Senators John Kerry and Barbara Boxer released a discussion draft of the Clean Energy Jobs and American Power Act (CEJAPA) on September, 30th 2009. The much-awaited Senate Climate bill establishes a strong cap-and-trade program to reduce greenhouse gas emissions and authorizes complementary policies to achieve further reductions, provide transitional assistance, and spur a clean energy economy.

Below is the Alliance to Save Energy summary of CEJAPA provisions most germane to energy efficiency.

Bill and Summary Organization:

CEJAPA is organized in two divisions:

• Division A authorizes policies outside the greenhouse gas (GHG) cap-and-trade program for pollution reduction, transition assistance, and adaptation. This summary provides a section-by-section overview of energy efficiency provisions in Division A.
• Division B establishes a GHG cap-and-trade program within the Clean Air Act and directs allocations to transition assistance, investment in clean energy, and several programs authorized in Division A. The summary below provides a thematic overview of Division B.

Division A: Authorizations for Pollution Reduction, Transition, and Adaptation

Title I: Greenhouse Gas Reduction Programs

Subtitle A: Clean Transportation

Section 111: Emissions Standards
This section would direct the Environmental Protection Agency (EPA) to create GHG emission standards by 2011 for heavy duty vehicles and engines that are not already covered by Tier II standards. It would direct EPA to set standards that ensure the greatest achievable emissions reductions. This section would also direct EPA to examine the various classes and categories of non-road vehicles and engines to identify those that both contribute significantly to the emission of GHG from non-road vehicles and engines and have the greatest potential for significant and cost-effective reductions in GHG emissions. It would direct EPA to promulgate by 2013 emission standards for those non-road vehicles and engines that EPA has identified. This section would also allow EPA to establish rules for the trading of GHG emission credits among and between these categories.

Section 112: Greenhouse Gas Emissions Reductions through Transportation Efficiency
This section would require the EPA, in consultation with the Department of Transportation (DOT), to establish within 18 months national goals for the reduction of GHG emissions from the transportation sector. The goals should be commensurate with the emissions reduction goals set by the rest of this bill. It would also require the EPA and DOT to assess progress toward the goals at least every six years, and to examine the contributions to emissions reductions of various measures. It would also require EPA and DOT to develop standardized emission models and methodologies.

This section would also require each state, and each metropolitan planning organization (MPO) that serves a transportation management area, to establish its own emissions reduction targets and strategies within two years of the establishment of EPA and DOT’s goals. It would require that the targets and strategies at a minimum: be based on models and methodologies that this section would require EPA and DOT to establish; contribute to the achievement of the national goals for reduction in GHG emissions from the transportation sector; and include efforts to increase or improve public transit ridership, walking, bicycling, implementation of zoning regulations that support transportation efficiency, travel demand management programs, surface transportation system operation, intercity rail and bus service, public facilities for electric vehicles, or other efforts that reduce transportation-related GHG emissions.

This section would require DOT to approve a state or MPO’s plan if DOT, in consultation with EPA, finds that the plan meets these minimum requirements and that it is likely to achieve the state or MPO’s emissions targets (this provision is labeled “Enforcement ”).

Section 113: Transportation Greenhouse Gas Emissions Reduction Program Grants
This section would direct DOT to provide grants to states and MPOs. Up to five percent of the funds available would support the development and updating of the transportation GHG reduction targets, strategies and plans that states and MPOs are required by Section 112 to create. The remaining funds would provide financial assistance in implementing the transportation plans that states and MPOs are required by Section 112 to create. It would direct DOT, in consultation with EPA, to develop criteria to consider when distributing the grants, and would lay out several criteria to consider, including the cost-effectiveness of GHG emissions reductions under the plan. It would stipulate that, for any project funded by the grants, the federal share of project costs must be 80 percent.

Section 202 of this bill would allocate allowances to state and local governments for renewable energy and energy efficiency, and would set aside ten percent of those allowances to fund this section.

