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AGC Looks at Climate Bill H.R. 2454: Title III Reducing Global Warming Pollution

The U.S. Senate is drafting a comprehensive bill to address climate and energy, and it is basing that work on a related bill passed by the U.S. House of Representatives.  The third installment of AGC's summary of the American Clean Energy and Security Act of 2009 (H.R. 2454) highlights the major provisions of Title III (Reducing Global Warming Pollution), which identifies reduction goals and establishes a cap-and-trade program to reduce emissions from major sources. Under a cap-and-trade program, covered entities are permitted to emit a certain amount of a pollutant during a defined period of time, such as one year.  The amount of pollutant the entity is allowed to emit - allowances -- depends on the category of the source (e.g., electric utility industry).  Each category of sources is assigned a limited number of allowances (e.g., the electric utility industry category received 35 percent of the total allowances under H.R. 2454).  The total number of allowances economy-wide also is capped and decreases each year in order to meet the emissions reduction goal set by policymakers.  If a covered entity requires more than its permitted allowances, then it can seek to reduce emissions, offset the emissions and/or obtain the needed allowances from another covered entity. Subtitle A - Reducing Global Warming Pollution The bill amends the Clean Air Act to add a new title, Title VII: Global Warming Pollution Reduction Program.  Reduction Goals and Targets The bill identifies greenhouse gases of concern as those that induce global warming and "cause and contribute to injuries to persons in the United States."  The bill sets economy-wide greenhouse gas reduction goals beginning in 2012, aiming to keep emissions below 97 percent of the quantity of emissions in 2005; and reduces the acceptable amounts in subsequent years: 2020 at 80 percent of 2005 levels; 2030 at 58 percent; and 2050 at 17 percent.  The bill further sets nearly identical reduction goals for specific capped sources of emissions.  Part A also establishes a review and recommendation process for Congress to assess the progress towards achieving the intended reductions. Designation and Registration of Greenhouse Gases The bill identifies seven categories of greenhouse gases and authorizes the administrator of the U.S. Environmental Protection Agency to designate additional gases as warranted.  The bill then establishes a registry of greenhouse gases for sources that meet specific criteria, such as stationary sources within specified categories (e.g., cement production) and those that emit 25,000 metric tons per year of carbon dioxide equivalent.  It also authorizes the administrator of the EPA to determine whether to include reporting requirements for vehicle fleets in the registry.  Among the logistical instructions to EPA in the bill, Congress requires that EPA provide for immediate dissemination of the reported data on the Internet. Program Rules, Offsets and Deforestation Reduction The bill establishes emission allowances for covered entities based on calendar year.  The number of allowances diminishes each year beginning at 4,627 (in millions) in 2012 to 1,035 in 2050 and stabilizes thereafter at the 2050 amount.  The bill further outlines details of the cap-and-trade program including prohibitions for exceeding allowances, methods of demonstrating compliance, the use of offsets and the trading and banking of allowances and offsets.  EPA will issue permits to administer the program.  The bill details the establishment of an offsets program including information on eligible offset projects, requirements, approval, review and audit procedures.  It outlines an international deforestation reduction program.  Subtitle B - Disposition of Allowances The bill lays out the allocation and auction of allowances with programs to benefit consumers, renewable energy and energy efficiency, trade-vulnerable industries, etc. Subtitle C - Additional Greenhouse Gas Standards The bill amends the Clean Air Act to add a new title, Title VIII: Additional Greenhouse Gas Standards. Stationary Source Standards The bill charges EPA to publish an inventory of the uncapped sources of greenhouse gas emissions that emit greater than 10,000 tons per year of carbon dioxide equivalent. It further directs EPA to promulgate standards of performance for those sources and corresponding regulations.  EPA may promulgate other standards (design, equipment, operational-based) in lieu of performance standards "without regard to any determination of feasibility...". Exemptions from Other Programs The bill exempts greenhouse gases from regulation under several programs in the Clean Air Act, such as criteria pollutants, hazardous air pollutants, new source review and title V permits.  The bill amends the Clean Air Act to include hydrofluorocarbons (HFCS) as class II substances and charges EPA with promulgating regulations to phase down the consumption of 20 listed HFCS that fall into class II, group II substances. Black Carbon The bill requires EPA to evaluate black carbon emissions and submit a report to Congress with -- among other details -- an inventory of major sources, technologies and strategies for reductions and recommendations of actions to reduce emissions.  The bill then requires EPA to promulgate regulations to reduce black carbon emissions or to propose a finding that existing regulations currently address these emissions adequately. Other The bill further addresses state programs, Davis-Bacon compliance, biological carbon sequestration as well as acid rain and mercury pollution reduction. Subtitles D and E- Carbon Market Assurance and Additional Market Assurance The bill amends the Federal Power Act to "promulgate regulations for the establishment, operation and oversight of markets for regulated allowances...".  It also sets forth numerous conditions on swapping derivatives and other transactions that involve energy commodities. What Can Members Do?