Serious debate on the Senate climate change bill (S 1733) is expected to begin this week, as the Senate Environment and Public Works Committee will hold three hearings on Chairman Barbara Boxer’s “mark” that was issued Friday. The mark is an updated version of the climate change bill that Boxer and Sen. John Kerry, chairman of the Senate Foreign Relations Committee, introduced in late September (see Daily GPI, Oct. 1).

Boxer has indicated that she plans for the committee to vote on the legislation, which would seek to reduce greenhouse gas (GHG) emissions by 20% below 2005 levels by 2020, possibly in the first week of November. But the odds are quickly diminishing that the full Senate will be able to pass climate change legislation this year, let alone reconcile their bill with the House version and send it to President Obama.

Not only is climate change being overshadowed by other issues in the Senate — health care and finance services reform — but it faces significant opposition from Republicans.

“We give the Senate a 50-50 shot of passing the legislation on the floor in early 2010, and remain unconvinced that there is any real chance that an energy-focused bill will be considered in the Senate before the close of 2009,” said energy analyst Christine Tezak with Robert W. Baird. & Co. She disagrees with critics who contend that the legislation may slide into 2011.

“We do not expect the legislation introduced Friday will be able to garner 60 votes in the Senate,” said energy K. Whitney Stanco of Concept Capital’s Washington Energy Bulletin. “In our view, the duo to watch remains…Kerry and [Sen.] Lindsey Graham (R-SC). However, if little progress is made on this ‘second track,’ we believe the odds for Senate passage of climate legislation will diminish below the 40% odds we give it now.”

Graham and Kerry earlier this month outlined a framework for reaching bipartisan agreement on comprehensive climate change legislation in the Senate, which would include provisions on promoting nuclear generation and expanding oil and natural gas development. The proposed framework offered some hope that the divide between Senate Democrats and Republicans over climate change could be bridged (see Daily GPI, Oct. 14).

“Overall the enactment of climate legislation is a long shot in the Congress. We believe that the closer votes are to the 2010 elections, the harder it will be for congressmen to support legislation which, by design, raise energy prices,” Tezak said.

The legislation would have a difficult time getting out of committee if Sen. James Inhofe of Oklahoma, the ranking Republican on the environment panel, carries out his threat of a Republican boycott of the mark-up if they are not satisfied with an Environmental Protection Agency (EPA) analysis of the bill, which was released Friday.

The 38-page analysis was completed in less than two weeks. It compared the Senate climate bill with the House version (HR 2454), and found “large similarities” between the two and said the costs of the two bills “are likely to be quite similar.”

Committee rules require a quorum of at least two minority senators to mark up legislation, according to Stanco. “A united Republican boycott could delay a mark-up until the EPA and/or the Congressional Budget Office can complete a more comprehensive analysis of the bill,” Stanco said.

Like the House climate bill, the centerpiece of the Senate legislation is a system to cap carbon emissions and allow polluting industries to purchase and trade emission credits to comply with the cap.

Also like the House measure, the Boxer “mark” would provide a number of industries with emission allowances, which are aimed at protecting consumers from energy price hikes; assisting industry in the transition to a clean energy environment; and spurring energy efficiency and development and deployment of clean energy technology.

Customers of electric utilities would receive about 35% of the distributed emission allowances, according to the Senate bill. Local electric companies would receive 30% of the emission allowances, while merchant coal and long-term power purchase agreements would receive 5% of the allowances. The allowances would phase out over a five-year period from 2026 through 2030.

Small rural electric cooperatives would get 0.5% of the emission allowances and would receive supplemental allocations each year from 2012 through 2025, phasing out by 2030.

Natural gas local distribution companies would receive 9% of the distributed allowances under the Senate bill to protect consumers from gas price hikes. The allowances would phase out between 2026 and 2030.

States also would receive 1.5% of the distributed allowances for programs to benefit users of home heating oil and propane. The allowances would phase out between 2026 and 2030.

The legislation also would provide allowances to energy-intensive industries — such as cement, pulp and paper and steel — to cover the increased costs incurred to reduce GHG emissions. Allowances set aside for this program would equal 4% of the allowances in 2012 and 2013, 5% of the allowances in 2014 and 2015, and then they would gradually decrease.

Oil refiners would be allocated only 2.25% of the emissions allowances starting in 2014 and ending in 2026.

Jack Gerard, president of the American Petroleum Institute, blasted the Boxer mark, calling it “worse” than the sweeping House climate bill that was passed in June (see Daily GPI, June 29).

“It promises more pain to consumers but also imposes much greater burdens on some parties than others. Farmers, truckers, airline passengers, and families and businesses that rely on petroleum fuels will be the clear losers, paying the lion’s share of the costs,” he said.

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