Updated at 1:06 p.m. on June 8.

So far the commentary around the Waxman-Markey climate bill has revolved around whether the legislation is too weak on polluters, cuts emissions too little, and gives away too much revenue. And those are legitimate questions about a bill that is nevertheless historic. But I want to raise a different concern: In my view one of the biggest flaws in the bill as passed out of the House Energy and Commerce Committee is that it gives short shrift to the promotion of clean energy technology innovation. America needs to invest much more in spawning the game-changing technological breakthroughs that will make clean energy cheap and change the nation’s emissions ballgame. And yet while Waxman-Markey makes important nods in that direction the revenue to be generated and invested looks far too small. Given that, I see no tougher or more important hurdle to passing a strong climate bill than boosting substantially its investments in clean energy technology.

The competing interests here, it should be said, are numerous, powerful, and fully engaged. The intense mark-up in the Energy and Commerce Committee last week only highlighted the variety of companies, industries, and organizations taking an intense interest in the bill, ranging from electricity generators and distributors to manufacturers, car-makers, natural gas companies, oil companies, chemical companies, states, environmental groups of various stripes. And yet, a top priority here needs to be innovation—not just shuffling around the burdens of who will pay. As a recent report issued by my group at the Brookings Institution argues, America needs to catalyze—very soon—radical scientific and technological breakthroughs and their massive commercialization if it is going to have any chance of securing the 80-percent greenhouse-gas emissions cuts needed by mid-century, regardless of whether it gets a strong regulatory cap in place. Over the next four decades, after all, global energy demand is expected to triple. At the same time, few believe energy pricing or regulatory strategies by themselves can achieve the necessary emissions cuts in the face of such quickly rising demand. All of which means that America and the world must change the game. America, in short, must move aggressively to develop and harness a portfolio of truly scalable clean energy sources—which we do not now have—and ensure that they are affordable enough to deploy throughout the world. Consequently, it matters a lot whether or not the Waxman-Markey bill invests deeply enough in clean energy R&D and technology development and deployment to catalyze the needed inventions over the next 40 years.

So how do things look on this front? From the innovation angle the Waxman-Markey bill must be deemed mixed and in need of much more work. On the positive side, Waxman and Markey deserve credit, given the circumstances, for setting aside some 16 percent of the hundreds of billions of dollars of cap-and-trade revenue that the bill would generate for such items as new auto technology, carbon capture and storage work, and other clean energy technology development and deployment. Given the pressure of competing interests, reserving even that much of the bill’s revenue for innovation activities remains an important start. Also welcome is the assignment of 1 percent of the bill’s permit revenue to the establishment of eight “Clean Energy Innovation Centers”— regional R&D hubs reminiscent of Brookings’ proposal for the nation to launch a network of energy discovery-innovation institutes (e-DIIs) designed to leverage the expertise of universities, national laboratories, industry, venture capital, and others in the transfer of innovative clean energy technologies into the marketplace. Paralleling the Department of Energy (DOE)’s FY 2010 proposal for the creation of eight “energy innovation hubs,” the Waxman-Markey language represents an important confirmation of the importance of public investments in innovation, run through new commercialization-oriented paradigms.

And yet, the fact remains that as passed out of the Energy and Commerce Committee the innovation investments in the American Clean Energy and Security Act (ACES) remain far too small, largely because so many of the bill’s carbon-emission permits have been given away free to ensure its passage. Assuming an average pollution allowance price of $15, ACES as currently written would generate just $9 billion annually for technology innovation activities, broadly defined, as notes an analysis by the Breakthrough Institute. Along these lines, some $2.5 billion a year would flow into carbon capture and storage, $4.3 billion into renewable energy and efficiency, and $1.3 billion into auto tech. Another $735 million a year would fund the clean energy R&D to be performed by the innovation centers. Now, to be sure, these are welcome flows and they do sound like big numbers, given the nation’s wholly inadequate current approach. But the ACES innovation numbers pale in view of the fact that my group at Brookings has called for the nation to invest as much as $20 to $30 billion per year on energy R&D alone even as President Obama has called for investing $15 billion annually. And they pale further given the fact that cap-trade revenues represent the nation’s best shot at sufficiently funding game-changing innovation in the face of the punishingly tight budgets that will prevail for the foreseeable future. The bottom line: Reps. Waxman and Markey deserve credit for insisting upon the presence of several crucial placeholders for innovation in their legislation, but the accommodations extracted by the interest groups elsewhere in the bill have left far too little revenue behind for the most crucial use of cap-trade money—investments to catalyze a radically cleaner energy future.

