Q&A from 10/21/09 Webinar
This Q&A will refer to the American Clean Energy and Security Act (ACES) passed by the House as the Waxman-Markey bill and the Clean Energy Jobs and American Power Act under consideration by the Senate as the Kerry-Boxer bill. Unless otherwise stated, the answers pertain to the content of the Kerry-Boxer bill.
1. What are the costs associated with the Waxman-Markey and Kerry-Boxer bills?
The EPA has analyzed both Waxman-Markey and Kerry-Boxer bills. They find that the impact of both bills will be relatively similar, with each costing the average household a few hundred dollars (<$200) per year. EPA notes that the cost will vary by geographic region. You can read the EPA analysis of Waxman-Markey at http://www.epa.gov/climatechange/economics/pdfs/EPA_S1733_Analysis.pdf and of Kerry-Boxer at http://www.epa.gov/climatechange/economics/pdfs/EPA_S1733_Analysis.pdf
However, the EPA analysis of these bills did not take into account the benefits of energy efficiency. The American Council for an Energy Efficient Economy (ACEEE) analyzed the effects of the Waxman-Markey bill including efficiency, and found that there would actually be annual energy bill savings of $485 and net savings of $354 in 2030. There analysis, available at http://www.aceee.org/press/e098pr.htm, also shows that with more investment in energy efficiency, the savings and job creation impacts improve dramatically. This analysis has not yet been conducted for the Kerry-Boxer bill.
Also, research recently released from a joint study conducted by University of California, University of Illinois, and Yale University has found that a bill like Waxman-Markey/Kerry-Boxer would result in tremendous job and GDP growth. The analysis models the effects of legislation with (1) a declining cap on emissions, (2) standards and investments in renewable energy, and (3) implementation of energy efficiency. Both Waxman-Markey and Kerry-Boxer meet these criteria. By 2020, it finds that comprehensive clean energy legislation would create up to 1.9 million new jobs, increase yearly household income by up to $1,175 and boost annual GDP by up to $111 billion. The researchers also found that each of the 50 states would benefit. Fact sheets for the whole nation and each state can be found at http://www.e2.org/jsp/controller?docName=jobs.
2. What is the current vote count for the Senate bill?
You can find a continually updated version of the vote count at http://www.eenews.net/eed/documents/climate_debate_senate.pdf.
3. How has/will international sentiment and pressure affect the Senate?
There is certainly international pressure on the United States to pass climate legislation before the United Nations Climate Change Conference in Copenhagen this December; however, Senators are relatively immune from this because the majority of their work is domestic. As a result, the response from the US has primarily come from President Obama, who has reiterated his support for climate legislation numerous times. In an address to the United Nations this September, the President stated, “We understand the gravity of the climate threat. We are determined to act. And we will meet our responsibility to future generations.” The President urged House members to pass the Waxman-Markey bill earlier this summer, and he is expected to play a similar role with the Kerry-Boxer bill in the Senate.
Renewable Electricity Standard (RES)
1. What is the difference between an RES and an RPS? Are they in both Waxman-Markey and Kerry-Boxer bills?
A Renewable Electricity Standard (RES) is the same as a Renewable Portfolio Standard (RPS), and we will use ‘RES’ throughout the Q&A. An RES requires an electric utility to provide a certain percentage of its electricity from renewable sources. Often, a portion of that percentage can be met through efficiency, too. There is an RES in Waxman-Markey, because it is a climate and energy bill; however, the Kerry-Boxer bill is a climate bill only. An RES is included in an energy bill that was approved earlier this year by the Senate Energy and Natural Resources Committee. The energy bill is known as the Bingaman bill, after the Chair of the committee, Senator Bingaman. The RES are as follows:
- Waxman-Markey Bill - 20% by 2020; 5-8% can be met with efficiency
- Bingaman Bill - 15% by 2020; 4% can be met with efficiency
2. Will the final RES in federal legislation be closer to the level in the Waxman-Markey bill or the Bingaman bill?
It is unclear at this point. First, the Senate will likely combine the Bingaman and Kerry-Boxer bills, which will entail some negotiating and could alter the RES. Then, if the Senate passes that version of comprehensive climate and clean energy legislation, they will have to reconcile it with Waxman-Markey bill from the House. This will again involve negotiations. Depending upon public sentiment and the specific House and Senate members serving when these negotiations happen, the RES could move either way.
