SummaryoftheAmericanPowerAct(KerryLieberman)

OnMay12,2010,SenatorKerry(DMA)andSenatorLieberman(ICT)releasedtheirdraftlegislation,
theAmericanPowerAct(APA).Thisbillcontainsacomprehensive,sectorbasedapproachtoenhancing
energysecurity,spurringthedevelopmentanddeploymentofcleanenergytechnologies,andreducing
greenhousegasemissions.Thebillcontainsthefollowingseventitles:domesticcleanenergy
development,globalwarmingpollutionreduction,consumerprotection,jobprotectionandgrowth,
internationalclimatechangeactivities,communityprotectionfromglobalwarmingimpacts,and
budgetaryeffects.

DomesticEnergyProduction

Inanefforttoincreaseproductionofnuclearpower,TitleIofthebillroughlytriplesthesizeofthe
existingloanguaranteeprogramto$54billion,doublesthecurrentregulatoryriskinsuranceprogramto
coverupto12reactors,includesarangeoftaxincentives,andstreamlinesaspectsofthelicensing
process.

Toexpanddomesticsuppliesofoil,thebillprovidesforrevenuesharingfromdrillinginareasofthe
outercontinentalshelfthatwereformerlysubjecttodrillingmoratoriawith37.5percentofrevenues
directedtostatesand12.5percentforuseundertheLandandWaterConservationFund.Itallowsa
statetoenactalawprohibitingdrillingwithin75milesofitscoastlineandrequirestheDepartmentof
Interiortoconductimpactstudiesofpotentialoilspills.Basedonthesestudies,statesthatarefoundto
bedirectlyimpactedbypotentialspillsareallowedtotakeactiontobanleasingfromdesignatedsites.

Tosupportcontinueduseofcoal,thebillprovidesfinancialincentivesforcarboncaptureandstorage
(CCS).ThebillcreatesaspecialfundingprogrammanagedbytheDepartmentofEnergytosupportinitial
largescaleCCSdemonstrationprojectsusingtheproceedsfromachargeonfossilbasedelectricity.The
billalsousesallowancevaluetoprovidefinancialincentivesforwidespreadcommercialdeploymentof
CCS.

ScopeofCoverage

Thebillcoversemissionsfromtheapproximately7,500majorstationarysourcesthatemitgreaterthan
25,000tonsperyearofgreenhousegasemissions.Itcoversproducersofgeneratorsofelectricity,
petroleumfuels,distributorsofnaturalgas,producersofcertainfluorinatedgases(Fgases),andother
specifiedsources.Greenhousegasesthatarelimitedunderthebillincludecarbondioxide,methane,
nitrousoxide,sulfurhexafluoride,perfluorocarbons,nitrogenfluoride,andhydrofluorocarbonsemitted
asabyproduct.

Targets

Thebillestablishesgoalsforeconomywideemissionreductionsfrom2005levels:4.75percentby2013,
17percentby2020,42percentby2030,and83percentby2050.Specificreductionrequirementstake
effectin2013forelectricitygeneratorsandtransportationfuels,whilelocalnaturalgasdistributorsand

May2010
industrialsourcesofemissionsarecoveredbeginningin2016.Emissionsfromtransportationrelated
fuelsarecoveredundertheoverallcap,buttheyaretreatedseparatelywithallowancessetasideand
directlypurchasedbyrefinedproductprovidersfromthegovernmentatthemostrecentauction
allowanceprice.Asectionofthebillalsocallsforfastmitigationactionsincludingsettingaseparate
caponhydrofluorocarbons(withan85percentphasedownrequiredby2033),studyingandpossibly
reducingemissionsofblackcarbon,providinggrantsfromUSDAtoconductpilotprojectsofsoil
sequestration(biochar),andsupportingtheMethanetoMarketsinternationalprogram.

DistributionofAllowances

Thebillestablishesanumberofmechanismstoaddresscostimpactstoconsumersandbusinessesand
tosupportcleanenergytechnologies.Beginningin2013andannuallythrough2029,emission
allowancesaredirectedtocompensateforincreasesinenergybills.Thisallowancevalueisprovidedto
allconsumers(residential,commercial,andindustrial)throughlocaldistributioncompaniesfor
electricityandnaturalgas,andthroughstatesforhomeheatingoil.

Inaddition,thebillestablishesarefundabletaxcredit,theWorkingFamiliesReliefProgram,forlow
incomefamiliesandanEnergyRefundProgramforqualifiedhouseholdsundertheSocialSecurityAct.
Beginningin2026,thebillalsoestablishesaUniversalTrustRefundwithsomeofthevaluefrom
auctionsusedfordeficitreduction(25percent)andtheremainderdirectlyrefundedtothepublic.

