29/06/09

On Friday 26th June 2009, The House of Representatives passed the landmark American Clean Energy and Security Act, sponsored by Rep. Henry A. Waxman, Chairman of the House Energy and Commerce Committee, and Rep. Edward J. Markey, Chairman of the House Select Committee on Energy Independence and Global Warming. This is the first time that the US House of Representatives has voted on climate legislation. The House vote is the first step in a two-stage process. For the Bill to become law, a similar Bill must now pass the Senate widely regarded as the much greater challenge where political and regional differences are even more pronounced. Chairman Markey said: “Today the House has passed the most important energy and environment bill in our nation’s history. Scientists say that global warming is a dangerous man-made problem. Today we are saying clean energy will be the American-made solution. This legislation will create jobs by the millions, save money by the billions and unleash investment in clean energy by the trillions.”

The debate in the Senate may begin as early as July and Senate Majority Leader, Harry Reid, suggested after the House vote that the Senate could pass a Bill “this fall”.  However, many commentators expect the Senate climate debate to continue into 2010 (ie beyond COP15). If passed in the Senate, ACES would put the US on a path to reduce its emissions (from 2005 levels) by:

·        20 per cent by 2020 (6 per cent below 1990 levels), of which 17 per cent will be achieved via the cap and trade scheme; 

·        42 per cent by 2030 (around 33 per cent below 1990 levels); and

·        83 per cent by 2050 (equivalent to 80 per cent below 1990 levels).

A significant late amendment added to the Bill would trigger, in 2020, the automatic imposition of border adjustment measures on imports from countries that do not control their carbon emissions.

President Obama hailed the House passage of the bill as “a bold and necessary step.” He said in a statement that he looked forward to Senate action that would send a bill to his desk “so that we can say, at long last, that this was the moment when we decided to confront America’s energy challenge and reclaim America’s future.”

What happens now in the Senate?

The Senate has already addressed some of the issues in ACES.  The Energy and Natural Resources Committee, chaired by Senator Jeff Bingaman (D-New Mexico) passed on June 17 an American Clean Energy Leadership Act that addresses several energy issues, including many of those in ACES.  The Senate Environment and Public Works Committee, chaired by Senator Barbara Boxer (D-California), has preliminary plans to act on a greenhouse gas cap-and-trade measure in August.  These measures, as well as those passed by other Senate committees, will likely be combined to create the Senate counterpart to the ACES Act.  If the Senate passes this combined bill, differences between the Senate and House bills would have to be reconciled, with the final bill passed by both houses, before the bill could be sent to President Obama and signed into law.

The polarised and largely partisan debate over whether the bill would kill or grow the economy - and subsequent narrow margin of victory in the House– is an ill omen for the Senate where the leadership will need moderate Democrats and Republicans to pass a bill. The House vote suggests that neither group is moving fast towards supporting climate legislation. However, substantive White House engagement will make a difference. This was evident in the latter stages of the House discussions and no doubt helped avoid a narrow defeat. The White House will need to continue to push hard for this legislation to have a good chance of passing the Senate.

Implications for COP15 in Copenhagen

The ACES passage through the House of Representatives keeps alive the possibility of climate legislation being passed in the Senate before December and therefore makes possible an international deal in Copenhagen.  However, even if a Bill has not have passed the Senate by December 2009, the Obama Administration will have a good sense of the position of US Congress going into the negotiations – a very different situation from 1997 and the Kyoto Protocol.  Some argue that having the Bill pass the House but not having passed the Senate is the ideal situation for Obama going into COP15 – as well as giving him a strong sense of the position of Congress, it also allows the Bill to be amended post-COP15 to take into account any elements of the post-2012 agreement that would benefit from compatibility with the US’s domestic Bill. 

Had the Bill failed in the House, the chances of the US being able to sign up to a deal in Copenhagen in December would be severely weakened and we would have likely not seen climate legislation debated again in the US for many months, if not years.  As Al Gore wrote on Friday, there was “no backup plan” to Waxman-Markey.

Border Adjustment Measures

A late amendment to the Waxman-Markey bill would automatically impose border adjustment measures on imports in 2020 unless both the White House and Congress were to agree to waive them.  It is unclear whether such border measures – intended to level the playing field by equalizing carbon emissions costs between domestic production and imports – would be permitted by World Trade Organisation rules.  Many developing countries complain that such measures can act as a form of backdoor protectionism.  The late amendment is significant as it automatically sets the switch for border measures to “on” and requires both White House and Congressional approval to turn it off. 

Significance

The US hasn’t enacted a major economy-wide clean air bill since the Clean Air Act amendments of 1990.  That bill had a cap-and-trade system where 97% of the permits were given to polluters (versus 85 per cent under Waxman-Markey) and it focused on direct, obvious, short-term health threats to Americans.  Significantly, Waxman-Markey received 8 Republican votes, which is 8 more than President Obama’s stimulus bill.  The Waxman-Markey Bill needed Republican votes to pass the House, as it will in the Senate.  The closeness of the House vote — with 44 Democrats voting “No” — makes clear that the really hard work is yet to come.

Many say the Bill doesn’t do enough, and they are right.  But then the original Clean Air Act didn’t do enough.  And the 1987 Montréal protocol would not have stopped concentrations of ozone depleting substances from rising and thus would not have saved the ozone layer.  However, they both began processes and established frameworks that were strengthened over time as the science warranted. 

Reaction

While some environmentalists enthusiastically supported the legislation, others, including Greenpeace and Friends of the Earth, opposed it, saying it didn’t go anywhere near far enough.  Industry was split, with the United States Chamber of Commerce and the National Association of Manufacturers opposing the bill and some of the nation’s biggest corporations, including Dow Chemical and Ford, backing it.

Republican leaders called the legislation a national energy tax and predicted that those who voted for the measure would pay a heavy price at the polls next year.