In view of this, then, the most daunting hurdle standing between the current legislation and House approval of a truly transformative bill is the sheer scale of the revenue concessions that may be required to secure passage. Which is to say, the biggest threat to success in the coming months will be the temptation to give away so many of the potential statute’s emissions permits that little or no revenue remains behind to finance innovation. Clearly, then, a crucial challenge for the rest of the year must be to protect and perhaps double the clean energy innovation outlays of the bill. Without success on that front, the nation may gain a cap-and-trade system but blow its best opportunity to foment the technology breakthroughs needed to make clean energy cheap and stave off massive climatic destabilization.

The American Gas Association (AGA) agrees that while the House Energy and Commerce Committee vote was an important first step in trying to pass climate change legislation, there are several significant obstacles to overcome before a bill will get to President Obama’s desk for signature. No matter how daunting the challenge, however, AGA is committed to working with Congress and the administration on this critical national issue.

We strongly believe that both natural gas utilities and their customers can and should contribute to improving the nation’s energy efficiency in order to meet the nation’s goals of optimizing our resources, maximizing our energy security, increasing conservation and reducing carbon emissions. In fact, if you look at our member’s track record when it comes to energy efficiency, you will find that the number of natural gas customers has increased more than 70% (38 million homes in 1970 to 65 million in 2005) since 1970, yet total residential natural gas consumption has remained about the same as it was in 1970. By insulating their windows and doors, by using energy-efficient appliances, and by conservation methods as simple as turning down the thermostat, natural gas residential and commercial customers have reduced their average natural gas consumption by about 1 percent annually since 1980—this rate of decline has accelerated to about 2 percent annually since 2000.

As the cleanest fossil fuel, emitting only one carbon atom when burned, natural gas can play a major part in significantly reducing carbon emissions. We look forward to working with Congress to craft sound policies that encourage the increased use of clean, abundant, domestic natural gas, which will improve our environment, enhance energy security and save American consumers money.

There are some hurdles, but I think it is likely that they will be cleared. So far, the people shepherding this bill, Chairmen Waxman and Markey, as well as the leadership of the House, have made it clear that passing this bill is a priority and have found ways to make the necessary adjustments to address (primarily economic) concerns raised by some Members of Congress. There’s no reason to believe they won’t be able to do that again.

Of the House committees with jurisdiction over components of the American Clean Energy and Security Act, several will waive their right to debate the bill and pass amendments. The House Committee on Agriculture will probably present the biggest challenge, because Chairman Collin Peterson (D-Minn.) has made it clear that he has concerns with some provisions of the bill and wants these to be addressed. These include issues related to offsets and recent EPA regulations on biofuels.

Your question suggests that the House bill is in dire straits--but I don’t think it is. The most daunting hurdles to climate legislation will be encountered not in the House, but in the Senate. Due to the almost certain threat of a filibuster, 60 votes will be needed to pass a bill in the Senate, creating a much higher bar than the simple majority required for passage in the House. In addition, it will be challenging to address the concerns of the centrist coal and manufacturing state Senators which will be essential to passing a bill. It may take the President’s intervention to provide the impetus to reach the finish line.

Nevertheless, there are a number of reasons for optimism. Passing cap-and-trade legislation will jump start our economy while putting us on the path to a low carbon future, there is support for moving forward in both bodies of Congress and our President is committed to enacting a bill. The alternative to legislation--EPA regulation under the Clean Air Act--is suboptimal for nearly all interests in the debate. This fact also increases the pressure for action.

