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Senators Unveil Competing Climate Change Proposals

A blueprint for a climate change and energy bill that sponsors hope will gain the 60 votes necessary to pass the Senate in 2010 was released Thursday by the three lawmakers who have been leading the charge for legislation: Sens. John Kerry (D-MA), Lindsey Graham (R-SC) and Joe Lieberman (I-CT). Separately, Sens. Maria Cantwell (D-WA) and Susan Collins (R-ME) on Friday unveiled a competing proposal to create a "cap and dividend" structure that would give dividends to U.S. taxpayers.

The Kerry-Graham-Lieberman proposal is a broad outline that was sent to President Obama as he departed for the United Nations climate change conference in Copenhagen, Denmark. The five-page proposal is designed to set the stage for negotiations in the Senate as it looks to match legislation passed by the House in June (see NGI, June 29).

"It is our belief that a market-based system, rather than a labyrinth of command-and-control regulations, will allow us to reduce pollution economically and avoid the worst impacts of global climate change," the trio wrote. "It will also provide significant transition assistance to companies and consumers without using taxpayer dollars or driving up the national debt.

"We believe a near term pollution reduction target in the range of 17% below 2005 emissions levels is achievable and reasonable, as is a long term target of approximately 80% below 2005 levels. Finally, we believe a robust investment in the development and deployment of clean energy technologies will ensure that as pollution reduction targets become more rigorous, companies will be better equipped to meet their obligations in a cost effective manner."

Encouraging the development and deployment of new energy technologies "and increasing our supply of domestically produced oil and natural gas on land and offshore...will ensure America's energy security," the trio wrote. "We will do so in a way that sends money back to the states that opt to drill and also provides new federal government revenues to advance climate mitigation goals...If energy independence is to be a priority, we must keep the entire energy cycle right here at home."

By "failing to legislation," the trio noted that Congress "is ceding the policy reins" to the Environmental Protection Agency, which plans to move forward, barring legislation, to regulate GHG after issuing an endangerment finding on carbon dioxide and other GHG last Monday (see related story).

"The absence of national greenhouse gas emissions standards has invited a patchwork of inconsistent state and regional regulations," they wrote. "Since it is not reasonable to expect businesses to comply with 50 different standards, it is imperative that a federal pollution control system be meaningful and be set by federally elected officials."

The trio is "considering a number of mechanisms," including a price collar and strategic reserve, to moderate the price of carbon and "prevent extreme market volatility" while maintaining the integrity of a pollution reduction program.

Among other things, the legislation is to include incentives for renewable energy sources such as wind and solar, "but successful legislation must also recognize the important role of clean nuclear power in our low-emissions future...We will make it easier to finance the construction of new nuclear power plants and improve the efficiency of the licensing process for traditional as well as small modular reactors, while fully respecting safety and environmental concerns."

As envisioned in the blueprint, the legislation also would "ensure a future for coal," they said, by committing resources "to the rapid development and deployment of clean coal technology and dedicated support for early deployment of carbon capture and sequestration."

In addition, carbon market regulations are to be included to provide "carbon market oversight, real-time transparency, adequate settlement requirements to control risk in the market and strong quality controls to ensure maximum effectiveness and clarity."

Response to the senators' proposal was mixed.

"What was offered...was nothing more than more of the same," said Thomas J. Pyle, president of the Institute for Energy Research. "Bipartisanship for the sake of bipartisanship may make for good headlines, but the proposal outlined...is a tripartisan bad idea for the American people -- paving the way for a job-killing cap-and-trade system that will increase the price of energy across the board."

Energy analyst Christine Tezak of Robert W. Baird & Co. was underwhelmed. She said Friday the outline "simply reiterates that some key Senate Democrats are committed to moving climate change legislation in 2010...The 'framework' in its current five-page form speaks more to justifying why legislation should be enacted than incremental details..."

Meanwhile, the Cantwell-Collins alternative would allow the government to cap emissions and sell carbon permits but the polluters, i.e., power companies and refiners, among others, could trade the credits only among themselves. No outside market would exist to trade the emissions credits.

Under the Cantwell-Collins plan, 75% of the revenue raised by selling emissions permits would go directly to U.S. taxpayers in the form of monthly electronic payments made to their bank accounts. According to Cantwell, under the plan a typical family of four would receive tax-free monthly checks from the government that would average $1,100 per year, or $21,000 between 2012 and 2030. The remaining 25% of the revenue would go to energy technology research and development.

Although fundamentally different from the Kerry-Graham-Lieberman proposal, Cantwell and Collins said they hope to work with the trio and the White House.

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