Kerry-Boxer Reported Out of Senate Environment & Public Works Committee; Other Committees Get Turn

Posted Dec. 7, 2009

In early November, the Senate Environment and Public Works Committee reported out a draft of S.1733, the "Clean Energy Jobs and American Power Act." The bill had no Republican support (Republican Committee members actually boycotted the proceedings). The draft contains a number of similarities to Waxman-Markey House bill, H.2454, but there are questions as to whether it can gain adequate votes in the Senate as it presently stands. Future action may focus on a compromise bill Senators Kerry, Graham and Lieberman are trying to hammer out with assistance from Administration officials.

It's now clear that further progress on the Senate version will not occur until next year, after the Copenhagen round of international climate talks, which officially started today. President Obama recently indicated that he would attend the opening of the Copenhagen talks, and indicated that the U.S. would commit to the reductions specified in the already passed Waxman-Markey bill, which are slightly lower than those included in S.1733.

How Do Waxman-Markey and Kerry-Boxer Differ?

Key differences between Waxman-Markey and Kerry-Boxer as it was reported out of the Environment & Public Works Committee (EPW) can be discussed under eight broad topic areas.

1. Differences in the Cap. For the period 2017-2029, the cap on emissions under Kerry-Boxer is slightly more stringent than it was under Waxman-Markey, with Kerry-Boxer starting at 20% below 2005 levels and Waxman-Markey at 17%. The Congressional Research Service (CRS) depicts the difference between the bills with this chart (see Congressional Research Service, Report R40896, "Climate Change: Comparison of the Cap and Trade Provisions in H.R. 2454 and S.1733" (Nov. 5, 2009), at 6.


2. Different Allocations of Allowances and Auction Revenues: Allowances would be allocated to assist with cost containment for specified impacted entities, such as petroleum refiners, as well as to other impacted sectors, such as states adapting to climate change impacts. The bills specify uses where allocations go to entities that are not covered by the cap. Both bills create a "strategic reserve" meant as an emergency supply to guard against market volatility. Over time, the quantity of allowances auctioned increases, and both Kerry Boxer and Waxman Markey incorporate the notion of a "price collar" - that is, a minimum price (nominally $10 in both bills though they use different base years) and a maximum price. The CRS charts depicting the different allocations between the two bills in 2016 and 2030 are below:


3. Different Provisions Regarding Offsets and Their Regulation.


• Amount. The Senate and House bills differ both limit the total amount of offsets permitted to be used in the scheme in any one year to 2 billion tons. Waxman Markey says half of these offsets can be international, Kerry Boxer says only 25% can. Both allow increases in the use of international offsets if domestic supply is inadequate.


• Kind. Analysis by ICLEI-USA suggests that domestic landfills could be a permissible source of offsets under Kerry-Boxer, but not Waxman-Markey, because they would likely be subject to new stationary source requirements under Waxman-Markey and would thus not be "additional."


• Regulatory Authority. Kerry-Boxer gives authority to the President for regulating domestic offsets, and to EPA for regulating international offsets. Waxman-Markey gives authority over domestic agricultural and forestry offset programs to the U.S. Department of Agriculture, and over other domestic offsets and international offsets to EPA.


4. Regulation of GHGs under Existing Clean Air Act. The U.S. Supreme Court's ruling in Massachusetts v. EPA opened the door to regulation of greenhouse gases under the existing Clean Air Act, and EPA has taken steps to limit GHG emissions in several discrete areas. EPA's regulation of motor vehicles for GHGs effectively became law when the White House, the big automakers, and California and the States that adopted its more stringent GHG standard for autos announced a compromise earlier this year. EPA is also considering regulating large stationary sources under the Prevention of Significant Deterioration (PSD) program. Kerry-Boxer would allow EPA to proceed with regulation under the PSD program while Waxman-Markey would not.


