Update 4:45 pm: The American Clean Energy and Security Act passed the House today by a vote of 219-212, the first time that a bill capping carbon dioxide emissions has passed a chamber of Congress. It now heads to Senate, where many are expecting another tough battle for the legislation.

Climate change legislation faces a major political test as the American Clean Energy and Security Act heads to a vote on the floor of the House Friday.

The floor debate began today with Democrats and Republicans trading hyperbole about the economic impact of the bill. Democrats, including President Barack Obama, have been calling it a green jobs bill. Republicans have been calling it "economic suicide."

In fact, it was sometimes difficult to tell that the debate was actually about a bill to "put a price" on the carbon dioxide emissions that scientists believe cause global warming. Here's the basic idea: by making burning coal, natural gas and other fossil fuels more expensive, the legislation will make renewable energy sources like wind and solar power more attractive.

The bill's details have caused consternation among some environmentalists, but if the chatter from Silicon Valley is any indication, the legislation's broad stroke actions will stimulate low-carbon energy technological innovation, which would be good news for green tech startups.

"We endorse putting a cap on carbon emissions," wrote John Doerr, a partner at Kleiner, Perkins, Caufield & Byers, a venture capital firm with dozens of green tech investments, in a memo to the president. "It alone cannot solve all our problems, and it must include other provisions to make it economically viable and to help smooth the transition, but it is the most important step in a coherent strategy for curtailing emissions."

The Congressional Budget Office has calculated that the net cost of the legislation in 2020 per American household will be about $175, although that could fluctuate as the details shift as the legislation makes its way out of the House — it is expected to pass today — and onto the Senate. The Environmental Protection Agency analysisfound that the bill, because of its energy efficiency provisions, could save Americans money on their utility bills.

Advocates of the bill — and climate legislation, in general — say that taxing carbon more accurately reflects the all-in cost of burning fossil fuels, which includes resulting climate change. In recent months, left-leaning thinkers have taken to calling this "closing the carbon pollution loophole."

While the bill is historic, the government has long used regulations, subsidies, and direct R&D funding to change the country's energy mix. Nuclear power generation received tens of billions of dollars in Federal R&D money and tens of billions more in subsidies and loan guarantees. Oil and coal exploration and mining have been and continue to be supported by government surveys of mineral resources. Indirect subsidies abound, too. A recent RAND study estimated that the 12-15 percent of the military budget could be saved if we relied less on oil from the Persian Gulf.

Commonly referred to as the Waxman-Markey bill, after the original Democratic sponsors Henry Waxman of California and Edward Markey of Massachussets, the legislation has been the subject of aggressive attacks by both right- and left-wing groups.

Right-wing groups like the Heritage Foundation say the bill will cripple the American economy. They point out that the bill will effectively raise the price of carbon, and because the vast majority of our electricity is generated by burning fossil fuels, the cost of electricity is likely to rise, at least in the near-term.

Left-leaning environmental groups say the bill doesn't go nearly far enough to combat climate change, particularly in the next decade. They also aren't happy that the utilities will receive their carbon permits for free. Many were pushing for 100 percent auctions, with the money refunded to taxpayers or used to support alternative energy R&D.

While both sides seem to have very specific projections about the costs of the bill 10 years in the future, all numbers should be viewed skeptically. It's very difficult to predict what the price of fossil fuels will be three years out, let alone 10. For example, if global oil and natural gas prices spike — and this bill has generated substantial investments in alternatives — then it will seem like a great idea, regardless of the legislation's impact on the country's carbon dioxide emissions.

That level of uncertainty could be carried across the rest of the bill. One major argument in favor of passing the climate bill is that it will make international climate negotiations in Copenhagen later this year easier. If the U.S. is leading on the issue, China and India could institute greenhouse gas curbs of their own.

The legislation uses a cap-and-trade mechanism in which the level of carbon dioxide emissions is capped and permits for that amount of CO2 are distributed to fossil fuel burners. Most of the permits in the current version of the document will be given to utilities and other fossil fuel users. The remainder will be auctioned. Many on the left had wanted to see all of the tradeable permits auctioned.

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Image: flickr/KQEDquest

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