Q&A from 9/3/09 Webinar

1. Will Cap-and-Trade be included in Senate legislation?

Yes. The Senate leadership is currently committed to cap-and-trade system. Majority leader Reid (D-Nev) envisions passing a package of climate and energy legislation, including the energy reforms already passed by Senator Bingaman’s Energy and Natural Resources Committee and a bill from the Environment and Public Works Committee (EPWC). Senator Boxer (D-CA) is the chair of the EPWC and has promised to unveil a cap-and-trade bill at the end of September.

2. Is a carbon-tax still an option, instead of Cap-and-Trade?

This is unlikely. As discussed above, Senate leadership is currently pursuing cap-and-trade as the primary mechanism of reducing greenhouse gases.

3. How will energy efficiency be incorporated in Cap-and-Trade?

Efficiency can help regulated greenhouse gas (GHG) emitters meet their emissions targets under the cap. Emitters must hold allowances for each metric ton of GHGs that they emit. If they emit more than their allowances permit, then they must either pay a fine or purchase a carbon offset. A carbon offset represents the reduction of one metric ton of carbon dioxide or its equivalent in other greenhouse gases.  By purchasing an offset, an emitter is financially supporting a GHG-reducing project. Energy efficiency projects, in addition to renewable energy projects, will most likely count as carbon offsets under ACES, but the legislation does not list qualified projects. Rather, it creates an Offsets Integrity Board that will advise EPA on the quality of various offset projects. From those recommendations, EPA will develop a list of qualifying offsets. All offsets must be additional, meaning that they reduce emissions below the status quo. Therefore, efficiency requirements that are part of ACES or other existing legislation cannot be considered for offset status, because they are not additional.

Also, 9.5% of the revenue from the sale of allowances under the cap-and-trade system is earmarked for energy efficiency and renewable energy development. This percentage will decrease over time.

4. Will legislation include a mandate to move to energy saving lighting, like European Union has done, or improvements to building codes?

It is unclear exactly which provisions the Senate will include, but we can look back to the content of the House ACES act for guidance:

Title 2 Section B deals with lighting and appliance efficiency. There will only be mandates for a limited set of lighting systems, such as outdoor lights. It does include $600 of incentives for (1) retailers to sell high efficiency appliances, (2) the replacement and recycling of old products, and (3) the manufacture of new energy-efficient products. 

Title 2 Section A deals with building energy efficiency. Mandates for building codes are as follows:

5. Who are Senators on Environment and Public Works committee?
Please see the list of members on the committee’s website at http://www.epw.senate.gov/public/index.cfm?FuseAction=Members.Home.

You can also find information on all the other Senate committees at http://www.senate.gov/pagelayout/committees/d_three_sections_with_teasers/committees_home.htm

American Clean Energy and Security (ACES) Act Questions
**Thanks to Environment Northeast’s “ACES Summary” for much of the information on the ACES Act. Available at http://www.env-ne.org/resources/open/p/id/885.**

6. Does ACES include direction to HUD (Department of Housing and Urban Development) to revamp the Energy Efficient Mortgage program?

ACES does not include direction to the Housing and Urban Development to alter the structure of the Energy Efficient Mortgage Program (EEM). Rather, it includes numerous provisions to support EEM. Please see Question 7 below for explanation of the support provisions. With regard to HUD, ACES does require that the department incorporate energy efficiency into all its programs.

7. Does ACES provide support for the existing Energy Efficient Mortgage programs?

The Federal Housing Authority’s (FHA) Energy Efficient Mortgage Program (EEM) helps homebuyers or homeowners save money on utility bills by enabling them to finance the cost of adding energy efficiency features to new or existing housing as part of their FHA insured home purchase or refinancing mortgage. It was established as a national program in 1992.

ACES supports EEM programs in a few ways. (1) Energy-efficient and location-efficient mortgages receive extra credit (125%) for Fannie Mae and Freddy Mac towards their housing goals. (2) Mandates that banks have a duty to serve underserved markets with energy-efficient and location-efficient mortgages. (3) FHA must consider the impact of utility cost savings on an applicant’s income if the mortgage will meet certain energy efficiency standards and is for a single-family house. (4) Secretary of Housing and Urban Development (HUD) to launch awareness campaign to educate lenders and potential borrowers of the availability, benefits, and terms of energy-efficient and location-efficient mortgages.

8. What exactly are National Association of Home Builders, National Association of Manufacturers, National Federation of Independent Businesses opposed to in the bill?

