The long-awaited US
climate bill (“the American Power Act”) is set to be formally
unveiled today by its key proponents in the U.S. Senate (Senators
John Kerry and Joseph Lieberman) , with a last ditch effort the
Obama administration urging quick passage of the controversial
legislation this year.



At the heart of the new bill is a binding commitment to cut US
carbon emissions by 17 per cent on 2005 levels by 2020, supported
by an emissions trading scheme to be launched in 2013, initially to
cover power firms, but ultimately to be expanded to cover other
carbon intensive industries.



Based on a summary of the final version that began circulating late
last night, there are no major surprises in the proposed
legislation.



Off Shore Drilling



Reacting to growing anger over the still unchecked oil spill in the
Gulf of Mexico, the draft legislation gives states the authority to
block oil production within 75 miles of their shores and would give
coastal states 37.5 percent of the revenue derived from offshore
drilling. However the bill sets the stage for a major expansion of
off shore drilling, seen by many as one way to garner support from
a handful of moderate Republicans who will be needed to pass the
bill.



Another element in the draft legislation that will help secure
Republican support are new loan guarantees ($54 billion) for
nuclear power and direct federal funding for clean coal
projects.



Carbon Trading



The Senate bill established a cap-and-trade program for utility
companies starting in 2013, under which the government would be
able to issue a declining number of pollution allowances, each
representing one metric tonne of carbon dioxide that companies
could buy and sell.



Factories and other “industrial sources” would fall under the
carbon market created by this cap-and-trade program after 2016. The
bill contains provisions that would enforce maximum and minimum
prices for pollution allowances. The floor price would be $12 per
allowance and the ceiling would be $25 in 2013.



Carbon prices would be allowed to rise annually at a fixed rate,
initially at 3 percent over inflation as measured by the Consumer
Price Index, with a ceiling at 5 percent annually. In the event of
unusually high carbon prices, a strategic reserve would be
established to ensure the availability of “price-certain
allowances.”



This carbon market would be tightly regulated to ensure that
trading of greenhouse gas instruments are conducted and cleared
through a controlled carbon clearing organization that would
regulate carbon market participants and ensure full compliance with
transparent rules of conduct.



One of the hookers in the draft legislation is a requirement for
states to abandon cap-and-trade programs they operate in favour of
a national program that uses different pollution-control approaches
for different industries. The implications for the future of carbon
trading schemes such as the Western Climate Initiative, which
includes a number of Canadian provinces, are unclear.



Consumer Protection



The Senate Bill contains several measures designed to protect
consumers from energy prices hikes as the nation moves toward less
polluting, but potentially more expensive forms of energy. Low
income working families would be eligible for assistance in this
regard.



Beginning in Beginning in 2013 and annually through 2029,
allowances will be provided to local electricity distribution
companies for the benefit of retail ratepayers, allowances that
cannot be used to support electricity sales to individuals or
entities other than those ratepayers.



Improving transportation



Major incentives will be provided to shift the U.S. transportation
sector toward lower carbon alternatives. The transportation sector,
like utilities and factories, will be included in the national
carbon pollution cap, but will not participate in the proposed
carbon market.



$7 billion annually is to be earmarked to improve mass transit and
highways and new government investments in battery and other clean
vehicle technologies are to be provided.



Major tax incentives are to be provided to encourage heavy-duty
trucks to convert from petroleum to cleaner natural gas as a fuel.
As well, impediments limiting natural gas generation by power
plants will be removed.



State and local governmental entities will be allowed to issue tax
credit bonds in order to finance natural gas vehicle projects, up
to a national limit of $3 billion



International climate change provisions



The draft legislation calls for active participation by the United
States in various international arenas with the goal to “establish
binding agreements committing all major-emitting countries to
contribute equitably to the reduction of global greenhouse gas
emissions.”



However, powers and provisions for financial rebates are to be put
in place to protect domestic industries disadvantaged by the
requirement to comply with U.S. regulations in the face of
competition from industries in other countries with less stringent
emission reduction requirements.



What implications this might have for Canada is unclear at the
moment, but once the full bill is available, this should become
more apparent.



In addition to providing assistance to the most vulnerable
developing countries to protect and promote the interests of the
United States, the bill would require an annual report on the
climate change and energy polices of the top five largest
greenhouse gas emitting countries that are not members of the
Organization for Economic Co-Operation and Development.

This report would provide Congress and the American public with
a better understanding of the actions these countries are taking to
reduce greenhouse gas emissions and to “identify how the United
States can assist these countries in achieving these
reductions.”



Clean Energy Career Development



One interesting aspect of the massive draft legislation are
provisions to promote education and career development for emerging
jobs in the clean and renewable energy sectors and for employment
in areas related to energy efficiency, climate change mitigation,
and climate change adaptation.



Doubts remain about passage



The full draft bill will be available later today for review.
Political sources quoted in the U.S. media remain doubtful that the
legislation will be passed this year and suggest the Obama
Administration may not be able to negotiate a binding international
emissions reduction regime backed by the full weight of
Congress.

For more information on the draft bill href=”http://kerry.senate.gov/americanpoweract/intro.cfm”
target=”_blank”>visit here