AGENDA ITEM # 6 SUBJECT H.R. 2454 – THE

							                                                            AGENDA ITEM # 6


SUBJECT:      H.R. 2454 – THE CLEAN ENERGY AND SECURITY ACT OF 2009

RECOMMENDATION:            Accept Report


Background and Analysis
On June 26, the House of Representatives passed H.R. 2454, the Clean Energy
and Security Act of 2009. The bill addresses climate change through an overhaul
of U.S. energy and global warming policy. The Senate will begin committee
hearings on its version of a climate change bill in September.

The following major provisions are included in H.R. 2454:

   •   Requires electric utilities to use 20 percent of renewable energy in their
       loads by 2020;
   •   Incentives to encourage investment in renewable energy;
   •   Sets national building code standards requiring new buildings to be 30%
       more efficient in 2012 and 50% more efficient in 2016;
   •   Institutes a national cap and trade program to reduce emissions from
       large sources by 17% below 2005 levels by 2020 and 83% below 2005 levels
       by 2050; and
   •   Sets up regional planning grids to site new renewable energy transmission
       infrastructure.

Cap and Trade
Cap and trade is an environmental policy tool used to reduce emissions while
providing emitters flexibility in how they comply with requirements. Cap and
trade programs intend to reward innovation, efficiency, and early action and
provide strict environmental accountability without inhibiting economic growth.
While H.R. 2454 addresses greenhouse gas emissions, cap and trade has been
used to reduce nitrogen oxides as well as the pollutants that cause acid rain.

Under a cap and trade approach for greenhouse gas emissions, companies would
have a limit on the amount of gas that it could emit. An “emissions permit”
would be required for every ton of greenhouse gas a company releases into the
atmosphere. The permits would set an enforceable limit – the “cap.” Over time,
the limits would become stricter, allowing for less and less pollution until an
ultimate goal is met.

Some companies will be able to reduce their emissions below their required limit
more quickly than other companies. These firms would be allowed to sell or
“trade” their extra permits to companies that are not able to make reductions as
easily. The extra permits are also referred to as credits. Under H.R. 2454, the
Federal government will auction most of the credits, providing a revenue stream
that can be used to help off-set the costs of program.