June 18, 2010
Collection: Breakthrough Institute Analysis of Congressional Climate Bills
The Breakthrough Institute team works to publish quantitative analysis of Congressional climate and clean energy legislation, often publishing series' of analyses "in real time" as the Congressional debate unfolds. Here is our collection of analyses of recent Congressional climate bills. Scroll down to find links to our analyses for each piece of legislation.
1. Kerry-Lieberman "American Power Act"
Clearing the Clean Energy Innovation Threshold - May 10, 2010
Senate Climate Bill Trio Scrapping Oil and Gasoline Fee? - April 22, 2010
New "Tri-Partisan" Climate Framework Aims to Clear High Senate Hurdle - December 10, 2009
3. Kerry-Boxer "Clean Energy Jobs and American Power Act" (CEJAPA, S.1733)
Published analysis in chronological order (most recent first):
Kerry-Boxer Climate Bill Allowance Allocation Breakdown - October 26, 2009
Discussion of analysis from other sources:
4. Cantwell-Collins "Carbon Limits and Energy for America's Renewal Act' (CLEAR Act, S.2877)
Full series of posts:
A CLEAR Look at the Cantwell-Collins Climate Bill, Part 1: Climate Goals - December 14, 2009
A CLEAR Look at the Cantwell-Collins Climate Bill, Part 2: Structural Advantages - December 17, 2009
Cantwell-Collins Calls the Question on Offsets - February 15, 2010
Summary of analysis:
- The CLEAR Act targets a 20% reduction in U.S. greenhouse gas emissions by 2020, relative to a 2005 benchmark, but the bill's emissions cap on fossil fuel emissions would require cuts just 5 percent below 2012 levels, making that target aspirational. If the most recent EIA projections of depressed emissions levels due to the economic recession prove accurate, those cuts could be in the range of 9% below the 2005 benchmark by 2020. The cap would apply only to CO2 emissions, and does not cover the non-CO2 greenhouse gases responsible for roughly 15 percent of U.S. emissions, when weighted by their impact on global warming. To achieve additional reductions necessary to hit the bill's 20% by 2020 target, the legislation directs the President to achieve additional emissions reductions in non-capped sectors of the U.S. economy by directly funding programs to encourage land-use changes that sequester carbon in forestry and agriculture or reduce emissions of non-CO2 greenhouse gases such as methane. The bill sets aside a portion of the cap and auction revenues in a trust fund that prioritizes spending on these additional reductions, but precise uses of that fund is subject to Congressional appropriations, and the 20% by 2020 target should be considered aspirational. See more here.
- The CLEAR Act's clean technology investments fall far short of expert recommendations, amount needed to ensure emissions goals are achieved. Ensuring emissions reduction goals can be achieved at affordable and politically sustainable costs, without triggering the bill's cost cap (see below), will require proactive and aggressive investments in clean technology innovation and deployment to ensure a steady supply of affordable emissions reduction technologies. The CLEAR Act will raise an estimated $42-126 billion annually by auctioning 100 percent of the emissions permits created under the bill's upstream carbon cap, leaving sufficient funding for necessary clean technology investments. However, the legislation devotes three-quarters of the carbon auction revenue to sending monthly rebate checks to households on an equal, per-capita basis. That leaves just one quarter of the bill's revenue that is set aside in a "Clean Energy Reinvestment Trust Fund," for an estimated $10-32 billion annually at the outset of the cap and auction program, increasing over time as carbon prices rise to roughly $16-46 billion by 2020. CERT funds would be prioritized to meet additional emissions reductions of non-CO2 greenhouse gases to meet the bill's 20% by 2020 aspirational target, and the bill names a number of other competing potential uses for the fund. Breakthrough Institute estimates that the CLEAR Act could easily devote as little as $2.5-8 billion annually at the range of initial carbon prices to catalyze clean technology innovation, directly support clean energy manufacturing capabilities and domestic market growth, and spur the construction of critical enabling infrastructure, such as long-distance transmissions lines, smart grid technologies and electric vehicle charging stations. That level of investment in clean technology could grow to $4-11.5 billion by 2020 but falls far short of expert recommendations, which call for targeted investments to remove key barriers to widespread clean energy adoption totaling on the scale of $30-80 billion annually. See more here.
