We are greatly concerned that the Kerry-Lieberman bill’s provisions related to the manufacturing sector do not go far enough to ensure the steel industry’s continued competitiveness in the global marketplace. While there are more allowances provided up front to energy-intensive, trade exposed manufacturers in the program, in later years there’s a big drop-off indicating that there would actually be fewer allowances that under Waxman Markey bill—perhaps as many as 1.5 billion allowances less for manufacturing over the life of the program than Waxman-Markey. Without sufficient allowances to compensate for emissions compliance costs and additional measures to offset the near-certain cost increases for energy, the leakage of both carbon emissions and manufacturing jobs is certain. The authors might argue the bill provides sufficient allowances for our direct emission of greenhouse gases and those indirect emissions from purchased electricity. We disagree, but even if true, the bill does nothing to offset the additional increased energy costs we expect due to the many mandates in the bill to change fuel sources, promote costly forms of electricity generation and build new transmission and other infrastructure.

Furthermore, while we agree that a border adjustment measure is necessary, we are disappointed the draft bill has a measure that is not strong enough, is delayed in going into effect and leaves too much discretion to the President. This is certainly not a strong enough backstop in the face of inadequate allowances.

We do believe that the bill needs to include provisions related to pre-emption of state greenhouse gas programs as well as EPA regulation of greenhouse gas emissions by stationary sources under the Clean Air Act. We are pleased to see that Senators Kerry and Lieberman have included some limited preemption in their bill, but it does not go far enough.

While the bill does include some noteworthy new features like increased Federal funding of R&D for new low-carbon energy and manufacturing technologies, overall it remains very similar to the Waxman-Markey bill that passed the House, and which we ultimately opposed last year.

The Tailoring Rule, issued by the EPA last week, is just another example of why Congressional action is necessary to prevent EPA regulation and allow Congress to address this very complex issue through the legislative process.

The Tailoring Rule does not solve the fundamental problems associated with regulating greenhouse gases under the Clean Air Act, which is that failure to address the global dimension of the climate change issue will place U.S. manufacturers at a significant competitive disadvantage, costing valuable American jobs and actually increasing greenhouse gas emissions. All this latest EPA regulation does is arbitrarily pick winners and losers in terms of which facilities must comply immediately with the new permitting requirements. This approach will unilaterally raise costs, while allowing our overseas competitors to continue to increase their emissions. In the end, however, no business will be left untouched from EPA’s expansive interpretation of the Clean Air Act.

There are several approaches that Senators, including Senator Rockefeller and Senator Murkowski have proposed to halt EPA regulation of GHGs from stationary sources under the Clean Air Act. And now the Kerry-Lieberman bill can be added to that list. Such legislative action is essential to preserving jobs and promoting economic growth while Congress considers comprehensive legislation to address climate change.

From our perspective, the American Power Act is a mixed bag. With some significant changes, the legislation can be much more consumer friendly. But as drafted, the American Power Act is far too complicated while missing an important opportunity to promote energy efficiency and clean energy programs.

The problems with the APA are quite similar to those in Waxman-Markey and Kerry-Boxer. First, although it takes the important step of allocating no-cost emission allowances to consumers via their regulated Local Distribution Companies, the legislation prevents proceeds from those allowances from being used for anything other than direct rebates to ratepayers. The nation’s State public service commissioners believe this approach is short-sighted and works against consumers. Here’s why: The legislation states that if the cap-and-trade system increases utility bills for retail and commercial consumers, then the value of the emission allowances must be distributed through utility bill rebates. It also creates an inefficient system of administrative and bureaucratic hurdles that prevent a clean and expeditious system of disbursing the allowance values to consumers.

The problem is that even the most conservative estimates expect climate-change legislation to increase electricity rates for just about everyone. Requiring direct rebates to these consumers prohibits State commissions from using these proceeds for other programs that also benefit consumers—such as energy efficiency, clean energy programs, investment in renewable generation, and other public-interest programs. Although many States may decide that rebating allowance values is in the consumer’s best interest, there is no need to restrict other States who conclude that investments in clean energy and energy efficiency programs are also beneficial for consumers. Ultimately, becoming more energy efficient and reliant on clean energy will reduce the cost of compliance with this legislation.

This bill has several flaws, but fortunately, they are easily corrected in ways that make this legislation much more consumer friendly.

We appreciate the efforts the bill’s authors have made to solicit the views of our industry and other energy-intensive industries that employ millions of Americans in family wage jobs as they crafted this legislation. Compared with past bills, the Kerry-Lieberman legislation invests more in U.S. manufacturing competitiveness. However, we are concerned that the legislation is still too costly. The 15 percent allocation for our industry is an improvement over previous proposals, but appears insufficient to create a level playing field for our industry against our international competition. American jobs could be endangered by higher energy costs and could be lost unless the allowances are sufficient.

Equally important is the formula used as the basis to allocate allowances. The use of sector averages as the basis for allocation – the approach used in the proposed legislation – will actually promote the very emissions leakage that the allocation is designed to prevent. Sector averages are unworkable because our industry and others have large variations in products we produce and the processes we use to produce them. Completely different products and processes are placed in the same sector category, resulting in a completely unrepresentative sector average which will over allocate allowances to some facilities and under allocate allowances to others. In addition, a sector average approach penalizes smaller, older facilities, and those with regional access to particular fuels.

Fuel type rather than process efficiency is the overriding factor that determines the number of allowances a facility would receive. Facilities using coal would receive only a fraction of the allowances needed to ensure competitiveness.

Because the forest products industry is extremely capital intensive, without an adequate supply of allowances, less efficient facilities will close rather than make the capital investments that policy makers expect to result from the use of a sector averaging provision, and this puts the government in charge of choosing winners and losers in the marketplace.

This bill attempts to address the regional economic disparities created by this approach for the utility sector by allocating a larger share of their allowances based on historical emissions. The same consideration needs to be given the manufacturing sector. Ultimately, it is the cap rather than the allocation formula that determines the greenhouse gas reductions that will be achieved.

