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Senate Bill Signals U.S. Intentions Ahead of Summit
Oct 14, 2009
By Mario Lopez-Alcala
The Clean Energy Jobs and American Power Act (S. 1733), sponsored by U.S. Sens. Barbara Boxer and John Kerry, was introduced to the Senate at the end of September. While the bill mirrors to some degree the American Clean Energy and Security Act (H.R. 2454) passed by the House of Representatives last summer, there are a number of key differences. Most important, the Boxer-Kerry bill sets earlier and more stringent requirements for cutting greenhouse gas (GHG) emissions.
The Boxer-Kerry bill establishes a 20-percent reduction in GHG from 2005 levels by 2020, in contrast with the 17-percent reduction established by the House bill, also known as ACES. The rest of the interim targets for both proposals are the same, including the overall 83-percent reduction from the same baseline by 2050. Another key difference between the House and Senate bills is that the Boxer-Kerry plan includes a provision to allow the Environmental Protection Agency (EPA) to regulate GHG emissions under the Clean Air Act; the House version doesn't allow the EPA to take such regulatory action.
The main program of the Senate bill, the Pollution Reduction and Investment program, sets an economywide cap-and-trade program for reducing GHG. Like the House bill, regulated emitters include stationary sources discharging more than 25,000 tons of carbon dioxide equivalent (tCO2e) per year, producers and importers of petroleum fuels, distributors of natural gas, producers of hydrofluorocarbons (HFCs), and other large sources. The program begins in 2012 for liquid fuels and electricity generators, and extends to other stationary sources in 2014.
The Boxer-Kerry bill proposes auctioning 25 percent of emissions allowances and allocating the remaining allowances to electricity and natural gas local distribution companies, refineries, energy-intensive, and trade-exposed industries. However, the details on how allowances will be distributed aren't yet defined and will be left to the Senate Finance Committee and further negotiations.
Senate Version Has Fewer Offsets
The Senate bill allows for 2 billion tCO2e of qualified offsets annually, including 500 million in international offsets. The amount of international offsets can increase to 750 million tCO2e if domestic allowances prove insufficient. This is only half the amount allowed under the House version of the bill. Also, after 2018, 1.25 tCO2e from international offsets would be needed to account for 1 ton of CO2e under the Pollution Reduction and Investment program.
The Senate bill further creates a Market Stability Reserve that sets a "price collar" around allowances. A price floor would be set at USD 10 per tCO2e and the price ceiling would be USD 28 per tCO2e (in 2005 dollars). If market prices for allowances exceed the price ceiling, a reserve pool would make up to 15 percent more allowances available at the ceiling price through 2016, and up to 25 percent more allowances available starting in 2017. The price ceiling would also rise at the rate of inflation plus 5 percentage points annually through 2017, and at the inflation rate plus 7 percentage points thereafter. This means the price ceiling would reach USD 48 per tCO2e by 2020 (in 2005 dollars).
Like the House bill, the Senate version also provides billions of dollars of public funding for development and deployment of carbon capture and storage (CCS), energy efficiency (including building codes and retrofit programs), renewable energy programs, clean vehicles, advanced energy technologies (including natural gas technologies with CCS), and expansion of nuclear power.
Just A Starting Point
This proposed legislation is just a starting point for further discussion in the Senate and will require eventual reconciliation with the House bill. With many contentious issues still to be resolved, including how permits are going to be allocated, the odds are growing increasingly long that the bill will be passed ahead of the world climate summit in Copenhagen this December. The main message of this act, perhaps, is to confirm ahead of the Copenhagen Climate Change Conference for the international community the United States' commitment to tackling climate change.
Nevertheless, business leaders are pressing their case for action. More than 150 business leaders from utilities, manufacturers, and clean-energy companies convened on Capitol Hill in early October, led by We Can Lead, an umbrella business organization. Meetings with 35 Senate offices were scheduled. In addition, signatories from 28 companies sent an open letter to President Barack Obama and the Senate on Oct. 6, 2009, urging speedy action on climate change regulation by the Senate. The letter was coordinated by Business for Innovative Climate & Energy Policy (BICEP), a project of Ceres, a national network of investors, environmental organizations, and public interest groups. Founding members include Levi Strauss & Co., Nike Inc., Starbucks Corp., Sun Microsystems Inc. and Timberland Co.
For more on BICEP, go to http://www.ceres.org/bicep.