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A proposed climate bill unveiled last week by senators John Kerry (D-MA) and Joe Lieberman (I-CT) is getting the support of some economists and utilities as a relatively inexpensive way to reduce carbon-dioxide emissions that will initially have almost no impact on electricity prices. The supporters, however, worry that the legislation won’t be passed, which would open the way for far more expensive regulations from the U.S. Environmental Protection Agency (EPA).

The bill, called the American Power Act, is designed to reduce greenhouse gas emissions and lay out a national energy strategy. Last year Congress seemed to be moving quickly on passing a climate and energy bill after the House passed such a bill in June, but Senate versions stalled. It’s not clear when the Senate will officially take up the new bill, which was put together with the help of Lindsey Graham (R-SC), who recently withdrew his support. Meanwhile, the EPA is drawing up regulations for controlling greenhouse-gas emissions that could go into effect in January if Congress fails to pass a climate bill.

The new bill seeks to reduce greenhouse gas emissions by 17 percent as of 2020 and by 83 percent by 2050, compared to 2005 levels, by limiting the amount that major emitters can release into the atmosphere. These limits will be enforced via a type of cap-and-trade system. This would require utilities, and eventually heavy industry and refiners, to obtain allowances for emissions, some of which will be given out, and some sold. Companies can decide to either reduce emissions or buy enough allowances to cover their emissions. The allowances can also be traded between emitters. Some of the proceeds from purchasing allowances will go to pay down the federal government deficit, some will go directly to consumers in the form of rebates, and some will fund programs to encourage the development of new technologies.

The bill includes incentives for nuclear power, natural-gas vehicles, and carbon-dioxide capture and storage technology, which would be most useful for coal power plants. It funds R&D for renewable energy and advanced vehicles, and includes a variety of measures to help decrease petroleum consumption. It includes incentives for offshore drilling, but states that could be affected by oil spills can veto projects.

Unlike the bill passed by the House last year, the Senate bill does not require utilities to use renewable energy, but such provisions exist in a separate energy bill sponsored by Sen. Jeff Bingaman (D-NM), and they could eventually be incorporated into the new bill. Another key difference with the new bill is the introduction of the rebate program for consumers that will offset the costs of the bill.

Support for nuclear power, oil drilling, and carbon-dioxide capture and storage was included to bring in Republican support for the bill. But the oil spill in the Gulf, and an uncertain political climate, could make it particularly difficult to pass the bill this year, says William Bonvillian, the director of MIT’s Washington, DC, office.

The bill’s chief weaknesses, says Robert Stavins, director of the Harvard Environmental Economics Program, is that “it’s unnecessarily complex, ” which could increase the cost of reducing emissions. For example, it places emissions caps on only selected parts of the economy, it applies caps to different sectors at different times, and it uses different approaches to allowances in different sectors. He says, however, that the legislation would be effective at reducing emissions to the target levels. “These agreements are going to be changed over time. But it’s a very sensible starting point for the U.S.,” he says.

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Credit: Jimmy Thomas/Flickr

Tagged: Energy, climate change, greenhouse gases, coal, oil, nuclear, carbon capture, energy policy, legislation, Duke Energy

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