3. What will happen when a bill passes in terms of the different states' RES schemes? Are they supplanted, subsumed, or do the federal bills simply set a floor and the states can enact maintain their own RES?
While no one knows exactly how it will work, it would appear that states can go above a federal minimum. This is the case with many federal standards – states must meet the minimum and are allowed to set stricter standards if desired.
Energy Efficiency
1. Do any of the building energy code provisions of these bills create a federal building energy code, or do they just provide funding for code implementation/training by state and local governments?
The Waxman-Markey bill created a building code that becomes increasingly stringent and is benchmarked against the IECC 2006 code. It also directs funding towards implementation. Specifically, it stipulates that national building codes are updated to attain 50% energy savings by 2015. After 2015 the code will have to attain an additional 5% savings annually. The Kerry-Boxer bill, on the other hand, doesn't create a national standard, but rather directs the EPA (or other department/agency at the president's discretion) to establish national goals for improved building codes and report periodically on progress towards those goals.
2. Are REEP (Retrofit for Energy Environmental Performance) funds going to be allocated through local government organizations or available directly to citizens as a tax credit, low interest loan, etc.?
REEP is an appropriation that will go to each state’s State Energy Program office. The office will have flexibility to distribute it using mechanisms based on each state’s infrastructure.
3. Are there any efforts underway to give energy efficiency the same tax benefits that are currently given to renewable energy (i.e., 30% Investment Tax Credit and 5-year Modified Accelerated Cost Recovery System)?
No. The REEP (Retrofit for Energy Environmental Performance) program will provide approximately 30% cost savings for most projects, but savings will not be based on a percentage of cost. Rather the savings will be based on performance, thereby incentivizing better results, not higher costs. This way the contractor can complete the highest quality work in the least costly way, saving the homeowner money and freeing up more money for other REEP projects.
4. Are there any incentives / tax breaks for energy auditing, as opposed to tax rebates for materials only (choice of which may not be the best use of funds if no energy audit is done)?
Yes. The REEP (Retrofit for Energy and Environmental Performance) program provides incentives for energy audits and retrofits for homes and commercial buildings. For a full summary of the REEP program, see Section 164 in the summary of the Kerry-Boxer bill by the Alliance to Save Energy, at http://ase.org/content/article/detail/6231.
5. What training certifications are being considered for residential retrofit contractors? How will training be rolled out? Will it be connected with Home Performance with Energy Star and/or HERS II?
Subsection 164(g) outlines the certifications necessary for contractors of the REEP (Retrofit for Energy and Environmental Performance) program, and Subsection 164(h) specifies that the training is left up to the states. As a condition for receiving assistance for the REEP program, a state or local government must adopt standards for training development by the EPA. For more information, see Section 164 in the summary of the Kerry-Boxer bill by the Alliance to Save Energy, at http://ase.org/content/article/detail/6231.
6. What kind of state and federal incentives are there in place to make high efficiency homes cost competitive?
The REEP (Retrofit for Energy and Environmental Performance) program (Section 164) is intended to facilitate the retrofitting of existing buildings across the US to achieve maximum cost-effective energy efficiency improvements and significant improvements in water use and other environmental attributes. In section 164(J), the bill specifies the type of awards and support that residential buildings can receive for reaching a given amount of energy savings. It states that homes can receive an award of up to $3,000 for demonstrating energy savings of 20%. Section 164 also states that REEP funding not exceed 50 percent of the total retrofit cost in each building.
Additional support for high efficiency homes will come through the Efficient Buildings Program, to be administered by EPA (Section 158). The program will assist owners of new and renovated buildings that achieve a high efficiency score based on Energy Star or EPA-determined equivalent standards. The program gives priority to projects completed by building owners with a proven track record of excellent energy performance or that result in greenhouse gas reduction benefits not encompassed in the Energy Star program. No appropriations or allowance values are allocated to this program.
