U.S. House of Representatives Passes Landmark Climate Bill Calling for Cap and Trade Program to Reduce Emissions - Teigland-Hunt LLP Client Alert
The American Clean Energy and Security Act of 2009 (H.R. 2454) (“ACES”) was passed by a narrow vote late on Friday, June 26th. Democratic leadership and the Administration delayed a vote until late in the evening, making last minute changes and eventually accumulating enough votes to pass the bill.
New Limitations on Emissions. The draft passed by the House would amend the Clean Air Act to implement a cap and trade program limiting greenhouse gas emissions across a range of sectors. ACES would require the implementation of a national program that would reduce greenhouse gas emissions as follows:
- Reduction to 97% of 2005 levels by 2012;
- 83% by 2020;
- 58% by 2030; and
- 17% by 2050.
New Renewable Standards. ACES would also establish a renewable electricity standard (RES) that requires electric utilities to supply an increasing percentage of their demand from a combination of energy efficiency savings and renewable energy. Compliance obligations could be met via purchase of credits under a RES trading program that would be established pursuant to provisions in the bill.
Implications for Derivatives Markets. ACES would grant the Commodity Futures Trading Commission (CFTC) jurisdiction over the establishment, operation and oversight of markets for regulated emissions allowance derivatives. In addition ACES contemplates a number of modifications to the regulation of derivatives markets, many of which are based on previous legislative initiatives in respect of the energy sector. For example, the Commodity Exchange Act would be amended to eliminate certain exemptions for energy trades and extend the regulatory authority of the CFTC to cover swaps involving energy transactions, including those on foreign boards of trade. The CFTC would also be required to establish position limits for energy transactions. Many of these provisions are more restrictive than those contained in the Administration’s recent proposal on financial regulatory reform. In apparent recognition of this fact, the bill contains a last-minute amendment granting the President authority to supersede provisions of the bill with regulations that address the operation and oversight of financial markets and derivatives. The House Financial Services Committee will continue to address regulatory reform of financial markets in a series of hearings scheduled for July.
Next Steps. ACES now goes to the Senate, where its future is unclear. Senate Majority Leader Harry Reid is rumored to have set a September 18th deadline for committees with jurisdiction over climate change legislation. Supporters of this legislation are aiming to have a bill passed before the United States participates in an international climate change forum in Copenhagen in December 2009.
If you have any further questions regarding climate change legislation, please feel free to contact Lauren Teigland-Hunt at (212) 269-1002 or GuyLaine Charles at (212) 269-1016.