Thursday, May 21, 2009

Analysis of Cap and Trade by Jim McConnell

Jim read the draft of the Cap and Trade Bill in detail so you don't have to. His excellent summary is set forth below.

American Clean Energy And Security Act Of 2009 - HR 2454

I have spent the last week of my spare time parsing all 932 pages of this draft of the Obama administration's cap and trade carbon emissions limitation legislation, to see if there is anything in the bill of concern to the construction industry. Here's what I have found:

Section 610(a)(13)(A) and (B): The bill includes hydroelectric power as part of the definition of renewable energy, so long as is comes from 1) increased efficiency or capacity created after January 1, 1992; or 2) power generation capacity added after January 1, 1992 to a dam which did not have generators before that date.

Section 610(a)(14) The bill includes as renewable energy power produced from burning solid municipal waste and construction, demolition and disaster debris, before or after gasification.

Section 610(a)(15) allows credit for energy savings created by reduced electricity consumption resulting from recaptured waste electrical, mechanical or thermal energy from commercial or industrial systems.

Section 610(a)(16) defines renewable biomass as including plant material from construction debris and landscape trimmings, removed from within 300 feet of a road, power line, utility tower or water supply line - meaning the heat from burning such materials counts as renewable energy.

Sections 610(a)(17) and (18) define renewable energy resources as including fuel cells, wind power, solar power, geothermal energy, biomass, biogas, biofuels and qualified hydroelectric power, and energy generated by sea tide and current movements of water in the oceans.

Section 1610(d)(2) requires retail electricity suppliers to derive a target percentage of their current power sales from renewable sources as follows: 6% in 2012 and 2013; 9.5% in 2014 and 2015; 13% in 2016 and 2017; 16.5% in 2018 and 2019; and 20% in 2020 through 2039, or [Section 1610(g)(1)] pay the government $25 per megawatt hour of the shortfall.

Section 1610(l) sunsets the requirements in 2040.

The bill permits but does not require industry to create a Carbon Storage Resource Corporation to perform research into carbon capture technologies. If firmed, the corporation's activities will be funded between $1 billion and $1.1 billion per year out of taxes on power from carbon combustion rated at $0.00043 per kwh for coal, $0.00022 for natural gas and $0.00032 for oil.

New coal fired power plants will continue to be permitted for construction, so long as they achieve at least a 50% reduction in CO2 emissions, if built before 2020, and a 65% reduction thereafter.

Electric utilities are required to plan for and provide a "smart grid" for charging electric powered vehicles, interoperable with vehicles of all manufacturers, and capable of recognizing the vehicle's owner no matter where the vehicle is connected for charging, billing the power used to the vehicle owner's account. There's going to be a lot of construction dollars spent on this one.

The bill encourages development of technologies for generating offshore electric power from tides, winds, wave energy and ocean currents.

Section 304(a) requires building codes to be revised to achieve design energy consumption savings of 30% when the act is passed, and 50% by 2014 for residential construction and by 2015 for commercial construction, with additional reductions of 5% every three years thereafter until 2030.

Greenhouse gas emissions are to be reduced 3% by 2012, 20% by 2020, 42% by 2030 and 83% by 2050, measured from base levels in 2005.

What does all this mean for construction? Well, the ability to burn debris for carbon cap and trade credits should keep tipping fees under control for a few years, construction of the smart grid and other renewable energy production facilities will keep certain types of construction tradespeople employed, and the cap and trade costs and vehicle emissions controls will increase costs for construction contractors just as it will for all other businesses.

For the text of the bill, go here:

The bill is currently still in markup in the House Energy and Commerce Committee, where Republican members intent to offer up to 400 amendments before it goes to the floor, where they will most likely vote against it regardless of the fate of their numerous amendments.

While the cap and trade program details remain subject to revision as the legislative process moves forward, the provisions outlined above regarding the construction industry are not likely to be changed much. We will keep you posted.

James G. McConnell
Attorney At Law
32 Birchwood Drive
Palos Park, Illinois 60464
Phone: (708) 923-9934
Fax: (708) 923-9936
Worldwide Mobile: (312) 287-1343
Website: James G. McConnell - Home

Phone: 859-802-1118
Skype: JameswithCCR

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