Jenner & Block: Senators Kerry and Lieberman's Cap-and-Trade Program in Their Recently Proposed Climate Change Legislation

Jenner & Block: Senators Kerry and Lieberman's Cap-and-Trade Program in Their Recently Proposed Climate Change Legislation

   By Gabrielle Sigel, Partner, Jenner & Block LLP

“On May 12, 2010, U.S. Senators John Kerry (D-MA) and Joseph Lieberman (I-CT) jointly introduced their ‘discussion draft’ of the American Power Act (the Act) as their proposal for the Senate version of comprehensive climate change regulation,” writes Gabrielle Sigel. “This legislative proposal is the result of negotiations starting in the Fall of 2009 between Senators Kerry, Lieberman, and Lindsey Graham (R-SC), who had the goal of developing a bipartisan approach to climate change legislation. Their bill was planned to be the nucleus for the Senate version of comprehensive climate change legislation, in response to the bill passed by the House of Representatives in June 2009, sponsored by Congressmen Henry Waxman (D-CA) and Edward Markey (D-MA). However, when they finally introduced their Senate proposal, Senator Graham had withdrawn as an official sponsor.  In a letter to President Obama in December 2009, the Senators set forth a framework for the Act, promising to address global warming through ‘a market-based system, rather than a labyrinth of command-and-control regulations,’ in order to reduce greenhouse gases (GHGs) to 17% below 2005 levels in the ‘near term’ and to 80% below 2005 levels in the ‘long term.’ This article describes the Act's market-based system, i.e., the cap-and-trade program, to reduce U.S. GHG emissions according to those goals.”

 

“The Act, almost 1,000 pages in length, primarily addresses the structure of its cap-and-trade system in ‘Title II, Global Warming Pollution Reduction.’ As set forth in that title, the current Clean Air Act, 42 U.S.C. § 7401 et seq., would be amended by a new Title VII, in which the bulk of the cap-and-trade system's design requirements are provided,” the author explains. “Title VII, entitled 'Greenhouse Gas Pollution Reduction & Investment Program,' contains the four major structural components of a cap-and-trade system:

 

(1) the cap structure, including reduction goal and sources capped;

 

(2) the offset credits structure, including allowed types of offsets and limits on credits;

 

(3) the emission allowance structure, including allowance distribution methodology, allowance adjustments for early action and other incentives, compliance periods, and banking/borrowing rules; and

 

(4) miscellaneous design features, such as enforcement, registry, and reporting.”

 

Except for the commodities market regulations, the principal regulatory agency responsible for the Act's cap-and-trade program is the U.S. Environmental Protection Agency (EPA), which will collaborate as appropriate with other agencies, such as the Departments of Agriculture and State. The Act's four principal cap-and-trade design components are discussed in this article.

 

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Gabrielle Sigel, a partner in Jenner & Block's Environmental Practice, is Co-Chair of her Firm's Climate and Clean Technology Law Practice. Ms. Sigel's national practice focuses primarily on environmental, safety and health litigation and counseling, toxic tort defense, and insurance coverage litigation and counseling. She recently concluded several toxic tort lawsuits concerning a contaminated site located in a residential area.

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