Section 114: SmartWay Transportation Efficiency Program
This section would direct EPA’s SmartWay Transportation Efficiency Program to quantify and evaluate the energy consumption and GHG impacts from technologies and strategies in the mobile source sector, including freight carriers. In addition, it would direct EPA to demonstrate and promote the benefits of technologies, products, fuels and operational strategies that reduce energy consumption and emissions through this program. The section would also establish a financing program to award loans and leases to public and private entities for the adoption of low-GHG technologies and strategies in the mobile source sector. It would provide funds for the electrification of freight transportation systems. It would authorize such sums as may be necessary to carry out this section.

Subtitle D: Water Efficiency

Section 141- WaterSense
This section would direct the existing EPA WaterSense program to identify and promote water efficient products, buildings, landscapes, facilities, processes, and services to reduce water use; reduce the strain on water, wastewater, and stormwater infrastructure; conserve energy used to pump, heat, transport, and treat water; and preserve water resources for future generations. This program is modeled after the EPA and DOE's Energy Star label and would include a labeling program. This program would be authorized $7.5 million for fiscal year (FY) 2010, $10 million for FY11, $20 million for FY12, and $50 million for FY13.

Section 142- Federal Procurement of Water Efficient Products
This section would direct that federal agencies procure a WaterSense or FEMP-designated product in order to meet the requirements of an agency for a water-using product, building, landscape, facility, process, or service, and requires that these products are clearly identified and prominently displayed in any inventory or listing of products by the General Services Administration (GSA) or the Defense Logistics Agency.

This section would also direct each Agency to prepare a water efficiency retrofit plan to maximize retrofitting of water consuming products and systems with high efficiency equipment.

Section 143- State Residential Water Efficiency and Conservation Incentives Program
This section would allow EPA to award grants to state and local governments, wastewater or sewerage utilities, municipal water authorities, energy utilities, water utilities, or nonprofit organizations, to pay up to 50% of the cost of establishing and carrying out a program to provide financial incentives to residential consumers for the purchase of residential water-efficient products, buildings, landscapes, processes, or services. Allocations are determined based on the population served by each entity; the targeted population of the incentive program, such as general households, low-income households, or first-time homeowners; and the probable effectiveness of the incentive program for that population, among other considerations. This section would be authorized at specific amounts between $100 -$200 million during FY10-FY14, and adjusted amounts in subsequent years.

Subtitle E: Miscellaneous

Section 151- Office of Consumer Advocacy
This section would establish an Office of Consumer Advocacy and Consumer Advocacy Advisory Committee within the Federal Energy Regulatory Commission (FERC) to represent on behalf of energy customers on matters concerning rates or service of public utilities and natural gas companies under FERC's jurisdiction. This office would represent consumers at hearings and judicial proceedings, monitor and review customer complaints, investigate utility services and rates, develop means to ensure that interests of energy customers are represented, collect data concerning rates, and prepare and issue reports and recommendations.

Section 152- Clean Technology Business Competition Grant Program
This section would allow EPA to provide grants to organizations to conduct business competitions that provide incentives, training, and mentorship to entrepreneurs and early state start-up companies throughout the United States to meet economic, environmental, and energy security goals in areas to include air quality, energy efficiency and renewable energy, transportation, water quality and conservation, green buildings, and waste management. Any 501(c)(3) organization or sponsored entity of a 501(c)(3) organization that is operated as a non-profit would be eligible for these grants. This grant program is authorized at $20 million.

Section 153- Product Carbon Disclosure Program
This section would direct EPA to study the feasibility of a national program to measure, report, publicly disclose and label the carbon content of products and materials sold in the United States. It would also direct the EPA to establish, within 36 months of the enactment of the Act, a voluntary national program for the disclosure of products' carbon content. The EPA would provide incentives for program participation, implement a public outreach campaign to increase consumer awareness, and develop protocols for measuring and verifying a product's carbon content.

Section 154- State Recycling Programs
This section would establish a State Recycling Program to support recycling programs and associated source reduction for states. The program would provide incentives for recycling-related technology that reduces or avoids GHG emissions, and for energy-efficiency projects for transportation fleets and equipment that are used to collect and sort recyclable material, among other things.

This section would direct states to distribute at least one-fourth of the funding made available to them in this section to county and municipal recycling programs that carry out these goals, and at least one-fourth to recycling facilities that also carry out these goals, as well as least one-fourth to manufacturing facilities for the demonstration or deployment of manufacturing-related technology and equipment that would improve the energy efficiency of technology and equipment used to manufacture recyclable material.

