Kerry-Boxer Released

Color me surprised that the Kerry-Boxer climate change draft bill actually improves upon the version that passed the House.

The Senate's environment committee will take up an energy and climate-change bill today that calls for a 20% cut in U.S. greenhouse gas emissions by 2020, according to a draft copy of the bill.

The measure, co-sponsored by Sens. Barbara Boxer (D-Calif.) and John F. Kerry (D-Mass.), will serve as the starting point for what promises to be a long and complicated series of negotiations. The Senate may not produce a final bill until next year.

A House measure passed this summer calls for a 17% reduction in greenhouse gases.

It's not consistently better - the permits for polluting industries are free to begin with, and more are given away than in the Waxman-Markey bill. And the big bipartisan handout here is major incentives to build nuclear power plants - you won't hear Republicans say this, but probably nothing else in the bill will be as costly to taxpayers. However, it does preserve the EPA's ability to regulate greenhouse gases, the back-up plan to climate legislation. There are also lots of incentives for mass transit and bicycling.

The interesting piece of the legislation is something called a carbon collar.

Still, environmentalists hailed the bill as an ambitious effort to address global warming while providing some reassurances to the U.S. business community. It includes provisions aimed at curbing speculation in the carbon market -- a concern of senators such as Byron Dorgan (D-N.D.) -- and would reserve some carbon allowances in a market-stability fund that would help ensure that the price of those allowances would not exceed $28 per ton. This provision, known as a "carbon collar," would not be likely to kick in for some time, since the Congressional Budget Office has predicted that the cost of carbon under a cap-and-trade system would probably be $26 per ton by 2019. That is what a company would pay to compensate for each ton of carbon pollution it emits.

Daniel J. Weiss, a senior fellow at the Center for American Progress, a liberal think tank, said the provisions amount to "a safety net to ensure that cleanup costs remain affordable. The draft Boxer-Kerry bill provides a solid foundation for Senate action on clean-energy-jobs legislation."

Adam Siegel praises the potential of this provision, with its floor and ceiling caps for allowance auctions. It provides a lot of stability for businesses to prepare for a shift to less carbon-intensive sources of energy. Joe Romm likes it too.

The bill makes a monumental improvement over the House bill by adopting a version of the carbon collar …

The floor price is $11 (the draft bill above is, as I say, not final) and the ceiling is $28 — and they both starting rising 5% plus inflation each year. The draft bill adds an excellent twist — from 2018 on the ceiling rises 7% plus inflation each year. …

Fence-sitting Senators and industries can legitimately see the Carbon Collar as achieving stronger cost-containment protection than their analysis suggests the House bill now provides, including protection against speculators running the permit price up, while progressives can legitimately see it as achieving better environmental outcomes than their analysis suggests the House bill now provides.Win-win.

There are possible problems with implementation, but in theory, having a floor will spur emissions cuts among businesses which may not otherwise bother.

As Paul Krugman noted this week, we cannot really wait until better legislation comes along. The House has passed their version, and Kerry-Boxer is the primary legislation in the Senate. There's a lot riding on this, and despite its lower profile right now, you can bet that industry will line up to take whacks at it. But we cannot afford to see it fail.

Here's the bill, called the Clean Energy Jobs and American Power Act (CEJAP?). It could have as many as three other committees to go through, so this is just a starting point.