U.S. House Passes Energy and Climate Change Legislation; Action Moves to Senate, but Fate Uncertain

September 8, 2009
Client Alert Newsletter September 2009

On June 26, 2009, the U.S. House of Representatives passed sweeping energy and climate change legislation, entitled the American Clean Energy and Security Act of 2009 (the "ACES Act"), by a vote of 219-212. The final version of the bill, which totaled over 1,400 pages, would affect virtually every industry in the U.S., ranging from energy producers to real estate developers. A summary of the major provisions of the ACES Act can be found here. The U.S. Senate has indicated that it will consider its own version of a similar bill, but despite the fact that the Democrats hold a potentially filibuster-proof majority in the Senate, the prospects of getting a similar bill through the Senate before the end of the year remain unclear.

One of the reasons for the uncertainty surrounding the fate of energy and climate change legislation in the Senate is that many of the key issues associated with such legislation cross party lines. For example, the final version of the ACES Act included a "border tariff" provision that essentially places a tariff on any goods imported from countries, such as China, India, and Brazil, that do not impose similar GHG restrictions on their own industries. The Obama administration and many Senate Democrats oppose such a provision, arguing that it may be illegal under World Trade Organization rules and that it may also expose U.S. exports to other protectionist policies. At the same time, many Senators from industrial states, including both Democratic Senators from Pennsylvania, have indicated that a border tariff provision would be necessary to secure their vote for climate change legislation.

Senate Majority Leader Harry Reid initially set a September 28 deadline for all responsible Senate committees to report out their markups of any energy and climate change legislation. Senator Boxer (the chairman of the Environment and Public Works committee) and Senator Kerry (the chairman of the Foreign Relations Committee) recently announced (with Senator Reid’s blessing) that a new bill will not be introduced until late September, meaning that the committees with jurisdiction over climate legislation will not begin to address a bill until October.

Ideally, proponents of climate change legislation are hopeful for some type of bill to emerge from the Senate before the last round of scheduled international negotiations on the successor to the Kyoto Protocol begin in Copenhagen in December. If that happens, a House and Senate conference will follow in an attempt to reconcile any conflicting provisions. If the prospects in the Senate for passing a bill are not good, however, it is unlikely that the Obama administration and the Senate leadership would risk a "no" vote from the Senate on climate change legislation in advance of the Copenhagen meetings and instead will likely wait until those negotiations play out before taking up climate change legislation again.