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Over 15 academics and professionals were interviewed for this report. They examined the American Clean Energy and Security Act, and the role of alternative energy in the U.S. future. You can read the raw interviews by visiting the Alternative Energies section. An online book is in production.
 With a cute nickname like "ACES," the American Clean Energy and Security Act sounds like a feel-good statement everyone could agree on in a flash, then adjourn to the pub. Wrong!
It's a humongous bill ... 946 pages of it ... and it barely squeaked through the House of Representatives on June 30 by a 219-212 vote. This suggests it may get some revision in the Senate, or at least the threat of it, before it gets passed and signed as it surely will ... this being a centerpiece of President Obama's legislative priorities.
For better or worse, "ACES provides an integrated solution to a long-standing energy problem in the United States," says Paul O'Rourke, who has more than 30 years' experience in energy consulting and general management, and heads the energy sector of global consulting firm LECG. "In fact, if implemented, it will be the most comprehensive energy plan ever enacted in this country’s history."
Mr. O'Rourke likes some parts of the bill, dislikes others ... more from him and others below.
What ACES Would Mean
RENEWABLE ELECTRICITY STANDARD: Utilities in each state would be required to produce a minimum amount of electricity from renewables, starting with 6 percent in 2012, and going up to 20 percent by 2020.
EMISSION CUTS: U.S. industry would have to reduce emissions by 3 percent from 2005 levels by 2012, by 17 percent by 2020, with more severe requirements from there. This is the "cap" part of what's known as "cap and trade." About 85 percent of the overall economy would be covered in this provision.
EMISSION PERMITS: Also known as carbon credits ... this is the "trade" part of "cap and trade." Companies that cut emissions more than the minimum would be allowed to sell their excess permits to other companies or bank them for future use. At the start, about 85 percent of the permits would be given away free to the companies and 15 percent would be auctioned off.
OFFSETS: Companies would be allowed to purchase carbon credits ... meaning they could fund clean-energy projects elsewhere instead of cutting some of their own emissions.
INVESTMENTS IN ENERGY TECHNOLOGY: The bill would spend $190 billion by 2025 on this goal, and would create a Clean Energy Deployment Administration within the federal government that would provide loans and loan guarantees.
COAL-FIRED POWER PLANTS: These would be allowed, though generally lambasted by the environmental lobby, if they use the carbon-capture-and-sequestration (CCS) technique.
ENERGY EFFICIENCY: The bill would set new standards for industrial uses, lighting products, commercial furnaces and appliances ... buildings would have to show 30 percent improvement by 2010 and 50 percent by 2016.
SMARTER ELECTRICAL GRID: The bill would try to help develop “smart grid” technologies and build better transmission infrastructure.
CASH FOR CLUNKERS: Somehow that got thrown in here ... $3,500 to $4,500 if you trade in your clunker for a more efficient vehicle.
Here's what energy experts who responded to our call for comment had to say both pro and con on the principles of the bill.
Strong Points of ACES
The experts praise the landmark nature of the bill for its various "firsts ... for tackling vital energy topics ... and for setting national standards.
Geoffrey Garver, an environmental consultant in Montreal who has been director of submissions on enforcement matters at North America's Commission for Environmental Cooperation, calls it "a step in the right direction, and the fact that it would for the first time regulate greenhouse gas emissions would be an enormous achievement. ... We are pleased to see new measures on green buildings, vehicle performance and renewable energy requirements and would hope that they could be strengthened."
Sarah King, an associate principal at GreenOrder, an environmental consulting firm in New York, says the legislation "is creating a momentum in Washington that has been previously nonexistent. For the first time, a U.S. cap and trade bill has a real chance of being signed into law; however, there are significant challenges. In the Senate, interest groups from farmers to manufacturers will push for amendments and provisions that lessen the impact on their industries. There is a risk that the Senate will fail to craft a compromise or only pass a significantly watered down version of the House-passed bill."
Mr. O'Rourke lauds its specific limits on emissions, "which are long overdue" ... the fact that offsets will "ease the burden of penalty payments" for noncompliance with greenhouse gas reduction targets ... and that it provides "much-needed subsidies" to encourage the increased use of renewable generation and conservation.
"Another key strength is that it sets clear targets and institutes some elements that will bring things together at the national level, and it will build upon important initiatives already underway at the state and regional levels. This would be a big improvement over the uncertainty of state and regional programs that drive our renewable energy policy now."
William C. Olson, vice-president of business development for ElectraTherm, which recycles wasted energy in production centers into electricity, thinks the bill would "facilitate the proliferation of green technologies" and "bring a degree of clarity to a national market."
He notes that right now, "lacking a federal Renewable Portfolio Standard (RPS), companies like ElectraTherm are resigned to delivering green technology to 50 different markets represented by the 50 states, each with its own RPS program. This is burdensome in that each state can establish its own criteria as to what constitutes green."