Section 156- Economic Development Climate Change Fund
This section would allow the DOE to provide to eligible recipients, including economic development districts, Indian tribes, states, cities, institutions of higher education, and public or private non profits, technical assistance, award grants, or enter into contracts for projects that promote energy efficiency that enhance economic competitiveness; increase the use of renewable energy resources; support the development of conventional energy resources to produce alternative transportation fuels, electricity and heat; develop energy efficient or environmentally sustainable infrastructure; promote environmentally sustainable economic development practices and modes; and that support development of energy efficiency and alternative energy development plans, studies or analysis, including enhancement of new and existing Comprehensive Economic Development Strategies.

Subtitle F: Energy Efficiency and Renewable Energy

Section 163 - Energy Efficiency in Building Codes
This section would direct EPA, or such other agency or agencies as designated by the President, in consultation with the National Institute of Standards and Technology, to promulgate regulations establishing building code energy efficiency targets for a national average percentage improvement of the energy performance of residential and commercial buildings beginning in 2014 and applicable through 2030. This section would also direct EPA or the other designated agency or agencies to establish national energy efficiency building codes for residential and commercial buildings, sufficient to meet the targets in the most cost-effective manner, and would allow the agency to promulgate provisions for state adoption of the national building code standards and for certification of state programs. The administrating agency is to report on the status of codes, adoption, implementation and compliance, and federal and state enforcement, and on impacts on energy use.

Section 164 – Retrofit for Energy and Environmental Performance
This section would direct EPA, in consultation with DOE, to establish standards for a national energy and environmental building retrofit policy for the commercial and residential sectors and to develop the Retrofit for Energy and Environmental Performance (REEP) program to implement these policies. This section specifies the amounts and forms of support that would be provided under this program and would require that REEP funding not exceed 50 percent of the total refrofit cost in each building.

The REEP program would be funded through the EPA by emission allowances; the allocation amount is not yet specified. In the absence of a state REEP program, the EPA could provide emission allowances to a local government entity. States may use State Energy Program funds that are not designated for another purpose to provide additional funds to the REEP program.

Subtitle G- Emission Reductions from Public Transportation Vehicles

Section 171- Short Title
This section would name this subtitle as the “Green Taxis Act of 2009”

Section 172- State Fuel Economy Regulation for Taxi-Cabs
This section would allow states to prescribe fuel economy requirements for taxicabs and other similar automobiles, as long as they are as stringent as federal requirements.

Section 173- State Regulation of Motor Vehicle Emissions for Taxicabs
This section would allow states to adopt and enforce air emission standards from new motor vehicles that are taxicabs and similar vehicles, as long as they are at least as protective of public health and welfare as federal standards. Same criteria for eligibility that applies in Section 172.

Title II: Research

Subtitle A: Energy Research

Section 201- Advanced Energy Research
This section establishes an EPA program to provide competitive grants to higher education, companies, research foundations, trade and industry research collaborations, or consortia of the above for advanced energy research. Applications are to receive priority if they show enhancement of the economic and energy security of the United States through the deployment of energy technologies that reduce foreign energy imports, reduce energy-related GHG emissions, improve energy efficiency in all economic sectors, and ensure that the United States maintains a technological lead in developing and deploying advanced energy technologies.

Title III: Transition and Adaptation

Subtitle A: Green Jobs and Worker Transition

Part 1- Green Jobs

Section 301- Clean Energy Curriculum Development Grants
This section would allow the Department of Education to award competitive grants to eligible partnerships developing job and career training programs in the fields of clean energy, renewable energy, energy efficiency, climate change mitigation, and climate change adaption.

Sec. 302: Development of Information and Resources Clearinghouse for Vocational Education and Job Training in Renewable Energy Sectors
This section would direct the Department of Labor (DOL), in collaboration with the Department of Education to develop an internet-based information clearinghouse to aid technical education and job training programs in the renewable energy sectors. The clearinghouse would emphasize programs that cater to high-demand middle-skill trades and would contain a separate section with information for each renewable energy sector, including energy efficiency technical training. This section directs the Secretary of Labor to solicit expertise from organizations involved in the clean energy sector, including business, organizations, career and technical schools, and institutes of higher education.

