Federal Relations

May 13, 2010

Kerry-Lieberman Climate Bill Unveiled

Yesterday, Senators John Kerry (D-MA) and Joseph Lieberman (I-CT) released their newly revised and long awaited energy and climate bill. Some of the key provisions of the legislation released today:

  • Sets a “price collar” on carbon emissions, including predictable floor and a ceiling price.
  • Industrial sources of carbon emissions are not regulated until 2016, after which energy-intensive and trade-exposed industries will receive allowances to offset both their direct and indirect compliance costs.
  • Only 7,500 factories and power plants – those who produce more than 25,000 tons of carbon pollution annually – would be regulated.
  • Ends existing state cap-and-trade programs in favor of one national greenhouse gas regulation standard.
  • No gas tax is included, but producers and importers of refined fuel products will purchase emissions allowances at a fixed price from the allowance auction.
  • Two-thirds of revenues raised which are not dedicated to reducing the deficit are rebated back to consumers through discounts, direct rebates, tax cuts and refunds.
  • Funds “critical investments in clean energy research and development, including renewable energy technology, advanced vehicle technologies and carbon capture and sequestration.”
  • Financial incentives to increase nuclear power generation including risk insurance, accelerated depreciation, a new investment tax credit to promote the construction, $54 billion in loan guarantees and a manufacturing tax credit. The bill also improves the licensing process, invests in R&D of small, modular reactors and enhances proliferation controls.
  • $7 billion a year is dedicated to highway and transit funding.
  • Protections for coastal states related to offshore drilling operations
  • Allows states to opt-out of drilling up to 75 miles from their shores.
  • States can veto drilling plans if they stand to suffer significant adverse impacts in the event of an accident.
  • States that do pursue drilling will receive revenues to help protect their coastlines and coastal ecosystems.
  • In the absence of a global climate change agreement, requires imports from countries that do not limit emissions to pay a fee at the border to avoid “carbon leakage”.
  • Farmers are exempt from the carbon pollution compliance obligations in the bill, but a new multi-billion dollar revenue stream is created to incentivize farmers to reduce emissions.
  • Removes disincentives for natural gas generation at merchant plants (investor-owned, not public utilities).

A section-by-section analysis of the climate legislation is available here. The Kerry-Lieberman proposal may be sidelined for this year by Senate Majority Leader Harry Reid’s (D-NV) decision to pursue comprehensive immigration reform as well as by the oil spill in the Gulf of Mexico, which has brought about the need to rework major sections of the legislation and apprehension on the part of some senators who represent coastal communities.