L ast Friday, the House of Representatives narrowly passed a massive climate-change bill that few, if any, members of Congress had actually read. The legislation would impose the first-ever limits on emissions of carbon dioxide and impose a raft of other regulatory measures, while simultaneously ensuring that key constituencies are protected from climate policy’s pinch. The bill is one step closer to becoming law, and yet most of our elected representatives could not tell you much of what it contains.
The centerpiece of the American Clean Energy and Security Act, also known as the “Waxman-Markey” bill after its two primary sponsors (Reps. Henry Waxman of California and Edward Markey of Massachusetts), is a “cap-and-trade” regime governing greenhouse-gas emissions. It imposes a cap on industrial emissions of carbon dioxide that declines over time: 17 percent below 2005 levels in 2020, over 80 percent below 2005 levels in 2050. Emitting firms must acquire emission credits, in any of a number of ways — by receiving them from the government, by buying them from other emitters, or by supporting projects that can “offset” their emissions (such as eco-friendly changes in agricultural practices).
Originally credits were to be auctioned off, but the bill’s sponsors opted instead to dole them out like corporate welfare to keep a lid on the legislation’s costs to business. Many major emitters are guaranteed free emission allowances for years to come. This enables the sponsors to claim that Waxman-Markey will be less expensive, but it also reduces the likelihood that it will generate meaningful reductions in emissions. Indeed, depending on how the offset provisions were implemented, it’s possible the bill would not reduce domestic carbon emissions for 20 years.
The trading of emission credits is what distinguishes this regulatory regime from traditional command-and-control regulation. In theory, cap-and-trade should be a more affordable way to reduce emissions, as less efficient emitters can purchase credits from those capable of reducing emissions at less cost. Yet even cap-and-trade is not free. Insofar as firms have to purchase their emission credits, the regime will operate like a carbon tax, albeit one hidden from consumers and prone to special-interest manipulation. Even with trading, the EPA estimates the bill will cost approximately $1,100 per household in increased energy costs by 2050.
Cap-and-trade is just one of the components of this gargantuan bill. Among other things, Waxman-Markey would impose a federal renewable-portfolio standard, requiring 15 percent of electricity from each utility to come from renewable energy sources, and an additional 5 percent to come from conservation and efficiency improvements. Insofar as such alternative energy sources are not cost-competitive, these provisions will further increase costs for consumers. The bill also provides for increased federal efficiency standards for buildings and appliances, and threatens to preempt local building and housing codes. As the Washington Post (but few other papers) reported, the legislation requires local building codes to meet ever-tightening energy-efficiency standards for new construction, and authorizes the Energy Department to develop a draft national code of its own. And, as one would expect, the bill contains many more provisions catering to various interest groups, such as a requirement that bill-funded projects comply with Davis-Bacon prevailing-wage rules.
The Waxman-Markey bill was already a 1,000-page behemoth when it emerged from the House Energy and Commerce Committee last month, but there was more to come. Several other committee chairmen wanted the chance to add provisions of their own, threatening lengthy turf battles that could tie up the bill for months. Intense negotiations ensued. Then, late Monday night, House Democratic leaders substituted a 1,200-page bill with new measures written to help the bill squeak through. Provisions were added to guarantee emission credits to rural electric cooperatives and placate agricultural interests — but the wheeling and dealing was not yet done.
As the floor debate approached, House leaders were still worried that they might not have the votes. Behind the scenes, negotiations continued apace, primarily with Rust Belt and farm-state representatives concerned that a greenhouse-gas emissions cap would harm their constituencies. Then, at 3 a.m. on Friday, with the floor debate just hours away, House leaders added yet more amendments — 300 pages’ worth — accommodating yet more interests that could be persuaded to support the bill.