Senators Kerry and Lieberman are, as is understood, planning to release the American Power Act Wednesday morning. Initial material has ‘leaked’, including a two-page summary (graciously transcribed from a pdf version to text by the Wonkroom) and a 21 page section-by-section “for staff use only” available on the Washington Post website.
By my nature, I hover between being a pessimistic optimist (seeing reason for hope while uncertain about prospects for it being achieved) and being an optimistic pessimist (seeing very real reasons for terror and concern while hoping that I turn out to be wrong). Reading through the just released material, I seem to have been allowed the optimist side to have too much influence in recent times, somehow subconsciously thinking that Senator John Kerry knew better and that he wouldn’t sign his name to a disastrous bill. Sigh … perhaps if I’d balanced that subconscious optimism with more open pessimism, the items in these released documents would be so disappointing.
Let me be clear, there are positive elements. The America Power Act will put in a carbon price, a ‘cap with a collar’:
Introductory floor and ceiling prices are set at $12 (increasing at 3 percent over inflation annually) and $25 (increasing at 5 percent over inflation annually), respectively.
While this pricing is far below any reasonable definition of the Social Cost of Carbon (SCC) emissions (and the $12 figure is roughly 1/8th of where reasonable analysis might put us), the creation of a floor price is critical. If, as I and so many clean-energy advocates suspect (understand …), cutting emissions will turn out to be very inexpensive for the initial period (decade plus) of any climate mitigation effort, that minimum price will help accelerate clean-energy action beyond what would occur without the minimum price. (Small fiscal incentives can help spark major change. As CCAN’s Mike Tidwell has noted, DC’s 5 cent fee on plastic bags has sparked an 80 percent drop in disposable plastic bag use over the past four months.) Now, as ‘industry’ claims to be most concerned about upper bound price, this climate activist would welcome trading slowing the upper bound’s increase over the first decade for accelerating the lower bound’s growth. (How about $15 to $25, with both growing at 4 percent / year above inflation through 2020 (placing this as a $25-$42 range)? Note, again, that a reasonable figure, today, in 2010 is in the range of $85 … that upper range 2020 figure would be half today’s SCC.)
NOTE: As per ending comment below, some optimism waking up in the morning … and some realism.
RE Realism — considering the US Senate, if this bill passes more or less in its current form, it will be a miracle. And, that carbon price will start the ball rolling to serious change in the economy … positive change … and we should, we hope, be able to build on that success.
RE Realism — much of what is bad in this bill actually is at least slightly better than what passed the House (at least looking at the summary) with the only major critical item in Waxman-Markey ACES not in APA being the Energy Efficiency, which could be because of committee jurisdiction questions / issues rather than what K-L believe matters.
RE Optimism — I didn’t see much to celebrate there but I’m told that the transportation section is far better than what I read it to be along with my missing some fast action material. Both of these could mean that this is better than an initial look suggested.
Finally — To be clear, if John Kerry and his staff had a chance to write a bill that they believe is required and appropriate, it is hard to believe that this is what they would choose to write. Again, political realities seem to trump scientific and physical ones.
Okay … time to wait for a whole bill to drop and more details to emerg.
Sigh … even the good news items within Kerry-Lieberman seem to come with significant caveats.
While, beneath the fold, I will look with some words to the two-page summary, here are some items of immediate concern:
- Targets remain very weak: 17 percent reductions by 2020 represent less than half where the (outdated, too optimistic) science says we should be getting to and represents less than half where we can get to with real benefit to the U.S. economy.
- Massive fossil-foolish subsidies: From massive amounts of resources for “Clean Coal” to massive subsidies for natural gas transportation that will create another major fossil fuel addiction, something that will masquerade as a clean energy bill will dedicate significant resources to perpetuating our addiction.
- Gap-after-gap: These 23 pages cannot capture every issue but gaps seem to exist. For example, neither seems to address one of the most powerful options for reducing our oil dependencies and starting to turn the tide on climate change: electrification of the railroads. Nothing … on so many viable and valuable tools for turning the tides on Global Warming rising seas.
