The American Clean Energy and Security Act (ACESA, H.R. 2454, Waxman–Markey Bill) $ ^{29} $

In June 2009, the US House of Representatives passed the Waxman–Markey Bill by a close vote (219 to 212). The act passed, ACESA, contains five titles but the following summary concentrates on Title III and Title V, to give an overview of the proposed cap-and-trade programme mainly focusing on GHG emissions.

Coverage: The programme covers seven GHGs. $ ^{30} $ Hydrofluorocarbons (HFCs) are subject to a separate cap. The sources covered include all power plants and large stationary sources emitting more than 25,000 tonnes of GHGs per year. The programme applies to both upstream emissions (e.g. petroleum refiners or importers) and downstream ones (e.g. industrial plants and natural gas distributors). The GHG cap will expand the coverage in three phases from 2012 through 2016, up to nearly 85% of US GHG emissions.

Caps: The programme sets two caps, a mandatory cap on emissions from the installations covered and non-binding, economy-wide, emission reduction goals for all sources.

Emission caps are 3% below 2005 levels in 2012, 17% below 2005 levels in 2020, 42% below 2005 levels in 2030 and 83% below 2005 levels in 2050.

Economy-wide emission reduction goals are the same as the emission caps except the 2020 target being 20% below 2005 levels.

Allocation: The majority of allowances are to be distributed for public benefits including consumer benefits. Low- and moderate-income households will also receive a tax credit or rebate. Auctions will start in March 2011. Initially, about 20% of allowances will be auctioned. The share of auctioning will increase over time to about 70% by 2030 and beyond. There will be a strategic allowance reserve for auction. The initial minimum price for 2012 will be $28 and the price for 2013–14 will be the 2012 price increased by 5% plus the inflation rate. From 2015, the minimum reserve price will be 60% above the three-year rolling average of the market price. No more than 20% of the compliance obligation may be annually purchased from the strategic reserve.

Timing: The compliance period is two years with unlimited banking. Borrowing from the next year is unlimited and with no interest, but borrowing from the second to fifth years is limited up to 15% of the compliance obligation and at 8% annual interest.

Offsets: The programme allows up to 2 billion tonnes of offsets to be used for compliance: 1 billion from domestic projects (forestry and agriculture overseen by the Department of Agriculture) and 1 billion from international programmes or projects. If the domestic supply is not sufficient, the Environmental Protection Agency can raise the use of international offsets up to 1.5 billion. From 2018 there will be discount for international offsets: 1.25 offset credits for each tonne of emissions. There will be no discount for domestic offsets. The programme approves the issuance of offset credits based on sectoral crediting mechanisms targeted at sectors in eligible countries. Credits may also be issued in exchange for credits issued by other programmes (e.g. the CDM) that create equal or greater assurance of the environmental integrity of the US programme.