UPDATE: More details at the end.
Sens. Lindsey Graham (R-SC), John Kerry (D-MA), and Joe Lieberman (I-CT) “shared an eight-page outline of their draft legislation that would reduce greenhouse gas emissions over the next four decades, including provisions to limit business costs while ramping up domestic production of oil, gas and nuclear power.”
E&E News PM (subs. req’d) reported the following details of the bill, which leaked out from the Senators “closed-door meeting with major industry groups they are courting”:
According to several sources in the meeting room, the bill calls for greenhouse gas curbs across multiple economic sectors, with a 2020 target of reducing emissions by 17 percent below 2005 levels and an 80 percent limit at mid-century. Power plant emissions would be regulated in 2012, with other major industrial sources being phased in starting in 2016.
In a bow to industry demands, the senators’ proposal would preempt U.S. EPA climate regulations under the Clean Air Act and halt dozens of state climate laws and regulations now on the books. Also, only facilities that release 25,000 tons per year of greenhouse gases must participate in the climate program.
Additional layers of certainty for industry come via a “hard price collar” that limits greenhouse gas allowances to between $10 and $30 per ton tagged to inflation, with an increase at a to-be-determined “fixed rate” over time. The legislation would also set aside a “strategic reserve” of 4 billion greenhouse gas credits that could be released into the market to help control price volatility fluctuations.
Well, I’m not a fan of a hard collar (i.e. a pure safety valve, with an unlimited amount of allowances sold if you hit the ceiling price) — but some sort of collar was inevitable (see How the Senate can fix cost containment in the climate bill with ‘price collar plus’). If the reserve is created from tons skimmed off of each year’s total allowances from 2012 to 2050, that is a good idea.
Also, if there is going to be a hard collar than the “fixed rate” of rise over time needs to be something like 6% plus inflation. The $30 starting price fora ceiling, presumably in 2012, isn’t that bad, but again, only if you are rising at a pretty rapid rate.
UPDATE: The floor price was misreported in the press, I’m told, which is good news because $10 is just too low. I’d want to start at least $12 if not higher. As an aside, I would strongly recommend starting the regulations in 2013 (or 2014), to give more time to set rules and keep this clearly away from the economic recovery. Also, the amount of allocations in the early years are likely to be too high anyway, thanks to the economic recession and the success of the stimulus bill, so you’re really not getting any environmental benefit from starting in 2012.
Preempting the EPA was inevitable if there is to be anywhere near 60 votes for this thing. [Pause for 10 seconds of angst, now get over it.]
Overall, the bill will … set up new nationwide standards for energy efficiency and renewable energy, as well as ideas on carbon market regulation crafted by Sens. Maria Cantwell (D-Wash.) and Susan Collins (R-Maine).
One can certainly make good use of the Cantwell-Collins idea of allowing only regulated entities to own permits.
The senators’ meeting included about a dozen top trade associations, including representatives from the U.S. Chamber of Commerce, Edison Electric Institute and American Petroleum Institute. Several of those officials left the meeting giving the three senators credit for their effort.
“Directionally speaking, the way they’re trying to conform and shape this bill I’d suggest is largely in sync with what most people in American industry think is the direction you’re going to have to go if you’re going to have a successful program,” said Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce. “Now there’s a lot of ifs, ands and buts, but if you’re asking for a broad statement, that’s a broad statement.”
John Shaw, senior vice president of government affairs at the Portland Cement Association, called the meeting’s tone “very positive.”
“I think many of the industry sectors are willing to work with the senators to achieve positive public policy results,” Shaw said, “but the devil is in the details, and folks are very anxious to see those details.”
If the Chamber were to support this bill — or even if not actively oppose it — that would be a miracle, and I don’t really believe in miracles.
Right now, the conventional wisdom is the bill has a very, very, very hard climb to 60 votes. More on that soon.
CQ has more details (apologies for the repetition):
As expected, the measure would set a mandatory cap on carbon emissions across the economy but apply different sets of regulations to different polluting sectors….
“¢ An economy-wide cap on carbon emissions that would begin in 2012, with a target of reducing carbon pollution 17 percent by 2020 and 80 percent by 2050.
“¢ Separate caps on carbon emissions by the electric utilities and manufacturing sectors, which would have to buy permits to pollute from the federal government.
“¢ A straight fee or tax, paid by consumers at the pump, on transportation fuels. The levy would be linked to the carbon content of the fuel and the price of carbon in the other markets.
“¢ A combination for the regulated sectors of a “cap and trade” model, under which polluters could trade pollution permits on an open market, and a “cap and dividend” model, which would return revenue from the sale of permits directly to consumers.
“¢ Direct rebates to consumers of half the revenue from the sale of pollution permits.
“¢ Delay until 2016 in starting the phase-in of carbon caps on manufacturers.
“¢ Application of a “carbon tariff” to imports of goods from countries that do not regulate their carbon emissions.
“¢ … The government would keep a strategic reserve of 4 billion credits, and would flood the market if the carbon price exceeded $30 per ton. The price would be indexed to inflation rates and rise over time.
“¢ A threshold of 25,000 tons of carbon per year before a polluter would be subject to regulation.
“¢ A single federal system to cap emissions, pre-empting separate state limits.
“¢ Sections or titles devoted to … farming, coal, clean energy innovation, and increasing production of nuclear energy and oil and natural gas drilling.