Alternative climate change legislation being developed by a US Senate Democrat has received significant input from oil companies, including Exxon Mobil. It could be introduced as early as this week as Congress returns from its August recess, according to Senate aides.
The 33-page draft bill designed by Senator Maria Cantwell (D-Washington) proposes a radically different mechanism for curbing greenhouse gas emissions, compared with the Waxman-Markey bill passed in June by the US House of Representatives (OD Jun.30,p1).
News of Cantwell's bill comes as Senate leaders struggle to draw up legislation that will cut greenhouse gas emissions while sustaining economic growth. And it could win support from Democrats representing manufacturing states that may lose jobs as a result of higher energy prices if the Waxman-Markey bill passes in its current form.
The bill takes a so-called "cap-and-refund" approach under which 100% of the available emissions credits would be auctioned off among upstream energy producers and importers of energy products.
Unlike the Waxman-Markey bill, there would be no free allocation of emissions credits to downstream emitters such as electric utilities, refineries and large manufacturing plants.
Prices would be set in a market for emissions credits from 2012, with a price floor of $7 per metric ton and a ceiling of $21 per ton.
Starting in 2015, the floor and ceiling prices would increase by $1 to $3 a year through 2050, with a view to meeting the Obama administration's mid-century goals for emissions.
Fully 75% of the auction revenues would be returned to consumers in the form of monthly cash refunds, much in the same way the Internal Revenue Service issues tax refunds. The remaining 25% would be used to accelerate the transition to cleaner fuels and compensate carbon-intensive industries and displaced workers.
"We commend Senator Cantwell's effort to step back and take a fresh look at some of the key issues in the climate change bill," Exxon spokesman Rob Young said in an e-mail to Oil Daily. Her proposal "provides some positive steps forward, such as the inclusion of a price collar to reduce the inherent volatility of cap and trade schemes," he added.
While Exxon still believes that a carbon tax is the best approach to curbing emissions, "we remain open and willing to work with all policy-makers on climate change legislation," Young said.
Exxon President Rex Tillerson has previously stated the company's preference for a carbon tax, but in recent months the company has shown a willingness to participate in the climate change debate and pursue the development of alternative fuels, including fuels derived from algae.
By limiting sales of emission credits to to producers and importers of fossil fuels, the bill would limit the scope for speculative trading by financial players.
Credits would expire after two years, they could not be banked or hoarded, and they would only be tradable among those eligible to buy them in the first place.
An analysis of the bill shows that while its impact on emissions would be less dramatic than other proposals in the first 10 years, it would ultimately achieve a reduction in US carbon emissions of about 80% by 2050.
Cantwell, who sits on the Senate's energy and environment committees, has been a supporter of cap-and-trade legislation. However, she and other senators have voiced concern about elements of the Waxman-Markey bill which would give away more than 80% of the available emission credits for free.
These giveaways run counter to the Obama administration's desire to auction off 100% of the carbon allowances in order to generate revenue for the federal government.
Bill Murray, Washington
