LEGISLATION:

Now launched, the climate bill faces period of hard work

The anticipated Senate bill limiting carbon emissions was introduced yesterday with a patriotic emblem mimicking the American flag, even as its sponsors stressed that the measure is open for changes.

Numbering nearly 1,000 pages after eight months of negotiating, the "discussion draft" of the American Power Act was dropped into an election-year atmosphere in which Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) will try to navigate a series of challenges in hope of finding a handful of supporters among undecided Democrats and Republicans.

With weeks remaining on the legislative schedule, senators and industry continue to express concern about elements of the bill, including questions around offshore oil drilling, the stability of carbon markets, the impact on manufacturing jobs and the distribution of carbon allowances.

Those issues can be surmounted, Kerry said yesterday, surrounded by corporate chiefs, environmentalists and a pastor, given the "never before seen" coalition of industries that are ready to pay a price for the carbon released by their facilities.

"Now is the time take action. The path to progress has been long, but despite Washington conventional wisdom, we are closer than we've ever been to a breakthrough," Kerry told an overflowing audience. "We want to make this the Senate that finishes the job."

There were no Republican senators standing in the half-circle of suited supporters, however. And while the rollout yesterday marks new momentum for the ambitious plan designed to reduce the nation's use of oil from members of the Organization of Petroleum Exporting Countries 40 percent over 20 years, it will likely wither in the coming weeks if a covey of lawmakers on both sides are not recruited.

"It will require Republicans to step up to the plate and support the proposal or some version of it," said David Hunter, a longtime climate adviser for Sen. Susan Collins (R-Maine) and now the U.S. director of the International Emissions Trading Association.

Right now, it's unclear if that will happen.

"Until we see more of the position statements from some of the key senators ... it's hard to say what the prospects of the bill are," Hunter added. "Certainly it's got a lot of momentum, and I think that deserves a lot of credit."

Obama weighs in

President Obama and Senate Majority Leader Harry Reid (D-Nev.) could push the legislation forward with muscular persuasion, Kerry and Lieberman said. Obama provided an early push.

"For too long, Washington has kicked this challenge to the next generation," Obama said in support of the bill yesterday. "This time, the status quo is no longer acceptable to Americans. Now is the time for America to take control of our energy future and jump-start American innovation in clean energy technology that will allow us to create jobs, compete and win in the global economy."

Reid is expected to meet with committee chairs early next month to discuss reconciling provisions in the American Power Act with other bills, including an energy bill by Sen. Jeff Bingaman (D-N.M.) that offers a renewable electricity standard.

"The president and Harry Reid are with us, and I heard several Republicans tell me privately in these last days they're encouraged by what's in this bill and they're anxious to review it and work on it," Kerry said.

But the sponsors, it appears, will also have to bridge divides with other senators before the bill can be assured of reaching the chamber's 60-vote threshold.

Sen. Olympia Snowe of Maine, a moderate Republican whom Kerry has been seeking as a co-sponsor, said she remains concerned about "taxes" after reviewing the legislation earlier this week.

The bill's carbon price would "translate into imposing greater fees on consumers, particularly on home heating oil and gasoline," Snowe said Tuesday. "I think it would certainly have adverse consequences."

"I just think that a broad initiative would be challenging in this environment," she added.

The Kerry-Lieberman bill requires refiners to buy carbon allowances matching their emissions, an expense that could trickle down to the price of gasoline at the pump. About $6 billion in greenhouse gas revenue would be used for upgrading transportation infrastructure and efficiency programs. Other incentives exist for manufacturers of vehicles like electric cars.

Unlike in previous cap-and-trade bills, the transportation sector would not participate in a carbon market with utilities and manufacturers. And they couldn't trade their allowances among themselves. Critics have described the program as a "gas tax."

'I've got a problem'

The authors are seeking to tamp down attacks around the cost of the program on electricity ratepayers, motorists and families by providing rebates. Two-thirds of allowance revenue raised by the program, outside the 25 percent that goes toward paying down the deficit, will go to households through their utility bills. Low-income residents will receive additional rebates. After 2035, all of the revenue, minus deficit payments, will go toward rebates.

BP PLC's growing oil spill in the Gulf of Mexico has complicated efforts to woo pro-drilling senators by providing incentives in the bill to drill. Those provisions, which permit states to receive 37.5 percent of royalties, have alarmed anti-drilling senators, who worry that oil spills could degrade fisheries and tourism.

The bill allows states to nix federal plans to drill within 75 miles of their shores. But neighboring states are unable to veto the project unless a government study concludes that an oil spill could cause them "significant adverse ecological or economic" harm.

Several Democrats, including Sens. Bill Nelson of Florida and Robert Menendez of New Jersey, have threatened to withhold their votes if offshore drilling is included.

"Seventy-five miles into the ocean, unfortunately, as we've seen from the Gulf region, doesn't box itself into nice little squares, so if a spill can take place that can reach the shores of New Jersey, I've got a problem," Menendez, who had not seen the bill, said yesterday.

Also in flux are two senators who have offered a competing climate plan. Sens. Maria Cantwell (D-Wash.) and Collins introduced the "CLEAR Act," which limits carbon markets to regulated facilities, in part because of the distrust of Wall Street banks after the economic plunge.

Kerry and Lieberman have a different plan. They would permit a secondary market in which unregulated traders could buy and sell carbon allowances. But they may be seeking a compromise with Cantwell and Collins by requiring firms, like utilities or banks, to provide upfront cash in all purchases -- rather than use derivatives.

Cantwell, when asked by a reporter yesterday if it seemed like Kerry and Lieberman were bending to her concerns, said, "I doubt it."