[Updated 6/18/09 with graphics that more clearly reflect banking of offsets under EPA's projected offsets scenario.]
The Waxman-Markey climate bill (HR 2454) will not require emissions reductions below projected business as usual (BAU) growth in emissions for at least a decade ahead, according to an EPA analysis [pdf]. EPA projects that firms covered under the bill's cap and trade program will opt to purchase over one billion tons of offsets each year from 2012-2020 rather than reduce their own emissions.
EPA predicts that firms would use 110 - 120 million metric tons (mmt) of available domestic offsets each year between 2012 and 2020 [see graphic, p. 6] and the full 1 billion mmt of international offsets permitted under the cap and trade program [p. 5].
If offsets are utilized at the levels projected by EPA, cumulative emissions in the sectors of the U.S. economy covered by the Waxman-Markey cap and trade program will be legally permitted to exceed EPA's business as usual emissions rates from 2012-2020 by nearly five billion mmt. If emissions in covered sectors were actually required to fall to the 17% below 2005 levels by 2020 targeted by the legislation, cumulative emissions would be just 49.5 billion mmt, 10.1 billion mmt lower than the levels legally permitted under EPA's projections for offsets utilization.
However, the EPA analysis was of the early "discussion draft" version of the Waxman-Markey bill and was issued on April 20, 2009. The version of Waxman-Markey passed by the Energy and Commerce Committee (HR 2454) included several changes, including an increase in the permitted quantity of international offsets limit to 1.5 billion metric tons if supplies of domestic offsets fall below the billion tons of domestic offsets also permitted by the bill (see "Climate Bill Analysis, Part III: Waxman-Markey eliminates key offset provision, increasing domestic offset use, lowering allowance prices"). Total offsets would still be limited to 2 billion tons per year. This provision would very likely be triggered -- both EPA and CBO estimate that domestic offset supplies will fall well below 1 billion tons per year.
EPA has not yet published an updated analysis of the version of Waxman-Markey now heading towards debate on the House floor. However, a brief EPA update [pdf]examines some of the ways the revisions from the discussion draft effect EPA's analysis of the bill. The memo notes that revisions to the bill would lead to an 11% increase in the use of domestic offsets and an unspecified increase in the use of international emissions offsets under the version of the Waxman-Markey bill passed by the Energy and Commerce Committee, relative to their analysis of the discussion draft version of the legislation [p. 2]. The graphics and analysis presented here include the 11% increase in domestic offset usage but does since EPA does not specify the increase in international offset usage, we continue to assume 1 billion tons of international offsets each year. This is therefore a conservative representation of the potential outcomes of Waxman-Markey under EPA's revised assumptions.
You can download Breakthrough's calculations based on the EPA analysis here [.xlsx]