USA's first climate bill clears first hurdle

3 July 2009


Landmark legislation, the first of its kind in the USA, to curb the country’s greenhouse gas emissions was approved by the House of Representatives in a close vote on 26 June, securing an initial victory in a policy battle high on president Barack Obama’s agenda. The House voted 219 to 212 to bind the US to cutting carbon emissions by 17% from 2005 levels in 2020 and 83% in 2050. It will also set up a national cap and trade system.

After long negotiations, the Democrat-controlled house has passed sweeping legislation calling for the nation's first-ever limits on pollution linked to global warming. The vote also delivers an important boost to the prospects of reaching an agreement for international action on climate change at the Copenhagen summit in December. ‘I think it will have a very positive impact on the Copenhagen process because the international negotiations have largely been stymied by countries waiting to see what the US will do’ said Jennifer Haverkamp, the director of international climate policy for the Environmental Defence Fund. ‘Passage of the house bill is just one step in that process, but it is such a crucial step’. This is a reference to the fact that the bill must still clear the Senate – where it faces even more daunting odds – before it can be signed into law.

The 1200 page bill ­– formally known as the ‘American Clean Energy and Security Act’ – will reach into almost every corner of the US economy. By putting a price on emissions of greenhouse gases, primarily carbon dioxide, the bill would affect the way electricity is generated, how homes and offices are designed, how foreign trade is conducted and how much US citizens pay to drive cars or to heat their homes.

In addition to establishing the cap and trade system that is at the heart of the bill, the measures approved by the house would require power companies to produce 15% of their electricity from wind and solar energy by 2020, potentially expanding the market and profit potential for companies in those sectors. Towards that goal, it seeks to boost nascent industries such as wind-generated electricity and solar power.

But the house result was very hard won. By the time of the vote, the Democratic leadership had made several major concessions to win support from opponents in its own party, which has weakened the bill to the point where environmental organisations have admitted disappointment at its final form. Greenpeace went so far as to call on Congress to reject it. Barack Obama put his personal prestige on the line, making three appeals in the space of 48 hours in the run-up, for Congress to deliver the bill.

Republican opponents say the bill will hurt the US economy. And it is by no means clear how much of the bill will survive in the Senate, where moderate Democrats and Republicans could form a majority that backs less ambitious action. Among the potential problem areas is a provision that would impose tariffs on goods imported from countries that do not match US carbon dioxide restrictions, a blow aimed at China and India that some business interests fear could provoke a trade war.

But Mr Obama and his principal Democrat supporters insisted that the bill’s measures will spur job-creating investments in ‘green’ technologies, while reducing US reliance on foreign oil. They say that the fear that higher energy costs will result is overblown, in part because savings from energy-efficiency investments could offset most or all of the costs to consumers.

Although the centre of the bill is its requirement that companies buy permits to emit carbon dioxide and other greenhouse gases, putting caps on those emissions, with the goal of reducing overall US greenhouse gas emissions by 83% by mid-century, there are partial get-out clauses for businesses. There is an agreement to give away to the business community more than 60% of pollution permits in the early years of the programme. And companies would be allowed to avoid cutting their own emissions by purchasing ‘offsets’, investing in climate friendly activities such as protecting rainforests. The bill also directs state regulators to make sure electric utilities that receive free pollution permits pass along the savings to customers. It is also wide ranging, including for example energy-efficient loan standards for the failed mortgage companies Fannie Mae and Freddie Mac.




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