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Comparison of Kerry-Lieberman Bill to House Greenhouse Gas Bill

May 14, 2010

Key Provisions


H.R. 2454

Cap-and-Trade Program Overview

GHG Reduction Targets

4.75% by 2013
17% by 2020
42% by 2030
83% by 2050

3% by 2012
Thereafter, same targets as Kerry-Lieberman

Phase in of Cap-and-Trade Program

2013 – Electric Power
Transportation Fuels
Heating Oil
Industrial Gas Producers
CO2 Sequestration

2016 – Industrial Sources
Natural Gas

2012 – Electric Power
Transportation Fuels
Heating Oil
Industrial Gas
CO2 Sequestration

2014 – Industrial Sources

2016 – Natural Gas

Transportation Fuels & Refined Products

Purchase allowances directly from EPA equal to carbon content of products sold during prior quarter

Price set quarterly, equal to clearing price at most recent federal allowance auction – same price for all covered sources

Participate in allowance and offset market like other covered sources

Banking allowances to meet future compliance obligations



Borrowing allowances with future effective dates to meet current compliance obligations

No limit on borrowing from the next year
Up to 15% of current obligation may be borrowed from 1-5 years ahead, w/ prepayment of 8% interest


Distribution of Emission Allowances (% of total annual allowances)

Federal auction with proceeds distributed through
Universal Refund

2026 – 8.1%
2027 – 21.5%
2028 – 33.7%
2029 – 47.1%
2030-2034 – 54.5%
2035-2050 – 77.8%

No similar provision

Electricity Consumers

2013-2015 – transition
2016-2025 – 35%
2026- 2029 – declining from 32% to 8.5%

2012-2015 – transition
2016-2025 – 35%
2026-2029 – declining from 28% to 7%

Natural Gas Consumers

2016-2025 – 9%
2026-2029 – declining from 7.2% to 1.8%


Home Heating Oil Consumers

2012-2015 – 1.9%
2016-2025 – 1.5%
2026-2029 – declining from 1.2% to 0.3%

2012-2015 – transition
2016-2025 – same
2026-2029 – same

Low Income Consumers

2013-2019 – 12.3%
2020-2029 – 10.6%
2030-2034 – 11.5%
2035-2050 – 12.5%

15% (auctioned to support assistance programs)

Trade-Vulnerable Industries

2013-2014 – 2%
2016-2025 – 15%
2025-2029 declining from 12% to 3%

2014 – 15%
Declining thereafter, phased out by 2025

Domestic Refineries

2013-2014 – 4.3%
2015-2025 – 3.7%
2026-2029 – declining from 3% to 0.75%

2% for all refineries, with additional 0.25% to small refineries

Carbon Capture & Sequestration

2017-2018 – 0.8%
2019-2034 – increasing from 4.5% to 10%

2014-2017 – 1.75%
2018-2019 – 4.75%
2020-2050 – 5%

Energy Efficiency & Renewable Energy

Varying between 2.5% and 0.5% through 2021

Varying between 6.5% and 1% annually

Clean Vehicles

2013-2020 – 1%
2021 – 0.5%

No similar provision

Clean Energy Research

2.5% to 3% through 2021

No similar provision

Transportation Infrastructure & Efficiency

12% in 2013, declining to 6.7% in 2034

No similar provision

Worker Adjustment Assistance

No similar provision

2012-2021 – 0.5%
2022-2050 – 1%

Domestic, Wildlife & Natural Resource Adaptation

2019 – 2034 – increasing from 0.75% to 3%

2012-2021 – 1.9%
2022-2026 – 3.9%
2027-2050 – 7.9%

International Adaptation

2019 – 2034 – increasing from 0.75% to 3%

2012-2021 – 1%
2022-2026 – 2%
2027-2050 – 4%

International Clean Technology Deployment

No similar provision

2012-2021 – 1%
2022-2026 – 2%
2027-2050 – 4%

Deficit Reduction

All allowances not otherwise allocated

All allowances not otherwise allocated

Emission Offset Credits

Volume of Offsets Allowed

Up to 2 billion tons annually; pro rated among covered sources


International Offsets

Discounted: 1.25 International = 1 Domestic
After 2018, up to 25% of an individual source’s allowed offsets

Same discount rate
After 2018, up to 50% of an individual source’s allowed offsets

Term Offset Credits

No similar provision

Agriculture and Forestry may generate offset credits that expire after 10 year term


EPA and USDA set administrative rules, criteria for offsets
Agriculture- and Forestry-based offsets administered by USDA

EPA sets administrative rules, criteria for offsets

Same approach, different provisions

Outside Involvement

Offsets Advisory Committee

Offset Integrity Advisory Board

Types of Offsets

Initial List in Legislation


Reserve against Intentional & Unintentional Offset Reversals




Additionality, Leakage, Verification and Environmental Criteria


International Deforestation

Assistance to developing nations to reduce deforestation


Emissions Market

Allowance Market Regulation

CFTC oversight of market

CFTC oversight of market

Limits on Allowance Trading

Market participants limited to those with compliance obligations and registered participants