- The CLEAR Act does not allow carbon offsets and is transparent about the emissions reductions the bill's carbon cap will drive. Fossil fuel importers and producers regulated under CLEAR are not permitted to use emissions offsets to prove compliance with the bill's emissions cap. Unlike other climate bills, CLEAR keeps emissions reductions in non-capped sectors strictly separate from efforts to transform the U.S. energy system through the bill's carbon cap. This enables a transparent debate over how quickly the U.S. energy sector can (or must) transition away from fossil fuels towards cleaner alternatives while ensuring that emissions reduction efforts in other sectors, including agriculture and forestry, are pursued in conjunction with, rather than instead of, the critical transformation of the energy system. Instead of relying on offsets to achieve reductions outside the cap at the expense of reductions under the cap, CLEAR pursues additional emissions reductions outside the energy-sector cap by using a portion of the bill's cap and auction revenues to directly provide incentives for land-use changes that sequester carbon in forestry and agriculture and fund programs to reduce non-CO2 gases such as methane. Competing climate bills, including the House-passed Waxman-Markey bill and the Senate Kerry-Boxer bill, allow regulated entities to rely heavily on emissions offsets for compliance with their emissions caps, despite widely documented difficulties (even outright fraud) in verifying the actual emissions impacts of many offset projects. Both of these competing bills permit regulated polluters to offset up to two billion tons of their emissions annually. That's a huge amount -- roughly one third of all U.S. energy-related emissions -- and is enough to completely negate any pressure on the energy sector to transition towards cleaner energy technologies for much if not all of the next two decades, rendering their emissions "caps" effectively non-binding for the foreseeable future.See more here and here
- The CLEAR Act features transparent, predictable cost-containment. Public (and policymaker) tolerance for increased energy prices is a key constraint on politically viable carbon pricing policies. Mechanisms to constrain the cost of carbon are thus an inevitable component of any politically successful cap and trade policy. Securing passage of any carbon pricing proposal will require a clear and transparent debate over the costs (and benefits) of such a policy and political consensus that such costs are worth it. To date, the most prevalent cost containment mechanisms have been complex and opaque, including the massive reliance on offsets. Eschewing the traditional reliance on offsets, CLEAR offers a simple and transparent approach to cost containment that can help end these debates: the bill provides assurance that carbon prices will not rise (or fall) outside of a prescribed and predictable range of prices. This approach, sometimes dubbed a "cost collar," guarantees that auction prices for carbon emissions permits will fall between both a floor and a ceiling, initially set at $7 and $21 respectively in CLEAR, with each value rising steadily each year. If the ceiling is reached, additional permits will be auctioned at that price, increasing the supply of permits to contain prices, and raising additional revenues. Unlike complicated and unpredictiable cost containment measures in other bills which subject climate policy to an endless war of competing economic models, CLEAR's transparent approach to cost containment offers a predictable mechanism that enables a transparent debate about how high the body politic is willing to allow carbon prices to rise, or where we want to limit the economic damage in any worst-case scenario. See more here.
- The CLEAR Act's transparent emissions cap calls the question on offsets. Until just recently, carbon offsets appealed to environmentalists, polluting firms, farmers, timber interests, and development agencies alike because they promised to hold down the cost of reducing greenhouse gas emissions while promoting sustainable development. But things that seem too good to be true usually are, and the awareness that offsets all-too-often do not represent real emissions reductions is growing. Rather than resolving the political and economic tradeoffs inherent in reducing emissions, offsets obscured them. Such was the case with Waxman-Markey cap and trade legislation, which passed the House last year. The bill's heavy reliance upon offsets obfuscated the fact that Waxman-Markey would not require emissions reductions by regulated firms for the first decade or two of the program. Thus, the bill would not result in the radical technological transformation required to make clean energy cheap and reduce emissions globally. By eschewing offsets entirely and featuring both a transparent emissions cap, the CLEAR Act would actually mandate greater emissions reductions in capped sectors of the U.S. economy than Waxman-Markey, and thus reveals the way offsets can undermine both the clean energy transformation and environmental objectives. The question now is whether policymakers, green groups and reporters will be able to continue representing offsets as real emissions reductions, and whether they will in the future continue to use them to mask two of the most unpopular elements of emissions trading legislation: higher energy costs and wealth transfers from consumers in developed nations to businesses in developing ones. See more here and here.