We’ve delayed this much needed action for more than a decade. Our planet and our children’s future can’t wait much longer.

Chairmen Waxman and Markey have proven that what was impossible in years past has massive momentum today. The House Energy & Commerce Committee’s passage of comprehensive energy legislation was a vote heard around the world. It marks a historic turning point in climate politics that secures America’s role as a leader in the clean energy revolution.

I’m confident the concerns of other House committees will be addressed, clearing the way for the full House and Senate to pass strong, comprehensive climate and energy legislation in 2009. As the American Clean Energy and Security Act continues moving forward, the pressure is on the bill’s critics to either drop their baseless attacks or come up with a viable alternative (and no, the words “drill, baby, drill” are not a stand-alone energy plan). Americans are tired of big polluters standing in the way of real progress on clean energy.

We've gotten another great comment from an outside expert, this time from Dirk Forrister, former White House Climate Change Task Force chairman and current managing director of Natsource LLC:

This bill has quite a head of steam as it comes out of the Energy and Commerce process. I was impressed at the leadership of Chairmen Waxman and Markey in getting such a strong majority behind the bill. A big part of that was the allocation agreement they reached with Congressman Boucher for the power sector, which gave a major boost to the bill’s prospects on the House floor. But I expect several other elements of the bill will get close scrutiny from other committees – and it will need to happen fairly quickly if the House is going to meet Speaker Pelosi’s goal of completing floor action this summer.

I think one major hurdle will be the Ways and Means Committee, which will probably review the allocations for other sectors – particularly transportation fuels. I doubt the fundamental model shifts away from cap and trade to taxes, given the momentum behind this bill, the President’s support for cap and trade – and the interest seen last year on the Senate floor in the same basic approach. However, there are significant revenue implications given the way the allocation system works in Waxman-Markey. I know there are some voices in the policy community still talking about a 100% auction, and this may be discussed again in Ways and Means. That idea failed miserably in the Energy and Commerce Committee- and I think for good reason. While some economists and academics think it is nirvana, it would mean massive transfers of revenue into the federal government – and it would trust the government to recycle the money efficiently. 'I am skeptical that voters would trust the government to recycle it efficiently. More importantly, that design alternative would impose on the economy both the compliance cost of a cap and trade program and the tax of auctioning the emissions allowed under the cap. By making the cost of compliance the effective tax rate on all emissions, a 100 percent auction dramatically increases costs without delivering any additional reductions. So I think it may be discussed, but it will not gain much traction.

The second hurdle will be the Agriculture Committee. The bill contains two provisions that are likely to prompt interest there – the carbon offsets program, which provides a potential avenue for farmers and ranchers to bring cost effective emissions reductions into the carbon market. I know a number of the farm groups have been very constructively engaged in preparing ideas for how this part of the program could work better – and I suspect they will bring these ideas forward for consideration in the Ag Committee. Also, the market oversight provisions imply a potential role for the Commodities Futures Trading Commission – which will trigger consideration of those provisions. The market oversight structure is important for providing clear rules for market participants – and for ensuring that consumers gain the benefits of a truly competitive carbon market. But there is a danger of creating such a cumbersome regulatory system that it hampers trading and makes the market inefficient – and more expensive for consumers. The Waxman Markey bill needs to be reviewed carefully – and it may need to be improved a bit to make sure that a well functioning carbon market can emerge.

This is a banner year for climate change policy. The House leadership is serious about getting this bill done – and the Waxman-Markey bill is a huge step forward. By passing a bill this year, the House will be improving the Obama Administration’s credibility in working with foreign leaders on an international accord in Copenhagen in December. Given the strong leadership of Speaker Pelosi and Chairmen Waxman and Markey combined with their desire to strengthen the President's hand in Copenhagen gives this bill a high priority of passage in the House this year. However, I expect the Senate and Conference will extend into 2010.