Writ large, this summary suggests lots of deal making with powerful polluting interests, with the the inclusion of too many elements based on flawed and inadequate public relations like papers masquerading as analysis.
Perhaps it will look better after a good night’s sleep … or is that just the optimist side talking?
NOTE: For a discussion that encourages that optimist side, see Joe Romm’s American Power Act to create millions of clean energy jobs. Friends of the Earth, on the other hand, fosters pessimism.
AMERICAN POWER ACT
**FOR STAFF USE ONLY**
**NOT FOR DISTRIBUTION OR PUBLICATION**
Well, so much for that ‘not for … publication’…
The American Power Act will transform our economy, set us on the path toward energy independence and improve the quality of the air we breathe. It will create millions of good jobs that cannot be shipped abroad and it will launch America into a position of leadership in the global clean energy economy.
Simply put … BRAVO! Let us put it clearly and bluntly: WE WANT THAT! This is what we should be striving to do, to set the nation on a path toward a prosperous and secure Energy Smart future.
Our approach sets an achievable national pollution reduction target and refunds the money raised right back to American consumers and American businesses.
Does anyone else note a problem here? “American consumers”? Why not “American citizens”? Why not “Americans”? No, we are defined not as people but as “consumers”. Thinking in those terms undermines efforts to foster an understanding that the very ethos of ‘consumption’ is one of the fundamental challenges driving a Sick Planet.
This is not a plan that enriches Wall Street speculators.
Responding to anti-Cap & Traders arguing (with some reason) that a Cap & Trade program could foster massive profits for brokers and traders, siphoning resources away from actually achieving positive change.
And this is certainly not a plan to grow the government.
Let us please ‘government is bad’ crowd, as if the Tea Party is about to endorse legislation that acknowledges the scientific reality of the Theory of Global Warming and begins to address humanity’s role in damaging our planetary ecosystem.
It is a plan that creates jobs and sets us on a course toward energy independence and economic resurgence.
While “energy independence” remains mainly political rhetoric rather than substance (try ‘energy security’ or such …), again: YEAH!
Jobs … energy security … economic resurgence.
It is time for Democrats, Republicans and Independents to come together to pass legislation that will create American jobs and achieve energy security, while reducing carbon pollution by 17 percent in 2020 and by over 80 percent in 2050.
This shouldn’t be a partisan issue — we should recognize our energy and climate challenges and opportunities. And, we should work together to address the challenges and seize the opportunities.
Our plan is based on five simple principles:
To be clear, principles matter.
First: Consumers will come out on top. The American Power Act sends two-thirds of all revenues not dedicated to reducing our nation’s deficit back to consumers from day one. The rest is spent ensuring a smooth transition—for American businesses and investing in projects and technologies to reduce emissions and advance our energy security. In the later years of the program, every penny not spent to reduce the deficit will go directly back to consumers.
Sigh … “Consumers … consumers … consumers …” Repeating it doesn’t make it sound better. Try this test rolling off your tongue: “My fellow consumers” vs “My fellow citizens”. Which one opens a winning speech in your neighborhood?
Note the focus on debt reduction, first, and then money to “consumers” with emissions reductions and energy security follow-on issues. This bill seems to assume that the United States won’t need (or want) to fund clean energy programs “in the later years of the program”, as if carbon emissions reductions will get simpler after the low-hanging fruit has been harvested rather than requiring continuous investment to foster additional low-hanging fruit.
Second: We need energy made in America. Today we spend almost one billion dollars every day on foreign oil, much of which is sent to regimes that are hostile to our nation and our interests. That is money we should be investing here at home. The American Power Act invests in technology to harness domestic power supplies and reduce our dependence on foreign oil.
Agreed … but … hmmm … seems to focus on new supplies rather than reducing demand.
Third: America needs to regain its competitive edge and lead the global clean energy economy. America enjoys an abundance of home-grown energy sources: coal, natural gas, nuclear and renewables. Each will play a critical role in our clean energy future. By investing in innovation across all energy sources, we will create millions of jobs rebuilding our energy infrastructure as we reinvigorate our manufacturing base, which will be called upon to produce the clean energy technologies of tomorrow.
Okay … perhaps … yes.
