June 2, 2009
RE: Federal Update
House Energy Reform Bill Takes Shape
The National League of Cities’ (NLC) Senior Legislative Counsel, Carolyn Berndt, has given us an update on the House Energy Reform and Climate Change bill. The comprehensive climate change and energy reform legislation calls for a reduction in greenhouse gas emissions by 20 percent below 2005 levels by 2020, and 80 percent below 2005 levels by 2050. The bill would establish a renewable portfolio standard, requiring 25 percent of electricity to come from renewable resources such as wind, biomass, solar and geothermal, by 2025, and allowing up to one fifth of the requirement to come from energy efficiency measures. The bill also calls for financial and technical assistance to local governments to support climate change adaptation projects.
The legislation would establish a “cap-and-trade” system to reduce the amount of greenhouse gases going into the atmosphere gradually. The bill would reduce (“cap”) emissions at 17 percent below 2005 levels in 2020 and 83 percent below 2005 levels in 2050. It would also provide for the auction (“trade”) of emissions allowances, which a company could buy from another business in lieu of meeting its obligation to reduce emissions.
Initially, the government would sell about 15 percent of these allowances at an auction, using the proceeds to help the public with higher energy costs, and distribute the rest for free to industry and states. A much greater percentage would be auctioned in future decades. The largest share of the free emissions allowances would go to local electric distribution companies to be passed on to consumers in the form of lower prices.
While eight House Committees still consider various portions of the bill, and changes are sure to come, here is a look at some key provisions relating to local governments.
State Energy and Environmental Development (SEED) Account
The bill establishes a SEED account, which would serve as the state repository for managing and accounting for emission allowances for renewable energy and energy efficiency purposes. Not less than 12.5 percent shall be distributed to local governments for energy efficiency and renewable energy purposes.
There are several sections of the bill that pertain to residential and commercial buildings, including establishing a building retrofit program and a building energy performance labeling program. While municipal buildings are not specifically mentioned in these programs, they are not specifically excluded either. NLC has asked the committee for clarification as to whether they would be included. The provision that would affect local governments most directly is the proposal for a National Building Code Energy Efficiency Target and a National Energy Efficiency Building Code for residential and commercial buildings. States and local governments with code authority would be required to adopt the national code or other code that meets or exceeds the target. From 2012 through 2050 states would receive emissions allowances for their SEED account for building code compliance. In any state that is out of compliance and a local government is in compliance, emission allowances would be provided to the local government. Local governments would be able to use their SEED allocations for this purpose as well.
The bill would establish a National Climate Service within the National Oceanic and Atmospheric Administration to develop climate information, data, forecasts, and warnings at the national and regional scales, and to distribute information related to climate impacts to state, local, and tribal governments and the public to facilitate the development and implementation of strategies to reduce society’s vulnerability to climate variability and change. States will be required to develop a climate change adaptation plan.
Renewable Electricity Standard
The bill would establish a renewable portfolio standard, which would apply to utilities that sell more than 4 million megawatt hours (MWh) of electricity to consumers, requiring 20 percent of electricity to come from renewable resources by 2020, and allowing up to one quarter of the requirement to come from energy efficiency measures. States could petition to reduce their renewable requirement to 12 percent and 8 percent efficiency. Based on 2007 data from the Energy Information Administration, 21 public utilities produced more than 4 million MWh.
Under this provision, each state would be required to submit to EPA goals for transportation-related greenhouse gas emissions (GHG) reductions. Each MPO with a population greater than 200,000 must submit a transportation plan to EPA/DOT outlining the strategies to be used to achieve the goals. EPA/DOT may award grants to states or MPOs to support related activities.
Energy Efficiency and Conservation Block Grant
The bill amends the Energy Independence and Security Act of 2007 pertaining to the Energy Efficiency and Conservation Block Grant (EECBG):
- removes limits on funds received by communities through the EECBG program that can be used to fund revolving loan accounts;
- allows small communities to join with other neighboring small communities in a joint program of sufficient size to be defined as an eligible local government recipient under the EECBG program.
As the bill continues to move through the House, NLC will continue to advocate for funding for the Energy Efficiency and Conservation Block Grant, local adaptation projects and energy efficient transportation solutions. The Senate has not yet drafted companion legislation.
Thanks to NLC, we will keep you posted on further developments.
Very truly yours,
William G. Dressel, Jr.