Senators Kerry and Lieberman Unveil Climate Bill

On May 12, Senators John Kerry (D-MA) and Joe Lieberman (I-CT) released their much-anticipated climate legislation, the American Power Act . The legislation seeks to reduce greenhouse (GHG) emissions 17 percent below 2005 by 2020 and 80 percent by 2050. "The American Power Act will finally change our nation's energy policy from a national weakness into a national strength," Kerry said when the bill was released. "This is a bill for energy independence after a devastating oil spill, a bill to hold polluters accountable, a bill for billions of dollars to create the next generation of jobs and a bill to end America's addiction to foreign oil and protect the air our children breathe and the water they drink." The bill includes 12 titles, including a mandatory cap on GHG emissions that is phased into different sectors of the economy at different times. Some of the measures include:

• Beginning in 2013, a national cap would be placed on GHG emissions, requiring covered entities (emitters of 25,000 or more tons of CO2-equivalent gas) to obtain allowances, initially allocated for free but gradually phasing to allowance auctions
• Electric power utilities would be placed under the cap in 2013; manufacturers would be phased in four years later
• Allowance permits could be traded on a regulated market
• A “hard price collar” would be created, keeping allowance prices between $12 and $25 in the trading market (increasing at 3-5 percent annually over inflation)
• Covered entities could “offset” their emissions by funding other carbon reduction programs; the program will allow up to 2 billion tons in offsets to be made available, with 75 percent coming from domestic programs and 25 percent from international programs
• Auction revenues that do not go to deficit reduction would be applied towards energy bill discounts and direct rebates
• Pre-emption of cap and trade programs that are implemented or enforced by states
• Trade sanctions would be put in place for countries which have not taken adequate steps to curb emissions
• Refined product (transportation fuel) providers must purchase quarterly allowances at a fixed price under a separate trading program
• States are allowed to opt out of federal drilling within 75 miles of their shore, while states that go ahead with offshore drilling would retain 37.5 percent of the federal revenue generated
• $54 billion in loan guarantees for the construction of new nuclear plants along with regulatory risk insurance for 12 new plants
• $2 billion a year in incentives to develop coal technologies that capture and store carbon

“For too long, Washington has kicked this challenge to the next generation,” President Obama said in response to the release of the bill. “This time, the status quo is no longer acceptable to Americans. Now is the time for America to take control of our energy future and jumpstart American innovation in clean energy technology that will allow us to create jobs, compete, and win in the global economy.”