Today, the Waxman-Markey bill, otherwise known as the
American Clean Energy and Security Act (H.R.
2454) is set to be voted on in the House of Representatives. The very
fact that the vote is occurring means this bill will pass in the House.
This monumental bill would establish a cap-and-trade program to cut
global warming pollution. Of course, a cap-and-trade program faces an
even more difficult path in the Senate.
So what is a
cap-and-trade program exactly (PDF)?
The cap: Each
large-scale emitter, or company, will have a limit on the amount of
greenhouse gas that it can emit. The firm must have an “emissions
permit” for every ton of carbon dioxide it releases into the
atmosphere. These permits set an enforceable limit, or cap, on the
amount of greenhouse gas pollution that the company is allowed to emit.
Over time, the limits become stricter, allowing less and less
pollution, until the ultimate reduction goal is met.
The trade: It will be relatively cheaper or easier for some companies to reduce their
emissions below their required limit than others. These more efficient
companies, who emit less than their allowance, can sell their extra
permits to companies that are not able to make reductions as easily.
Companies will be required to purchase the emissions permits from
the federal government, which in turn results in a sizeable revenue
stream to the federal government. Much of the back room politicking
that has occurred over the last few weeks regarding the Waxman-Markey
bill has involved how this revenue stream will be allocated to
government programs.
In addition to establishing an overall cap-and-trade program for
carbon emissions, the Waxman-Markey bill contains several provisions
which involve green building, and many green building and energy
efficiency programs will be funded by the cap-and-trade revenue. Below
is a summary of some of the major provisions regarding green building
contained in the Waxman-Markey bill.
Section 201: National Energy Efficiency Building Codes
Section 201 of the Waxman-Markey Act calls for the development and
adoption by state and local governments of a national energy efficiency
code. A summary of the main provisions are as follows:
1. Establishes a “national energy
efficiency building code” for residential and commercial buildings,
sufficient to meet each of the national building code energy efficiency
targets.
2. Sets energy efficiency targets for the national building code: “on
the date of enactment of the American Clean Energy and Security Act of
2009, 30 percent reduction in energy use relative to a comparable
building constructed in compliance with the baseline code…effective
January 1, 2014, for residential buildings, and January 1, 2015, for
commercial buildings, 50 percent reduction in energy use relative to
the baseline code; and…January 1, 2017, for residential buildings, and
January 1, 2018, for commercial buildings, and every 3 years
thereafter, respectively, through January 1, 2029, and January 1, 2030,
5 percent additional reduction in energy use relative to the baseline
code.”
3. If consensus based codes provides for greater reduction in energy
use than is required under the ACESA, the overall percentage reduction
in energy use provided by that successor code shall be the national
building code energy efficiency target.
4. Requires that states and local governments comply with or exceed the
national energy efficiency building code, and provides for enforcement
mechanisms for states which are out of compliance.
The federalization of building codes has the potential to save
consumers large amounts of money on their energy bills by enhancing the
energy efficiency of buildings nationwide, as well as addressing the
38 percent of carbon emissions generated by buildings in a comprehensive
manner. On the other hand, it represents a major shift in the balance
of power over building and land use regulation. Traditionally, building
codes, like almost all land use regulation in the United States has
been a local (in some cases, state) issue. This makes for a patchwork
of different codes across the nation. Indeed, thirteen states have no statewide commercial building codes, and fourteen states have no statewide residential building code.
Proponents of local control of regulatory authority argue that local
government can more appropriately respond to local conditions and can
experiment more freely with different types of regulations than would
be possible at the federal level. On the other hand, federal control of
building codes provide uniformity across the country for a problem
which does not respect state and local borders, prevents local
challenges to individual energy efficiency efforts (like AHRI v. City of Albuquerque)
and, given the large number of states which do not have a current
building code at all, provides more effective regulation of this
important source of carbon emissions.
Section 131, 132: SEED funds
According to analysis completed by the American Council for an Energy-Efficient Economy,
"allocations detailed in Section 782g direct 9.5 percent of allowances in
2012 (and decreasing amounts thereafter) to go into a State Energy and
Environmental Development (SEED) account to be used by state and local
governments for efficiency and renewables projects."
The allocation of SEED money will be at the discretion of local and state authorities.
One of the programs that can be funded by these allocation are Property Assessed Clean Energy (PACE) Bonds. PACE bonds involve
loans to commercial and residential property owners to finance energy
retrofits. Through the interest generated on these bonds, a revolving
fund is established to allow for even more retrofits to occur. Already,
California and Missouri have
announced plans to use funding from the Department of Energy State
Energy Program to establish PACE bond programs. Look for more states to
jump on the PACE bond bandwagon and use cap-and-trade revenue to fund
similar programs.
Section 202: REEP Program
With the American Recovery and Reinvestment Act, the Department of
Energy’s State Energy Program received billons of dollars. Under the
Waxman-Markey bill, the State Energy Program will again receive
billions of dollars for more energy efficiency retrofits. From the Pew Center on Climate Change (PDF):
"This section requires the Secretary of Energy to develop a Retrofit
for Energy and Environmental Performance (REEP) program to facilitate
building retrofit programs for energy efficiency and efficient water
use. Funding will be made available through REEP to the State Energy
Programs for state and local efforts, including audits, incentives,
technical assistance, and training. States are permitted to choose
funding mechanisms, with options including credit support, such as
interest rate subsidies or credit enhancement, providing initial
capital, and allocating funds for utility programs."
The REEP program has not been created yet so it is unclear what the
program will look like. Based on the DOE’s previous support for PACE
bond programs when allocating ARRA funds, don’t be surprised to see
even more of these programs established through REEP.
Green Act: H.R. 2336—Amendment to Waxman-Markey
On May 7, 2009, Rep. Ed Perlmutter (D-Colorado) introduced H.R.
2336, the Green Resources for Energy Efficient Neighborhoods Act of
2009 (“GREEN ACT”). According to Perlmutter’s office, “The GREEN Act
provides incentives to lenders and financial institutions to provide
lower interest loans and other benefits to consumers, who build, buy or
remodel their homes and businesses to improve their energy efficiency
and use of alternative energy.”
In essence, the Act:
1. Encourages energy efficiency in HUD
housing by offering block grants and credit for energy improvements in
the underwriting of mortgages;
2. Provides that Fannie Mae and Freddie Mac will have a duty to serve
very low, low and moderate income communities while developing
underwriting standards to facilitate a secondary market for
energy-efficient and location efficient mortgages;
3. Requires federal banking regulators to establish incentives for the
development and maintenance of “green banking centers” for the purpose
of providing information to customers seeking information about
acquiring green mortgages.
Interestingly, Perlmutter’s GREEN Act passed the full House of
Representatives as part of HR 6899, the Comprehensive Energy Security
and Consumer Protection Act in September 2008, but the Senate failed to
take action on this legislation. The GREEN ACT was added this morning
to the manager's amendment to the Waxman-Markey bill.
Shari Shapiro, J.D., LEED AP, is an associate with Obermayer Rebmann Maxwell & Hippel LLP in Philadelphia. And attorney Chris Cheatham, J.D., LEED AP, is an associate at Watt, Tieder, Hoffar & Fitzgerald, LLP in the Washington, D.C., Metro Area.
This post originally appeared on their blogs: Shapiro’s Green Building Law and Cheatham’s Green Building Law Update.
The LEED Gold-rated David L. Lawrence Convention Center in Pittsburgh -- Image courtesy of the convention center.
