The American Power Act would establish a greenhouse gas pollution reduction program and encourage development of clean energy technologies as well as nuclear power, coal, and offshore drilling. The bill would promote energy efficiency by developing a carbon reduction program, allocating auction revenues to clean energy resources, and establishing separate energy efficiency provisions. The following summary reflects the discussion draft, as introduced May 12, 2010.

Contents

Greenhouse Gas Pollution Reduction Program
Allowance Distribution
Other Energy Efficiency Provisions

Greenhouse Gas Pollution Reduction Program

This subtitle would establish the nationwide Greenhouse Gas Pollution Reduction and Investment Program. Administered by the Environmental Protection Agency (EPA), the program would set a declining cap on greenhouse gas (GHG) emissions from regulated entities in the years 2013 through 2050.  The GHG emission reduction targets for regulated entities (which constitute roughly 85% of total U.S. GHG emissions) would be 4.75% by 2013, 17% by 2020, 42% by 2030, and 83% by 2050, based on 2005 emissions (Section 703). The bill would set the same reduction targets for economy-wide emissions (Section 702).

The Greenhouse Gas Pollution Reduction and Investment Program would amend the Clean Air Act (CAA) through a new Title VII. All section references in this part orefer to additions to the Clean Air Act, not to section numbers of the American Power Act, unless otherwise noted.

Scope

Gases and Sectors: Greenhouse gases covered in the cap would include carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons, and others (Section 711). The cap would apply to electricity sources, natural gas distribution companies, fuel producers and importers, and stationary sources in specific industrial and chemical sectors, any of which emit, or whose products emit, greater than 25,000 million metric tons of carbon dioxide-equivalent (MMTCO2e) per year (Section 700(12)). 

Phase-in Prohibition: The cap for electricity would begin in 2013, natural gas in 2016, and certain industrial sources in 2016 (Section 722(c)).  When fully in place in 2016, the cap would cover about 85% of U.S. greenhouse gas emissions (Section 721(e)(2)). 

Additional Reduction Programs: The bill would establish separate programs to reduce emissions from hydrofluorocarbons (Section 619), perfluorocarbons (Section 714), and black carbon (Section 805). 

Interaction with existing GHG Reduction Regulation

EPA: The bill would exempt greenhouse gases from regulation in several programs in the Clean Air Act (Sections 2301-2307 of APA). 

States: The bill would prohibit states from implementing their own GHG cap-and-trade programs (Section 806). However, those states that have already implemented a program would receive credits for early action (Section 788 and 781(e)(7)).

Price Stability and Cost Control

Market Design: Under the cap-and-trade program, the EPA would auction a predetermined number of emission allowances to regulated entities each year. Regulated entities and regulated greenhouse gas market participants would be allowed to trade emissions allowances (Section 724) and bank allowances for future years in unlimited quantities (Section 725). When banking allowances, a regulated entity could borrow emission allowances from one year ahead without penalty and two to five years ahead at an annual 8% interest rate, up to 15% of their total obligation

Exception for Transportation fuels: Providers of refined petroleum products (including gasoline and diesel fuel) would not participate in the allowance market. They would pay EPA directly the auction price for a certain set-aside of allowances that could not be traded, banked, or borrowed (Section 729).

Price Floor: The bill would set a minimum price for emissions allowances of $12 in 2013, rising to $20 in 2030 and $37 in 2050 (Section 790(d)).

Price Ceiling and Cost Containment Reserve: (Section 726) The bill would establish a cost containment reserve which would set four billion allowances aside for auction in case market prices increase beyond a predetermined price ceiling. The reserve would be filled by an increasing portion of the total emissions allowances (1.5% in 2013 increasing to 2.5% in 2022 and 5% in 2030), as well as any allowance not sold in auction. Allowances could be sold from the cost containment reserve if allowance auction prices rose above a price ceiling of $25 (in constant 2010 dollars) in 2013, increasing at 5% plus the rate of inflation for 2014 and each year after (Section 726(b)(3)(A)-(B)).  This wouldconstitute an allowance price limit of $25 in 2013, rising to $77 in 2030 and $300 in 2050 (in 2010 dollars). Up to 15% of the total emission allowances each year could be auctioned from the strategic reserve.

Offsets (Section 722): Covered entities could comply with the emissions cap by purchasing verified offsets (GHG reductions outside the scope of the cap) not to exceed an economy-wide total of 2 billion tons per year. Economy-wide, 75% of offsets would come from domestic sources and 25% from abroad unless EPA determined that insufficient domestic offsets were available. To meet compliance for 1 emission allowance, 1.25 international offset credits would be required (Section 722(d)(1)(A)(ii)).

