Blog Post

Round #1 Compromise on Climate Bill: Cut Clean Energy Requirements

A “discussion draft” is what Reps. Henry Waxman and Ed Markey called their initial proposal for a climate and energy bill last month. And the discussion has been heating up ever since, fueled in part by multimillion-dollar lobbying efforts. The U.S. oil, gas and coal industry alone has upped its lobbying budget by 50 percent, spending $44.5 million in the first three months of this year in a campaign to green up their image and defeat cap-and-trade, the UK Guardian reports.

Democrats on the House Energy and Commerce Committee were supposed to come out with a final compromise version today after a scheduled horsetrading session last night. Some details have yet to be finalized, Markey told reporters late last night, but committee members gave in on several of the more ambitious rules to win the votes of more moderate and conservative Democrats.

Cleantech players, including venture capitalists, entrepreneurs and advocates, cheered the original draft when we spoke with them about it last month. Mohr Davidow Ventures cleantech lead Erik Straser told us he thought the bill was, in a word, “terrific,” and said he was “pleasantly surprised that we’re moving this fast.” But after last night’s negotiations, we won’t be moving quite so quickly after all.

Here are some of the key compromises for clean energy:

The original draft proposed to mandate a cut in U.S. greenhouse gas emissions by 20 percent below 2005 levels by 2020 and 80 percent by 2050 — more aggressive than President Barack Obama’s call for a 14 percent emissions reduction by 2020. Waxman tells the Washington Post that Democrats have agreed on a new reduction target of 17 percent by 2020 — weaker than the original proposal but much stronger than the 6 percent that had been advocated by some representatives.

A national renewable portfolio standard, or RPS, has so far survived negotiations, but not without taking a big hit. The original draft required electricity suppliers to generate 6 percent of their energy from clean sources by 2012, gradually increasing to 17.5 percent by 2020 and 25 percent by 2025. Now we’re looking at a mandate for just 15 percent by 2020, plus 5 percent in efficiency gains (reducing overall power demand through improved efficiency, rather than focusing solely on adding more clean energy to the supply side). If this compromise version passes, states with limited renewable energy resources will also be able to adopt an RPS as low as 12 percent with 8 percent efficiency gains. The definition of renewable sources that can be used to meet the standard has also been expanded to allow municipal solid waste and more biomass, as Greenwire reports.

Greenwire also notes that the energy efficiency resource standard, or EERS, which would have required electricity and natural gas utilities to slash demand through efficiency programs, has been cut in the compromise version — eliminating what could have been a strong driver for energy conservation and, indirectly, for investment in smart grid technology that can improve efficiency.

Waxman and Markey left the question of how to allocate emission permits in their proposed cap-and-trade system open to debate — an attempt to make the draft more palatable to representatives worried about the economic implications of making companies pay for every ton of greenhouse gas pollution (the Obama administration had called for this “100 percent auction,” but indicated that it would accept a compromise). Even at this late date, Democrats have yet to settle on allocations, but they have agreed to set aside at least 35 percent of permits for utilities so they will only have to pay for about 10 percent of their greenhouse gas emissions.