Fourth: We need a new approach to reducing emissions that recognizes the different needs of our different industries. The American Power Act includes separate, targeted mechanisms for the three major emitting sectors: power plants, heavy industry and transportation. Each approach is tailor-made to ensure a smooth transition into our collective clean energy future.
Details matter …
Fifth: The system must be simple, stable and secure. We only address the largest sources of carbon pollution and we provide predictability to businesses and consumers through a hard price collar and the creation of a single, clear set of rules. Our carbon market structure eliminates the possibility of manipulation, which will mean a secure, well-functioning market system.
This principle is reasonable and, well, even good but depends, of course, on the details.
Details on Key Provisions
Ahh … let us look at some details.
- From day one, two-thirds of revenues not dedicated to reducing our deficit are rebated back to consumers through energy bill discounts and direct rebates. We also provide assistance to those Americans who may be disproportionately affected by potential increases in energy prices through tax cuts and an energy refund program.
- After the initial transition period, revenues go into a Universal Refund that will increase until all revenues not spent to reduce the deficit are refunded directly to consumers.
The two-thirds back is concerning. Where, by the way, is the issue of all the government activities (at all levels0 that will bear carbon costs. What about moving funds to foster accelerated moves to clean energy within the government (at all levels) to reduce these costs and emissions?
Why, by the way, 2/3rds? This means that people who are above average in polluting levels will actually profit from the program. E.g., a rebate or dividend program should not be above 50% — at the maximum level.
Ensuring Regulatory Predictability
- It ensures predictability for American businesses by articulating a single set of rules for achieving its goals. Rather than allowing a patchwork of conflicting state and federal regulations, it lays out one clear set of rules for reducing greenhouse gas emissions.
- States will not be permitted to operate cap-and-trade programs for greenhouse gases. Those states that have already taken a leadership role in implementing emission reduction policies will receive compensation for the revenues lost as a result of the termination of their cap-and-trade programs.
The APA would take us (the U.S.) to lowest common denominator, forcing states which have been moving out and wish to act more aggressively to fall back to a minimalist objective which falls far short of meeting necessary reduction levels.
Ensuring Price Predictability
- We include a hard price collar which binds carbon prices and creates a predictable system for carbon prices to rise at a fixed rate over inflation.
- Introductory floor and ceiling prices are set at $12 (increasing at 3 percent over inflation annually) and $25 (increasing at 5 percent over inflation annually), respectively.
- To provide environmental integrity and ensure meaningful emissions reductions, we include a strategic reserve to complement the hard price collar and ensure the availability of price-certain allowances in the event of unusually high carbon prices.
Again, this is fine to even good. The risk in initial years is on the lower bound, not the higher end.
Decreasing our Dependence on Foreign Oil
- We provide over $7 billion annually to improve our transportation infrastructure and efficiency, including our highways and mass transit systems.
- We also address our use of foreign oil in our trucks and heavy-duty fleet by providing significant tax incentives for conversion to clean natural gas vehicles.
- We make important new investments in developing and manufacturing advanced vehicles, to ensure that America leads the world in advanced cars and batteries.
- We embrace ongoing efforts to create strong federal standards for greenhouse gas emissions and efficiency improvements in our vehicle fleet.
- Mindful of the accident in the Gulf we institute important new protections for coastal states by allowing them to opt-out of drilling up to 75 miles from their shores. In addition, directly impacted states can veto drilling plans if they stand to suffer significant adverse impacts in the event of an accident. States that do pursue drilling will receive 37.5 percent of revenues to help protect their coastlines and coastal ecosystems.
$7 billion/year is amusing but falls far short of our needs in “highways and mass transit systems”. And, there is nothing here on rail (let alone electrification of rail).
This includes the near fraud of heavy subsidization of moving from our oil addition to natural gas as the next fossil fuel addiction.
Expanding America’s Manufacturing Base
- Industrial sources will not enter the program until 2016. Prior to 2016, allowance value is dedicated to offset electricity and natural gas rate increases for industrial rate-payers and to improve energy efficiency in manufacturing — to keep power bills down in the future.