Getting comprehensive climate change legislation passed this year will be a major challenge, and one we need to tackle. The bill drafted by the House Energy and Commerce Committee, does more than that, of course. It also includes a commitment to renewable energy for electricity and other measures designed to build a foundation for our green energy economy. We believe it can be improved even more. In particular, we believe the renewable electricity standard (RES) should be strengthened to speed up the transition from fossil fuels to renewable energy in electricity generation. This would not only help achieve the bill’s overall objectives—reducing greenhouse gases and U.S. dependence on foreign oil. It would also produce hundreds of thousands of new manufacturing jobs and bring economic benefits to rural communities.

The legislation has laudable goals but is unbalanced. Its impacts could fall especially heavily on consumers of gasoline and diesel fuel. One study projects the bill would drive up gasoline prices by 74 percent. Today, that would mean boosting them to well over $4.00 a gallon, an increase nearly equivalent to a ten-fold rise in the federal gasoline tax.

U.S. refiners would bear a disproportionate burden as a result of getting two percent of the emission allowances while being held responsible for reducing emissions from a much bigger share (44 percent) of total regulated U.S. emissions. Other industries would receive nearly all the allowances they would need. Basically, this would shift much of the bill's costs to one sector, effectively imposing on it a huge new tax. This undermines a primary goal of the legislation, which is to use allowances to soften the bill's adverse impacts across all sectors of the economy.

In addition, the bill specifically excludes U.S. refiners from the tariff and rebate protections extended to other industries--protections designed to keep U.S. companies and workers from being unfairly disadvantaged against international competition. The bill would eliminate jobs and drive down U.S. energy production, subverting its purpose of strengthening the nation's energy security. A recent study of the legislation by CRA International has projected that millions more jobs would be eliminated than created.

The bill seemingly fails to recognize the world will use more energy in the future, including very substantial increased amounts of oil. Alternatives will grow in importance, and we support them along with more efficient use of all fuels. However, global energy demand, including demand for oil, will grow. The International Energy Agency recently estimated world oil demand will increase by nearly 25 percent by 2030 (with total energy demand rising 45 percent). The U.S. will consume its share of this oil and should be producing more of what it will use here at home, creating more U.S. jobs, keeping revenues in this country, and making the nation more secure. The legislation moves us in the wrong direction.

There's time to improve this well intentioned but extremely complicated and imperfect bill. More Americans need to understand how it will work and how much it will change their lives. Their views will and should influence negotiations and final decisions.

I’m going to take a broader approach address the challenges of getting the bill out of Congress altogether. As we saw from the intense markup last week, perhaps the biggest question about this bill is how it will impact consumers. Many Republican amendments would have placed conditions halting the cap-and-trade market if prices and electricity rates exceeded a given benchmark. With the many moderate Democrats in both the House and Senate, I see this as the defining issue going forward.

If House and Senate leaders carefully craft the cap-and-trade system, energy consumers can be protected from dramatically higher rates. As NARUC has advocated for almost two years, allocating no-cost emission allowances as a transitional measure within the electricity sector to State-regulated Local Distribution Companies is the best way to ensure that consumers will not be overly burdened. Interestingly, the Committee expanded this model to include natural gas LDCs for the same purpose – to mitigate consumer impacts attributable to carbon prices.

State commissions have workable and effective mechanisms in place to spread the value of these allowances to ratepayers through lower rates, investments in clean and renewable energy, energy efficiency programs, and assistance for low-income households. I am aware that doubts have been raised on the grounds that allocations to LDCs will not be used to protect consumers in all cases. These concerns ignore the longstanding record -- State commissions are publicly accountable for their actions and are legally obligated to ensure that utility rates are fair, just, and reasonable. Commission proceedings are open and transparent, and there are avenues for recourse for parties dissatisfied with a commission decision.