Section 303- Green Construction Careers Demonstration Project
This section would direct DOL to establish a Green Construction Careers demonstration project to promote middle class careers and quality employment practices in the green construction sector among targeted workers and to advance efficiency and performance on construction projects. DOL and DOE would identify projects, including residential retrofitting projects, to be assisted by the program and establish terms and conditions of the program.

Subtitle B: International Climate Change Programs

Section 323 – International Clean Energy Deployment Program
This section would direct the State Department, in consultation with other agencies designated by the President, to establish a Clean Energy Deployment Program to assist developing countries in activities that reduce, sequester, or avoid GHG emissions, and to encourage those countries to shift toward low-carbon development in compliance with the 1992 United Nations Framework Convention on Climate Change.

Subtitle C: Adapting to Climate Change

Section 381- Water System Mitigation and Adaptation Partnerships
This section would direct EPA to establish a water system mitigation and adaptation partnership program to provide funds to states for water system adaptation in response to climate change. Beginning in 2010, states could provide grants to owners or operators of water systems to address climate-related impacts on water quality, supply and reliability of a region. The funds would be available through a competitive process exclusively for programs and projects of specified purposes outlined in the section..

Division B: Pollution Reduction and Investment

Title I: Reducing Global Warming Pollution

This title establishes, within the Clean Air Act (CAA), a nation-wide cap-and-trade program referred to as the Global Warming Pollution Reduction and Investment Program. Economy-wide greenhouse gas (GHG) emission reduction goals for this title are 3% by 2012, 20% by 2020, 42% by 2030, and 83% by 2050, based on 2005 emissions (added to Section 702 of CAA). All sections in this title refer to additions to the Clean Air Act, unless otherwise noted as Division A or Division B of CEJAPA.

Greenhouse Gas Cap

The bill directs EPA to oversee a pollution reduction program which would set a declining cap on GHG emissions for regulated entities from 2012 through 2050. The reduction targets for capped sources are based on 2005 emissions, beginning with 3% reductions by 2012, 20% by 2020, 42% by 2030 and 83% by 2050 (Section 703). Regulated entities failing to submit required allowances for GHG emissions would pay twice the fair market value for each ton of excess emissions (Section 723).

Interaction with Existing GHG Reduction Regulation

EPA: The bill does not prohibit EPA from regulating greenhouse gas emissions through other programs in the Clean Air Act, a marked divergence from the House-passed American Clean Energy and Security Act of 2009.

States: The bill prohibits states from implementing their own GHG cap-and-trade programs through 2017, although EPA may make grants to local pollution control agencies to assist in the implementation of programs established under this bill that address global warming (Section 861).

Scope

The cap established in the bill covers about 85% of U.S. GHG emissions, applying to electric plants, oil producers and importers, industrial plants (generally ones that emit at least 25,000 tons of carbon dioxide), natural gas distribution companies, and other sources. All entities, except industrial stationary sources and natural gas distribution companies, enter the cap in 2012. Industrial stationary sources enter in 2014, and natural gas distribution companies in 2016 (Section 722(c)).

The bill establishes separate programs to reduce emissions from hydrofluorocarbons (Section 619), perfluorocarbons (Section 714) and black carbon (Section 851 ).

Price Stability and Cost Control

Trading (Section 724) and banking (Section 725) of emissions allowances may occur in unlimited quantities. A regulated entity may borrow emission allowances from one year ahead without penalty, and can borrow from two to five years ahead to cover up to 15% of its obligation with restrictions at an 8% annual interest rate. The bill does not identify a governing body for the carbon market, but states the “sense of the Senate” that there should be an integrated oversight program to ensure a well-regulated carbon market (Section 131 of Division B).

Offsets (Section 722(d)) Covered entities can comply with the emissions cap using verified offsets (GHG reductions outside the scope of the cap) not to exceed an economy-wide total of 2 billion tons per year. The economy-wide offset totals are to consist of 75 percent domestic and 25 percent international sources, unless EPA determines that insufficient domestic offsets are available. A 20% discount is applied to international offsets after 2018.

