OUR THOUGHTS ON:

What are the Prospects for Comprehensive Energy Legislation?

Energy & Resources

By George Adams

The prospects for comprehensive energy legislation looked good in July, 2009 when the Waxman-Markey Bill passed the House of Representatives. That piece of legislation created a cap and trade program with a 20% renewable energy target by 2020, a program to upgrade the electric grid and stronger energy efficiency standards. Although the cap and trade portion was criticized by some as being too lenient on polluters, the bill was a major step for renewables. It would have finally provided the national target that the industry has been seeking for years.

Shortly after the House passed this bill, the Senate began debate on their version of this legislation. This debate was soon put on the back burner as the legislative agenda for the remainder of the year and the first part of 2010 was monopolized by the recently passed health care legislation. Currently, there are a number of proposed bills in the Senate that focus on more specific renewable energy segments rather than a larger comprehensive energy bill. Some of these bills are focused on solar energy, electric grid, stronger energy efficient building standards and various versions of carbon tax legislation.

The latest discussion surrounding possible energy legislation indicates that the “cap and trade” carbon emissions market that had been previously proposed will not be part of any new energy legislation. The leading solution, however, appears to be coming from a bipartisan group of Senators led by John Kerry (D-Massachusetts), Joe Lieberman (I-Connecticut) and Lindsey Graham (R-South Carolina) that would put a price on carbon emissions which targets only the electric utility, transportation and industrial sectors of the economy. Some of the other key elements of the Senate Climate Bill include:

• Cap-and-Trade replaced with carbon caps on specific parts of the economy - electric utilities, transportation, and industry
• Greenhouse gas reductions - 17% reduction from 2005 levels by 2020; and 80% over the “long term”
• Carbon capture and sequestration standards and research funding
• Domestic oil and gas production expanded, including new offshore drilling
• Incentives for nuclear power plants and low-emissions transportation

If a bill is not passed in the near term (June/July, 2010), there is a possibility that the election-year political cycle will limit the chances of passing energy legislation. It is also very possible that the make-up of congress will change significantly after the November 2010 elections. This could dramatically affect the agenda for the upcoming session of congress. It remains to be seen what the future energy legislation will look like, but it appears that any energy bill passed in the near term will be a simpler version that will attract more bipartisan support than did previously proposed bills.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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