(This is the second and final part of an analysis of the June 26 passage by the House of Representatives of the American Clean Energy Stimulus Bill (ACES).

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This is climate-change legislation sought by President Obama to control carbon emissions, the main cause of climate change, from industrial and mobile sources in the U.S. The Senate expects to follow the ACES model and has begun hearings, hoping to come to a floor vote later this year.

A coalition of automakers, electric utilities, mining companies and industry giants such as General Electric and Dow Chemical joined forces with environmental groups to pass a “cap-and-trade” bill aimed at lowering United States emissions from more than six billion tons of carbon in 2005 to about one billion in 2050. Most reductions will come post-2020 and from now until 2025 there will be considerable consumer rebates and enormous federal investments in renewable energy and clean coal technology. Under a cap-and-trade system, companies may trade their “allowances” to emit carbon over the short term for investments in projects “offsets” that will reduce carbon in the U.S. and elsewhere. But they will have to drastically cut emissions by the mid-2020s. EPA and congressional estimates are that it will reduce debt and cost consumers under 50 cents per day; Republicans disagree.)

Legislation like ACES will ultimately join with global agreements to catapult the carbon-trading market to new heights from marginality. ACES has an increasing amount of the carbon allowances given to industry auctioned off as the years go by. Many believe that the carbon market may be the largest traded commodity on the planet in another decade; at least a couple of experts forecast a $2 trillion market. Wall Street, obviously, sees this as a positive.

Through 2013, the government will issue 85 percent of the carbon allowance permits as “free” to utilities and manufacturers and auction off 15 percent on the carbon-trading market. Of the free permits, 35 percent are for electricity generators but these free permits are reduced after 2013 and phased out between 2026 and 2030.

Up to two billion tons plus of carbon offsets to be invested in projects that will reduce global carbon emissions are available under ACES prior to 2020 and many fear just how useful they may be. Up to one billion offsets can be domestic, but if they are difficult to invest in, then they can be international. Offsets are not clearly defined and the majority will probably be in other countries.

Climate scientist and political analyst Joseph Romm said regarding offset usage in ACES that. “The 17 percent reduction from 2005 levels (by 2020) will be so easy to achieve with various low-cost clean-energy strategies that it’s hard to see why polluters would avail themselves of the higher-cost offsets option �- I doubt even 150 million tons of offsets will be used by emitters in 2020.”

EPA projections agree that far less than the billion domestic offsets allowed will be used, or be practical to invest in, and that international offsets will become a larger market. EPA also maintains that under ACES, 65 percent of new power by 2025 will be renewable �“ 92 percent will be low carbon.

ACES defenders say that domestic U.S. offsets will have rigorous requirements in terms of the number of steps demonstrating that carbon will be reduced, how it is enforced, how a new “Offset Advisory Board” will be structured and proving that CO2 reductions actually took place.

It is also true that offset reductions in carbon do not add to the overall reductions that will be required by the carbon “cap.” They simply allow for potential specific carbon-reducing projects to take place in lieu of reducing carbon emissions from industry sources.

Trust and taxes

Foreign “offsets” �“ where companies invest in some carbon-reduction projects using carbon allowances �“ are complicated enough to allow both good projects and scams if they are not closely enforced. Michael Brune of the Rainforest Action Network told Yale University that, “A coal company could offset its pollution by paying a logging company to raze a rainforest for a palm plantation in Indonesia”

Former carbon bank executive Jon Sohn is worried, “There are limited offsets in the U.S. and they’ll be highly regulated. If you’re Duke Energy and you have 72 percent coal generation looking for cheap offsets to balance out investments in renewable energy, you decide to invest in saving the rainforest somewhere. Here’s the reality: You are going to ask U.S. utility companies to invest in national policy reforms within governments such as Brazil or the Congo. Those governments and many others in developing countries want to control the investments in carbon offsets and deforestation-reduction policies just as they have in exploiting oil, gas and mining.

The government will promise you that they will refer to all the land titles in order to preserve rainforest and you don’t have to do a thing. Many governments have had terrible policies that have provided neither rights nor title to indigenous people on their own land.”

