The Anerican Power Act: Taking a Closer Look

The climate bill that's sponsored by Kerry and Lieberman received considerable attention both from the skeptics and the supporters, in the midst of the very volatile political seasons. Tagged as the American Power Act, this is very notable for the lack of endorsement from one prominent Republican senator. Graham turned his back on this bill during the final days of its completion.

The American Power Act has some similarities to the legislation passed by the House of Representatives in 2009. Their American Clean Energy and Security Act called for a comprehensive cap and trade mechanism for containing carbon emissions over the next few decades. The Senate version as proposed by Kerry/Lieberman focuses on major emitters, represented by power utility companies initially.

In one of the most politically volatile legislative seasons that we have seen for many a year, the much vaunted climate bill sponsored by Senators John Kerry and Joseph Lieberman has been received with equal doses of skepticism and praise. Triumphantly tagged the American Power Act, the proposal is most notable for the lack of one prominent Republican senator's endorsement. Sen. Graham has turned his back on the said bill during the last days of its completion.

The American Power Act proposes that revenues raised from the fees paid by the utility companies and other industrial organizations in the future would be largely rebated to consumers. This is intended to cushion the expected rise in the cost of utilities caused by the effective premium on a ton of carbon. In fact, two thirds of all the raised revenues should go back to the consumers, which shall rise to 75% in the future.

While Pres. Obama originally proposed a cap and trade system to work across all of factors of the economy, the American Power Act legislation proposes targeting only the heaviest emitters, i.e. those who produce more than 25,000 tons of carbon per year. This means that effectively, the legislation covers some 7,500 organizations, although a secondary market will be created, allowing voluntary participation on a highly regulated, "cash cleared" basis.

There was much speculation that the Kerry/Lieberman legislation would seek to exclude any state or regional initiatives aimed at harnessing carbon emissions. This would have a significant effect on California's AB 32 as a prime example, which is just starting to roll out. Programs like this have some protection governed by the proposals.

A number of incentives have been included in the American Power Act to help fund nuclear power plants through loan guarantees, tax credits, federal risk insurance and expedited licensing. Renewable energy advocates believe that not enough has been done to help them with their individual causes and insist that more is done to block offshore oil drilling in the wake of 2010's major events.

As an election year, incumbent senators and representatives will be more preoccupied about their future political careers. Energy reform is a very hot topic as the BP oil rig disaster is expected to remain in the news for many months of the year. Included in the provisions of the American Power Act are those which allow states to discard the use of offshore oil, at least within 75 miles of their respective shorelines.

It remains to be seen how the revenues raised from emissions allowances are distributed, but there is a clear indication that an effective carbon tax of some kind is in the offing. Yet again, this is a wake-up call to individual organizations, who should ensure that they are fully aware of their own energy efficiency and carbon liabilities, ready to implement their own plans for abatement.