ACCCE Position on Kerry-Lieberman Draft Bill
On May 12, 2010, Senators John Kerry (D-MA) and Joe Lieberman (I-CT) 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 Senators Kerry, Lieberman and Lindsey Graham (R-SC).
The following is the position of the America's Power Army's parent organization, the American Coalition for Clean Coal Electricity (ACCCE), on the draft Kerry-Lieberman legislation:
ACCCE supports the adoption of federal carbon management legislation so long as the principles adopted by our Board are adequately addressed. However, ACCCE cannot support the Kerry-Lieberman draft bill as it is currently written because it fails to adequately comport with those principles. Specifically, the Kerry-Lieberman draft bill:
1. Lacks a legal, regulatory, and liability framework needed for carbon capture and storage technology (CCS) and/or beneficial uses of CO2 to become commercially deployable as soon as possible. The draft bill creates a task force to develop a national strategy and study issues associated with CCS liability, but does not establish any new authorities to remove legal and regulatory barriers to CCS deployment.
2. Does not provide a sufficient, stable, and secure research, development, demonstration, and deployment funding for CCS. ACCCE has previously endorsed the Boucher bill, which would provide $1 billion per year for 10 years to fund CCS development and deployment. The funds would come from a small fee assessed on electricity sales, and the program would be administered by a non-governmental research organization. The Kerry-Lieberman draft bill establishes a similar program with more funding ($2 billion per year), but the program has a number of objectionable provisions that are different from the Boucher bill. For example, the Kerry-Lieberman funding does not take effect unless 30 state public utility commissions approve the funding program within six months after the bill becomes law. Further, the program funds would be subject to annual congressional appropriations, making funding uncertain from year to year.
3. Does not avoid a patchwork of conflicting standards or duplicative programs through the adoption of a uniform federal program. Under the provisions of the bill, state and local governments are prohibited from implementing cap-and-trade programs, but states may implement non-cap-and-trade programs and may require the retirement of federal allowances, which would make the emissions cap more stringent for sources in such states. Further, the bill leaves in doubt the effectiveness of Clean Air Act exemptions that are of greatest importance to the coal-fueled electricity industry, including new source review, new source performance standards, and Title V permitting. The bill provides no preemption of tort lawsuits and no exemptions from other federal laws such as the Endangered Species Act, Clean Water Act, and National Energy Policy Act.
4. Contains cap levels and compliance deadlines, which do not recognize that many of the technologies needed to reduce greenhouse gas emissions from new or existing fossil-fueled generating stations are not yet commercially available. The Kerry-Lieberman draft bill’s requirement to achieve a 17% reduction in CO2 emissions from 2005 levels by 2020 is not compatible with the commercial availability of these technologies.
5. Lacks effective cost containment measures to protect American consumers and the U.S. economy. The “price collar” (a ceiling and floor price for allowances) contained in the bill sets a minimum auction price of $12 per tonne that would increase by 3% above inflation each year. The bill also seeks to establish a ceiling price for allowances by setting aside a pool of four billion allowances in a “cost containment reserve.” These reserve allowances would be taken from the emissions cap in future years. The ceiling price for reserve allowances is $25 per tonne and increases at 5% above inflation each year. There are at least two concerns with the structure of the bill’s price collar. First, the $25 ceiling price would permit allowance prices to reach very high, likely economically damaging, levels. Second, filling the reserve with allowances from future years increases the stringency of the cap in those years.
6. Limits the broad use of domestic and international verifiable actions to offset greenhouse gas emissions. The bill would allow use of 2 billion offsets (1.5 billion domestic and 0.5 billion international) each year for compliance. There are restrictions on the use of these offsets by individual sources. While the bill would allow EPA to increase the international offsets in the absence of sufficient domestic offsets, the value of international offsets is discounted by 25% after 2017.
7. Incents fuel switching. The bill would create an “efficiency incentive” in the form of allowances for merchant coal plants that agree to either retire or repower with “less emissive” fuels. ACCCE opposes “bridge fuel credits” or similar mechanisms that would incent generators to switch from coal to natural gas.
8. Contains redundant and premature measures to limit CO2. The Kerry-Lieberman draft bill contains CO2 performance standards for new coal-fueled power plants. These standards would require plants permitted after January 1, 2020 to achieve a 65% reduction in CO2 emissions and plants permitted between 2009 and 2020 to achieve a 50% reduction by no later than January 1, 2020. EPA must review and, possibly, revise the performance standards periodically. Such standards 1) are unnecessary to achieve the emission reductions required under a cap-and-trade program and 2) would mandate CO2 reductions in new coal-fueled power plants before carbon capture and sequestration technologies can be expected to be commercially deployable on such plants.
June 14, 2010
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