AllowancevalueforthetransportationsectorisusedtosupporttheHighwayTrustFund,aCleanVehicle
TechnologyFund,transportationimprovementprogramssimilartothoseimplementedunderthe
AmericanRecoveryandReinvestmentAct,andstateandmetropolitaneffortstoreduceGHGemissions
throughtransportationplanning.Allowancevalueisalsousedtocompensatefirmsforearlyactionsto
reduceemissionsandstatesforrevenueslostthroughtheeliminationofstategreenhousegascapand
tradeprograms.Allowancevaluealsoissetasidetofundnaturalresourceadaptationprogramsand
deficitreduction.

OffsetsandCostContainment

Thebillestablishesanannualcompliancerequirementbutallowsunlimitedborrowingfromthe
followingyearsallowanceswithoutanypenalty.Italsoallowsforfirmstosatisfyupto15percentof
theircomplianceobligationusingallowancesborrowedfromupto5yearsinthefuture(atacostof8
percentannually).Firmsarepermittedtobankallowancesforfutureusewithoutanyrestrictions.

Thebillallowsthosewithcomplianceobligationstouseoffsetstomeetpartoftheirobligations.Thebill
setsoveralllimitsontheamountofoffsetsthatcanbeusedat2billiontonsperyear,ofwhich75
percentmustbefromdomesticsources.Ifdomesticoffsetsfallshortoftheallowablelimit,theceiling
oninternationaloffsetswouldbeincreaseduptoamaximumlevelof1billiontonsperyear.It
establishesanindependentadvisorycommitteetoidentifyandupdatelistsofeligibleprojecttypesand
requirestheEnvironmentalProtectionAgency(EPA)andtheUSDepartmentofAgriculture(USDA)to
makedecisionsbasedontheserecommendations.ThebillcontainsalistofprojecttypesthatEPAand
USDAmustincludeintheirinitiallistofeligibleprojecttypes.Italsoallowstheuseofoffsetsfrom
existingprogramsthatmeetspecifiedcriteriainordertocreateanearlysupply.Thebillestablishesa
similaradvisorygroupandoffseteligibilityprocessforinternationaloffsets.

May2010
Thebillcontainsahardpricecollarsetinitiallywithafloorat$12tonandaceilingof$25(inconstant
2009dollars)pertonwitheachescalating,respectively,at3percentand5percentaboveinflation
annually.Thebillalsoincludesastrategicreservefromwhichallowanceswouldbesoldiftheprice
ceilingisreached.

TradingandRegulationofGreenhouseGasMarkets

ThebillamendstheCommodityExchangeAct(CEA)toregulategreenhousegasinstrumentsinthesame
mannerasagriculturalcommodities.Itrequiresthatalltradingofgreenhousegasinstrumentstake
placeonanexchangeandbeclearedthroughacarbonclearingorganization.Itlimitsparticipationinthe
tradingofallowancestoregulatedcarbonmarketparticipantsandcomplianceentities,butitdoesnot
restrictwhocanparticipateinthetradingofderivatives.ThebillamendstheCEAtoallowforsettingof
positionlimits(e.g.,limitsontheamountorpercentheldbyasingleentity)topreventexcessive
speculation.

ImpactonStateandEPAPrograms

ThebillestablishesaprohibitiononstatelevelGHGemissionscapandtradeallowanceprograms.It
alsopreventstheAgencyfromsettingperformancestandardsforcappedsources(exceptforthe
standardsthatarespecifiedforcoalfiredutilitiesoncecarboncaptureandstoragetechnologyis
demonstrated,andtheapplicationof111(d)regulationtocoalpowerplantsbuiltpriorto2009)but
allowsEPAtosetstandardsundercertainconditionsforuncappedsources.

ImpactonIndustryandInternationalCompetitiveness

Inadditiontodelayingemissionlimitsontheindustrialsectoruntil2016,thebillalsograntsallowance
rebatestothoseindustriesthatmeetspecifiedcriteriaasenergyintensiveandtradeexposed.Italso
requiresthePresidenttoestablishanInternationalReserveAllowanceProgram,whichwouldrequire
importsinspecifiedsectorstopurchasesuchallowancesunlessaspecifiedpercentageofglobal
productiontakesplaceincountrieswithequivalentobligations.Thisprogramwouldtakeeffectin2020
unlessthePresidentdeterminesthataneffectivebindingagreementhasenteredintoforcethat
equitablyincludesallmajoremittingcountriesorthatsuchaprogramwouldnotbeintheeconomicor
environmentalinterestsoftheUnitedStates.

CleanEnergyTechnologyandJobs

Thebillincludesarangeofgrantsandprojectstopromotecleanenergycareerdevelopmentand
training.ThebillestablishesaCleanEnergyTechnologyFundandaCleanVehicleTechnologyFundto
developenergytechnologiesandpromotesU.S.leadershipindevelopinganddeployingadvanced
technologies.Thebillalsoextendsanddoublesthealternativefuelcreditsfornaturalgasvehicles.The
billalsoestablishesaCarbonConservationFundforinvestinginagricultureandforestryprojectsto
sequestercarbonandreducegreenhousegasemissions.

May2010