On June 26, the U.S. House passed H.R. 2454, the American Clean Energy and Security Act, intended to wean America away from fossil fuels, spur innovation in alternative energy and energy conservation, and reduce the generation of greenhouse gases (GHG), principally carbon dioxide (CO2). The bill now goes to the Senate, which is expected to take it up this fall. While significant amendments can be expected, several features of the House bill (below), or provisions like them, will likely become law:

 
 4The emission of CO2 by large generators, such as coal-fired power plants, will be regulated through a form of cap-and-trade system, under which such emissions will be capped. Companies will be allowed to purchase emission allowances. Generators that perform better than their cap level can sell their excess or unused emission allowances in a form of commodity trading similar to how transactions are conducted today on the Chicago Climate Exchange. In addition, other businesses, including farming or other agricultural operations that voluntarily sequester, meaning permanently remove, GHG from the environment in a certifiable manner will be entitled to offset credits, which may be similarly sold or traded as commodities, to industries needing to acquire them.
 
 4Electric utilities will be required to meet 20 percent of electricity demand through a combination of renewable energy sources and energy-saving measures by 2020.
 
 4Federal funding will spur new clean energy technology, including energy efficiency and renewable energy ($90 billion in new investments by 2025), carbon capture and sequestration ($60 billion), electric and other advanced technology vehicles ($20 billion), and basic scientific research and development ($20 billion). 
 
 4Energy-saving standards will be federally mandated for buildings and appliances, to be incorporated into state building codes.
 
 While smaller businesses will not be subject to direct regulation of GHG emissions-and the bill contains provisions to ease the economic impact of the compliance cost on electricity consumers-such businesses will nonetheless feel the impact of climate regulation, negatively and positively:
 
 - While initial utility costs to business may rise as utilities subject to GHG regulation pass compliance costs on to customers, the costs for owned or rented buildings, in the long run, will decrease as new (or energy-retrofitted) structures come on line.
 - Real estate construction costs and delays may display short-term increases reflecting initial regulatory uncertainties and product shortages. Developers and builders may face increased compliance costs. All of these will correct over time as marketplace and regulatory adjustments take hold. 
 - A new universe of vendors will come into existence as the market opens up for engineering, manufacturing and product innovation, as well as infrastructure development. New players large and small will emerge in a manner similar to the development of the computer industry in the 1970s and 1980s.
 - Corresponding shifts will take place in service industries, such as law, insurance, finance, securities and commodity trading and higher education, as whole new specialties and disciplines emerge.
 In short, the passage of H.R. 2454 marks this country's first, hesitant step into the post-carbon economy, and the beginning of a process that will ultimately have a profound effect at every level of the public and private sectors. 
 

 Jonathan P. Scoll is an attorney with Lindquist & Vennum. Reach him at (612) 371-3546 or <a target="_blank" href="mailto:jscoll@lindquist.com" rel="external">jscoll@lindquist.com</a>.

How Climate Regulation May Impact Small Businesses

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Upcoming Events

2024 International Biomass Conference & Expo

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Biodiesel Summit: Sustainable Aviation Fuel & Renewable Diesel

Carbon Capture & Storage Summit

North American SAF Conference & Expo

How Climate Regulation May Impact Small Businesses