CLIMATE:

Draft Bingaman bill would cap power plant emissions

A climate bill being developed by the Senate Energy and Natural Resources Committee chairman would impose carbon caps on electric utilities and achieve far fewer emission reductions than more sweeping proposals under consideration in the Senate.

A discussion draft by Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) would cut emissions by 2020 from regulated sources by 17 percent from 2005 levels and 42 percent by 2030. Utilities that emit more than 25,000 metric tons of carbon dioxide-equivalent per year would be under the cap starting in 2012, and large manufacturers could opt in to the program.

The sweeping measure from Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) calls for a 17 percent reduction in carbon emissions from 2005 levels by 2020 and a more than 80 percent cut by 2050. That proposal would cap emissions from utilities, manufacturing, transportation and other sectors.

The Bingaman draft is one of several climate measures circulating in the Senate as Majority Leader Harry Reid (D-Nev.) prepares to assemble an energy and climate bill for floor debate later this month. Bill Wicker, a spokesman for Bingaman, said the draft is a "mid-generation" version of the utility-only proposal and that there have been several changes since this version; he declined to provide details on the changes. Bingaman still has no plans to introduce a sector-specific bill yet, Wicker added.

The Bingaman draft does not significantly reward utilities for being the first to have their carbon emissions capped.

The proposal would provide 30 percent of total emission allowances by 2016 and would phase out allowances by 2022. The climate bill passed last summer by the House provided 35 percent of emission allowances in 2016.

Under the Bingaman draft, merchant coal generators would receive 10 percent of the allocations for electric utilities with the rest provided to local distribution companies to help ease the burden of the increase in the cost of energy on consumers. The LDC allocations would be distributed based half on historic emissions and half on sales -- a compromise between utilities that rely on coal-fired generation and those that rely more on nuclear, gas and renewable energy.

The draft also includes a price collar to provide predictability of carbon allowance prices.

The price of allowances would not be able to rise above $25 a ton in 2012 and drop below $10 per ton. The price ceiling would increase each year by multiplying 105 percent of the previous year's price ceiling and the inflation adjustment for that year. The price floor would be adjusted by multiplying 103 percent of the minimum auction price plus inflation of the previous year, according to the draft.

The draft bill would cap only the utility sector until after the president determines that the United States' five largest developing-country trading partners had taken comparable action to reduce their greenhouse gas emissions. Industrial sources would be subject to the cap five years after the president makes such a determination. The president would conduct the first analysis by 2015 and would reassess the situation every two years.

The manufacturing sector would not receive free emissions allowances under the draft bill to offset potential increases in electricity costs. They could, however, opt in to the carbon pricing system. That provision is aimed at swaying moderate Democratic lawmakers, who have stressed the importance of allowing manufacturers to participate if they choose to.

Bingaman's draft would block U.S. EPA from regulating industrial sources' greenhouse gas emissions until January 2018. It would also prohibit states from implementing or enforcing greenhouse gas regulations from regulated sources from 2012 through 2017.

Click here to read the draft bill.

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