The House of Representatives is expected to make a landmark decision on our energy and climate future as early as today. The 1,200-page American Clean Energy and Security (ACES) Act will establish a cap and trade system for greenhouse gas emissions and provide the incentives and standards needed to transition our economy away from its dependence on climate changing fossil fuels. In this sense, the ACES bill should be regarded a climate bill, an energy bill, an economic stimulus bill, and a homeland security bill all rolled into one.
Here is a top ten list of reasons why House members should vote to pass the ACES Act:
The ACES bill not only creates meaningful incentives to help industry build cleaner cars, power plants, and manufacturing facilities, it also puts in place efficiency standards that will lower energy demand and provide us with a pathway to true energy independence.
The cleaner cars incentives provide a good example of how the ACES bill will help reduce our dependence on foreign oil. The bill provides the re-tooling incentives and loan guarantees needed to achieve President Obama's aggressive targets for cleaner higher mileage vehicles by the year 2016-targets that are expected to cut US oil dependency by 1.4 million barrels a day by 2020, according the Union of Concerned Scientists (UCS). This is roughly equivalent to the amount of oil we currently import from Saudi Arabia today.
In addition to lowering domestic demand for foreign oil (which UCS estimates will save us $30-$70bln a year at the pump), the bill would also dramatically increase our domestic oil supplies through enhanced oil recovery (EOR). EOR pumps CO2 into depleted oil wells to recover more oil and is currently responsible for 10% of domestic oil production and is expected to grow to 25% of production in the US by 2020.
Under the aggressive incentives in the bill to develop carbon capture and storage (CCS) to scale, EOR producers could have access to enough low cost CO2 from power generation facilities to produce an additional 45 billion barrels of domestic oil, according to a recent study by the Department of Energy. This trillion dollar double benefit from CCS development and EOR will provide billions of dollars of tax revenues to states and further enhance our energy security through increased domestic production.
The transition to a low carbon economy will require trillions of dollars of investment and the hard work of millions of Americans. According to a recent PERI study, clean-energy investments at the level of about $150 billion per year-i.e. around 1 percent of U.S. GDP-can generate about 1.7 million net new jobs throughout the U.S. economy. This compares very well to fossil fuel investments, which would only generate roughly 600,000 net new jobs from the same capital allocation.
In addition, the ACES bill not only encourages investment in existing domestic manufacturing facilities (to take advantage of the output based incentives) but it will also accelerate investment in the new industries needed to help re-power the American economy over the long term. From the benefits of an increased demand for energy efficiency services (which ACEEE forecasts could create nearly 650,000 new jobs over the next few decades) to the benefits of creating whole new industries to meet the rising demand for low carbon technologies (including high efficiency motors, combined heat and power equipment, high speed rail equipment, mine methane and carbon capture equipment, water metering equipment, insulation materials, bio-fuel refinery equipment, lighter alloys, and more efficient automotive batteries), opportunities exist under the ACES bill to grow the millions of jobs needed to get the America economy back on track.
The ACES bill not only pays for itself but according to the Congressional Budget Office actually provides the US Treasury with $24bln in needed revenue over the next decade.
The ACES bill creates a stream of emission allowances for utilities and energy intensive manufacturers that can be bundled together and used as collateral for low carbon investments. By using allowances in a way similar to that of emitters under the acid rain program (who were able to use their emission allowances to help fund their scrubber purchases), these emitters would be able to bridge the credit gap faced by companies today looking to make large capital expenditures. This means that these companies can get work starting not in 2012, but as soon as the bill is enacted to make the investments needed to become less energy intensive and more globally competitive.
The ACES bill also creates a financing arm in the Energy Department to fund a range of low- and no-carbon energy projects that will also help accelerate low carbon technology investments.
The EPA's analysis of the ACES bill released last week concludes that the costs with respect to households will be "modest" at about $80-$111 per household per year. Numbers that are less than 5% of the estimates from climate bill doomsayers like the Heritage Foundation and NMA who have yet to properly model the bill.
According to the EPA, "these costs include the effects of higher energy prices, price changes for other goods and services, impacts on wages and returns to capital" and "do not account for the benefits of avoiding the effects of climate change."
In addition to providing meaningful guidelines for the carbon trading markets, the ACES bill should actually be commended for attempting to close many of the regulatory loopholes used by speculators to manipulate energy prices in the US.
Under the ACES bill, Congress would not only require the regulatory authority to establish uniform position limits, reporting requirements, and comprehensive market oversight provisions for the carbon markets, it would require the oil, natural gas, coal, and electricity markets to follow suit.
These requirements are not only expected to greatly reduce unwanted volatility in the carbon markets but dramatically improve transparency and reduce excess speculation in other US energy markets as well.
Following the EPA's long-awaited "endangerment determination" on CO2, which officially recognizes that global warming pollution is dangerous to our health and the environment and should be regulated under the Clean Air Act, industry has been trying to understand how this decision will affect their businesses. The ACES bill seeks to provide industry with a road map to understanding their carbon risk and provide the regulatory certainty needed for them to cost effectively invest in low carbon energy solutions needed to meet our targets of an 83% reduction in emissions by the year 2050.
With the launch of the DBAM carbon counter the writing is now officially on the wall with respect to how quickly our carbon emissions are rising and the potential impacts this will have on our national security. From a rise in "failed" states, to a breakdown in global commerce to the threat to our own coastlines, the ACES bill establishes a plan of attack for addressing climate change and will hopefully yield a global agreement over the coming months to reverse this trend toward higher emissions and increased climate uncertainty.
While it is very difficult to measure the impacts that lowering our demand for oil by around 1.4 million barrels a day by 2020 will have on global oil prices, it will certainly help keep prices from rising as fast as they would under business as usual forecasts. China currently consumes around 9% of global oil supplies and is expected to increase that amount to around 15% by 2020, putting increasing pressure on oil prices. The ACES bill provides the funding needed to lower our oil consumption and hopefully keep last summer's spike in oil prices (which was caused in part by a supply demand imbalance of around 1.1 million barrels a day) from becoming an ongoing concern.
The ACES bill requires retail electricity distributors to meet a rising fraction of demand with renewable energy and electricity savings, starting with 6 percent in 2012 and rising to 20 percent in 2020. These standards should help de-carbonize the power grid over time.
The ACES bill also sets strong targets for energy efficiency improvements in new residential and commercial buildings and strengthens the Energy Department's energy efficiency standards with respect to "best-in-class" appliance deployment. According to a recent ACEEE report, these targets are expected to save households $3,900 a year in lower energy costs by 2030.
With respect to performance standards, the ACES bill raises performance standards on new coal-fired power generation over time in a way that will discourage the development of long-lived, high carbon power generation going forward. These standards are expected to not only improve our air quality, but slow the onset of peak "cheap" coal in the US where coal supplies fail to remain cost competitive over time.
- Andy Stevenson
NRDC Finance Advisor
Originally published in NRDC's Switchboard blog.
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