Recovery Through Retrofit
1. Is Recovery Through Retrofit for Federal buildings only?
No. The Recovery Through Retrofit funding would be eligible for both Federal and non-Federal buildings. This October, Vice President Biden and the Middle Class Task Force released their Recovery Through Retrofit Report. The report’s recommendations are designed explicitly to expand the home energy efficiency and retrofit markets. A quick read, the report identifies three primary barriers to expansion, proposes solutions to those barriers, and then recommends additional growth strategies. Read the report at http://www.whitehouse.gov/assets/documents/Recovery_Through_Retrofit_Final_Report.pdf.
Cap-and-Trade
1. What is the baseline year for emissions reductions in both Waxman-Markey and Kerry-Boxer bills?
2005
2. How many tons of emissions are included in one "allowance" under the cap-and-trade system?
Emissions will be measured in “metric tons of carbon dioxide equivalents.” There are numerous greenhouse gases (GHG) and each one can absorb a different amount of heat. For example, one ton of the GHG methane will absorb many times more heat as one ton of carbon dioxide. Therefore, each type of GHG is weighted according to its heat trapping potential to determine a “carbon dioxide equivalent” i.e. how much of the GHG in question has the same heat trapping potential as an equal amount of carbon dioxide. Each allowance will cover one metric ton of carbon dioxide equivalent.
Nuclear
1. Will cap-and-trade result in more nuclear development, per se?
Not necessarily. At first it would appear to spur nuclear development, because cap-and-trade places a price on greenhouse gas emissions. Therefore, sources of emissions-free electricity, like nuclear, should benefit compared to electricity from coal and other fossil fuels. However, whether nuclear is increased through cap-and-trade will depend on whether the cost of carbon is high enough to incentivize building of the high-cost nuclear plants and whether those plants can overcome the non-financial barriers to being built (contending with ‘Not In My Back Yard’ sentiment when locating plants and high fear of nuclear malfunction).
2. How do the Waxman-Markey and Kerry-Boxer bills support nuclear?
Waxman-Markey provides little support for nuclear. It will establish a fund for research to help generators of nuclear and fossil fuel electricity and heat to recapture a portion of their thermal energy. The recaptured energy would be used for additional electricity or heat production.
Comparatively, Kerry-Boxer provides much more support for nuclear. First, it gives rather generalized support by stating that Congress will promote the diffusion of “safe and clean” nuclear energy and it will work to reduce the “financial and technical barriers” to its development. Second, it establishes a grant program, to be administered by EPA, to train nuclear power plant workers. Lastly, it establishes a grant program to fund research into new technologies for nuclear waste management. It is possible that the nuclear provisions will be expanded upon in order to gain the support of other Senators.
Other
1. Has Kerry compromised his bill by his op-ed piece in the NYT?
Answering this question depends on one's perspective. The SAVE Coalition is neutral on this question, but many pundits have suggested that, given the similarity of the Boxer-Kerry bill to the House's version of the legislation (Waxman-Markey), significant changes are going to have to be made to obtain 60 votes. Therefore, it is argued, the Op-Ed signals a move to bring together the votes needed for passage.
2. What formula does the Waxman-Markey bill use to distribute funding to states? Is it the same as in American Recovery and Reinvestment Act?
In the House’s version of the bill, Waxman-Markey, most funding is given to states indirectly. Under the State Energy and Environment Development (SEED) Funds, states are given a percentage of the allowances on the market, which they can then sell to raise revenue for energy efficiency and renewable energy projects. Allowances are also distributed for the benefit of oil heat consumers, which are distributed through the states as well as to local electric and natural gas distributors, which are regulated at the state level. This is a different model from the American Recovery and Reinvestment Act. For more information we encourage you to review an overview of the allowances controlled at the state-level that was done by the World Resources Institute at http://www.usclimatenetwork.org/resource-database/usclimatetargets_allowance_distribution_2009-06-25.pdf
3. Is it true that the Waxman-Markey bill strips the EPA of its authority to regulate carbon emissions?
Yes and no. The Waxman-Markey bill (House bill) removes the EPA’s authority to regulate capped emission sources, such as power plants. However, the bill directs EPA to establish performance standards for emissions sources that are not regulated under the cap.