Agriculture Proposals from the 110th Congress

Investing in Climate Action and Protection (iCAP) Act. This bill would amend the Clean Air Act to establish a cap-and-trade system for greenhouse gas (GHG) emissions, and for other purposes.

 The bill would regulate carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), sulfur hexaflouride (SF₆), hydrofluorocarbons (HFCs), and perfluorocarbons (PFCs). The bill would also regulate nitrogen trifluoride (NF₃), which is a GHG not covered by the Kyoto Protocol, and, in addition, would regulate any other anthropogenic gas the Administrator of the EPA determines to have a global warming potential equal to or greater than carbon dioxide. According to the bill’s authors, the legislation would cover 94% of U.S. GHG emissions—87% through cap-and-trade.

 The cap-and-trade program would reduce covered emissions to 2005 levels by 2012, to 20% below 2005 levels by 2020, and to 85% below 2005 levels by 2050.The cap-and-trade program would cover emissions from: fossil fuel-fired power plants that emit more than 10,000 carbon dioxide equivalents (CO₂e) a year; industrial facilities that emit more than 10,000 CO₂e a year; producers or importers of petroleum or coal-based fuels, the combustion of which will produce more than 10,000 CO₂e a year; natural gas local distribution companies (LDCs) who deliver natural gas that will produce more than 10,000 CO₂e  a year when combusted; producers or importers of more than 10,000 CO₂e a year of HFCs, PFCs, SF₆, or NF₃, or any other fluorinated gas that is designated by the Administrator as a GHG; and “commercial-scale” geological carbon sequestration sites to cover any leakage.

In addition to the cap-and-trade program, the act will cover an additional 7% of U.S. GHG emissions through financial incentives to farmers and forest managers to reduce GHG emissions and increase storage as well as performance standards for coal mines, landfills, wastewater treatment operations, and large animal feeding operations that emit more than 10,000 CO₂e a year. The bill would direct the Administrator to publish and subject to regular review a list of such sources not later than 90 days after enactment, and establish the relevant performance standards not later than 2 years after that.

The bill would also set mandatory performance standards for coal-fired power plants with a generating capacity of 25 megawatts or more, and which derive more than 50% of annual fuel input from coal or petroleum coke. Plants which commence construction on or after January 1, 2009, would be required to capture and sequester 85% of their CO2 emissions. Plants which commence operation before January 1, 2020, would have to be in compliance with the performance standard by either January 1, 2016, or four years after they commence operation, whichever is later.  

The bill would auction 94% of all allowances in 2012, transitioning to a 100% auction in 2020.

Allowance auctions would begin in 2010. The bill would establish a number of funds in the U.S. Treasury, and deposit in them the following percentages of revenues from allowance auctions from 2010-2019. Dollar amounts listed in the following table are the bill’s author’s estimates. 

Funds from the General Fund of the Treasury and the Climate Trust Rebate Fund would be used for refundable tax credits and rebates to compensate consumers for higher energy prices resulting from the bill. Cash rebates would be directed at low-income households and will be distributed through the Electronic Benefits Transfer system used for food stamps. All households earning under $110,000 would be eligible for some benefit, with benefit levels phasing out gradually for households earning $70,000 to $110,000.

In addition to auctions, 6% of allowances would be allocated to energy-intensive, trade-exposed industries each year from 2012-2019.

Entities would be able to fully bank allowances. Entities would also be able to borrow allowances from future years, and would be required to pay back borrowed allowances within 5 years, at an interest rate of 10% per year.

Entities would be able to meet up to 15% of their compliance obligation with EPA-approved domestic offsets, and an additional 15% of their compliance obligation with EPA-approved international emission allowances or offsets. Eligible domestic offset projects would be limited to: agricultural projects that reduce GHGs resulting from enteric fermentation or manure management in soils, or that increase biological sequestration of carbon through afforestation or reforestation; projects which reduce fugitive GHGs from petroleum and natural gas systems in the US; and projects that reduce GHG emissions from coal mines (agricultural and coal mine projects are only eligible if they are not subject to the performance standards discussed above). The bill would direct the Administrator to promulgate regulations for eligible international offset projects; forestry or land use projects, and projects involving the destruction of HFCs, would not be eligible.

The bill would establish an Office of Carbon Market Oversight (OCMO) within the Federal Energy Regulatory Commission. The OCMO would have the authority to oversee the carbon market to prevent fraud and market manipulation. 

The bill would establish a system of international reserve allowances to begin in 2020. If the President determines that a given country has not taken “comparable” action to reduce its GHG emissions, the President would be authorized to require importers of energy-intensive, trade-exposed primary goods from those countries to purchase and submit special international reserve allowances. These allowances would not be able to be used for compliance in the regular cap-and-trade system, and proceeds from the sale of these allowances would be used to supplement the International Clean Technology Fund established by the bill.

The bill contains a provision that would permit California to regulate GHG emissions from the tailpipes of automobiles, as well as other states which have adopted the same standards.

The bill would also amend the Clean Air Act to establish a low-carbon fuel standard. The Administrator would be directed to no later than 2010, establish a methodology for determining the lifecycle GHG emissions per unit energy of all transportation fuels for which such a determination does not already exist. The EPA would establish a fuel emission baseline, and would require transportation fuel providers to reduce, on an annual average basis, the average lifecycle GHG emissions of those fuels, resulting in a reduction of at least 10% from the baseline by 2028.  The performance standard used to determine the baseline would be revised in 2033 and every 5 years thereafter. The EPA would set up a market for credits, through which producers who achieve greater lifecycle emission reductions than the baseline would be able to earn credits to trade or sell to other producers, or bank for future use.

In addition, the bill would require the EPA to develop comprehensive regulatory standards for the underground injection of CO₂, and would requires the DOE to develop model building efficiency codes that states would be required to adopt and enforce in order to become eligible for funding from the National Energy Efficiency Fund that would be established by the bill.