Senators John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) Wednesday unveiled a new approach to climate change legislation they say can achieve the 60 votes necessary to pass the Senate. However, no Republicans have expressed support for the package and today all six west coast Democrats came out in opposition to provisions they feel did not restrict off shore drilling enough. The 987-page American Power Act promises to cut U.S. emissions of greenhouse gases by 17 percent from 2005 levels by 2020 and 80 percent by 2050, consistent with President Obama's pledge to the international community in December 2009. It would still allow the EPA to regulate stationary sources under the Clean Air Act.
The Kerry-Lieberman bill will lead to higher costs for energy produced by fuels that produce carbon emissions (as displayed in the chart below, nearly 70 percent of U.S. electricity comes from coal, petroleum and natural gas). It has yet to be formally introduced, but to mitigate higher energy costs for all users, the bill would provide more generous distribution of free greenhouse gas emissions allowances to electric utilities and U.S. industries than in previous climate change bills. These allowances are designed to soften the impact of higher energy prices on consumers and U.S. manufacturing, and would preempt states and the U.S. Environmental Protection Agency (EPA) from using some of their existing authority to regulate stationary sources of greenhouse gases. However, it does not provide a blanket preemption that could still bring in stationary sources of all sizes regardless of whether they are a covered entity under federal regulation under the Clean Air Act or other environmental statutes, including the Clean Water Act, Endangered Species Act, or National Environmental Policy Act, or, further, nuisance or citizen suit threats. In addition, the bill includes new transportation planning requirements that would require states and metropolitan areas to develop strategies with EPA approval to reduce greenhouse gas emissions through the transportation sector, including from reductions in vehicle miles travelled.
Kerry-Lieberman would also require federal contracting agencies and other agencies receiving federal funding for construction of projects authorized by the bill to comply with President Obama's Executive Order and subsequent rulemaking on PLAs, which was finalized in April 2010 and "encourages" federal agencies procuring construction projects greater than $25 million to "consider" the use of a PLA on the project.
The bill would impose emissions limits on approximately 7,500 U.S. factories and power plants and would cover only those operations that emit more than 25,000 tons of greenhouse gases each year. The bill would cover electric utilities starting in 2013 and delay caps for U.S. manufacturing and industry until 2016. Companies would be required to hold or purchase emissions allowances for each ton of greenhouse gas they emit. Transportation sector emissions would be covered by requiring oil companies to purchase emissions allowances at a set price (the impact on the transportation sector is examined in greater detail below).
Approximately two-thirds of the revenues raised from the sale of allowances would be returned to consumers, while one-quarter of the revenues would go towards funding other programs created in the legislation. After 2035, all of the revenue would go toward consumer benefits. The bill includes a price floor for carbon set at $12 per ton that would increase at a rate of 3 percent above inflation each year, as well as a price ceiling of $25 per ton rising at an annual rate of 5 percent above inflation. Natural gas and home heating oil and propane providers would also receive free emissions allowances.
Key to securing moderate Democrat and Republican support, the bill includes a nuclear title that would include tax incentives, expanded regulatory risk insurance, a $54 billion loan guarantee fund, and an expedited licensing process. At the same time the bill contains mixed messages over offshore oil and gas drilling, also seen as vital to votes, by returning 37.5 percent of revenues from federal waters to adjacent states, while allowing states to enact a law prohibiting offshore drilling within 75 miles of the state's coastline.
The bill provides less incentives for renewable energy and energy efficiency initiatives than previous climate change bills. The Kerry-Lieberman bill would only provide $8.8 billion in the first year compared to roughly $67.8 billion in the House-passed bill, H.R. 2454, and $51.3 billion in version approved by the Senate Environment and Public Works Committee, S. 1733. This funding would support initiatives such as energy efficiency retrofits to buildings and manufacturing facilities.
The Senate Majority Leader Harry Reid (D-Nev.) is expected to meet with committee chairs to discuss reconciling provisions in the Kerry-Lieberman bill with other bills, including an energy bill approved by the Senate Energy and Natural Resources Committee, S. 1462, which includes a renewable energy standard (RES). No further details for Senate consideration have been announced. AGC issued a statement Wednesday expressing concern with the American Power Act.
AGC continues to urge Senators to support a resolution, S.J.Res. 26, which would block the EPA from regulating greenhouse gases under the Clean Air Act. The resolution may be voted on in the Senate as early as next week. AGC encourages members to use AGC's Legislative Action Center to contact your Senators in support of the resolution.
For more information, contact Karen Lapsevic at (202) 547-4733 or lapsevick@agc.org.
2009 Electricity Generation by Energy Source (Thousand Megawatthours)
| Energy Source | Generation | Percentage |
| Coal | 1,764,486 | 44.6% |
| Petroleum | 38,827 | 1% |
| Natural Gas | 920,378 | 23.3% |
| Nuclear | 798,745 | 20.2% |
| Hydroelectric | 272,131 | 6.9% |
| Other Renewables | 141,115 | 3.6% |
| Other | 21,776 | 0.6% |