A Cooler Climate For Federal Cap-And-Trade Legislation

Author:Mr Jonathan Flynn, Gregory K. Lawrence and Kari S. Larson
Profession:McDermott Will & Emery

Although the future of new emissions and renewable energy legislation is increasingly uncertain, business still needs to prepare for climate change regulation.

Further evidence that the White House may be backing off of the aggressive agenda to advance economy-wide climate change legislation that it was championing a year ago surfaced on February 1, 2010, when President Barack Obama released his proposal for the 2011 federal budget. President Obama's current spending proposal eliminated an estimated $646 billion in new revenue over 10 years from a new federal "cap-and-trade" program that had been included in the White House's budget plan last year. The current budget proposal still makes reference to a federal program to limit greenhouse gas emissions through a new market-based mechanism, but now describes the program as "deficit-neutral" as opposed to a significant source of new government revenue. This subtle change appears to recognize that the current political climate may require a more limited program than the Obama administration once envisioned if any climate change legislation can be enacted in 2010.

The Congressional Climate

On June 26, 2009, the U.S. House of Representatives passed the American Clean Energy and Security Act of 2009 by a narrow margin of 219 to 212. This bill, sponsored by Representative Henry Waxman (D-CA) and Edward Markey (D-MA), would have established a cap-and-trade program for the seven most common greenhouse gases, along with a new federal renewable energy standard.

In the U.S. Senate, the Committee on Energy and Natural Resources reported the American Clean Energy Leadership Act of 2009, a renewable energy bill sponsored by Senator Jeff Bingaman (D-NM) on July 16, 2009. Then, on November 5, 2009, the Committee on Environment and Public Works in the U.S. Senate passed the Clean Energy Jobs and American Power Act, a cap-and-trade bill sponsored by Senator John Kerry (D-MA) and Chairman Barbara Boxer (D-CA).

The House and Senate bills contained several significant differences. Notably, the Waxman-Markey bill expressly prohibits the Environmental Protection Agency (EPA) from regulating greenhouse gas emissions under the existing provisions of the Clean Air Act. The Kerry-Boxer proposal preserves the EPA's authority to regulate carbon dioxide and other greenhouse gases through a "tailored" version of the Clean Air Act's current permitting process. The Waxman-Markey bill also includes detailed provisions to address international...

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