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A First Look At The Details Of The Kerry-Lieberman American Power Act

By Brad Johnson  

"A First Look At The Details Of The Kerry-Lieberman American Power Act"

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Last night, the Wonk Room published a summary of the provisions of the American Power Act, the comprehensive climate and clean energy legislation being introduced today by Sen. John Kerry (D-MA) and Sen. Joe Lieberman (I-CT). This post delves deeper into the legislation’s specific provisions. The following table compares key elements of Obama’s campaign promises from 2007 and 2008, the Waxman-Markey American Clean Energy and Security Act as passed by the House of Representatives, and the elements of the Kerry-Lieberman draft legislation, as based on leaked summaries.

The Kerry-Lieberman legislation has a 15-year transition period that supports state-level renewable and energy efficiency initiatives (which will create millions of jobs), invests in smart transportation, and rebuilds American manufacturing, much like Waxman-Markey, but with new support for nuclear energy and natural gas that reflects the interests of large blocs of senators.

Important scientific elements in Kerry-Lieberman are the rapid mitigation of super-greenhouse gases and black carbon, as well as natural resource adaptation programs. By the end of 2025 the legislation has shifted to resemble the refund-based auctioned-allowance system promoted by President Obama and advocates of cap-and-dividend.

The primary missing information from the summaries is the disposition of the allowances — how they will be distributed to polluters and how rapidly the auctioned pool grows. Details of the scientific review provisions were also not included.

Download the short summary as a readable PDF.

Download the section-by-section summary as a readable PDF.


Provision Obama Proposal Waxman-Markey Kerry-Lieberman
Overall Structure Economy-wide cap and trade, plus renewable electricity and energy efficiency standards and clean energy investment Utility, industry, and petroleum sector cap and trade starting in 2012, plus renewable electricity and energy efficiency standards and clean energy investment Utility (2013) and industry (2016) cap and trade with linked refinery cap (2013), plus consumer rebates, support for state-level renewable electricity and energy efficiency standards, and energy investment
Emissions Targets 15% below 2005 (at 1990 levels) by 2020, 80% below 2005 (77% below 1990) by 2050 Capped Sectors: 17% below 2005 (3% below 1990) by 2020, 80% below 2005 by 2050
Overall economy goal: 20% below 2005 (7% below 1990) by 2020, 80% below 2005 by 2050
Capped Sectors: 17% below 2005 by 2020, 80% below 2005 by 2050, plus accelerated mitigation of super-GHGs, black carbon
Scientific Review Not discussed Presidential plan in 2015 and every four years thereafter TBA
Traditional Coal Plants “Standards that ban new traditional coal facilities” if necessary, and “cap on carbon will make it uneconomic to site traditional coal facilities and discourage the use of existing inefficient coal facilities” Price on carbon mitigated by free allocations based 50% on historical emissions; Clean Air Act performance standards in 2016 determined by EPA Price on carbon mitigated by free allocations based 75% on historical emissions; Clean Air Act performance standards phasing in 2016-2020 determined by statute
Green Economy Investment $150 billion over ten years, including workforce training, plug-in hybrids, renewable electricity, advanced biofuels, advanced coal technology, nuclear power, and smart grid Approximately $100 billion over ten years, including workforce training, plug-in hybrids, renewable electricity, advanced biofuels, advanced coal technology, nuclear power, and smart grid $70 billion for clean transportation over ten years, extensive support for nuclear, natural gas vehicles, same support for advanced coal as W-M, and support for renewables
Permit Allocation Full auction Allocations based on historical emissions and energy production with 20% auction at start, phasing to 70% auction by 2030 Allocations based on historical emissions, early action, and energy production with 25% auction at start phasing to 100% auction by 2035
Renewable & Efficiency Standards 25% renewable electricity by 2025, 100% new building efficiency by 2030, phase out traditional incandescents by 2014 15% renewable electricity + 5% efficiency by 2020, 75% new building efficiency by 2030, appliance and lighting efficiency standards Support for state-level standards; if national standard based on Bingaman energy bill, weaker than projected business-as-usual
Consumer Protection LIHEAP, low-income weatherization grants, a “dedicated fund to assist low-income Americans,” plus Making Work Pay tax cut Over first ten years, 45% (approx. $30 billion) of allocated permits and auction revenues dedicated to consumer protection through rebates and efficiency measures, emphasizing low-income consumers Working families rebate checks from start; Allocated permits dedicated to consumer protection through rebates and efficiency measures; Universal rebate checks from 75% of auction revenues starting in 2026
Market Regulation Increased regulation of energy markets FERC and CFTC regulation, no over-the-counter derivatives trading, increased regulation of energy markets Prohibits derivatives, limits permit auction to covered emitters
Agriculture and Deforestation Domestic and international incentives to sequester carbon and reduce deforestation, support for biofuels Pool of offsets plus supplemental fund of 5% of permits for domestic and international incentives to sequester carbon and reduce deforestation, support for biofuels Pool of offsets plus supplemental fund for domestic and international incentives to sequester carbon and reduce deforestation, support for rural energy program
Deficit Reduction Not discussed 10% of permits auctioned (approx. $8 billion) over first ten years for deficit reduction Obeys PAYGO; Starting in 2026, 25% of auction revenues for deficit reduction
Fuels and Transportation Increase biofuels to 60 million gallons by 2030, low-carbon fuel standard of 10% by 2010, 1 million plug‐in hybrid cars by 2025, raise fuel economy standards, smart growth funding, end oil subsidies, promote natural gas drilling, enhanced oil recovery Smart growth funding, plug-in hybrids, raise fuel economy standards $7 billion a year for smart growth funding, plug-in hybrids, natural gas vehicles; offshore drilling with revenue sharing and oil spill veto, natural gas fracking disclosure
Cost Containment International offsets Offset pool, banking and borrowing flexibility, soft price collar using permit reserve auction at $28 per ton going to 60% above three-year-average market price “Hard” price collar between $12 and $25 per ton, floor increases at 3%+CPI, ceiling at 5%+CPI, plus permit reserve auction, offsets like W-M
Clean Air Act And States Not discussed Only polluters above 25,000 tons of carbon dioxide equivalent a year, regional cap and trade suspended until 2017, EPA to set stationary source performance standards in 2016, some Clean Air Act provisions excluded Only polluters above 25,000 tons of carbon dioxide equivalent a year, regional cap and trade pre-empted, establishes coal-fired plant performance standards, some Clean Air Act provisions excluded
International Competitiveness Tax incentives for domestic auto industry Free allowances for trade-exposed industries, 2020 carbon tariff on imports from nations without GHG reduction program Free allowances for trade-exposed industries, carbon tariff on imports from nations without GHG reduction program
References: Barack Obama, 2007; Barack Obama, 8/3/08; Pew Center, 6/26/09; leaked drafts of American Power Act, 5/11/10; text of American Power Act, 5/12/10.

Download the short summary of the American Power Act as a readable PDF.

Download the section-by-section summary as a readable PDF.

Update

Details on the allowance distribution has been updated from Wonk Room sources.


Update

,The full text of the legislation has been released.


Update

,5/13/10: Updated with figures on auction/allocation breakdown. The American Power Act starts with 75% of permits allocated, shifting to 100% auction by 2035. Permits are distributed in 2013 65% for consumers, 13% for industry investment, and 24% for public investment or deficit reduction. Those figures shift to 56/28/17 by 2020, and to 90/0/10 by 2035.

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