Yesterday, the House Energy and Commerce Committee released a discussion draft of comprehensive climate legislation. The Climate Leadership and Environmental Action for our Nation’s (CLEAN) Future Act sets a national goal to achieve a 100% clean economy by 2050. A section-by-section description was also made available.
The legislation seeks to achieve the goal through a variety of means including energy efficiency standards, grid modernization, clean energy grant and loan programs, and promoting zero emission vehicles. Below is an overview of the market-based programs in the Act::
Federal Clean Energy Standard
Requires retail energy suppliers to provide an increasing percentage of clean electricity each year starting in 2022, rising to 100% in 2050.
The baseline percentage starts at the average level of qualified clean energy from 2017-2019 – and the requirements increase in equal increments each year until 2050.
Credits are issued to clean electricity generators based on the carbon intensity of electricity generation compared to a baseline of 0.82 metric tons of CO2/MWh. Non-emitting sources (i.e. wind & solar) will receive full credit.
Retail energy suppliers must submit clean energy credits each year equal to their actual retail electricity load multiplied by the annual clean energy target.
Credits can be used in the year they are issued or banked for up to two years.
The program will have an alternative compliance payment (ACP) mechanism. The ACP is $22.00/MWh in 2022, ramping to $64.00/MWh by 2050.
The US Department of Energy will administer the trading program, issuing credits, operating a credit registry, and arranging credit auctions.
States would retain their ability to administer their own renewable portfolio standards (RPS).
State Climate Plans
States must complete the transition to a net-zero carbon emissions economy by meeting a federally mandated climate standard by 2050, with interim standards.
Similar to the Obama Administration’s Clean Power Plan, states have the flexibility to meet targets and may use existing or new market mechanisms, as well as control strategies suggested by the federal government.
States may work cooperatively to meet climate goals, similar to the current WCI and RGGI approaches.
The CLEAN Future Act is a product of the Democratic-controlled House – and there is no indication the GOP-controlled Senate is considering similar legislation. However, it begins to put specific language to broad climate strategies, such as the Green New Deal.
The House Energy and Commerce Committee is taking comments on the discussion draft, to be followed by a series of hearings.
Evolution Markets’ carbon and renewable energy markets teams will continue to monitor the debate and provide updates. Please contact our brokers at: firstname.lastname@example.org or email@example.com for more information.