Climate Bill Is a Misnomer: It's a Nuclear Energy-Promoting, Oil Drilling-Championing, Coal Mining-Boosting Gift to Polluters

After half a year of delay, Sens. John Kerry (D-Mass.) and Joe
Lieberman (I-Conn.) are set to release their nuclear
energy/cap-and-trade bill today. Until we see legislative text, we can
comment only on the broad outline made available yesterday and an
additional summary being circulated among legislative staff.

It's not accurate to call this a climate bill. This is nuclear
energy-promoting, oil drilling-championing, coal mining-boosting
legislation with a weak carbon-pricing mechanism thrown in. What's
worse, it guts the Environmental Protection Agency's (EPA) current
authority to regulate greenhouse gases as pollutants under the Clean Air
Act.

Here's our take on what we know is in the new bill:

Nuclear Power Incentives

At its core, this legislation is all about promoting nuclear power
and handing taxpayers the bill. Consider:
- Sections 1101 and 1105 would prioritize the needs of nuclear power
corporations over the rights of citizens to have full, public hearings
about the risks and dangers of locating nuclear power plants in their
communities.
- Section 1102 increases loan guarantees primarily for nuclear power to a
jaw-dropping $54 billion. These loans are a terrible deal for the
taxpayer, especially considering the high risk of default that even the
government acknowledges.
- Section 1103 provides $6 billion in taxpayer-subsidized risk insurance
for 12 new nuclear reactors.
- Section 1121 allows nuclear power plant owners to write off their
depreciation much faster. Section 1121 provides a 10 percent investment
tax credit for new reactors.
- Section 1123 extends the Advanced Energy Project credit to nuclear
reactors.
- Section 1124-6 allows municipal power agencies to derive certain tax,
bond and grant benefits from investing in nuclear power.

Oil

Apparently oblivious to the ongoing disaster in the Gulf of Mexico, the
legislation expands offshore drilling. In fact, all new offshore
drilling, leasing and permitting should be halted.

Section 1202 allows states to keep 37.5 percent of oil and gas
royalty money. That's like saying because more rich people live in
California and New York compared to Mississippi and New Mexico, those
higher-income states should be able to keep more federal dollars raised
from income taxes. Royalty revenue sharing is patently unfair -
especially because the disaster in Gulf shows that an oil spill does not
respect state boundaries.

Coal

Section 1412 establishes a carbon tax paid by ratepayers and collected
by utilities to fund carbon capture and storage (CCS) - with no money
allocated to rooftop solar or energy efficiency investments. Section
1431 will provide valuable emissions allowances for free to coal
utilities pursuing CCS - an untested, risky strategy that benefits the
coal industry and is gobbling up a lion's share of subsidies that
otherwise could go to renewable energy development.

Merchant coal power plants (whose rates are not regulated) will get
roughly 5 percent of the free allowances, which will provide
opportunities for them to gouge consumers.

And while the nuclear and coal industries will receive a lot of
taxpayer money and loan guarantees, Section 1604 states that "voluntary"
renewable energy markets are "efficient and effective programs" and
states that "the policy of the United States is to continue to support
the growth of these markets." This is backward: Renewable energy should
be getting the guarantees, rather than the coal and nuclear industries.

Offsets

The legislation allows entities to "reduce" their domestic greenhouse
gas emissions by purchasing offsets from projects located in the U.S.
and around the world. The recent offset crisis in Europe, where the
offset market collapsed due to fraud, underscores the lack of
accountability and transparency with offsets.

Consumer Protections
Rather than follow President Barack Obama's cap-and-dividend plan, which
would have required polluters to pay and would have distributed 80
percent of the money directly to families through the Making Work Pay
tax credit, or the Cantwell-Collins CLEAR Act, which calls for
distributing monthly checks to households, the Kerry-Lieberman approach
relies on distributing valuable free allowances to utilities from
2013-2029, then requiring that utilities use the money "exclusively for
the benefit of the ratepayers." But Congress won't be defining
"benefit"; rather, 50 different state utility commissions will. Some
will do a great job, but most will allow utilities to structure
expensive energy efficiency programs that benefit shareholders more than
ratepayers.

Wall Street

It appears that Wall Street may not have gotten everything it wanted -
yet. The legislation appears to incorporate elements of S.1399,
sponsored by Sen. Dianne Feinstein (D-Calif.), which creates an Office
of Carbon Market Oversight at the Commodities Futures Trading Commission
(CFTC), giving the agency authority to regulate spot and futures
emission markets. It requires all entities seeking to trade emissions
derivatives to register and be approved by the CFTC, and all
transactions must be cleared through a CFTC-regulated Carbon Clearing
Organization. This is a good start to ensure that Wall Street plays no
role in gambling on climate policy.

Danger remains, however, in creating carbon trading markets open to
non-energy producers. Strong regulations in place today may be easily
subverted tomorrow, leaving Wall Street positioned to control our
climate future.

Conclusion

The Kerry-Lieberman bill represents a missed opportunity. By meeting
behind closed doors, the lawmakers empowered corporate polluters to play
an oversized role in influencing the legislation to the detriment of
the climate and consumers. President Obama had it right when he
successfully campaigned on a theme of making polluters pay and
delivering benefits directly to households.

We need a bill that does not incentivize failed and dangerous
technologies like nuclear power and does not enrich utilities at the
expense of consumers.