5. Preemption. Kerry-Boxer and Waxman-Markey have largely identical language regarding preemption of State cap and trade schemes for the period 2012-2017. Compare S.1733, § 125 (inserting new Clean Air Act § 861), with H.2454, § 335 (same). There are two differences - but one is in nomenclature only:


• Kerry-Boxer uses the term "Comprehensive Greenhouse Gas Emissions Limitation Program" to refer to state programs that would be preempted; Waxman-Markey refers to them as "Cap and Trade [Schemes]." Though the term used in Kerry Boxer seems broader, the definition in both bills is identical - a "system of greenhouse gas regulation under which a State or political subdivision issues a limited number of tradable instruments in the nature of emissions allowances and requires that sources within its jurisdiction surrender such tradable instruments for each unit of greenhouse gases emitted during a compliance period." The definition in both bills specifically excludes targets or limits on GHG emissions implemented other than through the issuance and surrender of a limited number of tradable instruments in the nature of allowances.


• The difference of substance between Kerry-Boxer and Waxman-Markey on preemption is one of timing: Kerry Boxer provides that "if a Federal auction is conducted" by the statutory deadline of March 31, 2011, state cap and trade schemes may not be enforced that covers any capped emissions during the period 2012-2017, and if such an auction is delayed, State enforcement during the 2012-2017 period would be prohibited nine months after the date of the first federal auction. Waxman Markey would prohibit state cap and trade enforcement during the five-year window regardless of whether a federal auction occurs.


6. Carbon Market Regulations. Waxman-Markey provides for Federal Energy Regulatory Commission oversight of the cash allowance market, and Commodity Futures Trading Commission oversight of the derivatives market. Kerry Boxer recognizes that oversight is necessary but does not yet delegate this responsibility. Manager's Amendment, Div. B, § 131.


7. Trade Implications. Waxman-Markey contains a provision to prevent "leakage" and the importation of products from carbon-intensive industries from countries that do not sufficiently regulate GHG emissions by requiring the purchase of "international reserve allowances" by the importer. H.R. 2454, adding Clean Air Act § 768. Kerry-Boxer does not presently have a counterpart provision, but a number of Senators indicated that a trade limitation of this sort was necessary in a letter to President Obama regarding the U.S. position at the Copenhagen talks.


8. Allowances to State and Local Government Entities. Both bills contain a number of provisions for distribution of allowances and revenue from the sale of allowances to state and local governments and tribal governments. They differ in how this is accomplished. Such funding is allocated to energy efficiency projects, transportation projects or planning that may reduce GHG emissions, and various adaptation planning and projects. A more detailed analysis of the Senate and House versions is available from ICLEI-USA.

What Are the Prospects for Kerry-Boxer?

Although Kerry-Boxer has been reported out of the Environment and Public Works Committee despite Republican opposition, it should be considered by an additional five Committees in the Senate before being reported out for a vote. Among those is the Senate Finance Committee chaired by Democrat Max Baucus, which is expected to be next to mark up the bill. Chairman Baucus was the only Democrat on the Environment and Public Works Committee who voted against reporting the bill out, and there are questions as to how quickly he would get his Committee to act on the legislation. EPW Chairwoman Boxer stated that she expected the Finance Committee to act on the bill "in January," but Baucus has said he only intends to do so "in the early part of next year." DC Hill Update 11/23: Senate Climate Bill Scheduled to Pass by "Early Spring," 1Sky.org, 11/24/09.

The draft faces other sticking points. Several Democratic Senators from coal states have indicated concerns, and their votes would be crucial to passage of this bill.

What Alternatives Are There to Kerry Boxer?

Given the difficulties noted above for the Kerry Boxer draft, and the need to get 60 votes in the Senate to overcome a filibuster and approve any climate treaty, Administration officials and several Senators are looking for options that can gain more Republican support. Working from an editorial Senators Kerry and Graham published in the New York Times, and Lieberman, in cooperation with Administration officials, have been working on a compromise energy and climate proposal; they plan to deliver a bill to Senate Majority Leader Reid for approval. If they get it, the alternative bill would then go to the Congressional Budget Office and the EPA for analysis. Some coverage indicates that the alternative might place limits on power plant emissions and include measures to improve energy efficiency. ["Talk of a Plan B," New York Times, 11/18/09].