Manufacturing facilities that are trade-exposed like in the forest products industry should be awarded allowances based on their historical emissions and should be expected to reduce emissions from that point forward. Domestically, emissions would be unchanged, and it would prevent the carbon leakage that will undoubtedly result from the closing of our domestic facilities.

We look forward to continuing our work with the authors of the bill and others to address these concerns and create comprehensive legislation that addresses the goals of effectively reducing greenhouse gasses and gaining energy independence while preserving American jobs.

When it comes to livestock agriculture, the jury is still very much out on the Kerry-Lieberman cap-and-trade bill. But one thing is clear already. The Senate bill is an improvement over the House-passed Waxman-Markey bill.

Under the House bill, one of USDA’s own analysis projected that up to 60 million acres could be shifted from crop and pastureland to forest, as landowners seek to capture returns from the carbon offsets program. That would force a wrenching contraction in the livestock sector, raising consumer prices and putting many pork, beef and dairy producers out o business. It also raised troubling questions about how we can simultaneously reduce greenhouse gas emissions and feed a world population expected to grow by 3 billion people by mid-century.

The National Pork Producers Council took these concerns to Senators Kerry and Lieberman. We’re pleased that their bill, while it still sets up a system for buying and selling carbon credits, at least acknowledges our concerns by requiring USDA to periodically assess the impact of land removal on food, feed, commodity and livestock prices, and the environment.

Whether their solution is enough of a safety valve though, remains to be seen. The next step is to see the results of the analysis of the impact of the Kerry-Lieberman bill by both USDA and the Environmental Protection Agency. Once those are done we will know a lot more about whether the bill is a workable solution to the concerns of livestock producers and those worried about feeding a growing world population.

There are many reasons why the American Power Act (APA) is dead-on-arrival in the Senate, but the primary reason is also the simplest: the public doesn’t want it.

This bill is just another hidden energy tax, despite the best efforts of its sponsors to rebrand it as something other than cap-and-tax. The bill will mandate caps on carbon dioxide emissions that are nearly identical to the limits called for in the House-passed Waxman-Markey cap-and-tax bill. Just like Waxman-Markey, the APA will put a price on carbon that will make energy more expensive and will create a new financial market for carbon that will make Wall Street rich at America’s expense. There may not be a line item on a future electric bill that says “climate tax,” but under this bill, households all over the country will be forced to pay higher rates. Politicians will stretch words and the truth to prevent this bill from being called a tax, but that’s exactly what it will feel like to the American public.

After the country sunk into one of the largest recessions in its history, the public clearly and consistently told Congress where to focus its efforts: jobs and the economy. Several studies have shown that the hidden energy taxes in cap-and-tax legislation like APA will cost jobs at home and push them overseas to countries like China, which is refusing carbon caps in its own economy. Restrictions on carbon emissions will especially hurt energy-intensive manufacturing industries. The National Association of Manufacturers found that the Waxman-Markey bill – which is similar in many ways to the APA – could cost up to 2.4 million U.S. jobs. Enacting a law like APA will give China and other developing nations a competitive advantage in manufacturing at precisely the time the U.S. needs to strengthen its manufacturing base.

The Senate should pursue legislation that will put people to work, not a job-killing bill like the APA that has the potential to undercut an American recovery before it even gets started.

As we begin to debate the latest energy bill in Congress, let us not forget the lives that were lost on the oil rig that exploded in the Gulf of Mexico. Our deepest sympathies go out to their mourning families as well as to the loved ones of those who lost their lives in this year’s coal mine explosion in Montcoal, West Virginia.

Supplying our nation’s energy is not an easy endeavor, and thousands of our citizens knowingly take those physical risks to capture the resource that provides the services that keep our economy growing and our country prosperous. The workers on a rig in the middle of the Gulf, the heavy machine operators thousands of feet below ground, and the line men in cherry pickers following an ice storm all deserve our admiration and our gratitude. The environmental damage resulting from the Gulf disaster is nothing short of tragic, but equally tragic is the loss of human life. In light of these events and as we contemplate our energy future, it is important that we remember to acknowledge those who bear the physical risk to keep our economy strong.

Yes, we need to understand what happened and to take those steps that would prevent such calamities from ever occurring again. But, indeed, there is blame enough to go around. Each one of us should recognize and accept that our profligate use of energy is one of the more important contributing factors to the energy and environmental difficulties that we face. These recent tragedies, one in the mountains and one at the shore, will hopefully leave us with a fuller sense of the costs and a greater respect for the risks involved with meeting America’s energy demands. Recognizing what it takes to provide the fuels for the products and services that we rely upon just might make some of us more appropriately esteem the people and companies that too often are publically admonished for only doing what we ask of them.

As the spin cycles speculate on whether the Kerry-Lieberman Senate climate bill has a chance to pass this year, I’ve been looking at the clean energy innovation provisions and am underwhelmed.

I’ll defer to our colleagues at the National Commission on Energy Policy for a good side-by-side comparison of Kerry-Lieberman with the Waxman-Markey bill that passed the House last year. But suffice it to say Kerry-Lieberman looks surprising similar to the only so-so House bill on innovation matters.

The Advanced Research Projects Agency-Energy (ARPA-E), which is beginning to support “disruptive” efforts to develop transformational clean energy breakthroughs is slated to receive cap-trade allowances.

Allowance sale revenue is also reserved for support of accelerated deployment of clean vehicle technology, industrial R&D, carbon capture systems, and state-level renewable energy and efficiency programs to help accelerate market uptake and deployment of low-carbon products and services, like building retrofits and solar panel installations.

And beyond that there’s the usual grab-bag of technology-specific and fragmented research and deployment efforts (with a feel of interest-group pandering) around nuclear power, clean coal, advanced batteries, natural gas vehicles, plug-in hybrids, the steel industry, and so on.

