United States: Kerry and Lieberman Introduce Much-Anticipated Climate Change Bill

With no Republican sponsors and a full Senate calendar, the climate change bill faces an uphill battle despite significant industry support.

On May 12, 2010, Senators John Kerry (D-MA) and Joseph Lieberman (I-CT) introduced the American Power Act, a comprehensive energy and climate change bill that would establish a federal cap-and-trade program for carbon dioxide and other greenhouse gases (GHGs) and provide numerous incentives for new energy development in the United States. The bill was introduced after months of delay and without any explicit bipartisan support. Senator Lindsey Graham (R-SC) participated extensively in the negotiations and drafting of the proposal, but stepped away from the proposal in April following the Gulf of Mexico oil spill and a dispute with U.S. Senate leadership regarding immigration reform.

Although the Kerry-Lieberman bill follows the same general format as other climate change proposals debated in the Senate, it differs in a number of important respects from the American Clean Energy and Security Act of 2009, sponsored by Representatives Henry Waxman (D-CA) and Edward Markey (D-MA), that narrowly passed the U.S. House of Representatives in June 2009. Further complicating the bill's prospects, any differences between the Senate and House proposals would need to be reconciled before the climate change bill could become law.

For more information on the Waxman-Markey bill, see " Waxman-Markey American Clean Energy and Security Act Passes House ."

For more information on the Kerry-Boxer bill, see " Senators Kerry and Boxer Unveil Climate Bill ."

Emissions Targets

The bill seeks to reduce GHG emissions by 17 percent below 2005 levels by 2020, 58 percent below 2005 levels by 2030 and 83 percent below 2005 levels by 2050. These reduction levels match the short- and long-term reductions called for in the Waxman-Markey bill (17 percent below 2005 levels by 2020, and 83 percent below 2005 levels by 2050), and closely track previous commitments and targets discussed by the administration in connection with the Copenhagen convention. Sources of electricity, refineries, large industrial facilities that emit 25,000 tons or more of carbon dioxide equivalent GHGs per year, natural gas local distribution companies, geologic sequestration sites, and various enumerated categories of chemical and industrial facilities will be "covered entities" under the program. The cap initially applies primarily to electric generators. Large industrial facilities and natural gas local distribution companies will be subject to in the cap-and-trade program starting in 2016. The transportation sector, which includes refineries and transportation fuel terminals, will be subject to regulation under a separate program.

Regulation of Carbon Markets

Covered entities will be able to satisfy the new compliance obligation by submitting tradable emissions allowances. In response to political opposition to establishing a national GHG emissions market, the bill provides the U.S. Commodity Futures Trading Commission (CFTC) with significant new powers to regulate allowances and related derivatives products. For example, the Kerry-Lieberman bill would require all GHG products to be traded on an exchange and cleared through a "greenhouse gas clearing organization." The bill also contains strict market participation rules, limiting access to the cash market for greenhouse gas instruments to entities that are either subject to a compliance obligation under the bill or otherwise registered with the CFTC as a "regulated greenhouse gas market participant." Although allowances will be initially distributed through a competitive auction process, the price of GHG allowances will be subject to a hard-price collar, with a $12 floor (increased by inflation plus 3 percent per year) and $25 ceiling (increased by inflation plus 5 percent per year). Greenhouse gas instruments that are traded on a regulated futures exchange or that do not provide for physical delivery could be held and traded by any entity.

State Cap-and-Trade Programs

The Kerry-Lieberman bill would permanently prohibit states from implementing or enforcing cap-and-trade programs to limit GHGs. As a result, this provision would effectively dissolve state and regional programs like the Regional Greenhouse Gas Initiative, the Midwestern Greenhouse Gas Reduction Accord and the Western Climate Initiative. As currently drafted, the bill would provide compensation for states that have cap-and-trade programs that will be eliminated.

In contrast, the Waxman-Markey proposal would have preempted state and regional programs for a period of only five years. After the five-year moratorium was lifted, state and regional coalitions could develop regulations that either paralleled or surpassed the federal standard.

EPA Regulation of GHGs

Similar to the Waxman-Markey proposal, the Kerry-Lieberman bill would substantially limit the U.S. Environmental Protection Agency's (EPA) authority to regulate GHGs under its existing statutory authority. Under the current draft, the EPA would be expressly prohibited from regulating GHGs under the provisions of the Clean Air Act that address hazardous air pollutants, criteria pollutants, international air pollution and most aspects of new source review. In effect, the EPA's much discussed "endangerment finding" would be reversed. Coal-fired power plants permitted in 2009 and after would, however, be subject to new GHG performance standards.

Renewable Energy, Nuclear Energy and Other Incentives

Unlike the Waxman-Markey bill, the Kerry-Lieberman bill does not establish a mandatory or voluntary federal renewable portfolio standard. Instead, it provides financial assistance to state renewable energy programs in the form of emissions allowances. Many members of the renewable energy industry are disappointed that this comparatively non-controversial provision did not make it into the discussion draft.

The Kerry-Lieberman bill provides the nuclear power industry with substantial tax credits, loan guarantees and risk protection. The proposed tax incentives would provide nuclear generators with financial benefits that are essentially comparable to those enjoyed by renewable energy producers for the past several years.

Clean coal, oil and natural gas also receive targeted incentives, ranging from funding for new carbon capture and sequestration projects to new opportunities for offshore oil and natural gas drilling.

Hydraulic Fracturing

In response to increased state and federal scrutiny of hydraulic fracturing of shale and the development of other unconventional natural gas resources, the Kerry-Lieberman bill would require disclosure of all chemical constituents used in a hydraulic fracturing operation. This provision would subject hydraulic fracturing to new reporting requirements, but is less far-reaching than other proposals which would eliminate the exemption for "fracking" that currently exists in the Safe Drinking Water Act. Hydraulic fracturing is regulated extensively by state environmental agencies.


The Kerry-Lieberman bill is only in discussion draft form, and its authors have stressed that it is meant to serve as a platform for further negotiation. Nevertheless, it remains unclear whether the proposed bill will be able to garner enough votes in the Senate. If there is not enough support for the bill, Senate Majority Leader Harry Reid (D-NV) has indicated that he may opt for a smaller and less ambitious energy bill, which will likely track the energy bill sponsored by Senator Jeff Bingaman (D-NM) that was approved by the U.S. Senate Committee on Energy and Natural Resources in June 2009. The Bingaman bill would establish a new federal renewable portfolio standard, but does not directly address GHG emissions through a cap-and-trade or similar program.

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 Mondaq.com.

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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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