Offset Verification:The President, in consultation with “appropriate federal agencies,” is to establish a program for the issuance of offset credits. The President will develop a program to qualify eligible project types (Section 733), develop general requirements for offset projects (Section 734), and develop methodologies for the approval (Section 735) and verification (Section 736) of offset projects. The bill specifies minimum additionality requirements and directs the President to establish a process for accrediting third party verifiers and to establish measurement methodologies. Entities may receive credit for offsets issued by approved state, local, or voluntary offset programs from 2009 until the federal program goes into effect. In addition, domestic entities may receive allowances for documented early reductions from internal projects begun between 2001 and 2009 (Section 782).

Price Floor (Section 778(d)): The bill sets a minimum allowance price at $10 in 2012 (in constant 2005 dollars) rising at a rate of 5% per year. This would constitute a price floor in 2005 dollars of $15 in 2020 and $63 in 2050.

Market Stability Reserve (Section 726): The bill establishes a market stability reserve which would set allowances aside for auction to regulated entities in case market prices increase beyond a predetermined price ceiling. The reserve would be filled by allowances not yet specified in the allocation section of the discussion draft (Section 721) and replenished by domestic and international offsets purchased through reserve auction proceeds. The minimum strategic reserve auction price would be set at $28 (in constant 2005 dollars) for 2012, increasing at 5 percent plus the rate of inflation for 2013 and 2017, and at a rate of 7 percent plus inflation for the remaining years. This would constitute an allowance price limit in 2005 dollars of $28 in 2012, rising to $86 in 2030 and $330 in 2050. The maximum percentage of allowances to be auctioned from the strategic reserve in any given year is 15 percent of the total emission allowances from 2012 to 2016 and 25 percent of total emissions allowances after 2017.

Allowance Distribution to Regulated Entities

(Sections 771-783 of the Clean Air Act)
Allocation amounts are not specified in this draft.

Note on Utility Distribution to Consumers: The bill requires that allowances used to provide rebates to electricity (Section 772) and natural gas (Section 773) consumers cannot be issued solely based on the quantity of energy used by each ratepayer. Rather, customer rebates must be based on a fixed rate to the maximum extent practicable. In addition, the benefits are to be distributed ratably among ratepayer classes based on electricity deliveries, and equitably among individual ratepayers. For residential and industrial electricity ratepayers, however, if the cap would result in an increase in electricity costs, electric LDCs are to pass on allowances value to residential and industrial ratepayer classes ratably based on electricity deliveries; for industrial ratepayers the LDCs may do so based on electricity deliveries to each customer.

Electricity Local Distribution Companies (Section 772) – The bill provides allowances to electric local distribution companies (LDCs) for the benefit of their ratepayers. Allowances are to be distributed among LDCs according to the following formula: half distributed based on historic emissions; half distributed based on historic electricity use, adjusted by number of consumers every three years after 2015. This section requires that no LDC receive a greater allowance value than necessary to offset any increased electricity costs due to the enactment of the bill; excess allowances are to be redistributed ratably by GHG emissions among the remaining entities. Emission allowances distributed to LDCs must be used "exclusively for the benefit of retail ratepayers." EPA is directed to prescribe guidelines for LDCs to require measurement, verification, reporting and approval of methods used to assure the use of allowances to benefit retail ratepayers.

A portion of LDC allowances will go to merchant coal and long-term power purchase agreements according to a formula described in Section 722(c).

Small Electricity Local Distribution Companies (Section 772) – The bill provides allowances to small local distribution companies. Small local distribution companies are those that deliver less than 4 million megawatt-hours of electric energy to retail consumers. Allowances are to be distributed among small LDCs based on historic emissions. This section requires that small LDCs use the allowances exclusively to achieve electricity savings, deploy renewable electricity technologies, or provide low-income assistance programs.

Natural Gas Local Distribution Companies (Section 773) – The bill provides allowances to natural gas utilities for the benefit of their ratepayers. Allowances are to be distributed among natural gas utilities based on historic natural gas deliveries adjusted by the number of customers each three year period after 2019. This section requires that the allowances are used “exclusively for the benefit of retail ratepayers.” No less than one-third of the allowances are to be used for cost-effective energy efficiency programs for natural gas consumers.