The problem, though, is that while all of these items are well and good, nothing here answers to the urgency and scale of the nation’s energy innovation needs.

All told, the Kerry-Lieberman outline would, like Waxman-Markey, apply about 2 percent (or $1 to 2 billion a year) of its allowance revenue to clean energy R&D in the bill’s early years, and about 5 to 7 percent ($3 to 7 billion) to clean-tech research and deployment in various sectors over time—a little less than the House bill did. (Check here for my Brookings colleague Ted Gayer’s helpful tabulation of the year-to-year allowance distributions in the bill). So that’s real money.

However, while solid-sounding by itself, that’s paltry in the real scheme of things. All told, by our calculations, the U.S. needs to be spending $15 to $25 billion a year on federal clean energy R+D alone just to attain a research intensity on a par with other innovation driven sectors as health or IT or for that matter agriculture. Since that number is currently running to only $4 or 5 billion a year, the stark fact is that the nation needs to come up with another $10 or 20 billion in clean energy research investment each and every year for the foreseeable future—and starting now.

From that perspective, that Kerry-Lieberman would only manage to reserve for energy R&D pursuits $1 to 2 billion a year--or maybe $4 to 8 billion to be generous--must be counted a major disappointment. Once again, it’s extremely disappointing to see that the basic congressional dynamic continues to require massive allowance giveaways that “give away the store” in order to obtain the political support of interest groups. And its disappointing to see once again the failure in this process to serve the nation’s clear interest.

In the end, the American Power Act—like its House predecessor--underscores that Congress and the country are simply not serious yet about decarbonizing the nation’s energy system, catalyzing a clean new economy, and limiting global warming to acceptable levels. Here’s hoping further negotiations will bear down more thoughtfully on those critical imperatives.

KL’s quid pro quo for carbon limits is subsidizing existing carbon producers. Which is at least a bit oxymoronic. But the Bill’s best we can do mantra may indeed prove true. So I would suggest three modifications to make the $7.2 trillion policy cost (maximum, using the cap price) a more efficient solution:

1. Shrink the Industrial Policy Provisions: Our short-lived National Industrial Policy debate ground to a halt in the early 1990’s when the Japanese economy’s lost decades began – but KL signals a revival. A simplifying assumption of using the real dollar cap price would quantify free allowance subsidies of $237bn for CCS, $182bn for Clean Transport, $96 billion for Refiners, $78bn for Industrial Projects, and even $329bn for Tradable Goods (where an immediate border tax is arguably more fair). Additionally, accelerated depreciation (zero to five years) and tax credits in areas such as nuclear, coal transition, and natural gas vehicles – alongside the increase to nuclear loan guarantees of (I think) $88 billion. Finally, nothing in the Bill about shrinking existing fossil fuel subsidies. The notion of polluter pays makes for challenging politics these days. But polluter gets paid shouldn’t be the new norm.

2. Tighten the Cap: The 2 billion offsets per annum are excessive. While many argue that far fewer “verifiable and additional” offsets will be produced – the Bill creates moral hazard via this large economic incentive for the cheapest, and often worst, projects. The refiner provisions starting in Section 729 could also threaten the cap. The maximum covered emissions are 5.5 billion tons. Let’s assume that refiners were 2 billion of this total. Not only will the allowance market be smaller and less liquid without refiners - the Administrator will be short allowances if refiners don’t see demand drop as planned. In the extreme, if the short position became significant, a market perception of the refiners as exogenous (i.e. like carbon tax) would crush prices - fueled in part by 2bn offset tons on the (maximum) 3.5bn non-refiner market. Refiners should be put back into the cap and trade system directly or, at a minimum, the Administrator should be in balance every quarter.

3. Embrace Energy Productivity: After a bruising national debate revolving around healthcare’s high percentage of GDP, a national goal of minimizing energy costs relative to GDP while de-carbonizing has merit. We use about 100 quads (quadrillion BTUs) of energy today – the same amount per person as in 1970. One scenario is that we build many big expensive central station power plants like Nuclear and CCS, drill for lots more natural gas, and keep our quads of primary energy growing (albeit at a bit slower pace). The alternative scenario is that we stall or even shrink our primary energy consumption with technologies like smart grid, smart meters, grid-scale storage, PEV storage, combined heat & power, micro-grids, and decentralized generation. The KL Bill seems to favor the former over the latter. This is driven in part by protection of incumbents. But we need to acknowledge various principal-agent conflicts in our current energy system, and add language that supports State PUCs who want to make the most efficient decisions for consumers in spite of potential utility pressure to maintain monopoly power and grow rate base by building the kind of plants that KL so heavily subsidizes.

There is always CLEAR waiting in the wings. CLEAR is simple, credible, and fair. Republicans and moderate Democrats should see the appeal of CLEAR’s more market-based architecture if the industrial policy behemoth of KL is not amended…and sinks of its own weight. Whether an amended KL, or a switch to CLEAR, we should make a national decision in 2010.

As the Gulf of Mexico oil disaster continues to unfold with tragic consequences, it has become painfully clear that America needs a safer, cleaner approach to energy development. Congress must enact a comprehensive clean energy and climate bill this year that puts America back in control of our energy situation.

Senators John Kerry (D-MA) and Joe Lieberman (I-CT) have unveiled the long-awaited draft of their American Power Act. The launch of their bill kicks off an intensive effort to pass comprehensive climate and energy legislation in the Senate this summer, reconcile it with the bill passed by the House, and put a final bill on the president’s desk to sign into law this year.

The core carbon pollution limits in the bill, covering all major pollution sources, are a solid foundation for Senate legislation.

· The bill would amend the Clean Air Act to establish steadily declining limits on carbon emission from the major sectors responsible for America’s carbon pollution, including electricity production, heavy industry, and transportation.

· It includes an auction system with major dividends to consumers that start right away and increase over time.

· It includes cost reduction mechanisms and market safeguards, as well as measures to invest in key energy technologies, level the playing field for American manufacturing, and promote innovation and job creation.

