Kerry-Boxer Bill (Agricultural & Resource Economics)

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Kerry-Boxer Bill

This article was written by an EoE student intern and published under the general guidelines of the EoE Student Science Communication Project. Student author: Jennifer Lu, University of California at Los Angles. Reviewer: Stephen Nodvin.

On September 30, 2009, Senators John Kerry (D–Mass.) and Barbara Boxer (D–Calif.) introduced the Clean Energy Jobs and American Power Act, also named the Kerry–Boxer bill. It is largely based on its cousin bill the American Clean Energy and Security Act of 2009 (ACES), also named the Waxman-Markey bill, which was sponsored by Representatives Henry Waxman (D–Calif.) and Edward Markey (D–Mass.). ACES passed the U.S. House of Representatives on June 26, 2009. The Senate Environment and Public Works Committee approved the Kerry-Boxer bill on November 5, 2009 by a vote of 11 to 1. The Senate bill now must be merged with legislation written by at least five other Senate panels and then reconciled with the House bill before the two pieces of legislation can become law.

Polar bear on ice flow in Wager Bay (Ukkusiksalik National Park, Nunavut, Canada) (Photo credit: Ansgar Walk)

In a nutshell, the Kerry-Boxer bill aims to create a framework for strong climate change legislation that will “revitalize the economy, protect current jobs and create new ones, safeguard our national security and reduce pollution.” The key features of the Kerry-Boxer bill are the greenhouse gas (GHG) reduction programs and a cap-and-trade system. The GHG reduction programs include investment in renewable energy sources like wind, solar, and nuclear power, and exploring and utilizing domestic onshore and offshore oil and gas reserves. The cap-and-trade system will lower the US’s collective greenhouse gas emission levels while allowing big polluters to remain globally competitive as they come into compliance with the system. The Kerry-Boxer bill also strives to break the country’s dependence on foreign oil and retain jobs in America that would otherwise be lost to competitors overseas.

Greenhouse Gas Reduction Programs

The Kerry-Boxer bill contains two separate sets of standards for GHG reductions in the U.S. One set of targets applies to the economy-wide GHG reductions that should be achieved by implementing all policies of the bill. The economy-wide GHG reduction goals are 97% of 2005 levels by 2012, 80% by 2020, 58% by 2030, and 17% by 2050.

The other set of targets refers to the level of reductions required each year by sources that are specifically encompassed by the cap-and-trade program. These emitters, called covered sources, include electricity sources; certain stationary sources that emit over 25,000 metric tons of carbon dioxide equivalent and those in listed sectors (e.g. petroleum refining and aluminum, adipic acid, and cement production); liquid fuel importers and producers; GHG importers and producers; geologic sequestration sites; and natural gas local distribution companies that deliver 460 billion cubic feet or more of natural gas. In addition to the listed industrial sectors, any fossil fuel-fired combustion device in specified manufacturing sectors or natural gas processing or pipeline sectors that emits over 25,000 metric tons of carbon dioxide equivalent per year is a "covered entity." The bill establishes the following GHG targets for covered sources: 3% below 2005 levels by 2012; 20% below 2005 levels by 2020; 42% below 2005 levels by 2030; 83% below 2005 levels by 2050.

Other greenhouse gas reduction programs include clean transportation systems, carbon capture and sequestration, nuclear and advanced technologies research, water efficiency improvements, energy efficiency and renewable energy development, emissions reduction from public transportation vehicles, clean energy and natural gas advancement, and miscellaneous programs such as clean technology business competition grant programs and state recycling programs.

Cap-and-trade

The Kerry-Boxer bill will give the EPA Administrator the power to designate [[greenhouse gas]es] and establish the annual tonnage limit on greenhouse gas emissions from specified activities. The EPA Administrator will then establish allowances for covered sources in correlation with the tonnage limit for each year. One allowance will represent the permission to emit one ton of greenhouse gases or carbon dioxide equivalent per year. Total allowance will consist of emissions allowances (domestic and international) and offset credit (domestic, international, early, and term). Allowances and offset credits may be traded among entities. Covered sources are prohibited from emitting more than the greenhouse gas allowance level and offset credits they hold on the specified date.

This cap-and-trade program will begin for most covered sources in 2012. In 2014 specified industrial companies will be brought under the cap and by 2016 local distribution companies that deliver natural gas and all remaining unregulated covered sources will come into compliance with the cap-and-trade program. The bill sets a “price collar” on emissions allowances. The initial floor price will be $11/ton and ceiling price will be $28/ton. This mechanism will limit volatility and ease the cost of instituting the cap-and-trade system.

Domestic offsets are characterized in the Kerry-Boxer bill as methane projects at active underground coal mines, landfill methane, capture of emissions from natural gas and oil systems, non-landfill methane collection involving organic waste streams, afforestation/reforestation, improved forest management, agricultural, grassland and rangeland sequestration practices and changes in carbon stocks attributed to land use and forestry activities. The President will establish an updated list of eligible offset credits and their corresponding regulations before this portion of the bill is enacted.

International offsets have qualifying criteria. The U.S. must be a party to a multilateral agreement that includes the country in which the offset project is located. In addition, the country hosting the offset project must be a developing country. Offsets credits issued by an international body under the United Nations Framework Convention on Climate Change, the Kyoto Protocol or its successor are also recognized. Covered entities may use up to two billion domestic and international offsets annually to meet their allowance limit under the cap-and-trade program. Of the two billion tons of offset credits, ¾ may be derived from domestic offsets and ¼ from international offsets.

Early offset credits will be issued to reduction projects that occur between January 1, 2009 and three years after the effective date of Federal offset regulations. The President will also have the power to recognize other offset programs.

Term offset credits may be used in lieu of domestic offset credits to demonstrate temporary compliance with the Kerry-Boxer bill. Term offset credits will expire and must then be replaced with another term offset credit or an allowance/domestic offset credit to meet the greenhouse gas allowance limit.

Climate Change Adaptation Programs

The remaining portion of the Kerry-Boxer bill consists of national programs designed to ease the transition and adaptation to climate change conditions. This includes drinking water adaptation, technology, education, and research, green jobs promotion and worker transition programs, climate change worker adjustment assistance, public health adaptation policies, safeguards for natural resources conservation, and natural disaster (flood and wildfires) prevention and response projects.

Further Reading

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