Sohn adds, “How will Duke know what their funds are doing under these governments? There is a lot of information that is going to be needed on what is happening on the ground if we want to avoid conflict and actually see deforestation stopped and effective renewable projects developed.”

The bill contains about $150 million to help the developing world develop renewable-energy projects and adapt to climate change. Investments will be far greater due to offsets.

Steel and other heavy industries included in ACES will be assessed a border tariff on specific goods that are made in countries that do not have the same stringent standards for carbon as the U.S. Frequently mentioned are China and India. The president must impose an import tax on countries that do not meet U.S. standards for emission reduction or he has to request that Congress provide a joint resolution from both chambers to support his request.

Presidnet Obama, generally very supportive of ACES, opposes the tariff as language that will lead to litigation and trade challenges and an obstacle to U.S. negotiations over global climate-change accords.

Minnesota Rep. Colin Peterson and his agricultural committee negotiated several deals to attract farm organizations. These included an exemption from “taxing” cows for methane generation and having U.S. Department of Agriculture oversee farm programs allowing offsets under the bill instead of EPA.

Rural offset examples could be planting substantial numbers of trees to absorb carbon, no-till farming to store carbon in the soil, or installing methane capture systems over animal waste lagoons.

Farmers trust USDA and its 27,000 employees more than EPA but USDA has a history of vague bookkeeping. Peterson’s committee found a number of problems in possibly billions of dollars in duplicate grants and non-compliance with wetlands and wildlife laws. The USDA inspector general was unable to account for many of the funds distributed by the USDA’s Natural Resources Conservation Agency.

Biofuels made from soy biodiesel and corn ethanol will be greatly increased in production as low carbon fuels under ACES. Both fuels have been considered as being “indirectly” higher carbon users because of the fossil fuels involved in producing the fuel.

ACES would temporarily halt EPA from calculating which fuels qualify as having low-carbon emissions through all stages of manufacture. The question is put on the back burner for at least five years before EPA and USDA would have to agree on emissions. EPA does not have sole authority to determine fuel carbon emissions, and most studies have questioned whether soy and corn are “low carbon” fuels when one examines the fossil fuels needed to produce them.

Nuclear reactors

Nuclear reactors are low in carbon emissions, extremely costly to build, uranium mining is carbon intensive and impacts human health, and the milling, enrichment and waste-disposal phases are carbon-intensive. Taking such factors into account, nuclear power is not necessarily carbon- or cost-competitive with solar, wind, ocean tidal and biomass power.

Under ACES, new nuclear plants would end up receiving some subsidized loan guarantees and EPA estimates twice as many new nuclear plants would be built by 2025 under it than without the legislation.

Under a new required “Renewable Electricity Standard,” electricity generated from new nuclear units is not added to a utility's baseline electricity level. Therefore, a utility would not need to add renewable electricity to compensate for any nuclear plants built. A renewable standard does not provide a disincentive to new nuclear construction or a credit. It is neutral.

ACES creates a new Department of Energy administration to promote domestic development and deployment of clean-energy technologies with direct loans, loan guarantees, and letters of credit, and these include nuclear power who also increase and reform existing loans.

New reactors may continue to be stifled by economic competition; however, existing plants are unlikely to be decommissioned quickly.

Will it work?

Almost all recent climate-change scientific analyses indicate that if we have not hit the CO2 levels this bill calls for by 2030 in the next six to 10 years we will not be able to slow down the CO2 level in the atmosphere to 350 ppm. This will not be politically persuasive until the oceans rise on our cities’ shores.

The U.S. technological and environmental history since 1970 has been successful economically in reducing air pollution. If a climate-change bill is law by 2010 and lays out a road to developing and marketing renewable energy, it is probable that technological innovation and the marketplace actually will make it more economical to produce low-carbon energy and less fossil fuel. If that comes to pass it would make it easier to mandate carbon reductions as we are better able to assess their impacts on our environment and our economy.

A marked rise in sea levels by 2025 will certainly change the debate on whether we need to cut 83 percent of our emissions by 2050, or do so as fast as humanly possible. The politics are as uncertain as the climate.

(Editor’s Note: Kamp is environmental liaison for Wick Communications Co., which publishes the Nogales International.)