The bill needs improvement on the way to passage. It includes troubling provisions to curtail some current Clean Air Act authorities and to preempt some state programs.

The bill also includes major ill-advised proposals to promote new nuclear power plants and new offshore oil drilling. These include excessive subsidies for constructing new nuclear power plants and weakening changes to nuclear plant licensing requirements and safety and environmental safeguards. The bill also proposes new incentives for offshore drilling that have no place in an environmental bill and are especially hard to fathom in the wake of the Gulf disaster, which screams out that we need to focus on safety and on reducing our dependence on oil.

Now we need President Obama and Majority Leader Reid to guide a process that brings Senators of good will from both parties together around a comprehensive clean energy and climate bill – one that draws on the best elements of this bill as well as other proposals, so the Senate can pass effective climate and energy legislation this year. Encouragingly, President Obama has pledged to engage with Senators from both sides of the aisle pass comprehensive climate and energy legislation “this year.” Now more than ever, we need legislation that puts Americans back to work, reduces our dependence on oil, cuts carbon pollution, and creates a healthier future for our children.

The Kerry-Lieberman bill represents a failure of the imagination, a cynical charade to fool the voter, or both. All citizens need to know about the bill they can learn from this satirical video (in which I play the voice of Sen. Joe Lieberman).

Waxman-Markey was D.O.A. in the Senate because the public realized that cap-and-trade is a hidden tax on energy—a wealth transfer from consumers to special interests. Congressmen who voted for Waxman-Markey got an earful from angry constituents opposed to “cap-and-tax.”

So Kerry, Graham, and Lieberman got to work on what they said would be a fresh start, a bold new alternative. Instead, they served up the same-old, same-old, albeit tricked out with an advertising gimmick (rebranding) and Fabian gradualism (creeping Kyotoism) to sell the product as new and improved.

Sen. Lieberman remarked in April that he was dropping the phrase “cap and trade” in favor of “emissions reduction targets,” going so far as to joke about the in-name-only difference by asking a reporter, “Remember the Artist Previously Known as Prince?”

Unlike the Waxman-Markey bill, Kerry-Lieberman includes an actual tax on motor fuels (Sec. 729), although camouflaged as a requirement for refiners to “pay an amount” reflecting the carbon price established in the most recent emission allowance auction. This is what Sen. Kerry was calling a “linked fee” until its exposure as a gasoline tax by another name.

Lieberman and Kerry are not the only ones playing word games with America’s energy future. On-again, off-again co-sponsor Lindsey Graham recently said in an interview that he no longer considers the Kerry-Lieberman legislation either a cap-and-trade bill or a global warming bill. Why? “There is no bipartisan support for a cap-and-trade bill based on global warming.”

So, because climate alarm and cap-and-tax are not polling well, Graham now talks as if he can change the bill’s nature simply by calling it a jobs, energy, and national security bill. Fortunately, there’s no hiding the true identity of the Energy Tax Formerly Known As Cap-and-Trade.

As to the Fabian aspect, Kerry-Lieberman would initially impose a cap-and-trade program only on the utility sector. This is a selling point only if we forget what happens once the proverbial camel gets its nose (actually, almost half of its body) under the tent, and only if we ignore the bill’s avowed objective, which is to phase in an economy-wide cap.

Amy Harder also asks whether EPA’s Tailoring Rule (which would provide a six-year exemption from Clean Air Act permitting requirements for stationary sources emitting less than 50,000 tons per year of carbon dioxide-equivalent greenhouse gas emissions) will pressure Senators and interest groups to support the bill or trigger additional backlash against both the administration and the bill.

I don’t know. Different senators will probably react differently. This much is clear. Sen. Kerry does not think he can sell the bill solely on its merits. That’s why he has to pitch it as protection from the unpredictable burdens of litigation-driven greenhouse gas regulation under the Clean Air Act.

Senators should object to EPA’s interference in their deliberations on climate policy. Indeed, EPA is carrying out one of the biggest power grabs in American history.

The Senate will soon vote on the Murkowski resolution to overturn EPA’s endangerment finding—the trigger for the regulatory cascade that Sen. Kerry would use as a legislative hammer. As Senators prepare to debate the resolution, they should keep four questions in mind.

(1) When did Congress authorize EPA to license California and other states to establish fuel economy programs within their borders?

(2) When did Congress authorize EPA to take the lead from the National Highway Traffic Safety Administration in setting fuel economy standards for the auto industry?

(3) When did Congress authorize EPA to regulate carbon dioxide from stationary sources and, thus, determine climate policy for the nation?

(4) Finally, when did Congress authorize EPA to rewrite the New Source Review and Title V permitting programs to avert an administration debacle of its own making?

The answers, of course, are never, never, never, and never. EPA is poised to breach the separation of powers and preempt representative democracy. Overturning the endangerment finding is a constitutional imperative.

The following comments were submitted by James Marvin, retired Navy SEAL Commander, who works for an alternative energy company in Seattle, Wa., and has advocated for climate legislation as part of the veterans' climate group Operation Free.

The United States has to pass comprehensive climate and energy legislation. The longer we wait, the more difficult it will become to address the issue. Whether the American Power Act will carry the day, or some other legislation already introduced, remains to be seen. Doing nothing though, is not an acceptable answer and whatever the solution turns out to be it has to be pragmatic and it has to be timely.

Where you stand is where you sit and from where I sit our country’s dependance on foreign oil is a national security issue. It is costing American lives and one could say it is costing America itself. Comprehensive energy and climate legislation, no matter whose it is, is where we have to go as a nation. It will provide incentives for new energy solutions. It will put a price on pollution. It will address existing energy technologies appropriately. It will keep dollars out of the hands of extremest groups, and it will help keep America safe.

What our country needs now, and what the world needs in terms of leadership, is legislation that addresses energy and climate change holistically. Lasting change is going to take time and will require patience, persistence, and perseverance. But it has to start now. The longer it takes to address the issue, the more difficult the solution is going to be.