Regulation of clearing organizations, GHG instrument trading organizations

Limits on use of derivatives, credit default swaps, require clearing through registered clearing organizations

Cost Containment

Price floor - $12 in 2013, escalating thereafter at 3% + CPI

Reserve allowances sold to maintain price ceiling - $25 in 2013, escalating thereafter at 5% + CPI

No price floor

Reserve allowances sold to maintain price ceiling – $28 in 2012; after 2014 priced at 60% of 3 yr avg market price

Oversight of federal auction process

Comptroller General to review federal allowance distribution & auction process every 2 years

No similar provision

Tracking Allowance and Offset Ownership

EPA clearing house to track issuance and ownership of allowances and offsets


Effect on Clean Air Act Programs

State Program

State limits on stationary sources of GHGs (including cap-and-trade programs) preempted; states allowed to limit mobile source GHG emissions consistent with CAA

State cap-and-trade programs preempted until 2017

PSD Construction Permits

GHG emissions do not trigger PSD permitting


Title V Operating Permits

Sources not subject to Title V due solely to GHG emissions

If subject to Title V due to other emissions, GHG Allowance Obligations are Title V permit conditions


Ambient Air Quality Standards (CAA §110)



New Source Performance Standards (CAA §111)

Not allowed for GHG emissions from sources subject to cap; allowed for non-capped sources


Hazardous Air Pollutants (CAA § 112)

Does not apply to GHGs due to effects on climate chance or ocean acidification

Does not apply to GHGs due to effects on climate chance

International Air Pollution (CAA §115)

Does not apply to GHGs due to effects on climate chance or ocean acidification

Does not apply to GHGs due to effects on climate chance

Offshore Oil & Gas

Revenue Sharing

37.5% to coastal states with no current OCS production, with

20% of state share allocated to local communities

33% of State of Alaska’s OCS revenue share allocated to Alaska Native Corporations

No similar provision

Conservation Funding

12.5% of federal revenue directed to Land & Water Conservation Fund

No similar provision

Spill Risk

As part of lease sale planning, Interior must assess probability of spill, potential spill impact on coastal environment, and potential spill impact on coastal economy of adjacent State and any other States likely to be directly impacted by a spill

No similar provision

State Control

States may prohibit OCS leasing within 75 miles, or petition for specific areas to be closed to leasing

If Interior assessment shows spill in area proposed for leasing would have direct impact on State’s coastal economy, U.S. will not lease if State passes law prohibiting leasing in that area

No similar provision

Electricity Provisions

National Renewable Energy Standard

No similar provisions

By 2020, utilities must meet 20% of demand from renewable sources and increased efficiency

Nuclear Power

Federal loan guarantees – increasing the number of funded plants from 6 to 12

Increase number of projects able to obtain federal insurance against regulatory delays

Accelerated depreciation for new nuclear plants

10% Investment Tax Credit

Expedited NRC procedure for construction and operating permits

No similar provisions

Coal Plants

Emission Performance Standard for new coal plants:
2009-2019 – 50% CO2 reduction
2020-thereafter – 65% CO2 reduction

Commercial deployment of CCS supported by assessment on fossil fuel-based electricity totaling $2 billion annually

Distribution of emission allowances to commercial power and industrial projects deploying CCS

Emission allowances granted for shutting down or repowering merchant coal plants

Same performance standard


Same, but assessment totaling $1 billion annually

Same method for distributing allowances to projects with CCS

No similar provision

Rural energy savings

Low interest loans through rural electric coops for consumer investments in energy efficiency

No similar provision

Electric Transmission Siting

No similar provision

Expanded FERC jurisdiction within the Western Interconnection

Smart Grid

No similar provision

Goals for large utilities to reduce peak demand using “smart grid” technology

Transportation Provisions

Low-Emission Vehicles

Requires Electric Vehicle Infrastructure Plan; Funds Electric Vehicle Pilot Projects

Same provisions, plus:

Electric vehicle deployment program

Distribution of allowances to support electric drive vehicle development

Vehicle Emission Standards

No similar provision

Sets standards for heavy-duty and off road vehicles

Transportation Efficiency

Requires transportation emission reduction goals for metropolitan areas, and planning process

Distribute emission allowances to fund transportation efficiency efforts

Same provisions

No similar provision

Built Environment Provisions

State Energy Efficiency & Renewables Programs

Distribute emission allowances to States and Indian Tribes to fund energy efficiency and renewable energy programs

Same approach – creates State Energy and Environment Development Accounts

Residential Energy Efficiency

No similar provision

No similar provision

Subsidized loans to consumers for energy efficiency upgrades, repaid through charges on power bills

Requires greater energy efficiency in building codes

Lighting and appliance energy efficiency standards

No similar provision

General Provisions

Identification of Greenhouse Gases

Designates six greenhouse gases: carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons, and perfluorocarbons; authorizes EPA to identify additional GHGs

Specifies carbon dioxide equivalence for designated GHGs




GHG Registry

Annual Reporting of GHG emissions from covered sources (some changes from EPA-issued reporting rules – 40 CFR Part 98)


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