Carbon allowance trading bill lets old polluters buy their way out of cuts
H.R. 2177 — Tradeable Energy Performance Standards Act · Filed by Sean Casten (D-IL) · Introduced Mar 18, 2025 · Referred to committee
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What it does
This bill creates a tradeable carbon allowance system for large electricity and thermal energy producers, requiring them to submit one allowance per metric ton of CO2 emitted starting in 2028. Facilities can buy and sell allowances, pay a fee instead ($50–$70 initially, rising to the 'social cost of carbon' by 2048), or participate in bilateral agreements where new low-emission facilities sell allowances to existing ones. Revenue from fees and penalties funds an offset program for energy efficiency, grid upgrades, and electrification projects.
Why we flagged it
The bill establishes a cap-and-trade mechanism for CO2 emissions from large energy producers, with allowance trading, bilateral purchase agreements, and a federally funded offset program. It is fundamentally a market-based climate regulation, not a direct emissions ban.
What the text implies
- Bilateral purchase agreements allow existing fossil-fuel facilities to indefinitely avoid emissions reductions by purchasing allowances from new low-emission competitors, creating a subsidy pathway for incumbent polluters.
- The 'Output-Based CO2 Emissions Target' calculation uses a complex formula that may allow facilities to increase absolute emissions if sector-wide emissions rise, weakening the climate signal.
The full analysis lists 5 implications of this text.
Who stands to gain
Existing fossil-fuel power plants and thermal facilities (via bilateral purchase agreements); New low-emission facilities (via allowance distribution and bilateral sales); Energy efficiency and electrification contractors (via offset program grants)