In the end, comprehensive energy and climate legislation will have to be an amalgamation of disproportionate ideas, values, and solutions. The juggernauts will have to willingly embrace a new identity and it is everyone’s responsibility to help them transform.

Senator Kerry is right about the “legislate vs. regulate” scenario that American businesses face this year. As the gravity of this situation sinks in, I am still hopeful that a coalition of Democrats and Republicans will emerge in support of the far preferable legislative route, at least for large stationary sources.

The clock is running out on action this year, but there is still a tiny window of time for climate and energy, but only if some big players step forward to provide leadership. What is needed is for Senator Graham to resume his leadership role among Republicans and for President Obama to reassure moderate Democrats that this will enhance rather than degrade their election bids this fall.

In terms of the substance of the Kerry/Lieberman proposal, the core of the bill is sound. It relies on an emissions trading program for power companies and heavy industry that will get the needed reductions over time. It also provides necessary relief from EPA regulations. By starting early, the bill makes steady reductions over time thus providing long-term clarity for covered industries on their greenhouse gas obligations. It allows industry the flexibility to bank, borrow and trade emissions rights and allows ample use of offsets, as well as a strategic allowance reserve, for providing cost containment for those industries. Finally, it includes extremely valuable specifics on a domestic offset program, drawn from Senator Stabenow’s bill.

Opponents on the left are complaining of “giveaways” to these sectors, but the criticism is misguided. In every major pollution control program in U.S. history, companies are expected to pay for reductions down to allowed levels, but they are not usually required to pay for all of the allowed emissions as well. Free allowance allocations are consistent with this past practice, and they have a political advantage of undercutting the charges from the right that “caps” are “taxes.”

However, the bill does have some areas that need more work. The approach to transport fuel emission is complex. Transport fuel providers are expected to pay for all allowed emissions, which smacks of a tax. EPA is also directed to siphon allowances from the other sectors in “required consignment” sales, if the transport sector emissions exceed the amounts available for auction. This convoluted market structure is likely to cause market distortions over time, and it deserves a re-think.

Another problem is the cumbersome market oversight structure. There is broad support in industry for a solid market oversight by the CFTC. But the proposals to restrict access to the primary allowance market, and to require exchange trading of emissions and swaps, are far too onerous. These restrictions will reduce liquidity, cause challenges for offsets projects and raise the program’s costs unnecessarily.

Finally, the international offsets provisions need further refinement. It is unrealistic to expect international negotiations to produce a workable sectoral crediting system by 2016, as laudable as that goal may be. Similarly, the bill dropped an important provision allowing covered entities to use credits from forest protection projects at the sub-national level for a period of time.

These problems can be fixed as the bill heads to the floor. However, given the oil spill in the Gulf of Mexico, this is probably not the time to have a sober debate about offshore oil drilling. If a sensible compromise cannot be developed quickly in the oil related parts of the bill, it may be a wiser course to delay consideration of transportation fuel-related emissions and offshore drilling until a future Congress.

The Kerry-Lieberman Senate bill is a natural follow-up from the recent regulation of requiring vehicles to meet 35.5 miles/gallon on average by 2016, which was imposed in March 2010 with the EPA and the Department of Transportation -- and with a nod of approval of from the automobile industry. This Senate Bill is a natural extension as it puts limits on carbon emission from stationary sources rather than vehicles. The leader of the main utility industry trade group -- Thomas R. Kuhn of the Edison Electric Institute -- stood with Mr. Kerry and Mr. Lieberman on Wednesday and endorsed their bill. Power plants in this bill will end up with a 'cap-and-trade' system that replicates in a national context and utilities the carbon market of the Kyoto Protocol that I created in 1997, which is now trading about $150 Bn annually in the EUETS, and is making a significant difference in carbon emissions in the EU and Japan. With this Bill in place, there will be a natural convergence between the two markets -- the Kyoto Protocol carbon market and the US cap and trade for utilities. We will start to move toward a more regular situation in terms of having a price for carbon emission, which at present does not exist in the U.S. even though it exists almost everywhere else in the world. The utility industry as well as the automobile industry apparently understands the importance of this convergence.

Power plants represent about 41 percent of the total carbon emissions in the US and the world. Industry support for both measures -- vehicles and stationary sources -- is what counts, and it is there. This Senate Bill may not go far enough -- it reduces total emissions by 17 percent compared with 2005 levels -- and compared with the EU it represents only about 3 percent reduction on 1996 levels. However this Senate Bill is a good start, coming on the heels of 2010 the regulation on vehicle emissions, and if the Senate does not vote it, the Administration together with the EPA can impose similar reductions, since the U.S. Supreme Court gave it the power to do so in the Fall 2007, and without need for Congress approval. Why does the utility industry support this bill, and why did the automobile industry support the recent 35.5 miles/gallon regulation? One way or another -- either with this Bill or by Administrative action, we should be moving in a positive direction by ensuring a natural and needed convergence of 'carbon prices' between the Kyoto Protocol carbon market and the US cap and trade for utilities and for vehicles -- and this will provide our industry the price signals it needs to compete successfully in the world economy.

Perhaps the most intriguing question raised by last week’s events is whether Senator John Kerry, given his new-found anti-regulatory rhetoric, plans on voting with Senator Lisa Murkowski to block the Environmental Protection Agency’s endangerment finding for greenhouse pollutants under the Congressional Review Act.

But the more serious question is whether Kerry and the corporate environmentalists will give away the store to “get a bill.” It’s looking that way. Three examples of many highlight the contradictions. First, what is the Kerry response to the worst oil spill in American history? Answer: more and expanded offshore oil drilling with no game plan on how to end this addiction to fossil fuels (does anyone seriously think the Gulf of Mexico disaster will be limited to 75 miles as the Kerry state “veto” provision envisions?). Second, what is the Kerry response to the successful science-based protective standards in the established Clean Air Act? Answer: a new and untested legislative system that does not get us half way to the greenhouse pollution reductions that are needed (why are politicians scared of 350?). Third, what is the Kerry response to finally getting a grip on our destructive coal policies? Answer: tens of billions of dollars to unproven and potentially dangerous sequestration technologies at the expense of investment in solar, wind and geothermal (an alternative strategy would be to give renewable energy all the subsidies Halliburton has received over the last decade).

