The House Ways and Means Committee will hold an important hearing on Thursday to discuss policy options for reducing greenhouse gas emissions.  Witnesses in prior hearings have testified that the United States “must enact and implement a comprehensive national mandatory market-based program to progressively and significantly reduce U.S. greenhouse gas emissions in a manner that contributes to sustained economic growth.” Although action on climate change is unlikely before the end of the current session, this hearing will help set the agenda for January’s new session.

The meeting will be held at 10:30am on Thursday, September 18, in the main committee hearing room, 1100 Longworth House Office Building.  No witnesses have been announced.

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On Friday, the California Energy Commission and the California Public Utilities Commission released a proposed Final Opinion setting forth regulatory strategies to achieve the goals of the Global Warming Solutions Act (AB 32).  To accomplish significant reductions in greenhouse gas emissions, the agencies reaffirmed their commitment to expanding energy efficiency programs and recommended that all electricity retail providers be required to deliver 33 percent renewable electricity to their customers by 2020.  The agencies also set forth their recommendations regarding the distribution of greenhouse gas emission allowances in AB 32’s proposed cap-and-trade program.  In particular, the agencies proposed:

• Starting in 2012, 80 percent of the emission allowances would be distributed for free to the electricity deliverers and 20 percent would be auctioned. Over five years, the percentage auctioned would increase by 20 percent per year, so by 2016, 100 percent of the allowances would be auctioned.
• Free emission allowances would be distributed to electricity deliverers based on their historic energy output, weighted according to the electricity’s fuel source.
• All or almost all of the allowances to be auctioned would be distributed to electricity retail providers, which would then be obligated to sell the allowances in an independent, centralized auction. The retail providers would receive the revenues from the auction, which would be used “for purposes related to AB 32.”

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As the final weeks of the 110th Congress wind down, air pollution regulation is again taking center stage.  Republican Senators Inhofe and Voinovich introduced a bill yesterday that would reinstate the Clean Air Interstate Rule (CAIR), an EPA-promulgated rule that was struck down by the DC Circuit Court in July.  The Inhofe-Voinovich proposal would “implement the Clean Air Interstate Rule and the rule establishing Federal Implementation Plans for the Clean Air Interstate Rule as promulgated and modified by the Administrator of the Environmental Protection Agency.”

In the House, Democratic Representatives Dingell and Boucher are working to reinstate only the first phase, which goes into effect in 2009 for NOx and 2010 for SOx emissions.  Under this type of proposal, CAIR would be enacted, but would sunset after a few years, giving future Congresses the opportunity to debate long-term solutions without the time pressures inherent in end-of-session negotiations.

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A new Democratic comprehensive energy package being introduced this week may include significant research and development incentives for carbon capture and sequestration (CCS) technology.  On Wednesday, House Speaker Nancy Pelosi told reporters that the energy bill would incorporate a CCS funding provision.  That provision, introduced earlier this year as HR 6258, would allocate $1 billion a year to CCS development over the next 10 years, financed through a per-kilowatt-hour fee passed through to consumers.

The Pelosi bill includes provisions for offshore drilling as well as incentives for renewable energy resources and coal.  Meanwhile, in the Senate, a small but growing bipartisan group of lawmakers, now calling themselves “the gang of 20,” is working to develop a filibuster proof majority for a Senate Bill.  Given the budget and time constraints lawmakers face in passing and reconciling energy legislation by the end of the year, it is questionable whether a $10 billion CCS provision would be able to survive the conference process.  If it does, however, the CCS funding could provide a significant shot in the arm to the clean coal industry.

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After a little more than a month away, Congress returns this week to begin a three week sprint to adjournment.  Before the Congress can adjourn for the election season there is a lot of work left to be accomplished.  First, in some form or another, the Congress has to fund the continued operations of the Federal government beyond the end of September.  With no appropriations bill as yet signed into law, expect the Congress to achieve this goal by passing a “continuing resolution” which will keep the spending parameters established for FY08 for the remainder of the calendar year.

It is expected that the House of Representatives will take up an energy bill later this week.  Included within that bill will be the Democrats’ answer to the “Drill Baby, Drill” chants of last week’s Republican Convention.  It is expected that the bill will contain a limited opening of off shore exploration in the eastern Gulf of Mexico and off the coasts of Georgia, the Carolinas and Virginia provided the states “opt in” to the exploration.  It will also contain a renewable portfolio standard for utilities, a move likely to be opposed by Southeastern members of Congress.  Word is that the bill might also contain rescissions of favorable tax treatment of oil companies, loan guarantees to struggling auto makers, and incentives for renewables and natural gas vehicles.

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Earlier this year, a federal court of appeals struck down the Clean Air Interstate Rule (CAIR).  EPA designed CAIR to reduce or eliminate the impact of upwind sources on downwind nonattainment of NAAQS (ambient air quality standards) for fine particulate matter and smog.  EPA categorizes sources at the state level and, in CAIR, determined that 28 states and DC (the “upwind states”) contributed significantly to downwind nonattainment of one or both NAAQS.

One part of CAIR modified the Clean Air Act’s (CAA) cap-and-trade program for sulfur emissions by reducing the number of available allowances required for compliance and by designing a surrender mechanism to offset the drop in demand.  The intended result was to decrease emissions from electrical generating facilities in upwind states without completely unraveling the SOx markets.  The court, however, found that in enacting CAIR, the EPA exceeded its authority under the CAA and remanded the case to the agency to “redo its analysis from the ground up.”

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Note:  This is the first in a series of articles by ClimateIntel looking into legal, policy, and investment drivers that may influence the long-term viability of “clean-coal” technologies as tools for combating climate change. 

As Swedish Company Vattenfall prepares to commence operation of its new pilot clean-coal plant in Schwarze Pumpe, Germany, clean-coal advocates and policymakers should take notice and cheer.  Then, however, they should step back and reflect on the considerable technical, legal, and policy work left to be done if the “clean-coal” energy industry is to play its part in balancing global energy consumption with carbon emissions.

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