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October 12, 2009

The Other Half of Waxman-Markey: An Examination of the Non-Cap-And-Trade Provisions

October 12, 2009
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On June 26, 2009, the U.S. House of Representatives passed H.R. 2454, the Waxman-Markey bill. Generally, Waxman-Markey bill is thought of as a cap-and-trade bill, but it is far more than that. Of the bill’s 1,428 pages, merely half are dedicated to cap-and-trade. Dr. Robert Michaels, a Senior Fellow with IER, examined the non-cap-and-trade provisions of the Waxman-Markey bill.  He found that the rest of the bill is packed with regulations that would completely alter the United States’ economy. He argues that even without cap-and-trade, Waxman-Markey is the most repressive package of new taxes, wealth transfers and obstacles to economic activity that a Congress has ever assembled.

Notable Provisions in Waxman-Markey:

  • Mandate that utilities provide 20 percent of electricity from qualified renewables by 2020, up from about 2.8 percent today[1] (Sec. 101): The bill requires utilities to obtain at least 6 percent of their electricity from sources defined as renewable by 2012, 9.5 percent by 2014 and 20 percent by 2020 (some portion may come from efficiency-related savings).And if those mandates aren’t strict enough, Waxman-Markey also:
    • Defines wood and plant waste from federal lands as non renewable, while the same material, if found on certain non-federal lands, is renewable. (Sec.126)
    • States that new hydroelectric power from the U.S. is renewable; hydroelectric power from Canada is not.[2]
  • Establish a new $1 billion annual tax on electricity from coal and natural gas-fired power plants (Sec. 114): These tax proceeds are given to a nonprofit corporation to “accelerate the commercial availability of carbon dioxide capture and storage.” The Pew Center on Global Climate Change estimates this technology will increase coal-fired electricity costs by 40 to 70 percent.[3]
  • Provide assistance to the many workers who will lose their jobs as a result of the bill’s economically destructive provisions (Sec. 421–424).
  • Micromanage energy efficiency standards for lighting and appliances (Sec. 211–212), including swimming pool lights, portable lights, decorative gas lighting systems, theme park lights, stage lights, lights for artwork, water dispensers, hot food holding cabinets, hot tubs and more.
  • Establish a new $30 billion revolving loan fund to subsidize wind turbines, solar energy, fuel cells, batteries, biomass equipment and other energy sources (Sec. 246).
  • Create a Clean Energy Deployment Administration (CEDA) with $7.5 billion in Treasury “Green Bonds” (Sec. 182): CEDA will use taxpayer dollars to invest in energy technologies that private investors consider too risky. Waxman-Markey does not explain why the federal government, which has no history of investing wisely, will make better investments than private investors.
  • Require utilities to develop large scale plans for electric vehicles (Sec. 121) and increase the ceiling on loans to auto manufactures to build electric cars (Sec. 125). The bill also allows the Secretary of Transportation to require automobile manufactures to produce flex-fuel vehicles (Sec. 127), and even authorizes $350 million for a Cash for Clunkers” program for electric motors (Sec. 245).
  • Continue to allow EPA to regulate greenhouse gases using criteria other than global climate change (Sec. 831–835). Waxman-Markey prohibits EPA from regulating greenhouse gases based on their effect on global climate change, but does not prohibit EPA from regulating greenhouse gases on any other basis, such as ocean acidification.
  • Stall EPA’s efforts to determine the complete lifecycle greenhouse gas emissions of ethanol (Sec. 551). Though EPA has been working to determine the lifecycle greenhouse gas emissions from the production of ethanol, the bill stalls that effort. Recent science shows the lifecycle greenhouse gas emissions of ethanol may be greater than gasoline.[4]
  • Replace local and state building codes with a federal building code (Sec. 201). Apparently, state and local governments cannot be trusted to make their own decisions about what buildings to allow in their jurisdiction, so the federal government will require more expensive buildings across America. This is needless additional regulation, as weather and storm effects vary throughout the US.
  • Create a federal grant program to help electric utilities plant trees (Sec. 205).
  • Create an independent consumer advocacy office within FERC that is run by a political appointee and will not answer to the Commissioners (Sec. 198). This section also removes the independence of the office of Administrative Litigation and places it under a political appointee.
  • Establish a “National Climate Adaptation Program,” which empowers federal zoning of land and the oceans under the guise of climate change (Sec. 471–482).
  • Require the President to impose tariffs on imports from counties that do not reduce their emissions by 2020 (767–768).

Waxman-Markey does not include:

  • Any provisions that will increase the supply of energy without increasing prices, subsidies and costs to taxpayers.
  • Any provisions to accelerate access to billions of barrels of oil and natural gas on the outer continental shelf or the over 2 trillion barrels of oil in oil shale.

[1] See Institute for Energy Research, How Much of Your State’s Electricity Meets Congress’s Definition of Carbon-free “Renewable” Energy?, https://www.instituteforenergyresearch.org/2009/05/02/does-your-electricity-come-from-congress-approved-sources/. This requirement only applies to investor-owned utilities, not municipal utilities which sell 25 percent of the nation’s electricity. Waxman-Markey defines renewable hydro as hydro built on or after January 1, 1988. The vast majority of hydro in the United States was in place before 1988. It is not clear how much hydropower was brought online after 1988, so the 2.8 percent figure might slightly underestimate the amount of electricity which qualifies as renewable under Waxman-Markey.

[2] See Sec. 101. "Qualified hydropower" under the standard must be from a facility approved by FERC, which eliminates relatively plentiful Canadian imports from qualifying under the RPS.

[3] Vello A. Kuuskraa, A Program to Accelerate the Deployment of CO2 Capture and Storage (CCS): Rationale, Objectives, and Costs, report by Advanced Resources International, Inc. for the Pew Center on Global Climate Change, October 2007 at 14 and 18-25. http://www.pewclimate.org/docUploads/CCS-Deployment.pdf.

[4] Jason Hill et al, Climate Change and Health Costs of Air Emissions from Biofuels and Gasoline," Proceedings of the National Academy of Sciences 106 (Feb. 10, 2009), 2077-2082.

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