House Energy and Commerce Committee Chairman Henry Waxman promised to hold additional hearings on the allowance allocation issue after the bill cleared his committee. NARUC looks forward to again making the case supporting the principle that if emission allowances are to be allocated within the electricity sector, they must go to regulated retail utilities, and not power generators. Judging by the amount of concern expressed over the consumer impact issue at the House markup, this issue will remain a critical piece of the debate as other committees take up this legislation.

Updated at 10:33 a.m. on May 28.

In response to the heartfelt comments by Mr. Holt one might want to look at the recent employment and wages publication out from the Bureau of Labor Statistics: http://www.bls.gov/news.release/pdf/ocwage.pdf. It shows the employment breakdown for May 2008. This was released on May 1, 2009. Yes, it takes a while to compile and check such numbers. One might also want to look at the mass layoff announcements from the BLS to see what industries are being hit the hardest. http://www.bls.gov/news.release/mmls.nr0.htm. Different regions are getting hit harder than others by the recession, which I doubt will end in 2009.

There are not 100s of millions of jobs in the US. The population of the US is about 307 million. Total formal jobs according to the BLS are about 141 million. Airline passenger jobs are dropping like a rock and could reach under 440,000 by the end of 2009, according to the Airline Transport Association. Mr. Holt hit the main issue on target. People are losing jobs. We need to create jobs, rather than destroy them.

Clearly the most energy intensive, the most carbon-intensive, and most greenhouse gas-intensive industries will have to respond the most to the bill. There will be costs to pay. There will be inventions and innovations that need to happen. Such cost changes may spur such inventions and innovations. We also have to weigh the increased costs to some against the benefits to the many.

However, that is far from easy. There will be winners and losers from this bill. That is a hard fact of all such potentially major policy changes. I truly wish policy changes had not costs, but they normally do, and sometimes those costs are a heavy burden to pay.

Maybe some of the changes should be phased in more so for those energy intensive, greenhouse intensive and carbon intensive industries giving them more time to adjust. But if the phase-ins are too long the benefits may be lost. These are very tough tradeoffs, and they need to be looked at in clear-minded and thoughtful ways.

As Mr. Holt correctly points out: we are considering the livelihoods of many. However, we are also considering the long term environment and our energy security. The debates on these issues have really only just begun to head toward real policy changes. Let us hope that those policy changes add more than they subtract. There could be jobs in the changes about to happen. There is considerable discussion about the new "Green Jobs" coming.

History has shown that industrial change can be a difficult process. Let's hope that the changes in our energy uses, our environmental regulations, and our economic policies, will lead to more jobs that give greater satisfaction to people, and that the changes to come will be a jump start to the New American Century bringing us greater prosperity, more secure energy supplies, and a higher quality environment than we would otherwise have. As we economists might say: by finally and properly internalizing the massive externalities inherent in our energy choices we may actually increase overall welfare to our society. However, the key word here is "properly".

Last week’s historic markup of climate legislation by the House Energy and Commerce Committee is the most significant step Congress has ever taken in making the United States a world leader in advancing energy efficiency and addressing climate change. The American Clean Energy and Security Act (ACES) would move us in this urgently needed direction by reducing carbon-dioxide emissions and establishing a marketplace in which companies could buy and sell the right to pollute.

It is no overstatement to say that the bill’s market-based carbon cap and trade program has the potential to be the most significant energy efficiency policy ever implemented in this country – one that would help make the U.S. economy the most energy efficient in the world.

Most powerfully, by setting a price on CO2 and other GHG emissions, the ACES cap and trade system would send a strong signal throughout the nation’s economy that would spur energy savings in areas not easily reached through traditional energy policies. Improvements in the energy efficiency of existing homes and reductions in vehicle miles travelled, for example, are among the energy efficiency investments that Waxman-Markey would catalyze.

Let’s be realistic, however, about the hurdles facing the bill as it moves through Congress. At least two other House committees – Agriculture and Ways and Means – also want to put their stamp on Waxman-Markey, which could complicate the intention of House Majority Leader Steny Hoyer to bring the bill to the House floor in June.

