Climate Bill Analysis, Part 1: Waxman-Markey Gives Nearly 5 Times More to Polluters than Clean Energ

May 15, 2009 | Teryn Norris,

By Teryn Norris & Jesse Jenkins

The landmark Waxman-Markey 2009 American Clean Energy and Security Act was introduced in the House this afternoon (May 15, download PDF here), and the Breakthrough Institute has performed a preliminary analysis of how it would invest over $1 trillion in cap and trade revenue between 2012-2025. Our key findings for this period include (all numbers are approximate -- download spreadsheet here):

  • Polluting industries: 57.3% of allowances would be freely distributed to polluting industries, including 36.7% for the electricity sector, 12.3% for energy-intensive industries, 6.5% for local natural gas distribution companies, and 1.8% for oil refiners

  • Direct consumer protection: 16.5% of allowances would be used for direct consumer protection , including 15% for low and moderate-income families and 1.5% to benefit users of home heating oil and propane

  • Energy efficiency and clean energy technology: 12.2% of allowances would be used to fund energy efficiency and clean energy technology development and deployment

  • Adaptation and technology transfer: 4.7% of allowances would be used for domestic and global climate adaptation and technology transfer

  • Workforce development: 0.6% of allowances would be used to fund worker assistance and job training

  • Deficit reduction and other: 8.6% of allowances would be used to fund deficit reduction and other public purposes

How much money would these allocations translate into? That depends on the average price for each pollution allowance. The EPA's initial price estimate was $13-22 per allowance between 2015 and 2020, and has since revised that downward by at least 10% (to $12-20 per allowance) as the bill was weakened and additional offsets were permitted. We will assume here an average price of $15 per allowance. In that case, the allocation would look like this (click images to magnify):

Investment in clean energy technology development and deployment is broken out here (Note: the amount for clean energy technology within the "Renewable Energy and Efficiency" program is not specified):

Our analysis finds that Waxman-Markey would spend about $9 billion annually on a range of things that could generously be classified as technology innovation. By contrast, the legislation would give $32 billion to utilities, $9 billion to heavy industries, and $11 billion to low-income consumers annually. This $9 billion is far less than what Obama promised ($15 billion) and far less than the $30 billion that three dozen energy scientists and experts, including several Nobel laureates, called for in a sign-on letter during the fall of 2007. The large allowance giveaway to polluters also stands in contrast to Obama's previous calls for a 100% auction, which was included in his final budget proposal.

Of course, these funding levels assume a price of $15 per allowance. Some analysts, including Joseph Romm of Climate Progress, expect the bill to maintain a low price of $5-10 per allowance for the first several years. If the price was $10 from 2012-2025, the average annual investment in all areas generously classified as energy innovation would be $6 billion. This table compares clean energy investments for $10 per ton vs. $15 per ton:

To sum it up, this chart represents the first table above, including all allocation percentages and cumulative funding levels:

See here for the Breakthrough Institute's full collection of ACES analyses (also collected here):


Cap and Trade sounds a lot like the "Energy Deregulation" that allowed Enron to mess with California's energy supply back in 2001.

It sounds like a system where middlemen are set up to just add cost, not value.

It seems simple taxation (and penalization) would put more dollrs in the government's coffers and steer industry to respond more quickly. The more quickly the proper response is enacted, the sooner jobs will be created in new sectors. If jobs are created in "artificial" sectors only created in a madening arbitraty system, those jobs are at the greatest risk of disapearing once the artificial stimulants are removed.

We must understand that the US consists of less than 5% of the global population. We are often seen as the richest nation - especially in our own eyes. Our transportation system - getting to and from work - is based on hauling around at least a ton of car per commuter. Various forms of public transportation could transport more people more qickly in our growing sprawl cities - using half the energy, generating half the CO2.

This issue is near and dear. Growing up in and living near Los Angeles, I know how many man-hours are wasted on the freeway. I understand how tis slows eonomic activity. I see how our present system of transporation is a great tax on our people.

I understand how the tiny particles generated from engine wear, from tire wear, from breaks and stirred by passing cars - how thes particles embed themselves into our lungs and have plagued many in my family with asthema and increased susceptability to various alergies.

In the "libertarian" point of view, increased medical costs of our present policies have an impact that is hard to quantify economically - but the inpact is certainly heavier on the end-users and not on those in the supply chain that profit the most rom causing us commuters harm.

Under cap and trade - electric utilities are putting off investments in upgading their pollution control devices - perhaps amonia scrubbers, catalytic converters and other devices.

