Waxman's Cap-And-Trade Throwdown

In releasing the draft of an energy policy overhaul today, Rep. Henry Waxman, chairman of the House Energy and Commerce Committee, has put down a marker for the White House and the Senate. The prospects of passing a cap-and-trade emissions credit system this year are dim, mostly because too many Democratic Senators worry about the job cost and unequal distribution of renewable energy sources.  Still, the administration faces domestic and international pressure to begin the process of substantially reducing Greenhouse Gas (GHG) emissions by the December Copenhagen conference, when it will try to convince China and India to follow the U.S.'s example. Waxman, along with Rep. Ed Markey, have set a deliberately ambitious goal of, 20 years hence, reducing carbon emissions in the United States by 20% of their 2005 levels. That's a far more dramatic reduction than Obama proposed during the presidential campaign.

Just as deliberately, the draft does not specify how those credits will be issued and how they will be priced.  Just as deliberately, the bill includes various inducments and sweeteners and transition assistance to those industries and areas which will be hurt by the switchover to a cap-and-trade regime. The bill comes a day after the Environmental Protection Agency reocgnized its own authority to regulate carbon emissions, beginning a rulemaking process that will take at least a year and a half to finish.  What's the acceptable level for carbon emissions? Bureaucrats (and scientists) have yet to tell us. In the meantime, companies will be required to report emissions exceeding 25,000 metric tons of GHGs per year.

The Waxman/Markey bill is written as a replacement, and not a supplement, to EPA rules. As I've written before, the general idea is that an expedited EPA rulemaking process will force business and industry to play ball with Congress. (One positive sign: utilities are reacting cautiously to the bill; the president of Florida Power and Light wrote in a statement that "This discussion draft contains important provisions that will help the country make a full transition to the clean-energy economy of the 21st century - one that will create jobs, strengthen our energy security, and address the threat of global climate change. We look forward to working with Chairmen Waxman and Markey to pass a bill this year.")

One goal of the EPA rules is to create a baseline database of GHG emissions, although they might be artifically depressed by the recession. Only by knowing how much GHGs are being omitted can Congress or the government figure out how to price and allocate emissions credits.  

Waxman and Markey also require a mandatory renewable energy target that exceeds by five percentage points the standard that the European Union has set for 2020.  The further Markey and Waxman reach, the more room they'll have to negotiate with the Senate.