INSIGHT: New US Senate climate bill hailed and nailed

13 May 2010 17:32  [Source: ICIS news]

By Joe Kamalick

WASHINGTON (ICIS news)--A new climate change bill was launched in the US Senate this week, with enough weighty and controversial cargo to anger just about everyone - and almost certain to sink the measure in a choppy and crowded legislative sea.

Senators John Kerry (Democrat-Massachusetts) and Joe Lieberman (Independent-Connecticut) introduced their long-expected “American Power Act”, a 1000-page bill that would cap US greenhouse gases and mandate a staged but sharp cutback in those emissions on a schedule to 2050.

“The American Power Act will finally change our nation’s energy policy from a national weakness into a national strength,” Kerry said in announcing the bill.

“This is a bill for energy independence ... a bill to hold polluters accountable, a bill for billions of dollars to create the next generation of jobs, and a bill to end America’s addiction to foreign oil,” he said.

Kerry said that despite already widespread opposition to cap-and-trade climate legislation, he believes it is possible to get the 60 Senate votes needed to pass his bill.

“This isn’t a choice,” he said of the climate legislation, “it’s a necessity, and we’re going to get it done this year.”

However, Senator Lindsey Graham of South Carolina, the only Republican senator involved in the months-long drafting of what was to have been a bipartisan climate bill, said he did not think there is sufficient Republican or Democrat support for the measure to pass this year.

Noting that some Democrat senators who previously might have supported expanded offshore energy production - a key Republican-favoured element in the Kerry-Lieberman climate bill - are now opposed to any offshore development in the wake of the Gulf oil spill.

“The problems created by the historic oil spill in the Gulf ... have made it extremely difficult for transformational legislation in the area of energy and climate to garner bipartisan support at this time,” Graham said.

There is an awful lot in the Kerry-Lieberman bill, but boiled down to its essentials, it would:

• Impose a cap on US emissions of carbon dioxide and six other greenhouse gases beginning next year and require a reduction in those emissions to a level nearly 5% below the nation’s 2005 pollution volume by 2013. The emissions reductions would accelerate in following years to reach a level 17% below 2005 by 2020, 42% by 2030 and 83% below the 2005 level by 2050.
• Have the federal government auction off emissions permits to electric utilities and industries. The permits would be reduced in volume year by year and could be traded among individual facilities that have varying levels of emissions compliance. The target price for the permits would be $12 to $25 per tonne of carbon or equivalent greenhouse gases.
• Provide tax incentives and funding for renewed US nuclear power production, expedite the nuclear plant licensing processes, provide regulatory risk insurance of up to $500m (€395m) for each new nuclear power project, advance research on spent fuel recycling and provide federal help in lowering the unit cost of each facility.
• Encourage offshore oil and gas exploration and development, giving coastal states up to 37.5% of revenues generated by production off their shores. It would allow states that want offshore development to bar that work within 75 miles of their coastlines. In addition, it would require an in-depth federal analysis of the potential environmental consequences of a major oil leak from a proposed offshore well project - and any state potentially affected by such a spill could unilaterally halt the project, even if it was in waters of another state. (This was a late add to the bill and reflects concerns raised by the 20 April Gulf oil rig explosion and resulting and continuing oil spill.)
• Bar individual states and, in most cases, the Environmental Protection Agency (EPA) from regulating greenhouse gases, and it would provide emissions allowances to carbon-intense industries that face competition from foreign producers.
• Impose a border tax on imports of goods from foreign countries that lack climate controls and emissions restrictions. (This is a feature that many observers think would be in conflict with US obligations under World Trade Organization rules.) 
• Provide rebates and financial support to low-income families that would be facing higher utility costs flowing from the cap-and-trade climate mandate.
• Extend and double tax credits for hauling companies and fleet operators to purchase natgas-powered trucks and cars, and it offers an immediate 100% tax credit equal to the cost of building and equipping a manufacturing plant to produce gas-powered vehicles.
• Mandate that hydraulic fracturing service companies disclose all chemicals they use in natural gas well drilling and development so that the public and state and local regulatory officials can have Internet access to that data. Hydraulic fracturing, also known as “fracking”, is the technology used to free shale gas from deep rock formations.

The National Petrochemical & Refiners Association (NPRA) was quick to issue criticism of the Kerry-Lieberman bill, saying that it should be rejected outright.

“The draconian carbon reduction targets and timetables in this bill would trigger destructive change in America’s economic climate,” said NPRA vice president and general counsel Gregory Scott.

“This would add billions of dollars in energy costs for American families and businesses, destroy the jobs of millions of American workers, and make our nation more dependent on foreign energy sources,” he said.

He argued that the “severe and rapid reductions” in carbon dioxide emissions mandated by the bill “won’t have any impact on climate change because they only apply to vehicles, power plants, refineries and other manufacturing facilities in the US”.

“It is a fantasy to pretend that restricting our carbon dioxide emissions will improve the environment if China, India and other large and rapidly industrializing nations don’t adopt the same restrictions,” Scott said. China and India have refused to impose emissions cuts.

But Dow Chemical, the leading US chemicals manufacturer, commended Kerry, Lieberman and Graham for working toward "a comprehensive energy and climate change plan".

Dow, a member of the US Climate Action Partnership (US-CAP), an industry and environmental group advocating for climate change legislation, said the American Power Act "recognizes the need to maintain and enhance the competitiveness of American manufacturers".

The company said it looks forward to working with the bill's sponsors "to ensure that provisions in the bill are workable and effective in preventing the shifting of carbon emissions to other parts of the world".

A major environmental group, Friends of the Earth, was sharply critical of the new climate measure, charging that the Kerry-Lieberman bill "hands out billions in giveaways to some of the worst industrial polluters in the country" and would expand offshore drilling in the face of the current Gulf oil spill. "Unfortunately, this bill is as bad as we feared," the group said.

The Kerry-Lieberman bill is similar in many respects to a climate bill that was just barely approved by the House last year, but it also contains significant differences. 

If the Senate were to approve the Kerry-Lieberman measure - widely thought to be unlikely this year - Congress would still have an arduous and time-consuming task in reconciling the Senate and House bills.

The Senate already has a full plate of major legislative items - financial reform, a possible immigration reform measure, hearings on President Obama’s nominee to the Supreme Court, Elena Kagan, and a raft of new hearings and initiatives related to the Gulf oil spill and offshore energy development in general.

All this is crowding up against the congressional month-long August recess - with two week-long holidays in the calendar before then for Memorial Day and Independence Day. After the August recess, Congress will be in full-tilt campaign mode in the run-up to the 2 November national elections.

There’s about as much chance of the Senate passing this climate bill by August as there is for BP to be named Environmental Steward of the Year by Greenpeace.

 ($1 = €0.79)

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By: Joe Kamalick
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