Other Comments:
Will Sarni, founder and CEO of DOMANI, an environmental consulting company. He has 30 years' experience in this field and has managed development projects throughout the U.S., Europe and Asia: This "appears to be a bill supported by policy makers and industry. It is essentially an imperfect bill (not very aggressive in its goals) that has a good chance of passing. Moreover, it sends a signal to negotiators at Copenhagen that the U.S. has committed to reducing carbon emissions." (Editor's note: There will be a United Nations climate change conference in Copenhagen this December.)
Richard Armstrong, president of Renewed World Energies, an algae production company that is building a pioneering facility in this field in South Carolina: "I am glad to see this country making positive steps to control our emissions and begin the long process of switching to renewable energy" ... passing ACES would be "a first step that should have happened long ago." The bill would help "us and the utility companies begin creating good workable solutions in power generation with renewable sources that are not from fossil fuels."
Jim Simcoe, founder and president of EcoLife Consulting of Encinitas, Calif.: "This act is a great step in the right direction. It addresses some key areas of sustainability and sets targets that are realistic. The aid to retrofitting existing residential buildings is a great part of this program."
Weak Points of ACES
Mr.O'Rourke points to the enormous, and somewhat unknown, cost of the legislation as the chief matter of concern.
"The bill would require a massive investment in new technologies," he says.
"We are talking trillions of dollars at a time when our nation’s financial system is stretched to its limit and government spending is focused on propping up banks and the auto industry. Implementing the bill will put a huge burden on an already overstressed capital structure, and it will add huge costs to already over-burdened household budgets, as the costs of reducing CO2 emissions and subsidizing renewable energy get passed through to consumers.
"Since the costs of ACES will be immediate, but the benefits will not be realized for generations ... if at all ... we need to be asking ourselves whether this is the appropriate time for such far-reaching legislation that will radically change the energy landscape. Consumers will pay in many ways ... directly through increased electricity and gasoline prices and indirectly through new standards that require purchasing more efficient energy using equipment. In addition, American workers will pay through reductions in total labor earnings and employment, since the job creation aspects of the bill will not be sufficient to offset economy-wide job and income losses.
"Proponents of ACES have missed the fundamental economic premise ... “That it is impossible to bring about a net increase in labor earnings through measures that impose a net cost on the economy” ... particularly in the short term. It is dangerous for the U.S. to embark on such far-reaching changes without a clear understanding of how we are going to pay for everything in the bill."
Mr. O'Rourke also notes the huge amount of work to be done, as specified in the bill. "For example, it requires as much as 250,000 megawatts of new renewable capacity to be built ... 25 percent of total U.S. capacity today. Current estimates put the cost for this at $700-900 billion, plus we’d need to upgrade the transmission grid which would cost another $100 billion (some estimates range as high as $300 billion for other investments that will be required as a result of the legislation). That is a hefty price tag for just one part of the energy package."
Other Remarks
Geoffrey Garver: "We would prefer to see a bill that explicitly references the need to work toward global atmospheric greenhouse gas concentrations that must be respected in order to prevent catastrophic climate change. We are impressed with the approach of those calling for a limit of 350 ppm CO2 in the atmosphere as the basis for regulatory efforts. The reliance on offsets is troubling, especially offsets for preventing deforestation, as opposed to for reforestation."
Will Sarni: "The weakest parts of the bill are that a high percentage of allowances are being given away and not auctioned. Also, it would have been preferable to focus exclusively on a carbon cap and trade program (similar to the successful U.S. Sox trading program) and move the energy elements to a pure energy bill such as the Bingaman Renewable Energy Standards (RES) bill in the Senate."
Richard Armstrong: "The cons are the loopholes; as it is written now, the utility companies are allowed to reduce the 20 percent power from "green" sources by getting the individual state governors to petition a reduction to 12 percent and energy savings to 8 percent."
Jim Simcoe: "There need to be more incentives and programs for small businesses that are not green. They’ve addressed residential properties and green businesses but have not addressed the majority of for-profit small businesses in the U.S. To affect real change with these issues, there needs to be something made available to all small business owners."
And Mr. O'Rourke once more: While federal coordination has a plus, "this also has drawbacks because it adds government bureaucracy and additional cost. ... It will require a complicated and potentially cumbersome infrastructure to track compliance of mandated programs, and to verify and validate claims related to offsets and reductions in GHG emissions.
"Another negative is the time frame for implementing the measures. We are playing catch-up by trying to squeeze these ambitious renewable energy goals into a 10-year window ... all at too high a price. The accelerated and subsidized investment in renewable technology will force the U.S. to “throw away” otherwise economically viable fossil-fueled electric generating plants before the end of their useful lives. Meanwhile, over that same 10-year period, China and India will build more new coal-fired electricity generating capacity than we currently have in the U.S. ... virtually guaranteeing large increases in world CO2 emissions."
Editor's Note: Kate Sheppard of the januty Grist website, which is based in Seattle, provides an excellent summary of how it will affect us. http://www.grist.org/article/2009-06-03-waxman-markey-bill-breakdown .
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