Here is a brief overview of some the basic principles of the American Clean Energy and Security Act (ACES):

The last few weeks have seen the first debates on the latest draft of the potential US climate legislation.  It was unveiled last month, discussed, taken back behind closed doors for further mark-ups, and has recently reemerged.

The bill uses a market-based approach to curb greenhouse gas emissions called “Cap and Trade”.  This is an alternative to a straight-up tax on the pollution. A Cap and Trade system is often favored over a tax because it allows the markets to create incentives for pollution reduction, although there is still plenty of debate on the merits of each. This can ease the transition for businesses, and in this democracy, it increases the chance of some type of measure actually being passed (New taxes are generally considered to be non-starters).  Another plus of a Cap and Trade system is that the government can set an actual cap on total national emissions.  A tax has no way of capping emissions at a certain level – it merely puts a cost on the emissions.

The way a Cap and Trade system works is that the government decides which industries and sectors to regulate, sets a cap for total allowable emissions and then gives away (or sells) allowances to the regulated entities. Each allowance would represent 1 ton of CO2 and in order to pollute 1 ton of CO2, a company would have to turn in an allowance.  This way, companies that can reduce their pollution will end up with extra allowances.  These they can sell to other companies in need of them or hold on to them for future use.  An economic incentive to pollute less is created.  Over time the cap is lowered and therefore pollution is reduced in a transitional way.

A sticking point to date has been whether to auction off the allowances or to give them away.  President Obama was a vocal proponent of auctioning them in order to help raise money to ease the transition to higher energy costs for low-income communities and to help balance the budget.  There has been strong opposition to this however due to the dramatic increase in costs to regulated companies, mainly because what was always free (emitting CO2) would all of a sudden carry a significant cost (buying allowances).  Representatives from greenhouse gas intensive industries argued that the sudden jump in overhead cost would disadvantage them on the global market and lead to those companies relocating to unregulated countries or losing market share.  This scenario, given the current economic downturn, was unacceptable to many and has lead to a compromise where 85% of allowances would be given away and 15% would be auctioned.  The proceeds from the 15% would go to low-income communities to help pay for increased energy costs (more on this in the future).

Here is a brief overview of the basics of the bill as they stand now. There is still much debating to be done so many of these may change:

It will regulate more and more emitters over time.

• In 2012 it will cover 68.2% of US emissions: All electricity generators, Natural gas liquid-, petroleum- and coal-based liquid fuel producers/importers (upstream) whose products when combusted emit over 25,000 tonnes annually, producers and importers of fluorinated gases and geologic storage sites.
• In 2014 it will cover 75.7% of US emissions by adding industrial sources (downstream) that annually emit 25,000 tonnes or more, not including emissions from petroleum and biomass combustion, plus all sources (regardless of size) in select energy intensive sectors (e.g. glass, ceramics).
• In 2016 it will cover 84.5% of US emissions by adding Natural gas Local Distribution Companies (LDCs) (midstream) that deliver more than 460,000,000 cubic feet of gas annually to non-covered entities.

It will cut emissions by: 

• 3% below 2005 national levels by 2012.
• 17% below 2005 levels by 2020.
• 42% below 2005 levels by 2030.
• 83% below 2005 levels by 2050.

It will give away 85% of allowances and auction off 15%

It includes a renewable energy standard that mandates 15% of the nation’s energy must come from renewable energy and there must be a 5% savings from energy efficiency by 2020

And of course much more… see the related articles below to get a sense of all that is involved.

The Bill:  http://energycommerce.house.gov/Press_111/20090515/hr2454.pdf 

http://www.greenbiz.com/news/2009/05/15/waxman-markey-climate-change-bill-advances

http://blogs.ft.com/energy-source/2009/05/22/waxman-markey-ii-a-few-of-the-key-components-of-the-bill/

http://www.wri.org/stories/2009/04/brief-summary-waxman-markey-discussion-draft.