National Federation of Independent Businesses
Issue: NFIB identifies cost and reliability of energy for small businesses as a primary concern. They argue that cap-and-trade legislation will affect small business, even though their emissions are not explicitly regulated, because larger, regulated companies will pass on their costs to the smaller businesses (http://www.nfib.com/tabid/210/Default.aspx)

Response: ACES would help achieve stability and availability of energy for small businesses. The cap-and-trade system would transition our economy away from fossil fuels that have highly volatile prices and that are controlled primarily by foreign countries. We would increasingly use domestically produced renewable energy that cannot be disrupted by international political disputes and that has more stable prices.

ACES contains many provisions to contain costs for businesses. The cap-and-trade program will raise energy prices; however, ACES mandates that a portion of the funds from the sale of emission allowances are rebated to businesses. Specifically, 50% of the allowance revenue will be given to business, totaling ~ $47 billion. $14 billion will be directed toward emission intensive industries, and $27 billion will be given to local distributers of electricity and natural gas with instructions to pass those savings on to commercial and industrial customers. This final provision is specifically designed to keep energy costs for businesses low. These facts and figures are from the Congressional Budget Office’s analysis of the costs of ACES, available at http://www.cbo.gov/ftpdocs/103xx/doc10327/06-19-CapTradeCosts.htm.

National Association of Home Builders
Issue: NAHB opposes the new, more stringent energy efficiency building codes, arguing that it would be more cost effective to retrofit old homes. Old homes are much less efficient than current new homes, so they argue tax payers would get greater benefit for their investment. Also, increasing the stringency of energy efficiency building codes will confer higher costs to the consumer. Lastly, applicable efficiency measures differ by state; therefore changes to the national building code will require unrealistic reductions by some states. (http://energycommerce.house.gov/Press_111/20090424/testimony_richardson.pdf).

Response: It is true that old homes are much less efficient than new homes; however, by focusing on new homes standards, no tax payer funding is needed. If the legislation were to retrofit homes, in order to guarantee efficiency improvements it would have to allocate funding to homeowners. By simply improving the codes, we will see energy efficiency improve in all new building without allocating new funding and we accelerate the transition towards efficient homes.

In terms of higher costs to the consumer, some of the higher cost will be recouped in the form of lower energy bills. There is also an Energy Efficient Mortgage Program (See Question 8) designed to help homeowners attain a mortgage if their house meets certain energy efficiency guidelines. See the Energy Efficient Mortgage section above for more details.

NAHB raises a valid concern that a national code may require technologies that will not be cost-effective in all regions. ACES address this concern by requiring that any code that is established must be cost-justifiable (i.e. a given technology, if employed in the home, will recoup its costs before it must be replaced). Also, states may adapt the code so long as they meet or exceed the national efficiency requirements.

US Chamber of Commerce
Issue: The US Chamber of Commerce advocates for legislation that does not burden business, addresses the international nature of climate change, requires developing nations to take responsibility for reducing emissions, and that avoids job loss. (http://www.uschamber.com/issues/priorities/energy_env.htm)

Response: For the US to avoid massive job loss long-term, we need to recognize and adapt to the market shift that is occurring toward sustainable forms of energy and business practices. If we fail to make that shift, we will eventually fall behind other countries. Our businesses will be less attractive to investment and bright minds and less competitive, due to higher operating cost.

The Chamber’s request for legislation that simultaneously deals with climate change domestically and internationally is unrealistic. International negotiations develop treaties that individual countries must then ratify – we cannot hold another country accountable through our own legislative process. Further, in order for the US to agree to an effective climate treaty, we must have passed our own domestic climate legislation in advance. The reason is simple: the Senate must ratify any treaty, and if domestic climate legislation cannot pass the Senate, there is no reason to assume internationally developed legislation could.

9. Please provide more information on Clean Energy Deployment Administration; who will it work with and what is its commercial interface?

Due to the high risk involved in developing new clean energy technologies, energy infrastructure, efficiency technologies, and manufacturing of such technologies, the Department of Energy (DOE) will create a self-sustaining Clean Energy Deployment Administration to provide funding to supplement private capital for such projects.

The Administration will have a revolving Clean Energy Investment Fund, which will be credited with $7.5 billion of Green Bonds. This fund will act as the Administration’s “commercial interface” allowing it to invest in or loan to companies developing clean energy technologies.

Within one year, the Secretary of Energy must publish recommendations for the Administration’s near-, medium-, and long-term goals for deployment of clean energy technologies. This recommendation will likely detail any expected partnerships with private industry or other government agencies.

10. How will energy efficiency be a part of the Renewable Electricity Standard?

By 2020 electricity distributors must acquire 20% of their electricity from renewable sources or 15% from renewable resources and 5% from cumulative energy savings (i.e. efficiency). If a governor demonstrates that his/her state is unable to meet renewable electricity targets, efficiency savings may be increased to 8% and renewable energy requirements dropped to 12%.

11. What is the proposed level of efficiency improvements for new home construction under Title 2 Subtitle A Section 201?

