While the APA bill of the US, whose draft was unveiled recently, is widely believed to have no chance of sailing through in 2010, it is pertinent to note its key provisions as future versions might carry several of its tenets.
Wouldn’t you think it would be utterly rash to predict, or even mention the poser, when India might have its climate legislation? After all, there is no urgency or need yet. The recently released GHG 2007 report by the INCCA states that, while India’s 1.72 Gt-CO2 equivalent aggregate GHG emissions in 2007 makes it ranked 5th in the world, behind USA, China, EU and Russia, the emissions intensity of India’s GDP declined by more than 30% since 1994, the year for which the first official National Communication estimates were brought out about 6 years ago.
Okay, so how about a comprehensive legislation for energy sector? Soon it will be a decade since the last good thing happened in the sector – the Electricity Act of 2003. The other good things in the intervening period have happened due to that Act itself. Although the report of a well-empanelled Expert Committee on Integrated Energy Policy did come out about four years ago, it didn’t get onto a transformational path to comprehensive energy legislation.
One has to admit, from a non-expert view on legislative matters, that the task of bringing broad-view based legislations, especially on climate and in energy sector, which are likely to have pervasive impacts on all sectors of the economy, is easier said than done.
The Kerry-Leiberman Bill
After studying the draft American Power Act bill (APA Bill), which Senators Kerry and Lieberman unveiled on May 12, 2010, I have to say that when it comes to climate legislation, often slammed as climate policy laggard, the US government has gone several miles in framing the cap-and-trade pathway that it wishes to take on the tricky, arduous and uphill task. In any case, in order to learn, it would be pertinent to point out some important things in the draft text.
The draft bill follows up from last year when US House of Representatives narrowly passed the Waxman-Markey bill, the American Clean Energy and Security (ACES) Act of 2009.
The bill’s objective is “To secure the energy future of the United States, to provide incentives for the domestic production of clean energy technology, to achieve meaningful pollution reductions, to create jobs, and for other purposes.” The statement looks like the keywords – energy security, domestic production, clean energy, technology, emissions reductions, and jobs – put together in a coherent and well-articulated structure. Nonetheless, that’s what it is about.
Key Features of the draft APA Bill
First, let us see the cap-and-trade provisions in the subtitle ‘Global Warming Pollution Reduction’. From the base level of 2005 emissions, the bill targets emissions reduction of 4.75% by 2013, 17% by 2020, 42% by 2030 and 83% by 2030. The cap and trade system would be in place for Power and Refining sectors in 2013, while for other designated manufacturing sectors in 2016. However the coverage is limited to only Large Point Sources, i.e., polluters with more than 25,000 tCO2-equivalent annual emissions. Carbon price range is set at $ 12 – 25 /ton with annual inflation adjustments of 3% for floor and 5% for ceiling.
The Environment Protection Agency (EPA), which itself is trying to put forth an alternative GHG regulation in case of APA Bill’s failure, is designated by APA bill to set emissions allowances. Allowances would be fully provided in early years but by 2030, all allowances would need to be purchased. It sets non-compliance penalties at double the auction clearing price per ton of CO2 equivalent.
The bill also has provisioned for the market regulation check, similar to Waxman-Markey’s House Bill. It prohibits trading in derivatives and limits permit auction to covered emitters.
Finally, existing GHG cap-and-trade programs in States would have to shutdown against compensation from the Federal government.
Like the Waxman-Markey bill, it also proposes “border tax” on imported products from countries with no carbon legislation. This provision, even if it is WTO-consistent, has raised doubts internationally.
Under the subtitle ‘Domestic Clean Energy Development’, noteworthy are the massive provisions for nuclear and clean coal technologies. It proposes increasing funding for Loan Guarantee Program to $54 Billion for Nuclear. Emphasis on deployment of Clean Coal technologies comes out vividly from its intent of commercial deployment of 72 GW of capacity for Carbon Capture and Sequestration technology with the power sector, within next 23 years. While Renewable Portfolio Standards obligation is not mentioned, the bill expands clean energy manufacturing tax credit by $ 5 billion.
Among other major provisions, transportation sector would attract $ 7 billion funding per year for improving transportation infrastructure and efficiency. Plug-in hybrids and natural gas vehicles also have generous incentives. If this bill is enacted, this would be a bid boost for the nascent industry.
Some provisions that are, as some writers have pointed out, ‘to buy-in the opponents’ have also been included. One such provision limits offshore drilling. This is possibly a response to the Deepwater Horizon rig accident and resultant oil spill in the Gulf of Mexico. Under this, there would be an option for coastal states to opt-out of drilling up to 75 miles from their shores, and directly impacted states can veto the drilling plans, while coastal states pursuing drilling to receive 37.5% of revenues for safety funds. In another provision, it would be mandatory to disclosure the composition of liquids being employed for Natural gas fracking.
Conclusion
In all, there are several takeaways from this bill. In drafting this bill, while they had the benefit of experience of EU, where a cap-and-trade system is in place, they also had the benefit of experience of Australia, where non-acceptance led to shooting down the proposed cap-and-trade system. The promoters of APA Bill are hoping to take it to the floor for Congressional debate in June or July. However, the analyst- and policy-watchers- communities have discounted the unveiling as a non-event, widely believing that it has no chances in 2010, mainly due to impending Senate elections.
I believe that even if this bill doesn’t succeed this time, future versions would carry several of the tenets contained in this text.
Dr Ashish Rana works in a leading private sector company. He has been a Lead Author in Working Group III of the IPCC. The views expressed here are solely those of the author and do not reflect those of his employers.
References
http://moef.nic.in/downloads/public-information/Report_INCCA.pdf
http://kerry.senate.gov/americanpoweract/pdf/APAbill.pdf
http://www.opencongress.org/bill/111-h2454/text
http://www.ens-newswire.com/ens/may2010/2010-05-14-091.html
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