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House Democrats Release Draft Energy and Greenhouse Gas Emissions Bill

Representatives Henry Waxman (D-CA) and Ed Markey (D-MA) Tuesday unveiled a 648-page draft global warming and energy bill that would establish a cap and trade program to curb U.S. greenhouse gas emissions by 20 percent below 2005 levels by 2020 and by 83 percent by 2050.  The draft bill would also create a nationwide renewable energy electricity standard that reaches 25 percent by 2025, new energy efficiency programs, place limits on the carbon content of motor fuels, and require greenhouse gas standards for new heavy duty vehicles and engines. The Waxman-Markey draft would establish a market-based program (i.e., cap and trade) for reducing greenhouse gas emissions from electric utilities, oil companies, large industrial sources, and other entities that emit more than 25,000 tons per year of CO2 equivalent.  Under this program, covered entities would have to have tradable federal permits, called "allowances," for each ton of CO2 emitted into the atmosphere.  However, the bill does not provide details on how the allowances would be distributed.  President Obama has called for 100 percent auctioning of allowances; however, the draft bill would set aside a number of allowances for certain industries, including iron and steel, aluminum, cement, glass, ceramics, chemicals, and paper. The draft bill would direct the U.S. Environmental Protection Agency (EPA) to set emissions standards on sources that are not covered by the allowance system, such as hyrdofluorocarbons (HFCs) used in refrigeration, air conditioning, and insulation, as well as black carbon, or "soot," which is emitted by construction equipment, among other things. The draft bill requires the EPA to set greenhouse gas standards for a variety of vehicle types, including new heavy duty trucks, and allows EPA to set standards for other types of non-road vehicles and engines.  There is also a "low carbon fuel standard" for fuels used in on-road and off-highway vehicles. The Waxman-Markey draft would not require the EPA to regulate CO2 or other greenhouse gases as criteria pollutants or hazardous pollutants under the Clean Air Act.  In November 2008, AGC submitted substantive comments to the EPA arguing that regulation of greenhouse gases under the Clean Air Act would trigger a broad range of regulatory requirements and would stop or delay future building and highway construction. Representatives Waxman and Markey have set a timeframe for the House Energy and Commerce Committee to vote on the measure by Memorial Day, followed by a vote on the House floor in July.  The Senate, where support for a comprehensive climate change bill is weaker, has yet to propose similar legislation.  The Senate yesterday approved an amendment during its budget debate that would prevent the Senate from using special procedures that would allow a cap and trade bill to pass with a simple majority vote.  (In the absence of unanimous consent, Senate rules require a 60-vote threshold for passage of controversial measures). AGC is currently evaluating the impacts of the Waxman-Markey draft on the construction industry.  Any cap and trade program is likely to increase the cost of construction as a result of higher energy, manufactured goods, and materials prices.  Also, firms with facilities that emit more than 25,000 tons of CO2 per year would be covered under a cap and trade program and would have to purchase allowances.  There may also be new emission and fuel standards for construction equipment.  AGC is working with Congress to point out these impacts and look for opportunities to mitigate the bill's impacts with incentives funded by the revenue derived from allowance auctioning.