The American Power Act - U.S. Senate Climate and Energy Bill Released

Author:Mr Steve Solow, Cynthia L. Burch, Karl R. Heisler and Nancy J. Rich
Profession:Katten Muchin Rosenman LLP
 
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The long-awaited U.S. Senate climate and energy bill was unveiled on May 12, 2010, although it has not yet been formally introduced. Officially titled the "American Power Act," the bill is nearly 1,000 pages long and was crafted over the past year by Senators John Kerry (D-MA), Joe Lieberman (I-CT) and Lindsay Graham (R-SC). The Kerry-Lieberman bill, much like the Waxman-Markey bill that passed the House in 2009, would mandate limits on greenhouse gas (GHG) emissions for the electric utility, oil refining, natural gas and "energy-intensive" manufacturing sectors. The bill would also create a comprehensive GHG emissions trading system and would provide funding and incentives for a variety of energy and environmental initiatives.

Kerry-Lieberman has the following key elements (click on the links for a more detailed description):

Mandates a shrinking cap on total GHG emissions from major industrial sources, starting with a 17% cut in emissions (below 2005 levels) by 2020 and achieving reductions of 42% by 2030 and 83% by 2050; Distributes annual "emissions allowances" to electric utilities and oil refiners (starting 2013) and certain energy-intensive industries (starting 2016). These allowances are used to pay for a regulated entity's GHG emissions for a given year; Establishes a highly regulated emissions allowance trading system; Allows regulated entities to purchase a limited number of "carbon offsets" in lieu of emissions allowances by funding reforestation and other GHG-reducing projects in the domestic and foreign agricultural sector; Imposes a tariff on imports from countries that have not established mandatory limits on GHG emissions to protect "trade-sensitive" U.S. industries and deter businesses from outsourcing their operations to avoid GHG regulations; Preempts EPA's ability to limit GHG emissions under existing Clean Air Act mechanisms, although it phases in Clean Air Act new source performance standards for coal-fired power plants by 2020 and retains EPA authority to continue to regulate GHG vehicle emissions; Permits expansion of offshore drilling; Provides a variety of financial incentives for the construction of new nuclear power plants; and Funds the development of renewable energy sources and carbon capture and sequestration technology. The bill is considered more industry-friendly than its House counterpart. Waxman-Markey, for example, lacks provisions for nuclear power, offshore drilling and protective tariffs. Moreover, Kerry-Lieberman...

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