Sartre would be proud of American politics in the 21^st century. We clearly flirt with the absurd.

The American Power Act is an agglomeration of complex regulatory measures and corporate subsidies. In an effort to provide something for everyone, the bill provides little for the American people. As it stands, the bill is not in the economic nor environmental interest of the United States. Erecting an ever-more complex cap-and-trade scheme on an industry-by-industry basis invites rent-seeking and corporate gamesmanship at the expense of meaningful reductions. Directed subsidies and grants may reward powerful constituencies, but they won't encourage the innovation and deployment of transformative environmental technologies. A partial directed rebate of the revenues from carbon allowances is half of a good idea. A far better, and much simpler, approach would be the adoption of an economy-wide carbon tax from which all revenues are directly rebated to American taxpayers, with no strings attached. This is the simplest and fairest way to provide marginal incentvies for increased efficiency and carbon-use reductions without hampering economic growth.

While the bill is bad, the EPA's plans are not much better. This week the EPA finalized rules purportedly designed to fulfill the agency's statutory obligation to regulate greenhouse gases as pollutants under the Clean Air Act. The rule EPA issued, however, is patently illegal and a flagrant violation of the plain text of the Act. The statute sets clear numerical thresholds for the imposition of PSD and Title V permitting requirements, and provides EPA with no authority to re-write these thresholds -- turning 250 tons-per-year into 75,000 tons-per-year -- by administrative fiat. The EPA may believe that the it is not practicable to apply the express terms of the Clean Air Act to GHGs, but that is not the agency's call to make, especially not after the Supreme Court's decision in Massachusetts v. EPA, which expressly rejected the argument that the CAA was unworkable for GHGs. If the EPA would like to follow a different course, it must go to Congress -- and let's hope Congress can come up with something better than the APA.

Global climate change is one of the biggest threats to our wildlife and natural resources, and yesterday Senators Kerry and Lieberman jumpstarted a legislative effort to address this problem that had been stalled for much too long. But in order to drive the country forward into a clean-energy future, legislation must wean us from fossil fuels not someday, but now.

We’ve done too much waiting as it is. The Gulf oil disaster has made it more apparent than ever that this country needs to move away from dirty fossil fuels like coal and oil as quickly as possible. But this bill actually encourages states to allow drilling off of their coastline, by providing financial incentives. This provision must be removed from the bill.

Instead of more drilling, we should be rapidly expanding our investments in clean renewable energy sources such as wind and solar. Renewable power from large-scale solar and wind farms can help to speed up the transition to a clean-energy future, in a safe, responsible way. By making sure that renewable development is done right, in the places that it makes the most sense, we can move beyond the risky, dirty and dangerous fuels of the past.

Our wildlife and natural resources are feeling a sense of urgency as well, already experiencing the impacts of climate change across the country. Sens. Kerry and Lieberman took a first step to address not only the causes of climate change but also the effects already being seen on the ground, but the provisions in their bill lack adequate funding. We need to see sufficient, dedicated funding for wildlife and natural resource adaptation that will be available immediately, not in 9 years as would be the case under the bill. For many species, delayed adaptation assistance will mean help comes too late. We need to prepare for these changes now, rather than act once they’ve taken place.

The need to advance comprehensive climate and energy legislation is more pressing than ever, but a bill that promotes offshore drilling is not the answer to achieving American energy security and reducing global warming pollution.

Let the Gulf oil disaster be the impetus that propels us beyond our addiction to oil and into a clean energy tomorrow. We can’t afford to lose momentum again.

We are poised on what could be a historic moment for America.

Never before has the US Congress been so close to passing legislation that could change the way our country uses and produces energy, while also taking steps to protect our lands, waters and communities from the growing threats of climate change.

The surprising array of initial supporters of the American Power Act – ranging from some of the country’s largest energy producers to leading military experts to conservation organizations – shows a growing recognition of the need for action.

The continuing oil spill in the Gulf of Mexico has the potential to be another incentive for members of Congress to move our country away from our dependence on oil and to kick start a new clean energy industry that will build American jobs and economic opportunities.

By lowering greenhouse gas pollution 17 percent in the short-term, and by 80 percent over the next 40 years, the bill also has the potential to position the United States as a global leader in the fight against climate change.

Whether one agrees with every bit of science that points to the threats of man-made carbon emissions, The Nature Conservancy’s own scientists working on the ground around the world are seeing firsthand the impacts of a changing climate on the Earth’s waters, lands, species and human communities. As a father and a grandfather, it seems to me irresponsible to ignore these signs of an uncertain future for the next generations of Americans.

By developing a bill that has been able to draw diverse support, Sens. John Kerry, Joseph Lieberman (and, yes, Lindsey Graham) may finally have achieved enough common ground -- and common sense – to take the next steps needed to build a clean energy industry, grow American jobs and protect our country’s natural resources.

Certainly the bill is not perfect. The Nature Conservancy plans to work closely with members of Congress and others to bring more focus to several issues including the need to protect communities around the world from climate impacts and the importance of investing in forest conservation as a strategy for reducing carbon emissions:

• In an age of globalization, floods, droughts and other climate-related disasters across the globe will directly affect Americans here at home. Helping people and the natural systems upon which they depend cope with climate impacts is less dangerous and less expensive than dealing with climate-caused armed conflicts and with governments destabilized by food and water shortages.
  