On the Senate side, prospects for climate legislation remain uncertain. The Environment and Public Works Committee has yet to announce a timetable for hearings on a climate bill, and the Energy and Natural Resources Committee is proceeding in piecemeal fashion to craft a separate energy bill. According to our best sources, the Senate is unlikely to take up energy and climate legislation until September or October.

So what are the stakes here for those of us working on behalf of greater energy efficiency and investment in new clean energy technology?

ACES includes many important and complementary policies for overcoming existing barriers to greater investment in energy efficiency – perhaps the most significant being an aggressive policy and timetable for improving building energy codes through strong model codes and financial incentives to states for their adoption. The bill allows independent code-setting organizations, along with state and local governments, a chance to develop and adopt the codes; but it quickly provides a federal backstop if they do not – a major advance, in our view.

The Alliance estimates that funding for energy efficiency in the bill would total more than $100 billion over the 2012-2050 period, an average of about $3 billion per year over and above regular appropriations. This would be a significant increase over historical levels of federal funding, but the Alliance believes this excellent legislation would be improved with an even more robust energy efficiency allocation.

In sum, Waxman-Markey is not a perfect bill, but it is landmark legislation representing a major step forward for our nation. It deserves our wholehearted support as it navigates through the many congressional hurdles it must surmount on the road to enactment.

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Chairmen Waxman, Markey and Boucher are to be commended for their leadership in passing important energy and climate legislation out of the House Energy and Commerce Committee last week. Congressman Rick Boucher was particularly instrumental for his work on mitigating customer costs and seeking to ensure that we have a full suite of low-carbon energy options to draw on in the future. While it’s anyone’s guess as to just what the legislation will look like when it reaches the House floor, the debate in the Energy and Commerce Committee underscored an ingredient absolutely essential to its success: maintaining and strengthening provisions to protect consumers from the higher energy costs that a climate bill will impose.

For nearly two years, the Edison Electric Institute has worked for consensus within our industry on a climate policy framework, recognizing that climate change presents one of the biggest environmental and energy policy challenges we have ever faced. This effort culminated in a landmark agreement within our membership on how to allocate emission allowances within the electric power sector.

Our proposal calls for allocating the great majority of allowances to local electricity distribution companies, split evenly based on sales and emissions. Some allowances also would be allocated to merchant coal generators to help defray their compliance costs. This approach was approved unanimously by EEI’s Board of Directors, because there was widespread agreement that allocating, rather than auctioning, emission allowances was one of the best ways to help soften the economic impact of climate legislation on our customers.

The American Clean Energy and Security Act (ACES) incorporates much of EEI’s proposal, because committee members, too, recognized that passing the benefits of the allowances directly to consumers was critical to managing costs. And this focus on consumer protection was essential to garnering the support necessary to report the bill out of committee.

We continue to have concerns with several key elements of the legislation—including the very ambitious near- and mid-term emissions targets—and will continue to seek appropriate adjustments. But whatever changes to the legislation lawmakers contemplate, it is critical that they leave the bill’s emission allocations framework intact. These provisions are crucial for protecting consumers and are important to maintaining and building support for the legislation as it moves through Congress.

One of the biggest hurdles will be trying to get past the sense that some have that this is a massive energy tax. One needs only to google on the bill to see the surge of articles being sent out by some think tanks and pundits on how this bill could damage an already weakened economy.

On the other side of the political spectrum the biggest hurdle will be explaining why so many of the carbon credits are to be "given away", as some have mentioned. Some think this bill is too tough on industry, or unfair to industry. Others think it is not tough enough with its form of cap-and-trade.

There are many different views on the emissions-climate change debate in Congress, in lobbying groups, and amongst other stake holders and constituencies that those who will need to vote on this will have to face and respond to in some ways. My guess is that it will be far from easy. The final version of the bill could have some significant differences compared to the bill we see today. There may be a lot of the usual give and take, and a certain number of additional amendments and attachments made.

It should be very interesting to see how this all works out. What happens on this bill could give us a sense of how easy or hard the next climate and energy legislations may be to get through.

