CLIMATE:

Energy and Commerce panel launches 4 days of cap-and-trade, energy bill hearings

House Democrats will begin the sprint toward global warming legislation this week with a series of hearings featuring high-ranking Obama administration officials and dozens of other witnesses to discuss the expansive climate and energy measure unveiled last month.

The Energy and Commerce Committee will delve into the details of the 648-page draft bill introduced by Chairman Henry Waxman (D-Calif.) and Energy and Environment Subcommittee Chairman Ed Markey (D-Mass.).

President Obama and Democratic congressional leaders are hoping to finalize legislation this year that would establish a program requiring a mandatory cap on greenhouse gas emissions.

U.S. EPA Administrator Lisa Jackson, Energy Secretary Steven Chu and Transportation Secretary Ray LaHood will headline the hearings. Until now, the Obama administration has broadly said that it supports the goals of the sweeping bill but has deferred commenting on many of the important details. In addition to those officials, dozens of other stakeholders are expected to testify before the joint panel comprised of the full Energy and Commerce Committee and the Energy and Environment Subcommittee.

"It will be an exhaustive set of hearings," Markey said on Friday. The hearings will begin tomorrow afternoon with opening statements, followed by the Obama administration officials on Wednesday.

Lawmakers and witnesses will look at a host of contentious issues in the debate over cap and trade, including setting emission targets, allocating revenue from the sales of carbon allowances, preventing industries from fleeing to other countries with weaker emission standards, the role carbon offsets should play, and many others.

The Waxman-Markey draft seeks to curb emissions by 2020 on a slightly more aggressive scale than the limits Obama has proposed. Obama's budget released in February suggested a 14 percent cut at the end of the next decade, whereas Markey and Waxman call for a 20 percent cut. Both the Waxman-Markey draft and Obama's plan call for a midcentury target of slashing emissions by 83 percent.

But the House proposal offers more specifics than the Obama 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 and a 42 percent reduction in 2030 (Greenwire, March 31).

Waxman said in a recent interview with Bloomberg News that he will not compromise on his proposed 20 percent reduction in greenhouse gas emissions over the next decade, despite criticism that such strict cuts could hurt the ailing economy.

"I want to keep those caps in place," Waxman told Bloomberg, although he added that he would be willing to compromise in other areas of the bill.

What to do with auction revenue will be another contentious issue as deliberations continue. Obama's budget called for using the lion's share of the revenue to fund his proposed middle-class tax cuts, but lawmakers and interest groups have a slew of competing theories about how to divvy up the nearly $650 billion that the budget predicts will be raised by the cap-and-trade plan between 2012 and 2019.

Lawmakers will also wade into the details surrounding whether to allocate emission allowances to energy-intensive industries, a highly contentious issue that was sidestepped in the Waxman-Markey draft.

Obama and many environmental groups have endorsed auctioning 100 percent of carbon emission allowances under a cap-and-trade plan, but industry groups and some lawmakers are pressing to give energy-intensive industries some free allowances that they say will help utilities and other emission sources meet compliance costs and protect consumers from price spikes. The administration has indicated recently that it would consider holding off on a 100 percent auction plan (E&ENews PM, April 8).

Markey's subcommittee is still scheduled to mark up the bill next week, followed by a full committee markup the week of May 11.

Endangerment finding alters playing field

The politics surrounding the draft bill were altered drastically Friday when the Obama EPA issued a proposed finding that that greenhouse gases threaten public health and welfare. If finalized, the "endangerment finding" would pave the way for EPA to use the Clean Air Act to limit the heat-trapping emissions, a move opposed by industry groups (Greenwire, April 17).

The release of the long-awaited proposal is widely seen as a tool used by the Obama administration to spur legislative action from Capitol Hill by pushing reluctant lawmakers and industries toward supporting a bill that would be more flexible than regulations from EPA. Obama and Democratic lawmakers have said they would prefer legislation to rules from EPA (E&ENews PM, March 17).

"It's actually more cost-effective and environmentally effective to legislate," Markey said in response to EPA's proposal. "There is more flexibility inside a legislative process to deal with trade-exposed energy intensive industries, with the impact on consumers and the other issues that legislators would be concerned about."