Home Heating Oil and Propane Consumers (Section 774) – The bill provides allowances to states for the benefit of residential and commercial home heating oil and propane consumers. Allowances are to be distributed to states ratably based on the carbon content of home heating oil and propane sold to consumers in each state in the preceding year. States must use at least one-half of these allowances for energy efficiency programs and the remainder for direct financial assistance programs for consumers.

Additional Allocations Specified in the Clean Air Act: The bill provides allowances for domestic fuel production (Section 775), consumer protection (Section 776), carbon capture and sequestration (Section 780), and carbon-intensive trade-vulnerable industries (Section 761-765).

Title II: Program Allocations

(Sections 201-215 of Division B of CEJAPA)
Allocation amounts are not specified in this draft.

State and Local Investment in Energy Efficiency and Renewable Energy (Section 202 of Division B). The bill provides allowances to state and local governments for renewable energy and energy efficiency.

• 62.5 percent provided to States based on the following formula: 30 percent distributed equally among states, 30 percent distributed by population, 30 percent distributed by energy consumption, and 10 percent distributed by an energy efficiency formula to be set by EPA, which would include performance based metrics measuring each state’s successes in decreasing energy consumption, and weather adjusted criteria. CEJAPA directs states to use these funds exclusively for the following purposes:
  • At least 35 percent to energy efficiency programs, comprising: implementation and enforcement of building codes, implementation of an energy-efficient manufactured home program, implementation of building performance labeling, and low-income community energy efficiency programs.
  • Renewable energy programs, including grants, production incentives, loan guarantees, and certain other forms of financing for the development and deployment of renewable energy and electricity storage technologies.
  • Electricity transmission, including support for states, nonprofits, landowners, and transmission providers to facilitate planning and siting for renewable energy, as well as for smart grid.
  • Energy efficiency programs for end use consumers of electricity, natural gas, home heating oil and propane.
  • Energy retrofits and green investments in subsidized housing.
  • At least 2 percent to district energy, combined heat and power, and recovery of waste energy.
  • Smart grid development (as described in the Energy Independence and Security Act of 2007 or EISA).
• 25 percent provided to local governments for energy efficiency and conservation block grants, as authorized in EISA.
• 10 percent provided to States and metropolitan planning organizations (via the Department of Transportation) for Transportation Greenhouse Gas Reduction program (see Section 112 of Division A).
• 2.5 percent to renewable energy generating companies, as decided by EPA (in consultation with DOE) based on the amount of renewable energy generated and the technology used.

Buildings Codes (Section 203 of Division B): The bill provides allowances to states to be used exclusively for building codes adoption and implementation (see Section 163 of Division A). The allocation would be divided among states based on the formula in Section 202.

Retrofits for Energy and Environmental Performance (REEP) (Section 204 of Division B): The bill provides allowances to states to be used exclusively for the REEP building retrofit program (see Section 163 of Division A). The allocation would be divided among states based on the formula in Section 202.

Research and Development for Clean Energy (Section 205, 206 of Division B): The bill provides allowances to DOE for Energy Innovation Hubs to promote commercial application of clean, indigenous alternatives to fossil fuels. DOE would also receive allowances for the Advanced Research Projects Agency – Energy (ARPA-E) to research, develop and demonstrate new energy and manufacturing technologies.

Investment in Clean Vehicle Technology (Section 201of Division B): The bill provides allowances to the Treasury to establish a Clean Vehicle Technology Fund. 80% of the funds would be provided to DOE to support the development and demonstration of a national transportation low-emissions energy plan and support the use of plug-in electric dive vehicles (EDVs) through considerations for an EDV infrastructure and through implementing EDV pilot projects. The remaining 20% would be provided to EPA for the distribution of grants to state, local or tribal agencies, non-profits, or institutions that carry out programs to reduce diesel engine emissions.

Additional Allocations to Programs (Sections 207-216 of Division B): The bill also provides allowances to fund international clean energy deployment (Section 207, see Section 363 of Division A), international adaptation (Section 208, see Section 324 of Division A), worker training and transition assistance (Section 209; Section 210 see Sections 311-313 of Division A, Section 214, see Section 132 of Division A), and other adaptation programs (Sections 211 -212; Section 213, see Section 370 of Division A; Section 215 see Section 155 of Division A).