Domestic Offset Verification (Sections 731-744): EPA and the U.S. Department of Agriculture (USDA) would establish a program for the generation and issuance of domestic offset credits. These agencies would develop a program to qualify eligible project types (Section 734), develop general requirements for offset projects (Section 735), and develop methodologies for the measurement, approval (Section 736) and verification (Section 737) of offset projects. The bill would specify minimum additionality requirements,  which ensure the emissions reductions would not have occurred without the project funding, and would direct the agencies to establish a process for accrediting third party verifiers (Section 737). Entities could receive credit for offsets issued by approved regulatory or voluntary offset programs from 2009 until the federal program went into effect. In addition, domestic entities could receive allowances for documented early reductions from projects begun between 2001 and 2009 (Section 740).

International  Offset Verification (Sections 751-763): EPA, in consultation with the Department of State and the U.S. Agency for International Development (USAID) would establish a separate program for the issuance of international offset credits. Offset projects would be implemented in developing countries. As with the domestic offsets program, the EPA and coordinating agencies would ensure that offsets are measurable, additional, and verifiable.

Allowance Distribution 

The American Power Act would allocate revenues from the auction of emission allowances to a number of energy and consumer protection programs. The programs are described in Titles I, II, III and IV of the American Power Act and the allowance distributions described in Section 2002 of Title II, as an amendment to the Clean Air Act. 

All sections in this part refer to amendments to the Clean Air Act, unless otherwise noted.  When two sections are listed, the first references the allocation amount and the second, the program description.

Electricity Local Distribution Companies (Section 781(a)(1); Section 782): APA would provide the following percentage of all allowances to electric local distribution companies (LDCs) for the benefit of their ratepayers :

Up to 14.3% of these allowances will go to merchant coal units and long-term contract generators according to a formula described in Section 782(c)&(d)). The remaining allowances would be distributed among LDCs according to the following formula: 75% based on historic emissions; 25% based on historic electricity use, adjusted by the number of consumers every three years after 2015. The bill would prohibit any LDC from receiving more allowances than necessary to offset the increased electricity costs from the cap, and would redistribute any such allowanes to the other LDCs based on GHG emissions.

The bill would require that LDCs use allowances "exclusively for the benefit of retail ratepayers." LDCs are to distribute dividends based on the electricity delivered to each ratepayer class (residential, industrial, etc.) and equitably among individuals within each class.  The bill would prohibit an LDC from providing rebates to individuals solely based on the amount of electricity consumed and would require that rebates be apportioned at a fixed rate to the maximum extent practicable. The bill would exempt residential and industrial ratepayers from this requirement, however, if a fixed rate would result in increased electricity costs. 

Natural Gas Local Distribution Companies (Section 781(a)(2); Section 783): The bill would provide the following percentage of all allowances to natural gas utilities for the benefit of their ratepayers:

Allowances would be distributed among natural gas utilities based on historic natural gas deliveries adjusted by the number of customers in each three year period after 2019. The section would require that the allowances be used “exclusively for the benefit of retail ratepayers,” and that, as with electricity rebates, dividends be distributed equitably among ratepayers in each ratepayer class (residential, industrial, etc) and that rebates be distributed at a fixed rate to the maximum extent practicable.  The section would require that at least 20% of the allowances be used for energy efficiency programs for natural gas consumers.

Home Heating Oil and Propane Consumers (Section 781(a)(3); Section 784): The bill would provide the following percentage of all allowances to states for the benefit of residential and commercial home heating oil and propane consumers:

Allowances would be distributed to states based on the carbon content of home heating oil and propane sold to consumers in each state in the preceding year. States would be required to use at least one-half of these allowances for energy efficiency programs and the remainder for direct financial assistance programs for consumers.

Industrial Facilities (Section 781(b)) - The bill would provide the following percentage of all allowances to energy- and trade-intensive industrial sectors to mitigate the costs incurred by the carbon cap and to encourage energy efficiency in production:

Allowances would be distributed to eligible entities based on their industrial output, with considerations for the average carbon intensity of the relevant sector and the emissions intensity of the facility's electric utility
(CAA Sections 771 -774).

The bill would also provide 0.5% of emissions allowances in the years 2013 through 2015 for energy efficiency retrofits and modernization in manufacturing plants (Section 781(b)(2)) . 96.77% of these funds would be distributed as grants to promote waste heat recovery and improve efficiency in energy-intensive industries and data centers. The bill would require that a certain portion be used for sensors and controls and a certain portion allocated to small and medium-sized manufacturing enterprises.  The remaining 3.23% of overall funds would be distributed to support manufacturing extension partnership activities. 

