Kerry-Lieberman Sets the Stage for Climate Change and Energy Security Debate

On May 12, 2010, Senators Kerry and Lieberman introduced the American Power Act as the Senate's alternative to the Waxman-Markey bill previously introduced in the House of Representatives, known as the American Clean Energy and Security Act. The stage is now set for commencement of debate on how best to address climate change while enhancing energy security in the United States.

The American Power Act: Cap and Trade, Nuclear Power and Clean Coal

While the bill is called the American Power Act, many of its key provisions deal with reducing GHG emissions to capped levels, allocating allowances, regulating the trading of allowances and shifting energy production to less carbon intensive technologies. The stated goal is energy security through use of abundant domestic energy resources with significantly reduced emissions of carbon. The bill has drawn quick support from several large electric utilities.

Using 2005 as the baseline, the bill would cap GHG emissions at a level equal to a 17% reduction by 2020, 58% by 2030 and 83% by 2050. The first facilities affected by the American Power Act will be electric generation facilities. Large industrial facilities and natural gas local distribution company facilities will follow by 2016. Refineries and transportation fuel facilities are not covered in the bill. The bill also preempts state cap-and-trade regulation and significantly limits the EPA's authority to regulate GHGs. Allowances will be provided to the companies that achieve reductions, with most of the revenue from sales of allowances dedicated to rate reductions for consumers.

The bill provides numerous incentives and protections for the development of nuclear energy generation and reprocessing of nuclear fuel. In addition, there are provisions that will insulate consumers from possible cost overruns in constructing nuclear generation facilities as well as provisions to promote clean coal technology through carbon capture and sequestration. The centerpiece of the bill is $2 billion set aside annually for development of capture and sequestration as well as incentives for the commercial deployment of 72 GW of generation using such technologies to divert the GHG emissions.

American Power Act v. ACES: Key Differences

The American Power Act does not include a national renewable energy standard. ACES does. The American Power Act also does not contain the energy efficiency measures that are an important aspect of the ACES bill.

Silence on Critical Renewable Energy Incentives

Neither the American Power Act nor ACES address certain incentives industry advocates claim are critically important to various renewable energy alternatives. For instance, both fail to address extension of the volumetric ethanol excise tax credit, the bio-diesel tax credit, definitions for the biomass industry to include algae and biomass heating applications, or extensions of existing tax credits for wind, solar, geothermal and biomass.

What's Next? While key supporters exist for both the American Power Act and ACES, it seems likely that there will be vigorous debate in 2010, but not new legislation. Perhaps most importantly, the stage is now set to begin formally addressing climate change while increasing energy independence and security.