- The CLEAR Act features a number of other streamlined features, each of which offers advantages. The CLEAR Act would establish a simplified "upstream" cap on the few thousand fossil fuel importers and producers that first bring carbon-laden fuels into the U.S. economy. Unlike competing climate bills, 100% of the emissions permits would be auctioned at a regular (monthly) basis, and only the fuel producers/importers regulated under the emissions cap would be able to purchase permits. Wall Street derivatives marketers, speculators and other interests can't buy or sell emissions permits or create and trade in carbon derivatives or other secondary products under CLEAR. See more here
House of Representatives
1. Waxman-Markey "American Clean Energy and Security Act" (ACESA, H.R.2454)
Download this summary as a pdf here
The Breakthrough Institute has published twenty separate "real-time" analyses of major provisions in the Waxman-Markey climate and energy bill, entitled the "American Clean Energy and Security Act" (ACES), tracking changes and conducting analysis as the bill has evolved from initial discussion drafts in May into House-passed legislation in June. The following bullets summarize major findings of these analyses, which primarily focus on the potential impact of the legislation on energy innovation, the deployment of emerging clean energy technologies, and the competitive position of American clean energy industries:
The bill's greenhouse gas emissions cap is effectively non-binding for the first decade or more and is unlikely to drive significant near-term changes in the U.S. energy economy. In order to control costs of the cap and trade program created by the bill, firms are permitted to purchase up to 2 billion tons of offsets annually - roughly equal to one third of total emissions in sectors of the economy that fall under the emissions cap - instead of reducing their own emissions. Up to 1.5 billion tons could be offset by overseas emissions reduction projects. Projections of likely offset usage are generally lower than the legal maximum due to expected limits in the supply and availability of low-cost offsets. However, analysis of the legislation published by multiple government agencies projects that regulated firms will utilize enough offsets each year to render the cap effectively non-binding for most of the next decade or two. Firms would be legally permitted to continue business-as-usual emissions and practices through the end of 2017 under the most conservative offset projections (from the CBO) and through 2027 under the most expansive estimate (from the EPA). Emissions could fall for other reasons during this time period but would not be required to by the emissions 'cap.'
- EPA Projects Coal Will Expand Under Waxman-Markey
- EPA Projects Waxman-Markey Would Not Require Emissions Reductions Through 2020
- CBO Projects Waxman-Markey Would Cut Cumulative Emissions Only 2% Through 2020
- Waxman-Markey's Non-Binding Emissions "Cap"
- Emissions "Cap" May Let U.S. Emissions Continue to Rise Through 2030
The global recession is likely to drive an oversupply of emissions permits under the cap and trade program for several years. Unless the economy rapidly recovers, U.S. emissions in 2012 (when the cap and trade program would be implemented) will likely remain lower than the emissions cap for several years, leading to an over-supply of permits and a collapse in carbon market prices to at or near the floor price on auctioned permits established by the bill ($10 per ton, rising slowly over time). Firms will purchase and bank low-cost permits and emissions offsets during this period, undermining the stringency of the emissions cap in future years, as well. Under likely emissions and economic recovery scenarios, U.S. emissions in capped sectors could rise for much - if not all - of the next two decades by utilizing only a fraction of the offsets permitted by the bill.
- The carbon price signal established by the cap and trade program is expected to be modest and insufficient to pull emerging clean energy technologies into the market or spur significant investment in clean energy innovation. Estimates of carbon prices for the first decade under the bill range from $11-$16 per ton of CO2 under EPA forecasts to $15-$26 per ton under CBO projections. If the economic recession results in lower-than-previously-forecasted emissions levels and emissions permits are over-supplied (as discussed above), prices will be even lower, likely remaining at or near the $10 per ton auction floor price established by the bill. For comparison, carbon prices in the European Union's Emissions Trading Scheme (ETS) have regularly traded at more than $30 per ton of CO2 and have been insufficient to drive significant clean energy innovation or deployment of low-carbon energy sources.
The renewable electricity standard (RES) established by the bill will not ensure any increase in U.S. renewable energy deployment beyond already conservative business-as-usual projections. After exemptions are factored in, the bill's combined energy efficiency and renewable electricity standard will require between 8% and 11.5% of U.S. electricity generation from qualifying renewable sources by 2020. Without any RES, the U.S. Energy Information Administration (EIA) already projects 10% of U.S. electricity will come from qualifying renewable energy sources by 2020 under their business-as-usual forecasts. EIA's projections are considered conservative, because they assume tax credits driving wind, solar and other renewable energy deployment expire without renewal (in 2012 for the production tax credit and 2018 for the investment tax credit). Analysts with the Union of Concerned Scientists conclude, "Bottom line: The Waxman-Markey RES does not ensure that any new renewable electricity will be developed beyond the renewables that are already projected to occur under the business as usual forecast by the [EIA]."