The national model building energy codes and standards will be updated so as to achieve:

After 2015, building energy codes and standards will require an additional 5% savings each year.

Also, codes will be established to increase the solar reflectance of roofs.

12. Under ACES, are there tax incentives, rather than mandates, for home builders?
ACES creates a new national building code standard; however, states and local jurisdictions can alter their building codes to comply to meet or exceed the national requirements. States will receive funds as a result of cap-and-trade allocation. It would be up to individual state legislatures to offer incentives or mandates. http://climateintel.com/2009/05/11/energy-efficiency-building-codescan-they-acheive-the-promised-results/

13. Will the $2,000 builders’ tax credit that expires in 2010 be extended?
Yes, in the ACESA the bill provided home energy tax credits through 2014 with the ability to extend them at that time.

14. How do I find out if my state's elected officials are committed to passing climate legislation?

There are two places:

  1. “Take Action” page of the National Save Energy Coalition website – simply click on your state and a word document will open that includes your Senators’ stances on climate and clean energy legislation. http://www.nationalsaveenergycoalition.org/action.html

  2. Energy and Environment Daily – A PDF that lists all 100 Senators’ positions.  Go to http://www.eenews.net/eed/ and click on “Senate Climate Debate: The 60-Vote Climb” at the top of the page.

15. If Cap-and-Trade does not make it into Senate legislation, is the House interested in re-passing Title 2 provisions, and REEP in particular, with a different funding mechanism, especially in the form of tax credits?
It remains to be seen, remember if Cap-and-Trade does not make it into the U.S. Senate. Federal Courts have given permission for the U.S. EPA to implement the program under the Clean Air Act. REEP itself has been sponsored as a separate bill by Congressman Welch (VT). It was originally added into the American Clean Energy & Security Act but has 40 independent co-sponsors. The bill can be taken up again separately and amended if ACES is not signed into law. Learn more at http://www.efficiencyfirst.org/static/files/REEP_Summary.pdf

16. Would the REEP provision ever be considered in a single bill on its own?
 Yes REEP was originally a separate bill and combined into ACES. It has 40 co-sponsors in the U.S. House. As the legislation did pass the House it does not need to be reconsidered on its own; however, this bill can be taken up separately if ACES does not become law. http://www.efficiencyfirst.org/static/files/REEP_Summary.pdf

17. Will Clean Economy Lobby Day (Oct 6-7) coordinate with Efficiency First's event in Washington on Oct 7-8?
Efficiency First and Clean Economy are in touch about what each organization is doing. However, at this time there are no joint activities scheduled. Efficiency First's members will be speaking with Senators and House members directly about REEP; whereas Clean Economy members will be talking about the climate bill in general and addressing renewable energy. If you are interested in participating in Efficiency First's efforts to lobby for REEP please contact them at info@efficiencyfirst.org. For Clean Economy Lobby Day information please log on to www.wecanlead.org.

18. Please provide more information on Clean Economy Lobby Day (Oct 6-7).
We Can Lead, the coalition of business groups led by the Clean Economy Network and CERES, is gathering 100 CEOs, senior business leaders, and investors of job-generating and cost-cutting companies in DC Oct. 6 & 7.   The message of the dirty economy - that an energy and climate bill will eliminate jobs - is being hammered away by their lobbyists.
The clean economy's message -- that this is going to be the biggest job and wealth generator since the computer, internet, and biotech revolutions combined -- is not getting through.  We have to make this REAL to our political leaders.  We need to be in their offices telling them directly about the businesses and jobs that we have already created in their states and what we'll be able to do with their help.

In particular, we need business leaders with operations or investments in the 13 states that will be the swing votes on this bill (see list in post-script below).   If you don't have 0perations or investments in those states, but still have a great job creation and business
growth story, you have double duty.  We need you to attend AND reach out to your peers from those states. For Clean Economy Lobby Day information please log on to www.wecanlead.org.

19. Under ACES or potential Senate legislation, how would carbon credits be quantified (would RESNET or HERS play a role) and what would a credit cost?

EPA will establish rules for quantifying and tracking carbon credits, perhaps with the aid of other agencies (e.g. DOE and FERC).  The cost of a credit is subject to great uncertainty, but EPA estimated that the costs might be $13/ton CO2 equivalent in 2015, $16 in 2020, $26-27 in 2030, $42-43 in 2040, and $69-70 in 2050.

20. Who is doing research on the best return on investment measures for existing home efficiency retrofits?

A variety of people are working on these issues including ACEEE (see our state potential studies available at http://www.aceee.org/energy/state/scerp.htm ), Department of Energy, Lawrence Berkeley National Laboratory, and Oak Ridge National Laboratory.  Depending on the region, there may also be local groups working on this issue.