The Evolution and Anatomy of

Recent Climate Change Bills in the U.S. Senate:

Critique and Recommendations

Kenneth RichardsSchool of Public and Environmental Affairs

&

Stephanie Hayes RichardsBloomington Energy and Environmental Intelligence

The Evolution and Anatomy of

Recent Climate Change Bills in the U.S. Senate:

Critique and Recommendations

• The two major climate change bills in the U.S. Senate were:S. 2191: America’s Climate Security Act of 2007 (Lieberman-Warner)S. 1766: Low Carbon Economy Act of 2007 (Bingaman-Specter)

• Initial analysis was published in the Environmental Law Reporter

• On May 20, Senator Barbara Boxer introduced a Manager’s Amendment to the Lieberman-Warner Bill (S. 3036)

• Manager’s Amendment scheduled to be discussed on the Senate floor this week

• Summary of draft analysis of Manager’s Amendment presented today

The Evolution and Anatomy of

Recent Climate Change Bills in the U.S. Senate:

Critique and Recommendations

• Emission Reduction Targets

• Cost-Containment Mechanisms

• Point and Scope of Regulation

• Incentives for Activities Outside the Covered Facilities

• Distribution and Auction of Allowances

• Earmarking and Use of Auction Revenues

• Strategic Approach

Major Features of the Manager’s Amendment (S. 3036)

• Emission reduction targets similar to Lieberman-Warner bill

• Allocation of allowances closely resembles Lieberman-Warner bill

• Point and scope of regulation is primarily upstream, similar to Bingaman-Specter bill

• Cost containment mechanisms include a safety valve, as does the Bingaman-Specter bill

Major Features of the Manager’s Amendment (S. 3036)

• Enhanced environmental integrity, including minimum reserve price for allowances

• Movement towards behavior changes with more balanced technology approach

• Reduced technological lock-in, particularly with CCS, elimination of 4 billion CCS bonus allowances

• Deficit reduction fund, which directs some auction revenues to General Fund

• Reduced interference with price signal

•Requirement of “reproducibility” in offset estimation methods

Historical EmissionsS. 1766

S. 2191

S. 1766 Cond

IPCC 50

IPCC 85

2000 Emissions Levels

S. 3036

Business As Usual

Emission Reduction Targets

Cost-Containment Mechanisms

Lieberman-Warner

(S. 2191)

Bingaman-Specter(S. 1766)

• Trading

• Borrowing up to 15 percent of emissions up to 5 years from use year at 1.1 times “the number of years beginning after the use year and before the source year

• Unlimited Banking

• Trading

• No borrowing provision

• Unlimited banking

• “Technology Accelerator Payment” of $12/metric ton CO2 equivalent in 2012 (5 percent increase each year)

Cost-Containment Mechanisms

Manager’s Amendment

(S. 3036)

• Trading

• Borrowing up to 15 percent of emissions up to 5 years from use year at 10 percent compound interest

• Unlimited Banking

• Emergency “off ramps”Increase allowances borrowed

Adjust repayment periodRelaxed constraints on international

allowances/off-sets

•Minimum reserve price for Regular Auctions of $10 in 2012 (increases by 5 percent/year)

• Cost containment auctionsMinimum price of $22 per allowance | Maximum price of $30 per allowanceIncreases by 5 percent/year after 2012

Point and Scope of Regulation

Energy Source

Direction of Regulation

Lieberman-Warner

S. 2191

Bingaman-Specter

S. 1766Manager’s Amend

S. 3036

Coal Downstream Downstream Downstream

Natural Gas Downstream Upstream Upstream

Oil Upstream –transportation fuel; Downstream –industrial

Upstream Upstream

Nonfuel chemicals

Upstream Upstream Upstream

% Emissions Regulated

80 percent 85 percent 84 percent

% Emissions Excluded

15 percent 15 percent 16 percent

Activities Outside the Cap

Activity

Accounting Method

Lieberman-Warner

S. 2191

Bingaman-Specter

S. 1766Manager’s Amend

S. 3036

Domestic Offsets Off Budget(15 percent)

Off Budget(Unlimited)

Off Budget(15 percent)

Int’l Offsets NA Off Budget (10%)

Off Budget(5%; Carry Over)

Int’l Market Allowances

Off Budget (15%)

Off Budget(Unlimited)

Off Budget(Unlimited; CO)

Early Action On Budget(1-5%; 2012-2016)

On Budget(1%; 2012-2020)

On Budget

(1-5%; 2012-2025)

CCS Bonuses On and Off Budget(4% plus 4 B bonus)

On Budget(8%)

On Budget(1-4%; Kick Start)

Ag and Forestry On Budget (5%)

On Budget(5%)

On Budget(4.25 – 4.5%)

Int’l Forest Projects

On Budget

(3%)

NA On Budget

(1%; Carry over)

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050

Year

Distribution of Allowances under Lieberman-Warner Bill (S. 2191)

Auction

Forest Carbon

States

CCS

Agriculture and Forestry

Industry

Early Action

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050

Year

Distribution of Allowances under Bingaman-Specter Bill (S. 1766)

Auction

States

CCS

Early Action

Agriculture and ForestryIndustry

0

1,000

2,000

3,000

4,000

5,000

6,000

2012 2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048

Other

Auction

Forest Carbon

States

CCS

Early Reduction

Agriculture

Industry

Distribution of Allowances under Manager’s Amendment (S. 3036)

Auction

States

CCS

Early Action

Agriculture and Forestry

Industry

Forest Carbon

Other

Distribution of Auction Revenues

Program Area

Percentage

Lieberman-Warner

S. 2191

Bingaman-Specter

S. 1766Manager’s Amend

S. 3036

Energy Assistance Fund

20% 17% Decreasing

4%Increasing

Climate ChangeWorker Training

5% NA 14%Increasing

Adaptation Fund 20% 33%Increasing

29%Increasing

Energy Technology Development

55% 50% 18%Decreasing

Energy EfficiencyConservation Block

Grants

NA NA 8%Decreasing

Deficit Reduction NA NA 23%Increasing

Climate Security Act

5% NA 3%

Decreasing

Strategic Approach “Report Card”

Sector

Grade

Lieberman-Warner

S. 2191

Bingaman-Specter

S. 1766Manager’s Amend

S. 3036

Buildings A F A

Industry B B B+

Forestry A- C A

Waste C B B+

Energy B B B+

Transport C D A-

Agriculture C D B-

Water C F B

Infrastructure B- B+ B+

Human Health C F B-

Tourism C F B-

Manager’s Amendment (S. 3036) and Coal/Electric Power

•Important changes from previous bills

• Reduced level of bonus payments for CCS capture, but introduction of “Kick-Start program” to fund development

• Reduced emphasis on price subsidies• Reduced earmarking for technology development • Increased funding for support of worker

• Remaining issues:• Lack of distinction between utilities subject to state ratemaking

and those that are not• Design of “cost-containment auction”• Development of offset estimation methods and extension to

international offsets