Senate Climate Bills Seek Cleaner Future
July 21st, 2010 by Ruralite
Photo of the U.S. Capitol courtesy of Architect of the Capitol.

Photo of the U.S. Capitol courtesy of Architect of the Capitol.

Despite different pathways, proposals claim emissions can be significantly reduced.

In a contentious midterm election year, U.S. senators are debating climate legislation on many fronts.

Political pundits joining the fray have predicted Senate legislation could be approved anytime from this summer to long after the election is over.

For several months, Sens. John Kerry, Joe Lieberman and Lindsey Graham—a Democrat, Independent and Republican, respectively—worked together to develop legislation that included a mechanism for pricing carbon emissions.

Graham dropped out of that coalition in May because of differences, in part, over oil and transportation industry restrictions. His focus now is setting limits on just the electricity sector to supersede regulations proposed by the U.S. Environmental Protection Agency.

“That is what I will be pushing next year, a utility-only bill,” Graham said in a Greenwire report in June.

The Kerry-Lieberman bill seeks to reduce carbon pollution by 17 percent in 2020 and by more than 80 percent in 2050. Those benchmarks are identical to goals laid out in climate legislation passed last year by the U.S. House.

Both bills would set limits and establish emissions allowances that companies would be required to hold in the amount of greenhouse gases they produce.

A more recent bill, sponsored by Sen. Dick Luger, seeks emissions reductions without regulating greenhouse gases. Luger’s emissions goals are about half the amount of the Kerry-Lieberman bill.

Luger and fellow Republicans say strict emissions regulations would amount to a carbon tax. He believes reductions can occur, in part, through greater diversity of domestic energy resources and “a voluntary retirement program for the nation’s most-polluting coal plants,” according to his legislative outline.

Investment in domestic resources, especially nuclear energy and wind power, is also a key element of the Kerry-Lieberman bill.

A third option has been proposed by Sens. Maria Cantwell and Susan Collins, a Democrat and Republican, respectively. Their bill would establish “a target amount of carbon from fossil fuels that can be emitted into the atmosphere without disrupting the economy, using a gradually declining ‘cap,’” according to a white paper describing the legislation on Cantwell’s website.

The cap would limit the amount of fossil fuel producers and importers of coal, natural gas and oil can sell into the U.S. economy.

The bill’s “upstream” point of regulation limits regulatory compliance to 2,000 to 3,000 fossil fuel producers and importers, which would include monthly auctions of carbon permits, according to Cantwell.

The emissions allowances in the Kerry-Lieberman bill are similar to the carbon permits, but are arrived at through a different formula and would be required for a much larger group of energy-related companies.

An analysis of the bill by the Peterson Institute for International Economics predicts the cost of carbon emissions per metric ton would start at $16.47 in 2013 and increase to $55.44 by 2030.

Despite a price increase of up to 7 percent by 2030 for U.S. consumers—depending on the type of fossil fuel being used and for what purpose—the overall effect for households could be negligible because of efficiency improvements and returned revenue from emissions allowances, according to the Peterson Institute.

In the Cantwell-Collins bill, the carbon permits could not be traded and would be auctioned only to entities with a compliance obligation.

The Kerry-Lieberman bill’s emission allowances would be used to offset cost increases across several energy-related industries. Even small electric distribution utilities would need allowances to keep rates in check.

The flood of emissions allowances could create a new arm of the finance industry focused solely on marketing those credits, says Scott Corwin, executive director of the Public Power Council, a policy and advocacy group supporting public electric utilities in the Northwest.

“One of our concerns is how does that whole thing get gamed over time, and how does that affect the consumer?” Corwin says. “You could see all kinds of financial investments and hedging.”

Public utilities in the Northwest could be at a disadvantage when the initial allowances are made available because of their historic use of emissions-free energy from nuclear and hydropower.

The federal government will give away several billion allowances at the beginning of the process. After that, allowances would be sold or traded at market price. If a fair system is not established, utilities with historically low use of carbon-based fuels would receive very few allowances to start with, and would be forced to buy more at market price as their emissions increase.

Baseload generation from hydro and nuclear has reached capacity in the Northwest. As utilities grow, they will need to find generation from other sources, including fossil fuels.
“If you look at the (energy) portfolio most of our utilities have, a 10-percent baseload increase met through natural gas could triple their carbon use,” Corwin says. “In seven to 10 years, their emissions will have grown to the point where you will need significant allowances.”

EPA and the Clean Air Act
A 2007 U.S. Supreme Court ruling determined the U.S. Environmental Protection Agency (EPA) can regulate greenhouse gases under the Clean Air Act.

That decision was challenged this year by some lawmakers and the power industry, who say the Clean Air Act is not the proper tool for regulating emissions released from the burning of fossil fuels during electricity generation.

A resolution sponsored by U.S. Sen. Lisa Murkowski, a Republican from Alaska, to block EPA action on emissions failed to garner the 51 votes necessary for approval during a June 10 vote in the Senate.

Several federal climate proposals, including a bill passed by the U.S. House in 2009, have regulatory limits built into them, although the extent of those limitations vary by proposal.

The EPA announced in May an emissions rule it intends to enforce beginning in July 2011 for stationary sources, such as power plants and refineries.

Existing plants that annually emit 75,000 tons of greenhouse gases or new plants with 100,000 tons of emissions a year would be regulated by the EPA rule.

For comparison, a 500-megawatt capacity coal-fired plant emits about 3 million tons of carbon dioxide a year, according to the Massachusetts Institute of Technology.

Several states continue to pursue legal roadblocks, questioning EPA’s stance that greenhouse gas emissions are a threat to human health. Other states, however, led by California, have indicated support for federal emissions controls and are looking to implement their own automobile emissions standards.

Read more about proposed climate legislation mentioned in this story at kerry.senate.gov, luger.senate.gov and cantwell.senate.gov.