By a vote of 74-14, the Senate voted yesterday (June 2) to "invoke cloture" to proceed to debate on Senate Environment and Public Works Committee Chairman Barbara Boxer's (D-CA) revised version of the Committee-passed Lieberman-Warner climate change bill, S. 3036. It is important to note that this vote was a procedural vote and does not reflect where Senators will be on substance. The Senate is now engaged in 30 hours of "post cloture" debate, before proceeding to debate on the merits of the bill.
Given the cost and complexity of the bill, support even among Democrats appears to be eroding. Therefore, it is unclear how the Democratic leadership will proceed with debate, and amendments, on the bill. Despite this uncertainty, numerous amendments on both sides of the aisles are being prepared, and may be offered, including those related to enhancing nuclear power development and increasing funds for low-and middle-income families affected by the bill, among others. Furthermore, the President has threatened to veto the revised bill (see related update below).
The following are some of the changes included in S. 3036 from the Committee-passed bill:
To address budget deficit concerns raised by the Congressional Budget Office, the revised bill now directs the EPA Administrator to auction a certain number of allowances from the available allowance "pool" to raise cash to pay the difference between the level of revenues the climate program raises and the level new federal spending. In 2012, 5.75% of the pool will go to deficit reduction. This will grow to 16.75 % in 2050;
- In order to allocate allowances for deficit reduction, which was not contemplated in the bill as reported from committee, the percentage of allowances allocated to other entities and functions were also adjusted. For example, transition allowances to fossil-fueled generators in 2012 will now be 18%, instead of 19% in the Committee-approved bill. However, fossil fueled generators will get a greater percentage allowances in 2030: 2.75% compared to 1% in the Committee-approved bill;
- Allowances for "new entrants" were zeroed out in S. 3036. The Committee-passed bill gave "new entrants" allowances from the 19% allocated to fossil-fueled from 2012 to 2030. In S. 3036, allowances for new entrants are eliminated, leaving new fossil-fueled generators to obtain needed allowances from the auction or other holders of allowances;
- Load-serving entities, now classified as "local distribution companies" receive a slight boost in allowances in S. 3036: 9.50 in 2012; 9.75% from 2013 to 2025 and 10% from 2026 to 2050. From this pool of allowances, 3.25% will go to local gas distribution companies each year of the program. Proceeds from the sale of these allowances may be used for a broader range of activities than in the Committee-passed bill: demand response, promotion of zero-and low-carbon distributed generation technologies and assistance to small business customers were added to the list that previously included assistance to low-and middle-income consumers and energy efficiency. Thirty-percent of the proceeds from sale of these allowances must go to residential customers;
- New authority is granted to the Carbon Market Efficiency Board to hold a "cost containment auction" each year from 2012 to 2027, to stabilize the allowance market. The Board shall offer a certain number of allowances at an initial price no lower than $22/metric ton and no higher than $33/metric ton. Six million allowances for this "cost containment auction" will be taken from the overall pool of allowances available for the program in 2030 to 2050. This is an attempt to address industry's request to include a "safety valve" that caps the cost of allowances; and
- As in the Committee-approved bill, a "covered entity" may meet up to 15% of its allowance requirements through the use of "offset" allowances. S. 3036, however, allows the use of international credits and international forest carbon credits developed through tree planting or forest restoration projects to be used if the covered entity does not have enough domestic offsets to meet the 15% provision.