The Waxman-Markey bill specifies that EPA cannot regulate carbon dioxide or other greenhouse gases as criteria air pollutants or hazardous air pollutants -- two sections of the law that could require sweeping regulations across the U.S. economy.

Republicans were quick to condemn what many view as a false choice between legislation and regulation. "By pushing forward a flawed approach, this administration is playing a game of chicken with Congress over regulations and our economy: either pass legislation or force economically damaging new regulations on businesses," said Rep. Darrell Issa (R-Calif.), ranking member of the House Oversight Committee.

"The problem is that bureaucrats and Democrats now will want to rush forward, notwithstanding all the ignorance of economic realities of which they're famously capable," said Energy and Commerce Committee ranking member Joe Barton (R-Texas). "If successful, they'll blacken the sky with government rules and pay for them with a cap-and-trade law that costs millions of people their jobs."

Energy provisions

While the climate provisions have taken center stage, the bill would also enact other profound changes in energy policy, including new financing and regulatory mandates. It includes Democrats' longstanding goal of a renewable electricity standard. The bill's standard reaches 25 percent by 2025, although states could use efficiency measures to meet up to a fifth of the requirement.

Senate support for a renewable standard grew with the last election but hurdles remain in that chamber. Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) -- who has floated a plan with somewhat lower targets than the House measure -- has been trying to reach an agreement with moderate Democrats wary of the provision.

The bill also includes other renewable energy provisions, such as authorizing long-term federal contracts for purchase of power from sources such as wind and solar energy.

The Waxman-Markey draft also includes an "energy efficiency resource standard" that requires electricity and natural gas providers to ensure growing amounts of energy savings among their consumers. The EERS is a major priority for energy efficiency groups such has the American Council for an Energy Efficiency Economy but also faces opposition. Already the American Gas Association, an industry trade group that represents natural gas utilities, is opposing the provision. Bingaman's committee is holding a hearing on EERS on Wednesday (see related story).

The massive bill includes many other measures aimed at improving building and appliance efficiency, improving transmission planning, helping to deploy a "smart" electricity grid and many other areas.

Various efficiency measures include financing and other assistance to help states adopt energy-efficient building codes. It also creates a new federal Retrofit for Energy and Environmental Performance program to create energy savings at residential and commercial buildings that would blend federal expertise with new financing for states.

Elsewhere, it includes a major new program that would provide billions of dollars over a decade to speed commercial deployment of carbon capture and storage technologies that could help attract support from coal-state lawmakers (E&E Daily, April 1). This measure, reflecting a bill by coal-industry ally Rep. Rick Boucher (D-Va.), would create a $1 billion annual fund over 10 years to help accelerate the commercial-scale use of the technology, which is seen as vital to allowing continued use of coal while simultaneously cutting emissions from the carbon-heavy fuel.

Oversight

Another major issue looming over the hearings is which agency or agencies will oversee what could become trillion-dollar markets for trading in emissions allowances and offsets, and related financial products. The Waxman-Markey bill would put the Federal Energy Regulatory Commission in charge of emissions allowance and offset markets. But it leaves it up to an interagency working group to decide where jurisdiction over the larger derivatives market will lie.

Some major oil, power and financial services companies -- and some lawmakers -- say the Commodity Futures Trading Commission should be the primary carbon market regulator (Greenwire, April 17).

Bart Chilton, a CFTC commissioner, issued a statement Friday saying the agency is expected to monitor and oversee the trading of derivative products linked to emissions allowances. Chilton said the agency is gearing up for overseeing what could become very large markets by expanding the scope of its energy advisory committee, which will now be the Energy and Environmental Markets Advisory Committee.

"The mission, mandate and membership of the EEMAC is being expanded to ensure that we are ready for what could be a $2 trillion market in the future," Chilton said. "We will have impressive experts who will help us as we try and figure out what needs to been done on day one after legislation becomes law."

Click here to read the draft bill.

Click here to read the executive summary of the proposal.

Schedule: The hearings are tomorrow at 3 p.m.; Wednesday, April 22, at 9:30 a.m.; Thursday, April 23, at 9:30 a.m.; and Friday, April 24, at 10 a.m. All hearings are in 2123 Rayburn.

Witnesses: U.S. EPA Administrator Lisa Jackson, Energy Secretary Steven Chu, Transportation Secretary Ray LaHood and dozens of other witnesses TBA.

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