On May 12, 2010, Senators John Kerry and Joseph Lieberman released the initial draft of a comprehensive climate change and clean energy bill, titled the “American Power Act” (APA). The 987-page draft bill, which has not been formally introduced in the Senate, is the product of months of negotiations led by Sens. Kerry, Lieberman and Republican Lindsey Graham. Graham recently stepped away from the negotiations, in the belief that no meaningful debate would be possible within the current climate of the Gulf of Mexico oil spill and issues of immigration reform.

Despite that, the Kerry-Lieberman bill has garnered tentative praise from some industry stakeholders, including several major electric utilities and the Edison Electric Institute, the leading trade association for investor-owned utilities.

Of interest to Canadian readers will be the greenhouse gas (GHG) emission reduction targets and timetables. These are are almost identical to the Waxman-Markey bill passed by the House in June 2009 (the “American Clean Energy and Security Act”). The cap on GHG emissions would begin a year later than in Waxman-Markey, in 2013, at a level equal to 4.75% below 2005 emission levels, with a 17% reduction below 2005 levels required by 2020, 42% by 2030, and 83% by 2050.  However, the APA differs from Waxman-Markey in many respects and is seen as a compromise.

The Bill imposes a cap-and-trade system only on major emitters, such as coal-fired power plants. Most small and medium-sized industry is exempt.  It is only facilities that produce more than 25,000 tons of carbon pollution annually – about 7,500 factories and power plants – that must comply with reduction targets. The establishment of a federal cap-and-trade system will put an end to regional or state cap-and-trade systems.

The bill also sets a “hard price collar” on carbon prices, which sets a minimum auction reserve price for allowances at $12 per ton in 2013, which would rise at 3% above inflation. The ceiling price is set at $25, increasing at 5% over inflation.

Most observers don’t see the bill passing this term, and there is a varied response to the provisions it sets out. For some sample commentary, check out the Willms & Shier website, a response from the American Council for Affordable and Reliable Energy, and from the U.S. renewables business.
  

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