Senators Unveil Emissions Bill

This story appears in the May 17 print edition of Transport Topics.

Two U.S. senators last week unveiled a carbon emissions reduction bill observers said would significantly increase the cost of diesel fuel.

The nearly 1,000-page bill, introduced by Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.), calls for limitations on carbon emissions — mostly from large stationary sources, but it also would give the U.S. Environmental Protection Agency the authority to regulate greenhouse gas emissions in the transportation sector.

Overall, the legislation dubbed the American Power Act would attempt to cut carbon dioxide emissions and other greenhouse gases to 17% below 2005 levels. By 2050, it would seek to reduce greenhouse gases by more than 80%.

“Our bill will create jobs and transform the American economy; make our country more energy independent, which in turn will strengthen our national security; and improve the quality of the air we breathe,” Lieberman said.

Though the Senate bill does not call for a cap-and-trade plan such as the one in the House version, it would for the first time set a price on carbon dioxide emissions by coal-fired power plants and other large polluters and would require oil producers to purchase emissions permits.

It also would give coastal states the right to veto oil drilling within 75 miles of their shores and would provide incentives for the construction of nuclear power plants.

However, it also would boost the cost of diesel and gasoline without reducing the output of carbon dioxide by the trucking industry, which is a nondiscretionary user of the fuels, said Bill Graves, president of American Trucking Associations.

“While others might object to our characterization, the climate bill clearly imposes a tax on transportation fuels and reallocates revenue from that tax for nontransportation purposes,” Graves said in a May 12 statement. “Only a small portion of the tax would go to the Highway Trust Fund for much-needed improvements and repairs to our nation’s highway infrastructure.

“While the trucking industry has reduced its fuel consumption and carbon output through the EPA SmartWay Transport Partnership Program and other efforts, the bulk of trucking companies’ fuel use is for their economically vital role of distributing freight whenever and wherever manufacturers, wholesalers, retailers and consumers demand,” Graves added.

The legislation would create a “linked fee” system that would dictate the price refiners will pay for carbon allowances, said Richard Moskowitz, vice president and regulatory affairs counsel for ATA.

In 2013, the bill would impose a minimum carbon price of $12 per ton.

“If refiners pass this cost on in equal amounts across their refined products, it would translate to a diesel fuel price increase of at least 15 cents per gallon,” Moskowitz said.

The bill also establishes a carbon price ceiling of $25, which would translate to an increase in the cost of diesel of 31 cents a gallon, Moskowitz said.

Both the floor and the ceiling prices contain automatic inflation escalators, which will further increase the cost refiners must pay for carbon allowances, he added.

For truckers, the bill also authorizes a grant program to help purchase soot filters and contains provisions to encourage the use of trucks powered by natural gas.

Reactions to the proposed legislation were varied.

John Horsley, executive director of the American Association of State Highway and Transportation Officials, criticized the bill because he said it would preempt revenues from “pollution fees” being deposited directly into the Highway Trust Fund.

“The evidence is clear; Congress can ill afford to consider any legislation that preempts funding from the Highway Trust Fund, which supports the vital transportation systems every American relies on,” Horsley said in a statement.

Thomas Kuhn, president of the Edison Electric Institute, an association that represents shareholder-owned electric companies, endorsed the legislation at a news conference with Kerry and Lieberman, saying it included important “customer protections.”

In a statement, Jay Timmons, executive vice president of the National Association of Manufacturers, said the organization supports the bill’s provisions allowing offshore oil drilling and nuclear power plant construction.

“However, we remain concerned that the legislation could impose additional burdens on manufacturers that will raise energy prices and ultimately hurt our global competitiveness,” Timmons said.

The American Petroleum Institute said it was withholding judgment on the bill.

“We are reviewing the released text to assess the proposal’s possible impact on jobs, energy production and consumers of oil and natural gas,” API President Jack Gerard said. “However, until full legislative language has been thoroughly analyzed, any assessment would be guesswork at best.”

Despite statements by Republican senators that the bill is doomed, both Kerry and Lieberman said they believe they can muster the 60 votes needed for passage. Politics must be set aside to enable the United States to reduce pollution and its dependence on foreign oil, they said.

Lieberman said the bill “does not cater to the politics of the moment” but is “the right thing to do.”