Clean Vehicles Technology (Section 781(c)(2), Section 4111of the American Power Act): The bill would deposit allowance proceeds into a new Clean Vehicle Technology Fund, according to the following schedule: 1% of allowance proceeds from 2013 to 2020 and 0.5% in 2021.  EPA would grant 75% of this fund to vehicle manufacturers and component suppliers to reequip or expand existing domestic manufacturing facilities to produce qualifying advanced technology vehicles (such as plug-in electric drive medium- and heavy-duty vehicles). Automobile manufacturers not in compliance with applicable corporate fuel economy (CAFE) standards would not be able to receive grants. Twenty percent of the fund would be used for the deployment and integration of these advanced vehicles; and the remaining 5% for the development of the National Transportation Low-Emission Energy Plan.

Low Carbon Industrial Technologies Research and Development (Section 781(c)(3) and Section 4143 of the American Power Act): The bill would provide 1% of emissions allowances in the years 2013 to 2020 and 0.5% of allowances in 2021 for the National Industrial Innovation Institute.  Established by the Department of Commerce, the Institute would carry out research and development projects of technology that improves the efficiency and competitiveness of domestic manufacturers and reduces energy consumption and greenhouse gas emissions.

Clean Energy Technology Research and Development (Section 781(c)(4) and Section 1801 of the American Power Act): The bill would provide 2% of emissions allowances in the years 2013 to 2021 to institutions of higher education, research entities, or companies for clean energy research through Advanced Research Projects Agency – Energy (ARPA-E) in the Department of Energy (DOE). Energy efficiency, renewable energy, water security, and smart grid research would be eligible for support and funding through these allowances.

Investment in Energy Efficiency and Renewable Energy (Section 781(c)(5); Sections 1602 and 1603 of American Power Act): The bill would provide the following percentage of all allowances to states and rural utilities for investment in renewable energy and energy efficiency programs: 

The allowances would be used to support the Rural Energy Savings Program (Section 1602) and state renewable energy and energy efficiency programs:

Rural Energy Savings Program (Section 1602):

The bill would provide 0.5% of allowances in the years 2013 to 2015 to a loan program, administered by USDA, to support rural utilities in making loans to their customers for energy efficiency improvements. Revenue from carbon allowances would be loaned by USDA at zero interest to eligible rural utilities. Those utilities would, in turn, loan money to their customers for improvements to real property (i.e., not movable appliances), which would be paid back via utility bill assessments. Utilities would be required to repay the loans within ten years.

The USDA would contract measurement and verification (M&V) providers to perform audits of the improvements and assist utilities in training, using a protocol the agency would develop. Customers participating in the program would be required to conduct an energy audit to confirm the effectiveness of any upgrades. 

This section would also direct the USDA to set up demonstration projects with utilities to show auditing approaches, M&V processes, and worker training. The projects would target medium-sized service areas with large numbers of old or manufactured homes.

Support for State Renewable Energy and Energy Efficiency (Sec. 1603):

The bill would provide the remaining allowances, above, to states and Indian tribes for energy efficiency and renewable energy projects. Indian tribes would receive 0.5% of the emission allowances, and the remaining portion would be divided among states according to the following State Energy Program funding formula: one third equally among the states, one third based on population, and one third based on energy usage. 

Revenue from these allowances could be used for promoting energy efficiency and renewable energy through building energy codes, energy-efficient manufactured homes, building energy performance labels, low-income community energy efficiency, energy efficiency building retrofits, renewable energy deployment, cost-effective efficiency programs for end-use energy consumers (including both electricity and fossil fuels for heating), development of a smart grid, and supporting surface transportation projects (not more than 10% of allowances to be used for this purpose).

The bill would require states to prioritize expansion of existing energy efficiency programs over the creation of new ones to demonstrate that the additional funds supplement, rather than supplant, existing energy efficiency programs. States not in compliance with these requirements would have their allowances redistributed to other states.