- Understanding EPA's Analysis of the ACES Renewable Electricity Standard
- EPA Projects Fewer Renewables Under Waxman Markey than Business As Usual
- UCS Analysis Finds Waxman-Markey RES Won't Increase Clean Energy Deployment
- Southern Alliance for Clean Energy Confirms Breakthrough's Analysis of Renewable Electricity Standard
- Renewable Electricity Standard Severely Weakened; May Have Little to No Impact
The bill invests far less in clean energy technologies and industries than either the American Recovery and Reinvestment Act (ARRA) or the direct investments being made by competing nations, including China, South Korea and Japan. At an average carbon price of $15 per ton of CO2, clean energy technologies would receive just $9 billion out of over $70 billion in annual allowance revenue generated by the bill's cap and trade program. Only about $1 billion annually would be directed to clean energy R&D, just one fifteenth of President Obama's proposed investment in next-generation energy research and development. An additional $1 billion annually would be directed through a separate provision towards the demonstration and early deployment of carbon capture and storage (CCS) technology for coal-fired power plants, bringing the bill's total direct investment in clean energy technology to an estimated $10 billion annually. In contrast, ARRA (the stimulus bill) will invest over three times more - roughly $33 billion annually - in clean energy technology in 2009 and 2010. The Chinese government is planning to invest $44 to $66 billion annually in China's own clean energy technologies and industries over the next ten years and South Korea and Japan are also making aggressive investments to position their clean energy industries at the lead of the burgeoning global clean energy sector.
- ACES Allowance Allocation Update
- Smart Provisions Could Spur Clean Technology - If They Are Funded
- Foreign Offsets Receive 2.5 Times More Money than U.S. Clean Energy
- Clean Energy R&D Investment May Be 30 Times Smaller than President Obama's Budget
- Waxman-Markey Gives Nearly 5 Times More to Polluters than Clean Energy
Full AECSA Collection by Order:
Climate Bill Analysis Part 19: ACES Could Align Economic Interests to Weaken Climate Legislation
Climate Bill Analysis Part 18: Understanding EPA's Analysis of the ACES Renewable Electricity Standard
Climate Bill Analysis Part 17: ACES Allowance Allocation Update
Climate Bill Analysis Part 16: EPA Projects Fewer Renewables Under Waxman Markey than Business As Usual
Climate Bill Analysis, Part 15: EPA Projects Coal Will Expand Under Waxman-Markey
Climate Bill Analysis, Part 14: Waxman-Markey Puts Ratepayers at Risk
Climate Bill Analysis, Part 13: EPA Analysis Projects Waxman-Markey Would Not Require Emissions Reductions Through 2020
Climate Bill Analysis, Part 12: CBO Projects Waxman-Markey Would Cut Cumulative Emissions by Just 2% Through 2020
Climate Bill Analysis, Part 11: New UCS Analysis Finds Waxman-Markey RES Won't Increase Clean Energy Deployment
Climate Bill Analysis, Part 10: Smart Provisions Could Spur Clean Technology - If They Are Funded
Climate Bill Analysis, Part 9: Southern Alliance for Clean Energy Confirms Breakthrough's Analysis of Renewable Electricity Standard
Climate Bill Analysis, Part 8: Waxman-Markey's Non-Binding Emissions "Cap"
Climate Bill Analysis, Part 7: Renewable Electricity Standard Severely Weakened; May Have Little to No Impact
Climate Bill Analysis, Part 6: Strategic Reserve May Allow "Cap" to Rise by 10 Percent, Introduce Billions More Offsets
Climate Bill Analysis, Part 5: Foreign Offsets Receive 2.5 Times More Money than U.S. Clean Energy
Climate Bill Analysis, Part 4: Emissions "Cap" May Let U.S. Emissions Continue to Rise Through 2030
Climate Bill Analysis, Part 3: Waxman-Markey eliminates key offset provision, increasing domestic offset use, lowering allowance prices
Climate Bill Analysis, Part 2: Clean Energy R&D Investment May Be 30 Times Smaller than President Obama's Budget
Climate Bill Analysis, Part 1: Waxman-Markey Gives Nearly 5 Times More to Polluters than Clean Energy