• Senators Reportedly Preparing to Release Climate and Energy Bill
  • April 20, 2010 | Author: Scott D. Deatherage
  • Law Firm: Thompson & Knight LLP - Dallas Office
  • According to press reports, Senators Kerry, Graham, and Lieberman are preparing to release their joint, compromise climate and energy bill next week, or, if they do not make that deadline, after the congressional Easter break.  This may mean the first full week of April.

    The Senators met with various industry and business associations and the reported response by those associations appeared reasonably positive.

    The bill would reportedly apply a cap and trade system to utilities and a carbon tax on transportation fuels.  So far this makes sense.  The utilities have favored cap and trade since the sulfur dioxide cap and trade system worked to achieve reductions in acid rain and at a lower cost than anticipated.  The system gives industry a great deal of flexibility in a market-based system.

    With transportation fuels, the use of allowances for the fuels sold by by petroleum refineries and natural gas suppliers was a form of tax or a hybrid of sorts, so going to a tax makes sense.  The refineries and natural gas companies appears to a large extent to favor this approach for the fuels they sell as they can recover 100 percent from their customers, but an allowance system may have caused them to only be able to pass on the costs to customers at about an 85 percent level.  Thus, petroleum refineries and natural gas suppliers would have to pay these costs, and the downstream users would in essence receive a discount, so they would not be a likely to reduce their use of fuels and be more energy efficient, thereby, reducing their greenhouse gas emissions.

    The open questions are what to do with non-utility emitters.  Manufacturers are reportedly asking for a 10-year delay before coming under a cap and trade system.

    How this will play out remains to be seen, but all eyes will be on this bill when it is finally released.