Transportation Infrastructure and Efficiency: (Section 781(f)(3); Sections 1711, 1712, and 1721 of American Power Act): The bill would provide the following percentage of all allowances for investment in transportation projects and planning:

Additional allocations

Consumer protection: The bill includes several provisions to provide direct credits and rebates to Americans for consumer protection:

• Refundable Credit for Working Families (Sections 3201, 3202 of the American Power Act): This program would provide 2.5% of emissions allowances in the years 2013 through 2029 for low income families through a refundable tax credit.
• Energy Refund Program (Section 3203, 3204 of the American Power Act): This program would provide 12.5% of emission allowances in all years to low income households through monthly or annual refunds to offset the loss of purchasing power from the American Power Act.
• Universal Trust Fund (Section 781(a)(5)): This program would provide, beginning in 2026, a tax rebate or credit to all Americans funded through a monthly electronic transfer or another means (according to the study in section 3205 of the American Power Act). The credit size would depend on a scaling factor for family size and the value of allowances available for that year. The following percentage of all allowances would be allocated to the fund each year, with 75% of the allocations dedicated to the tax refund and 25% to deficit reduction:

Other: The bill would also provide allowances to trade-exposed industries (Section 781(b)(1); Section 774), domestic petroleum refineries (Section 781(b)(3); Section 796), commercial deployment of carbon capture and sequestration (Section 781(c)(1); Section 794); adaptation (Section 781(d); Section 5005 of the American Power Act), early action rewards for voluntary offsets (Section 781(e); 788), and reserve allowances for goods exchanged on international markets (Sec 777).

Additional Energy Efficiency Provisions

The American Power Act contains seven titles, of which only Title II, summarized above, would establish the GHG pollution reduction program. The other six titles further describe the use of allocations in the program and establish complementary policies outside the program. The outline below includes every title in the bill, with descriptions for those sections related to energy efficiency.

Title I: Domestic Clean Energy Development

Subtitles A-C: Nuclear, Offshore Oil and Gas, Coal - n/a

Subtitle D: Renewable Energy and Energy Efficiency

Section 1601: Renewable Energy and Energy Efficiency: This section states that renewable energy and energy efficiency are critical to the purpose of this Act and that several measures are necessary to accelerate progress: mandates for the deployment of clean and renewable energy; innovative funding mechanisms for clean energy technologies; transmission improvements; improved building codes; and improved appliance standards. The section does not contain any specific mandates, but suggests an intent to enact the additional measures.

Section 1602: Rural Energy Savings Program: See Allocations: Investing in Energy Efficiency and Renewable Energy, above

Section 1603: Support of State Renewable Energy and Energy Efficiency: See Allocations: Investing in Energy Efficiency and Renewable Energy, above

Section 1604: Voluntary Renewable Energy Markets - n/a

Subtitle E – Clean Transportation

Part I – Electric Vehicle Infrastructure

Sec. 1701: National Transportation Low-Emission Energy Plan; Pilot Program: This section would require the DOT to develop a National Transportation Low-Emission Energy Plan that projects the near- and long-term needs of an electric drive vehicle (EV) refueling infrastructure; identifies infrastructure and standardization needs for stakeholders such as electricity providers and vehicle manufacturers; and establishes an “aspirational” goal of achieving deployment of EV infrastructure by 2020. The section would also require DOT to establish diverse pilot projects to demonstrate EV infrastructure, using financial resources determined by DOT. The section would also establish a Low-Emission Energy Plan Coordinator to oversee the development of the national plan and implementation of pilot projects.

Part II – Transportation Efficiency

Sec. 1711: Greenhouse Gas Emission Reductions through Transportation Efficiency: This section would require EPA, in consultation with DOT, to establish – within 18 months –  national goals for the reduction of GHG emissions from the transportation sector. The goals should be commensurate with the emissions reduction goals set by the rest of this bill.  EPA and DOT would assess progress toward the goals at least every six years and examine the effectiveness of various measures in reducing emissions. It would also require EPA and DOT to develop standardized emission models and methodologies.

This section would also require each state and each metropolitan planning organization (MPO) that serves a transportation management area to establish its own emissions reduction targets and strategies within two years of the establishment of the federal goals. It would require that the targets and strategies, at a minimum: be based on EPA and DOT models and methodologies; contribute to the achievement of the national goals for GHG emissions reduction from the transportation sector; and include efforts to increase or improve public transit ridership, walking, bicycling, implementation of zoning regulations that support transportation efficiency, travel demand management programs, surface transportation system operation, intercity rail and bus service, public facilities for electric vehicles, or other efforts that reduce transportation-related GHG emissions. 