• Destruction of the world’s forests produces about 15 percent of the annual carbon dioxide emissions pumped into the atmosphere each year – more than all the planes, trains and automobiles on Earth. We cannot win the fight against climate change without stopping deforestation. Allowing US businesses to invest under carefully controlled conditions in international forest protection can begin mitigation of climate change at a very reasonable cost while we ramp up the use of low carbon energy technologies. And the savings companies will achieve will translate into savings for the American consumer.

I have no illusions that resolving these and other issues to achieve passage of the American Power Act will be easy. We have already seen how transforming the country’s energy system, while also addressing the politically charged issue of climate change, can get people stirred up.

However, the broad spectrum of businesses, military leaders, faith-based groups, conservationists and others who are supporting this bill shows that there is, at last, the distinct possibility for action. We at the Nature Conservancy are grateful for this opportunity to work together with all sorts of other interests to make this work.

Given the state of the U.S. Senate and the abominable Waxman-Markey bill that the House passed last year, I’m not exactly surprised by the American Power Act. But I am disappointed. The greenhouse gas reductions that the American Power Act sets -- 17 percent below 2005 levels by 2020 -- are woefully inadequate to fend off the most damaging effects of climate disruption. And they’re hardly ambitious, considering that in 2010, we’re already ten percent below 2005 levels. There is a poverty of ambition in this bill, but an abundance of defeatism. By anticipating that the Senate wouldn’t pass a strong and meaningful climate bill, Senators Kerry and Lieberman, with an assist from Senator Graham, have produced weak and insufficient legislation that shouldn’t pass.

It’s no wonder that corporate polluters such as Shell, ConocoPhillips, and Edison Energy (and BP, before the catastrophe in the Gulf of Mexico) are lining up in support of the American Power Act. The bill’s loan guarantees for nuclear reactors, wasteful spending on carbon capture for coal, and exemption of Big Ag from mandatory reductions in carbon pollution are all boons to polluting corporations.

Despite the drilling disaster in the Gulf of Mexico, the bill allows President Obama’s plan to expand offshore drilling to go forward. Though it does allow states to veto drilling in waters up to 75 miles off their coasts, it also sets up revenue systems that encourage states to “drill, baby, drill,” and will open the door for oil industry lobbyists to cajole state governments into leveraging the safety of their beaches and environment against a temporary increase in revenue.

The American Power Act isn’t about reducing pollution, it’s about expanding production. It’s not about conservation, it’s about ramping up domestic production of fossil fuels and other energy sources that are dirty, dangerous, and unsustainable. During the bill-writing process, the Chamber of Commerce was openly courted and consulted. Make no mistake -- the goal of the Chamber is not to create jobs, it’s to protect business interests, and that means maximizing profits. That means protecting and tightening the chokehold that a handful of industries have on energy production in this country today. That’s what the American Power Act calls “energy independence.”

Defending Senate strategy over substance, Senator Kerry writes, “Our planet can’t wait.” Our planet cannot wait for senators to wake up to the realities of our climate crisis and do what they’ve been sent to Washington to do -- make the smart and reasoned decisions that are best for their constituents instead of the corporations that contribute to their campaigns. Our planet can’t wait while the Obama administration delays implementing existing Clean Air Act protections. And our planet can’t wait for fossil fuel industries to come up with incremental adaptations that will in the end guarantee that they’ll still be dictating the energy policy of this country. If it has to, then frankly, we’re screwed. Throwing good intentions after bad ideas won’t get us anywhere. It will instead perpetuate a system where the status quo is dressed up and projected as comprehensive reform.

For analysis of the bill and more information about Friends of the Earth's position, please visit http://www.foe.org/kerry-lieberman.

In the midst of what appears to be the worst offshore oil disaster in American history, U.S. Senators John Kerry (D-Mass.) and Joseph Lieberman (I-Conn.) will today put forth a draft climate bill that will not solve the problems of global warming and continues pandering to the fossil fuel industry – including expanded offshore oil drilling -- that created the problems in the first place.

The proposal reflects months of back-room negotiations between the senators, major polluters, and other Washington insiders, and would:

• provide only a fraction of the greenhouse gas pollution reductions scientists have said are necessary to avoid catastrophic climate disruption;
• ban successful Clean Air Act programs from reducing greenhouse pollution;
• ban existing state and local efforts to tackle climate change;
• catalyze increased oil and gas drilling — including offshore drilling; and
• subsidize dangerous and costly nuclear energy.

This proposal moves us one baby step forward and at least three giant steps backin any rational effort to address the climate crisis. The senators’ proposal would entrench our addiction to fossil fuels by offering incentives for increased oil and gas drilling just days after what appears to be the worst offshore oil disaster in American history. Large domes, small domes, golf balls, garbage, chemical dispersants, fire — none have succeeded in stopping the enormous flow of oil into the Gulf of Mexico. Clearly, there are no 'safeguards' Senators Lieberman and Kerry could put into this bill to make offshore oil safe. This proposal echoes greenhouse pollution reduction targets that scientists recently called ‘paltry’ and inadequate to prevent the worst impacts of climate change. Scientists have determined that reducing carbon pollution to 350 parts per million is necessary to preserve life as we know it. 350 ppm must be the bottom line for all climate and energy policies. The senators’ weak targets will not reduce carbon pollution to below 350 ppm from its current level of 391 ppm.

In his recent Earth Day proclamation, President Barack Obama specifically celebrated the gains of the Clean Air Act; nonetheless, this proposal appeases polluters by gutting the Act, which has protected the air we breathe for 40 years, reaping economic benefits more than 40 times its cost. The Clean Air Act already provides a mechanism to establish science-based pollution caps for greenhouse pollutants, yet the Kerry-Lieberman proposal would ban proven successful Clean Air Act programs from cutting greenhouse emissions. The Kerry-Lieberman proposal is not the answer because it asks the wrong questions. A successful climate bill must build upon, and not roll back, our existing foundation of environmental protections, and it must achieve the greenhouse pollution reductions necessary to avert dangerous climate disruption.

