On May 12, 2010, Sens. Kerry and Lieberman introduced a discussion draft of their long-awaited climate bill – the American Power Act. The bill would establish a program to reduce U.S. greenhouse gas (“GHG”) emissions 17 percent from 2005 levels by 2020, and 83 percent by 2050. The bill would mandate emissions limits on approximately 7,500 manufacturing facilities and power plants that emit more than 25,000 tons of GHGs annually. Companies covered by the legislation could achieve compliance by obtaining the free carbon emission allowances that would be distributed under the bill, or by purchasing such emission allowances as necessary.
The bill would apply to electric utilities, transportation fuels, including aviation fuel, and other refined oil products beginning in 2013, and to manufacturers in energy-intensive industries and natural gas distributors in 2016. Eventually, most regulated sources would purchase emission allowances or offset credits through federal auctions or a regulated market. Allowances for transportation fuels and other petroleum products would be purchased by refiners and fuel providers at a fixed price from the government. The bill would provide significantly more free GHG emissions allowances to covered sources than previous bills; free allowances would not be completely phased out until 2030.
Allowances would also be distributed to states that could sell the allowances to fund energy efficiency programs, adaptation programs, and research and development of new technologies. Beginning in 2026, consumers would receive a portion of the revenue raised from auctioning the allowances through energy bill discounts and rebates.
The bill would preempt state GHG cap-and-trade programs and all other state regulation of GHG emissions from stationary sources, but would allow states to continue to develop GHG emission standards for motor vehicles and other mobile sources. The bill would also prevent EPA from regulating GHGs under the Clean Air Act’s existing construction and operating permit programs. However, EPA would be permitted to regulate emissions from mobile sources, including aircraft, and set technology-based new source performance standards for sources with annual GHG emissions of less than 25,000 tons.
The Kerry-Lieberman bill also promotes investment in advanced vehicle technology and batteries, offshore drilling, nuclear power, and the development of carbon capture-and-storage technologies at coal-fired power plants. However, in response to the recent Deepwater Horizon oil spill, states would be allowed to veto new offshore drilling leases within 75 miles of their coast and drilling plans of neighboring states that could have negative impacts on them.
The bill recognizes the importance of developing a global framework for regulating GHG emissions from civil aircraft and specifically provides for allowances for international air carriers to compensate for compliance with foreign GHG reduction systems, such as the European Union Emissions Trading System, which will begin regulating carbon emissions from aircraft in 2012.
Although the bill is supported by a number of industry leaders and environmental organizations, it is not expected to pass the Senate