Section 1712: Investing in Transportation Greenhouse Gas Emission Reduction Programs: See Allocations: Transportation Infrastructure and Efficiency, above

Part III – Highway Trust Fund

Section 1721: Augmenting the Highway Trust Fund: See Allocations: Transportation Infrastructure and Efficiency, above

Subtitle F: Clean Energy Research and Development

Section 1801: Clean Energy Technology Research and Development: See Allocations: Clean Energy Technology Research and Development, above

Title II: Global Warming Pollution Reduction

See Greenhouse Gas Pollution Reduction, above

Title III: Consumer Protection

Subtitle A: Investing in Low-Carbon Electricity and Energy Efficiency for Consumer Protection

Section 3001: Electricity Consumers: See Allocations: Electricity Utilities, above 

Subtitle B: Investing in Low-Carbon Heating and Energy Efficiency for Consumer Protection

Section 3101: Natural Gas Consumers: See Allocations: Natural Gas Local Distribution Companies, above

Section 3102: Home Heating Oil and Propane Consumers:See Allocations: Home Heating Oil and Propane Companies, above

Subtitle C: Consumer Relief: See Additional Allocations: Consumer Protection, above

Subtitle D: Advocating for Consumers

Section 3301: Office of Consumer Advocacy: This section would establish an Office of Consumer Advocacy to serve as an advocate for the public interest. This office would represent energy customers on matters concerning rates or service of public utilities and natural gas companies at hearings or proceedings of the Federal Energy Regulatory Commission and federal agencies. It also would review customer complaints and grievances, performs relevant investigations, and develops means to ensure that the interests of consumers are adequately represented.

Title IV: Job Protection and Growth

Subtitle A: Protecting American Manufacturing Jobs and Preventing Carbon Leakage

Section 4001: Ensuring Real Reductions in Industrial Emissions: See Allocations: Industrial Facilities, above 

Section 4002: Domestic Fuel Production - n/a

Section 4003: Advanced Energy Project Credit: This section would increase the funding-level for the Advanced Energy Project Credit to $7.3 billion, as established in the Section 1302 of the American Recovery and Reinvestment Act at $2.3 billion. The Advanced Energy Project Tax Credit provides a 30% credit for investment in new, re-equipped, or expanded manufacturing facilities that produce energy efficiency technologies or other renewable energy generation, energy storage, transmission, and greenhouse gas reduction technologies. The section would extend the application period three years and period of issuance five years. 

Section 4004: Report on the Utilization of Tax Incentives - n/a

Subtitle B: Clean Energy Technology and Jobs

Part I-Clean Energy Career Development

Section 4101: Clean Energy Curriculum Development Grants: This section would authorize the Department of Education to award competitive grants to eligible entities to develop programs of study that are focused on emerging careers and jobs in the fields of clean energy, renewable energy, energy efficiency, climate change mitigation, and climate change adaptation. Eligible entitites include educational agencies, post-secondary institutions, and entities categorized as "representatives of the community," which may include labor organizations, businesses, and industry groups that have experience in the fields described.

Section 4102: Development of Information and Resources Clearinghouse for Vocational Education and Job Training in Renewable Energy Sectors: This section would direct the Department of Labor to develop an internet-based information clearinghouse to aid career and technical education and job training programs for the renewable energy sectors.  The clearinghouse would contain a separate section on energy efficiency technical training.

Section 4103: Clean Energy Construction Careers Demonstration Project: This section directs the Secretary of Labor to establish a clean energy construction careers demonstration project to promote middle class careers and quality employment practices in the green construction sector and to advance efficiency and performance on construction projects.  Projects may include residential retrofitting.

Part II-Transportation

Subparts A-C: Clean Vehicles, Natural Gas Vehicles, Community Information - n/a

Subpart D- Additional Greenhouse Gas Standards

Section 4141: Emission Standards for Mobile Sources: This section would direct EPA to develop GHG emission standards for new heavy-duty motor vehicles or new heavy-duty motor vehicle engines (with some exclusions) by 2011.  These standards would have to reflect the greatest degree of emission reductions achievable through the application of technology that EPA determines will be available for that model year, considering cost, energy, and safety.  In addition, by 2013, EPA would be required to issue GHG emission standards for other classes and categories of new non-road engines and vehicles.  In establishing these standards, EPA would provide rules on averaging, banking, and trading of GHG emission credits within or across classes or categories of motor vehicles and motor vehicle engines, non-road vehicles and engineers, and aircraft and aircraft engines.

The section would also direct EPA to work with the National Highway Transportation Safety Administration and other entities under current authorities to set motor vehicle emission standards for model years 2016 and beyond that reflect the greatest emission reductions and fuel efficiency improvement achievable through the application of technology EPA determines will be available, considering cost, energy, and safety.

Parts III- IV Agriculture, Manufacturing and Technology - n/a

Titles V-VII: International Activities, Adaptation, Budgetary Effects - n/a