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Last week, the House Committee on Energy and Commerce released a discussion draft of the American Clean Energy and Security Act of 2009. The bill, sponsored by Representatives Waxman and Markey, represents a substantial step forward for those eager to see the development of a clean technology economy here in the US. From a clean energy standpoint alone the proposed legislation calls for a package that includes a federal RPS (requiring 6% renewable power by 2012 and 25% by 2025), carbon capture and sequestration, clean fuels and vehicles, and smart grid and electricity transmission deployment. But the bill (nice summary found here) is about more than just clean energy, as it includes title provisions on energy efficiency, global warming pollution, and economic transition. In short, the bill contemplates not only our fuel sources, but the manner in which we deliver and consume fuel, how we manage the associated greenhouse gas emissions, and the necessary economic and trade steps to ensure a successful transition.

Applauded by the President of Environmental Defense, the bill has generally drawn support from environmental groups, with the President of NRDC calling it a ‘bold step‘. Whether the bill will pass both houses of Congress is an interesting question that centers, in part, on its impact on electricity prices. Because the bill includes both renewable energy and cap and trade measures, its substantial near-term costs are likely to be paid by the electric power industry, and ultimately passed through to rate-payers in the form of higher electricity prices. In simple terms this makes sense- the market price of a kWh today ignores the costs associated with environmental externalities such as GHG emissions, and therefore is too low. Properly capturing these costs, or shifting toward clean technologies, will increase prices over the foreseeable future. However, the voting public’s attitude on environmental protection appears to be changing. When asked about the tradeoff between economic growth and environmental protection, a recent Gallup poll suggests that, for the first time in 25 years, more Americans believe economic growth should be given priority.

How these costs are distributed geographically is of particular concern. While Democratic legislators from the East and West Coasts push for energy transformation, those representing constituents in the Midwest and other coal dependent regions worry about the potential costs of their reliance on ‘dirty’ electricity sources. Representative Mike Doyle (D-PA) is quoted in a recent Platt’s article on the issue of allocating emissions allowances, “How these credits are allocated is going to be key to determine if we can hold ratepayers harmless”. Doyle is not alone, according to this US News & World Report article that calculates the number of Democrats in the Senate (26) and House (96) that come from coal dependent states. While the impact of climate-change is global in nature, should the cost of GHG reduction be distributed evenly among all those who will benefit, or fall proportionately on those responsible for the emissions themselves?

Compromise surrounding the notion of cost distribution takes many forms. The Wall Street Journal’s Environmental Capital blog addressed the issue this week, pointing out that the proposed bill only calls for tougher emission standards on new coal plants licensed after 2015. Plants licensed in the interim won’t be required to meet the increased emission standards until the sooner of 2025, or the achievement of substantial commercial operation (2,500 MW) of clean-coal plants featuring carbon capture and sequestration.

Interestingly, commentary on the topic prior to the proposed bill’s release centered on coal’s uncertain future, with nearly 100 proposed coal power plants either cancelled or postponed in the US since the beginning of 2007. In large part, this uncertainty was the product of the Supreme Court’s 2007 ruling giving the EPA authority to regulate coal under the Clean Air Act and the overall financial risk associated with the future cost of carbon emissions. Is it possible that the proposed Waxman-Markey bill, generally supported by environmental groups, actually provides the certainty, at least in the short term, that traditional coal development has coveted? And if so, will it in fact spur an increased number of coal plants seeking licenses over the next six years?

Obviously, the discussion on this proposed legislation is far from settled, so speculating on its impact, or expecting a run on traditional coal plants, is premature. However, this leniency on traditional coal, like the lack of specificity on how emission allowances will be allocated, speaks to the massive challenge supporters of clean energy legislation will face in trying to determine who will bear its cost.

On this topic, President Obama advocates for the redistribution of emission allowance revenues through tax credits. The President’s approach is intended to soften the regressive nature of electricity rate increases. Similarly, could a targeted version aimed at tax-payers in coal-dependent states help solve the Capitol’s geographic challenge? While the Administration’s public stance on the issue of rapid action on climate-change appears to be softening, it will be interesting to follow how the possibility of EPA action factors into the discussion. While lawmakers from coal-dependent states carry substantial clout when it comes to passing a climate bill, there is far less they can do in the face of EPA action, a negotiating tool available to the Obama team and supporters of the Waxman-Markey bill in Congress.

Ultimately, the issue of fairness return us to a fundamental question- is it possible to make clean energy strides, sufficient to dramatically reduce the threat of global climate change, without altering the cost structure of our current energy infrastructure? While most agree that such changes are necessary, it is apparent Democrats in Congress (saying nothing of partisan challenges) are likely to continue to butt heads, arguing for low-cost legislation that protects the environment without unfairly burdening constituents.