Looming on the edges of this debate should be some discussion of the recent reports out of the IMF, Saudi Arabia and others that oil prices could spike in the next few years because of the significant drop in exploration and other investments. Such a bill really needs to incorporate in some of the potential changes in energy prices and other prices that we may face. It should also take a long term perspective on employment, industrial change, technological change, transport and other costs, the overall environmental impact of the bill, how this bill might effect the systems-within-systems that energy-environment interactions are just a part of, and more.

This will not easy. I wish our politicians well on this, and hope that they make some of the wise decisions that they were voted in to make. However, we cannot forget the realities of the political process, and should really expect more of an intelligent and complex muddling through with lots of concessions than the "perfection" that so many pressure groups would like to see. The final bill will likely not be the best of all possible bills, but hopefully something that will add positively to the solutions of our country's energy and environmental problems.

While we believe committee members made a number of improvements to the legislation – including target/timetable, treatment of energy feedstocks, and energy efficiency provisions, we are very concerned that the emissions allocation provision for trade-vulnerable industries (Title VII, Section 782) treats energy-intensive industries differently from every other U.S. sector. The bill employs a different allowance schedule for energy-intensive industries as compared with other sectors, reducing allowances over time and unfairly depriving energy-intensive manufacturers of receiving more than 200 million allowances through 2021, at an estimated cost of more than $5 billion. The bill also assigns a baseline year of 2005 for energy-intensives versus a flexible, multi-year base period for other sectors.

The emissions allocation schedule is vital to the effectiveness of climate policy, helping to facilitate the transition to a lower-emission economy and prevent the ‘leakage’ of U.S. production, jobs and emissions to other nations. As the bill moves forward, we’ll be working hard to achieve changes to this and other provisions, preserve the improvements made to date, and add important new policies such as expanded domestic oil and natural gas production. Our recommendations include:

• Targets and Timelines – The bill currently calls for a 17 percent greenhouse gas emission reduction through 2020 for covered entities. Given uncertainty surrounding the development and deployment of carbon capture and storage and other low-emission technologies, we suggest a lower reduction target through 2020, with larger emissions reductions during later years.

• Competitiveness – We appreciate that the Inslee-Doyle proposal was included in the bill, and support the decision to allocate 15 percent of emission allowances to energy-intensive industries such as the business of chemistry. We do not support the use of sector efficiency averages as the basis on which a facility will receive allowances. We strongly support changing the emission allowance baseline year and schedule to create equal treatment of energy-intensive industries and other U.S. sectors.

• Technology Deployment – Deploying low-carbon technologies remains one of the critical elements of a successful climate program. While the revised bill includes some incentives and mandates to promote and deploy certain types of ‘clean energy,’ such as energy efficiency, carbon capture and sequestration, renewable energy and nuclear energy, the level and scope of clean energy technology investment must be substantially increased in order to reach emission reduction targets. Among these additional types of investment, technologies such as Combined Heat and Power (CHP) merit equal investment with other clean energy technologies.

• Domestic Energy Supply – Affordable, available energy is closely linked to climate policy. In addition to direct compliance and indirect purchased electricity costs, chemical makers will incur higher energy costs as a consequence of climate policy. Natural gas is key to reducing emissions, as it is used for renewable energy production, for the manufacture of energy efficient materials and as a lower-carbon electricity source. Unfortunately, the regional nature of natural gas pricing combined with restrictive U.S. energy policies means that U.S. consumers face higher natural gas prices than those in nations whose policies lead to more available natural gas. These policies put U.S. chemical makers and other manufacturers at a disadvantage in global markets while making it more difficult for the nation to meet emission reduction targets. Congress must pass a comprehensive, bipartisan national energy policy that improves energy security, reduces greenhouse gas emissions and ensures that U.S. companies have access to competitively-priced natural gas. Improved access to natural gas supplies is an important component of a national energy policy – we must assure that American resources are available to smooth the transition to a lower-carbon economy.