At first glance, it appears that the six months Senators Kerry, Lieberman, and Graham spent deal making behind closed doors was time well spent for certain corporate and Wall Street interests. And when you consider that the measure is expected to result in no scientifically meaningful reduction in global temperatures, it is all the more unfortunate for the American consumer, who would ultimately be stuck paying the bill. The proposal Senators Kerry and Lieberman finally released hits American families with a gas tax that will increase prices at the pump, a cap-and-trade policy that will jack up electricity rates, and a host of new federal mandates and subsidies that will only benefit the shareholders of a small handful of rent-seeking corporations like Honeywell, BP and the utilities that belong to the Edison Electric Institute -- most of which stand to gain billions of dollars as a result of their multi-million dollar lobbying spree. Fortunately, I have no doubt that once the truth gets out and people realize how deeply flawed this proposal is, it will be soundly rejected. And while nobody should forget the very active role that Senator Graham played in constructing these new national energy and gasoline taxes, he should at least be commended for choosing not to participate in the official unveiling of this 987-page job killer.

Insanity is often defined as doing the same thing over and over and expecting different results. By that standard, the newest version of US climate legislation is certifiable. The bill introduced today by Sens. Kerry and Lieberman fails to distinguish itself significantly from previous cap and trade proposals.

Essentially, the “American Power Act” attempts to impose a carbon trading mechanism while simultaneously buying off some of the targeted sectors by delaying coverage or offering incentives. Because favored entities may find themselves better positioned to gain advantage and game the system, Kerry and Lieberman may succeed in getting a number of companies to endorse the proposed approach.

A cap and trade system that mandates arbitrary emission reductions for the next several decades simply will not work. Too many factors necessary to successfully calculate those cuts are beyond the legislative capabilities of Congress. Moreover, the technology necessary to achieve substantial reductions in greenhouse gases does not now exist (and cannot be ordered up on a legislative schedule).

Although the bill’s summary makes the claim that the system must be “simple, stable, and secure,” it is clear that the fleshed out legislation will be unable to fulfill any of those promises. History shows that Congress all but incapable of creating simple legislative rules. The inherent, dynamic nature of energy markets and other unknowns guarantee that the system will not be stable. And the more complex the cap and trade system, the more likely that Enron-Goldman Sachs types will devise ways to game and profit off the system’s flaws.

Mechanisms intended to prevent trading manipulation will almost certainly end up creating new ways to end run the system. Just look at Europe’s experience. If there’s money to be made, opportunists will find ways to outsmart the system.

The money promised to various interest groups diverts revenue that could be directly returned to American taxpayers in the form of a lower payroll tax and almost guarantees that deficit reduction will remain a distant goal for the foreseeable future. As a nation, we face a serious financial crisis that requires a new way of thinking about spending, entitlements, and taxes. The turmoil being experienced in Europe, especially Greece, could very well be a harbinger of what could take place here if Congress continues its ‘business as usual’ approach to legislation.

The “American Power Act” features provisions that make sense in there own right and should be pursued independently of this legislation. Pre-empting EPA greenhouse gas regulation, increasing revenue sharing to coastal states from offshore oil and gas exploration and production, and removing impediment to greater use of natural gas are three worthwhile and important actions. But, these positive features of the Kerry-Lieberman proposal fail to offset its imposed energy scarcity and higher prices to consumers and business.

In all likelihood this bill will suffer the same fate as other cap and trade proposals (if it ever gets to the Senate floor for a vote). Between now and then, its many flaws and special favors will become more apparent. As they come to light, the American public’s already white-hot anger will intensify. Senators who are up for re-election could face early retirement if they pass a law that makes our economic situation worse and imposes unnecessary costs on consumers.

The Senate needs to rethink its approach to emission management and face up to the futility of trying to legislate energy use and economic activity over the next forty years. There are too many unknowns and unknowables for that to be successful. The best and most simple approach to change behavior on energy consumption and to provide incentives for new technology is not another form of command and control but a simple carbon tax with proceeds rebated to consumers through a reduction in the payroll tax.

The Kerry-Lieberman bill can serve as a foundation on which we can build an America free from oil dependence, with millions of new clean energy manufacturing, construction and service jobs here at home, less wasted energy, and less of the carbon pollution that is threatening our economy, our health and our climate. But this proposal will only serve as a solid foundation if the Senate both improves and completes it.

Last month's West Virginia coal mine tragedy and the oil disaster currently unfolding highlight the desperate need for a new clean energy economy that ends our self-destructive addiction to dirty energy. We need to move away from dangerous, and deadly energy sources towards greater efficiency and cleaner energy.

The Sierra Club is pleased that this draft allows EPA to move forward with performance standards for existing power plants including coal. We are disappointed that the bill still waives some key safeguards from the Clean Air Act . We are also pleased that revenue from diesel credits will be directed toward planning that will reduce global warming pollution from transportation and provides guidance on additional spending for the cleaner and more efficient transportation options that will begin to wean America off oil. But we are disappointed that the bill establishes no strong, driving mandate to reduce our consumption of oil. We now understand that imported oil puts our economy and lives of our young men and women at risk in one way. And that trying to “drill baby drill” deep in the waters off our coast also puts our economy and the lives of our young men and women at risk in a different way.

We need to get off coal and oil – not in forty years, but in the next twenty.

So we regret that bitter opposition from the dirty energy sources of the past like coal, oil and nuclear has watered down this proposal in order to unduly subsidize energy technologies which already receive an unfair public bailout. The proposal must do more to acknowledge the need for America to serve as a world leader in protecting forests and helping the world prepare for climate disruption.

Furthermore, this is no substitute for a moratorium on off-shore drilling -- which is the only way that we can ensure that the kind of disaster we are experiencing in the Gulf does not happen again. And we need to require ALL of America's coal-fired power plants to transition to clean fuels as fast as they can. We expect much more action from our leaders to help America break its addiction to coal and oil as quickly as possible.

Let's build a clean energy America on the Kerry-Lieberman foundation.