- In 2016, energy-intensive and trade-exposed industries receive allowances to offset both their direct and indirect compliance costs. This assistance will be distributed in a way that rewards efficiency investments and makes our manufacturing facilities more competitive.
- We also significantly increase incentives for clean technology manufacturing, by expanding the clean energy manufacturing tax credit by $5 billion, providing incentives for the production of advanced vehicles and component parts and funding investments in energy efficiency innovation. Alongside these priorities, we also support community economic adjustment assistance and worker training.
- In order to protect the environmental goals of the bill, we phase in a WTO-consistent border adjustment mechanism. In the event that no global agreement on climate change is reached, the bill requires imports from countries that have not taken action to limit emissions to pay a comparable amount at the border to avoid carbon leakage and ensure we are able to achieve our environmental objectives.
Excellent to call out energy efficiency investments in manufacturing.
Notably, there is no direct mention of “Combined Heat Power” which could, via the manufacturing sector, add some 10% to America’s electricity power generation with, in essence, zero additional emissions.
A border adjustment, of some sort, has to be part of any serious climate legislation.
Creating New Opportunities for American Farmers
- We establish a new multi-billion dollar revenue stream for the agricultural sector through a domestic offset program that provides incentives for farmers to reduce emissions on their land. The program provides USDA with primary authority over domestic agriculture and forestry projects.
- Additionally, the bill supports the Rural Energy for America Program, which has already reduced costs and created thousands of new clean energy jobs across rural America.
Okay, perhaps … despite real and serious problems with offset programs and offset management.
Investing in Clean Energy Research, Development and Deployment
- The American Power Act funds critical investments in clean energy research and development, including renewable energy technology, advanced vehicle technologies and carbon capture and sequestration.
- We also establish pilot projects to determine the regional feasibility of light- and heavy-duty plug-in electric vehicles.
Okay … how much in terms of resources. And, well, we already know that many plug-in vehicles make sense adn could be put into manufacturing overnight — such as plug-in hybrid electric school buses.
Ensuring Coal’s Future
- We empower the U.S. to lead the world in the deployment of clean coal technologies through annual incentives of $2 billion per year for researching and developing effective carbon capture and sequestration methods and devices.
- We also provide significant incentives for the commercial deployment of 72 GW of carbon capture and sequestration.
Clean Coal is about as realistic as unicorns or flying carpets, something we’d love to see real but, well, just remains a fantasy.
How many resources will be thrown after this? Now, to be honest, a continued R&D program makes sense — because if it can be made to work at at cost-effective prices, that would be a change-the-game development. But, how much is enough to spend on such a long shot. $2 billion here, $2 billion there — eventually you have some real money.
And there’s more …
Okay … reserving judgment time.
Encouraging the Use of America’s Natural Gas
- We create a level playing field for natural gas in the power sector by removing disincentives for natural gas generation at merchant plants.
- We also help guide the state regulatory process by requiring public disclosure of chemicals used in the production of natural gas.
Increasing Nuclear Power Generation
- We have included a broad package of financial incentives to increase nuclear power generation including regulatory risk insurance for 12 projects, accelerated depreciation for nuclear plants, a new investment tax credit to promote the construction of new generating facilities, $5.4 billion in loan guarantees and a manufacturing tax credit to spur the domestic production of nuclear parts.
- We improve the efficiency of the licensing process.
- We invest in the research and development of small, modular reactors and enhanced proliferation controls.
- We designate an existing national laboratory as a nuclear waste reprocessing Center of Excellence.
Reducing Transportation Emissions
- Emissions from the transportation sector will remain under the carbon pollution cap.
- Producers and importers of refined products will not participate in the carbon market, but will purchase allowances at a fixed price from the allowance auction.
Blocking Market Manipulation
- The bill only requires the largest sources of pollution to comply with reduction targets: those who produce more than 25,000 tons of carbon pollution annually. This means the program only focuses on 7,500 factories and power plants.
- Participation in the auction and primary cash markets is restricted to entities with a compliance obligation and a limited number of ‘market makers.’
- Participation in the secondary market will be open to all participants, but it will only exist on a cash-cleared basis. It will be highly regulated, exchange traded and transparent.