These allownaces extend the artificial impression that these older plants are more economical to operate.

Providing subsidies - perhaps paid for by the direct taxation of carbon emissions - to go directly into helping high electric cost areas replace their old powerplants with the latest more efficient and less poluting technolgies - that would certainy improve the jestation of US efforts to reduce carbon emissions and still grow electricity production.

When the electric grid loses about 50% of the energy pumped into it in transmission losses,the increase in efficiency at many power plants become far less valuable than increases in efficiency at the consumer end. (Overall in the USA, the "fuel to end-use" efficincy of our electric grid is below 25%.)

A natural gas fired microturbine "on-site" at a local facility can outproduce the "fuel efficiency" of our electric grid. When considering electricity production to carbon dioxide emissions, on site generation produces far less CO2. Any hydrocarbon fuel has an advantage over coal in that hydrogen oxidation (H2O exhaust) packs a lot more punch than burning carbon - aka coal - (Almost all CO2 exhaust), and electric utilities have become far too addicted to cheap coal.

Placing on-site generation in a distributed manner throughout a community provides the best coverage. If (or more likely when) stuff fails, people, consumers and producers will be better able to continue normal economic activity.

The more economic activity around an area that just underwent any disaster will recover more quickly if the surrounding areas are unaffected. That would be a great energy policy - to put applied research dollars into distributed on-site technolgies and est sites incorporating solar, powerhaps wind, natural gas fired microturbine-cogeneration and hybrid microturbine/fuel cell technolgies. These technolgies together have much promise in reducing our overall energy consumption.

Just reversing the provisions of the 2005 Federal Energy legislation that prevented small solar energy installations from getting paid back dollar for dollar on energy sold back to the grid - reversing tose provisions would "supersize" America's decrease in CO2 emmissions while lowering costs ver time. When the price the utilities pay back oversized solar energy installations is tied to the amount the utility charges other consumers for electricity, the utilities are afraid to raise rates because they would face paying out more to solar energy providers.

Eventually, the electric utilities would have so many solar energy installations feeding their grids, the electric utilities would lower electric rates to consumers faster to prevent paying out more to the many "producers" who overproduce solar electricity.

Releasing small solar energy providers to achieve must faster payback on their individua privaate investments will significantly cut into CO2 emmissions over time as the base-load of solar energy installations increases.

The present strategy to "cap & trade" put forward seems to reward Centralized energy providers - only.

Centralized energy producers would do best to invest in ways to "store" excess electricity from variable input renwable sources. Many alternatives are attractive including the reversible methanol fuel cell and running pumps to create algea based "gasoline" fuels - both which recycle carbon dixoide directly into fuels - closng the carbon cycle. (We need to stimulate our economy in this direction anyway, or risk falling farther behind others that do take the progressive path.) And electricity storage can also be acomplshed with reverse-hydro, flywheels, capacitors and other methods used today.

Batteries alone wont't work. I've heard of schemes where utilities get people to buy electric cars charged up during the day, and discharged at night. This scheme puts the cost of the maintenance of the rapidly cycled car battery on the owner of the car!

"Cap and Trade" is just another example that those who profit the most are the ones who can afford to hire lobbyists to write laws with our taxpayer's Congress.

By CZ on 2009 06 29

Cap and trade is crazy. Effectively, we Americans will be adding an additional tax to our energy bills. Why are we about to do this? Because the United Nations shouts 'climate crisis'. The problem with the scenario is that the United Nations is a political organization riddled with intrigue and power grabbing. Why the heck are we relying on them for scientific judgment? Why aren't we listening to our own climate science commission? We don't have one, that's why. As I said, it's crazy.

The underlying premise of cap and trade--that CO2 drives global warming--is based on United Nations' climate reports that are tainted by politics and agenda. Plus, there's been a lot of new climate science discoveries since Kyoto that's omitted from the reports. You don't have to be a scientist to realize they don't pass the smell test. See . America needs our own objective scientific assessment of global warming. I am a Democrat who for the past 20 years believed global warming was caused by CO2. Now after reading the UN reports I realize the fix was in and we were all mislead. The UN reports are politics not science, yet our government treats them as fact.

By Rmoen on 2009 05 27

If the EPA is correct and we max out on international offsets, at $15/ton that's $18.7B. So we're indescriminately sending more money overseas than we're spending on cleaning up our own energy innovation.

By Dave Douglas on 2009 05 16