U.S. Climate Change Bill to be Introduced

Senators Lieberman and McCain intend to introduce legislation early in the 108th Congress that would require the U.S. Environmental Protection Agency (EPA) to create regulations to limit the greenhouse gas emissions from the electricity generation, transportation, industrial, and commercial economic sectors as defined by EPA’s Inventory of U.S. Greenhouse Gas Emissions and Sinks. The affected sectors represent approximately 85 percent of the overall U.S. emissions for the year 2000. The bill also would provide for the trading of emissions allowances and reductions through the government provided greenhouse gas database which would contain an inventory of emissions and registry of reductions.

Washington D.C. – March 16, 2004 [SolarAccess.com] Targets: The bill would establish two targets; one for the year 2010 and the other for the year 2016. The 2010 target would set the U.S. emissions level for the affected sectors at 5896 million metric tons (or the year 2000 levels). The 2016 target would set the U.S. emissions level for the affected sectors at 5123 million metric tons (or the year 1990 levels). The quantity of emissions (number of tons) would be specified, as opposed to specifying the year, and are based upon the EPA’s Inventory of U.S. Greenhouses Gas Emissions and Sinks, which is submitted annually to the United Nations as part of the U.S.’s commitment under the United Nations Framework Convention on Climate Change. The methodologies used are consistent with other international practices for measuring a country’s greenhouses gas emissions. The bill’s emissions limits would not apply to the agricultural and the residential sectors. Certain areas within the affected sectors may be exempt if the Administrator determines that it is not feasible to measure emissions from that area. These limits would be subject to a bi-annual review for adequacy by the Under Secretary of Commerce. Allowances: All covered entities, those which emit more than 10,000 metric tons of greenhouse gases per year, would be required to submit to the EPA one tradeable allowance for each metric ton of greenhouse gases emitted during the reporting period. For the transportation sector, each petroleum refiner or importer would be required to submit an allowance for each unit of petroleum product sold that will produce a metric ton of emissions. The Administrator will determine the amount of emissions that will be emitted when a unit of petroleum products is used. The Secretary of Commerce would be required to determine the amount of allowances to be given away or “grandfathered” and the amount to be auctioned. The Secretary’s determination would be subject to a number of allocation factors identified in the bill. Proceeds from the auction would be used to reduce energy costs of consumers and assist disproportionately affected workers. Consideration would be given to any company that would be willing to commit to meeting the year 2016 targets by the year 2010. Alternatively, an entity may satisfy up to 15 percent of its emission reduction requirements by submitting tradeable allowances from another nation’s market in greenhouse gases, submitting a registered net increase in sequestration, or submitting emission reductions that was registered by a person that is not a covered entity. After the year 2016, this limit would be reduced to 10 percent. If a covered entity has an excess of tradeable allowances for a reporting period, the entity may hold those allowances in order to sell, exchange, or use in the future. The bill also would allow for the buying and selling of credits earned under the Corporate Average Fuel Economy (CAFE) program. Credits from the program would be earned when a manufacturer exceeds the CAFE standards by more than 20 percent. Manufacturers would be allowed to purchase up to 10 percent of their requirements to meet the CAFE standards. Penalty: Any company not meeting its emissions limits would be fined for each ton of greenhouse gases over the limit at the rate of three times the market value of a ton of greenhouse gas. The market value would be based upon the price of emission credits from trading system provided for in the bill. Additionally, any company planning to make capital investments or deploy technologies within the next 5 years would be allowed to borrow against those expected future reductions to meet current year requirements. The loan would include a 10 percent interest rate. Trading: The trading aspects of the bill would be accomplished by incorporating the registry system that was included in last year’s Senate-passed Energy bill. It would allow companies that realized a verifiable emission reduction to register that reduction in the registry and subsequently trade them on the open market. Companies not regulated under the mandatory limits would be permitted to participate in the trading system. By participating, they would be required to report their emissions as part of the emission reduction verification process. This provision would allow regulated companies to trade emission reduction with non-regulated companies. The EPA Administrator would be required to implement a comprehensive system for greenhouse gas reporting, inventorying, and reductions registrations. The system would be, to the maximum extent possible, complete, transparent, and accurate. The system should also minimize costs incurred by entities in measuring and reporting of emissions. The Secretary of Commerce, within one year of enactment, would be required to develop measurement and verification standards and standards to ensure a consistent and accurate record of greenhouse gas emissions, emissions reductions, sequestration, and atmospheric concentrations for use in the registry. Research: The bill would establish a scholarship program at the National Science Foundation for students studying climate change, require a report from the Department of Commerce on technology transfer, and require a report from the Secretary of Commerce on the impact of the Kyoto Protocol on the U.S. industrial competitiveness and international scientific cooperation. The bill also would make changes to the U.S. Global Change Research Program, establish an abrupt climate change research program at the Department of Commerce, and establish a program at the National Institute of Standards and Technology in the areas of standards and measurement technologies.

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