Debate in the U.S. Senate on measures to limit greenhouse gas (GHG) emissions across the nation officially began Wednesday with the introduction of an 800-page bill that increases the targeted reduction for GHG to 20% by 2020 from the 17% in the version already passed by the House, eases the road to compliance for business and agriculture, and adds incentives for nuclear and natural gas-fired power.

The bill, written by Sens. Barbara Boxer (D-CA) and John Kerry (D-MA), chairmen of the Environment and Public Works Committee and the Foreign Relations Committee, respectively, leaves the contentious question of how carbon allowances or permits to emit carbon dioxide and other heat-trapping gases would be distributed to utilities, manufacturers, agribusiness and other interests to be filled in by the committee, according to one draft of the proposed legislation obtained by NGI and comments from around Capitol Hill.

Numerous drafts were circulating ahead of the bill’s launch, and other provisions also are expected to be part of the negotiations among the 12 Democrats and seven Republicans on the committee. Other Senate committees with contingent jurisdiction — Finance; Foreign Relations; Agriculture, Nutrition and Forestry; and Commerce, Science and Transportation — are expected to weigh in on portions of the bill, which adds to the uncertainty about its final form. The Senate Energy and Natural Resources Committee also will have input.

The bill looks more favorable to business interests than the House version, expanding the available pool of offsets by 40%. It also has what has been called a “soft” carbon collar provision and market stability fund designed to keep the cost of carbon below $28 a ton, along with provisions to limit speculation in carbon credits. There are some added incentives for nuclear power production, but they are not major, nor are they likely to satisfy the nuclear power industry.

The recent surge in lobbying and public relations by the natural gas industry appears to have paid off in the proposed Senate legislation (see Daily GPI, Sept. 25; Sept. 18; Sept. 8).

“In our view the only clear winner in the draft is the natural gas industry — provisions were included which would establish a fund to support power plants that ‘replace or retire’ greenhouse gas intensive existing generation assets,” according to K. Whitney Stanco, analyst for Concept Capital’s Washington Research Group. “The provision appears to encourage fuel switching to natural gas, the deployment of storage technologies and other types of clean generation.”

America’s Natural Gas Alliance, which represents 28 of the leading North American independent producers, applauded the “natural gas placeholder” language in the bill, which establishes a new Environmental Protection Agency program to provide financial incentives to power projects that reduce GHG emissions that are not otherwise eligible for tax credits.

The American Gas Association (AGA) urged Wednesday that any such climate change legislation should take into account “the monumental strides” U.S. natural gas consumers have made during the past 40 years to reduce GHG emissions and increase energy efficiency. If a cap-and-trade approach is implemented, the AGA said, Congress “should maintain or increase the four-year delay for natural gas utilities coming under that program; increase their allowance allocation from 9% to 12%; extend their allocated allowance phase-out from 2030 to 2040; significantly modify or delete the provision that stipulates one-third of the value of allowances allocated to natural gas utilities should go to energy efficiency programs, as this approach will not reduce emissions and will only raise costs; treat all renewable energy sources equally, whether they are used to generate electricity or supplement natural gas supplies; and keep ‘carbon footprint labeling’ in the legislation, which will help consumers make informed carbon reduction decisions.”

The bill is somewhat less favorable to coal interests, including a provision that leaves oversight of stationary pollution sources, such as coal-fired power plants, under the jurisdiction of the EPA. A main reason for the support of climate change legislation by coal-related interests has been to avoid almost certain imposition of strict emissions restrictions by the EPA if Congress fails to take the lead.

Jack Gerard, president of the American Petroleum Institute, said, “Boxer-Kerry leaves unaddressed key elements of how it intends to constrain carbon emissions. Unfortunately it appears to be following the pattern the House followed, which resulted in a political bidding process that picked winners and losers.”

Noting that the bill omits many key details, the National Association of Manufacturers (NAM) said it was concerned that the current draft introduced Wednesday would increase costs for manufacturers and consumers. “The bill calls for a 20% reduction of carbon dioxide emissions from 2005 levels by 2020. The House bill set a target of 17% reduction, which is itself an ambitious and potentially costly goal. The increase represents an even more significant technological and economic challenge to manufacturers while resulting in little benefit to the environment,” said Keith McCoy, NAM’s vice president for energy and natural resources.

Sponsors of the legislation likely will have the votes to get a measure out of committee without too much delay. Mark-up has been scheduled for the end of October. Hill watchers, however, see chances of a reconciliation with the Waxman-Markey bill passed by the House and final passage this year as highly uncertain (see Daily GPI, June 29). That would move the bill into 2010, an election year, which also makes passage unlikely.

“We continue to believe that odds for passage of an economy-wide cap-and-trade bill are low before the 2010 election,” Stanco said.

While the administration has been pushing to have U.S. climate change legislation completed before the international summit on the subject scheduled in Copenhagen, Denmark, in December, it may have to be satisfied with touting the progress embodied in separate House and Senate products.

Some observers said the new bill, if enacted, would prove to be an unfair burden on taxpayers. A new study conducted by the National Center for Policy Analysis said the legislation could cost taxpayers more than $1,761 per family annually and would not reduce global warming temperatures any more than one-tenth of a degree by 2050.

“The bill will do nothing to effectively address global warming, will cause more harm than it prevents, and will impose enormous costs on American families,” said H. Sterling Burnett, senior fellow with the National Center for Policy Analysis and author of the study on the legislation.

The study concluded that cap-and-trade would cost an average of $314 billion a year in lost gross domestic product, or $9.4 trillion over the period from 2012 to 2035. The study also said the legislation would increase the cost of residential electricity between 31-50% by 2030 and job losses would total 2.5 million by 2030.

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