Senate Climate and Energy Bill Unveiled

US Senators John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) released a 900-plus page "discussion draft" of a climate and energy bill yesterday, called The American Power Act. 

Republican Lindsey Graham of South Carolina, who helped write the bill over the last few months, withdrew his support two weeks ago over immigration reform, and did not attend the unveiling of the bill. 

However, representatives from the US power industry and oil and gas industries were on hand to show their support for the bill, which offers a laundry list of concessions in return for a cap-and-trade program on carbon emissions. 

The bill offers little direct support for renewable power and does not include a renewable portfolio standard (RPS)(a.k.a. renewable electricity standard), which wind and solar power advocates say is needed to provide consistent, long-term support for project development.

The Waxman-Markey bill passed in the US House last summer includes a 15% RPS and an additional 5% in energy efficiency by 2020. It’s possible that an RPS could be added to the Senate bill, if it moves forward–but that is far from guaranteed, as Congress has only 10 working weeks left before its August break and Wall Street reform and a Supreme Court confirmation are the highest priorities.

In-depth analysis of the bill will take time, but a breakdown of key aspects includes the following:

Emissions Reduction Target: 17% reduction in greenhouse gases emissions by 2020 and 83% by 2050 (identical to targets set in the Waxman-Markey). The bill regulates seven greenhouse gases, including carbon dioxide, methane, nitrous oxide, and more potent fluorinated gases.

Cap-and-Trade: A cap-and-trade program would go into effect for power plants in 2013, and large industrial factories would be included starting in 2016. Introductory floor and ceiling prices would be set for carbon emissions permits. Floor: $12 (increasing at 3% over inflation annually); and ceiling: $25 (increasing at 5% over inflation annually). Permits would be provided free by the government initially, gradually transitioning to a full auction by 2030.

The bill calls for auctions to take place within the existing Regional Greenhouse Gas Initiative, the Western Climate Initiative and the Mid-West Governors Accord. 

Clean Energy Technology Fund: The bill calls for a new fund to promote new energy technology, though it offers few details on eligibility or funding levels. The bill also calls for an additional $5 billion in funding for th 30% tax credits offered for renewable energy projects.

Nuclear incentives: The bill includes numerous expanded incentives for the nuclear power industry, including $36 billion in new loan guarantees; 10% investment tax credit (convertible into a cash grant) for new power plants. (read good coverage on nuclear incentives here)

Coal: The bill offers $2 billion annually for so-called clean coal R&D and sets a goal of 72 gigawatts of Carbon Capture and Sequestration (CCS) deployment.

Oil and Gas: The bill attempts to deal with the controversial issue of coastal state revenue from offshore drilling, offering 37.5% of revenues to the state while the feds would collect 12.5%. The ongoing Gulf oil spill led to the inclusion of opt-out clauses for states to block drilling within 75 miles of the coastline. However, since oil in the Gulf spill has now spread as far as 130 miles, this buffer zone is no real protection. 

Transportation Fuel: Producers and importers of refined fuels will not participate in the carbon market, but will purchase allowances at a fixed price from the allowance auction.

Natural Gas Vehicles: The bill includes Several provisions from the “Nat Gas Act” supported by T. Boone Pickens including extension and expansion of tax credits for purchase of natural gas vehicles, and the creation of tax credit for capital expenditures on natural gas vehicle manufacturing facilities. 

Trade Tariffs: In the event that no global agreement on climate change is reached, the bill requires imports from countries that have not taken action to limit emissions to pay a comparable amount at the border to avoid carbon leakage. The devil may be in the details here, as this could be a huge issue with developing nations and a difference in opinion as to what is "action to limit."

US Farmers: Farmers are exempt from the carbon pollution compliance obligations in the bill. It calls for the establishment of a domestic offset program to provide incentives for farmers to reduce emissions.

Consumer rebate: A summary of the bill provided by Senator Kerry’s office says two-thirds of revenues not dedicated to reducing our deficit will be rebated back to consumers through energy bill discounts and direct rebates. However, its not clear where revenue would be generated in the early years before the transition to a full auction system. And everyone knows the deficit is large enough to eat up a significant amount of revenue.

The next few days are likely to make or break the success of this bill. The Obama administration said they will support it, but its not clear whether or not they will expend the political capital needed to win decisive votes.

Senate Majority Leader Harry Reid said last week he will wait to see what type of response the bill receives before deciding whether or not to bring it to the floor, or pursue a smaller energy bill.

Environmental groups seem to be split on the bill at this point, with big-name organizations praising it as a starting point for better legislation, and smaller organizations blasting it as a massive giveaway to entrenched corporate interests. Among the larger organizations are Ceres, Environment America, Environmental Defense Fund, Natural Resources Defense Council, The Nature Conservancy, Sierra Club, and the Union of Concerned Scientists (UCS). 

UCS said the draft needs improvement in several key areas:

• Including funding for reducing tropical deforestation, an important step for securing an international climate deal and one of the most cost-effective ways to reduce emissions.
• Ensuring that a periodic review of climate science and technological advancements is enforceable and will lead to changes in policies aimed at reducing emissions if necessary.
• Reducing the reliance on offsets, which would let polluters avoid cleaning up their own emissions for years.
• Adding a provision to establish a national oil savings plan to reduce U.S. dependence on oil and other petroleum products by 3 million barrels per day by 2020 and 7 million barrels per day by 2030, which is more than four times what the United States imports daily from the Persian Gulf. 
• Including safeguards to ensure that wood, plants and agricultural residues from private lands are harvested sustainably and reduce overall carbon emissions.
• Limiting the excessive subsidies for nuclear power, rejecting provisions for expedited plant approval, and removing constraints on the Nuclear Regulatory Commission’s ability to ensure that new plants are safe to operate.
• Increasing funding for states to invest in clean, home-grown renewable energy and energy efficiency programs. 

A coalition of 200 environmental, peace, consumer, religious organizations and small businesses said the bill is "a taxpayer bailout of the nuclear power industry and other dirty energy interests that would be ineffective at addressing the climate crisis."

Michael Mariotte, executive director of the Nuclear Information and Resource Service, which coordinated the group’s statement said: "This bill is just business-as-usual: taxpayer giveaways to giant nuclear and other energy corporations wrapped in the guise of doing something about our climate crisis. To call this a climate bill is greenwashing in the extreme. We need to direct our resources to the fastest, cheapest, cleanest and safest means of reducing carbon emissions?this bill does just the opposite."

Full text and summaries of the bill are available at the link below.