Thursday, November 12, 2009

Key aspects of the Kerry-Boxer Bill

- Scope of Coverage
  • Gases covered: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and nitrogen trifluoride (the same identified by the Waxman-Markey).
  • Entities covered: large stationary sources emitting greater than 25,000 tons per year of GHGs, producers and importers of petroleum fuels, distributors of natural gas, producers of hydrofluorocarbon gases, and other specified large sources.
  • Approximately 85% of national greenhouse gas emissions are covered under the cap.
- Targets
  • 20% reduction target from 2005 levels in 2020 (higher than the 17% reduction proposed in the Waxman-Markey bill).
  • 3% reduction from 2005 levels in 2012; 42% reduction in 2030; and an 83% reduction in 2050 (the same as Waxman-Markey)
- Distribution of Allowances
  • Allowances are allocated to electricity and natural gas local distribution companies and to states for home heating oil and propane users expressly for the purposes of benefiting residential, commercial and industrial consumers.
  • Free allocation of allowance value is also provided to refineries and to energy-intensive, trade-exposed industries to prevent “carbon leakage”.
  • It calls for initially auctioning 10% of allowances annually (increasing to 25% by 2040) specifically for the purpose of making sure the bill does not add to the budget deficit.
- Cost Containment: it provides for a two-year rolling compliance period, unlimited banking of unused allowances, and limited borrowing.

- Offsets
  • allows for the use of 2 billion tons of qualified offsets annually: three quarters allowable from domestic sources (1.5 billion) and one-quarter (500 million) from international sources.
  • If domestic supplies of offsets prove inadequate, an additional 750 million tons from international sources can be used to reach the total of 2 billion tons annually.
- Price Collar: in order to preserve market stability the reserve auction price is set at $28 (in 2005 constant dollars), this would increase each year by a certain percentage (5% through 2017 and 7% thereafter) over the previous year’s reserve auction price plus inflation.

- Cap-and-trade: the bill envisages as the Waxman-Markey a GHG cap-and-trade system under which the government would put limits on the amount of carbon pollution from stationary sources; thus, companies would need an annual permit for every ton of carbon pollution they release into the atmosphere. It includes a 6-year moratorium (2012 through 2017) on states imposing their own GHG cap-and-trade programs.

For more information see:
"The Clean Energy Jobs and American Power Act (S. 1733)- Kerry-Boxer Bill"
Pew Center (2009) "At a Glance. Clean Energy Jobs and American Power Act Passed by Committee on November 5, 2009"