Canada: Senators Kerry and Lieberman Release 'American Power Act' Bill

Last Updated: May 19 2010
Article by John Goetz

On May 12, 2010, Senators Kerry and Lieberman released their long awaited climate and energy security bill, the American Power Act Bill. Senator Lindsay Graham was a co-sponsor of this bill prior to withdrawing his participation a few weeks ago, primarily for political reasons not related to the content of the bill. Last week, Graham cited the Gulf oil spill as another reason not to move ahead with the bill at this time. Notwithstanding this, the bill has now been released for review by the Senate. The bill will need 60 votes in order to pass in the Senate, which will be difficult to muster without the support of all 59 Democrat senators and at least one Republican senator. Support by some Democrat senators for a climate and energy bill has been in question due to the potential impact of the bill on certain coal state economies and states opposing offshore drilling. However, the draft bill attempts to address some of these issues.

Highlights of the Bill

Since Canada's federal government has stated that it will follow the path of the U.S. in crafting its climate legislation, including the inclusion and design of a cap and trade system or similar market mechanism for reducing greenhouse gas ("GHG") emissions, the American Power Act Bill will have a major impact on Canada if it passes. The provisions highlighted here pertain largely to those that will most directly impact Canadian business and Canada's future climate change legislation.

Emission Reductions

The bill calls for reductions in greenhouse gas emissions from covered entities from 2005 levels as follows:

  • 4.75% by 2013
  • 17% by 2020
  • 58% by 2030
  • 83% by 2050

The covered entities are large stationary sources in certain sectors, emitting more than 25,000 tonnes of CO2e annually. (Note that this is significantly lower than the current Alberta threshold of 100,000 tonnes and the previously proposed federal threshold of 50,000 tonnes.) It is estimated this threshold will mean the program will apply to 7,500 factories and power plants. The emissions reduction requirements will begin with utilities in 2013 and manufacturing will commence in 2016. Producers and importers of fuels will be subject to an emissions cap, but will not be part of the cap and trade carbon market. Instead, they will be required to purchase allowances at a fixed price on a quarterly basis that have been set aside for them. It is not clear what the "fixed price" will be, but it is expected to be based on the price established by the auctions. The EPA will be required to continue regulating the reduction of emissions from transportation.

Cap and Trade System

The bill provides for capping of emissions from the utilities and manufacturing sectors with the distribution of allowances for these sectors equivalent to the number of tonnes of GHG emissions allowed for each year. It is not certain what portion of allowances will be auctioned and what portion will be given away for free to emitters. However, allowances will be given away free to certain energy-intensive and trade exposed industries to offset their cost of compliance and allow them to remain competitive while rewarding efficiency investments. The upstream oil and gas sector will not be part of the carbon market, but as mentioned above, producers and importers of refined fuel products will be required to purchase allowances.

The bill also provides that states will no longer have the jurisdiction to legislate their own cap and trade programs and that any such programs will be replaced by the provisions of this bill. Notwithstanding this restriction, states can still enforce stricter targets for emission reductions than are contained in the bill.


Offsets will be included in the cap and trade system and will be generated from eligible projects primarily in agricultural, grassland and rangeland management and sequestration practices, forestry activities and land use changes, and capture of fugitive methane emissions from coal mines, landfills and oil and gas distribution facilities.

Price Collar

The bill establishes a floor and ceiling price for allowances of $12.00 and $25.00, respectively, beginning in 2013 with a provision for an annual increase of 3% on the floor and 5% on the ceiling, plus inflation.

Border Adjustments

The bill provides for a border adjustment mechanism that will require imports from countries that have not taken action to limit emissions to be subject to an adjustment amount at the border to prevent carbon leakage. Presumably, this will also apply where an exporting country's emission reduction standards are not as stringent as those in the U.S. This is one of the reasons that the Government of Canada has been waiting to introduce its climate change legislation, which will have to be at least as stringent as that of the U.S. to avoid this tariff.

Market Participation

To mitigate market manipulation and volatility, only entities with compliance obligations and a limited number of market makers will be allowed to participate in the auctions and the primary cash market. Jurisdiction over trading of greenhouse gas instruments will be under the Commodity Futures Trading Commission and offexchange trades of futures instruments will be prohibited. Trading of greenhouse gas instruments on the secondary market will be restricted to trading conducted on an exchange and cleared through a greenhouse gas clearing agency. Only regulated greenhouse gas market participants will be allowed to trade and real time publication of trading information will be required.

Carbon Capture and Sequestration

The bill calls for the creation of special funding programs to provide incentives to encourage research and development of CCS technologies and will provide allowances for commercial CCS deployment projects based on the volume of CO2e permanently sequestered.

Agricultural Soil Sequestration

Farmers will be exempt from the obligation to reduce GHG emissions but will be allowed to participate in the offset program by reducing emissions in their farming operations. This is expected to be a multi-billion dollar revenue source to farmers and a key source of offsets for the offset system.

Clean Energy and Nuclear

There are a number of financial incentives and funding sources for research, development and deployment of clean energy and nuclear projects, including tax incentives, accelerated depreciation and loan guarantees. Pilot projects for the use of electric-powered heavy and light-duty vehicles and incentives for the use of cleaner natural gas in heavy-duty vehicle fleets are also contemplated in the bill.

Offshore Drilling

Offshore drilling was initially added to this bill as a political compromise to gain support from certain senators for the bill. The bill recognizes that offshore drilling is required to achieve greater energy independence during the transition period to clean energy. After the recent Gulf oil spill, the bill was changed to address the related environmental issues that became front and centre. The bill still contemplates an expansion in offshore drilling, but not until investigations have been completed and safeguards put in place to ensure that a spill like the Deep Horizon accident does not happen again. The bill provides for the right of coastal states to opt-out of drilling up to 75 miles from their shores. Nearby states can veto drilling if they stand to suffer significant adverse impacts in the event of an accident. It will be interesting to see how nearby a state has to be to veto drilling based on the fear of a major oil spill (which is now and likely always has been, reasonably foreseeable). At the same time, coastal states that do allow drilling will receive 37.5% of lease and royalty revenues. 12.5% of federal royalties will also be directed to a land and water conservation fund.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions