New Climate Bill Could Be 'Best' Deal for Business

New Climate Bill Could Be 'Best' Deal for Business

Image CC licensed by Flickr user Skazama

Senators John Kerry (D-Mass.) and Joseph Lieberman (I-Conn.) unveiled today their long-awaited climate change bill, a day after its summaries were leaked to public and weeks after its Republican sponsor withdrew his support.

The American Power Act (PDF), the latest attempt in the Senate to deliver on a key piece of President Barack Obama's agenda, faces a tough uphill battle. Lindsey Graham, its one-time Republican sponsor, called passage "impossible" as recently as Friday.

But some say the bill could be as good as it gets for the business community, in terms of comparisons to previous bills, financial support, and something many businesses have been yearning for: certainty.

"This bill is the best that most sectors could hope for," said Truman Semans, principal at consulting firm GreenOrder, former member of the U.S. Climate Action Partnership Executive Committee, and past GreenBiz.com contributor. "I would characterize it as there being enough for everyone from a multisector perspective ... What they put together is a package that really provides something that is both economically viable but also a reasonable first step in terms of the environment."

Uncertainty over climate legislation has complicated long-term business decision making for a variety of sectors, said Ken Colburn, environmental policy director for Stonyfield Farm, a member of Business for Innovative Climate & Energy Policy (BICEP). Over the last year, he's noticed a "growing impatience" among businesses.

"Everybody in the business community knows it will happen," Colburn said. "Either they have been sitting on the sidelines with investment capital, waiting for some clarity. Or worst case, the investment capital doesn't really sit, it goes elsewhere and that's a real risk to America."

Even businesses some would consider to be far removed from potential regulation have watched to see how legislation would unfold.

"For us in the snowsports industry, we've been waiting for this for a long time," said Auden Schendler, director of sustainability at Aspen Skiing Company, also a BICEP member.

He foresees a slight uptick in power costs should APA become law, but "that burden is nothing compared to the burden of inaction."

"If will effect everything, every decision you make," Schendler said of the bill if it passes. "How you build your buildings, how you get your power, how you make manufacturer your stuff."

Utilities -- the largest source of U.S. emissions -- would benefit from the bill's passing in a few key ways, Semans said.

"The electric power sector is among those most in need of certainty in terms of capital planning and investment. This bill is really the best they're going to get now or in the future in terms of design criteria, especially for allocations," he said, noting that the Edison Electric Institute was heavily engaged in discussions on the emissions permit allocations.

"(It) provides support for nuclear, natural gas, carbon capture and sequestration," Semans continued. "In the absence of strong federal partnerships, these investments wouldn't happen for a long time."

The bill aims to reduce greenhouse gas emissions by 17 percent below 2005 levels by 2020, by 42 percent by 2030, and by 83 percent by 2050. The electric power sector would receive 51 percent of emissions permits in 2013 to help soften the shock of higher prices for customers, declining to 35 percent between 2016 and 2027. Natural gas producers would receive 9 percent of permits between 2016 and 2025, also for the benefit of consumers. The bill offers additional allowances and billions of dollars in loan guarantees and other incentives for nuclear, "clean coal" and other low carbon technologies.

Overall, 12.3 percent of allowances would be auctioned off between 2013 and 2019, leaving the rest -- nearly 88 percent -- to be handed out for free in the early years. Later, some of the growing auction proceeds would be directed toward the nation's deficit.

"The American Power Act sends two-thirds of all revenues not dedicated to reducing our nation’s deficit back to consumers from day one," Kerry and Lieberman said in the bill's short summary. "The rest is spent ensuring a smooth transition for American businesses and investing in projects and technologies to reduce emissions and advance our energy security. In the later years of the program, every penny not spent to reduce the deficit will go directly back to consumers." 

Not everyone is happy with the bill, including environmental groups Friends of the Earth and Center for Biological Diversity. Some recent foes of previous climate legislation attempts appear to be withholding final judgement until the bill is fleshed out.

“The National Association of Manufacturers appreciates the transparent and inclusive process Senators Kerry, Lieberman and Lindsey Graham (R-SC) pursued over the past few months in drafting this legislation," the organization said in a statement. "While we are encouraged by many of the provisions, we believe it is still a work in progress." 

Other aspects of the bill include:

•  Utilities would enter the program in 2013, with industrial sources participating in 2016. Petroleum refiners would fall under a separate but linked program. No outside parties, such as investors or banks, would be able to buy allowances in the emissions trading program. 

•  A hard price collar that would set the price of a ton of carbon dioxide equivalent at between $12 and $25.

•  Regional emissions trading programs, such as the Regional Greenhouse Gas Initiative in the Northeast, would be suspended, with participating states receiving compensation for any lost revenue.

•  States may opt out of any offshore drilling up to 75 miles from their shores, or veto drilling plans of they suffer significant negative effects from an oil-related accident.

•  A border tax would be imposed on imports on products from countries without climate change policies to prevent "leakage." Two percent of emissions would go toward trade-exposed industries between 2013 and 2015, increasing to 15 percent from 2016 to 2025.


The border tax is controversial, meant to protect heavy industry from unfair competition from those operating in countries without emissions reduction policies.

"My thought is most countries have been simply waiting for us to act," said Colburn of Stonyfield Farm of the border tax. "It's helpful politically, but how much it will be used may be less than we may have anticipated."

Many global manufacturers feel this type of trade distortion can carry serious consequences, Semans said, but the bill offers time for international systems to adjust.

"It could potentially create more harm than good, but is politically required for this package to pass," Semans said.

Whether or not the bill will pass remains to be seen. Chances diminished considerably when Graham walked away in the aftermath of Arizona's immigration bill. The Gulf oil spill added another wrinkle to the equation.

"It's a reminder we need to transition to a clean energy economy," Schendler said. "It's the most stirring statement of the externalities of the fossil industry."

The idea of a spill is understandable to Americans, Schendler said, but BP's inability to stop the leak has given the public a deeper understanding of oil drilling's potential consequences.

"But arguably, it's a perfect metaphor for what we are doing with CO2," he said. "We just can't see it."

GreenBiz.com Assistant Editor Jonathan Bardelline contributed to this article.

Image CC licensed by Flickr user Skazama.