Kerry-Lieberman (Minus Graham) Release "The American Power Act"
Talking Points
- Senators Kerry (D-Massachusetts) and Lieberman (I-Connecticut) have released the much anticipated discussion draft of the American Power Act (APA). Originally the bill was to include Senator Graham (R-South Carolina) as a co-sponsor as he played an integral role in the development of the legislation. However, Senator Graham withdrew from co-sponsoring prior to public release of the legislation, citing perceived Democratic shifting of priorities towards immigration reform as an act of bad faith by Senate Majority Leader Harry Reid (D-Nevada) and the White House.
- The bill has been released and is undergoing economic modeling by the Environmental Protection Agency and the Energy Information Agency. Senator Reid has indicated the bill will only go to the floor for a Senate vote if it has a real shot at passing. 60 votes necessary to overcome a likely filibuster are not yet secured. The bill could reach the floor in June or July.
- The APA has significant stakeholder support with endorsements from a range private sector interests including Dow, Florida Light & Power, General Electric and American Electric Power. The US Chamber of Commerce and the American Petroleum Institute both released statements welcoming the legislation but stopped short of specific endorsements. Several leading environmental groups including the Environmental Defense Fund support the bill.
- The bill is framed around 5 central themes: 1) Benefits to Consumers, 2) Energy Independence, 3) US Competitiveness and Job Creation, 4) Reducing Emissions differently for power plants, heavy industry and transportation, and 5) Regulatory Predictability.
- The APA takes a significantly different approach from the House-passed Waxman-Markey bill approach of economy wide cap on emissions; instead adopting a unique sector by sector approach.
- The key lynchpin of the bill is a mandatory 17 percent reduction in greenhouse gas emissions below 2005 levels by the year 2020. The power sector will fall under the cap in 2013, with industrial manufacturing sectors entering the system in 2016. The refining sector for transportation fuels will be required to purchase a set number of allowances each year but will not be engaged in carbon trading of allowances and offsets, resulting in what amounts to a fixed price carbon tax for the sector.
- Carbon markets, a key component of a cap-and-trade policy, remain part of the equation within this bill, but the market will be highly regulated in terms of trading and pricing of carbon. In addition, there will be significant distribution of allowances in early years coupled with allowance auctioning that will expand over time. Some key details of allowance allocation remain to be negotiated.
- Provisions for expanded offshore oil drilling promise to be controversial but are a key component of reaching the necessary 60 votes to pass the bill. Protections allowing states to maintain or establish bans on drilling are included.
- Provisions for scaled-up financial support for nuclear energy, transportation and carbon capture & storage are integrated into the bill. Corresponding national renewable energy standards and incentives for the industry are not in the bill, but are anticipated to be incorporated in consultation with the Senate Energy & Natural Resources Committee. The bill does, however endorse and seek to support state-level renewable energy programs.
- The natural gas industry will face new regulations for public disclosure of hydraulic fracturing chemical fluid ingredients. These provisions seek to increase public confidence and support of the industry with respect to environmental, health and safety concerns.
- Programs directed towards bilateral and multilateral funds for international climate mitigation and adaptation measures are established under the bill. However, sustainable funding for these efforts through a set-aside of emission allowances is uncertain leaving these efforts more vulnerable and requiring annual Congressional appropriation processes.
- Fast Action Mitigation provisions for reducing GHG emissions from hydroflurocarbons, black carbon, enhanced soil sequestration and methane.
