bill will kill the economy while Waxman claims it will save the economy. We seem to have no shortage of individuals willing to argue the extremes on this one.

Myron Ebell, director of energy and global warming policy for the public interest group Competitive Enterprise Institute, suggested that ACES “should be dead on arrival. We will work to see that it dies as quickly as possible.” Waxman and Markey, said Ebell, “blithely set targets for reducing greenhouse gas emissions without any serious analysis or even awareness of the colossal costs of energy rationing to American consumers, workers, and industry. If enacted, the bill’s cap-and-trade scheme would be a governor on the economy that would permanently limit economic growth at best and produce perpetual stagnation and decline at worst. Other major provisions of the bill would compound the economic damage.”

A cap-and-trade approach, wrote energy analyst Chris Nelder in Business Insider, is one that “I fear could prove a disastrous boondoggle. There is ample evidence that such programs have been a failure in Europe and elsewhere as traders exploited loopholes, and the programs did not produce the expected reductions in emissions.”

And to Pete Du Pont of the Wall Street Journal online, the cap-and-trade section of ACES is “intended to give the government more regulatory authority over the energy industry and a great deal more money – perhaps trillions of dollars – some of which would be available to grant to favored people and industries.”

In addition, noted du Pont, “the bill’s outline does not say who would the energy allowances free, who would have to pay for them, and how much they would pay, but it does intend to make energy much more expensive and less available to consumers. Electricity, oil and large manufacturing businesses (which are jointly responsible for 85 percent of America’s greenhouse emissions) would have to obtain at some price federal government pollution permits – ‘tradable federal permits,’ or ‘allowances,’ for each ton of CO2 emitted into the atmosphere. These permits would require reduced plant emissions over time, from a mandate of 3 percent below 2005 levels in 2012, to 20 percent in 2020, 42 percent in 2030, and 83 percent in 2050.”

Republican “Distortions” Rile Markey

The critique of his discussion draft brought out the fight in Rep. Markey. “Just as they did in last year’s fight over energy policy – when they made countless false statements, like no oil was spilled during Hurricane Katrina,” he said in a statement released by his office April 2, “[Republicans] are now spreading misinformation about clean energy legislations.”

Markey lambasted what he called Republican “distortions” regarding his policy, including these two on his list:

• First, that clean energy and climate legislation would cost $1,300 per family. “This number assumes that the revenues from a cap on global warming pollution would never make it back into the economy, which is the exact opposite of the program,” Markey notes.
• Second, that Democratic proposals would cost families up to $3,100 per year. “More fuzzy math,” said Markey. “House Republicans took the total revenues from a hypothetical global warming pollution system analyzed by MIT and crudely divided it by the number of households in America, getting approximately $3,100 per family. What they omitted is that MIT has determined the costs on a typical family and the burden would only be less than 1/40th of what [Rep. Boehner] and others claim.”

In ACES’ corner are the following proponents:

• Dr. Richard H. Moss, vice president for climate change at World Wildlife Fund, who called the draft “a major first step toward a strong cap-and-trade bill that will cut emissions, jumpstart a new clean energy economy, and strengthen the ability of the Obama administration to negotiate a fair and effective global climate deal this December in Copenhagen” at the United Nations Climate Change Conference.
• Trip Van Noppen, president of Earthjustice, who said: “Shifting away from the dirty fossil fuel-based energy that causes global warming to clean, efficient, and renewable sources like wind and solar power will create good new jobs for millions of Americans. We can either take advantage of this shift, or continue to watch as other countries act more swiftly. By seizing on the strong momentum behind comprehensive clean energy and climate legislation, Chairmen Waxman and Markey are helping re-position our nation as an innovative leader, which will bolster our economy at a time when it is critically needed.”
• NRG Energy President and CEO David Crane, president and CEO of NRG Energy: “Any climate program must promote private sector investment in vital low-carbon technologies that will create new jobs and provide a foundation for economic recovery. … As a member of the United States Climate Action Partnership (USCAP), we believe the balanced provisions in its Blueprint, and especially those regarding the use of allowance value, offer the best way to achieve these goals.”

What Are We in For?

One thing is certain: ACES is going to be debated in the House and the Senate, and in short order the votes will be coming in. The Waxman/Markey bill has the advantage in the House, where the Democrats’ clear majority will ensure passage regardless of the effects on the economy.

Obviously, passage in the Senate will be more difficult, but the Democrats still have a majority there as well. No one argues that there will not be a cost to the consumer to implement this bill, so it will come down to how well Congress can sell the benefits to the rest of us. In Europe, the cap-and-trade system had no effect on reducing carbon dioxide, but it did generate a whole new type of business, and a new industry was created. Perhaps this is the best we can hope for here.

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