The House of Representatives on June 26 passed a massive bill aimed at improving U.S. energy independence and curbing domestic greenhouse gas emissions. Known as the American Clean Energy And Security Act of 2009, the bill was introduced on May 15 by Energy and Commerce Committee Chair Henry Waxman (D-CA) and Subcommittee on Energy and Environment Chair Edward Markey (D-MA).

The final tally was a close 219 to 212, with eight Republicans voting for the bill and 44 Democrats voting against it. In a statement after the vote, Markey declared that the House has passed "the most important energy bill in our nation's history."

GHG Emissions Reduction

At well over a thousand pages, the comprehensive bill sets economy-wide reduction goals on greenhouse gas emissions and calls for the establishment of a cap-and-trade system to limit emissions from a wide array of covered sources. It mandates a 17 percent reduction of emissions by 2020 and an 83 percent reduction by 2050, both over 2005 levels.

Initially, the majority of emissions allowances will be freely allocated to the covered sources. Nevertheless, about 15 percent of available allowances will be auctioned—and that percentage will increase over time.

New Standards for Electric Utilities, Other Provisions

The bill also sets new standards on electric utilities, requiring utilities to meet 20 percent of their electricity demand through qualified renewable sources and energy efficiency by 2020. There are also provisions on studies and incentives for carbon capture and sequestration technologies, efficiency incentives and standards for buildings and appliances, and grants for green jobs.

USDA-Administered Carbon-Offset Program

The bill also has potentially important implications for the agriculture and forestry sectors. According to House Agriculture Committee Chair Collin Peterson (D-MN), although the bill will "clearly exempt" both agriculture and forestry from the emissions cap, it will allow farmers, ranchers and forestland owners to participate in a carbon-offset program administered by the USDA. Peterson further says that the bill will expand the definition of renewable biomass and will help fund the installation of blender pumps in an effort to increase the availability of renewable fuels. The transfer of the offset program from the EPA to the USDA may have been the key compromise that propelled Peterson to support the bill.

What Does All This Mean?

The debate now heads to the Senate, where the fate of the bill is anything but certain. There are two things to note.

First, the political haggling in the Senate is likely to be even more contentious. And it remains to be seen whether any legislation on clean energy and climate change will emerge from the Senate this year.

Second, if the Senate does pass a bill, it may well be a hybrid of the Clean Energy and Security Act and several proposals currently circulating in various Senate committees. If this is the case, a reconciliation process between the House and Senate versions will be necessary before a bill is ready for the president's signature.

Accordingly, those companies that may be affected by the version that the House has passed should not assume that they have seen the final version of any new law. Nevertheless, this development does provide further indication that momentum is swinging toward this new regulatory environment—and it gives potentially affected companies greater reason to be prepared for it.

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